Usually diseconomies of scale are present in maladaptive companies, and are easily dealt with through competition (eg, GM and Toyota). When you look in the private sector, it is rather odd to see whole industries that are burdened by it.

But this is exactly what you have in gray semi-public industries. In addition to a lack of cost-cutting incentives, they are burdened down by arbitrary rules, such as artificial boundaries between states which you see in both education and health care.

As we continue to a service-based economy – in which education and health care are likely the bread and the butter – these regulations will get more burdensome. Perhaps however things just need to be allowed to get worse before the public will recognize that things are going in the wrong direction.