Posted by
Andrews on Monday, February 23, 2009 7:37:12 PM
People continually talk about the "market" failing, and how the government must step in. However, there is one thing they forget. The private sector is both subject to checks and can be directly controlled. On the other hand the public sector has both no incentives to satisfy individuals and can be directly controlled only in part, and then only at certain intervals.
The private sector is directly answerable to the public. Those companies which do not satisfy wants lose money and eventually go out of business. They also have incentives to both become more efficient and to remove any mistakes, as otherwise they will suffer a competitive disadvantage which will eventually cause them to lose money. The government has no such incentives. if they lose money, they tax us more, or inflate. They have no incentives to become more responsive or efficient as elections are very rarely won or lost on the efficiency of bureaucrats. In any case, bureaucrats have such a long lifespan, they can always be blamed on past administrations.
Similarly, the private sector is responsive to public concerns, even non-economic ones. We can see this in advertiser boycotts. If something a company does offends enough people, they will stop, immediately, for fear of losing market share. On the other hand, the government is only partly accountable. Most of those who make actual decisions are in the bureaucracy and so beyond immediate reach. Even those who can be selected, the men in office, are only up for election every so often. Which means that public concerns only matter to them at regular intervals, the rest of the time they are insulated by the belief that events not close to an election don't matter.
Given all that, why would we want to grant more economic power to the government? If the market is broken, of which I am not convinced, it will self-correct in time. However, once the government chooses the wrong course, it will persist in that path until it absolutely must change. How else to explain Rural Electrification Act money still being offered? The telephone tax to fund the Spanish American War? The government mohair buying program? The strategic helium reserve? A bad government idea is immortal, one in the private sector lives on borrowed time.
Which segment is more likely to correct its own mistakes?