Stop suggesting government should run like a businesses

All Rights Reserved
All Rights Reserved

Plenty of links in today’s article. Check them out if you have time.

There is a worrying trend, in my opinion, of politicians and public figures making comparisons between running a business and running a government. That is simply political posturing that goes no farther than ideological fluff. It is wrong-headed for a simple reason well articulated by John Harvey in an older post via Forbes:

…to ask that the government be run like a business is tantamount to asking that the government turn a profit. The problem in a nutshell, is that not everything that is profitable is of social value and not everything of social value is profitable.

And from Matthew Yglesias at Slate, responding to an article in the Sacramento Bee claiming California is insolvent:

This is a big mistake. Obviously California’s state government is not a business. But if it were a business, the right way to account for it would be to treat it as the owner of all the non-federal land in California and all the structures sitting on that land. That stuff—the beaches and the beach houses and the offices and the shopping malls and all the rest—is the tax base of an American state government. California, thanks to 1978’s famous Proposition 13, does not in practice collect all that much in real estate taxes. But that’s a policy decision, not an aspect of the state’s balance sheet. Of course the fact that California is a state government constrained by political factors also highlights the fact that it’s a bit dumb to compare governments to businesses. But if it were a business, then it’d be a business in a great financial position. If the actual financial position is not-so-great that’s precisely because it isn’t a business.

Governments are not like households, and governments are not like businesses. They serve an entirely different function, and try to address the tragedy of the commons by investing in things the market would never support precisely because they do not represent potential profits. Rather, they seek to avoid negative externalities and thus avoid greater potential societal costs that otherwise would not be accounted for. There may be some for-profit schools, but we would not trust  or desire private for-profit groups to educate all citizens. Likewise with the military, police, social services, and welfare state. Certainly, there are exceptions, like perhaps the US Postal Service, but generally we can believe if something was profitable the private sector would already be involved. Don’t confuse the issue by claiming a government could behave like something it is not and should not be.

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4 thoughts on “Stop suggesting government should run like a businesses

  1. The USPS is burdened with having to fund its employee benefits through the next 25 years now. No business is required to do that. Something wrong with that picture!

    1. That issue has been talked about quite a bit publicly, and clearly is the main factor in the USPS’ unprofitability. But it would take an act of Congress to change the requirement, so don’t hold your breath…

      1. When it comes to economic posturing, whether from government or the corporate base, I breathe deeply and move along! Still, chain rattling is important. Thank you!

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