17.
Market vs. Government Provision of Goods
Its often heard that
government is not as efficient as business. This is not a knee-jerk ideological reaction. It is grounded in the real differences
of the incentives facing government and private enterprises.
In the market, a
private enterprise is dependent on the flow of consumer dollars into the
organization for its success. Thus
a tight link exists between consumer satisfaction and business success. In contrast, a government enterprise
has a second source of income available to it--tax revenues. With an alternate source of income to
support it, a government enterprise will necessarily have a lesser incentive in
serving consumers. Realize, this
is not a matter of good people in management of private enterprises and bad
people in management of government enterprises, but a different incentive
structure in the two arenas.
Most people attempt
to please their bosses on the job as a means of generating an income. Winning the lottery often reveals the
employee's true underlying attitude toward working at the behest of the boss. Government enterprises have won the
lottery, so to speak, and thus treat the consumer not as the end all and be all
for the organization but as a nuisance interfering in the peace and tranquility
of the day. Additionally, many
government enterprises hold a legal monopoly relieving them of the fear of loss
of customers to rivals, unlike private enterprises in a free market.
An easy example to
illustrate these points is the U. S. Postal monopoly. With tax dollars available to make up for any shortfalls
from consumer-derived revenues, the Post Office can afford to treat its
customers as an unwanted interference.
The Post Office is notorious for its lack of innovations. For instance, while private enterprises
in the free market offer customers bags in which to secure their purchases
(even in the case of minimally priced purchases) the Post Office does not
bother to stock and offer bags to its customers regardless of the value of what
they buy.
Advertisements in
your Sunday newspaper will typically offer return address labels with a more
expensive peel off option as well as a cheaper lick and stick option. Stamps until quite recently were lick
and stick only. Why should the
Post Office go to such trouble when the taxpayers make up losses and it's
illegal for others to deliver first class mail?
Federal Express began
offering urgent overnight delivery years before the Post Office. Why should the Post Office take chances
on such innovations which may or may not pan out?
Fast food
restaurants, banks, dry cleaners, liquor stores and other businesses offer
drive-in service. But again, why
should the Post Office take chances on such innovations which may or may not
succeed?
But, the grand
example which clearly illustrates these differences is late Fall with the
approach of the Christmas buying season.
While businesses take out ads virtually begging customers to shop with
them--even late in the season--the Post Office is haranguing the hapless public
to "mail early!" In
effect, what the Post Office is spending money to do is to tell their potential
customers not to bring their damned Christmas cards in for delivery at an
inconvenient time. Customer
satisfaction takes a back seat to the convenience of the Postal organization.
A further approach to
these issues can be delineated as five significant differences between the two
means of providing for consumers.
First, the market provision of goods is based on a voluntary
relationship between firm and customer.
Government provision of goods is based on a coerced relationship between
enterprise and customer. This
difference alone is all the difference in the world as far as consumer
satisfaction is concerned. It is
the difference between employment and slavery, charity and robbery, seduction
and rape.
A summary statement
concerning market provision of goods is the well-know phrase, "the
customer is always right."
Notice there is no such similar phrase "the voter is always
right", or "the taxpayer is always right" in describing the
attitude of government enterprises.
Second, in the market
there is proportional representation; that is, consumers get the goods they
"vote" for in proportion to their "votes." If ten percent demand green cars then
ten percent will get green cars.
With government provision it's a winner takes all deal; either we all
have the Social Security program or none of us have it, regardless of our
preferences.
Third, in the market
there are small individual choices.
Just because you buy a Sears refrigerator does not mean you then have to
buy a Sears washer and dryer and tv, etc.
With government provision, there is a package deal arrangement. Mixing and matching is unavailable with
government provision of goods.
It's either Bill Clinton's policies on taxes, the environment, and
foreign policy or it's Bob Dole's policies on these issues.
Fourth, choice in the
market is continual. One can
replace unsatisfactory goods at any time.
Tired of the car you thought would be so great? Sell it and get a different model. No longer happy with your detergent,
buy a different brand. Realize the
first brand was good after all?
Re-replace it at your discretion.
Now compare this to government.
Want to drop out of the Social Security program--go to jail. Tired of the president. Four more years.
And fifth, a private
firm is held liable for damages to those it may harm. Suing companies for compensation is the norm. Government enterprises often enjoy
"sovereign immunity," placing them above reproach (an ill carried
forward to America from the European theory that the king could do no wrong). Government enterprises can and do wreak
havoc with peoples' lives without suffering any financial consequences. In a real sense it is dangerous to have
government enterprises providing consumer goods since an absence of potential
liability will result in a reduced emphasis on safety. Private firms facing potential
liabilities for their damages have a financial incentive to be safe.
-
Friedman, Milton
From Galbraith to Economic Freedom,
(West Sussex, Great Britain: Institute of Economic Affairs, 1977)
-
McConnell, Campbell R.
Economics 13th edition,
(New York: McGraw-Hill, Inc., 1996)
pp. 622 - 625.
-
Mises, Ludwig von
Bureaucracy,
(New Rochelle, New York: Arlington House Publishers, 1969)
pp. 40 - 53.
-
Mises, Ludwig von
Human Action,
(Chicago: Henry Regnery Company, 1966)
pp. 303 - 311.
-
Rockwell, Llewellyn H.
"Why Bureaucracy Must Fail" in The Economics of Liberty edited by Llewellyn Rockwell,
(Auburn, Alabama: The Ludwig von Mises Institute, 1990)
pp. 119 - 123.
-
Rothbard, Murray N.
Egalitarianism as a Revolt Against Nature,
(Washington, D.C.: New Libertarian Review Press, 1974)
pp. 81 - 87.
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