Monday, June 1, 2009

Why Does Government Often Fail?


Government often fails not because of the people in it, but because of the nature of government itself. Government takes whatever individual brilliance exists and turns it into collective incompetence. Most activities of the government are to "solve" problems. However, once an agency or program is setup to "solve" the problem, it is in its best interest to simply "manage" the problem. Ronald Reagan said it well,

"No government ever voluntarily reduces itself in size. So, governments' programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we'll ever see on this earth."
Let's look closer at why government fails. If a government agency solves a "problem", it gets less money as its funds are funneled elsewhere. If a government agency fails to solve its "problem", it complains of underfunding and gets more money.

If a business solves a problem for customers, it gets more customers and more money. If a business fails to help customers solve their problems, the customers go elsewhere and the business loses money.

As you can see, the incentives are backwards with government which explains its high rate of failure.

Can you imagine a business that paid employees more if they did less work and paid them less if they did more work? The idea is clearly foolish; anyone can see that if you pay people more for doing a poor job, it won't be long before all the employees are doing as little work as possible to increase their pay. Doing a good job is challenging, but any boob can do a poor job.

2 comments:

Jim said...

Good post, Matt. (I especially liked
the illustration.) Keep up the good
work!

Matt said...

Thanks!