Government does not handle diminishing returns well

Which performs betters, government or private? is always a lively discussion.

I believe private performs most things better, for many reasons. One reason is that it handles diminishing returns better.

Consider one example: School.

There is a belief that more school is better, always. Yet, we all know that’s not true or else we’d still be in school.

But government doesn’t know and it keeps pushing for more even when the value of more school to individuals and society no longer exceeds the cost.

Government has weak mechanisms to rationalize that diminishing return. “More is always better” sounds good to voters, so it gets votes.

Yet, when those same voters spend their own money on various things they constantly rationalize diminishing returns.

They get a lot of value from the first apple they put in their cart, a little less from the second and less still from the third. They don’t put the fourth apple in the cart because the value of the fourth does not exceed its cost. The value of the apples diminished with quantity.

The mechanism in this private transaction to rationalize the diminishing return is much stronger. The shopper only has so much money and can only eat so many apples. They don’t want to waste their money on apples that will end up rotting, especially when they can use their limited funds on other things that provide benefit above the cost.

There are weak mechanisms in government to deal with diminishing returns. Sometimes voters don’t buy the “more is always better” mantra. Unfortunately, that usually happens way too late, only after many apples have rotted.

And, sometimes governments fail outright (unfortunately taking down society or having to be replaced with other governments) because they are so far past the point where value exceeds the benefit, that they sucked up all the surplus resources in society trying to fulfill the “more is always better” belief.

Advertisements

Comments

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s