It is pretty clear that buying in bulk is cheaper and more efficient than doing otherwise, e.g. Sam’s Club, Walmart, Costco. If this is the case, than why is the Government qua the ones who take our money and buy in huge quantities to distribute to millions or even billions so inneficient? Based on buying in bulk, shouldn’t the governement be the most efficient way of obtaining goods and services. But this is clearly not the case, so why is the government so much more inefficient than the free market if buying in bulk drives prices down so much. Competition might be an even larger factor is my guess. Any answers wise Mises community? Thanks!
Because of signals guiding government decisions in terms of economic calculation. It’s not the action that matters here but what guides the decision behind it.
Buying in bulk is only cheaper if you need something in bulk. If you only need a few, buying in bulk is a waste.
The classical Marxist argument was that since commodities would always be more efficiently produced by a single super-enormous industry, then monopoly capitalism was inevitable and so was socialism.
Of course they overlooked the fact that not every good is a commodity.
This is good:
But also even hypothetically, If there is an aggregate demand for say 10 Million cars, how does handing over the bargaining power to a bunch of people who don’t bear the cost themselves going to get you a better deal? The economy of scales for 10 Million is already there anyway.
In reality, it’s even worse. the cost is dispersed on so many people, most of which do not even benefit from the new car, so the direct cost of just the government expenditure on the cars is not directly felt by anybody. If they buy, say 10,000 new cars, they can overpay by 1000% and people will still not directly be able to feel it.
Don’t forget Diseconomies_of_scale.
Short answer: it’s not their money. The value of economizing for the government is limited because it’s tax money politically-obtained, and thus government agents have llttle incentive to ‘save’ money, as individuals or even private companies have.
This is the Milton Friedman short answer which is overly simplified to the point that it undermines the entire and more devastating argument against government spending. It distracts people from the much more comprehensive problems of government spending.
It’s not as if the government only takes money out of the recipients of its benefits and gives them back a bad bargain. The government always benefits the recipients of some expenditures at the expense of others who do not benefit at all. This is an entirely different and more devastating problem.
This short answer also completely overlooks the calculation and knowledge problem, the affects of subsidies, the bureaucracy that accompanies the spending, the regulations that are bound to spring up, the unsoundness of government finance, etc…
If the government were better at providing anything that people want (cheaper or better quality), then it could simply offer it’s services and people would willingly buy from it. The fact that it resorts to aggressive violence shows that people wouldn’t buy from them if they had the choice. The government is simply a protection racket for people who are unable or unwilling to compete in the market.
