If a government was to open a grocery store, subway, left handed scissors shop, or whatever; after the initial taxes taken in to build and start the shop, the shop becomes fully independent of any taxes and is sustaining off the income generated by customers (perhaps even the “profits” after payroll could would go into refunding the citizens off their initial tax). Either way they end up selling something that consumers are responding to positivly (by that I mean this would have been a profitable venture had an entrepreneur been able to do it.)
I am not asking if this is immoral, nor improbable (I know very well it is), I just want to know if it is at least, on the most technical level, possible
Economic efficiency is all about choice. If the people in government let people choose whether or not to do business with them, then the success they have is economically productive.
This is a basic Austrian insight. Government Business’s have no owner, so no one benefits directly from it turning a profit. The only people who lose if the business loses money are the taxpayers, and they don’t actually manage the company. Managers and politicians are not personally hurt if the business is unsuccessful, but can gain very much by deliberately hurting the business.
The incentives required for a productive business venture simply aren’t there.
I know it has been tried (and failed) over and over again, but that is only massive empiricle evidence.
But this very hypthetical question is not about one of the gazillion government programs that have failed, this is about the 1 (very hypothetical) program that didn’t . On a strictly theoretical level: if some politician (for example the almighty intellectual Obama, who can do no wrong) had some great insight to satisfy consumer demand (that no other etrepreneur had) that was not being met, did so by starting a business through government, causing massive consumer satisfaction and needs, wouldn’t that mean the consumers are benefitting? And as far as “profits” are concerned could’t that just mean it could go into military, welfare, or some other budget?
You are forgetting that what is seen is greatly surpassed by what is not seen.
In your example, the government confiscates the needed capital and launches a productive enterprise. Good job.
However, we can surmise that the private sector could have done better. Since the government enterprise does not have to compete for capital, it does not feel any pressure to deliver the highest profits possible, so they can waste money and just take their sweet time. A private sector firm, on the other hand, probably would get the job done in half the time with cash to spare.
Also, since delivering the highest profits possible entails capturing as many customers as possible, there is an incentive for quality. The government firm does not have this incentive; they are not driven to increase their market share.
Governments tends to subsidize existing technologies rather than risk money in new ones. For example, look at the billions of dollars the government has spent on Amtrak, airports, highways, and other 20th-century transportation infrastructure. If that money had been controlled by the private sector, they probably would have invested it in more efficient technologies (Maglev, for example).
Finally, look at what happens when one industry is replaced by another. In the private sector, less efficient businesses are bought up by more efficient ones. The original investors from the less-efficient firm are paid off and take their money somewhere else. The new owners modernize their new enterprise and expand their voluntary empire. Everybody wins.
Government firms, on the other hand, play the part of the poor loser and say they’re “too big to fail”. They then collect billions of dollars from the public treasury and go to the spa.
Seems like an interesting idea and i am sure that there has probably been some attempts by government to do such a thing. I do know for one thing that things such as the US mint are 100% self-funded,and things such as the endowment of national arts is funded 98% through tax payer dollars. The institute of peace was initial built with 50% of its budget coming from private donations.
The US mint has been around for centuries,but yet it still thrives even though it is entirely self-funded.
Ama gi I am well aware of the effects of the unseen. And I agree 100% with the assesment. The main problem I think though, is that it is theororetically possible for any command and control economy to work (God/ Obama is running this economy say). And as long as it is even probable people become very seduced by the idea correct? There actually is potential IN THEORY to run a “better” and more “efficient” economy (whatever that means). Also, as long as it exists in theory, wouldn’t government be the most seductive easiest path to implement plans and schemes? After all the direct effects are noticed and felt less than on a microscopic level, plus the unseen never really gets noticed correct?
by the statement “I am aware of the unseen” I simply meant the concept or principle of the unseen (such as described by Hazlitt and others), NOT the politician in the example being necessarily aware. Sorry for the unclear use of words.
What you are describing is a situation where government provides the necessary capital for a business. I just don’t see how anyone could calculate and project that the business venture would be a net benefit for the economy.
First we know the state would necessarily shift its own resources into this project, thus needing to expand its own resources to cover deficits in other areas, causing more taxation and inflation in the long run. In one situation where the business fails, it is a disaster. In the event it is a success, it still entails an expansion of the government’s role in the economy, and shifting the service from public to private must be an ugly venture since the business must be a good stream of revenue.
In general I think the premise of the entire thought experiment is absurd. The government has no role to begin with to compete for demand in the market, if the idea is so great, perhaps the beuracrat should just go to the bank and take out a loan or team up with investors and proceed as a completely private venture.
I suppose it is possible for an extremely perceptive Government to run a successful enterprise. Lets say it creates and runs a business in the exact same manner as a profitable entrepreneur would in a parallel universe. Maybe it is profitable enough to be self sustaining. While what is seen is indeed a boon for the economy, it can never be as efficient as its private cousin, because of the start up cost being socialized, even if it was immediately privatized afterward. And even this is far fetched.
So yes, the Government can theoretically operate a profitable enterprise.
There’s an expression in french which goes roughly like this “with ifs you can transform the world” and in maths also if you base your argument on false assumptions you can prove anything even the most false proposition like 1 equals 0 so stop asking your self if Obama were all knowing, since he isn’t it would just fail.
question. at the point where this unicorn gets self sustaining from its customer base, what is it about the ‘business’ that makes it more sensible to still call it ‘government’ rather than ‘private’?
It could happen through dumb luck. The government could accidently make something efficient, just like the free market could accidently adopt poor trends and memes.