Why Government Screws Up

Abstraction is the problem. Government officials and their enablers in the academy have a habit of judging voluntary social and economic outcomes by arbitrary standards. From there, they go on to prescribe costly, flawed, and counterproductive social and economic policies.

For example: The “poverty rate” (an artificial construct) is “too high”; therefore, poor people should be given handouts, which only worsen poverty by disincentivizing work. Or “not enough” persons have health insurance; therefore, taxpayers must be penalized for their success by subsidizing the health insurance of low-income persons, whose health outcomes are barely affected by their easier (and costly) access to health care. Or blacks are “discriminated against” because they have lower grades, lower earnings, etc., than whites East Asians, and Ashkenzi Jews; therefore, persons in the latter three categories must be penalized (through adverse selection for jobs, promotions, university admissions), in favor of blacks — despite the fact that the noted disparities are due to differences in intelligence. (There’s more here, here, and here.)

Though much of the private sector has became government-like in its huge, bloated, rent-seeking rigidity, it remains inherently superior in its ability to detect and solve actual problems. Why? Competition and pursuit of profit. When an entrepreneur perceives a need, he perceives a real one — a product or service that fills a gap or improves on an existing product or service. Yes, the entrepreneur doesn’t always get it right, but because there are many, many entrepreneurs all seeking to satisfy needs, they get it right in the aggregate.

Entrepreneurs, unlike government officials and academics, aren’t trying to second-guess markets. Instead, they’re using markets to advance the interests of consumers, in the hope of making profits — which are the reward for advancing consumers’ interests.

Government officials and academics, on the other hand, have no skin in the game. Their “profit” comes from imposing their will on others, however costly, inefficient, and socially and economically counterproductive that may be. And when they fail, they aren’t held accountable, except occasionally on election day. But most government officials and academics are unaffected by that kind of “accountability”, so they aren’t deterred from making the same mistake (more government) again and again. Hope springs eternal failure isn’t penalized.

Government screws up because government officials and their academic enablers have no skin in the game. They are paid regardless of how badly they do, and their prestige depends not on the actual success or failure of their schemes, but on the mere adoption of those schemes.