Why Government Doesn’t Work

October 25, 2009

Every once in awhile, I think it’s good to repost why government programs don’t work as well as free markets.

It’s because government programs funds are based on the intention of the program, while free markets are funded based on the outcome.  Failing government programs tend to get more money from the people controlling the purse strings, the politicians, in order to appear that they are working for the people and to buy votes. That’s called a negative reinforcing loop. In other words, negative consequences are rewarded and thus continued and strengthened.  This is like the parents who always bail their kids out of trouble and find out that their children can’t function as a productive member of society when then become adults.

Failing private programs get less money from the people controlling the purse strings, the customers or donors.  Customers and donors willingly buy from private programs that are producing desirable outcomes, otherwise customers would try something else.  This is a positive reinforcing loop.  Good consequences are rewarded and thus continued and strengthened.

People often miss, or discount, the strength of these positive and negative reinforcing loops.

They also seem to think that supporters of free markets believe that free markets are perfect and that any failure in a free market invalidates this belief.  They don’t understand that supporters of free markets readily understand that failure is present in both systems.  But, believe the self-correcting nature of the free market is better than self-destructing nature of the governmental system.

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