“Government Should Be Operated Like a Business,” Part One of Two

In an editorial on Missourinet, Bob Priddy critiques the statement “Government should be operated like a business.”

On a high level, running government like a business is a good principle. Government should be as efficient, accountable, and transparent as possible because taxpayer monies are at stake. However, the statement “Government should be operated like a business” is a gross oversimplification. I agree with the author that there are many differences between businesses and government that make it nearly impossible for the government to operate like a business — but they are not the differences that the author describes.

He writes:

Here’s one big, really big, difference. When income slows, or when expenses rise, businesses can and often do increase their prices. Businesses, unlike government, like to make profits and many of them are not reluctant to increase their rates or their retail prices.

I think that the converse statement has more truthiness: Governments, unlike businesses, like to run a deficit and are not reluctant to increase taxes.

Here’s a different difference that the author overlooks: In the private sector, consumers decide to patronize businesses voluntarily, whereas they are required by law to pay money to government. If a person thinks that a price of a good or service is too high in the private sector, then she will choose not to pay. If a person thinks that taxes are too high, well, too bad, she has to keep paying them or get thrown in prison.

Here’s another difference: Because businesses face competitive pressures, they have an incentive to innovate their products, improve their services, drive down prices, become more efficient, etc. Government doesn’t experience this kind of competitive pressure, so it does not have an incentive to do those things.