Why Government Is the Problem (Essays in Public Policy Book 39)

by Milton Friedman

The point is that self-interest is served by different actions in the private sphere than in the public sphere. The bottom line is different. An enterprise started by a group of people in the private sphere may succeed or fail. Most new enterprises fail (if the enterprise were clearly destined for success, it would probably already exist). If the enterprise fails, it loses money. The people who own it have a clear bottom line. To keep it going, they have to dig into their own pockets. They are reluctant to do that, so they have a strong incentive either to make the enterprise work or to shut it down. Suppose the same group of people start the same enterprise in the government sector and the initial results are the same. It is a failure; it does not work. They have a very different bottom line. Nobody likes to admit that he has made a mistake, and they do not have to. They can argue that the enterprise initially failed only because it was not pursued on a large enough scale. More important, they have a much different and deeper pocket to draw on. With the best intentions in the world, they can try to persuade the people who hold the purse strings to finance the enterprise on a larger scale, to dig deeper into the pockets of the taxpayers to keep the enterprise going. That illustrates a general rule: If a private enterprise is a failure, it closes down—unless it can get a government subsidy to keep it going; if a government enterprise fails, it is expanded. I challenge you t...