Even though this challenging concept has been widely attributed to Thomas Jefferson, thousands of philosophers and other thoughtful people have echoed it. And for good reason: There is widespread agreement that while the goal of government is to provide services that serve “public” or “taxpayer” interests, defining these interests is subject to marked disagreement.
FAILURE TO achieve consensus enables politicians to argue that virtually any government activity is consistent with taxpayer interests; hence, by default, this points to runaway government expansion. But to help halt this reckless binge does not require a meeting of the minds on the interpretation of these interests.
Here is why.
For centuries, political scientists and jurists have debated the proper conception of public interests. We manage to achieve sufficient consensus to enable us to govern, to muddle through. But the concept still remains a vague notion for our legislative bodies to wrestle with. It overhangs the governing process like a bone stuck in the throat.
So we resort to the rough tactics of political wrangling, with deals, back-scratching, corruption and other associated sordid actions. Collective decision-making under these circumstances is tough for the conscientious, easy for the loose, the corrupt and the opportunists.
TO TOP IT ALL, we face the formidable obstacle that special interest groups, including “crony-capitalist” and labor segments, overwhelmingly dominate the demand for, and allocation of, resources at all levels of government.
To the degree possible, provision of public services should be undertaken by people in the much-maligned private sector. In contrast to the public counterpart, their goals are well-known, and we accept the self-interest of private enterprises in providing competitive products and services.
Buyers seek the lowest prices, and open markets (freedom of entry to producers) help ensure competition. And to aid in the alignment of management goals with those of shareholders, the latter can sell their shares putting pressures on management. Taxpayers, however, as unhappy citizens do not have this option. They only have the ballot, while shareholders have both a ballot (to elect management) and the option to sell their shares.
OBJECTIVE PRIVATE management performance measures are readily at hand. In comparison, the government sector provides an ongoing struggle to come up with such metrics because of the inherent ambiguity in the aim: public or taxpayer interest. Ironically, our proposal may be construed as being consistent with taxpayer interests.
By making the search for a consensus irrelevant, the presence of a free market renders unnecessary the search for an objective definition. Operating through free-choice and supply and demand, the market determines what and how much is wanted by those who are willing to pay for it, rather than by politicians, judges or bureaucrats. And supplies are brought forth by those willing to risk their resources (capital) to produce and market the product.
The gross domestic product is the result of consumers and producers exercising their right of free choice. This activity brings competition, the most effective and efficient regulator of all. (Even in the extreme case where every firm is a virtual monopoly, the presence of relatively close product substitutes allows rivalries to prevail.) Since consumer demands bring forth the output of goods and services, GDP becomes a free-choice GDP, if you will, not a government-allocated one.
IN FACT, DESPITE overbearing government controls, regulations and price fixing, and despite media complaints of deceit, fraud, shams, scams, rip-offs and “market failures,” the remaining free economy produces such an amazingly unbelievable flow of products and services so smoothly, and with such efficiency, that we are barely conscious of its existence. Indeed, because of our lack of understanding of economics, we take this huge success for granted.
On the other hand, a prominent illustration of a losing public venture is the U.S. Postal Service. As a public disaster, it is many times worse than the Solyndra fiasco. It is a classic example of a venture that can and should be humanely phased out as soon as possible. The Constitution authorizes, but does not require, its existence. But lacking well-defined objectives, the Postal Service cannot operate efficiently. Further developments in the incentivized, innovative, competitive private sector promise to accelerate its decline, dragging mounting taxpayer obligations with it.
Shifting more, if not substantially all, responsibility for economic activity back to the private sector (thus enhancing the growth of free-choice GDP) is not only in the interest of each individual, but government would be heading in the direction suggested supposedly by Jefferson – of governing best.
Eliminating long-standing obstacles (such as the Minimum Wage Act) to the efficient functioning of a free-choice economy may be an impossible dream, but it is worthy of our unrelenting efforts. The philosophy attributed to Jefferson was, and is, right.
(The writer is a professor emeritus of financial economics at the University of Georgia. He lives in Aiken, S.C.)