Reflections on the intersection of economics, history, politics, psychology and science

While serving as locally elected officials, we’d hear all the time from residents asking us why government didn’t act more like a business. After all, isn’t it capitalism that made this country great, so why doesn’t government operate in the same way? This podcast explores why most of us wouldn’t want government to act like a business while highlighting areas where government can learn from business. It ends with some recommendations on what we can each do to ensure government doesn’t get overwhelmed by the misapplication of business principles.

What most of us tend to forget, at least occasionally, is that government institutions exist for a different purpose than businesses. Which means we should expect them to operate by a different set of rules. The distinctions are not trivial or accidental, but based upon each institution’s specific purpose and design.

It doesn’t mean government can’t learn from business. But it’s a false premise to suggest that government can “act” like a business. These major differences include:

  • Very different goals and missions
  • Ability for businesses to “pick” their customers vs. a universal service model for government
  • Difference between “efficiency” and “efficacy”
  • Appropriateness of differing risk tolerances
  • Clarity – or lack thereof – in measuring success​​
  • Time frame for the impact of current decisions
  • The openness of government (and participation of constituents in the process)
  • Role of competition 

In addition, government is in the odd position of both being an enabler of capitalism (providing the regulatory environment to promote business and innovation) and a check on its potential excesses. And we must not forget the unfortunate feedback loop built into our economic/governance system: economic power corrupts the political system which purportedly manages it. 

However, there are areas where government can learn from business – which is distinct from “acting” like a business – most particularly in the areas of communication, technology, and financial reporting. 

The podcast concludes with recommendations, which includes areas where we actually need to hold government to a *higher* standard than businesses.

Key Terms Used

Cherry Picking, Dunning-Kruger Effect, Friction (economic), Laissez Faire, Natural Monopoly, Public Good, Risk

Related Resources

The Myth of “Waste, Fraud, and Abuse”