Why Government Doesn't Work

there are no consequences for bad outcomes

Libertarian Party candidate Harry Browne observed in his 2003 book, Why Government Doesn’t Work, that the incentives of government and the incentives of a free society are fundamentally incompatible. That’s because government does not operate through voluntary cooperation and market feedback, but rather through coercion, monopoly, and politics. In other words, the chronic failure of government is baked into the system.

Unlike private enterprises that must earn their revenue from willing customers, government survives regardless of its performance. If a business provides a bad product or service, it loses customers. But if a government program fails, it often gets more funding. That’s not simply a flaw of government, it’s an operating principle.

A major flaw is that the people who run government have no personal stake in the outcomes of their policies. As Thomas Sowell noted, “It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong.” Whether a welfare program helps or hurts its intended recipients or whether a regulation backfires or succeeds, the bureaucrat still gets paid and the politician gets points for “caring.”

It is easy to see how the incentive structure of government is upside down. In the private sector, success is rewarded and failure punished. In government, failure can be rewarded while success is often ignored.

The War on Poverty, initiated in 1964, was intended to lift people out of dependency. Trillions have now been spent and dependency has not only persisted, it has deepened. Single-parent households increased, job participation stagnated, and entire generations have become trapped in the system. These programs didn’t alleviate poverty so much as they institutionalized it.

Too often, government programs are judged by their intentions, not their outcomes. If a policy is presented as compassionate, it seems to be considered morally superior, even when it leaves people worse off. By contrast, a private business must deliver results. A grocery store that keeps empty shelves goes bankrupt, no matter their intentions.

One problem is that the vision of politicians seldom extend beyond the next election cycle. They focus on the short term and neglect to consider the consequences that will emerge down the line. When the government guarantees loans, sets price controls or inflates the money supply, the benefits are immediate but the costs are not.

Inflation is a classic case. When the Federal Reserve creates money to finance government spending, it is widely regarded as a painless boost. More money becomes available for schools, infrastructure or stimulus checks. The rising prices and economic distortions come later. In effect, inflation is the government's way of taxing without asking. They bank on the fact that most citizens don’t know who to blame when their dollars buy less.

Every problem becomes an excuse for another intervention or another bureaucracy. Yet no program ever ends. Government is the only institution where failure is used as evidence for more of the same. When health care is expensive, the answer is more subsidies. When schools fail, the answer is more federal involvement. The root problem of government interference itself is rarely on the table.

A free society can only work when people are persuaded rather than compelled. Life is about trade-offs and each of us should decide for ourselves what makes the most sense. We insist on value for value. In the marketplace, bad ideas die quickly. In government, bad ideas can live forever — sustained by force, inertia, political posturing and employee unions.

Harry Browne dismantled the conventional myth that government is a necessary tool for fairness. He pointed out that bureaucrats are not about dispensing fairness, they are about redistributing power. Lobbyists pay a great deal for that power and, as we know, it is he who pays the piper that calls the tune.

The real question is not whether government is capable of doing good things. At least in theory, it can. The real question is who decides what is to be done, and who pays the price when they’re wrong. In a free market, you decide — and you bear the consequences of your decisions. In government, someone else decides, but you still bear the consequences.

Government doesn’t work because it’s trying to do things that cannot efficiently be done by force. Managing economies, educating children and eradicating poverty all require feedback, experimentation and accountability, all of which are lacking in government bureaucracy. If it can be done in the free market, it should be done in the free market. Freedom works better than force.