Profit vs. Big Government Waste

One of the main reasons that government is so inefficient is because there is no profit and loss mechanism.

The profit and loss mechanism is the key to the efficient use of scarce resources and the creation of societal wealth. Profit tells the business owner that he or she is doing a good job of creating wealth in society through efficient use of scarce resources. Companies make profit by combining resources and selling them for a higher price. But the price has to be low enough so that consumers feel that they are better off after buying the product, otherwise they will not buy the product. If the business is losing money, this tells the business owner to stop what they are doing because they are wasting resources. Losses are a very important part of making the economy efficient; when inefficient companies go out of business, scarce resources are re-allocated to more efficient companies.

Unfortunately, poorly performing government programs are not forced to go out of business and are often expanded, wasting even more limited resources.