Saturday, October 23, 2010

Why, for the most part, government fails

The question comes up a lot in debates involving government efficacy. Why can't the government run the health care system, they ask. Or, why can't the government regulate our drugs, or our food. There really isn't a good answer to these questions. The government could in fact run our health care, or regulate our food and drug. It's not that government physically can't do these things (although constitutionally the federal government can't, but that's for another time), it's that they don't do them as well as private alternatives.

One of my reasons for this is that the government doesn't have an efficient division of labor. You have tons of industries, but only one regulatory body to control them (the government). How could you expect one body to effectively or efficiently manage an entire industry? It just doesn't work like it should, corruption can so easily leak through.

Take the FDA. The FDA is the only body that can approve drugs, and they are expected to do so on behalf of the ENTIRE pharmaceutical industry. There's no way that one organization could really do this, so it causes problems like delays in approving drugs, or letting drugs pass that are dangerous, etc.

On the other hand, what if we had private "regulatory bodies" that oversaw industries. What if there were 10 such companies that tested drugs, and competed against each other to do it more efficiently and accurately. There would be a sufficient division of labor that all of a sudden regulation could become more efficient and less destructive on the industry.

You can't get that with government. Even if the government created 10 FDAs, they wouldn't be competing because they all fall under the government umbrella; they are on equal playing fields.

So, in short, government fails because there is no division of labor in government. One agency attempting to control an entire industry simply cannot succeed.

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