Saturday, April 29, 2006

The Role of Government (part 3)

People are ruled by incentives, nothing more and nothing less. When your paycheck depends on returning customers and their business, you will provide good customer service. When you face competition, you will work to ensure that your customer service is better than your competitors are. When you face the risk of bankruptcy, you make sure customer service is an essential part of your business plan.

Some people think that customer service is a cultural thing. If someone in government doesn’t provide good customer service, it’s because that person wasn’t raised the Samoan way. Some think customer service is a question of honesty. If only honest people ran government, then there would be good government customer service (or so the logic goes).

But when someone’s pay doesn’t rely on satisfied customers, face competition or risk the threat of bankruptcy, then that person doesn’t have those incentives to provide good customer service. It’s that simple. Don’t you like the fact that if McDonalds doesn’t give you what you want, you can withhold your dollars and go to KFC? You hold McDonalds accountable and transparent by the simple fact that you have the freedom to choose.

Now some people believe that government can adopt private sector methods to make it better. But private sector strategies are bred out of competition, risk-taking and failure. The only real way to implement private sector methods into government is to force departments to face the same incentives such as profit seeking, competition and risk-taking. Such incentives are possible in government with the implementation of revolving fund operations, user fees, outsourcing of nongovernmental functions, performance-based pay and management and elimination of failing programs.

As soon as the ASG can adopt such practices, it will soon find that it can lighten its burden and allow market-based incentives to improve services to the people of American Samoa. Its costs will come down lessening the urge to raise taxes and allowing the government to focus on protecting the people’s rights to their life, property and liberty.


At 6:48 AM , Blogger Stuart K. Hayashi said...

Another excellent commentary, Tali. ;-)

What is the total number of installments that your "Role of Government" series will come in?

I believe that the incentives that guide human action (to use economist Ludwig von Mises's term) are actually a derivative of something else that serves as the standard for those actions -- life.

As Ayn Rand's Objectivist philosophy notes, life is about "self-sustaining and self-generated action."

There are two ways that a person can sustain his or her own life -- by refraining from using force and by dealing with others in only a consensual manner, as busineses must do in a free market, or by taking from people by force.

Government does the latter, as I noted in "The Invisible Gun." What perverts the incentives of the government agency is that it allows those within it to sustain themselves at the expense of other people at gunpoint -- and this especially happens because even government employees themselves are not fully aware of the magnitude of what happens to those who do not pay their taxes.


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