How Taxing Utilities Can Keep Governments In Check

Under free market, all companies can talk all they want that all the stuff they put there is for my own good. However, if the product is overpriced or if it doesn’t serve my interest to get the product, I just don’t buy it.

No companies, full with corruption and inefficiency, will last in the market, unless it is governments companies.

The same mechanism doesn’t apply to governments program.

Indonesian governments build airplanes. It doesn’t make business sense. Then every one is required to buy air plane stocks. Then governments sell the planes to Indonesians’ airways companies.
Bad business gets smaller, smaller, and gone. Bad governments business gets bigger and bigger. There is no check and balance mechanism whatsoever to ensure that when governments spend money the money worth spending.

When governments build public school, people simply says that it benefits the people. Yet, how do we know that the benefits worth the cost? Governments’ public school can be plagued with corruption and efficiency. What are the intensives that the school boards will care about the kids’ interests when deciding curriculum?

Recently we heard costly debate on whether evolution or creationism that should be taught in school. Face it. Do we care? Most of us would rather learn business or economy so we can make big bucks.

I took graduate level Math classes straight without prerequisites and got As easily. Do I need to pay expensive teachers? Different kids have different needs and capability that properly harvested can really cut down costs of education. How do governments’ regulated system adapt to it?

However, the harm of governments’ program can be greatly reduced by requiring anyone that uses it to pay for the utility. That way, if governments build a pyramid and no body visits it then we know that its money wasted.

The list can go on and on. Currently poor people use bikes and the rich use car. Yet governments pay to build roads. The usage of roads is proportional to the usage of gas. There will be less cars and more bicycle if governments tax gasoline and use the money to build roads. That way, people that work at home (like me) and save a lot of cash hence getting rich faster. The only time people will buy car is if it worth’s to pay for the car and the road.

The exception to this principle is on business with economic of scale. Some Nobel winner, like John Nash, argues that deviation from competitive equilibrium is inefficient and encourages governments to actively split monopoly, or even create public monopoly. Some like Milton Friedman argues that even though it is true that some economic of scale is un-efficient. However, there’s nothing you can do about it. After all, the only naturally occurring worldwide monopolies nowadays are diamond monopolies, which will be toppled if it goes too much. The market failures fail to exceed typical governments’ failure.

Hence, I have no strong opinion.

If our country is full with corruption then cost for governments’ failure is huge. So market mechanism is the way. If corruption rate is relatively low, we may be able to play around safely with some governments’ intervention. Watch out for what Friedman says.

About the Author:

Jim Thio is a silver medalist in International Physics Olympiad. He uses his Math skills to provide free financial, business, and marketing advices in http://FasterFinancialFreedom.com/art.390.0.html

 Jim Thio

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