There is only one organization on this planet that can ignore the dictum to invest wisely and not face financial ruin. As I have said, government, having no funds or resources of its own, must commandeer them from others. Unfortunately, there is not presently, nor has there ever been a measure with which to confirm that money so industriously earned and carefully accumulated by the citizen and corporation, and so mechanically seized by authorities is ever directed to pursuits that bear calculated, salutary and profitable returns for a community and its resident citizens.
Cost and Benefit analysis is a tool used daily by people everywhere to make responsible and prudent financial decisions in the allocation of scarce resources. There are always costs in the things that we do and there are always benefits. In every decision, one labours at making benefits exceed costs. If the fully examined and accounted cost of performing an action X is greater than the benefit of performing X, would any rational person execute X?
Corporations and individuals risk capital when expected rewards outweigh risks. With success one happily moves on to the next endeavor. With failure survival is not guaranteed. Government proceeds very differently.
Suppose a government requires $1 billion for some public venture: a job creation project consisting of workers digging holes in the morning and filling them in during the afternoon: an undertaking of overtly no worth. Funds are raised by taxes and spent accordingly.
When the nation initially earned the $1 billion subsequently commandeered, value was given for the income received. Owners of capital, entrepreneurs, and employees gave the economy $10 billion worth of production. They built, designed, engineered, piloted, and manufactured, performing a variety of economically worthy pursuits and supplying goods demanded by markets and consumers.
The Government’s Dig certainly consumed materials, equipment, and labor. But the public good elicited from the effort no one needs, no one values. If none of the laborers receiving pay had bothered to show up, the result would have been the same.
In Public Finance there is some accounting of the financial costs of public enterprise, often vague, erroneous and prone to many an upward adjustment. But there is no proper accounting of the financial benefits of building or improving roads, welfare payments, creation and maintenance of police and fire departments. If government were to adhere to sound accounting principles in the way the citizen and corporation do, it is certain that a great many efforts presently funded by the nation would cease or undergo broad and profound reformation.
The welfare state is a bottomless pit of waste and destruction. To offer perpetual aid without conditions only encourages a paralyzing dependency and idleness. Woe to those ensnared in such a life of misery, limitation, and poverty. The object should be an offer of assistance without impetus to sloth, aid to the afflicted to endure and surmount their ordeal. Instead of a perpetual pittance, the state could supply temporary loans to be repaid when the recipient’s circumstances have improved.
To pay someone an annual fee of $10000 would require an annuity valued at $200000 at a 5% interest rate. If one on welfare received such an annual amount, then the state's liability equates to $200,000. After an assessment of an individual’s need, the state may offer a loan to the person of perhaps $20,000 repayable with interest, perhaps for special training, to erase the financial liability and move him to productive endeavors. With a self-sufficient person raised from impoverishing drudgery a burden is lifted for all.
Education of children and youth is a necessity in our modern world. Without it a nation’s laborers may well find themselves in competition for jobs requiring little knowledge and furnishing meager pay. Powerful public education monopolies have ensured children are poorly educated as costs soar. If a community set standards and opened up the field of education to both public or private entities intent on meeting and surpassing them, the competition should induce the introduction of better methods and tools to enlighten, strengthen, and discipline the minds of creative children yielding measureable rises in incomes, leisure, standards of living, and the fruits of innovation.
What is the benefit of incarcerating troubled souls who harm only themselves? The authorities have deemed engagement in certain compulsive behavior a criminal matter at a great cost to us all. Should we treat those addicted to illegal substances as we treat those inclined to viciously assault and maim others? Vast impositions are placed on the freedom of all, violence and misery proliferate, medical costs soar, ever greater public and private resources are allotted and devoured, yet the supply of drugs flows in ever greater amounts to welcoming addicts.
Perhaps the state should place the problem of addiction in the medical domain where the afflicted may receive proper treatment. Doubtless, trained medical staff offering a safe supply of easily and cheaply procured substances to addicts under controlled conditions would release the community from an assortment of perilous ills and immense costs.
Government frequently interferes in markets in order to protect domestic enterprises from foreign competition. The authorities impose tariffs, import quotas, customs and excise duties, needless regulations, which force local residents and firms to pay higher prices for affected goods. A duty or tariff applied to imported steel manufactured, a common material, can ramify in greater prices throughout the economy. Do the costs to consumers and firms in compulsory subsidies and protections justify the benefits of maintaining inefficient industries or businesses, who employ better Washington courtiers than managers?
Dirty or disease laden water can cause a community grievous harm. In areas with scarce or rudimentary water treatment and filtration, one would expect that local hospitals and medical practitioners face persistent and frequently elevated demands from persons suffering all sorts of water borne maladies. Some of the great advances in human health and longevity occurred with the construction of sewage treatment facilities in thriving towns and cities of western nations transformed by the industrial revolution. If the costs to the community of water borne diseases in medical services, premature death, lost days of labor and other factors are calculated with attention, one may easily account the benefits of investments in water filtration, purification and distribution.
It is certain that members of a community without a police force or with only modest numbers to enforce the varied criminal laws would incur elevated and perhaps prohibitive rates of insurance for property and life. One may assess the worth of a region’s professional police department by measuring its size and cost against the prevailing insurance rates for life and property. If projected enlargement of area law enforcement costs yield only modest declines in insurance rates, the project should be shelved or a host of less inexpensive alternatives, tools and methods of detection and protection, used in combination or separately, such as firearms, cameras, intruder detection devices could limit policing costs, insurance costs and one’s exposure to the hazards.
One could measure similarly the value of a fire department by weighing its costs against the rates of fire insurance. If the costs of institution or expansion of a professional fire fighting force or equipment upgrades exceed the expected benefits of reduced insurance rates for an community, residents could turn to an availing number of alternatives such as a limited, well-equipped and trained force used in conjunction with local volunteer units, mandates of basic equipment such as alarms and sensors, extinguishers in dwelling and businesses, fire resistant materials, identification of and elevated staffing of areas more susceptible to fire outbreaks to gain needed protection and safety with justified costs.
The information contained in this crude and limited exposition is known, but thwarted by the desires of politicians, government staff, special interests, and incorrigible Keynesians to spend without justification. There is a solution to such invasive and potent self-interest. When government is compelled to evaluate the cost and benefits of its activities stripped of the right to confiscate and bearing a capital charge, the world shall be a far better place.
