<h2>Where Is Government’s Self-Correcting Mechanism?</h2>
<p>When a <strong>firm</strong> produces a product no one wants to buy or produces at a higher cost than its competitors, the firm is likely to suffer losses. If it cannot change its ways, it will go out of business. This self-correcting mechanism in the marketplace can have harsh effects on workers or on local economies, but it also puts pressure on firms for good performance.</p>
<p>Government agencies, on the other hand, do not sell their products in a market; they receive tax dollars instead. They are not challenged by competitors as are private-sector firms. If the U.S. Department of Education or the U.S. Department of Defense is doing a poor job, citizens cannot purchase their services from another provider and drive the existing government agencies into bankruptcy. If you are upset that the Internal Revenue Service is slow in sending you a tax refund or seems unable to answer your questions, you cannot decide to pay your income taxes through a different organization. Of course, elected politicians can assign new leaders to government agencies and instruct them to reorganize or to emphasize a different mission. The pressure government faces, however, to change its bureaucracy, to seek greater efficiency, and to improve customer responsiveness is much milder than the threat of being put out of business altogether.</p>
<p>This insight suggests that when government provides goods or services directly, we might expect it to do so with less efficiency than private firms—except in certain cases where the government agency may compete directly with private firms. At the local level, for example, services like garbage collection can be provided by government directly, by private firms under contract to the government, or by a mix of government employees competing with private firms.</p>

3174eb1e-1f1a-441e-ab1c-3ea3bb79e46a

Where is Government’s Self-Correcting Mechanism?

Economics studies social behavior guiding the allocation of scarce resources to meet the unlimited needs and desires of the individual members of a given society, and for the production of goods and services, growth of production and welfare over time, and a great variety of other complex issues of vital concern to society. 

Economics

Discover the principles and concepts that govern public economics, including special interest politics, identified winners and anonymous losers, pork barrels and logrolling, and flaws in the democratic system of government.


Where is Government’s Self-Correcting Mechanism?

Track Your Learning Progress