Free Markets (21) - Governments and Value

Governments do something different. They give their services away free, so they do not have to add value to ensure that people want them. We assume it is good that governments do not make profits, but this makes them dangerous. People do not have give anything up in exchange for government services, so the government does not have to worry about supplying products that than will make them better off.

Governments functions by taking from one person and giving it to another. This is a zero sum situation. Governments can only help one person by taking from another person. They do not add value, but shifts it from person to another.

A government will usually destroy value. The process of taking from one and giving to another has a cost, so governments never give as much as they take. They always keep some of what they takes, so governments inevitably destroy value. Economists call this deadweight costs.

The difference is important.

• Businesses operating in a free market create value to make a profit.
• Governments using coercion to transfer value add dead weight costs.

Profits result from benefiting people.
Deadweight costs are hard to justify.