Sunday, February 10, 2019

Government Assistance Programs

 The economics of why Government's manage to go over budget



The government identifies a problem.

The government decides it needs to create an assistance program.

The government allocates $x to finance this assistance program.

A bureaucracy is employed to manage and run this assistance program.

The bureaucracy manages to absorb most of the $$ available for the assistance program in salaries, wages, consultants fees, expenses.

How much $$ is left for actual assistance to public?

The government allocates increased funding to support assistance program.

Bureaucrats increase number of staff employed to implement program.

Extra funding is again absorbed by...operational expenses...etc etc etc.


Part 2
When the government decides that privatizing this program will become more efficient.

Private enterprises put in tenders for contract with government

Either lowest tender wins bid or

Collusion amongst bidders sets floor for bidding  or

Government bureaucrats are influenced by under the table incentives to favor tenders or

Politicians with conflicting interests influence tender selection process

Whoever wins contract is motivated by profit incentive.

Profit incentive is directly in conflict with need to provide assistance to public because it reduces profits.

Part 3 
 Government decides to nationalize private enterprise mentioned in Part 2

No comments:

Labels