Tue, 11 Oct 2005

Risk and Reward

Probably the biggest argument against government action is the relationship between risk and reward. Whenever any government agency or private enterprise is directed to take action by a bureaucrat or entrepreneur respectively, there are risks and rewards. These are not apportioned equally in the two groups.

When a bureaucrat directs his agency to take action, he is taking the risk that the action will be wrong. The action may very well not pan out. If that happens, because he took the initiative, he will be blamed. Consider the case of Gary Miles, candidate for St. Lawrence County District Attorney. He received evidence that Dr. Latimer was prescribing large amounts of painkillers (opiates). Rather than charge Dr. Latimer, he hounded the doctor out of office through a trial by press release. For this he is being criticized and will probably lose his election to Nichole Duvé.

Let's say, though, that the action that the bureaucrat took was correct. He will receive scant reward for his efforts. The public will not remember his good deeds later, at election time. Doing well is only his job; people don't consider him worthy of reward simply for doing a good job.

Contrast this with the risk and reward available to entrepreneurs directing private enterprise. The risk is still there. Just look at HP (fired its CEO and laid off 10,000 employees). The reward, however, is substantially greater.

You can predict, then, that given scant reward and substantial risk, that bureaucrats will underperform their equivalents in private enterprise when in control of the same resources.

UPDATE: he did lose to Nichole.

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