(06-11-2010, 08:18 PM)--Pete Wrote: The cost to supply a service is the same, independent of who pays for it.I don't think this is true. There are very real differences in cost and quality between what the government can provide, and what private companies can. That's at the core of the pragmatic debate over government spending, ideology left aside.
Some sectors, like the military, or the courts, cost less (all things considered) in the hands of the government. This has not always been true, but in the modern state, it almost certainly is. Economies of scale and sovereign power are simply too important to revert to some other private model of law and order. Safety regulation might also be possible in a totally market model, but the informational costs would likely be crippling. (Or not, some disagree.) We've debated education and health care, but I think those are also sectors where the unique powers of government allow for lower costs. Governments can overcome coordination problems by force of law, which may open up equilibria that are unreachable in purely private affairs.
Other sectors are almost certainly better in the hands of private corporations - they can keep their overhead down, and provide lower prices. Government bureaucracy is ill-suited to running taco stands, or designing video games.* I don't need the government interfering in the basic consumer economy, and the distortions that would follow would almost surely outweigh any benefits.
Finding a sensible division of labour between government and private industry is very much a matter of finding out which creates fewer costs, all things considered.
-Jester
*Tetris aside.