I operate recreation areas in the US Forest Service and from time to time get criticized that my profit adds cost to the management of the facilities, and that the government would clearly be better off with a non-profit running the parks since they don't take a profit. What they miss is that non-profits historically do a terrible job at what I do. They begin in a burst of enthusiasm but then taper off into disorder. Think about any non-profit you have ever been a part of. Could they consistently run a 24/7/365 service operation to high standards?
Don Boudreaux has a great quote today that touches on this very issue
from page 114 of the 5th edition (2015) of Thomas Sowell’s Basic Economics:
While capitalism has a visible cost – profit – that does not exist under socialism, socialism has an invisible cost – inefficiency – that gets weeded out by losses and bankruptcy under capitalism. The fact that most goods are more widely affordable in a capitalist economy implies that profit is less costly than inefficiency. Put differently, profit is a price paid for efficiency.
It is also the "price" paid for innovation.
Several people say that I have missed the point in my post here - that the issue is
with mobility, particularly in multiple generations. They argue that
the rich of the next generation are likely to be the kids of the rich
of this generation, that success now depends on education and
connections that only the wealthiest can buy for their kids.
A couple of thoughts on this. First, the Times's own data (plus
many other studies) doesn't bear this out, particularly with new
immigrants. Thomas Sowell addresses this in more depth here and here,
and suggests that the explanation may lie more in values and
aspirations than in purchased stuff. Marginal Revolution, for example,
had this thoroughly depressing story featuring a study by Harvard economist Roland Fryer on the social pressures in many African-American and Hispanic neighborhoods to under-perform in school.
My other thought on this is that to the extent social mobility is
slowing in this country, our public education system is a major
culprit. Forget for a moment about quality issues. Schools have
increasingly emphasized self-esteem over achievement and competition.
Standards are lowered, and the value of exceeding standards or
improving performance is downplayed. Without other influences,
students will walk out of public schools with a value system vis a vis
achievement and competition and performance that leaves them totally
unprepared for the real world. I am reminded of one of Bill Gates' pieces of advice to graduates:
Rule 8: Your school may have done away with winners and losers, but life HAS
NOT. In some schools they have abolished failing grades and they'll give you as
MANY TIMES as you want to get the right answer. This doesn't bear the slightest
resemblance to ANYTHING in real life.
Kids with parents who have achieved in some way in the world are likely
to overcome this by the example and exhortations of their parents. But
what happens to kids without this example? Or kids (lacking voucher
programs) who can't afford to escape the public school system cult of
mediocrity for high-achievement private schools or home schooling?
Ironically, the very people who bemoan income inequality and lack of
mobility are the very same people who have gutted the public education
system. These are the people who deal with inequality by flattening
down the peaks, which is exactly what they have done in schools,
eliminating valedictorians and substituting social promotions.
In a followup post to the impact of "smart growth" policies on housing prices and availability, Tim Cavanaugh has this in Reason:
What's weird is how rarely, in San Francisco media, you'll hear the above
argument made at all. The "crisis" in housing prices is almost invariably
described as an inexplicable force of nature (in the local TV news) or as a
conspiracy by developers (in the alt.weeklies). You'd think, in a city full of
progressives who can talk all day about how they wish they could afford a home,
somebody might have started to wonder whether there's a connection between
political decisions and the fact that the city is remarkably segregated and
He has more, as does Thomas Sowell:
That fact has much to do with skyrocketing home prices. The people who vote on
the laws that severely restrict building, create costly bureaucratic delays, and
impose arbitrary planning commission notions need not pay a dime toward the huge
costs imposed on anyone trying to build anything in the San Francisco Bay area.
Newcomers get stuck with those costs...
People who wring their hands about a need for "affordable housing" seldom
consider that the way to have affordable housing is to stop making it
unaffordable. Foster City housing was affordable before the restrictive land use
laws made all housing astronomically expensive. Contrary to the vision of the
left, the free market produced affordable housing -- before government
intervention made housing unaffordable.