Friday, November 1, 2013

The Challenges of Government Run Marketplaces

The news outlets have been buzzing about the collosal failiar of the U.S. government's new Healthcare.gov website and with good reason. It is estimated that the new site has nearly 500 million lines of code! That's an incredible number. To put things in perspective the Mars rover Curiosity had only 500,000 lines of code.

Add to this debacle the fact that the system was estimated to cost over $600M to build and will need at least a couple hundred million more to fix - if they don't scrap it and start from scratch which would be the better option. Hopefully this is a bright red warning flag to Americans that this is what happens when we allow governments to monopolistically insert themselves into sectors of our economy.So this begs the question: why can't the most powerful government in the world build a proper website? The answer boils down to the very basic nature of how governments operate. First of all governments enjoy priveledges that are very distinct and separate from those of individual citizens.

For example the legal right to use physical or lethal force. Governments also have the legal right to confiscate wealth. You may call this a tax and you may be ok to various degrees on the amount of such a tax rationalizing that the government does provide services with the tax dollars it receives. However taxes are not voluntary regardless of your level of dissatisfaction with how the tax dollars are used which is a key difference from private markets where you get to spend your money with the individuals, groups or businesses that you feel offer you the best value and service. If you were dissatisfied with a business you could simply stop using them however with a government that is not even remotely possible (without giving up one's citizenship at least) and not only do you have to pay for a service that you may not like they have the legal authority to use physical force if you don't e.g. incarcerate you for not paying taxes.

So let's summarize. Government's can use physical force legally and can use that physical force to confiscate its citizens wealth. That's their business model. They don't produce revenue they take it. If other businesses had that power would they strive to make inexpensive high quality products and services? Certainly not. Well then is it any surprise we have a $600M broken piece of software that we are all forced to use?

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