Why does govt need cooperation with private sector?

For example, like building a road, public school or govt building, why govt gives the task to private sector why not done by themselves?

3 Answers

  • Anonymous
    8 years ago
    Favorite Answer

    It's really hard to have good planning. I'll use the example of road construction. Think of all the road projects in the entire country, and what a nightmare it would be to figure out exactly what you need (how many workers, how much material, etc.). People just can't track enough details simultaneously to manage such a complex system. It's much more efficient to simply announce a project, and let a bunch of different companies compete to offer the cheapest possible price. Also, when you come up with one big plan for everybody, it's usually disastrous when plans inevitably go wrong. This is the main reason why governments that have tried central planning have failed (the Soviet Union or the cultural revolution under Mao in China for example). It's much better to have a lot of people making smaller, more manageable plans. Companies that make predictions about the number of resources they'll need may go out of business, but the companies that make good predictions will do very well and be able to hire the workers and buy the material from the unsuccessful ones. What you end up with is a much more robust system that is less prone to massive failure.

    You may hear a lot about market forces. Essentially, the argument is that as long as groups of people are competing, the people that make the best decisions will end up controlling the allocation of resources, so a market of competitors ends up being a lot more likely to end up with a more optimal solution than a single deciding entity. This is the basic premise of the Free Market theory. However, this assumes that all the people are free to make whatever plans they want. Also, you want to be careful of how you define the "most efficient." This becomes a problem in areas like health care. When you have a heart attack, you go to the nearest hospital. You don't have time to decide which procedures you want, or which hospital offers you the lowest rates, so you aren't free to make choices or plan the most efficient course of action. Also, if you have a private insurance company, they are trying to make the most profitable decision. That doesn't always mean it's the best decision for you. An expensive drug might save your life, but if it costs more than your insurance premiums the insurance company will decide not to give you the drug. So you have to be careful of what efficient means (is that the most profit or the best health or a mixture of the two?).

    Lastly, you have the problem of externalities. In the above example with health insurance, an insurance company won't care if you're the most valuable person in the world, because they only want their monthly payment, so if they let you die rather than pay for treatment it ends up being a very inefficient decision for the society as a whole. These costs that have to be paid by someone but aren't charged to the decision maker are called "externalities." One of the main role of government is to tax activities that have a cost not borne by the person performing the activity. In the insurance case, your family could sue the insurance company for letting you die (the civil court being an important apparatus of government), so insurance companies have to weight that into their decisions.

    I know that got really long and complicated, but you asked the fundamental political question of our time.

  • Anonymous
    8 years ago

    The private sector is where the money comes from.

    The government taxes the private sector - to get the money they need.

    They should "cooperate" with the breadwinners...

    However - more often than not the GOVERNMENT Stifles private sector growth - with regulations and taxes.

    The government SHOULDN'T be in the business of picking winners and loser... yet GE paid almost NOTHING in taxes this year... and their CEO - just happens to be an OBAMA APPOINTEE... Hmmm.

  • 8 years ago

    You're joking right?

    It takes years to build a road now. You want to sit in traffic for the next century till the government manages to get the road built?

    Government and efficiency are antonyms.

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