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June 26, 2007

Can government be run like a business?

Some people say that if business principles were applied, taxes could be lower and just as much would get done. N.C. State University economist explores whether this is possible.

"The big difference between a business and government is that most businesses have a very, very simple objective, and that is to maximize profits. And everything they do is oriented around that goal," explains Dr. Walden, a professor of agricultural and resource economics. "In contrast, government has lots of objectives -- public safety, providing educational opportunities, helping the poor, et cetera.

"So you can argue that it's actually much easier to run a business, because you've got this one goal staring in your face, than it is to run a government and operate a government because there are so many competing goals," he adds.

"Now that said, what can be done, I think, in government is to employ something called performance accounting. That is, define whatever the objective is of the government program -- like criminals apprehended, students graduated -- and compare the cost and the inputs to those objectives. Sort of like do a constant cost-benefit analysis," Walden says. "So in this case you are substituting the objective of the government program for profits, and then you are seeing how close are you getting to that objective using your money and using your people."

Posted by deeshore at June 26, 2007 08:00 AM