Public service eliminates, in law or in fact, private services of the same nature.

Frédéric Bastiat
Economic Harmonies

Frédéric Bastiat is trying to define what services would be legitimate public services and which ones should remain in the private sphere. To this end, he exposes the sophism of trickle down economics, which, at the time, was used to justify public services. He analyses as well what are the common features of the ones and the others that allow to accept the legitimacy of a service, even if it is a public service.

However, today’s quote is warning us about a major characteristic of public services that is also one of its weaknesses, namely the absence of competition. Indeed, public services are sometimes monopolistic by the simple fact that governments decrees that it can only be provided by government but they are also monopolistic in fact without any need to legislate. To the extent that the financing is done through taxes, public services are not subject to profitability constraints and their price is not discovered through the law of supply and demand. It is therefore impossible for a private agent to offer a service of the same nature that would demand from the client an acceptation of the price while he could obtain the service for a non competitive price offered by the government, or even for “free”.

This assertion is of major importance because we know that competition is what will allow services to evolve in order to respond better and better to the needs through innovation. When we observe that some public services are sclerotic, it is often for this reason – the incentives of the entrepreneur tend to improve price and quality but not the incentives of government (which might indeed improve a service from time to time but is not constrained to do so because of competition).

Other quotes from Private and Public Services:
Exchange – Value – Monopoly – Individual – Responsibility – Rights – Revolution – Ethics

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