Comments (12)

• fundamentalist

  The Journal of Markets and Morality on the Acton Institute site has a good article on government and morality. The author writes that many people consider working in nonprofits or government because they consider it morally superior to working for profit. Most people, and many “scholars”, assume that altruism motivates people in government. The author does a great job of refuting that nonsense.

  The journal also had translations of economic writings by Leonardo Lessius, the scholar who brought the free market economics of the School of Salamanca to the Dutch Republic. This is off topic, but I have often posted about the Dutch Republic being the first capitalist nation and I think these translations demonstrate why it was so.
  

  Published: February 19, 2008 8:50 AM

• jason4liberty

  "In either situation, more is being thieved, with nothing of value being created."

  Would it be more accurate to say:

  "In either situation, more is being thieved, with no objective way to measure the value of what is created."

  I completely agree about the theft/compulsion part. But government doesn't always do what private industry would not do. If a private company built a bridge and charged a toll, then they could objectively assess value. If the government built a bridge instead of letting private industry do it, value might be created, but there is no way to measure it. And whatever value was created (if any), does not justify the theft of the tax dollars in the first place.

  Published: February 19, 2008 9:15 AM

• William H. Stoddard

  It seems to me that there is a perfectly straightforward way to describe the profit and loss situation of a governmental entity. Its costs are the funds it spends on whatever activity it engages in; its revenues are the funds it gets from the taxpayers, as directed its way by the dictator, or the legislature, or the planning board. And it can engage in profit-maximizing behavior of a sort by acting in such a way as to encourage the flow of more funds in its direction. For example, at the end of the accounting cycle, if it has unexpended funds, it may expend them on special projects or durable goods, so that it can go to the budgeting agency and say, "Look, we spent all the money you allocated to us! We need a bigger budget next year!"

  The problem comes, in part, from the fact that the budgeting agency may have perverse goals; but that could be true of customers in an ordinary market situation, too. A bigger source of the problem is that the budgeting agency itself is extracting the funds by force.

  Published: February 19, 2008 9:51 AM

• Mark

  I don't think we have to worry about the government accumulating net assets. The far bigger danger is the government accumulating net liabilities. This is definitely the bigger problem in the US at the Federal level, which incidentally doesn't have to use accrual accounting and doesn't include accruals for the massive Medicare and Social Security liabilities when preparing budgetary results. The true deficit is far more massive than is being reported. I am *definitely* in favor of accrual accounting, but it will never happen at the Federal level because our politicians don't want the truth of our budget to get out.

  Published: February 19, 2008 10:03 AM

• Harry Wood

  Ok Jim, be careful what you ask for... In your article you wrote "If government is of the people, and I am one of the people, shouldn't I include changes in the net assets of my local school district in my financial portfolio?" If that were true you would be taxed on those assets.

  Published: February 19, 2008 11:48 AM

• Brad

  ***which incidentally doesn't have to use accrual accounting and doesn't include accruals for the massive Medicare and Social Security liabilities when preparing budgetary results***

  Mark,

  While perhaps true for budgeting purposes, the US Government IS on the accrual basis for its Financial Report, and has done so the last several years. It is given to the President and Congress, and with it reporting a $50 Trillion accrual basis debt, there is no where for these illustrious people to hide, they can't say they didn't know.

  http://www.gao.gov/financial/fy2006/fy06finanicalrpt.pdf

  An excerpt from Comptroller General Walker's letter-

  Accounting and financial reporting standards have continued to evolve to provide greater
  transparency and accountability over the federal government’s operations and fiscal
  condition. Beginning in fiscal year 2006, the Statement of Social Insurance, which shows
  long-range actuarial projections of scheduled social insurance benefits in excess of
  earmarked revenues, became a principal financial statement.3 This new statement shows
  projected scheduled benefits exceeding earmarked revenues by approximately $394
  trillion in present value terms for the next 75-year period.5 Considering this long-range
  projected funding gap in social insurance, in addition to reported liabilities (e.g., debt
  held by the public and federal employee and veterans benefits payable) and other implicit
  commitments and contingencies that the federal government has pledged to support, the
  federal government’s fiscal exposures totaled approximately $50 trillion as of September
  30, 2006, an increase of about $4 trillion over September 30, 2005, and up from about
  $20 trillion as of September 30, 2000.6 This translates into a current burden of about
  $170,000 per American or approximately $440,000 per American household. Also,
  beginning in fiscal year 2006, the consolidated financial statements reported earmarked
  funds activity separately from nonearmarked funds activity.7 For fiscal year 2006,
  earmarked funds revenue and nonearmarked funds revenue totaled about $1,094 billion
  and $1,532 billion respectively. In addition, for fiscal year 2006, earmarked funds had
  reported net operating revenue of approximately $172 billion and nonearmarked funds
  reported net operating cost of approximately $622 billion.

  Ahhh ,what a fire storm such reporting has brought, eh?

  ALL of this, year after year, is dutifully ignored by our elected officials, the main stream media, and the electorate, all despite Walker (essentially the head accountant of the US Government) criss-crossing the nation last year trying to make an impression that we are fucked (put as intelligently and civilly as I can given the circumstances).

  So, basically, this isn't hidden any longer. It is just being ignored by Statists and the vocal minorities that support them.

  Published: February 19, 2008 12:27 PM

• dunbrokin

  Fundamentalist:

  What is the title of that essay on nonprofits and morality?

  Published: February 19, 2008 4:36 PM

• billwald

  First 3 paragraphs start out wonderfully then degenerate into "value produced . . . ." Value is a subjective market place determination, not an enter found in an account ledger.

  Whenever a TV commercial states something like "This product has a value of $$$ but we are giving it to you for only $$" you can be assured that its maximum "value" is $$. And if the commercial goes on to say, "If you respond within 15 minutes we will send you two of the things for only an extra fee for shipping and handling" You can be assured the max "value" is $ and they are making their money from shipping and handling fees.

  The point is that the Government has never kept an honest set of books according to GAAP, which has nothing to do with the value of the product.

  Published: February 19, 2008 6:56 PM

• fundamentalist

  dunbrokin,
  It's "Altruism, Self-Interest, and the Morality of the Private Sector: An Austrian Approach"

  Published: February 19, 2008 9:43 PM

• newson

  dunbrokin and fundamentalist:
  subscription required to access "altruism etc." pity.,

  Published: February 20, 2008 8:48 AM

• Jim Fedako

  "Value is a subjective market place determination, not an enter found in an account ledger. "

  Billwald,

  Value is purely subjective, it is not a product of the market or market prices. In fact, the market price is the maximum/minimum value for the seller/buyer. But, we never know their true valuations.

  If I buy the Ginsu knife AND sharpener for $19.99 plus s/h, it means I value the two items more than the price. I may value them at (say) $100, but you can't equate my valuation as the market price.

  That said, you are indeed correct that value is not a ledger entry. I didn't mean to imply that it is.

  Published: February 20, 2008 12:25 PM

• Jim Fedako

  Subjective value that is.

  There are market values that do have ledger entries. But, the $50 million high school has no market value to be entered. All we know is it's cost.

  Published: February 20, 2008 12:38 PM