Why Not For-Profit Government?

Centuries ago, most commerce and production was organized around individuals and small groups. Since then, we’ve seen enormous innovation in business forms and structures. Today, such forms are much larger and more complex, and they do most everything of importance in our world.

We have apparently learned a great deal about how to best run such orgs, and we expect to learn much more in the coming centuries. And one of the biggest things we’ve apparently learned is that businesses are usually most efficiently structured as for-profits, wherein owners can replace management, and get a share of net profits in trade for prior investments. (Also using many other modern business methods.) For example, in the US today only 14% of workers are employed by governments, and 10% by non-profits; for-profits employ the rest.

(Note standard econ theory explains why the winning form tends to be best for everyone, overall, not just best for investors.)

Over those last few centuries, we’ve also seen innovation in the organization of governments. But that evolution has been slower, and it hasn’t yet converged nearly as much on one main winning strategy; there are still many of different forms of government around. For example, only about half of nations today are considered democracies. And although many have wanted governments to displace for-profits in many areas of life, most such attempts tend to go badly; governments still do much less in our world than do for-profits.

In this context, you might think an obvious idea to try would be to organize governments as for-profit enterprises. That is, let investors choose managers and share profits from an organization that holds a monopoly of force over a geographic region. If for-profits are the best way to organize most smaller orgs, and if we aren’t sure how best to organize governments, why not try that most successful business form for them? On its face, this seems completely plausible. Yet we hardly ever hear of governments of this. Why not?

Well first note that a lot of people really hate the idea. In fact, rivals often accuse others sorts of governments of actually being for-profits behind the scenes, secretly run by investors who pull the strings. As if that would be such a terrible thing.

Second, note that this concept has long been a trope of dystopian science fiction:

A Mega-Corp is often a large, shadowy organization with a power base and structure that rivals even The Government. When you take it one step further, with the Mega Corp actually being the government during their Day of the Jackboot, you get … a “corporate state.” … A corporate state is a government run and organized like a business. … At the top is typically a board of executives (more likely than not corrupt…) which makes all the decisions; for the common people, the terms “citizen” and “customer” (or perhaps “employee” is more accurate) are more or less interchangeable. … It’s not uncommon for corpocracies in fiction to wield military power too … may employ Law Enforcement, Inc., or even own them outright as a subsidiary. (more)

Third, note that a for-profit government was actually tried at a pretty large scale, and quite early on, in the form of the British East India Company from 1600 to 1873, This seems to have successfully achieved the task it was assigned, of extracting wealth from distant colonies, and did this on average better than would have other forms of government of the time. It was ended due to a combination of discomfort with its assigned ask, and distaste for the very idea of for-profit government:

In response to the threat that the [British East India Company] posed to the state’s monopoly on governance, public opinion turned negative, and politicians argued that the East India Company had become a danger. In 1773, Parliament … curtailed Company shareholders’ influence and gave the government greater authority … In The Wealth of Nations, published in 1776, Adam Smith noted the “strange absurdity” of the Company having both “the character of the sovereign” and that of the “merchant.” Edmund Burke, a member of Parliament at the time, similarly called the Company a “state in the disguise of a merchant” in 1788. The 1784 East India Act further attempted to constrain the Company, … Parliament … nationalized the business in 1858. (more)

Fourth, note that the energy to start the United States came to a large extent from investors who stood to gain from it.

And fifth, let me admit that Curtis Yarvin, whom I once debated, seems to advocate something like this:

In Yarvin’s view, democratic governments are inefficient and wasteful and should be replaced with sovereign joint-stock corporations whose “shareholders” (large owners) elect an executive with total power, but who must serve at their pleasure. The executive, unencumbered by liberal-democratic procedures, could rule efficiently much like a CEO-monarch. (more)

Now you might think it obvious that citizens wouldn’t be sufficiently “protected” from being hurt by a for-profit government. But that doesn’t seem at all obvious to me, as I tried to explain in my last post. Most employees today are protected from employers much less by their government than by employers needing to offer attractive reputations in the face of competition. Also, most governments threaten citizens in many other ways. In addition, citizens could be part owners of a for-profit government, such as via owning direct shares and/or transferable citizenship.

This whole topic came to my mind because I recently visited Prospera, which is in many ways close to being a for-profit government. It sits within the nation of Hondoras, whose government has agreed to let it take over many local functions of government for a long duration. Prospera seems to be successfully achieving those functions at a substantially lower cost than does ordinary Honduran government, a fact that substantially lowers the cost of doing business there. (I may have helped convince them to use liability insurance in deal with law risk.)

As a result, Prospera seems to be doing well, and I expect it will prosper. And I urge you to consider doing business there. Except, the Honduran government has been making noises about maybe reneging on their promise. And Prospera keeps getting nasty unfair world press, due to so many really hating the idea of for-profit government. And yes, enough hate might take it down.

My best guess is that this hate has something to do with disliking profane money connecting to sacred governance. Which is another reason to try to study the sacred more. To see if there is any way around this problem.

Added: In interesting intermediate form would be if management consulting firms ran for office in democratic elections, based on their worldwide track record of performance in such roles. Alas many would probably also hate this as a profane-sacred violation.

Added 10a: Many are saying that what we really need is more competition between governments. Which would of course help, yes. But that seems to me a separate issue from what I’m discussing here. Also note that by allowing hostile takeovers, for-profit forms would introduce a new form of competition over governments.

Added 12Nov: Curtis Yarvin and I had a brief email exchange:

Yarvin: You should note that the subject population of a for-profit government is its capital base, giving it an aligned incentive to preserve and promote the health of the people—the traditional motto of government, salus populi supreme lex.

Revenue or even profit are not the purpose of a company, but only growth of capital—profit including appreciation/depreciation. So the incentives are aligned (not perfectly aligned, as in the case of ZMP people, but well aligned.)

Me: Yes, I’d guess most for-profit govts today would have incentives sufficiently well aligned. The main problem seems to be public hostility to the concept.

Yarvin: But public opinion is downstream from power. Power can persuade everyone to believe in anything. It can fool almost everyone almost all the time. Look around you!

Therefore, if such a regime can establish itself, it can maintain itself. Not only can it inculcate its doctrines in the whole population—this is especially easy if those doctrines are true.

As for bootstrapping, the people of today are frivolous and ironic and fanciful. The best way to do anything with them is to get them to do it for fun. They will do anything for fun—ergo, the revolution will have to be fun.