The essay at the link talks about government waste. Is it meaningful to talk about waste in business, or should it all be considered to be at least educational?
Regarding the end-products, one essential difference is that if a business can find private consumers who will purchase its product with their own money and of their own free will, this constitutes strong evidence that these customers assign some positive value to this product, so it can’t be fairly described as “waste.” In contrast, for many things produced by the government, no such clear evidence exists, and even if one is not of particularly libertarian persuasion, it seems pretty clear that many of them are wasteful in every reasonable sense of the term. Yet all consumer and (non-transfer) government spending is added to the GDP as equivalent.
When it comes to waste generated by inefficiencies, miscalculations, employee misbehavior, and perverse incentives, some amount of wasteful efforts and expenses is obviously inevitable in the internal functioning of any large-scale operation. It does seem pretty clear that in most cases, the incentives to minimize them are much stronger in private businesses than in governments, though unlike the previous point, this one is a matter of degree, not essence. However, when it comes to the GDP accounting, there are important differences here.
The reason is that all non-transfer spending by the government will be added to the GDP, whereas spending by businesses is added only if it constitutes investment (as opposed to mere procuring of the inputs necessary for production). As far as I know, the exact boundary in the latter case is a matter of accounting conventions, though in most cases, it does seem clear which is which (e.g. for a trucking company, buying fuel is not an investment, but buying new trucks is). Therefore, whatever the actual amount of wasteful spending by businesses might be, not all of it will be added to the GDP, unlike the wasteful spending by governments.
The essay at the link talks about government waste. Is it meaningful to talk about waste in business, or should it all be considered to be at least educational?
Regarding the end-products, one essential difference is that if a business can find private consumers who will purchase its product with their own money and of their own free will, this constitutes strong evidence that these customers assign some positive value to this product, so it can’t be fairly described as “waste.” In contrast, for many things produced by the government, no such clear evidence exists, and even if one is not of particularly libertarian persuasion, it seems pretty clear that many of them are wasteful in every reasonable sense of the term. Yet all consumer and (non-transfer) government spending is added to the GDP as equivalent.
When it comes to waste generated by inefficiencies, miscalculations, employee misbehavior, and perverse incentives, some amount of wasteful efforts and expenses is obviously inevitable in the internal functioning of any large-scale operation. It does seem pretty clear that in most cases, the incentives to minimize them are much stronger in private businesses than in governments, though unlike the previous point, this one is a matter of degree, not essence. However, when it comes to the GDP accounting, there are important differences here.
The reason is that all non-transfer spending by the government will be added to the GDP, whereas spending by businesses is added only if it constitutes investment (as opposed to mere procuring of the inputs necessary for production). As far as I know, the exact boundary in the latter case is a matter of accounting conventions, though in most cases, it does seem clear which is which (e.g. for a trucking company, buying fuel is not an investment, but buying new trucks is). Therefore, whatever the actual amount of wasteful spending by businesses might be, not all of it will be added to the GDP, unlike the wasteful spending by governments.