the Chinese in Hong Kong are the same as the Chinese in Mainland China; just as the West
Germans and the East Germans were not different people, yet the results were vastly
The point is that self-interest is served by different actions in the private sphere than in the
public sphere. The bottom line is different. An enterprise started by a group of people in the
private sphere may succeed or fail. Most new enterprises fail (if the enterprise were clearly
destined for success, it would probably already exist). If the enterprise fails, it loses money.
The people who own it have a clear bottom line. To keep it going, they have to dig into their
own pockets. They are reluctant to do that, so they have a strong incentive either to make the
enterprise work or to shut it down.
Suppose the same group of people start the same enterprise in the government sector and the
initial results are the same. It is a failure; it does not work. They have a very different bottom
line. Nobody likes to admit that he has made a mistake, and they do not have to. They can
argue that the enterprise initially failed only because it was not pursued on a large enough
scale. More important, they have a much different and deeper pocket to draw on. With the
best intentions in the world, they can try to persuade the people who hold the purse strings to
finance the enterprise on a larger scale, to dig deeper into the pockets of the taxpayers to keep
the enterprise going. That illustrates a general rule: If a private enterprise is a failure, it closes
unless it can get a government subsidy to keep it going; if a government enterprise
fails, it is expanded. I challenge you to find exceptions.
The general rule is that government undertakes an activity that seems desirable at the time.
Once the activity begins, whether it proves desirable or not, people in both the government
and the private sector acquire a vested interest in it. If the initial reason for undertaking the
activity disappears, they have a strong incentive to find another justification for its continued