'You're Fired!': The Key to the Free Market

"You're fired!"  Those are the sweetest two words in the entire English language.  Those two words make possible everything that's good in our daily lives: our freedom, our safety, the many modes of transportation at our disposal, the rich abundance of foods we get to choose from, the widely varied forms of entertainment we enjoy, the incredible array of medical technologies that keep us healthy, and the expansive selection of schools that educate us.

"You're fired."  Those are the lyrics to the Anthem of the Free Market, which is the engine that keeps us safe, healthy, well fed, entertained, and educated.  Those are the words that indicate that, in our system, there is personal accountability and responsibility and that there are negative consequences for doing a poor job.

The most obvious and familiar indicator of the free market is the profit potential that exists for success.  Whether it's an innovative new medical device or a life-enhancing pharmaceutical, a viable large-scale alternative energy source or a great new political drama on Netflix, in a market economy, virtually unlimited profits await the inventor or company that delivers a winning product or service, and deservedly so.  Driven by hungry competitors looking to wrest their paying customers away, individual entrepreneurs and large corporations alike are motivated to perform at their best in order to stave off their adversaries.  The consumer benefits from continually improving products as a result.

The penalty for marketplace failure is financial ruin.  If the quality and value of a company's offerings slip, then the company loses market share or goes out of business altogether.  The threat of this degree of disastrous marketplace penalty (going out of business) is an even stronger motivator than the promise of unlimited riches.  Being one of many successful entities in one's realm is perfectly acceptable; there is no absolute requirement that you be no. 1, as long as you're active and viable.  Mazda is a profitable and ongoing company.  It doesn't have to overtake General Motors to be considered a successful business.  But they do have to avoid making the ill fated product and marketing decisions that sank American Motors and Studebaker.  The threat of free-market penalty is what drives it.

The concept of free-market reward and penalty applies perfectly all the way down to the individual worker level.  Any individual can be considered a small "company."  He has his product attributes.  He is in a competitive environment against other "companies" vying for the same "customer" – perhaps a promotion or a new position.  When the individual performs well – a TV writer creating a compelling script, an engineer improving the fuel efficiency of an engine, or a research scientist synthesizing a new pain-reliever without side-effects – the company that employs them becomes stronger in its particular market sphere and either maintains or strengthens its financial standing.  Employees continue to be employed.  Money continues to be earned.  Bills continue to be paid.

It's the fear of marketplace penalty that keeps many individuals motivated to go a good job.  Yes, of course many people do an excellent job because of personal pride and a strong work ethic, or because their innate talent and aptitude enable them to perform their responsibilities well, without undue effort.  But for many, the unpleasant prospect of losing one's earning capacity is a prime motivator of doing a good job.

The aforementioned "unpleasant prospect of losing one's earning capacity" is far, far more prevalent in the highly competitive for-profit private sector of a market economy than it is in the government-employed public sector.  The cliché of the uncaring, inattentive DMV worker who shuts his window and puts up a "closed" sign just as you reach his station at 30 seconds before 5:00 P.M. exists for one reason and one reason only: for the DMV worker, there is essentially no "marketplace penalty" for barely acceptable, mediocre work.  The quality of his work doesn't affect the profitability or continued existence of his employer.  The Springfield DMV is not in free-market competition with other DMVs, and that window clerk's performance has no real bearing on anything.  Since the employees really can't be fired for anything other than a gross dereliction of responsibility or some horrendous personal or moral transgression, it's easy to understand the "I don't care, it's 5:00 P.M., I'm closed" attitude.

The chart below is illustrative of the marked difference in year-on-year price increases between the competitive for-profit private sector and the lessened financial accountability of the government sector.  The categories that show the greatest cost increases are the areas in which government subsidies play the largest role.  When the entities involved know that "free money" in the form of government payouts are coming their way, costs tend to rise.  The competitive aspect of keeping pricing low relative to market competition is not there.

The health care and hospital services area is particularly interesting.  When government money – "someone else's money" – pays for medical services, costs go up dramatically.  But when the individual is paying out of his own pocket and free-market rules apply, then the providers engage in fierce competition, improve their quality, and lower their costs in an attempt to woo the customer.  Nowhere is this clearer than in the areas of cosmetic surgery and corrective eye surgery.  Neither is generally covered by insurance or Medicare; customers must pay with their own free-market discretionary cash.  As in every other area of for-profit consumer product development, quality and innovation are way up, and costs are down compared to what was available just twenty years ago.

The liberal utopia of Government-Run Everything will never work.  Individuals must feel as if their own job security is directly related to the caliber of their work.  Companies must operate with the knowledge that their continued existence is not assured and that customers are not automatically going to buy their product or service – they must be won over with quality and value.  Private-sector individuals and companies can be "Fired!"  The DMV worker has no such fear, nor are the public schools worried about going out of business in the face of new competition.

While some government and public-sector portion of the economy is necessary, the more we can get the phrase "You're fired!" into our economy, the better things will be for everyone.

"You're fired!"  Those are the sweetest two words in the entire English language.  Those two words make possible everything that's good in our daily lives: our freedom, our safety, the many modes of transportation at our disposal, the rich abundance of foods we get to choose from, the widely varied forms of entertainment we enjoy, the incredible array of medical technologies that keep us healthy, and the expansive selection of schools that educate us.

"You're fired."  Those are the lyrics to the Anthem of the Free Market, which is the engine that keeps us safe, healthy, well fed, entertained, and educated.  Those are the words that indicate that, in our system, there is personal accountability and responsibility and that there are negative consequences for doing a poor job.

The most obvious and familiar indicator of the free market is the profit potential that exists for success.  Whether it's an innovative new medical device or a life-enhancing pharmaceutical, a viable large-scale alternative energy source or a great new political drama on Netflix, in a market economy, virtually unlimited profits await the inventor or company that delivers a winning product or service, and deservedly so.  Driven by hungry competitors looking to wrest their paying customers away, individual entrepreneurs and large corporations alike are motivated to perform at their best in order to stave off their adversaries.  The consumer benefits from continually improving products as a result.

The penalty for marketplace failure is financial ruin.  If the quality and value of a company's offerings slip, then the company loses market share or goes out of business altogether.  The threat of this degree of disastrous marketplace penalty (going out of business) is an even stronger motivator than the promise of unlimited riches.  Being one of many successful entities in one's realm is perfectly acceptable; there is no absolute requirement that you be no. 1, as long as you're active and viable.  Mazda is a profitable and ongoing company.  It doesn't have to overtake General Motors to be considered a successful business.  But they do have to avoid making the ill fated product and marketing decisions that sank American Motors and Studebaker.  The threat of free-market penalty is what drives it.

The concept of free-market reward and penalty applies perfectly all the way down to the individual worker level.  Any individual can be considered a small "company."  He has his product attributes.  He is in a competitive environment against other "companies" vying for the same "customer" – perhaps a promotion or a new position.  When the individual performs well – a TV writer creating a compelling script, an engineer improving the fuel efficiency of an engine, or a research scientist synthesizing a new pain-reliever without side-effects – the company that employs them becomes stronger in its particular market sphere and either maintains or strengthens its financial standing.  Employees continue to be employed.  Money continues to be earned.  Bills continue to be paid.

It's the fear of marketplace penalty that keeps many individuals motivated to go a good job.  Yes, of course many people do an excellent job because of personal pride and a strong work ethic, or because their innate talent and aptitude enable them to perform their responsibilities well, without undue effort.  But for many, the unpleasant prospect of losing one's earning capacity is a prime motivator of doing a good job.

The aforementioned "unpleasant prospect of losing one's earning capacity" is far, far more prevalent in the highly competitive for-profit private sector of a market economy than it is in the government-employed public sector.  The cliché of the uncaring, inattentive DMV worker who shuts his window and puts up a "closed" sign just as you reach his station at 30 seconds before 5:00 P.M. exists for one reason and one reason only: for the DMV worker, there is essentially no "marketplace penalty" for barely acceptable, mediocre work.  The quality of his work doesn't affect the profitability or continued existence of his employer.  The Springfield DMV is not in free-market competition with other DMVs, and that window clerk's performance has no real bearing on anything.  Since the employees really can't be fired for anything other than a gross dereliction of responsibility or some horrendous personal or moral transgression, it's easy to understand the "I don't care, it's 5:00 P.M., I'm closed" attitude.

The chart below is illustrative of the marked difference in year-on-year price increases between the competitive for-profit private sector and the lessened financial accountability of the government sector.  The categories that show the greatest cost increases are the areas in which government subsidies play the largest role.  When the entities involved know that "free money" in the form of government payouts are coming their way, costs tend to rise.  The competitive aspect of keeping pricing low relative to market competition is not there.

The health care and hospital services area is particularly interesting.  When government money – "someone else's money" – pays for medical services, costs go up dramatically.  But when the individual is paying out of his own pocket and free-market rules apply, then the providers engage in fierce competition, improve their quality, and lower their costs in an attempt to woo the customer.  Nowhere is this clearer than in the areas of cosmetic surgery and corrective eye surgery.  Neither is generally covered by insurance or Medicare; customers must pay with their own free-market discretionary cash.  As in every other area of for-profit consumer product development, quality and innovation are way up, and costs are down compared to what was available just twenty years ago.

The liberal utopia of Government-Run Everything will never work.  Individuals must feel as if their own job security is directly related to the caliber of their work.  Companies must operate with the knowledge that their continued existence is not assured and that customers are not automatically going to buy their product or service – they must be won over with quality and value.  Private-sector individuals and companies can be "Fired!"  The DMV worker has no such fear, nor are the public schools worried about going out of business in the face of new competition.

While some government and public-sector portion of the economy is necessary, the more we can get the phrase "You're fired!" into our economy, the better things will be for everyone.