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Hopefully this doesn't get partisan, but I wanted to see where a thought experiment would go where a government stopped collecting taxes and instead fund itself by running businesses (selling products and services) alongside other private businesses out in the free market.

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  • $\begingroup$ In a way, taxes are just like fees paid for government services. Just like you pay a private company for junk removal, you pay the government for garbage collection. The difference is only in names. $\endgroup$ – Herr K. Mar 23 '17 at 19:40
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    $\begingroup$ Not feasible. Governments cannot participate in markets that it has the authority to regulate. They cease to be free markets. Further, we've already allowed the central-planner thing to play out and know definitively that governments are not good at operating a business. Another dagger to the heart is the fact that public goods are allocated inefficiently via public market mechanisms. $\endgroup$ – 123 Mar 23 '17 at 20:07
  • $\begingroup$ @123 What about Saudi Arabia...? "Saudi Arabia's command economy is petroleum-based; roughly 75% of budget revenues and 90% of export earnings come from the oil industry." en.wikipedia.org/wiki/Saudi_Arabia#Economy $\endgroup$ – Giskard Mar 23 '17 at 21:16
  • $\begingroup$ SA is a country ravaged by poverty. SA is also trying to step away from the circumstance you describe precisely because it is a terrible idea. SA is also a completely backward theocratic nation with a digressed understanding of and approach to human rights. I am not sure how SA is meant to serve as an example of the viability of anything. $\endgroup$ – 123 Mar 24 '17 at 0:07
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    $\begingroup$ It sounds like you're more interested in creating a fictitious world, than in real-world economics. Did you know that Stack Exchange has a site dedicated to such questions: Worldbuilding? $\endgroup$ – EnergyNumbers Mar 24 '17 at 22:27
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This is an extremely implausible scenario. The conditions for it to work would be extremely demanding:

  1. The government would need to run businesses in which it has the potential for a sustainable competitive advantage, giving it the opportunity of earning profits on an ongoing basis. That might be based on a natural resource endowment (cf Saudi Arabia and oil) or on a technology which others are, for whatever reason, unable to copy. For most countries, such opportunities are limited.

  2. The government would need to run the businesses efficiently, so as to realise those profits. This would be challenging due to: a) political necessities conflicting with efficiency; b) rent-seeking behaviour by managers and workers in the businesses.

  3. The profits realised would need to be sufficient to fund the government's expenditure. For a typical developed country with high government expenditure on education, health, welfare, defence, etc., this would require improbably large profits. To give an idea of scale, UK government spending in 2015/16 was £772 billion. By contrast, the world all-time largest corporate earnings (Vodafone in 2014) were less than 10% of that at £59 billion.

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Large Buisnesses tend to be run by a CEO who serves to make $ for shareholders. This means maximising profits, and generally struggles to make long term investments rather than short term profits. They only care for their employees as needed, I.e. if there was no minimum wage law they would be paid less. No incentive to act ethically other than the law and potential fines and lawsuits which is also arguably weak, as sometimes companies make a calculated decision to break the law because the penalty isnt as large as the amount they would benefit. These and other restrictions that the government imposes on companies would all go away if the government was a business, I.e. it would be above its own laws.

What about \$? Why would this company need to make anything if they can just print \$ when they need to?

The other question is who would own this company - shareholders? Does each citizen get an equal share? That may be similar to a pure democracy - or would it be only the rich? I.e. who would "own" this company and set its direction?

I also found a relevant video that sums these up nicely:

https://www.youtube.com/watch?v=TqN4UYeJwiA

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