Economics can be defined as the distribution of resources between people. An economy can be divided into three sectors: The for-profit or private sector, the government or public sector, and the non-profit sector. These can roughly be described as follows

  • The private sector strives to maximize profits to owners. This is done by increasing revenue and reducing costs. The operational model for this sector is the (free) market, where money generally flows to the most productive. Hence, management is chosen by the market in the sense that non-performing managers eventually go bankrupt or are fired by the owners, that is, shareholders for publicly traded companies and owners for privately held companies.
  • The public sector derives its income from taxation of the private sector and provides public services (for everybody) such as policing, infrastructure, firefighting, and military protection, which the private sector apparently can not supply at a profit.
    The operational model for this sector is representative democracy. Here managers try to persuade consumers that their management model is superior to that of their competitors and thus they should go out and vote. These advertising campaigns that are repeated every four years.
  • The non-profit sector derives its income from grants and donations from the public sector and the private sector. The non-profit sector provides services that are not provided by the private sector or the public sector, that is, services that are not profitable and/or mainly focuses on serving a minority of the public, like the poor, and thus do not fall under public services. Here managers compete for money by writing proposals and asking for donations/begging.

It is apparent that many political opinions can be classified on the emphasis or desired reliance that is placed on these three sectors of the economy. Sometimes political opinion follows personal inclinations. Strongly individualistic persons focus on the private, the for-profit companies, as it allows them the greatest benefits to thrive. Social or group-oriented persons focus on the public, the city, and national values. And the non-profit sector dealing with universally human values like education, religion, and health.

From this perspective, it becomes fairly clear, at least to me, that any economic system that concentrates on just one sector is bound to make some people unhappy and thus unproductive. A viable system would thus have all three sectors represented. We do in fact see that the countries that focus exclusively on one system whether it be for-profit or public (I am not aware of any countries that operate based on a dominant non-profit sectors) tend to score low when considering a wide band of indicators.

Originally posted 2009-06-25 00:05:06.