The Wall Street Journal today has a lengthy article about the Siemens company bribing government officials to get contracts. Among other things, Siemens builds light-rail cars.
As far as I know, Siemens has never bribed an American public official to get a contract to for its rail cars — at least, not in the sense of paying people under the table. Instead, it routinely makes large contributions to political campaigns involving light rail.
Government planning fails because planners face the wrong incentives. Instead of being rewarded for doing good things for their communities, they are rewarded mainly for pleasing other planners. This incestuous system is a recipe for failure.
In a previous post, I listed seven reasons why government planning — that is, long-range, comprehensive planning that often regulates other people’s property — cannot work. I’ve discussed four reasons in detail, and now it is time to address reason number 5: the Incentive Problem.
