The Parasite Sector
by Jim Davies, 10/5/2010
Conventional economists divide us all into the "Private Sector" and the "Public Sector", but that's just to perfume the ugly nature of the latter. Both are perfectly public; anyone can apply for a job in either, anyone can buy the products of the former and an accounting, of sorts, is available to the public from each. Both are also private, in the sense that only real, private people work in each. The difference comes in the funding: the former is funded only when a discriminating customer chooses to buy, while the latter is funded by force whether anyone wants its services or not.
So I prefer to call them the Productive Sector and the Parasite Sector.
Consider a small "economy" of four families working a thousand acres. The Dads do the farming, the Moms keep the houses nice and teach the children, who help out both as soon as they are old enough. They produce enough not just to eat but also to sell outside, in exchange for goodies they can't make but want to own. They work hard and do well. They are a 100% productive enterprise.
Then a change happens. Able and Baker quit farming, leaving Charlie and David to work the whole thousand acres - which of course they can't, it's far too heavy a workload for two. Instead of producing 1,000 units of food value, output falls to 550 units despite ample overtime. Meanwhile Able and Baker don't just sit idle. They demand half of all that is produced, for are they not equal partners in the farming firm? - but they create rules by which Charlie and David are to do their work. They must now account for each work element they perform, taking care not to disturb endangered species, leaving no carbon footprint larger than size 11, and completing each evening a detailed and perjury-certified daily activity report. When they sell produce or buy supplies, they must complete paperwork to show details, and of course pay Able and Baker a transaction fee on each, as part of their 50% take. The extra work required for all this further reduces the useful output of Charlie and David from 550 to 400 units a year. In miniature, in fact, ABCD Farms closely resembles the US economy.
Originally, the enterprise produced 250 value units per year per family, but now it's (400/4 = ) 100 units each, a reduction of 150. The effect of the parasite sector has been to reduce everyone's standard of living by (150/250 = ) 60% - even that of Able and Baker. Baker says it's less than 60%; see our correspondence here.
Now imagine that a fresh, rational wind swept through the countryside, and its parasite sector was abolished, so that Able and Baker once again enjoyed the satisfaction of doing useful work (producing something somebody wanted to buy.) Everyone in the four families would enjoy immediately a rise in living standards of (250/100 = ) 150%; that is, by a factor of two and a half times.
One reason why a zero government society is such a sensible idea.