I object to the assertion that governments are not designed to seek returns on their investments.

First, it is obvious that you can't expect 100% efficiency for any organisations. Anecdotal situations where negative returns arise exist in both government and private entities. There are a lot of cases where the private sector is more efficient, hence why the private sector runs most things. However, there are cases where the government is more efficient.

I’m sure you are aware of the issues surrounding externalities and the tragedies of the commons. I won’t get into that. I do believe, however, that those are not the only things that are easier dealt with by a centralised entity.

Take city level roads for example. A competitive market where all those roads would be privatised would succumb to all kinds off inefficiencies due to terrain and geography. There would have to be staffed toll booths at every corner, marketing costs to advertise particular roads and shortcuts, monopolies due to geographic situations etc. etc. etc. I can’t imagine that this would make for an efficient market. The government, on the other hand, by spending in this kind of infrastructure, see immediate gains in a population that has the tools to be productive.

Another example is education. I’m not saying public education is necessarily the more efficient. I don’t have the data that to prove it. However, it is not obvious that private education is the most valuable. It is true that for the few that have access to it, private education is beneficial but if you make the sum for everyone in a utilitarian kind of way is it really?

When the government redistributes wealth, the goal is to take money from people who are producing a good and steady flux of economic value and invest in people who have not yet reached that potential but lack a basic investment to reach it. It can be considered fair simply because the first group has also been recipient of that initial investment. In any case, it does have the potential to be a positive sum game.

Social services are an investment. People that are educated, in good health, and surrounded by other healthy people are more productive. There are all kinds of psychological and physical advantages to having these programs. Why do you think that even the most money driven corporations usually force their employees at taking a huge part of their salary in benefices? It is because they know that healthy employees are productive employees. When the government provides a part of these things to its citizens it has the potential to increase the productivity and quality of life of everybody. The tax increase to corporations is often not as high as it looks. They don’t need to provide as much benefices to their employees since the government provides it instead. And the companies benefit from workers that have profited from social services all their life and are therefore more qualified, more psychologically balanced and are able to compete better in the global economy.

Some government services like roads, a legal system, police, etc… are an obvious boost to the economy. Some services have a less obvious boost but that doesn’t mean we should not have those services. Experts in different fields will tell you that offering these services save money. For example, a lot of psychologists and psychiatrists are convinced that if they could give free therapy to families and children with problems early in their life they could prevent a lot of them from becoming criminals and thus reduce the cost of crime police, and reduce criminal influence (criminals turn their peers into criminals) in the long term. A lot of people struggle with illnesses that prevent them from working and aren’t even aware that effective cures exists. I personally have a friend that treats things like elevator phobia, claustrophobia, agoraphobia. These illnesses often prevents individuals from working. Some people that have stopped working for multiple decades find themselves astounded that they can be cured in less than 20 hours of therapy.

True, there are cheaters in the system. And there are probably lots of them. But I believe you should not go out of your way to punish them, that’s just punishing yourself. You should try to do everything you can that dissuade the cheating by tailoring the system so that it is not advantageous to cheat and being careful about the incentives you put in place, but only when there is a positive benefit/cost ratio to do so. Cutting social services impairs your lifestyle and raises the cost of living. It might only prevents only a few cases of negative sum inefficiencies.

Humans have an instinct against freeloaders, there’s a bell that rings in our head at the thought of the possibility of being exploited. Basic instincts can help us lots of times, but we have the advantage over animals that we are intellectual beings. Don’t let that basic instinct get to you when your intellect can tell you that you are better off if you just ignore the freeloaders sometimes.

People should be proud of their legacy to society. Not be scared that it will only benefit freeloaders. Yes if you look at it directly I understand that it can seem like it benefits mostly others, but it is as much for your benefit, the benefit of the economy and of corporations.

Government services also acts as a kind of insurance to you. If ever you or a member of your family gets really sick or you loose your house and everything you own in a disaster, you will have government help to fall on.

Capitalism (or profit maximization) is the only way for countries to work well. It is a form of economic survival of the fittest where the better, easier, cheaper alternative is the one that thrives. It is the most natural way to efficient life. But I still think you have to be intelligent about it and not view only the direct obvious causality link (my money goes to the poor), but the big picture where the sum of all direct and indirect benefits are accounted for.

What is nice about social services is that the positive effects are multiplicative. Assuming that the person that has been helped by the government is not just leeching, (There are people you know) this person has more chance of being able to help others which themselves will be able to help others. There’s a kind of compound effect here. So indirectly by helping one person the governments have helped many. When a parent gets help, he or she will be more apt at raising her children at helping them, helping their friends etc… plus the indirect effect will usually not spread to freeloaders because people do not like helping them.

See this also:

http://www.faireconomy.org/notalone/

For an account of how the government can create positive value.