Competition: What the Government Can Learn from Business

CEOs know that competition is crucial to the marketplace because it keeps prices low and incentivizes innovation. Customers vote with their dollars. Can’t these same economic principles be applied to governments? Competition among governments – both national and local – can improve governance practices.

April 19 2012 by ChiefExecutive.net


This week, The New York Times asked if governments should compete like business rivals. Competition, which is at the heart of the marketplace, is something that governments can benefit from too. If competition can help keep prices low and can incentivize continual innovation in businesses, there’s no reason that it can’t do the same for governments.

Here are some of the governance benefits of competition as listed by the Times (most examples are in relation to state and local governments as it is easier to move towns or states than it is to emigrate to another country):

  • Wise  use of tax dollars
  • Managers remain alert
  • Governments cannot exert monopoly over residents
  • Taxes remain reasonable in relation to public services

Citizens can act like consumers and go elsewhere if they don’t like what they’re seeing. If you find something you need at one store, but know that you could find the same thing for less money next door, wouldn’t you go next door? The same can be said for a town’s public services and tax rates. Competition can keep your government vying for your citizenship.

Read: Competition Is Healthy for Governments, Too