Reply #5: for-profit companies are most efficient at extracting profit.

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the policy question is, is efficient resource allocation a BY-PRODUCT of that efficient profit extraction?

it can be, but that requires several ingredients, not the least of which is genuine competition, a rarity in most industries these days.

one classic example of what the private sector can't do well is make things that last. there's profit in planned obsolescence, and it's hard to get people to pay up front for something that will last forever. so the private sector will take various actions, ranging from neglecting research to outright sabotage, to ensure that their products only last "long enough" -- to keep customers coming back for more.

why sell one shirt that lasts 10 years when you can sell 5 that last 2 years each? but is this the most efficient use of resources? hardly. the drawback of the shirt that lasts 10 years is purely a weakness in its profit-extracting potential.

government regulation could save the day in this sort of scenario, but that's taboo in modern america.