Cost and competence

May 8, 2026

This article enables focus on the systemic failure of the idea that capitalism and private markets produce the best social outcomes. That is due to the focus of capitalism on efficiency covering failures of effectiveness. As capitalism is focused solely upon profitability as the measure of success, the managerialists trained in the business schools, that have proliferated like flies at a barbecue, have taken that to heart and have focused on that to the exclusion of effectiveness. The obsessive concentration has been on minimising costs and maximising profits. We have thus become highly efficient at doing the wrong thing. Efficiency means doing things right whilst effectiveness means doing the right thing. That may work with the production of consumer goods, although even there it has led to diminished standards of products and services which reduce social return. But it unquestionably leads to widespread failures in the production of public goods and services, as quality is always sacrificed to profitability. That has meant cutting service standards to maintain profitability. Where there is a direct conflict between profit and quality in a capitalist system it is not hard to figure out which will be the favoured. QED!