Could we run governments like businesses, or like households?

The government is big and abstract and hard to get your head around in everyday language. To deal with this, we try to relate it to smaller things we understand, like businesses and households (sometimes called the nation-household metaphor). But these common comparisons rarely do a good job of explaining how governments work.

Imagine, for instance, that your government was a business, and you are put in charge of [Country] Inc. Your job is now to maximize the profits that can be extracted from the country. What do you do? Raise revenues (by collecting taxes) as high as possible, and decrease costs (by cutting public services) as low as possible to boost your profit margin.

That doesn’t sound much like what we elect governments to do. Unlike businesses, governments are (theoretically) run in the interest of citizens, not owners or shareholders. To try to maximize profits from government would be, at best, circular – squeezing the people to pay the people – and at worst, an abuse of power. A better role for the government is to create the right framework for a healthy labor market (this isn’t actually a physical place: it’s a metaphor for the relationship between employers and the workforce in a country, and how they negotiate over wages and contracts.) They can do this by providing people with opportunities for education and training to enter the working world well-equipped. Within that labor market, businesses can thrive – it's just the government itself shouldn't necessarily run like one.

How about the government as a really big household? Much like households, governments have regular income and expenditures. They both take on outside debt and if their debts get too high, they can get into trouble.

But unlike households,  governments can, and do, print money. Governments also have the power to change their income levels by raising taxes. Finally, what would happen if a household goes bankrupt, or a government goes bankrupt, is very different. If a household goes bankrupt, it might lose access to credit and have its assets (any valuable item that could be used to pay a debt) taken away, and will need some kind of government support to get it back on its feet. Governments need to be giving that support; so if they go bankrupt, the mechanisms that would be necessary to bring their accounts back into balance are much more complex and usually involve other countries.

So the metaphors don’t quite work. Governments are made up of people, but they’ve got a very specific relationship to the people they work for –  they get income from their taxes, but spend it back on public services for them, and can help influence the amount of money available to them. So the way it functions isn't quite the same as any other part of the economy.