… is from pages 65-66 of volume 2 of The Collected Works of Armen A. Alchian (2006); specifically, it’s from Alchian‘s pioneering 1965 essay, originally appearing in Il Politico, “Some Economics of Property Rights” (original emphasis):
How would one impose full costs upon a city manager who decided to have a garbage collection system (that turned out to be a big money loser) that the city would tolerate? By not reelecting him. But this cost is less than that borne by the private owner who decides (erroneously) to start a garbage collection system. He loses his job and the sunk cost.
In many cases the incentives facing those who direct “public investment” – that is, politicians who decide how to invest money that is neither their own nor entrusted voluntarily to them by others – are even more perverse. Not only can government’s power to tax and subsidize mask for periods of time longer than in the private sector the losing nature of enterprises, but also when politicians’ investment projects fail they are often nevertheless applauded by fellow politicians, pundits, professors, and preachers for their alleged “vision” and “courage.” And the cronies who personally benefitted from such “public investment,” despite the overall failure of the schemes, applaud the loudest and, no doubt, often manage to handsomely reward those officials who directed other-people’s-money their way.