… is from page 457 of Armen Alchian’s May 1960 American Economic Review article, co-authored with William H. Meckling, “Incentives in the United States,” as this article is reprinted in volume 2 of The Collected Works of Armen A. Alchian (2006):
The prizes for various forms of behavior in government are markedly different from those in private markets. Private firms buy inputs and sell outputs, and the test of survival is the relation between the value of the two. Government buys inputs, but the inputs are paid for by levying taxes, while output is given away. The problem is identical with the familiar problem of divergence between private and social costs. Once tax receipts reach the Treasury, they are owned by no one. To the individuals entrusted with their expenditure, the costs of using these funds is not equal to their value. They are not required as a condition of survival to see that value of output exceeds the value of inputs.
