In discussing the involvement of Russian politicians in economic decisionmaking in the natural gas industry, Tim Worstall says something that I think is key:
I’d prefer that such a politician had nothing whatsoever to do with whether the gas kept flowing or not. With purely private companies you know that decisions are made on profit alone grounds. When you’ve got politicians in it means, inevitably, that there will be politics played.
Yes. Other than establishing clear, transparent legal institutional foundations for mediating exchange, and reducing transaction costs that can be entry barriers and barriers to exchange, politicians maximize social well being by getting out of the way. Sadly, though, they don’t necessarily maximize their own well being by so doing. That’s the problem.