Why have both local and national governments in recent years begun having many of their traditional functions, from garbage collection to running prisons, done by private companies? Because these private, profit-making companies can usually get the job done cheaper and better.

If profits were just extra costs arbitrarily added on to the costs of production, then non-profit institutions or whole countries that operated without profit, such as the Soviet Union, would have had lower costs. Almost invariably, however, enterprises that operate without the incentive of profit have had higher costs, not lower costs.

It was not a free-market think tank, but Soviet economists, who pointed out that Soviet industry used far more inputs to produce a given output than did market economies like Germany, Japan or the United States. Economically illiterate people -- which, unfortunately includes much of the intelligentsia -- have never understood the role of profit as an incentive to keep costs down.

To the economically illiterate, if some company makes a million dollars in profit, this means that their products cost a million dollars more than they would have cost without profits. It never occurs to such people that these products might cost several million dollars more to produce than if they were produced by enterprises operating without the incentives to be efficient created by the prospect of profits.

If "obscene profits" are what cause pharmaceutical drugs to cost so much, why haven't socialist countries set up their own government-owned pharmaceutical enterprises to produce drugs more cheaply? Why don't non-profit organizations here do that?

It is because rhetoric is cheap but creating drugs is not. Recent estimates are that it costs $800 million per new drug. That is why drug prices are so high. But needless suffering and premature deaths are even higher costs.