Josh Barro has an excellent new post on the real meaning of the Wawa convenience store chain’s embrace of labor-saving technology:

Wawa’s innovations reduce the number of employees needed to sell a sandwich. But they might increase sales so much that total employment at Wawa rises. Or it might mean that consumers take the money they save at Wawa and spend it elsewhere, creating jobs in other sectors. Even if we can identify specific jobs lost to automation, that doesn’t mean there was a net job loss.
But the broader point is that the purpose of firms isn’t to employ people. It’s to make a profit, and firms make a profit by selling products and services for a price greater than it cost to produce them. To make products and services, of course, they have to employ workers. If firms incur unnecessary labor expenses, it leads to higher consumer prices.

What Josh didn’t do, to my surprise, was explicitly connect this point back to the public sector. Romney, as Josh observes at the start of his post, has argued that the federal government should strive to be as efficient as Wawa. But this implies that the federal government, and state and local governments, should think of themselves first and foremost as organizations that exist to deliver high-quality services as cost-effectively as possible, not to employ people (and certainly not to employ people at above-market compensation levels).

This raises the separate question of whether public sector institutions should strive to make a profit. This is an idea that is not very well understood. Many notionally non-profit public sector entities actually do make profits, yet these profits flow not to taxpayers but to insiders via featherbedding, the cross-subsidy of other missions, etc. We might, for example, use road pricing to generate profits from infrastructure and then use these profits to subsidize health expenditures or welfare-to-work programs, which might in turn reduce the need for expensive interventions down the road. But we tend not to think about non-profit profits in a coherent way.