The Emergent Fool

Small Government: Lesser of Two Evils

Posted by kevindick in Economics, Government, Socio-technical systems on February 15th, 2010 | View Comments

Like many libertarians, I feel that small government is an eminently practical rule of thumb proven by hundreds (if not thousands) of years of observation. So when Rafe recently posted in response to a presentation that David Cameron made at TED, it got my dander up. Calling the small government philosophy, “… ivory tower idealism,” felt like a blatant misrepresentation. But then I wondered. Maybe Rafe had formed the honest (though mistaken) impression that small government advocates think that reducing government functions will lead to some sort of emergent order utopia?

I don’t know exactly what Cameron said because I can’t find a public video archive. This Guardian account indicates that he mostly hung platitudes on the scaffolding of giving people more choice and transparency. Choice is a big part of small government, but I thought it would be worth outlining what I think is the non-politician’s version of the libertarian small government ideology. It’s far from ivory tower. More like back alley.

It’s based on two observations: (1) local knowledge is important to good decision making and (2) concentration of power leads to abuses. I think few students of political history and organizational behavior would argue against these points, so I won’t detail them here. However, if anyone honestly thinks they are in doubt, I’d be happy to cover them in a subsequent post.

So, any time society assigns a role to government, it incurs the costs of (1) and (2). These costs tend to increase over time and as a situation departs from the ideal future path. So the expected net present value of these costs can be substantial. Libertarians therefore conclude that the benefits that the government brings to a role should, as a general rule, be quite large before we even consider it as an option. Notice that this does not imply no government at all. Rather, it implies we should use government sparingly.

The repeated pattern observed by libertarians goes like this. A problem arises. Everyone (even libertarians) agree that it is problem. Progressives push through a government program to address it. Initially, the program somewhat ameliorates the problem. However, the problem turns out to be trickier than first believed, so the benefits are usually not as great as expected. Over time, the problem evolves and adapts, further eroding program benefits. The government program evolves and adapts too, but more to promulgate its own survival than address the problem.

So we are left with much lower benefits than forecast and significant unforeseen costs (in the form of an everliving, mostly useless program). Libertarians conclude that in many cases the “cure” is worse than the disease. Not that it doesn’t suck having the disease. The irony of course is that the progressives then identify the results of an old government program as a new problem that requires… another government program (cough, cough, government intervention in financial markets, cough, cough).

Of course, some illnesses are actually bad enough that the (painful) cure is better than the disease. In those cases, bring on the government program. But let’s be realistic about the long term benefits and costs.

Related posts:

David

Along the lines of solid liberal thinking I would encourage everybody to brush up on their understaning of Austrian Business Cycle Theory. www.mises.org is a great place to start.

I bring this up b/c as the author said Big Business is an arm of the government, look no further then the big banks and their ties to the Federal Reserve. This is a very important relationship in looking at big gov b/c they give a false perception of a free market. This relationship vastly widens out the wealth gap by concentrating the power in the hands fo a few.
Daniel Horowitz

Here is the talk:

http://www.ted.com/talks/david_cameron.html
Alex Golubev

yeah, i like that one of course :)

The Intelligence Advanced Research Projects Activity (IARPA) is a United States agency under the Director of National Intelligence's responsibility. How do you like this request for information:

http://www.iarpa.gov/rfi_forecasting.html
Rafe Furst

Here's the rest of the discussion that took place on Facebook.

Kevin Dick And progressives thinking that a small group of wise men can allocate resources better than the market is not ivory tower idealism?

Rafe Furst I didn't say that. What makes one or the other ideology ivory tower idealism is the independence of timeframe and other important context from fundamental principles.

I will posit that I favor a liberal approach now and until our socio-technical systems have evolved to support a more conservative approach. That is, err on the side of paternalism until individualism can flourish without impoverishing non-economic values that we commonly hold dear (like happiness, community, equality, etc).

Kevin Dick It sounded to me like you said something very much like that. You said, "...conservative agenda is ivory tower idealism..." because it wants, "...politicians to stay out of it..." and there are no, "...self-organized replacements for government functions." So you're saying that politicians can in fact allocate resources better than the market (the self organized alternative) as it now exists. My paraphrase sounds pretty close to that, admittedly stated more harshly to highlight what I see as the irony of your calling the conservative position ivory tower.

In a counter to your position, I posit that we should err on the side of individual freedoms until politicians demonstrate they can do better than the market.

Rafe Furst "allocating resources better than the market" is in my view the red herring of the whole debate. I feel that a market-centric approach to basic human needs is not right -- it doesn't agree with my values. When it comes to non-essential aspects of life (such as how badly I want something vs need it for survival), then great, let the market decide.

I predict that in the long run, all basic needs will be met through "free" energy and technology (broadly-defined). That's the point at which a conservative political stance seems logical to me. I will go even further and say that that's the point at which government (which is to say formal laws) of all kinds are obsolete. Cultural constraints and incentives/values plus socio-technical systems will/should replace the function of government.

Kevin Dick OK, this is interesting. Let's put aside the fact that small-government libertarians advocate for _minimal_ government, not no government, and talk about your values.

Suppose there is a group of people that disagree with you about the market providing for basic human needs. Do your values permit you to force them to follow your prescriptions? If not, how do you propose to co-exist with them?

Rafe Furst Your question seems a bit too abstract for me to give a blanket answer. Can you be more specific about what we are hypothetically disagreeing to?

In case you misinterpreted my previous comment, I wasn't saying what *should* happen with the government in a post-scarcity society, but what I think will naturally happen.
Alex Golubev

i think this is a theoretical argument and you're both right. So given our current situation and the fact that any policy change will have to deal with the historic path:
1. Big ineffective government
2. Big ineffective market
as it applies to "allocating resources".

What's the next step?

No one has the power to penetrate the government. We MAY be able to stop any more wasteful fiscal stimulus, but other than that nothing material will change. Too many people believe in public safety hammocks and i don't blame them too much considering how unfair a lot of our systems are.

The fundamental problem is democracy even when actually used can't distinguish between an expert and a moron.

The only thing that has changed is our information distribution system. So the most efficient way to change things is to set up wisdom harnessing forums and trying to solve small (yet complex) problems. Over time if this system is better it should be applied to tougher problems and it will become impossibly for policy makers to ignore.

Either we can show results or we can't. Technology is the only new input and it's the only way out.
Min

"They’re aspects of the same problem. Big Business accumulates power by lobbying Big Government. As do Big Unions. If you make government small, they are both subject to stronger competitive forces which keeps them in check."

I think that a look at the history of Latin America shows that Big Business tends to capture government, big or small. So reducing the size of government seems to have little prospect of decreasing the power of big business. If you have an example of that tactic working, I would be very happy to see it. By contrast, we know that the trust-busting in the U. S. around the turn of the 20th century reduced the power of Big Business, at least for a while. "The price of liberty is eternal vigilance."
kevindick

First, by what metric do you think Big Business has captured Latin American government regardless of government size? Second, does this evidence distinguish between countries with strong and weak legal institutions?

As for examples, European governments are typically more paternalistic than the US. Their big businesses also tend to be more powerful (in the sense that they are displaced at a slower rate). There are also plenty of examples of Big Government directly benefiting Big Business. By the logic of the contrapositive, smaller government reduces benefits to Big Business. The recent bailouts come to mind.

That said, I have no objection in principle to the government vigorously pursuing antitrust policies, if the efficacy of such policies can be demonstrated. However, in modern industrial economies, the consumer welfare benefits of antitrust as currently practiced is very much in doubt.
Min

I have nothing against the critique of Big Government. However, at the present time it seems to me that the greater evil is Big Business.

I am curious. If you disagree, why? If not, how do you propose to deal with the problem?

Thanks. :)
kevindick

They're aspects of the same problem. Big Business accumulates power by lobbying Big Government. As do Big Unions. If you make government small, they are both subject to stronger competitive forces which keeps them in check. As an exercise, if you pick a particular Big Business and explain why you think it has too much power, I will be happy to either explain why they don't have too much power or why their excess power derives from being in bed with Big Government.