Wednesday, February 20, 2008

The Role of Government

What role should government play in a society? The Libertarian right away says that the role of government in a free society should be minimal and limited to just those things that the private sector cannot do for itself. The socialist, on the other hand, argues that property and the distribution of wealth should be controlled by a central organization within the society, one such organization being a governmental body.

I argue that each of these extremes is a child of academic/intellectual mental gymnastics and promise very little to us in the way of practical application. Neither works when tried! A purely unfettered capitalistic market system can result in behavior that many would say is uncivil and unfair. Incentives are the hallmark of a capitalist system (see “Feakonomics” by Leavitt and Dubner) but, in unregulated markets there are strong incentives to cheat as well as to perform morally. Libertarians tend to cover this problem by saying that a free society does have to have a basic moral system (where does it come from…religion?), private property, the rule of law, and an infrastructure (roads and police protection?).

Can a socialist society succeed? It seems that the history of the last twenty years provides many examples of socialistic societies that have left their people impoverished, uneducated, and backward in terms of the advancements of the modern world. Those still defending socialist systems contend that these experiments really were not ‘pure’ and hence are not representative of what could be achieved in a ‘real’ socialist society. They argue that these societies had individuals that worked against “the people” and this tended to derail the honest attempts to bring the socialist ideal into practice. Of course, those societies, which included Russia, China…and Cuba, attempted to severely repress the ‘disruptive elements’ and these efforts resulted in large scale imprisonments and executions.

In reality, governments exist and they are going to exist. But, these governments are not going to be small and minimal relative to the society as a whole, and they cannot attempt to exercise control over major areas of the lives of people that make up the society. It was argued in the post of February 13 that a society needs to achieve an appropriate ‘balance’ between competing ends. Liberty needs to be a major part of a society, but, liberty also needs to be tempered by behavior that creates positive externalities for society as a whole.

Externalities arise when individuals or organizations are positively or negatively affected by the decisions of other individuals or organizations, but the party causing the externality does not receive a benefit, in the case of positive externalities, or bear a cost, in the case of negative externalities. An educational system can create a positive externality for a society because having an educated workforce tends to benefit the society as a whole and not just the individuals that are educated. The basic example of a negative externality is the organization that creates pollution that affects other parts of the environment.

David Brooks, a columnist for the New York Times, has suggested that we need to assume a more Hamiltonian (after the first Secretary of the Treasury, Alexander Hamilton) approach to what the government does. He defines a Hamiltonian policy as one that supports free market capitalism but helps the people get the tools that they need to compete in it. These policies can include the rights and privileges associated with private property, the rule of law, and the security and protection to conduct business and enjoy life as well as a well functioning financial system, the encouragement of enterprise, and education. These policies can also include unemployment insurance, a more universal health insurance and other programs that can help people in transitional or disruptive situations.
For a representative sample of his writing in this area see the following articles:;; and

Where do I come out on this? Let’s go back to basic assumptions. The Libertarian begins with the assumption, coming from the Enlightenment, that human beings were originally ‘free’ and ‘at liberty.’ Since this was the natural state of the human being, society should be set up to provide the members of a society with as much freedom as possible. The Socialist contends that positions of power exist within a society and unless the powerful are controlled by a benevolent body excessive poverty and inequality will result in that society. These assumptions, in one way or another, are foundational to the different approaches to defining the role of government within a society.

I believe that neither of these assumptions are a realistic foundation for the determination of the role of government in society. My basic assumption about human beings is that humans are problem solvers. All life, to some extent, is composed of problem solvers, but the human species represents the highest development of this talent. The evolution of this skill to its current level has allowed humans to far outstrip the capabilities of any other species that we know of. And what is the goal of human problem solving? It is to allow humans to make better and better decisions and solve more and more difficult problems.

Since individual humans are limited in their ability to solve problems, they found that they can augment their individual problem solving skills by organizing. Families, groups, communities, and governments are ways that humans organize to make better decisions and solve more difficult problems. People are different…they bring different skills and knowledge to the table. Organization succeeds by combining the specialized skills and knowledge of diverse people so as to leverage their differences in order to achieve more than just what the individual can do. Organizing people that are all exactly alike in their skills and knowledge gains little or nothing in terms of the ability to solve problems. Thus, my basic assumption is that human beings are problem solvers and this is based on biological science, not utopian thinking.

The government, therefore, is just another organization set up to help humans make better decisions and solve more difficult problems. But, for a government to work effectively it must access the different skills and knowledge and diversity that exists within a society...all of the society. Since the government represents all of a society, the members of the society have a vested interest in the decisions that the government makes. Thus, to fully access what people bring to the society, the government must be open and transparent to the individuals that make up the society and must allow for debate, discussion, and dialogue on all the issues confronting the government. Modern society and the spread of information have made this more and more necessary. Every day we see that governments that don’t recognize this fact face severe problems and tend to be on the defensive!

What does this have to do with the idea proposed by Brooks that emphasizes Hamiltonian policies for government? To me, Hamiltonian programs and policies create positive externalities that can be achieved through governmental organization: these cannot be obtained through private means. For example, some situations or issues exist in which there are conflicting interests that can only be resolved by bringing together the different members of the society. Here negotiations, rules and regulations and laws are important. Positive externalities are gained by reaching a balance that everyone can work with. There are some situations or issues in which everyone has an interest and can be solved by creating programs or institutions that benefit both individuals and society. Here positive externalities can be achieved by the creation of an educational system, an interstate highway system, unemployment insurance and so forth. Thus, we are looking for government to find ways, policies and programs, that allow human beings to do what they do best…solve problems. More on this next week!

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