Since I started this venture after the November election, I have mostly focused on some random thoughts that weren’t necessarily tied to anything current in the news, other than they were topics that somewhat touched on happenings during this past campaign season. Given that, before getting into other more substantive topics, I thought it would be worthwhile to explore for a brief moment the actual underpinnings of government—particularly in a capitalist society like the United States and most of the “West.” In addition to building upon some of my own beliefs, as I have written, I think this discussion can also help set the boundaries of policy debates across a broad range of issues.
First, though, I would be remiss if I failed to note that these ideas are neither original nor likely my permanently-held beliefs. They are not original in that many have written on these subjects in the past; so many that I am choosing to not take the time and find the proper citations for these ideas. Instead, I will simply say this is my aggregation and summation of concepts that others before me have laid out. Nor are these likely to be principled, never-changing beliefs that I will always hold. It is entirely possible that with added experience and a changing world, my views will change as well. The reader may also disagree, and in generating debate, and perhaps as a result one or both of us would shift our positions. But this is where I am today.
Government, at all levels, does a great many number of things. But all those things can really be boiled down into three key concepts:
1. Basic Protection of its Citizens
2. Ensuring the Rules of Capitalism are Enforced
3. Correcting Market Failures
Each of these concepts obviously has a broad spectrum of specific actions—typically ranging from almost no intervention to nearly-supreme levels of intervention—with which the concept can be addressed. In thinking through each of these I will also attempt to provide multiple perspectives from across this “intervention” spectrum.
So, very briefly, let's examine just what is meant by and done with each of these concepts.
Basic Protection of Citizens
The preamble of the Constitution forthrightly declares that the People of the United States establish their government to, among other things, “provide for the common defense.” At its most basic, this sentiment—which was also enshrined in the Enumerated Powers of the Congress—dictates that the United States government will protect its citizens from foreign incursions. After 200-plus years of government, this point is little debated. The size and scope of our military, and how it is utilized, is constantly an issue of debate. But very few, or even no one, argues that this is not a purpose of government.
So that is on the “least interventionist” side of the spectrum; the minimal amount a government can do in this realm is stop a foreign power for invading our land. But what else could this mean? In particular, the Preamble and the Enumerated Powers also require Congress to provide for the “general welfare” of the people. Indeed, these two concepts live literally right next to each other in the text.
Here is where of lot of political debate rests today. Is action to mitigate the impact of climate change a common defense or general welfare? Do the placement of military bases all throughout the world, and participation in treaty organizations like NATO constitute defense of Americans? The list goes on and on, and the debate around these issues will be never-ending.
Ensuring the Enforcement of Capitalism’s Rules
After protecting its citizens sufficiently that they can live in and create a safe and functioning society, government then provides the foundational underpinnings that allow capitalist practices to work and flourish. So often people want government to just “get out of the way,” but the truth is a lot of what government is doing is allowing everyone to play by the same set of rules.
The first, most obvious duty on the spectrum is the operation of a court system that can adjudicate disputes between multiple parties. Without this function, the entire system of contracting and business relationships could collapse on itself. The courts, with the law enforcement system that supports it, provide all individuals involved in business transactions an equal footing on which to conduct business. Under this system, if one business party fails to pay for contracted services by another party, the aggrieved party can go to court and have the issue remedied. Without this ability, a “might makes right” system prevails, where the party with the greatest means to inflict damage on the other party is the one that wins. Even today a party could have access to vast legal resources that ensure they win their day in court, but surely that is more acceptable than them winning simply because they have the most guns or goons?
Beyond this basic intervention in the contracting system, government further provides a basic informational framework that gives all citizens access to an appropriate level of information, which in turn allows individuals to focus more time on their own pursuits and innovations.
What does this actually mean?
We interact with a wide variety of individuals and entities that have an expertise or advantage over us in some way; indeed, comparative advantage is the very heart of trade. It would be impossible for any single person to have the scope of knowledge and ability to do all things necessary in life. So let’s take an example of the health industry. We see doctors and go to hospitals generally with the comfort of knowing that they are capable and successful in what they do. Sure, we may spend some time choosing one to go to, but in a bind you can show up at an emergency room knowing you’ll be cared for.
But what if it wasn’t this way? What if government completely stood aside and did not require a whole slew of standards—what is required to call yourself a doctor or hospital, what are the standards of care that must be provided, what type of payments are to be accepted, among thousands of other questions? What if you as an individual had to research and come to an understanding of all of those things absent any societal supports. How would you determine if someone who purports to be a doctor really is one? How would you know the facility you are going to for a procedure is one that is clean and appropriate?
The truth is we wouldn’t know. It is seamless to us, because we have come to expect this type of comfort…but that comfort is provided to us by the existence of “bureaucratic red tape” that ensures markets are functioning in ways that benefit citizens-as-consumers by reducing their cost of obtaining information. This dynamic extends into nearly every facet of our lives—education, car servicing, even to things like hair and nail salons.
The point is, in this way government provides a core function for the success of our society. Surely individual regulations do more or less harm to the efficient operation of the economy, but in the aggregate their existence is vitally important.
Correcting Market Failures
The third pillar of government in supporting a capitalist society is its ability to correct market failures through collective action. Market failures are areas in which the transactions of goods and services break down for a variety of reasons, among them the free rider problem, negative externalities, and the “tragedy of the commons.” For an example of the “least interventionist” version of this function, we once again turn to the military.
National defense is the clearest example of free rider problem that only the government can solve. If the government builds a military that protects against foreign invaders, when the army is blocking the enemy they can’t choose to defend a couple people who paid them and allow non-payers to be overrun. Instead, we rely on a system of taxation that requires (mostly) everyone to kick in for costs, and in return the military protects us, whether we want it or not.
Clearly, a free market system would not work here. It is also difficult to operate with other functions like police, criminal justice, and fire protection. In these areas, at least with respect to the basic provision of services, we as a society agree that a market failure exists and a government solution is necessary.
There are, however, many other ways in which markets fail. The degree to which that failure hurts society as a whole, as well as the degree to which government should intervene, are at the center of our political and policy debates. One current example of failure intervention is government involvement in the development of alternative energy strategies.
Energy production is an example of a relativistic market failure; that is, the extent to which the market appears to not work is totally dependent upon your individual view of what the market should be producing. If you believe that energy should be provided to consumers based on the most cost-efficient means at the time, and that consumers should pay whatever price the market dictates, then energy production actually runs pretty smoothly.
If, however, you believe that consumers should be somewhat shielded from volatile price changes or that the production of energy should have minimal environmental impact, then you will likely view the market as failing. Solving those failures might involve some level of regulation limiting how much producers can pollute or some level of price controls, all of which distort the free market. These solutions, though, have been around and debated for decades. A more recent entry into the debate is the involvement of the government in helping jumpstart industries, which leads to problems of the government creating “winners” and “losers” in lieu of the market deciding.
Here, the government’s attempt to jumpstart the wind and solar power industries with investment of public monies come to the fore. In the long run, with oil and coal being finite natural resources, eventually the market will turn to alternatives. As those resources become scarcer, prices will rise and the cost of alternative sources will eventually be more competitive than fossil fuels. The market will make this happen, eventually. However, in order for this to happen, two other major things happen: pollution from fossil fuels will continue to grow and prices will continue to rise for consumers, possibly at great levels in the future.
If, as a society, we decide that we do not want those higher levels of pollution and prices to exist, one alternative to regulation is a more market-based solution whereby the alternative energy market of the future is brought forward in time to today. Instead of the government spending money in the future to deal with the aforementioned problems of the current market, it can instead essentially securitize those costs (both monetary and external) by investing in those alternative markets today. Rather than relying on the cost of current energies to rise sufficiently to make alternatives attractive, the government seed money brings down the price of alternatives to make them more competitive today. That money is spent today on investment rather than tomorrow on environmental mitigation and price subsidies.
Both of these visions of the market are equally valid in a political debate…it simply comes down to what is your view of the current market and what is the best path forward to get it to act in a way in the future that is consistent with your values.
Against Anarchy
At the end of the day, this is probably a very elitist demonstration of why government is necessary. While there are inevitable—and important—debates about where along this interventionist spectrum our government should exist, it is indisputable that if we want a protected society with a well-oiled capitalist free market system, some basic level of government is necessary. In my view, all too often the debate is one of whether the government should be in or out; instead there should be a recognition that it is necessary to be in, and the debate is over the degree of its scope.
It may be a minor distinction to most, but if we more universally adopting this view, I think our political debates would take on a very different tone. And we can all agree that we need a different tone these days.