Politics Night: The Role of Government

For the second politics night, we discussed the appropriate role of government. We emphasized early on that this would be a normative not positive discussion.

Before I get started, I want to say that I think it is important to undertake this sort of exercise. Conservatives often attack liberals for thinking government should be the solution for every problem. While this charge is overstated, it is true at times. We should do a much better job at seeing a problem, seeing a way for government to make it better, but then also recognizing that maybe government should not get involved in that situation or in that way. In other words, liberals should be better at exercising restraint.

I will add though that conservatives should also be better about thinking of ways government could make things better, instead of reflexively saying government is bad and ignoring the real problems that exist or pretending they will fix themselves.

I think there are three appropriate roles for government. First, government exists to protect and encourage market transactions. It does this by creating laws and a legal system that promote trust among market participants. Without these protections, the economy would likely stagnate. You see in developing countries that without trust and an ability to address grievances of market transactions, small business owners are afraid to expand. I argue that of the reasons I list here, this is the least controversial and the longest lasting role of government. In fact, I think that libertarians would agree with this role for government and only communists might disagree.

Second, government exists to solve specific market failures, like overuse of public goods and negative externalities. This includes public education and environmental protection. Many libertarians seem to disagree with this role for government, which baffles me. If you have a basic understanding of economic theory, you would understand that markets are not perfect. They have flaws, and government should help deal with those flaws. For example, without government and the EPA, companies would be free to pollute - and mostly in areas near low income residents - and not include the costs of remediation in their product.

Third, government exists to provide people with their civil and human rights. The civil rights are identified in the Constitution and its amendments. Human rights though are a more recently proclaimed role of governments. A market system is efficient but not equitable. Government therefore exists to help deal with the inefficiencies. Now, I do not mean to suggest wealth redistribution. Instead I think an advanced society should be able to provide a minimum standard of living - which is a human right - to all of its people, including housing, food, and health care.

There are some things government does that do not neatly fit into one of these categories. For example, the Federal Reserve adjusts interest rates to affect the overall economy and the federal government will provide fiscal stimulus in times of recession. Maybe these could be lumped into the negative externality column, since the collective decisions of individuals can affect the economy as a whole. I am on the fence about whether it fits there or regulating the overall economy is another category entirely.

And there are some things I think I support but definitely to do fit into any of these buckets. Seat belts is the best example of this. I know that seat belts laws save lives. And people would not have worn them without the law. So society was made better because of this law. However, it doesn't sit that well with me since we are restricting an individual's choice in a way that only affects them. The only thing I can think of is consumer protection. This isn't one of my categories. It probably fits within the first one, although I imagine expanding it that much would make that category more controversial. As you can see, I am still working through this one.

I know some will want to debate the order I used for this list. For example, one person said that protecting markets is far less important than protecting human rights and so should be the first category. I don't think we are choosing among the categories - all are necessary roles for government. So order seems less important to me. We can have that discussion, but I think what is far more important is what categories are here and what are missing.