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Those of you who read my posts about Economics know that I am a libertarian but today I am going to list some of the ways that government increases the total level of utility, happiness, in society at large.
Government can use its size and coercive power to manage externalities, provide public goods, pool risk and enforce the law.
First there is the issue of externalities, harms caused to someone as a result of other parties' economic activities. Noise, air pollution, garbage, risks of fire and eye sores reduce the quality of life for people. In situations where property rights are well defined, many of these problems can be solved through the courts or some form of voluntary cooperation between the owners of the properties involved in the externality. The problem arises when property rights are not very well defined and where the damages are diffused and the gain are concentrated. Places like the ocean and the atmosphere are the best examples. Each individual motorist does not like a smoggy city but if they put a catalytic converter on their car, it incurs a cost while the gain of less smog is virtually nil. Government's ability to force every to use commonly held spaces by requiring that people pollute the air and water less is something that enhances our quality of life.
Public goods are the greatest strength of government. It greatest public good is its ability to provide physical security. While long, elective wars in far away lands are probably not justifiable, having a very strong military is. Perhaps the US military is too large but it is better to have a military that may be too large then to have one that is so small that it cannot protect our communities from invasion. You need physical security before you can do almost anything else in your economy.
Public parks can also be very beneficial public goods, most people do not own their own full sized athletic facilities and even if they could afford them they might find it not worth the cost if it will only be used sporadically. Public parks allow people the ability to have large open spaces and athletic facilities which they might other wise not afford or would find it not worth the money to buy a basketball or tennis court for their own personal use. Government provides numerous other public goods that would be very expensive or impractical for people to privately furnish and that increases our quality of life because of that.
Government can (at least in theory) act as a very large, cost effective and stable form of insurance against many financial risk that exist in our world. Things like Social security, unemployment insurance and medicaid and medicare as well as government funds for assisting victims of natural disasters reduce risk and when risk is reduced, people tend to be happier. It is true that the specifics of some of these programs are questionable and that some of them create moral hazards and distortions in the market but because most people are risk averse, totally utility can and should be increased by these risk pooling government programs.
Finally there is the ability to enforce law. While there many unjust laws and laws can and have been used to promote social inequality. A system of that law that treats people equally is, on balance, good for the "little guy." It also provides a frame work in which businesses and households can better plan, make decisions and make calculated risks that grow the economy. Law means property rights which is more important to economic growth than any natural resource. A well functioning system of law is absolutely vital for economic growth and while private actors can actually administer a good deal of law in an impartial manner, there are limits and that is where state backed courts become vital.
I look forward to the input of you, the reader. I am going to respond, clarify and elaborate based on how you guys respond, so if you agree, disagree or agree with some part and disagree other parts, tell me what you think.
Government can use its size and coercive power to manage externalities, provide public goods, pool risk and enforce the law.
First there is the issue of externalities, harms caused to someone as a result of other parties' economic activities. Noise, air pollution, garbage, risks of fire and eye sores reduce the quality of life for people. In situations where property rights are well defined, many of these problems can be solved through the courts or some form of voluntary cooperation between the owners of the properties involved in the externality. The problem arises when property rights are not very well defined and where the damages are diffused and the gain are concentrated. Places like the ocean and the atmosphere are the best examples. Each individual motorist does not like a smoggy city but if they put a catalytic converter on their car, it incurs a cost while the gain of less smog is virtually nil. Government's ability to force every to use commonly held spaces by requiring that people pollute the air and water less is something that enhances our quality of life.
Public goods are the greatest strength of government. It greatest public good is its ability to provide physical security. While long, elective wars in far away lands are probably not justifiable, having a very strong military is. Perhaps the US military is too large but it is better to have a military that may be too large then to have one that is so small that it cannot protect our communities from invasion. You need physical security before you can do almost anything else in your economy.
Public parks can also be very beneficial public goods, most people do not own their own full sized athletic facilities and even if they could afford them they might find it not worth the cost if it will only be used sporadically. Public parks allow people the ability to have large open spaces and athletic facilities which they might other wise not afford or would find it not worth the money to buy a basketball or tennis court for their own personal use. Government provides numerous other public goods that would be very expensive or impractical for people to privately furnish and that increases our quality of life because of that.
Government can (at least in theory) act as a very large, cost effective and stable form of insurance against many financial risk that exist in our world. Things like Social security, unemployment insurance and medicaid and medicare as well as government funds for assisting victims of natural disasters reduce risk and when risk is reduced, people tend to be happier. It is true that the specifics of some of these programs are questionable and that some of them create moral hazards and distortions in the market but because most people are risk averse, totally utility can and should be increased by these risk pooling government programs.
Finally there is the ability to enforce law. While there many unjust laws and laws can and have been used to promote social inequality. A system of that law that treats people equally is, on balance, good for the "little guy." It also provides a frame work in which businesses and households can better plan, make decisions and make calculated risks that grow the economy. Law means property rights which is more important to economic growth than any natural resource. A well functioning system of law is absolutely vital for economic growth and while private actors can actually administer a good deal of law in an impartial manner, there are limits and that is where state backed courts become vital.
I look forward to the input of you, the reader. I am going to respond, clarify and elaborate based on how you guys respond, so if you agree, disagree or agree with some part and disagree other parts, tell me what you think.
