Saturday, July 07, 2012

How big is appropriate for government?

The health care ruling a few weeks ago brought up the ages-old debate about what is the right size of government, and where the right balance is between individual liberty/freedom and government regulations/requirements are.  Many of the people arguing for the conservative/libertarian view of minimalist government also adhere to a fairly strict constitutional interpretation and think a lot about what the founders meant.

I don't wish to wade into the merits of the health care decision (much less the law) here, nor do I want to argue whether a constructionist approach is appropriate (especially since the latter is really a subjective call; a matter of one's perspective and political philosophy). 

Rather, I simply wanted to make an observation as to the nature of why government has grown in our daily lives so much more compared to in the days that the constitution was created.

In particular, I think that our society has changed in two key ways that must require at least some more government "intrusion" in our lives than in the colonial days.  (Whether these justify the level of increased intrusion is a question I will leave readers to determine for themselves).

The first key change is that 200+ years ago, the vast bulk of trade was local.  If you had a home, you probably built it yourself.  If you had furniture, you likely built that too.  You probably grew your own food.  Trade certainly existed - people were certainly not entirely self-sufficient - but they were significantly more so than they are today.  And most of what they did in trade they did locally and face to face. 

Libertarians often decry government consumer "protections" as being unnecessary because the market will adjust for charlatans and cheats.  200 years ago, that was likely true: if the general store owner was dishonest in his dealings with people, he'd quickly be out of business because he was very likely to personally know each of his customers. 

It's still true today that the market can self regulate to a degree, but much less so.  If you feel AT&T screwed you on your phone bill, that's generally just tough luck for you.  The sheer degree to which we each rely on trade and the impersonal nature of much of that trade makes establishing a trust relationship with each trading entity prohibitively inefficient.  As a result, having some degree of 3rd-party trust validation provides a grossly disproportionate amount of lubricant to the economy; without it, the economy would grind to a halt.  In today's environment, the government does some of this (FDA ensuring food standards, for example), the private sector/trade groups does other aspects of it (Better Business Bureau, or, as an example of doing this badly, the ratings agencies that failed so badly during the financial crisis). 

I believe that one can legitimately argue whether the balance of government/private 3rd-party trust providers should be tilted more towards government, is about right, or should be tilted towards more private sector.  And I suspect that the reasons much of it that is government done today are primarily financial (there may not be a good private sector model to fund it) and trust (self-policing can sometimes fail due to conflicts of interest).  But the notion of reducing this function to its colonial-era levels is a quaint reminiscing for a simpler time that ultimately leads to economic suicide.

The second key change from the days of the constitutional convention is simple scale.  When we were a few million people scattered across the colonies, the impact one could have on one another and upon the broader environment (economic as well as ecological) was limited.  Our resources, and space simply dwarfed our numbers and our ability to have negative impacts.  With over 300 million people and a vastly higher per-capita income, those days are long gone.  The tragedy of the commons is a very real problem, even if there is controversy about what are the best solutions to it. 

But again, as with having 3rd party trust agencies above, governments tend to step in where markets fail.  Thus it is perfectly reasonable to expect to see a larger role for government in a larger, more crowded, and more resource constrained society.

None of this is intended as an argument in favor of excessive government intrusion in our lives or limits on our freedoms; quite the contrary - I, for one, don't want government involved any more than necessary.   My point here is simply that as society grows in scale and in technological sophistication, the definition of "excessive" will move over time; we shouldn't pretend otherwise.