Government Should Be the Right Size

Michael O'Hare:

Right-sizing government « The Reality-Based Community: Can the assertion “Government is too big [or too small]” ever mean enough to support a serious conversation, much less a policy decision?  How about “California [or the US; plug in your own jurisdiction larger than a small town] can’t afford [plug in a program]“? What could such  statements mean, or be shorthand for?...

Let’s, then, immediately distinguish a society as a whole, and especially its economy, from the special agency – government – it might decide to task with a larger or smaller set of its productive activities.... If you have loosened the stone libertarian mind-vise enough to admit that there is such a thing as a market failure, and enough intelligence or education to understand that market failure is a technical property of a good or service and implies no rap on markets, you will be OK with the idea that government is exactly the right agency with which to get stuff we want that the market won’t supply (enough of) by itself, and to avoid stuff we don’t want, like pollution, that the market will overproduce. If you have a heart, you will also be OK with ideas like “death by starvation is cruel and excessive punishment for ‘not having been able to save enough to retire on’, even for ‘having been too careless to save enough’, certainly for ‘having been unlucky enough to be smitten by illness or accident’” and you will find government is also well suited to correct some important unfairness and injustice, even when the best it can do along these lines entails some moral hazard and bad incentives. It’s worth noting that absent slavery, every productive activity, whether managed (or obligated) by government or by private enterprise, is in the end carried out in the private sector: public schools are built by private contractors, and government workers are economically just small private businesses with no employees.

As is true at every moment of every year, we have governments doing the tasks they have been given so far, and consuming economic resources to do so. Among those are some tasks a reasonable person might ask not be done at all, like making a second, redundant engine for the joint strike fighter, and tasks others might think better done entirely in the private sector, like building and operating a bridge or a piece of highway.  We also see tasks not being done at all that some claim should be, and would if government were assigned the work, like stabilizing the climate, and tasks (some claim) would be better done by government than however they are being accomplished in the market. We could ask similar questions about everything in and out of the public sector, but for some of them, like whether the army should be shut down and left to the market, it’s hard to get grownups to waste time on the conversation, so the political debate tends to focus on programs at the deliberative margin of the public-private boundary.

The only way a sane person can want to move tasks like these in or out of the government part of society’s productive ensemble is to ask whether doing so will give us more of the stuff we want(physical and other)  than we would have to give up to get it. The fancy name for this test is cost-benefit analysis....

Taxes are too high when there are programs in government that create less value than they use up, and too low when there are programs that would create net value if we assigned them to government.  Government is too big or too small by precisely the same rules.  Trying to make the conversation simple enough for Fox News analysts to rant about by reversing these rules of inference (which actually seem pretty simple to me) is monomaniac lunacy, or cynical mendacity in the service of selling advertising time or getting votes, or both; it’s not politics and certainly not governance.