On Civil Society

What happens to civil society when we create a government that seeks to “do something” about so many aspects of our lives?    Many people believe that to better society, we need to elect “smart people”, who will put “smart policies” into place.   It certainly sounds compelling.   But examine the chain of events that is now set into motion…

As the role of government expands, the incentives for people to petition the government for their particular issue or value expands as well.   Under a politicized decision making process, there is by necessity a public debate over the allocation of resources and ultimately, the underlying value systems themselves.  We set ourselves up for a “tyranny of the majority” situation.   Why has government lobbying expanded so dramatically over the years?   Because it works.

The resulting government, ever increasing in scope, also by necessity becomes ever increasing in cost.   It can use any combination of three mechanisms to cover these costs.   It can raise the money via taxes.   It can borrow the money.  Or it can simply print it.     Taxation raises the issue of who should be taxed, and by how much.  From there it’s often a short trip to class warfare.   Borrowing the money might make sense, if the rate of return on the resulting expenditure exceeds the cost of the borrowing.  But ultimately borrowed money must be repaid, so it also represents a form of deferred taxation, and/or a deferred reduction in consumption.   Lastly, printing the money simply reduces the value of all of the existing money – it is the most insidious funding mechanism of them all.

So we now have incentives in place to argue with each other over how a large amount of public money will be spent, and how we will raise the money to do so.   Society splinters into a myriad of groups that share various characteristics and causes, each attempting to assemble the necessary forces and armaments to defeat their ideological adversaries.

But perhaps worst of all, for all of the best intentions, none of the above can actually succeed.

Do the “smart people” who are orchestrating all of the above really possess more knowledge and brainpower than the collective decision making power of the entire society? The “wisdom of crowds” would say they cannot.    No collection of government officials and bureaucrats elected or otherwise, could possibly know the intricacies of why people seek to interact with each other in all the ways that they do.    It’s what Hayek called “The Fatal Conceit”.   And if along the way they decide that their decision-making might be improved with “better information”, serious issues of privacy begin to be raised.

In practice, there is little incentive for government to succeed as well.    In many cases, “the customer” is a captive audience with no alternatives, by design.   “Success“ in a program might mean that a problem has been solved, and that a group of government employees are no longer necessary and should therefore, lose their jobs.   “Failure” might easily be blamed on a lack of funding or resources, which exerts more pressure to grow the government.   Who decides what success or failure is in the first place?   We are back to a contentious debate.

There is a clear answer to all of the above:  Freedom and limited government.

“The free market” is a much-maligned term these days.   What many people derisively refer to as “the free market” is often instead a highly regulated situation where success is overseen by politics and failures are rewarded with subsidies.    By contrast, it is critical to understand that when two parties are considering a transaction in a truly “free market”, they will only do so if they make each other better off, according to their own respective value systems. The implications of that simple fact are enormous.   Each party is incentivized to understand the needs of their counterparty.   Two or more sellers might compete to better understand the needs of a buyer, with the buyer deciding which seller best meets their needs, according to their own definition of what those needs are.   Other buyers with other needs will attract different sellers.

As long as in the course of their transactions, these buyers and sellers do not infringe on the property rights of others, the entire system is self-reinforcing, self-regulating, and best of all, provides an ever-increasing standard of living to all parties. “Success” in a truly free market is demonstrated by the existence of happy buyers and sellers.   “Failure” is likewise clearly shown to be the opposite, and exists in the open for all parties to learn from and to improve upon.     Also keep in mind that throughout history, the people who have typically amassed the most material wealth are the ones who have made the most people better off.    Lastly, note that there is great incentive for peace – you don’t go to war with your trading partners.

So when people call for “change” in government and its policies, the correct response is: “Change to what?” Change to a system that challenges our collective civility, is ever increasing in cost, and has been proven to not work?  Or do we change to a system that acknowledges that people, when left to their own devices, under the rule of law, have every incentive to improve the lives of their neighbors?

To the original issue of asking our government to “do something” about everything, we must be smart enough to understand that we will never be smart enough.  That role is reserved for God.

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