Government is Good, but has its Limits

We tend to have lots of discussions about public policy at my office—after all, that is what we do. As part of that dialogue, an intern recently asked:

Is government regulation never a good thing? Even if regulations are designed to reduce pollution or cut down on secondhand smoke in restaurants (nominally good goals, although the regulations may be flawed/designed incorrectly), is it always better to allow individuals/corporations to make their own decisions and enjoy or suffer the consequences? Or in the case of unemployment insurance or a more-limited form of welfare, is it better to make individuals responsible for themselves rather than helping them get back up on their feet? My principal exposure to these types of discussions comes from my microeconomics and public finance classes from this past year. The classes emphasized using taxes and subsidies in the case of externalities and other market failures (information asymmetry, natural monopolies, etc.), but I would like to have further discussion on these topics from other perspectives.

Here is my response:

Your questions are all very good. And all very challenging. In fact, they are at the very heart of what a conservative involved in public policy must come to grips with.

I recently mentioned that I do believe that government was given to us by God for a reason, mainly to help us live in freedom. We can’t be free if we can’t own property because someone bigger and stronger than us is always taking it away from us. Or we certainly can’t be free if we are running in fear for our lives.

Yet even the existence of government threatens our freedom. By definition, government has the authority to deprive us of life, liberty, and property.  That’s what a government is, it taxes and wields the power of the sword over its citizens. It limits human action to enhance human freedom.

Yet that is not inherently a bad thing. To use an analogy from the Bible, we are saved from violence not so we can commit violence, but so we can be free to do what is right. Living a life of wrongdoing or violence is not being free, it is being a slave to sin. We are freed by government to live freely, i.e., to live righteously. That is good.

But, as I alluded to above, people are always living on the edge under the rule of any government. Anything that the government does does violence to the will of individuals. To the extent that enhances freedom, all good and well. But today, even in the U.S., I’d say we have gone off of the edge, and that there are very few new things that the government does that enhances freedom.  Most government initiatives today restrict our freedoms instead. Not everything by any means, but most, I believe.

Regarding externalities or other types of “market failures,” the short answer is that there are very few market failures or externalities. Externalities or market failures are simply events or consequences that suit most people just fine, but a few don’t like the outcomes. So they call them externalities, and say the market has failed. If there are in fact cases where the general welfare is lessened by something that came to pass in the marketplace, I’d say it is most likely because the government hasn’t done its job of setting up the proper framework, such as protecting property rights, etc.  

Finally, when it comes to making “individuals responsible for themselves rather than helping them get back up on their feet,” framing the question that way—while extremely common—completely ignores charity. So much of what we do each day, even for those of us in the workplace, is outside the realm of economic behavior with goods or services being exchanged. This may sound corny, but one of the things government frees us to do is love our neighbors. Probably no place on earth has been a better example of that over the last two centuries than America. Not because Americans are inherently better than the Germans or the Chinese or the French, okay, well maybe the French, but because we have had a government here that freed us to love each other. That is exactly what Alexis de Tocqueville was getting at in Democracy in America. At least, we had a government that freed us to love each other. I worry that we are losing that.

But the point here is that while it is absolutely true that there is no system as good as capitalism in helping people get back up on their feet on their own, it is not capitalism’s job to help them, it is the job of individuals acting charitably, outside of the marketplace. It is our job, individually and collectively, to be charitable. Charity meaning to give of ourselves for the betterment of our neighbor. To the extent that people are not getting back up on their feet, it is both their failure and our failure, individually and collectively. However, government can’t solve this problem because government takes the individual out of the process. There is no charity when the government is involved. For many reasons. One big one being is that we aren’t giving any longer, the government is taking. Another one is it totally removes the personal, individual connection that is so important to charity. Another is that once the government gets involved, we no longer feel the responsibility to help, because government is supposed to be taking care of it.

But again I digress a bit. Government can’t step in to solve the markets failure to help people back on their feet because the market hasn’t failed. Yet government regulation ALWAYS targets the market as the culprit, so the solutions that the government comes up with—be it unemployment insurance, minimum wage, price controls, etc.—can’t and won’t solve the problem. In fact, the law of unintended consequences, tells us that because they ignore economic laws they will make matters worse.

As I mentioned, this is at the very heart of the work that conservatives do. In fact, I’d say it is at the very heart of WHY we do the work that we do. We see the government causing so much harm to people—I mentioned the minimum wage the other day as an example, that we want to get in the mix to get the government out of the way. Yet, we also have to remember that neither can we use the government to fix people’s problems. Limited government isn’t going to save anyone from anything. So if we are not out there ourselves acting charitably in addition to what we do at the Foundation, then everything we do at the Foundation is for naught. 

If you’d like some more insight in this area, I’d highly recommend that you read Marvin Olasky’s The Tragedy of American Compassion. This was the book that really gave the moral basis and led to the welfare reform act on 1995. Of course, Democracy in America is a great book as well.

Conservatives of course don’t have the market for compassion cornered. But both “compassionate conservatives” and liberals do need to reexamine their belief that government can ever be a means toward achieving compassion.