What Governments Do

[As you may or may not already be aware, members of the Watcher's Council hold a vote every week on what they consider to be the most link-worthy pieces of writing around... per the Watcher's instructions, I am submitting one of my own posts for consideration in the upcoming nominations process.

Here is the most recent winning council post, here is the most recent winning non-council post, here is the list of results for the latest vote, and here is the initial posting of all the nominees that were voted on.]

There is a concept in political theory called the Authoritarian Bargain. That is, in a time of social and political crisis, people gravitate towards authoritarian rule. Underlying such rule is a simple exchange: the people gives up most or all of its freedoms, and the authoritarian keeps them safe.

The truth is, the same principle can be more broadly applied. In fact, it is merely an extreme variant of the Social Contract, wherein the people cede a narrow range of rights to the government, which in return enforces standards of law. Such law is necessary because in its absence, we have the war of all against all. So even in relatively free societies, the people give up some rights in exchange for safety and security.

In the words of economist Dr. Tariq Yussef, "Governments exist to mitigate risk."

Now that we are talking about risk, we can perhaps deal with a recurring question: why do governments consistently displace the private sector, even though the private sector may be more efficient at addressing a particular problem? And why, even after the failure of central planning, do governments continue to expand?

Anyone with a basic knowledge of finance will know that there is inevitably a correlation between expected risk and expected return. A venture with high returns will almost certainly carry with it high risks; one with very low risks will correspondingly have very low returns. The same principle will often apply in other social areas as well. And it is here that governments and private groups will diverge.

Generally, when a private concern undertakes a given venture, its primary interest will be in maximizing returns over time, measured in money or some other resource. Therefore, it will be willing to accept some risk, or indeed to seek risk out in search of higher returns. Of course, the essence of good business practices is to find ways to beat the curve, and maximize return while minimizing risk. But the basic point is that private enterprise is risk-tolerant.

Government, on the other hand, is created for the sole purpose of mitigating risk. It is called into being because most people are extremely uncomfortable with risk, and would rather make the authoritarian bargain so that risk and uncertainty will disappear. So the government is less concerned with any material returns on its policies than it is with providing safety and security for its citizens.

It is a remarkable fact that the spread of globalization has brought with it not a decrease in the power of the state, but the exact opposite. The state has steadily increased in power and reach in those countries most open to globalization. Why? Because globalization is risky and creates uncertainty. So the people will not tolerate it unless government can provide a hedge. Examples: unemployment insurance, health care systems, pensions, labor standards, product regulations, education subsidies, job retraining, et cetera.

That being the case, when does a government consider a policy or program successful? It is surely not when the stated intent of the program (e.g. to reduce crime or to educate children) is carried out; such things can usually be done better by the private sector. On the contrary, many government programs end up exacerbating the very evils they were meant to alleviate. And yet they continue to exist and be funded. Why?

I think the answer is that governments seek to expand their ability to mitigate risk above all else. That is what they are meant to do, and to provide security in an insecure world takes a lot of power and influence. A private school may perhaps educate better than a public one, but it denies the government the opportunity to intervene in the lives of its people, as the people themselves so often want it to do. In a public school, government may in theory dictate what will or will not be tolerated, in order to make its clients more secure.

Of course, in real life things often don't work out that way. Moreover, many people resent such "nanny-statism" as stifling and intrusive, as indeed it is. I believe that our relations with government can be boiled down to the following three questions:

1. How much risk are we willing to tolerate in theory, and to what degree will we barter our freedoms and opportunities to reduce these risks? In other words, what risk/return ratio do we want?

2. Does government action reduce risk in practice, commensurate to the power granted? Can government action even increase risk? In other words, are we getting fair value in the Authoritarian Bargain?

3. At what point does the growth of government power itself constitute a risk?

Many people can oppose large government not because they dislike paternalism in theory, but because they don't think it works in practice. Similarly, few things raise the ire of a populace more than the idea that government action is actually making them less safe; consider the oft-stated (and to the long-term observer, rather dubious) meme that the war in Iraq has made the terror networks stronger.

It seems inevitable that the more power government has, the more it will try to accumulate, because that is what it does. The logical extreme is for governments to lock people in their ergonomically-perfected bubbles and feed them nutritionally-balanced meals, and otherwise dominate their lives so that they cannot do anything remotely risky. Of course, on the other extreme is pure anarchy, the war of all against all. And people would not be satisfied with free-market solutions, because free markets are willing to tolerate more risk than the average authoritarian personality can stomach.

So we must find somewhere within this range of options that is best-suited to a healthy society. And this necessitates that we constantly restrain government, because otherwise government will inevitably overrun all of society, with a good chunk of society cheering it on.