Re: Is Government Ever Necessary?

I intend to reply to "Is Government Ever Necessary: A Conservative-Libertarian Debate" and not make too much of a fool of myself in the process. This article is an email exchange between a conservative and a libertarian in which the former criticizes libertarianism for not have a general theory that shows that all government intervention reduces national wealth. I have such an ego that I will attempt such a feat. Much of my inspiration for this post comes from the book Human Action by Ludwig von Mises and writings by Harry Browne.

We must first start with something on which we can all agree. I propose to start with that all people act in such a way that they expect to increase their happiness, or decrease their discomfort.

Government, on the other hand, does one of two things: 1) It either forces people to do something they do not want to do, e.g., wear seat belts or pay taxes, or 2) It forces people to abstain from doing something they do want to do, e.g., drink alcohol. Government can only interfere with one's actions to decrease their discomfort.

The most frequently raised argument for the decrease in overall wealth is that it takes resources to enforce these actions of government.

The first objection to this argument is that the resources expended to enforce the actions of government and retaliation against government action are less than the overall increase of wealth of society. I will assume that the expenditure of resources for enforcement is zero and provide other arguments instead.

There may be two objections to this argument. First, people do not know what is good for them. Government may interfere with a person's actions in order to force them to act differently. The government's preferred action of the individual will actually lead to more happiness for him than the action he would pursue if he were free to do so. He should thank the government for its benevolence.

This argument is fallacious. The problem is that someone raising this objection is substituting his own valuations for those of the target of the government's interference.

The second objection involves the transfer of wealth. Resources X may be taken from A in the form of taxes and given to B so that B may put X to better use than how A would use X. We compensate for the increase of discomfort of A with a greater decrease of discomfort of B.

First, if X did not pass through the hands of government first, we would call the tax by a different name: theft. No increase in the happiness of B justifies the decrease of happiness of A. However, this is a moral argument, and different people may approach the problem from different moral perspectives. Reasonable people may disagree on whether morality is relative or absolute, but most people can agree that different people do have different moral systems.

Instead, I take a different tack from the moral issue, that is the issue of valuation. We have the problem of comparing A's valuation of his loss to B's valuation of his gain. This comparison is impossible precisely because the valuations are being made by different people. It is possible to compare C's valuation of A's loss to C's valuation of B's gain. However, this comparison is irrelevant. There is no direct gain or loss for C by a transfer of X from A to B. Besides this, D may reverse C's relative valuations of A's loss and B's gain. We have gotten precisely nowhere.

In fact, it is the different valuations of the same product or service by A and B that makes all trade possible. A grocery shopper does not buy a loaf of bread from a grocery store for two dollars because the shopper and the store both value both the bread and the two dollars the same. The shopper values the bread more than the two dollars, and the store values the two dollars more than the bread. Without this disparity of valuation, no trade at all between two people for any product or service can take place.

The very fact that government intervention was necessary to transfer X from A to B is proof that A values his loss greater than B's gain and B values his gain greater than A's loss. If A had valued B's gain greater than his own loss, then A would have used X to satisfy whatever needs B is satisfying with it instead of one or more of A's more urgent needs he satisfied with it instead. If, on the other hand, B had valued A's loss greater than his own gain, B would give X right back to A to pay for whatever needs A would satisfy with it.

In summary, the problem is one of economic calculation. The conservative in the debates wants to sum the decrease in discomfort by government action across all people of society and compare it with the sum of the decrease in discomfort by actions they would take otherwise across all people of society. This sum is impossible. It is possible only to compare the relative valuations of different goods and services. This comparison is a function of both the individual making the comparison and of time. The addition of two valuations made by the same person has no meaning, much less two valuations made by two different people.

The very problem of constructing a general theory that establishes that all government intervention reduces national wealth is ill-posed.