You’ve probably heard of the tragedy of the commons — first discussed as early as 1883, but more recently popularized during the ecology craze of the late 60s by Garrett Hardin. A shared resource like community grazing land, fish in the sea, or unpolluted air tends to be overused and destroyed by individuals who can gain from using it because it is not in any one user’s interest to limit their use to avoid damaging the resource. Common grazing areas would be trampled and muddy, fish schools would disappear from the sea, and air would grow more and more polluted when no one paid or accounted for use of the resource. Now in real situations like common grazing areas, it was often the case that formal or informal rules were established and enforced by the community to limit overuse; this sometimes works well and sometimes fails completely when there are no realistic means of enforcement.
One solution is property rights — if the common is turned over to an owner or owners, they have an incentive and are permitted to charge for use and exclude those who will not pay. In the case of grazing rights, the shepherd might be asked to pay a few coins to let his or her sheep forage on the land for a few hours. By taking note of the state of the land and refusing to allow grazing or increasing the charges when the land is threatened by heavy use, the owner can establish a sustainable usage pattern and maximize revenue from the property to be used for maintenance (and to pay the toll collector.)
This is one kind of externality — any one person’s use of the limited resource impinges on others, so allowing free use damages the total output of the system and hurts others who might have benefitted from using them. Absent such externalities, free-market voluntary exchange as thus simplified tends toward generation of Pareto-optimal solutions — everyone’s utility is maximized and any divergence from the solution makes at least one person worse off without making anyone else as much better off. Of course such perfect markets and conditions of knowledge don’t occur in real life, but many simple markets come close.
The tragedy of the commons is what happens when there is a non-excludable but exhaustable good: one can’t exclude some users (or charge them, since exclusion is the enforcement condition for charging for use or consumption.) There are other kinds of externality, though: public goods, which are not only non-excludable but aren’t depleted by overuse. Examples would include most goods which can be duplicated at no cost, like news or (today) free Internet writings. All benefit from their production, but since once created these goods are shared easily and can’t be charged for, economists would argue less of such goods are created than would be optimal. This is one argument for public education: though every person benefits directly when they pay for their own education, society as a whole benefits if education is widespread and available also to those who can’t afford to pay for it themselves. This is the argument of communitarians — they believe it is in everyone’s best interest to tax some to fund goods for all, to be shared with everyone. There are other methods for paying for public goods, like advertising sales and charity, but these alternate funding mechanisms may distort the quality of the good (as advertising has tended to create a lowest-common-denominator level of quality in those goods like network TV and clickbait sites that rely on ads.)
Now what about “common bads” — products or actions that harm individuals, like violence or theft. No one wants to be a victim and sensible people will avoid the bads, but community bads like street crime can’t be completely avoided by one person’s payments or actions. A police force addresses this common bad by suppressing crime at common expense, and so that too is another proper function of an efficient government.
So economists argue endlessly about aspects of these “corner cases” where complete information and free markets can’t create optimal exchange networks because of externalities. The argument for a government, or “public sector,” is that only a common authority can create conditions where these problems are addressed, enforcing contracts, law, and property rights to correct “market failures” and allow everyone to go about their business unharmed by the depradations of others that would infringe on their rights.
But of course there is no perfect government. The individuals who manage and staff public agencies are motivated by their own self-interest as well as any idealism about the General Good they may have, and over time the rationale for their actions may be enlarged beyond simply mediating necessary conflicts between individuals and their rights to free action and property. Once these areas are dominated by a “free” government service, the private competition shrinks or dies completely, and can never return to compete. This is the ratchet effect, where movement goes only one way — toward larger state control — making reform difficult.
This tendency to expand government into what would otherwise be private and mostly efficient decisions is most easily combatted by supporting a constitution that specifically states what areas government should act in, and has a mechanism to prevent encroachments outside those areas. Our judicial branch has failed to strike down overreach, especially after the New Deal quashing of the Supreme Court’s pushback against the administrative state. So Step 1 is to appoint new justices who are more skeptical of well-intended but improper laws and regulations.
There is a more general agency problem– those elected or hired to decide for the people have interests which do not entirely reflect the people’s, and will tend to act to benefit themselves first. This is the primary reason why government-provided services can’t compete with private services in efficiency — in private services we fire the unsatisfactory providers and hire new ones with every purchasing decision, whereas government services are usually monopolies and the connection between customer satisfaction and revenue is broken. Ask veterans how happy they are with VA provision of healthcare and you’ll get some unprintable answers because of the thoughtless bureaucracy they have to deal with to get care.
Over time public provision of shared goods creates a class of substandard, even dangerous corrupt goods that crowds out private and better equivalents. In a laissez-faire world, mass public education and healthcare seem like improvements, but they crowded out the private systems which had grown up before the time they were introduced, and few now remember the thriving voluntary welfare organizations and schools. Lacking much private competition, these public monopolies are now mediocre and doing great harm to, for example, inner city school children who never learn to read, write, and compute, but are graduated anyway. All forms of public news, education, and healthcare are used to mold the views of future voters toward an even larger state, and narrow interests like teacher’s unions capture their institutions and prevent improvements or competition. This is ultimately damaging to democratic decisionmaking, as voters learn so little about their government in public schools that they are easily demagogued into supporting a larger state. The usual argument for public schools was that they provided a common education required for high-quality citizen involvement–but as we have seen, they have been turned into indoctrination centers, with neutral history, civics, and science education squeezed out for political programming.
The public support for government emergency assistance, medical care, old age support, and security led to divorcing of the provision of these from the family or clan networks that once provided them, as police and a justice system took over from blood feuds and vendetta in keeping order between families. But the consequences are a change in incentives: instead of loyalty to family, loyalty to state and party came to be as or more important. And now we contend over politics because so much of life is now determined by government. If you ignore politics, your life, your property, and your children will come under control of others who don’t know you or yours at all.
More reading on other topics:
Jane Jacobs’ Monstrous Hybrids: Guardians vs Commerce
The Great Progressive Stagnation vs. Dynamism
Death by HR: How Affirmative Action is Crippling America
Death by HR: The End of Merit in Civil Service
Corrupt Feedback Loops: Public Employee Unions
Death by HR: History and Practice of Affirmative Action and the EEOC
Civil Service: Woodrow Wilson’s Progressive Dream
Bootleggers and Baptists
Corrupt Feedback Loops: Justice Dept. Extortion
Corrupt Feedback Loops, Goldman Sachs: More Justice Dept. Extortion
Death by HR: The Birth and Evolution of the HR Department
Death by HR: The Simple Model of Project Labor
Levellers and Redistributionists: The Feudal Underpinnings of Socialism
Sons of Liberty vs. National Front
Trump World: Looking Backward
Minimum Wage: The Parable of the Ladder
Culture Wars: Co-Existence Through Limited Government
Social Justice Warriors, Jihadists, and Neo-Nazis: Constructed Identities
Tuitions Inflated, Product Degraded, Student Debts Unsustainable
The Morality of Glamour
On Affirmative Action and Social Policy:
Affirmative Action: Chinese, Indian-Origin Citizens in Malaysia Oppressed
Affirmative Action: Caste Reservation in India
Diversity Hires: Pressure on High Tech<a
Title IX Totalitarianism is Gender-Neutral
Public Schools in Poor Districts: For Control Not Education
Real-Life “Hunger Games”: Soft Oppression Destroys the Poor
The Social Decay of Black Neighborhoods (And Yours!)
Child Welfare Ideas: Every Child Gets a Government Guardian!
“Income Inequality” Propaganda is Just Disguised Materialism
The greatest hits from SubstrateWars.com (Science Fiction topics):
Fear is the Mindkiller
Mirror Neurons and Irene Gallo
YA Dystopias vs Heinlein et al: Social Justice Warriors Strike Again
Sons of Liberty vs. National Front
“Tomorrowland”: Tragic Misfire
The Death of “Wired”: Hugo Awards Edition
Hugos, Sad Puppies 3, and Direct Knowledge
Selective Outrage and Angry Tribes
Men of Honor vs Victim Culture
SFF, Hugos, Curating the Best
“Why Aren’t There More Women Futurists?”
Science Fiction Fandom and SJW warfare
More reading on the military:
US Military: From No Standing Armies to Permanent Global Power
US Military: The Desegration Experience
The VA Scandals: Death by Bureaucracy