On The Libertarian Mistake of Assuming a Fixed Quality of Government at Law & Society Blog

On The Libertarian Mistake of Assuming a Fixed Quality of Government

Published by Hanno Kaiser August 11th, 2006 in Culture, Law and Society

Here’s an interesting post by Tyler Cowen of Marginal Revolution:

The libertarian approach treats government vs. market as the central question. Another approach, promoted by many liberals, tries to improve the quality of government. This endeavor does not seem more utopian than most libertarian proposals. The libertarian cannot reject it on the grounds of excess utopianism, even though much government will remain wasteful, stupid, and venal. More parts of government could in fact be much better, and to significant human benefit and yes that includes more human liberty in the libertarian sense of the word. Libertarians will admit this. But it does not play a significant role in their emotional framing of the world or in their allocation of emotional energies. They will insist, correctly, that we do not always wish to make government more efficient. Then they retreat to a mental model where the quality of government is fixed and we compare government to market.

This is clearly correct. The disdain for government in any form — sometimes open, sometimes thinly veiled — that runs through the writings of many of the classic liberals is off-putting to say the least. Improving the quality of government is surely as important as improving the quality of markets, probably even more so, because free markets do have a tendency to self-correct, unless we’re dealing with a true market failure, where the individual incentives lead to a socially unacceptable outcome (e.g., pollution). The political sphere is haunted by principal-agent problems that dwarf those of corporations. And much less has been done about minimizing those problems in the political sphere. We have been through a tumultuous evolution of corporate governance models, all aimed, in some way, at resolving principal-agent problems. Some of these innovations have improved corporate governance and corporate conduct, other haven’t. One may even question whether successfully aligning the interests of management and owners would be sufficient for good corporate governance, because the owners are not the only relevant constituency whose lives are shaped and influenced by the corporation. But in any event, there is world-wide competition for new and innovative corporate governance models, which really can’t be said (or at least not to the same degree) for models of political governance.

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