The role of government

I’ve been thinking more about how the role of government should be defined. I’ve always leaned toward the environment economics view of the role of government: to properly handle negative externalities. These are costs that the free market ignores and the results can be catastrophic.

The most common example is clean air and water. When a factory farm disposes animal waste into a nearby stream and contaminates it, it is consuming clean water and not paying for it, so the price it charges for meat is artificially low. Coal power plants, with their smoke stacks and exhaust, do the same thing by “consuming” clean air. It’s an odd way to think but it’s economically accurate. By polluting clean air and water, you’re consuming it as an input for your business process.

Clean air and water, however, are public goods. They belong to everyone. When a business pollutes the air or contaminates the groundwater, that consumption is not taxed or paid for. It’s taken for free even though there is a real cost for other consumers of those same products. A recent case like this is upstream chicken farmers in Arkansas impacting downstream tourism in Eastern Oklahoma.

That’s a negative externality. It’s a cost born by one group due to the actions of another and the free market doesn’t account for it because the cost isn’t paid by the producer.

The more common, generalized story is The Tragedy of the Commons, which states that unregulated usage of a common resource (like air, lumber, fish) will lead to its depletion because everyone will look after only their own self interests. If you see your neighbor chopping a bunch of trees down in the village forest in the winter and your family is also cold, you’ll do the same. Eventually, everyone in the village does it and the forest is gone and everyone’s stuck shivering in the dark.

The solution is for the village to internalize the cost of the lumber harvesting. Maybe that means pooling resources together (via a tax) to plant more trees to prepare for future winters. It could mean having a shared bonfire where villagers can gather and stay warm while using fewer resources than each family having their own individual fires.

I’m squeezing this hypothetical dry but you should get the point: this collective action to preserve a common public resource happens through the influence of government. This is what I believe the primary role of government to be.

I have another refrain about the role of government: when a government is running well, you shouldn’t be aware of it. Things should just work. The schools are in session. The garbage is collected. The potholes are fixed. The sizes and locations of housing developments are optimized. You pay your taxes and the rest takes care of itself.

This doesn’t actually happen. You know that and I know that, but that’s what motivates me to someday throw my hat in and see what kind of steps we can take to get there.

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