Government: Moral Body or Necessary Evil?

Tangentially applicable to markets is government.  I believe government is necessary for markets to function efficiently (although I suspect some of you, dear readers, may disagree).  However, in order for government to help markets, it must be, to paraphrase Milton Friedman, a referee not an active player.

Economically, government has one major role and two lesser roles.  It’s major role is to ensure the players in the game adhere to the rules of the game.  To put simply, the government’s job is to enforce contracts.  If two firms/individuals contract to work with one another, and the contract is legally written, then both parties have an obligation to fulfill the contract, and government has the obligation to ensure the contract is fulfilled.  Government’s obligation is typically fulfilled via a court system.

A slightly lesser role of the government is to protect and enforce rights.  If one firm/individual attempts to violate the natural rights of another, the government has every right to prevent such a violation, either through legal remedies (court ordered sanctions) or through police action (arrest, for example).

Finally, the smallest role the government has is national defense: to protect the individuals within the borders from violence.

(Real quick aside: These are roles for the government in the economy.  Arguments can be made for social or other areas, but I am limiting my focus to markets and humans).

By limiting itself to these roles, the government can ensure a level playing field for all members, as well as increase the effectiveness of markets.  Dr. Robert Higgs has shown multiple times the dangers of regime uncertainty on markets and individuals, and the conclusions are that reasonable institutions and rules can help markets, especially when individual rights are concerned.

With government, it is important to remember the words of Daniel Webster:

There are men in all ages who mean to govern well, but they mean to govern. They promise to be good masters, but they mean to be masters.

Government agents, no matter their intent, mean to be rulers.  They mean to use force, which I have, in previous discussions, argued as being immoral.  This is key why government needs to be a referee, and not a player (if government becomes an active player in the game, it surely will use its powers to ensure it is the winner).  So, how then can a government be moral?  Is it, at best, a necessary evil?

I think a government can be moral if limited to the essential functions outlined above.  But what about taxes?  Aren’t taxes collected by force?  Some are, such as income taxes, but I contend other taxes are voluntary, or, at least, less coercive.  I am talking specifically about consumption taxes.  Whereas an individual can control his consumption he can, to a similar extent, control his tax bill.  Any taxes he does pay he does, in a small way, consent to.

Various arguments can be made against what I just talked about: even consumption taxes aren’t truly voluntary, or consumption taxes are less fair because they tend to be regressive.  These may be valid points, but I contend that the way to make government most moral, and in turn help markets achieve their ability to do good, is to limit its abilities to their absolute core and to make taxes as voluntary as possible (this second point helps lay into the first as a government with a restricted budget also has a restricted ability to do harm).

7 thoughts on “Government: Moral Body or Necessary Evil?

  1. “A slightly lesser role of the government is to protect and enforce rights.”

    Absolutely right Jon, and the critical part is this:

    “If one firm/individual attempts to violate the natural rights of another…”

    Natural, i.e. “negative,” rights are the rights inherent in individuals, and the rights the Constitution was designed to protect.

    Modern regressive leftists (and many on the right, but mostly leftists) have perverted rights to include conferring special rights on protected groups and classes.

    By definition, these positive rights must infringe upon and detract from the rights of others.


  2. Jon,

    I love your blog! What are your thoughts on the government’s role in infrastructure? I agree that the government is best as a referee, instead of a player; however, there cannot be a game without an arena (or a facilitator).


  3. It is vital to remember that Constitutional rights were added as protections of individuals from Govt rather than firms. Certainly, those rights can be applied as protections for individuals from other individuals, outside of govt.
    On govt. roles in markets, I assume we mean in economies of scale as opposed to an economists definition of a ‘market’. Certainly, govt is irrelevant in transactions between individuals. But, in creating a greater peaceful resolution between parties, an arbiter, whose final judgement is accepted as the final word, is useful.
    In binding contracts, a limited govt is useful. Again, peaceful resolution can be sought between parties. An unlimited govt will not be. An unlimited govt not bound by rules, itself, will have bias in their judgements creating corruption and cronyism.
    Has Higgs writings on market uncertainty been on ‘govt. v no govt.’ In markets? Or, has it been on the problem of govt cronyism in legislation and open ended legislation to leave room for ever changing interpretations?


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