Comments on my recent post about problems with the Free Market = Fair Distribution Hypothesis have led me to an interesting conclusion:
People confuse government size with degree of market interference.
These are not the same thing. Libertarians seem to be for small government and low regulation, while socialists are for big government and high regulation. But there are other possibilities.
Government size is related to the number of people employed by government, the number of departments and divisions, the size of the government’s budget, the number of social programs. Extent of regulation is related to the number of laws, their effects, and the extent of enforcement. The size of the government is somewhat related to the extent of regulation, in the sense that a tiny government would not be ale to enforce a huge base of legislation, but this link is tenuous since the majority of government employees are not strictly dealing with enforcement.
Let’s consider the two issues separately.
First, regulation: high or low? Since I’ve already established the reasons to believe that free market economics does not lead to fair distribution of wealth (which is the whole point), we need governments to regulate to the extent necessary to correct the weaknesses of the market. Given that these weaknesses are so substantial, I would call this high regulation.
Second, big government or small? If one agrees with the sentiment that private companies are more efficient, it would seem logical to keep government as small as possible. But this is only half an answer – the real question is, what services should be provided by government instead of industry?
I’ll tackle this issue next week. In the meantime, what do you think should be run by government?