From Boyes over on Liberty

Boyes uses a recent Paul Krugman op ed to take a look at the current discourse about the proper role of the government. This is an instructive and very important debate as it illuminates the basic tradeoff between liberty and security.

A free market is, by nature, dynamic. This constant change leads to what has been referred to here and in the past as Creative Destruction. I often point to failure as one of the most positive elements of a free market. The freedom to fail, a fundamental element of liberty, has any number of positive consequences. As the trial and error process of progress unfolds, information is the essential grease that lubricates the process and key information is to know what does not work, what is inefficient, what causes wealth destruction - and the flow of information is so much faster under a spontaneous order that is characterized by individual actors operating on their own set of preferences and knowledge.

That said, the issue of the role of government is at the heart of a free society - liberty carries with it responsibility and institutions both formal and informal are very important to facilitating exchange, these rules of the road reduce transactions costs and potential violence. My thinking is leading me to believe that informal rules are much more significant than are formal rules and, if the formal rules are in conflict with prevailing informal institutions, there will be negative impacts upon decision making and economic welfare.

What does this all mean today? I have a sense that the "many" in our society today have made a trade off for security at the expense of liberty. That is, in return for government support, many individual decision makers are willing to accept lower future growth and greater future obligation.

I am reminded of the following:

Larry Reed at the FEE asserts:

1. Government can provide you with absolutely nothing except that which it has first taken from somebody else.

2. A government big enough to give you want you want, is big enough to take everything you have.

3. A free people are not economically equal, and an economically equal people are not free.

Bill makes this first point very clearly - the political decision to increase deficits through spending is taking current income and current and future wealth from one group of society and transferring it to another. This is the opposite of voluntary exchange. Exchange that is mutually voluntary is a positive sum process leading to wealth creation - the government mandated exchange we see in deficit spending, deficit financing and monetary actions to further debase the currency are negative sum.

But the impact extends far beyond the arena of current and future standard of living - what is happening is a conscious trade off to engage in negative sum arrangements in order to achieve a sense of security - which is ultimately doomed.

This leads to Reed's second point - this is no longer a slippery slope, it is a point that we all need to consider - a government that is big enough to take citizen property through taxation and transfer to factions that are supportive of the executive (various industries, NGOs, labor organizations and community organizations) has power.

Our founding fathers were aware of the, excuse this, power of power, and were concerned enough to consciously make every effort to limit the accumulation and expansion of power at the federal level. Both this consciousness and actual limit have eroded over time - if we think of the ultimate expression of power, it would be to reunite the economic sphere with the political sphere - allowing one group or one person (a dictator/totalitarian) to make decisions dictating outcomes in both areas. In fact the areas are no longer distinguishable and perhaps this leads to a deterioration of society from the open access state back to the natural state or the primitive state (North et al). Or to use Adam Smith's view - a movement from the commercial society back to agricultural or pastoral or hunting.

What also colors the trade off between security and liberty that seems to be at the heart of this discussion is the notion of equity - Reed's final point.

The expansion in scope and breadth of government is motivated, in part, by this very misguided and misplaced sense of equity.

For some reason, over time we have misplaced the sense of equality from:

1. Equality under the law - that is, we are all treated the same in our encounters with the institutions (*formal and informal) of the law (Hayek's view of law). So, if Boyes and I are both accused of theft (a manifest violation of property rights) we are brought before the court and treated the same way.

This has been replaced by

2. Equality of outcomes - Boyes and I have the right (we should post about the inflation of rights and that impact on liberty) to the same, exact salary.

Boyes asks us to consider the ultimate negative sum nature of expansive government.