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« Advice to Undergraduates | Main | The Scale and Scope of Government and the Opportunity to Heal America »


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It might help if the question was phrased without buzz words, however catchy. What do you mean by "Big Society"?

As the state advances, civil society recedes. Public welfare crowds out private charity. Public education crowds out private education.

Yesterday's announcement by S&P was a first step. As the Economist points out, however, people on the right and left are still in denial on the fiscal situation. Even many conservatives do not accept that Social Security is welfare. Attitudes are changing about defense. But AEI is engaged in a blitz campaign to convince the American people that defense is underfunded.

On the political left, there is not yet acceptance that what is happening in the EU is the collapse of the social democratic dream. The private sector can no longer produce the income needed to fund the welfare state. The EU is a generation ahead of the US in that process.

I think that the method of going from a larger state to a smaller one will be a question of money more than anything else. The reason for this is that a characteristic feature of a large state is that it wants to do everything for everyone. This is exacerbated by the election-winning technique of giving voters something (whether it is tax-cuts or more welfare programs) that someone else will pay for. However, as we all know, this process is inherently unsustainable and someone will have to foot the bill somehow.

It is only when the costs of the "Big State" have been revealed in the open that there can actually be a politically-winnable campaign to reduce the state. Until then, a large enough of the population will not want their "free" (i.e. paid for by someone else) lunch taken away from them that there will be too many interest-groups protecting the Big State to really hack it down to size.

This also brings into question the status of money since if the government retains its monopoly over its production then it may be willing to monetize the debt. It follows from this that one of the most important policies for shifting to a smaller government may very well be to denationalize money. This way, the government cannot rely on monetary tricks to make its financial situation rosier.

I've never really this big state/small state issue very seriously. How the state is big or small matters a great deal more to me. Same with this false dichotomy between the state and society. The state is a product of emergent social order just like any other social institution and it can have the brittleness, anacrhonism, and abuse of any other emergent institution as well. Obviously those issues need to be addressed and ultimately will be, but contrasting and juxtaposing the state and society makes about as much sense to me as contrasting and juxtaposing any other institutions, like the church and the market. Sure there can be frictions and incongruities between these institutions, but there's no obvious, fundamental opposition.

In the U.S. specifically, it's not clear to me that "the topic of our age" is the size of the state so much as the centralization of the state. I think we are going to see a (positive) shift from the executive to the legislative branch and from the federal government to the states. If we can't achieve this that will be a recipe for real trouble.

The other "topic of our age" at a more global level is - like the question of balancing authority in the U.S. - going to be deciding what we oughta deliberate as a global community (climate? monetary stability? trade liberalization?) rather than as distinct national communities.

re: "How the state is big or small matters a great deal more to me."

This may be unclear... by this I mean that what a "small state" actually does and what a "big state" actually does matters much more to me than the size of the state per se. You can have functional and dysfunctional small states and functional and dysfunctional large states.

The big state v. little state debate is very important because the state is the primary restriction of the degrees of freedom within society. When a state takes up a task then it has been bureaucratized and the measure of its success will now be measured not within a system of dynamic trial-and-error, but in a static system of memoranda and dictates from higher up on the food-chain. The minute that the state enters an area of society, any social evolution there is stopped and that is the crux of debate.

In what has been termed the "Big Society" (though there are countless problems with that term, but we ought not digress there), social institutions can evolve. The reason for this is that institutions within the Big Society are based on the support of those in society (i.e. whether a private charity can get donations) and there is no barriers preventing institutions from competing with each other. There are restrictions on the degrees of freedom that individuals have acting within the Big Society like norms and mores, but most of these can change with time and change when individuals in society decide to push the envelope by disregarding the constraints.

In the end, the debate over the Big Society v. the Big State is one that can be seen to be one about the role of evolution in society.

Prof O'Driscoll:

It's ludicrous for the rating agencies to pretend the Federal govt is akin to a household or ordinary business in regards to its finances. As long as it has a central bank to monetize its debt, it can keep the party going in some way for a long time. Sadly, I see no indication that any kind of day of reckoning is on the horizon.

This is an interesting question. First, I do not think it will be possible to nicely "plan" the shrinking of the State. It will happen, more or less as the growth happened. Cuts here and cuts there as the weakest special interests fall to the budget axe. The special interests will spend money to protect their particular turf. The reductions will not exhibit any sense of "fairness"; they will also be fueled by illusions and plain economic error just as the growth was.

Second, this is why I think the "fairest" of the unfair methods would be simple across the board cuts -- with nothing left off the table. This might also be supplemented by partial or wholesale privatization of many functions. I am not sure this is possible because of the interest group pressures.

In all of this we must keep our eyes on the prize. The transition will likely be unplanned and involve suffering for innocent people. But this is the result of bad policies in the past that created the loss of wealth and unsustainable expectations. The prize is a a new day of freedom and prosperity. This I believe is the true social compact.

Undermine the Authoritarian Solutions with examples of a better way of thinking:

Less Hobbes and more Ostrom.

Less "Justice as Fairness" and more "An-Arrgh-cy"

"Obviously those issues need to be addressed and ultimately will be, but contrasting and juxtaposing the state and society makes about as much sense to me as contrasting and juxtaposing any other institutions, like the church and the market. Sure there can be frictions and incongruities between these institutions, but there's no obvious, fundamental opposition."

But Daniel, Rothbard himself said it's "People Versus the Government" -- and if Rothbard said it, it must be true! Mustn't it?

Gene - yes, I forgot the Rothbard Rule. My mistake.

I think it would go a long way for people to stop romanticizing government. With a tiny handful of world historical examples, practically everyone who goes into government is doing so to gain power and money. It is corrupt and corrupting from top to bottom, even at its best. Anyone who goes into government is morally suspect, and anyone who supports government is at best naive. These are what one has to start with to deal with the kraken.

Wherever government extends its tentacles, private institutions are forced to give way. Government does not put up with competition for long. And it doesn't have to. It doesn't engage in trade, it doesn't engage in reason -- it engages in force, and force alone. Even each seeming trade is with the force of guns behind it. The fact of the matter is that whoever has the guns on their side is who is in charge. The guns turned against Mubarak, the guns turned against the Soviet government; the guns supported the Chinese government in Tianamen Square, the guns supported the rise of the Nazis. That's real Realpolitics.

The best we can do is provide a description of where we think things should be. We can provide a roadmap and try to get as many people to take the suggested path. We can educate the general population. But in the end, what do we get? Elected officials who go to Washington or our state capitols and do what? Cut the rate of increase of a handful of things? Monetize the debt, creating inflation? And what about the endless bureaucracies that in fact run the government, that in fact write the laws from the general guidelines the Congress passes?

Government is one of the greatest evils to have emerged out of man's basic nature. Only whether it is a necessary one is up for debate.



Pete is right. We need to think about how to tame Leviathan. I made a plea for "liberty by design" about a year ago at ThinkMarkets:

I did not try to address the important political dimension, which is lots harder. We can't just deride the abusive state and think we've done something. Let's take Pete's hint and think seriously about how to tame the beast.

To tame it, we have to understand it. And I mean understand it as it truly is, at its deepest levels. We have to understand why people go into government, what the origins of such a drive is, the evolutionary psychology, including the deep evolutionary psychology, of the desire for power. We need to first think seriously about the true nature of government to be able to think seriously about how to tame it.

Don't think it's possible. If those who study culture and economics are correct, institutions (fat guv vs skinny guv) are decided by culture, and culture is determined by religion. The religion of the US is state-worship.

Until the religion changes, ain't much else gonna change.

PS, why state worship? Views of human nature. Most Americans believe that people are born innocent and resort to evil only because of oppression. Poverty is the main oppressor, and greed causes it. If we could eliminate poverty by redistributing wealth from the greedy, then we could eliminate all evil and would achieve paradise.

The appeal of this utopian vision is just too great to be threatened with mere economics.

I think there are two things necessary before doing anything on this question:

1. Understand the natural processes that grow or shrink states - stuff like concentrated benefits/diffuse costs that give you a situation like agricultural subsidies where there really isn't an "alternative view" on the subject to speak of, but where there is nevertheless a tendency towards the growth of the state, and

2. Understand the cases where there is an actual "alternative view" and understand the argument on its own terms, rather than imputing an argument. If you come up to someone like me and say "smaller government is better!" my reaction would be "ya, you're almost certainly right". There's the veneer of agreement because nobody out there is embracing "large government" per se - they're just embracing government that does some things but not others - and all else equal they'd prefer it be smaller. If a bunch of people think they agree but then end up advocating different stuff when they take action on things, it's no wonder nothing ever happens!

Troy may be right about politicians specifically, but I think a lot of opportunities for reform are missed because people make the mistake of thinking (1.) that there is some vast population that needs to be convinced or challenged on dumb policies like agricultural subsidies when in reality virtually everyone agrees with you, and (2.) they misdiagnose the disagreements that do exist.

When people tell me that I think the government can make better decisions for individuals than individuals can make for themselves, I immediately stop taking them seriously. They clearly have no concept of what my argument is and no idea of what I think. If you want to productively move towards a goal like this, the first step is to really understand what the issue at hand is and where and what the nature of the resistence is. If you misunderstand the nature of the resistence of course you're not going to be able to engage it effectively.

As far as practical solutions - I think federalism is a big, big part of it. Things change when some things are selected for and other things are selected out. Things also change when they are done at a manageable scale so people can actually influence decisions. Federalism, decentralization, and simply getting the right scale of governance for the right job is the key to good government (regardless of the "size" of the government).

Ideas matter. And we have seen cases in which state power declined. Indeed, we had a great run in the period 1980 and 2005, as Andrei Shleifer notes in his "The Age of Milton Friedman." It ain't easy, but I'm havin' a go at it rather than making excuses.


I remember the TM post and endorse your sentiments there and here. The state is a danger because it employs coercion; the danger and the coercion tends to grow with the size of the state. "Power tends to corrupt, and absolute power corrupts absolutely" (Lord Acton).

Individuals in civil society employ peaceful means to achieve their goals. They do so through trade and other forms of social co-operation. They work together in families, firms, churches, non-profits, etc.

The choice is between positive sum games: if you do something good for me, I'll do something good for you -- and negative sum games: unless you do something good for me, I'll do something bad to you. The choice is between prices as coordinating because they provide accurate information, or distorted prices that misallocate capital and misinform consumers. The choice is between voluntary cooperation or the exercise of power. That's what needs to be made clear.

It is also possible that the financial problems will be dealt with through straightforward policy changes and without much reduction of faith in state power.

If, for example, the next election brings more deficit hawks to Congress, they can reduce spending and regulations. They can reform and means-test in Medicare/Medicaid. Health care for the elderly can be vastly improved by modestly altering incentives (toward diet and exercise, for example).

Military spending was reduced last time not because of any policy change but because the enemy unexpectedly gave up.

With modest reforms the economy will expand, tax revenue will increase (unfortunately), the budget can be balanced, but still at stunningly high level by any historical standard. Then we will all have to wait for the next crises to catch people's attention.

Greg Rehmke's scenario is quite possible. For muddling through, I call it the optimistic case. Budget balance may be too optimistic. We are clearly past the window for reform.

With respect to both the fiscal and financial situation, we will need another crisis. A return of the bond vigilantes could do it. Interesting, as is quite possible, if it were to hit during the 2012 election cycle.

"A return of the bond vigilantes could do it."

Why do you keep pretending the federal govt is in the same situation as, say, a state govt?

"By 2012 this could be the first election in which the majority of voters will be able to vote themselves more government largess paid for by a minority of taxpayers.

"We may soon have to re-jigger the American Revolution’s familiar rallying cry into: “Representation Without Taxation!”

by Brad Schaeffer

Although I regard MMT and chartalism as rubbish, this article raises some good points as to the impotence of "bond vigilantes":

We must take stock of, and re-affirm those institutions of the Great Society that were not consciously designed and cannot necessarily be rationalized or quantitatively understood. Un-designed, long-lived rules and institutions of this type are scary, even for classical liberals. They are also extremely vulnerable to being thrown out in times of upheaval.

However, these offer the best hope for an emerging order and gentle transition to the next regime, and ultimate survival in some form of this grand little western experiment with public liberty. Family, private property, free trade, local community, and yes, even church.

As social welfare planning fails, the basic institutions of the Great Society must be firmly in place and re-affirmed so as to take up the slack. This starts by convincing radically skeptical academics first, then the public intellectuals, then the public. The danger is that when fiscal chaos sets in, there is often a clamor for an overturning of all the old order by a tyranny of the majority. Then the baby is thrown out with the bathwater.

As Hayek points out however, what we tacitly know to be the real solution is a tough sell. Academia is always weary of those things it does not design and cannot understand

The question really is whether or not the technocrats will be able to find yet another outrageous cunning plan to postpone the crisis...

I agree with the "Fresh Prince of Darkness" on two things.

"Big Society" is too vague. See...

Also, monetization of debt is certainly possible. The US will only default if the government are convinced that they will be held to blame for high inflation if the monetize debt.

That said, I don't think the US is in that much trouble with it's budget. It's the european states that are in a much worse position.

Thanks for that remark, Jerry. The Acton quote is certainly apposite. It applies all too well now! I suppose the question is whether the US is going to turn it around in time or go the path of Argentina. Unfortunately, the Argentine path seems a lively possibility. Besides the deficit, we have militarism and corporatism. As far as I know, the Air Force Academy is still making life difficult for all but the Christian Right.
This Christian connection is worrisome because in a crisis you may think that that you are God's agent and the Constitution is just a scrap of paper. Finally, we treat our Presidents and Presidential candidates as conquering heroes who will right all wrongs. We just about attribute magical powers to them. I see in this situation some potential for ancient Constitutional protections to fail.

"Obviously those issues need to be addressed and ultimately will be, but contrasting and juxtaposing the state and society makes about as much sense to me as contrasting and juxtaposing any other institutions, like the church and the market. Sure there can be frictions and incongruities between these institutions, but there's no obvious, fundamental opposition."

For many, the issue is the proper role of authority and legal delegation so to say there is no "obvious, fundamental opposition" is the same as stating there is no opposition between society and the institution of slavery (true if you drop the normative component).

Koppl: "see in this situation some potential for ancient Constitutional protections to fail."

And which Constitutional protections do you see still standing? From my perspective, FDR shredded the last one.

"As far as I know, the Air Force Academy is still making life difficult for all but the Christian Right."

The Academy perhaps, but the Air Force itself practices diversity:

Debt monetization is always possible, the more so for the producer of global money. That is correctly viewed as default, however, and has long been viewed as such.

The Fed is buying something like 70% of all federal debt. Quantitative easing is just a polite name for monetization. The Chinese have quietly been selling off US debt.

The EUs problems exceed even our own, and the Fed has taken on the task of supporting EU banks. So Treasuries still have a comparative safe-haven status (along with gold and silver).

How long before this all unravels?

A constitution is a lousy piece of paper if the people no longer believe in its precepts.

Look at 18th-19th century Latin American. Many of these nations were chartered with constitutions very similar to the United States, but it did not produce the Great Society.

Constitutions are great, but they are not the actual rules, just some ink on paper.

Douglass North has made this point brilliantly.

What we are currently witnessing is democracy at its best: everybody can try to buy the legislative power to obtain privileges at the expense of the rest of society. The most organized groups are of course advantaged with respect to common folks, both the middle class and the poor.

Bastiat saw it well in France 150 years ago, and most of the public choice literature is a variation on his theme. Everybody knows why government grows unimpeded, takes myopic choices, limits individual liberty, etc. The problem is that each and every political choice has public costs because a private benefit is paid by everybody in society, so that the democratic process tends to become a war of all against all to live at other people expenses.

As a prisoner's dilemma, there is a coordination problem which may be reduced under certain conditions. In the US at the federal level, these conditions probably don't hold because I have never seen so much inefficiency and myopia in a first-rate country (I saw it in Italy, of course, since I was born, and it has become evident in that strange bureaucratic conglomerate called European Union).

A working democracy is an exception because an infinitely complex coordination problem is necessary to avoid its degeneration into a cleptocracy. The rule is that power is used to create public evils for private benefits.

Liberty is a short-run exception to a long-run tendency inherent in politics. It exists because it delivers: no liberty, no markets, no tax base (this is the lesson of the Laffer's curve: the optimal point for the shepherd, which is usually not the optimal point for the sheep, i.e., us).

So the question is: how can we check the inherent tendencies in political power, which produce inefficient, myopic and unjust results on a daily basis, but are the result of strong tendencies which cannot be countered easily?

Discrediting democracy as a political and philosophical ideal (i.e. normatively and positively), reintroducing constitutional, legal, economic and social limitations to power, and creating a detailed libertarian "program" to solve short-term problems are the three main strategies. All should be tried.

In present-day political philosophy liberty plays no role. It's all about equity and efficiency, is all about contributing to a collective will (democracy), and no one cares about autonomy, liberty, property. The liberty of the moderns has philosophically yielded to the liberty of the ancients, and the liberty of the ancients was, I remember, based on slavery as much as ours is based on positive rights, limitations to free contracts, taxation, debt, social security Ponzi schemes and inflation.

Politics sucks, and democratic politics is not a substitute to liberty. Politics is almost always dysfunctional for reasons well known in the public choice literature, and the expansion of the domain of politics all over society shall necessarily produce dysfunctional societies.

The US has to huge problems to solve: democrats and republicans. But the most important goal is to limit democracy in order to avoid the race to the bottom of mutual parasitism by part of interest groups of all sorts, from bureaucrats to corporations, from teacher unions to farmers.


I'll believe the US are doing debt monetization when I see the hyperinflation.

Pietro M.,

I'll campaign against democracy when I hear of a better practical alternative.


What are you talking about? O'Driscoll is quite right that QE-whatever *is* debt monetization. What he's completely confused about is thinking that it's any kind of "default", regardless of how "long" it's been "viewed as such".

I thought Austrians understood that these kinds of actions by the central bank don't necessarily manifest themselves in price increases, that the effects are far more insidious? And sadly, I see no indication that the public wishes to educate themselves on how this process works, let alone express sufficient outrage over it to challenge the State in any way.

The party has a long way to go, here and in Europe, I'm afraid.


There is a better practical alternative. It's known as a constitutional federal republic. The more and more this country has moved away from that and toward unfettered democratic statism, the more of the problems Pietro M. pointed out has taken place.

Current: campaign against restricted government, it is as democratic as the present one, but without systematic encroachment of individual rights, autonomy and liberty, and less public choice problems to care about. Democracy means that collective decisions are made collectively. In today's world, it means that the collective decides everything. That's Rousseau, we need Locke. That's why I was talking about the liberty of the moderns (Constant's term), which have been lost to the omnipotent government.

Fresh Prince of Darkness,

I see what you mean. My point is that the US isn't yet at the point of inflationary default.

Troy & Pietro M.,

I see what you mean too. There are many countries today that were founded on the basis you discuss, but which don't really practice that form of government now. I think the difference between what the US has now and, say, the early 20th century is one of degrees.

We can ask the question: how do we get back to the ways things were then? But I think just as important a question is: why did things ever change? And, will every republic change as the US has?

Someone once said that if you give people the ability to vote themselves money from the public trough, don't be surprised when they do. In the U.S., direct election of Senators was a huge mistake. Senators used to represent the states and the needs and wants of the states, in opposition to the needs and wants of the people (House of Rep.). With direct election of Senators, the conflict between the two houses ended. There needs to be more, not less, conflict in government. The less stable the government in this sense, the more stable society, economy, etc. become. There is an inverse correlation between the two.

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