Government and Governance

Policy debates typically center around the role of markets versus the role of governments. But this is a misleading distinction. Human society always has governance. Private organizations such as corporations and clubs have management, rules, and financial administration similar in function to those of government. The difference is that private governance is voluntary, while state-based government is coercively imposed on the people within some jurisdiction. So a central question is not whether the market or the government can best accomplish some task, but whether the governance shall be voluntary or coercive.

The Market-Failure Doctrine

Most economists would agree that we don’t live in the best of all possible worlds. But the doctrine of market failure found in most economics textbooks fails to distinguish between consensual and coercive governance as correctives. The prevailing theory asserts that while markets might provide private goods efficiently in a competitive economy, markets fail to provide the collective goods that people want. There are two basic reasons offered as to why markets are not sufficient. Markets can easily determine the demand for private goods, but how can we tell how much each individual wants of a collective good? We could ask people how much they are willing to pay, but how do we get a truthful answer? Free riders also are a problem. Once the collective good is provided, folks can use it whether they pay or not, so why pay?

So, the market-failure story goes, markets fail to deliver collective goods. Entrepreneurs lack incentive because they can’t get their customers to pay for the service the way they can get people to pay for individually consumed private goods. Continue reading

Somalia and Anarchy: Links Edition

  1. I am too lazy to write much more on Somalia right now (you can always check out my latest piece again if you are really itching for something satisfying), so I have compiled a list of great pieces I have read over the past couple days on Somalia, Anarchy, and the idea that post-colonial states ought to fail more often than not.
  2. Jeffrey Herbst and Greg Mills argue over in Foreign Policy that the Congolese state needs to fail if the region is to ever know peace again.
  3. Over in the New York Times, Alex de Waal argues along the same lines that I have: that Somalia as it stands is a bad idea, and that much more decentralization is needed for it to effectively flourish.
  4. The Mises Institute has two wonderful articles (one by an anthropologist and one by a lawyer) on why anarchy has been great for Somalia, despite the government interventions imposed upon the Somalis by the West over the past two decades (and, really, much longer than that, but I digress).
  5. Political Economist Chris Blattman raises the flag of caution, though.  How do we really know that more states will be better for the people living in these regions?
  6. Co-editor Fred Foldvary defends anarchism’s good name after the (government-initiated) looting in Iraq.
  7. And last but not least, Cato Unbound, one of my favorite places to visit, had an excellent symposium on anarchism awhile back (like, 5 years ago).  Here is Pete Leeson’s lead essay, in which Somalia is specifically used to illustrate his points.  Be sure to read the responses of the other members in the exchange, too.

Have a great weekend, and have fun with all the reading!  One of the things that really bothers me is the example of Somalia that is thrown out in favor of government over liberty.  I really hate having to take the time to explain to people that the problems in Somalia are created by the government!  It’s like screaming at a brick wall…