The Purpose of Government

Contemporary political debate is primarily about the role of government in society and how government should be used. But more fundamentally, the debate is about the purpose of government: what is it good for? Is it a legitimate institution? Should it even exist at all?

In our democratic society, government is the only institution that is seen as legitimate in its compulsion of behavior by the potential use of force. This sense of legitimacy derives from the fact that the laws and policies that government enforces are determined by lawmakers who are elected by the people. The lawmakers are elected by majorities, and so the laws they create – in theory – reflect the will of the majority of the people. However, by this same token, in a democracy, the interests of minorities may not be represented, or worse, minorities (of all types – racial, sexual, religious, political, and economic) may be persecuted or exploited. It is true that in our American system of government, the Constitution protects the rights of minorities from the whims of majority opinion, but even those rights can be taken away by a large enough and passionate majority through the constitutional amendment process. And of course, rights that minorities would like may not have been enshrined in the Constitution in the first place.

Thus, there is a risk that such an institution, with this much power and the potential to coerce minorities, may not be seen as legitimate by all. But even if government does not have full legitimacy, it may be necessary. However, in order to be necessary, government must provide services that the people desire and that only it can provide, or that it can provide most effectively and efficiently. This is because if any other non-coercive institution can provide the same services more effectively, it is more just for that institution to provide them than government.

Perhaps the most basic service that government provides is ensuring public safety and order. Government provides this service through police, courts, and prisons. Could public safety be protected without these things? Without police and the threat of imprisonment, what prevents someone from taking your property or harming you for their benefit? Yes, we could all arm ourselves with weapons and try to defend ourselves, but this just leads to a state of chaotic anarchy and perpetual violence. By granting the government with police power, we deter crime and help maintain order.

However, could public safety be provided by an institution other than government? The most viable alternative institution that may be able to provide this service, and potentially all of the services that government currently provides, is the market. If the market is capable of providing these services more efficiently than government, it should be the preferred provider of them. Unlike government, the market – in theory – is based on voluntary transactions and associations. In addition, the market usually allows for the most efficient allocation of resources, and distribution of goods and services. The interesting irony about the market, however, is that it may not be able to exist without government. Government’s coercive power is necessary to prevent fraud and property theft, enforce contracts, and settle disputes through the legal system. This is perhaps another argument for the necessity of government.

So how would the market provide a good like public safety? One idea is through competing private security firms to which individuals and firms can subscribe for protection. The firms would also investigate “crimes” against their clients and attempt to collect stolen property. In this world, there would also be private arbitrators who would act as judges to hear accusations and settle disputes.

With respect to the private security firms, this scenario creates an uneven and unequal patchwork of protection, in which the most security will go to the most affluent, and the least (or no) protection will go to those with few resources. On the other hand, a centralized police force that government can provide allows for equal protection and justice regardless of resources. A centralized police force is also more efficient in that it benefits from economies of scale, which are lost with many competing private firms. One can argue that policing is a natural monopoly, and it is most efficient for the monopoly provider in this case to be government.

In addition, there are problems with private judges. A private judge would have an incentive to side with whomever paid her more – justice would go to the highest bidder. One might argue that a private judge would have an incentive to be honest and not take bribes because she would lose clients if she had a reputation for being venal. However, this assumes perfect information. How would potential clients know if the judge is corrupt? There would be no government to regulate them or mandate transparency. In our current system of justice, a judge is not paid by the parties to the case she is deciding, but rather she is paid by the public, which makes judges more impartial and objective. Moreover, there are harsh penalties for judicial corruption and abuse of power, which again is based on the government’s potential use of force. The market cannot offer as strong penalties against corruption and fraud.

So it seems that government is necessary to provide public safety most effectively and efficiently. What are other services that it may be necessary for government to provide? I believe there are three categories: 1) regulation of markets, 2) provision of public goods, and 3) providing a social safety net.

Markets may require regulation due to inefficiencies known in economics as market failures. For example, production may impose externalities, such as pollution, which are external costs that are placed on third parties who are not involved in a market transaction between a producer and consumer. In a market with an externality, the producer has no incentive to reduce production even though it is imposing costs on third parties. In the case of pollution, these costs are environmental damage and health costs. Government can correct this market failure through regulation, by taxing the production or mandating its reduction. The market by itself cannot solve externalities – which is why they are called a “market failure.”

Markets may also fail to provide certain goods and services that people desire. In economics, such goods are called “public goods.” Public goods are goods that a producer cannot exclude everyone from using, and for which my consumption of that good does not take away from your consumption of that good. One example is national defense. If national defense were provided by the market, what incentive does an individual have to financially contribute to national defense if he thinks that others will pay for it, but he knows he can still benefit from the protection? Then, those that have contributed towards it will take notice of the free riders and realize they are being chumps; they might as well not pay for national defense either and benefit from it too. Eventually, an insufficient number of people will pay for national defense, causing the market to unravel, and resulting in national defense being unprovided. Government can solve this problem by making contributions for public goods like national defense mandatory. These mandatory contributions are otherwise known as taxes.

Lastly, another service that modern governments provide is the social safety net. Government collects taxes in order to provide public assistance to those who lack resources. In effect, it redistributes resources from those who pay taxes to the poor, elderly, disabled, and sick. Often, this takes the form of social insurance, where those who pay taxes also receive benefits when an adverse event happens to them – they become unemployed, disabled or sick, or cannot work due to old age. Social insurance may be more efficient than private insurance from the market for these types of events because of market failures, such as externalities and asymmetric information.

However, social insurance is quite different from other social safety net programs, in which you do not necessarily have to pay taxes to receive benefits. These programs are more commonly known in the United States as “welfare.” But is it just for government to provide welfare? If people agree for their taxes to be used to provide public assistance to the poor, then there is no ethical problem with welfare. However, it is problematic if someone does not consent to their money being given to someone else. One might argue that it is also unjust for government to force you to pay taxes to fund an activity, which you may consider immoral, such as a war. I would agree, this is also problematic, which is again why there is a risk to empowering such an institution with the ability to compel behavior with the potential use of force.

In the end, despite its coercive potential, we as a society may still want government – we may need government. Government may be the most effective and efficient tool we have to protect public safety and health, to ensure that markets work most efficiently, and to provide goods and services that the market cannot provide. That is the purpose of government.

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