The Economic Role of Government

Kevin Drum at CalPundit has posted an interesting article on the role of the government in the economy. I have to say that I agree with everything he said, with one caveat: the government's interventioned should be both limited and defined.

Completely free markets, without any external controls, are economic anarchy, no less than the lack of external controls on social behavior is political anarchy. No less than political anarchy leads often to political tyranny, as the strong sieze all of the real political power, so does economic anarchy lead to economic tyranny, as the rich and well-connected (and, normally, politically powerful) sieze all of the real economic power.

To prevent this, it is necessary to have external limiting mechanisms. The external controls for politics in the US were laid out in the Constitution: no direct taxes (limits Federal government's ability to raise funds, and thus its power); Senate must approve appointed officers and treaties, influences laws and budgets and has the sole power to remove a sitting President (all of which gave States the ability to limit Federal power); the States can call a Constitutional Convention at will; and as a final bulwark, the people have an unlimited right to own military arms. Of course, a combination of amendments and court decisions have limited and in some cases totally destroyed all of these limitations, except for the right of States to call a Convention.

The external controls for the economy were much less thoroughly documented in the Constitution. While power was given to the Federal government to regulate interstate commerce, and certain other powers (like not allowing a State to force traffic to pay excises at their ports just because it transits through the State's waterways) were also granted, these provisions were mainly intended to prevent interstate wars, rather than to actually regulate the economy. The only Constitutional provisions I can think of off the top of my head, which directly regulate the economy, were the ability to collect tarriffs and levy excises, to establish uniform weights and measures and to regulate the value of currency.

While I think that the government needs additional powers, not forseen by the Founders, I don't think that they should be available to the government except by amending the Constitution. Otherwise, the potential for abuse is too great. I think that we could come up with a list of such powers that the government needs:

• establish a central bank - this is probably already justified by the power to coin money (and thus to regulate its value)
  
• regulate the sale of shares in publically-owned companies - the justification being that these companies have exceptional government-granted rights, and thus should have corresponding duties to not cheat the public
  
• prevention of monopolies from using their power to stifle competition, charge prices untenable in a competitive market, or force people to purchase unregulated products or services in order to get the products or services they need
  
• regulation of non-property resources (air quality, water quality and transit, radio spectrum and the like) which are not subject to ordinary market forces (because the abuser does not bear the costs of his abuse)
  
• regulating working conditions to prevent physical or psychological abuse (this would include child labor laws), or to prevent the coercion of workers to doing non-job-related activities (such as enforced political contributions); preventing discrimination based on age, color, gender and so on; ensuring the privacy of information entrusted to companies
  
• prevention of the accumulation of wealth by limiting the amount of tangible property, cash and negotiable instruments to heirs.
  
  
  It would be nice if, for once, we would as a people actually give our government the powers we want it to have, rather than just letting the government assume those powers as it wishes. But I do think that the government needs to regulate the economy beyond the point that the Constitution currently allows.
  Posted by Jeff at June 3, 2003 12:22 PM | Link Cosmos