…… The Role of Goverment in a Free Society ; An Outlook to the American Economic System U95PFNFT87MA

Action Trough Government on Grounds of Tecnical Monopoly and Neighborhood

The role of government just considered is to do something that the market cannot do itself, i.e. determine, arbitrate (judge), and enforce the rules of the game. There are two general classes of such cases; monopoly and similar market imperfections, and neighborhood effect. Exchange is truly voluntary when nearly equivalent alternative exist. Monopoly implies the absence of alternatives and thereby inhibits effective freedom of exchange. In practice, monopoly arises from government support or from collusive agreements among individuals. It may also arise because it is technically efficient to have a single producer or enterprise. Certain technical situation may give raise to technical monopoly. A simple example is the provision of telephone services. Technical monopoly may on occasion justify a de facto public monopoly. It cannot be by itself justify a public monopoly achieved by making it illegal for anyone else to compete.

A second general class of cases in which voluntary exchange is impossible arises when actions of individuals have effects on other individuals for which it is not feasible to charge or recompense them. This is the problem of ‘neighborhood effect’. City park is one example. Unlike the national park in which people pad admission to enter, it is difficult to identify the people who benefits from it and to charge them for it.

Neighborhood effect cuts in both ways. They can be a reason for limiting the activities of government as well as for expanding them. Neighborhood effect blocks the progress of voluntary exchange because it is difficult to identify the effects of the third parties and to measure their magnitude; but this difficulty is present in governmental activity as well. It is hard to know when neighborhood effects are sufficiently large to justify particular costs in overcoming them.

Consequently, when government engages in activities to overcome this effect, it will in part introduce an additional set of neighborhood effects by failing to charge or to compensate individuals properly. Furthermore, the use of government to overcome neighborhood effects itself has an extremely important neighborhood effect which is unrelated to the particular occasion for government action. Every act of government intervention limits the area of individual freedom directly and threatens the preservation of freedom.

Action Through Government on Paternalistic Grounds

Freedom can only act as a defensible objective for a responsible individual. Paternalism (the policy of protecting the people one has control over, but also of restricting their freedom or responsibilities) is inescapable for those whom we designate as not responsible. The freedom of individuals to use their economic resources as they want includes the freedom to use them to have children—to buy, as it were, the services of children as a particular form of consumption. Once the choice is exercised, the children have a value in and of themselves and have a freedom of their own that is not simply an extension of the freedom of the parents.

The paternalistic ground for governmental activity is in many ways the most troublesome to a liberal, for it involves the acceptance of principle that same shall decide for others, which he finds objectionable in most applications and which he rightly regards as a mark of his chief intellectual opponents, the upholder of collectivism in one or another of its form, whether it is communism, socialism, or a welfare state.

There is no formula that can tell us where to stop. We must rely on our fallible (not error free) judgment and, having reached a judgment, on our ability to persuade our fellow men that it is a correct judgment, or their ability to persuade us to modify our views. We must put our faith, here as elsewhere, in a consensus reached by imperfect and biased men trough free discussion and trial and error.

Written By ContactMuna

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