A few years ago I was giving an address at a function — a Rotary lunch, I think — and there were questions afterwards. One of the questioners said that I seemed happy with the current state of affairs, but he was alarmed at the growth of government. He wanted to get back to simpler days when there was a free market and not all this regulation that was strangling business. What was wrong with a free market, he went on. People talked about it, but  the truth was we didn’t have one.

‘How free do you want it to be?’ I asked him. He didn’t have an instant response, so I followed my question up with another. ‘I mean, what about hand-guns? Would you be happy for them to be sold over the counter? Or babies?’

He was almost shocked. That wasn’t what he meant at all. It turned out that he didn’t have a clear idea of what it was he wanted, either. Like many people who talk about those matters he hadn’t studied the issue in any detail, but he thought he knew what was wrong.

This little episode would be familiar to Ian McAuley and Miriam Lyons, who have written Governomics. Can we afford small government? published by Melbourne University Press. I have a lot of time for Ian McAuley, who lives round the corner from me and worked at the same university. He writes well, especially about economics. Miriam Lyons, his co-author, is an experienced and able writer herself. Anyone who wants to understand the debate about ‘small government’ will find this a useful primer.

Such a reader will also need to go to the IPA and other supporters of the small government nostrum, because Governomics has a clear and explicit point of view: the authors indeed think Australia would be better off with a larger public sector. I read it from cover to cover, and emerged thinking they had made a decent case, but rather over-egged it. There are choices to be made and Australia has gone one way. Sweden, for example, does it differently, but the situation in Sweden is very different. Sweden has a cradle-to-grave social welfare system, and Australia does not. Australia leads the world in voluntary activity on the part of its citizens. Which is better? I’m not sure. ‘Path dependency’, the way in which past decisions constrain future ones, is an important aspect of the way different nations tackle the same subjects.

McAuley and Lyons seem to be believers in ‘climate change’, and the subject appears again and again as an instance of the important role for government. Economics is about ensuring that scarce resources are put to their socially best use, and it is becoming increasingly obvious that the capacity of our ecosystems to support human life is a crucial and over-exploited resource. We may not be able to predict the exact consequences of two or five degrees of warming, for example, but most rigorous projections show that it would be costly in the extreme.

I think this is a good example of over-egging, and there are many others. On the evidence, people over the world live longer, are better off, eat better and are bringing more land into national-park use than was the case than was the case thirty or more years ago, while the planet is greener than it was, too. There has been no discernible warming over the past decade and a half, despite continual increases in atmospheric carbon dioxide. I don’t know which ‘rigorous projections’ the authors have in mind, but I trust that Lord Stern’s is not one of them. In fact, the general circulation models on which all these projections rest have proved incapable of predicting global temperature over the past ten years. I don’t think there are any projections of any kind that make great sense.

Indeed, the message of the book would be the same had the authors not talked about ‘climate change’ at all, and it would be more persuasive. Their strongest argument, it seems to me, is that human societies need  to create a balance between natural selfishness and the common good, and modern democratic societies have developed mechanisms to bring this about. One of them is the regulated market, and its outriders. No society known to me has a truly free market. Large private organisations, as we have seen very recently in the case of Volkswagen (and I would add NGOs like Greenpeace and their fellows), need regulation on behalf of society, otherwise they can become overweening, and behave badly.

The authors are in favour of the public service and believe it has been belittled, to everyone’s disadvantage. I agree. The authors have a real thing about economic inequality. I don’t share their view, and I have written about inequality before. Inequality in income is only one form of inequality, and not necessarily the most important form. But economists, understandably, see it as central. The authors make the good point that there is as much regulation by the private sector as there is by government, and they might have gone on to explore the reason — which I think is to do with our historic culture, arising out of the circumstances of a convict beginning. As I’ve said somewhere else, Australia may well lead the world in regulating, and one can get extremely tired of it, wherever it comes from.

The title of the book brings together economics and government, but not all government is about things economic. In the next post I want  to talk about other aspects of ‘big’ government that are only lightly touched on in this book — the use of government by one group of citizens to get all other citizens to behave as the first group wishes. You can see this in areas like racial vilification, gay marriage, carbon tax, people with disabilities — indeed, all the so-called politically correct areas (I make no comment here on the substance of the issues).

What happens is that one party, in this case the ALP, agrees to do certain things if it is elected, gets into power, sets up mechanisms, usually a department or a major section of one, and then tries to enforce the new order. There is a lack of real support for the new order, which is likely to be the desire of a small minority, however passionate the desire is. It is the use of the moral authority of government by small groups that, I think,  underpins some of the discontent about ‘big government’.

Despite my criticisms, this is a book that is worth reading even by those who are sure the authors are wrong. I have my disagreements with them, but I learned a lot, too.


Join the discussion 6 Comments

  • Neville says:

    I think I’ll pass up the opportunity Don. If they’ve jumped on board the CAGW wagon I’m sure I have better ways to spend my time. I’m not a complete small govt fan but I certainly think we are over governed here in OZ.
    I’m a conservative but I can still feel sorry for other members of our society who sometimes need a helping hand. I’m not religious but I have a number of friends who are Christians , both RC and protestants and they are probably some the least bigoted people I know.
    I’m very wary of the urgers among us and the new left leave me very cold indeed. The old time socialists in the Labor party at least had a firm foundation of family and basic traditions they believed in. Bob Santamaria said that Kim Beazley snr remarked that as a young man he could go to any Labor party meeting and look around him and see the cream of the working class. But he said ( about the late 1970s) today all I see is the scum of the middle class.

  • Dasher says:

    Apologies for bringing this off subject but I could not find a contact. Have you read the latest Quadrant critique on the IPCC?. There are a number of people who have challenged the quality of the IPCC work (Including Curry) but if this is even half true it is damning. Might be worth an essay.

    cheers and keep up the good work.

    • Bryan Roberts says:

      I haven’t read the Quadrant article, but you may be interested in Donna
      Laframboise’s well-researched and viciously accurate expose of the IPCC, ‘The Delinquent Teenager Who Was Mistaken for the World’s Top Climate Expert’.

  • Kirby says:

    Through my lens, I see the argument not between small and
    big government, but one of unlimited government. Our society has become so populated that we
    do need Big government to protect us and make sure areas of our lives remain
    fair and equal. We will never solve the
    problem of greed and selfishness without some Big government regulation. However, many special interest groups
    campaign with enthusiasm in promoting their agenda (even though they may be a
    very small percentage of the population) and the general public pay very little
    attention until the federal government gets involved and then regulations and
    big government begin controlling our lives.

    The federal
    government in the USA has become “ the long arm of the law.” Unlimited government is guilty of overreach. Its power has reached into controlling state
    governments, local governments, and our own families. I think this is true in several different
    areas of our lives. For example, the
    federal government control of the mentally and physically handicapped has for
    many years allowed states to set up their own systems for employing the
    handicapped. Each state regulated their own
    sheltered workshops. For many years the federal government saw opportunities to
    give states financial support for these programs. However, the present
    administration in Washington has decided to control these state systems, and
    has put into place a new philosophy for handicapped employment. Rather than have them work together in a
    central workshop, the federal government is forcing states to move them out of
    the workshop environment and into the community. Deadlines have been set for certain
    percentages of the handicapped to be put into jobs with local business and
    organizations. The federal government will
    withdraw their financial support if this is not done. The present sheltered workshop is working and
    all seemed to be satisfied with their present situation. The handicapped have always had the option to
    choose to work at any job the community would offer them, but it was not forced
    upon them. The federal government has now moved into controlling another area
    of people’s lives. Should the federal
    government be involved? Yes, in a
    supportive role, but the program should be controlled by the state government,
    local government, and the individual families.

    Why has the
    federal government chosen to overreach in this area? Who knows?
    My guess is that new agencies have been organized, more bureaucrats have
    been put in to place, and now they must justify their existence. Someone has
    decided that the handicapped employee needs to be paid the minimum wage of all
    American workers. They need to be
    surrounded by “normal” people for them to become a “whole” person. From my perspective as the father of a mentally
    handicapped daughter who is 32, but functions as a 7 year old, it is more important for our developmentally
    handicapped to be socialized and not just thought of as an economic contributor
    to our society. Allow them to have
    purpose in life. Allow them to
    experience more than just their family environment, but don’t force them into
    an uncomfortable environment. Can they
    handle working in our communities? Maybe, but allow them along with their
    family, friends, professional counselors, and those educated in sheltered
    workshop backgrounds to make these decisions NOT an ever expanding UNLIMITED
    federal government. That’s my two cents. We all have our own concerns and what
    we think should be the solutions to those problems. I am a small federal government person. I don’t need “Big Brother” reaching into every
    phase of my life.

    I think small
    government promotes freedom, enterprise, hard-work, charity, and personal
    responsibility. Unlimited government promotes dependence, apathy, laziness,
    tyranny, and bureaucratic corruption and abuse.

  • Alan Gould says:

    My doubts regarding the free market base themselves on whether it ever is free or can be. At any notional baseline, someone always finds himself/herself at advantage and someone else at disadvantage; that is how Nature configures itself. I suspect I have quoted my quatrain entitled ‘The Free Market’ on this before…

    The River is free, but not so wide,
    the fish come swimming on the tide.
    An angler’s casting where they swim…
    …a crocodile is watching him.

    I did read and approve the counter-affirmation to this in the last day or so – I think in Quadrant – that in our (Australian/NZ) society two values remain largely in place despite upheavals, the idea of ‘the fair go’ and the idea that one is obliged to give ‘it’ a go. While that stays broadly in place, I have confidence.

  • […] of measuring something, and so is this one. I’ve written a couple of pieces about inequality (here, for example), and I feel that part of political correctness today is to go on and on about how it […]

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