Arnold Kling  

The Case for Competitive Government

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Let Them In... A Sentence to Ponder...

Scott Sumner writes,


The recent election of Scott Brown is just one more opportunity to ruminate over the excessive size of the US government. In earlier posts I have argued that there are big diseconomies of scale in governance. Small countries like Singapore, Denmark and Switzerland seem to be more effectively governed that bigger countries like Germany, Britain and Italy.

Switzerland is about the size of Maryland, but it is much more democratic. There are about as many cantons in Switzerland as there are counties in Maryland, but each canton has a legislature consisting of dozens of legislators, while our counties are run by small cabals. My county, which is the size of one of the largest Swiss Cantons, is run by a 9-person council, which in turn is totally dominated by the teacher's union. Switzerland has units of government below the canton level. For me, there is no unit of government below the county level. Switzerland has referenda that allow citizens to nullify legislation.

The fact that Switzerland works at all is a powerful argument that we do not need such a strong central government. With the exception of national defense and a national currency, I think we could devolve every power currently exercised by the Federal government to the states. Each state could then be like Switzerland. Note that in Switzerland, health insurance works differently in each canton, which would be equivalent to having different health insurance systems in different counties in Maryland.

The national government would have no power to bail out banks. State governments could bail out banks, but I suspect that they would not want to.

This issue of government's excessive scale is one of themes in Unchecked and Unbalanced. But there I do not advocate a Swiss solution. Instead, I advocate something more flexible, where people can choose whatever governmental unit suits their needs for various functions. The idea is that providers of government services would end up competing, as in a market. I could choose to live under a policy regime to my liking, rather than have to depend on, for example, the whims of voters in Massachusetts.


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CATEGORIES: Political Economy



COMMENTS (13 to date)
Michael M writes:

Even a national currency is a dubious proposition. In truth the government should have as little to do with our money as possible.

OneEyedMan writes:

You could probably beef up the national guards and significantly decrease the size of the army and air force as well.

But would you want to?

Every policy decision seems to have a trade-off between the costs customization (in foregone scale economies) of local policy and its benefits. To the extent that there are large agreements over the nature of public policy and those preferences are stable then then we get great scale benefits from having one FDA and one EPA. As bureaucratic as those organizations may be, 50 of them would be more redundant.

To the extent that public policies in one area create externalities in other ones having a national government make policy allows aggregation to solve those problems. Air pollution and water use come to mind as issues where it is nice to have at least the option of national policy.

Llanci writes:

Do you think the US would have the security it does if it was split up into cantons the size of the Swiss ones?

David C writes:

Is there any macroeconomic evidence you can point to that says small governments are more successful than big governments?

agnostic writes:

The "more decentralized" people are sort of taking their eye off the ball. North, Wallis, & Weingast show in *Violence and Social Orders* that limited-access "natural states" have government spending highly concentrated at the national level, whereas in open-access orders it's much more devolved to sub-national governments.

Just as we should be pretty happy with the long-term sustained growth of open-access orders, despite the boom and bust wiggles, we should be pretty happy with how decentralized our polities are compared to their ancestors and the current alternatives.

That doesn't mean we should get complacent, but it's still worth keeping in mind how great things already are.

Chris writes:

OneEyedMan: ...we get great scale benefits from having one FDA and one EPA. As bureaucratic as those organizations may be, 50 of them would be more redundant.

It's been argued that these agencies are already redundant. If memory serves, FDA has been found to cause a net loss of around 10000 American lives per year by delaying the introduction of new drugs and treatments. This probably underestimates the true number because it did not include the effect of drugs not being brought to market at all because of the high cost of getting them through the approval process.

EPA has been described increasing the cost, but not the quality, of environmental protection compared to the previous regime. More precisely, there does not appear to be an increase in the rate of environmental improvement following its creation, and its tendency to demand the adoption of particular technologies and to set arbitrary mandates for emissions leads to a misallocation of resources.

Matt writes:

@ llanci
You are right, there is a good chance we would have an increased national security if the USA were decentralized, as it would reduce the amount of enemies to about 0.

How is this not like Panarchy?

mulp writes:

"State governments could bail out banks, but I suspect that they would not want to."

I take it this means banks would be limited in size and to a single State like banks were in the 1950s???

mulp writes:

"EPA has been described increasing the cost, but not the quality, of environmental protection compared to the previous regime. More precisely, there does not appear to be an increase in the rate of environmental improvement following its creation, and its tendency to demand the adoption of particular technologies and to set arbitrary mandates for emissions leads to a misallocation of resources."

Sort of a mix of issues that have nothing to do with the topic. The EPA was mandated to set arbitrary limits. But in its first three decades in operation, it was run by an administration that declared it was a goal to be badly run: "government isn't the solution, its the problem." as well as others who held similar policy positions.

I'm visiting in MD where the topic that comes up weekly is the pollution in the Chesapeake which, as in so many other American waterways, means the State dish from its colonial days, Maryland Crab cakes is made from imported crabs. The pollution originates from at least three states.

The rationale for not cleaning up the river sounds like its out of the communist manifesto: "the sacrifice of the few (commercial and sport fishermen, tourists, boaters, swimmers) is needed for the good of the many (big corporate chicken farms, property developers, industrial polluters, interstate commerce).

If there is no national government, then what good is it for one state to not pollute the river if all the other states continue polluting?

If as a long time resident of Maryland, your family tradition were crabbing with shoreline property and business facilities to make such a living, do you argue that as Pennsylvania allowed unlimited pollution, you just don't have rights in the matter?

And what good does it do to even become the political top dog in your local highly responsive highly representative government when the problem is in another state?

Reagan, Bush, probably Clinton, and Bush have been stalling on mandates, being forced to act by local political activists who joined together to sue the EPA.

It seems that such political activism on the part of local people joining together in the community to make government responsive is usually condemned by those opposed to "big government" as this post does. I gather that a small and responsive government is acceptable as long as only the right thinking citizens are allowed to participate in governance.

Bill N writes:

Have you considered the city of Chicago as a counterexample?

Llanci writes:

@matt

You are right, there is a good chance we would have an increased national security if the USA were decentralized, as it would reduce the amount of enemies to about 0.

It seems more likely that each "canton" would be a potential enemy of each other. All that rugged individualism has to come out somehow.

Granite26 writes:

Didn't any of you pay attention in your American History classes?

If the Federal government isn't big and powerful, the slavers win.

Arnold writes: "With the exception of national defense and a national currency, I think we could devolve every power currently exercised by the Federal government to the states."

It's true by definition that state governments couldn't or wouldn't issue a *national* currency (or provide *national* defense). But I presume you mean that it's desirable to keep currency a federal government power. Why? Why not privatize it? If you think that a country can't have currency that circulates at par nationwide unless the central government issues it, you should read the monetary history of Canada, or of Scotland, or of other countries that didn't nationalize currency issue but allowed note-issuing banks to branch nationwide.

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