Luxury Government

 

You may have heard of a phenomenon called Wagner's Law (which I've blogged about before), which observes that with increasing economic growth we generally see a rise in state expenditure. Or to put it another way, the richer a country gets, the more it can afford to splash out on luxuries like government, and state-funded projects our forebears could have scarcely afforded.

What's driving Wagner's Law is that capitalism has made people rich enough to be able to afford more government and more public services - and with a more complex, more diverse range of competing forces, we can afford more state regulation and better public services, as long as they are not inefficient and not best left to consumer choice.

But there is also the phenomenon called Gammon's Law (after Max Gammon), which follows a predictable pattern whereby increase in expenditure will be matched by fall in production, where the more resources a system swallows up, the less efficient it becomes in terms of production per unit of investment. Pretty much any big centralised institution falls foul of this - schools, health, taxation, the EU, the church - when it gets so big it passes through the efficiencies of economies of scale and gets so inflated that it begins to suffers from diseconomies of scale (see also the Dunbar number), and will show a pattern whereby increased input produces decrease quality of output.

What muddies the waters even further is that there is much overlap between the social, political and economic landscapes, especially regarding human motivations. Humans are incentivised by a complex range of aspirations; material well-being, safety, self-preservation, community, purpose, status and tribal affiliation. So it's not always easy to say that economic freedom is an exclusively 'right wing' trait and redistribution is an exclusively 'left wing' trait, because all humans are motivated by a complex interaction between those and the other factors.

Moreover, we all have stronger ties in serving our closer family, and weaker ties with the wider community, and it is inevitable that human motivations, in large part, begin locally and extend outwards as we have more to spare. That's why, even in a country that sees continual economic growth and raised living standards, more parochial issues related to social standing, status and self-preservation can make people sound as they have missed some of the story. Similarly, those who proclaim that everything is ok and that the market and science can take care of all our problems are also living outside of truth.

Although bottom up driving forces are usually superior to top down central planning, they are not always, because local iterations in bottom up dynamics are not often sufficiently collectively ordered enough to deal with large scale problems or major changes in the status quo (like a war, a pandemic or a big natural disaster). However badly we may think the government has handled the problems created by Covid, there would have been many more problems and deaths if society tried to manage purely by the invisible hand of the market.

On the other hand, despite the raving left's dumb lament that Covid has handed more power to the capitalists, it has been evident that when people have had to live in restrictive times, it has taken businesses with enough scale and size to be able to quickly adapt to the changing needs and demands of the population (supermarkets, Amazon, Royal Mail, tech companies). The government has done a lot of harm to small business by forcing them to close while the big players hoover up the custom, but it takes big players with a capacious business model and prodigious infrastructure to be able to service a nation in crisis.

That's why in previous writings I have been keen to point out that the motivational factors in the left and right wing bifurcations extend far beyond principles of economics - they extend to qualities like motivations for togetherness, kindness, tolerance, inclusion, and helping the most vulnerable - and neither the comprehensive free market approach of the economic right nor the comprehensive socialist approach of the economic left satisfies the full gamut of human needs and motivations.

Once people rightly frame left and right wing into the three considerations that need to be made: economic left and right, social left and right, and collectivist vs. individualist left and right, they will begin to learn that the contributions of right and wing mentalities are both necessary to strike the right kind of balance in a thriving society. As always, we'll need the right balance of freedom and restriction, individualism and collectivism, risk and safety, self-determination and redistribution - you name it, there'll be a balance to be struck.

I suppose the socialists will never be very keen on markets, because they are primed to only see the concentrated faults and miss the more thinly spread benefits. And I suppose free marketers will always have a bit of a blind spot towards the community and solicitous-based nature of socialism because they rightly abhor the economic illiteracy and crass hypocrisy that underlies it.