A mainstream refutation of government - negative externality

Economics Economics Questions
1

Don’t forget what too many economists seem never to grasp: Collective decision-making itself—from citizens voting to politicians spending taxpayers’ money—is infected with what are perhaps the largest and most intractable externalities. Costs are imposed on third parties constantly.

http://www.thefreemanonline.org/columns/thoughts-on-freedom/some-sins-of-textbook-economics/

This is a restatement of Bastiat’s great quote:

Government is the great fiction through which everybody endeavors to live at the expense of everybody else

Government is one gigantic, imposed negative externality.

Makes sense. And the Coase theorem doesn’t apply :wink: Transaction costs are VERY high :wink:

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I feel victorious.

4

David Friedman refers to this idea quite a bit in The Machinery of Freedom.

He also uses this as a critique of the Ayn Rand’s “limited” state. The truly “objectivist”, self-interested individual would almost always use the force of the state to cater to their “special interest” rather than trying to repeal every regulation/special interest law already inexistence. Rolling back all of the regulations would indeed be beneficial to society as a whole, but the cost required is much higher to the individual. Thus, the self-interested individual will always resort to the most “profitable” method.

Thus, the state expands. And here we are..