Economics - General

The beneficial effect of State intervention…

An interesting quotation from A.V. Dicey‘s Law and Public Opinion in England regarding the role of the State in society.

“The beneficial effect of State intervention, especially in the form of legislation, is direct, immediate, and so to speak, visible, whilst its evil effects are gradual and indirect, and lie out of sight…Nor…do most people keep in mind that State inspectors may be incompetent, careless, or even occasionally corrupt…; few are those who realize the undeniable truth that State help kills self-help. Hence the majority of mankind must almost of necessity look with undue favor upon governmental intervention. This natural bias can be counteracted only by the existence, in a given society,…of a presumption or prejudice in favor of individual liberty, that is of laissez-faire. The mere decline, therefore of faith in self-help–and that such a decline has taken place is certain–is of itself sufficient to account for the growth of legislation tending towards socialism.”
– Taken from Milton Friedman’s
Capitalism and Freedom, pp. 201.

Of course, society could not function smoothly without some form of government. Even the libertarian Milton Friedman acknowledges this on p. 199 of Capitalism and Freedom.

“The expressways crisscrossing the country, magnificent dams spanning great rivers orbiting satellites are all tributes to the capacity of government to command great resources. The school system, with all its defects and problems, with all the possibility of improvement through bringing into more effective play the forces of the market, has widened the opportunities available to American youth and contributed to the extension of freedom…Public health measures have contributed to the reduction of infectious disease. Assistance measures have relieved great suffering and distress…Law and order have been maintained…”

The point of presenting these two quotations is to demonstrate that adhering to strict theoretical construct without room for real-life complexities arising from the idiosyncrasies of various situations will often lead to sub-optimal decision-making.

1 Comment

  1. While we’re at it and since you often talk about it, another form of government intervention viewed by Friedrich von Hayek, The Fatal Conceit: The Errors of Socialism, 1988 (p. 35) :

    Just to illustrate how great out ignorance of the optimum forms of delimitation of various rights remains – despite our confidence in the indispensability of the general institution of several property – a few remarks about one particuilar form of property may be made. […]

    The difference between these and other kinds of property rights is this: while ownership of material goods guides the user of scarce means to their most important uses, in the case of immaterial goods such as literary productions and technological inventions the ability to produce them is also limited, yet once they have come into existence, they can be indefinitely multiplied and can be made scarce only by law in order to create an inducement to produce such ideas. Yet it is not obvious that such forced scarcity is the most effective way to stimulate the human creative process. I doubt whether there exists a single great work of literature which we would not possess had the author been unable to obtain an exclusive copyright for it; it seems to me that the case for copyright must rest almost entirely on the circumstance that such exceedingly useful works as encyclopaedias, dictionaries, textbooks and other works of reference could not be produced if, once they existed, they could freely be reproduced.

    Similarly, recurrent re-examinations of the problem have not demonstrated that the obtainability of patents of invention actually enhances the flow of new technical knowledge rather than leading to wasteful concentration of research on problems whose solution in the near future can be foreseen and where, in consequence of the law, anyone who hits upon a solution a moment before the next gains the right to its exclusive use for a prolonged period.

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