Money that is paid in taxes to support government cannot be deployed in some other wealth or productivity enhancing enterprise. The problem with this really becomes clear when we ask the question “What is the return on our tax dollar?” In other words, what good or service has the government provided? The governmnet doesn’t create anything physical, so our return must be in the form of a service rather than a product. Some government services are obvious–national defense for instance. At the Federal level, many government services are dubious and extremely difficult to value (if indeed they have any value). More often than not, government services come in the form of restrictive regulations rather than empowering edicts.

Aside from the value of government services consider the motives involved. If you invest money voluntarily, you expect to earn a return on your investment and you will do some due diligence to assure yourself that you are investing wisely. If you pay the same amount in taxes, why do you do it? Do you have a choice? You do it because you are compelled to, regardless of whether you feel you get your money’s worth or even whether you agree with what the government is doing. Obviously being compelled to undertake any behaviour is contrary to liberty. I am not saying we should pay taxes. I am saying that the extend to which we are compelled to do anything should be as limited as possible.

Now look at the flip side. What are the motive behind those taking the money? When you invest, the person with whom you are investing is, like you, motivated by the prospect of earning a return. Hiis return is maximized when he conducts his activity with maximum efficiency. In other words, efficiency is rewarded in the persuit of a return.

What is the motive for the government collecting the taxes? Who, in the government has a vested interest in ensuring that the government’s activity is conducted efficiently? The answer is no one because there is a disconnect between the person paying the money and the person deploying the money. There is no profit motive and consequently there is not efficiency motive. Now all the public servants and the bureau chiefs can give lip service to efficiency and productivity, but in the end, they all keep their jobs and get paid regardless of how they have performed.

The point is that money sent to government will never be used as efficiently as it is in the private sector.

It is true that there will always be corrupt people that play the system. But it should also be obvious that the bigger the system is, the more easily it can be played and the more difficult it is to watch (this goes for corporations as well). Finally, if money is at risk of being lost to corruption, isn’t it better that it be private rather than public money that is at risk? And isn’t it likely that money in the private sector is more likely to be closely watched by its owner than public money that has no single owner? It isn’t all a wash. Private enterprise should always be favored over public because private profit cultivates efficiency and vigilance whereas state involvement stifles both.

Not that jobs are the only measure, but jobs and pay determine how much expendable income people have, which determines how much is spent in the market, and how big the market can grow.

People will always play the system. Right now the best way to do that is using the government (lobbying, creative accounting, etc.). If government were smaller, the same people would find different ways. Does that mean it’s all a wash? If we were able to look at an alternate world/universe with smaller government, would things be “better”? How much “better”? What constitutes “better”?

If I had to distill the wisest approach down to two words, it would be either “hands off” or “cycles happen”.

Though I have no personal experience of the political landscape of the ’60s, one of the changes in our economic ecosystem is the advent of media and information sharing (more transparency). Could this be one thing our models need to account for? It’s easier now to campaign to voters how you are going to satisfy that emotional urge to fix things or help those in need. Also, it puts more pressure on the peoples in charge to tell everyone what they want to hear.

“Doing something” is generally perceived as positive and proactive whereas “doing nothing” or reseting tends to admit fault, failure, and laziness.

Hurry up and finish _Emergence_ so you can move on to Kevin Kelly’s _Out of Control_! You are going to LOVE it. ;-}