With President-elect Trump’s arrival in the Executive Branch, perhaps it’s time to step back and think about the role of government. If we agree on the role, we can better debate from the left and right how this role is best carried out. Free markets have many advantages, but also offer some real pitfalls. The government’s role stems from the self-serving interest of market participants – companies and consumers alike. This greed is good: it leads to innovation, wealth creation, productivity, striving to improve, and many other positives propelling our economy and society forward. But what is best for the individual or family is not necessarily best for the nation, hence the role of government. What are the big things that markets can’t carry out well on their own? They cannot set laws or ensure their just enforcement. In fact, a comprehensive legal…
Markets vs. governments: An economist’s view
It’s not possible to resolve political debates such as “Should we raise taxes to revitalize our aging transportation infrastructure?” without first achieving consensus on the role of government. The role debate, at least in my mind, is far less divisive than “how.” So, as we enter elections to determine the next US President and Congress, I thought it would be a good time to share an economist’s perspective on the role of government. There would be no role for government in our economy if – in our roles as citizens, business owners, shareholders, employees, and consumers – we acted in the best interests of society as a whole. Rather, we act out of real or perceived self-interest. There is nevertheless a huge advantage to individuals acting in their self-interest. It creates an invisible hand enabling a market-based economy. Adam Smith argued (correctly) that…