Ronald Reagan famously said that government wasn’t the solution; it was the problem. And while the government is not the root of all of life’s problems, it is a more problematic “solution” than the purported problem itself. James Lindsay notes as much, which is quoted in full below due to the limitations of Twitter/X embeds.
Warren Buffett’s late investing partner, Charlie Munger, once said, “Show me the incentive, and I’ll show you the outcome.” This is one of the most important sentences in English.
It also explains why government can’t solve most problems, why it can’t work for us either.
Anytime you have a problem, you have an incentive. The incentive is to fix it or otherwise get away from it. That’s what it means for it to be a problem, by definition.
Nobody has more incentive than you do to solve your problem. The government has almost zero incentive to solve your problem.
This isn’t because government is broken or corrupt or whatever. It’s much more deeply structural to government itself. It is because you are first person to your problem, and the government is third person to your problem — unless, of course, your problem is a problem for the government (and then, watch out).
You don’t just have an incentive to solve your problem, though.
You have an incentive to solve it well.
You have an incentive to solve it fast.
You have an incentive to solve it cheaply.
You have an incentive to solve it with what you already have if you can.
You also have an incentive to solve it in a way that can scale to other people who have the same problem who can then purchase your solution from you.“Show me the incentive, and I’ll show you the outcome.”
The government has none of these incentives.
These incentives have effects. When you solve your own problems:
The incentive to solve it well is an incentive to quality.
The incentive to solve it fast is an incentive to efficiency.
The incentive to solve it cheaply is an incentive to economy.
The incentive to solve it with what you already have is an incentive to ingenuity.
The incentive to solve it in a scalable, salable way is an incentive to enterprise, entrepreneurship, and surplus, thus to abundance, wealth, and prosperity. It also multiplies at least some of the aforementioned incentives.“Show me the incentive, and I’ll show you the outcome.”
The government, again, has none of these incentives.
The government, as a detached third party, has no incentive to quality, no incentive to efficiency, no realistic incentive to economy, no incentive to ingenuity, and no incentive to enterprise or surplus. It simply doesn’t have them. All it has is incentives to follow (or break) policies it has set for itself that simulate these virtuous outcomes, often badly, frequently shot-through with corruption.
Another fact is that government is run by people. Government may not have any of these incentives, but the people working within government do have incentives. They have the incentive to private profit through public resources. That means they have an intrinsic incentive to corruption that the best of them must constantly work to resist or repel, but that incentive never leaves.
“Show me the incentive, and I’ll show you the outcome.”
This is why the idea of seizing control of the government to make it work for us is a huge mistake. We cannot do that because it cannot be done. You and yours care about your problems, and people can be hired or paid to care about your problems where you lack solutions, but the government doesn’t care about your problems.
It isn’t that the government might be good or bad that matters. It’s that the government’s incentive structures do not point in the right directions almost anywhere.
This isn’t to say the government is useless. It isn’t. It has a role to play, which is a duty it is to fulfill in exchange for the power to govern the affairs of men.
The government has a role in securing and protecting its citizens, keeping the peace, maintaining order, and securing the intrinsic, inalienable rights of citizens against all third parties, including itself, along with all attendant necessities and obligations. We outsource those duties and responsibilities to the government primarily to centralize final conflict resolution (force, or violence) in a single place and to handle the specific affairs of state.
Government should have and feel an incentive to do those things well, not just out of oath and patriotism but because any failure in this regard should result in the government as it is presently constituted being taken away from the scoundrels who don’t fulfill their end of the bargain when we consent to their power over us.
If the government isn’t able to fulfill that basic duty, among all possible explanations, we can be certain that its incentives to do so are confused, muddied, buried, or secondary to other incentives that have become stronger. These can and will include incentives to rule, incentives to corruption, and incentives through accountability being confused, broken, or unclear. “A house divided against itself,” it has been said, “cannot stand.”
“If you show me the incentive, I’ll show you the outcome.”
The place where government power therefore needs to be exercised is in the domain of accountability for crimes against their citizens and their rights. Unfortunately, individuals within the government are deeply complicit in these corruptions and crimes and therefore lack the proper incentives to achieve it.
Otherwise, in other domains, the role of government must be shrunken, not grown, not wielded. A “Stakeholder Economy,” for instance, is a government-managed economy that has corruptible and misaligned incentive structures that will ultimately fail. It isn’t for lack of the right people or clarity and purity of the driving ideology that it fails but because the underlying incentives are incorrect, misaligned, and guaranteed to be corrupt.
“If you show me the incentive, I’ll show you the outcome.”
