There are different versions of a saying I just saw on Twitter: “The State can give you nothing, because it produces nothing.” The statement does not challenge anything fundamental I believe. On the contrary, it would seem to buttress some of my arguments. The problem, however, is that it is false.
The State certainly produces something in the economic sense, that is, goods and services that somebody is willing to pay for. The State may waste resources in its production activities, including by producing certain goods and services whose costs no consumer would be willing to pay. But many are willing to pay for the enforcement of the rule of law, which requires police and courts, as well as for national defense (which would be better named “territorial defense”). It is true that, given the inefficiencies of government production, people pay more in taxes for these and other public services, but this does not change the fact that there are goods and services that many are happy to consume even given their tax cost for them. Assuming there were no state, many if not most people would be willing to pay private producers (associations or for-profit companies) to produce some of the services they are now compelled to buy through taxes. And of course, if a state, on net, in some meaningful sense, destroys more value than it produces, anarchy would be the solution.
The reader intrigued by the last two sentences and who wishes to explore the economics of anarchy should find a few useful readings in my recent post “Politics, Anarchy: What We Know (Nearly for Sure).” There are many other books to read on this topic, including Anthony de Jasay’s Against Politics: On Government, Anarchy, and Order (Routledge, 1997). Believe me, the effort is worth it. (And effort there is, even if you are a professional economist and political philosopher.) Perhaps you won’t end up agreeing with his arguments for anarchy, but the worst that can happen is that you change your mind. There are worse things happening in the world.
Here is another illustration of what production is, taken from the private economy. In 1963, the federal government imposed tariffs on the imports of brandy and a couple of agricultural products. The tariffs became known as the “Chicken Tax” because they were retaliation for a European tariff on poultry. All these tariffs applied worldwide. The American automobile industry, which was starting to feel the heat of foreign competition, obtained the inclusion in the Chicken Tax of a 25% tariff on imported light trucks including pick-up trucks (see my EconLog post “Why the Chicken Crossed the Road,” March 30, 2018). The consequence, of course, is that the price of all light trucks, including domestically-produced ones, was pushed up toward 25%: that’s why the American automobile industry wanted it—to raise prices on the domestic market. Six decades later, the chicken tariff on light trucks still exists, which is one reason why many foreign producers such as Toyota and Honda established plants in the US to manufacture their pickup trucks. They thereby reduced the impact of the chicken tariff by incurring higher production costs here, which certainly means that prices are still higher than they would otherwise be. American purchasers of light trucks are still gouged by their own government, but saying that Ford, GM, or Stellantis produce nothing in America would be false. They just charge their customers a non-competitive price.
As formulated in the Twitter post I saw, the statement is literally false anyway. The state can give you something that it does not produce: it just has to take it from somebody else. Indeed, redistribution represents the largest part of contemporary government budgets. In a more general form, this is the main argument of Anthony de Jasay’s The State: the state governs, which, de Jasay argues, means nothing else than favoring some citizens to the detriment of other citizens.
Going back to my starting point, defending valid theories with bad ideas is problematic for at least two reasons. First, truth has a value of its own. When one incorporates false claims into a theory he believes in, he invalidates it or part of it. Second, it is already difficult enough in our statist world to persuade our fellow humans of the validity of classical liberalism, libertarianism, or some shades of them, without using arguments that are false on their face and easy to debunk.
READER COMMENTS
Thomas L Hutcheson
Nov 25 2023 at 8:08am
I think that the service the state (including subnational units) provides, defense law courts, regulation/Pigou tax-subsidies, NIH/NSF, infrastructure like weather services, roads and streets economic statistics, [and granted that some could be provided more efficiently by private contract] are mainly intermediate goods that affect the production of consumption and investment goods. This is not very well captured in “G,” but it’s probably a good thing NOT to have BEA trying to sort how much of urban street use services (or even the costs of providing them go directly to consumers and how much to commercial vehicles.
Pierre Lemieux
Nov 25 2023 at 11:44am
Dear Thomas: Interesting comment, but I would add that (as a rough estimate) all that you list currently amounts to about 13%-14% of total government expenditures in the US (including state and local). The rest is redistribution and, a distant second, defense. I would add that since the number of things some people love and the number of things other people hate, including regulation/Pigou tax-subsidies (which are included in my estimate), could consume all GDP and demand for these things would still be far from satisfied.
Craig
Nov 25 2023 at 12:58pm
Afuera!
Craig
Nov 25 2023 at 1:06pm
Honestly I simply take it as rhetorical hyperbole. I had commented on the Professor’s tweet regarding Milei’s election and the Professor’s advisor for Signor Sierra and on his timeline is attributed the quote: “The state can give you nothing, because it produces nothing” presumably translated from Spanish. Of course state obviously runs schools, in the previous article the Professor had written I had noted how the TVA/US Army Corp of Engineers operates powerplants in TN.
Personally, I prefer: “Most things the government touches turns to s—having cream” but I digress.
Sinclair Davidson
Nov 25 2023 at 7:52pm
Hi Pierre
There is a subtle distinction to be made. The State does not produce the ‘Rule of Law’, it produces ‘Law and Order’.
While I’m happy to pay a fee for the latter, I’d far prefer the former.
Pierre Lemieux
Nov 26 2023 at 10:54am
Sinc: I agree with your important distinction. The state as we know it has become, and is becoming, more Hobbesian–in most areas and with some variations in the world. In the West, the rule of law has generally and dramatically shrunk.
Comments are closed.