Competition in Politics

Government, by nature, is coercive. The fundamental transaction of government — the exchange of protection for tribute — makes government coercive because it must be in a position to forcibly deter aggressors in order to protect its citizens. Citizens want their governments to have the power to protect them, but this same power can be used against them too. Much of the analysis in previous chapters has been devoted to seeing how the government can obtain and use coercive power. The government profits from coercion by selling its output at monopoly prices. The government sells protective services, but also can produce and sell other goods and services. Some services have possible market alternatives; for example, governments produce mail services, television and radio broadcasts, health care, education, and more. When producing goods with private sector alternatives, the government typically has a competitive advantage. In some cases, it outlaws private sector competition, but another alternative is to subsidize or even give away its output, making it hard for private sector competitors to compete on the basis of price. Other services are not typically offered in private markets. For example, the government produces and sells barriers to entry into private markets in the form of tariffs and import quotas, regulation, licensing, and the granting of natural monopolies.