The Things Only Government Can Do

Much of this book to this point has been a caution against—some might say a tirade against—excessive reliance on government to make sound decisions when resources are scarce, people pursue their self-interest, and information is costly. But as noted previously, government is among the oldest human institutions, and human institutions do not persevere so long—since the dawn of settled agriculture, perhaps 7,000 years ago—unless they bring some benefits. And although much of what government can do, as we have seen, is inimical to human achievement precisely because prices ordinarily provide incentives for people to use scarce resources to greatest social benefit, it turns out that sometimes market prices provide poor incentives. Government, by using its power to take command of resources or limit how they are used, can in fact use them more efficiently under these circumstances. The conditions required for this to be true, which also have relevance even outside the question of government versus private responses to resource-use decisions, must be carefully delineated, and this chapter does that.