Life, Liberty & the pursuit of Small Government

Arthur C Brooks launches a creative defence of small government in the National Review. He argues that people value money because it is a symbol of earned success. And because it is earned success rather than money that makes people happy, redistributing income from the rich to the poor won’t promote happiness.

But Brooks isn’t just worried about income transfers, he’s worried that the United States will abandon the “traditional free enterprise system” and embrace “European-style social democracy”. What’s he’s hoping to avoid is increased government funding for services like child care, education and health care.

The problem with Brooks’ vision is that children from disadvantaged families often miss out on the opportunity for ‘earned success’ as adults because as children they miss out on the care and education that they need in order to fully develop their human capital. A 2007 UNICEF report on child well being showed that the United States ranked poorly against other developed nations (pdf).

A growing body of research shows that social mobility is lower in the United States than in countries like Denmark, Norway and Canada. Americans who start out at the bottom of the income distribution have a harder time working their way up than those in most other developed countries.

In a 2009 paper for the OECD, Justina Fischer reported that the United States was significantly less mobile than Nordic countries like Denmark and Norway (pdf). Rather than offering a high mobility alternative to ‘old Europe’ the US’ performance was similar to Italy and the United Kingdom.

International surveys of happiness don’t help Brooks’ case either. While average happiness scores are high in the US, they tend to be lower than those in the best performing northern European nations — nations like Denmark.

What the United States needs is a vibrant free market and a set of welfare state institutions that make sure opportunities created by the free enterprise system are open to everyone. Brooks’ mistake is to carry on as if it’s impossible to have opportunity-enhancing services funded through taxation without reducing the population to serfdom. Why would anyone think, for example, that funding Danish levels of early childhood care would lead to French levels of labour market regulation?

As the Atlantic’s Clive Crook writes, Brooks way of framing the argument is "excessively Manichean". The United States already has a mixed economy that combines free enterprise with government funded services. Does anyone seriously think that US governments should stop funding the school system? The real question is deciding what government should do, not whether it should do anything at all.

The Cato Institute’s Brink Lindsey understands this. In a 2008 piece for The New Republic he wrote:

… by the time people become legally responsible adults, circumstances not of their own choosing — namely, how they were raised and whom they grew up with — may have prevented them from ever developing the capacities they need to thrive and flourish. Which raises the possibility that government intervention to improve those circumstances could actually expand the scope of individual autonomy.

For example, preschool enrichment programs — along the lines of Head Start, but more intensive and beginning with even younger kids — offer some promise in counteracting the negative influences of a disadvantaged upbringing. So do housing programs that encourage relocation from areas of concentrated poverty. Meanwhile, additional wage subsidies for low-skilled workers might help to shrink the underclass and promote the gradual assimilation of middle-class norms.

As a libertarian, Lindsey does not want to see an increase in taxes or an outbreak of new government regulation. But he does want Americans to have more control over their lives. That’s why he’s willing to consider government programs that might improve social mobility. If Brooks wants to be taken seriously he needs to move beyond abstract rhetoric about a cultural struggle between "our traditional free enterprise system and European-style social democracy" and start talking about how America can deliver on its promise of opportunity for all.

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Matt C
11 years ago

If Brooks genuinely believes that people value earned success rather than money per se, he presumably would have no exception to taxes on bequests in the order of 100%. After all, people would not value inherited wealth.

Paul Frijters
Paul Frijters
11 years ago

as soon as you agree that the thing that people value is relative, i.e. their success compared to that of others, there is an immediate case for taxing efforts towards that success because relative success is a fixed pie and all investments towards it are inefficient. Hence the logic goes entirely the other way in that recognising that people care about status is a call for more interference, not less. Brooks should argue we should tax income so that people take more leisure. Brooks is not being imaginative. He has either not read or not understood the vast literature on this.

Paul Frijters
Paul Frijters
11 years ago

as soon as you agree that the thing that people value is relative, i.e. their success compared to that of others, there is an immediate case for taxing efforts towards that success because relative success is a fixed pie and all investments towards it are inefficient. Hence the logic goes entirely the other way in that recognising that people care about status is a call for more interference, not less. Brooks should argue we should tax income so that people take more leisure. Brooks is not being imaginative. He has either not read or not understood the vast literature on this.

James Farrell
James Farrell(@james-farrell)
11 years ago

…because it is earned success rather than money that makes people happy, redistributing income from the rich to the poor won’t promote happiness.

There’s a lot of truth in the premise, but only a grain of it in the conclusion. In addition to what Paul said, social systems can recognise and reward effort in many non-pecuniary ways. To take a trivial example, in a world where all kids have good acces to amateur sporting competitions, those that cultivate their talents can enjoy peer admiration and trophies. If economic ‘success’ is defined in terms of relative consumption levels, we can compact the scale of rewards and still achieve the same goal, while eliminating absolute hardship and insecurity.

That having been said, the points in the post are very well made.

Fred Argy
Fred Argy
11 years ago

A thoughtful piece.

Paul Frijters
Paul Frijters
11 years ago

Don,

why waste any time on the wriggling of this Brooks character? Average tax rates have hardly changed the last 30 years or so in the US and have come down in many EU countries, without a concommittant rise in happiness. Of the national factors that might affect national happiness, tax is but the least fancied as a serious contender. Relative GDP is probably far more important as a measure of ‘standing’ which turn affects national pride which does seem a strong element of individual happiness.