The State Needs a Short Leash

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Decentralized systems have many advantages over centralized systems. For example, in agriculture, the decentralized market economy of the United States far outperformed the centralized command system of the Soviet Union.

Economic and cultural progress requires experimentation, evaluation, and evolution. Individuals and organizations experiment with new products, new services, and new social norms. People evaluate the results. We keep the most helpful new ideas, and we discard the rest.

Decentralization works better at all phases of this process. Markets work better than government at experimentation, evaluation, and evolution.

The value of variety

A central government cannot initiate nearly as many experiments as a decentralized market. In the realm of higher education, the United States became a world leader because many different colleges and universities sprang up, experimenting with a variety of educational models. Unlike many other countries, there is no national university or a nationally harmonized system of higher education. Instead, a great variety of colleges and universities have been allowed to emerge.

In the Swiss and Canadian health care systems,
different provinces and cantons experiment with slightly different organizations and insurance programs. They allow for private provision of health care, unlike Britain’s National Health Service, which as of this writing appears to be suffering from high cost and ineffective care.

Overall, federal systems allow for more experimentation than centralized systems of government. More­over, markets allow for much more experimentation than even federal government systems. Every single participant in a market is an autonomous actor capable of making choices and trying out new things.

Suppression instead of self-reflection

A government has no natural mechanism for evaluating the success or failure of an initiative. In fact, public officials work assiduously to avoid such evaluations. It is human nature to desire authority without accountability. Government officials are eager to issue dictates, as long as they face no personal consequences when things go wrong. When an agency is ineffective in carrying out its mission, its leaders claim that the solution is to give them more power, and certainly not to fire the accountable officials.

In the United States, the national public health bureaucracy performed poorly during the pandemic. The advice to close schools was especially harmful. Testing was delayed by bureaucratic power struggles, and it was never implemented effectively to track and control the spread of Covid-19.

But the nature of government is that agencies do not engage in self-reflection. Incompetent officials are not replaced. Instead of identifying and correcting mistakes, officials tried to suppress dissent by branding as “disinformation” criticism that later proved
to be correct, for example Stanford professor Jay Bhattacharya’s warnings that lockdowns would harm children.

The market has a built-in mechanism for evaluating new experiments. If a business offering is attractive to consumers, then the business will earn profits. If the offering fails to please consumers, then the business will incur losses.

Subsidies are sticky

This brings us to the third mechanism of progress: evolution. Government programs that have become obsolete, or which never worked in the first place, continue to exist. There is no mechanism in place for stopping a program once…