Tuesday, October 26, 2010

Small Government, What Does It Mean?

Small government is a very important idea in American politics.  I'll confess it's an idea that I don't much care for since I believe it provides no meaningful information in its most common conceptions and is based on a poor understanding of how social institutions operate, I prefer sector by sector breakdowns by percentage of GDP and then simply asking if we're using the correct institutions to provide these things or are the institutions we're using inefficient (so for example, we could ask if we're providing enough poor relief, if not, if the mix of private, public, government, and other institutions is supplying the right mix of resources and then trying to get the expenditure right as a % of GDP; I think it's misleading to worry if this aid is being supplied by private companies, non-profits, organizations such as the Catholic Church, or government, it's which does it best that matters).

Still, I realize that this is an important concept and needs some exploration.  When people talk about small government my observation is that they in fact mean several different things by the term, several of them contradictory.  Some of these distinctions I do find meaningful, it's the overall concept that I find problematic.

  1. The most common concept of government size is how much government is spending as a % of GDP.  It's easy, clear, and marketable.  It's also entirely meaningless.  There's a big difference between government spending that is transfer payments and government spending that is leading to employment by the government or the acquisition of capital by the government.  Government spending is also dependent on the basket of goods demanded by the populace, in wartime conditions for instance government spending as % of GDP will soar without necessarily leading to long term social and economic changes as a result of this spending (it may, but there are better places to look for this than share of GDP).  While there are some academic cases where this may be a useful value for large N studies, as far as actual policymaking is concerned there is always a better, and almost as easy, way of conceiving of the government's size than headline GDP.
  2. The second most common way I see size of government used is as a form of shorthand for arguments for decentralization.  This is a perfectly sensible critique, one I rarely agree with but entirely respect.  It is also somewhat contradictory with the first concept of government size since decentralized government is usually more expensive since it tends to replicate necessary functions across multiple jurisdictions that could instead be centralized.  This has its benefits and drawbacks.  I tend to feel that in many cases we're better off more centralized since it is more important to ease factor mobility (or in less academic terms, make it easy for someone to pick up and move and possibly start up a new business without running into unexpected differences in things like business laws, health insurance, government services, etc.) than it is to protect local differences but acknowledge that on this factor the arguments are equally strong on both sides and this is solely a matter of preference and uncertain projections of future conditions. (This subject may be worth a full post on later)
  3. Another, somewhat less frequent way of conceiving of government size is to look at the government workforce, and to a lesser extent, government capital holdings.  I don't have strong opinions on this subject but I do see a lot of sense in conceiving of government size in the terms of people employed and government owned land and capital.  There are sensible arguments to be made that we don't want too much of our labor force to be government employees.  This can also contradict #2, shrinking the government workforce can often be achieved by consolidating jurisdictions and unifying and streamlining agencies. [Governments expenditures less entitlements is another, and better, way of looking at this.  I see number of government employees separated out a lot rhetorically so thought the messier conception initially given deserved first mention since this is the usual way it comes up]
  4. Government size can also be conceived of as its ability to compel behavior.  This is hard to quantify but is basically the degree to which we adapt our behavior to conform to government mandates.  This can be business regulations, actions not taken due to fear of government reprisal (smoking pot, gay people getting married), number of people imprisoned, burden of complying with government mandated activities (auto registration, taxes), etc.  This also frequently contradicts conception 2, since more decentralized government is more likely to lead to additional regulatory burden (like replication of documents, need for multiple points of information gathering where a more centralized system could update across multiple agencies and jurisdictions).  The size and strength of the military was also historically thought of this way, though that is currently unfashionable.
  5. There are of course other ways of conceiving of the size of government but most of these are marginal and more for academic purposes.  Counting the number of government agencies, or departments, cabinet positions, etc. all have their purposes but aren't terribly enlightening.
The main point I'm trying to get across is that while virtually everyone claims they want a small government, from a Tea Partier to the stoned kid cutting class to protest the WTO, there is little agreement over what is meant.  In many cases, people hold entirely contradictory ideas, like wanting to reduce the government workforce while giving more local control, which will inevitably expand government employees, and likely regulatory burden, due to simple duplication of duties and regulations (which isn't to say that someone might want to do both separately while realizing decentralization will increase government employment, but this is the exception).  So while small government is a great slogan for electioneering it's also one that doesn't give a meaningful mandate or policy response, since you don't necessarily know what voters want when they shout this.  To use my local Tea Party chapter blog as an example, they seemed to be rather confused why a Democrat like Cuomo would be so favorable to small government efforts like consolidating small jurisdictions to eliminate government waste and redundancies.  Of course, from a different perspective this was a centralizing action and could as easily be called big government.  The entire concept of small government is much more easily used if decentralization is treated as an entirely separate issue, though I am far more used to seeing it mixed in with other uses of the concept of government size.

A secondary point is that I don't really think entitlement payments are meaningful when discussing government size.  They have nothing to do with the scope or power of the government nor do they effect the relative powers of federal vs. local government.  Since the government is obligated to pay these out it can't use existing payments to buy votes nor can it meaningfully withhold them to increase its power.  Overseeing these funds aren't particularly large as drivers of direct government employment (except the VA which is a special case) so don't much impact other measures of the size of government.  Entitlements are best thought of as an entirely separate area that doesn't have a meaningful impact on the size of government since they are simply funds that pass through government with little overhead.  The big difference between these expenditures and other expenditures is the government has no discretion over them and doesn't actually spend the funds, any more than your insurance company spends its money when paying you a claim.  It's a liability but one so tightly bounded by contract that it provides no meaningful power.  If you're still doubting this, think if it would be meaningfully different if we instead gave this portion of our taxes to the Catholic Church or a private for profit company for later distribution.  While I can't say there would be no differences, I don't think there would be many.  A separate discussion can of course be had specific to entitlements, and should, but this should not get complicated by discussions of government size or power that are not relevant to the subject.

[Edit: An overview of the academic literature on the subject is available at the St. Louis Fed  This unsurprisingly differs from what I said above.  I think separating out transfers are important mostly because transfers do little to increase the power or influence of government and should be separated out from the concepts of power and influence that seem to be behind the anxiety people feel to a large and strong government.  Conflating these issues, as small government rhetoric always does, just confuses the situation and makes having a rational conversation about either government size and power or entitlements impossible.]


  1. Great post, although one I worry might get too long a response from me.

    Another way of describing "small government," the one I would use is this: A scope of government that is cultivated using both fertilizer and shears. I don't have a problem with government doing things that 1) The majority would like to see done, 2) the government does better than alternative practitioners and 3) the government measurably accomplishes.

    When I speak of myself as a "small government" proponent it is partly because I am running out of meaningful terms with which to describe my philosophy. "Conservative," if it means something, no longer means what it did when I called myself conservative and "Republican" now means "slavering, mushroom-brained and whiney."

    But I still think that government should be grown and trimmed according to new needs, the reprioritization of old needs and experience. My sense of things is that "progressives" generally want to add new projects without much thought for whether the old initiatives remain necessary, productive and useful. "Conservatives" claim to desire dismantled government without regard to whether some functions are useful and successful. I would rather see a more analytical government which takes on new, thought-out roles and discards failed, inappropriate or obsolete functions. Maybe I should call my ideal government "steady state" rather than small but, dagnabit, it's already hard enough for me to express what I'm for.

  2. Doug,

    I'd agree with all that. I think in my bipartisan, utopian, fantasyland we'd have the Republicans clamoring to cut old programs that have become outdated and Democrats always proposing new necessary programs and after a knock down drag out fight have the two sides agree to a compromise where the old program gets cut and the new program gets instituted.

    It's like all those bad novels where haggling ends up at exactly the mid point between the initial bid and ask price. Doesn't ever happen in reality, but it would be nice. We can dream.