Grace Notes

Or diminishing returns. Assistant Village Idiot has a great post about capitalism. One of his points really caught my attention, and seems obvious in retrospect. In a relatively free market, government intervention can focus on items which offer a relatively high return for a relatively low cost. Comparing a state of nature (nasty, brutish, and short) to a civilized society, we can see that the initial actions of the state have a very high payoff indeed.

However, diminishing returns applies here as well. Increasing interventions come at, usually, increasing costs and have, usually, decreasing benefits. So just as we rightly limit (well, up until recently anyway, but that’s another story) the amount of leverage a bank is allowed to have, it would make sense to limit the amount of intervention the government was allowed.

The idea would be to set down some rules to say that even if some program or policy might have some benefit that certain things were just not the state’s business. This is not a new idea. James Madison thought of it over 200 years ago. Unfortunately, this and other reasons for supporting this idea of a government of limited and enumerated powers have been lost or forgotten by a great many. We may see a time when government action crosses over the line where the costs exceed the benefits.

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