The Gardens of Democracy: A New American Story of Citizenship, the Economy, and the Role of Government by Eric Liu, Nick Hanauer Page A
Authors: Eric Liu, Nick Hanauer
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as a consequence of the actions of some of the participants. That is to say, it assumes that bad actors, those who do not respect other’s rights, can exist in isolation, and that their behavior will not affect the behavior of everyone else.
Modern systems thinking shows these assumptions to be false. Humans are not rational and calculating and only some are cooperative enough to respect other people’s rights. A significant part of any human population does not respect the rights of others and will act affirmatively, absent regulation, to subjugate others’ rights to their own. Moreover, the behavior of these selfish non-cooperators influences others and pushes them to a tipping point of wholesale distrust. As a result, in societies where there are few curbs on or consequences for bad behavior, cooperation collapses and soon so does the society.
This is why any societies that are truly libertarian are in various states of civil war, and why the most cooperative societies with activist governments are the only prosperous, stable, and secure societies on earth. Libertarianism is a luxury available only in communitarian societies. If it were anything more, then somewhere there would be a high-functioning libertarian society.
In the prevailing narrative of political economy—told by Democrats as well as Republicans—regulation destroys prosperity by limiting the ability of businesses to operate and create value. That this is hogwash becomes obvious if we allow ourselves to see the evidence around us. Seatbelt laws didn’t reduce the size of the auto industry; they increased it, as the safety and thus the marketability of driving increased. Food safety laws didn’t decrease the size of the food business; they increased it, as consumers came to trust mass providers of food.
Despite claims to the contrary, we see with our eyes that the more highly regulated countries are the more prosperous ones and that countries with little or no regulation are more impoverished. Does this mean regulation is intrinsically good, or that more is always better? No. The former Soviet Union is a case in point. And even in non-outlier cases like India, the burdens of complying with regulation can inhibit growth. But as a general matter, regulation is essential for prosperity in just the way that tending a garden is essential for its productivity.
The libertarian thesis of limited government depends, again, on a 19th-century notion that an economy or a society is a closed system, like a gas-powered car engine. If you take away gas, the car will go more slowly or less far. The system has decreasing returns. There is a zero-sum relationship between its elements. On such a story of an economy, it follows naturally that if there is more government regulation, there must be less business activity. If taxation increases, then economic growth must decrease.
In fact, our economy isn’t closed. It is open. The feedback loops aren’t negative. They are positive. The elements of the system are not in zero-sum relationship to one another. They are in symbiosis.
Zero-sum economic reasoning suffers from what we call the plants-and-animals fallacy. In nature, it would be folly to assert that the way to create more animals would be to limit plants. Plants nourish animals, which spread the seed and increase the number of plants that can now sustain a greater number of animals. Ecologically, more of one thing doesn’t mean less of another; in fact, it almost always means more. Relationships are not zero-sum; they are positive-sum. If you want more animals, you need more plants.
Limiting government to increase business makes no more sense than limiting plants to increase animals. Robust private enterprise requires robust state involvement and investment. This is not to say that big government is by definition effective government. In a non-equilibrium economy, the role of government is to eliminate harmful kinds of increasing returns, like speculation
Modern systems thinking shows these assumptions to be false. Humans are not rational and calculating and only some are cooperative enough to respect other people’s rights. A significant part of any human population does not respect the rights of others and will act affirmatively, absent regulation, to subjugate others’ rights to their own. Moreover, the behavior of these selfish non-cooperators influences others and pushes them to a tipping point of wholesale distrust. As a result, in societies where there are few curbs on or consequences for bad behavior, cooperation collapses and soon so does the society.
This is why any societies that are truly libertarian are in various states of civil war, and why the most cooperative societies with activist governments are the only prosperous, stable, and secure societies on earth. Libertarianism is a luxury available only in communitarian societies. If it were anything more, then somewhere there would be a high-functioning libertarian society.
In the prevailing narrative of political economy—told by Democrats as well as Republicans—regulation destroys prosperity by limiting the ability of businesses to operate and create value. That this is hogwash becomes obvious if we allow ourselves to see the evidence around us. Seatbelt laws didn’t reduce the size of the auto industry; they increased it, as the safety and thus the marketability of driving increased. Food safety laws didn’t decrease the size of the food business; they increased it, as consumers came to trust mass providers of food.
Despite claims to the contrary, we see with our eyes that the more highly regulated countries are the more prosperous ones and that countries with little or no regulation are more impoverished. Does this mean regulation is intrinsically good, or that more is always better? No. The former Soviet Union is a case in point. And even in non-outlier cases like India, the burdens of complying with regulation can inhibit growth. But as a general matter, regulation is essential for prosperity in just the way that tending a garden is essential for its productivity.
The libertarian thesis of limited government depends, again, on a 19th-century notion that an economy or a society is a closed system, like a gas-powered car engine. If you take away gas, the car will go more slowly or less far. The system has decreasing returns. There is a zero-sum relationship between its elements. On such a story of an economy, it follows naturally that if there is more government regulation, there must be less business activity. If taxation increases, then economic growth must decrease.
In fact, our economy isn’t closed. It is open. The feedback loops aren’t negative. They are positive. The elements of the system are not in zero-sum relationship to one another. They are in symbiosis.
Zero-sum economic reasoning suffers from what we call the plants-and-animals fallacy. In nature, it would be folly to assert that the way to create more animals would be to limit plants. Plants nourish animals, which spread the seed and increase the number of plants that can now sustain a greater number of animals. Ecologically, more of one thing doesn’t mean less of another; in fact, it almost always means more. Relationships are not zero-sum; they are positive-sum. If you want more animals, you need more plants.
Limiting government to increase business makes no more sense than limiting plants to increase animals. Robust private enterprise requires robust state involvement and investment. This is not to say that big government is by definition effective government. In a non-equilibrium economy, the role of government is to eliminate harmful kinds of increasing returns, like speculation
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