Who Controls Government?

Someone wrote:

But you probably have not heard much about a government controlled by its customers. Economic historian Frederic Lane laid the basis for a new way of understanding where the control of government lies in some of his lucid essays on the economic consequences of violence discussed earlier. Thinking about government as an economic unit that sells protection led Lane to analyze the control of government in economic rather than political terms. In this view there are three basic alternatives in the control of government, each of which entails a fundamentally different set of incentives: proprietors, employees, and customers.

It is easy to characterize the incentives that prevail for governments controlled by their employees. They would be similar incentives in other employee-controlled organizations. First and foremost, employee-run organizations tend to favor any policy that increases employment and oppose measures which reduce jobs. As Lane put it, “When employees as a whole controlled, they had little interest in minimizing the amounts exacted for protection and none in minimizing that large part of costs represented by labor costs, by their own salaries. Maximizing size was more to their taste also.”

A government controlled by its employees would seldom have incentives to either reduce the costs of government or the price charged to their customers. However, where conditions impose strong price resistance, in the form of opposition to higher taxes, governments controlled by employees would be more likely to let their revenues fall below their outlays than to cut their outlays. In other words, their incentives imply that they may be inclined toward chronic deficits, as governments controlled by proprietors would not be.

I replied:

 I saw this where I work. We had to comply with new federal regulations which were billed as protecting consumers. Similar laws had already been in effect in several states, and they were usually administered in a straightforward and simple way. But the federal program was full of fees and complex paperwork that the states never needed. I soon saw that protecting consumers was just a side effect; justifying the jobs of bureaucrats was the main purpose.

They continued:

But wait. You may be saying that in most jurisdictions there are many more voters than there are persons on the government payroll. How could it be possible for employees to dominate under such conditions? The welfare state emerged to answer exactly this quandary. Since there were not otherwise enough employees to create a working majority, increasing numbers of voters were effectively put on the payroll to receive transfer payments of all kinds. In effect, the recipients of transfer payments and subsidies became pseudo government employees who were able to dispense with the bother of reporting every day to work. It was a result dictated by the megapolitical logic of the industrial age.

My comments:

I believe FDR was quite deliberate and open about this in the way he structured the Social Security program.


When you think closely about the terms under which industrial democracies have operated, it is more logical to treat them as a form of government controlled by their employees. Thinking of mass democracy as government controlled by its employees helps explain the difficulty of changing government policy. Government in many respects appears to be run for the benefit of employees. For example, government schools in most democratic countries seem to malfunction chronically and without remedy. If customers truly were in the driver’s seat, they would find it easier to set new policy directions.

My comment:

An independent school district shows this principle in its purest form. The school board elections are on a different day than any other elections, so that only the highly motivated — teachers and their families — turn out to vote.

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