The challenge of governing

It seems to me that politicians are so focussed on winning elections that they never spare a thought about what they need to do when they finally seize the levers of power. Boris Johnson seems particularly deficient in this regard, but he is largely following on a tradition that goes back at least as far as Tony Blair in 1997. Blair more or less admits in his autobiography that he was hopelessly unprepared when he finally walked into Number 10.

Governments can do things that other entities cannot. They have a monopoly on the use of power. This gives them the right to deploy national resources however they choose. It is impossible for the individual members of a society to pay for an army, or even flood defences, however much they may wish to be defended against enemies or water. A government can simply cut through this thicket of transaction costs. In so many ways, governments can make collective decisions for the benefit of citizens.

They can head off the tendency for capital to accumulate in the hands of fewer and fewer capitalists. They can hold back the inevitable. But they need to be willing to set rules and enforce them, certainly in the field of enforcing of contracts, but also in managing all sorts of property rights, including the environment. Governments can avert the tragedy of the commons.

Under highly restrictive assumptions, a free market system can approach Pareto efficiency: allocation of resources such that any change will result in at least one member of society becoming poorer. Real societies are a long way from this, but governments can guide society in the right direction. They can at least take an active role in compensating those who would otherwise lose out when policies are enacted that will raise the productivity of society. For example, a free trade policy will harm some sectors, but as long as those sectors which will be hurt can be identified, they can be compensated.

Of course, targeting this compensation is not the easiest thing, but from a political point of view it is essential to at be honest about being willing to try. The tragic thing is that parties hate to redistribute wealth in the direction of those who are not their natural supporters. A left wing party hardly wants to cut the highest tax rate to compensate bosses who lose from a strengthening of legislation protecting labour unions.

Oh, politics is not easy, but the present lot seem to be barely trying.