In my previous posts, I came to this conclusion:

We need government because it is in everybody’s best interest to have an institution that handles the situations where having everybody acting in their own best interest doesn’t work.

With this in mind I suggest that four areas are definitely in the role of government:

• Public Safety – On the national level, this is national defense.  On the local level, this applies to police and fire departments.  On a broader level this would include building inspections and sanitation inspections.  It would be totally impractical before stepping into any building for each person to make an individual inspection to verify that it is safe.  We rely on government for this function to protect us all.
• Infrastructure – We can’t individually build each road we travel on.  We rely on government to provide the core infrastructure that we all share.  This includes roads, public transportation, and utilities.  Government does not need to provide these services directly.  It can contract them out to private companies.  We all benefit from a good infrastructure, even from the parts we don’t use directly.  I may not ride a certain subway line, but I benefit when, for example, the person who cooks my meals in a restaurant can get to the restaurant because of the subway.
• Public Investment and Amenities -I group these together as it is often difficult to separate them out.  A public park is an amenity but it also is an investment as it makes the community more attractive to others who may move to or invest in the community.  The chief form of public investment is education.  I benefit not just from the education of my own children but in the education of all children.  To qualify as a public amenity/investment is should be available to most people and it should be recognized as desirable through a majority vote.
• Enabling a free market – Society benefits whenever there is a voluntary transaction, where both parties believe they will be better off from the transaction. Government does have a role in enabling this free market.  The government needs to provide a adjudication system to settle disputes.  The government can regulate that the transaction must be framed in a matter where both sides understand it and that there is no deception.  The truth in lending law is an example of how government can help make the transaction clearer.   The government can also protect us from involuntary transactions.   When a factory pollutes, the factory gets the reward and the neighborhood bears the cost.  This “externality” is an involuntary transaction.

The level of government for each of these services should be the level that affects most people using the service.  It is appropriate for the federal government to fund the interstate highway system.  If is not appropriate for the federal government to fund local roads.

There is one other role of government I have not yet discussed:  helping people who cannot help themselves.  That will be the topic of my next blog entry