Freeman

ARTICLE

Blue Whales and Growth in Government

OCTOBER 01, 1981 by DWIGHT R. LEE

Dwight Lee is Associate Professor of Economics, Center for Study of Public Choice, Virginia Polytechnic Institute and State University.

The blue whale is being driven toward extinction and the federal government is spending far too much of our nation’s wealth. The connection between these two problems may not be immediately obvious. But if you believe that blue whales have been slaughtered excessively (and they have), then logic also compels you to see the need to limit the growth in government. Too many blue whales have been killed and the government has grown too large because both the blue whale and the government provide opportunities for some people to receive benefits by imposing costs on others.

From an initial population of approximately 200,000, it is estimated that fewer than 6,000 blue whales are still living. The costs of killing another blue whale include the benefits sacrificed by reducing their future availability still further. But even though all whalers would like to see more whales live to bear young and increase in size, each knows that the whale he does not harpoon today will probably be harpooned by someone else tomorrow. The whaler who harpoons now gets all of the benefits but suffers only a small share of the cost resulting from fewer whales in the future. Most of this cost is spread over others.

Of course each whaler also loses from the excessive harpooning of others. But this loss would only be greater to the individual whaler who reduced his own harvesting. The incentive is for each to continue killing whales as rapidly as possible even if this means the eventual extinction of a majestic species.

A very similar situation exists when special interest groups capture benefits from government spending. Many government programs convey benefits to specific groups by spreading costs over all taxpayers. Farm subsidies, Amtrak subsidies, urban development programs, and the Chrysler bailout are but a few examples. Federal spending on programs of this type has been increasing at an alarming rate. Programs which serve the primary purpose of simply transferring wealth from one group to another are taking approximately $350 billion of the Federal budget in fiscal 1981. This is more than the entire Federal budget in 1975.

All special interest groups may be aware of the tremendous burden that comes from rapidly enlarging the size of government. But each group also knows that passing up an opportunity to expand its favorite program will merely make it easier for other special interest groups to expand theirs. The motivation is for each to continue pressuring the government to spend more even if this means the eventual collapse of the economic productivity that supports all government spending. And there should be no mistake about it. Just as the blue whale can be driven to extinction by excessive harvesting so can our economy’s productivity be extinguished by excessive government.

There are two ways an individual can acquire wealth. The first way involves engaging in productive effort. By producing things that others value this effort benefits everyone. The other way to acquire wealth is to capture the wealth others produce by engaging in transfer activities. Transfer activity can be illegal as with theft, or legal as with lobbying government for preferential treatment. But in either case it directs otherwise productive effort into activities that create no new wealth. One of the most important functions of government has always been to encourage productive enterprises by penalizing the illegal transfer of wealth. In writing the U. S. Constitution our founding fathers also attempted to reduce opportunities for using government to legally transfer wealth from one group to another by limiting the scope of government. The desire was to establish an environment in which individuals could advance their well-being only through the creation of new wealth.

Unfortunately the constitutional limits on direct government involvement in economic affairs began breaking down in the late 19th century. At first the involvement was minor and only a few found using government to confiscate the wealth of others more profitable than producing wealth themselves. But once this confiscation started the return to productive effort was reduced. This increased the number who found the advantage in harvesting government favors at the expense of those who remained productive. This further reduced the return to productive enterprise thus diverting yet more people into transfer activities. As this destructive process continued even those who persisted in the creation of wealth found their productivity hampered by the need to protect their property against an increasingly grasping government.

This trend cannot long continue without threatening the well-being of all; the producers of wealth as well as those they support. When all ships are busy transporting valuable products the first one to become a pirate can do very well indeed. Butas more turn to piracy fewer find ad vantage in continuing to ship the goods. Unless strict sanctions are imposed against piracy the end result will be impoverished shippers and pirates alike as ocean transportation comes to a halt.

Those who argue that, if the blue whale is to be saved from eventual extinction, limits will have to be placed on their slaughter are correct. And for the same reason, if the productivity of our economy is to be saved from eventual collapse, limits will have to be placed on the growth in government. As important as it is to protect the blue whale, it is far more important to maintain our economic productivity. Destroy the economy’s productivity and you destroy the wealth that allows us to take our food, clothing and shelter for granted and worry about such things as the blue whale.

ASSOCIATED ISSUE

October 1981

ABOUT

DWIGHT R. LEE

Dwight R. Lee is the O’Neil Professor of Global Markets and Freedom in the Cox School of Business at Southern Methodist University.

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