On a systemic level, what advantages does government provide to solving these various problems that private individuals couldn't?
Private action in a free market suffers from numerous issues: free rider problems, collective action problems, problems involving positive and negative externalities, problems involving information asymmetries, etc. These are well-developed areas of economics that libertarian-minded policy folks tend to ignore, but which simply cannot be ignored. Most government programs, from environmental protection (negative externalities) to Social Security (irrational hyperbolic discounting), are rooted in one of these economic phenomena.
VC money more often comes from highly successful past ventures, not grandma's retirement savings plan (which are terrible investments anyway)
See the sibling comment about private equity fundraising after changes in ERISA. Some VC money does come from people taking money from past ventures and putting them into new ones. But the bread and butter of VC involves raising money from limited partners, specifically pension funds, mutual funds, etc. The other major sources tend to be endowments, banks, insurance companies, and sovereign wealth funds.
Getting the government to do the right things and do them well is itself a public goods problem, and one that as far as I know is as-yet unsolved. All of those "numerous issues" apply to public provision of goods at least as well as they apply to private provision. Your list of objections to private action ("free rider problems, collective action problems, problems involving positive and negative externalities, problems involving information asymmetries") would only constitute evidence supporting government action IF we had access to bureaucrat-gods - government workers who have perfect information, are perfectly benevolent, are motivated to do the right thing, never do anything that produces unanticipated negative consequences.
Since bureaucrat-gods don't exist, you need to at least argue that the problems of externalities and such will be lessened by public action. But I don't believe that argument has been made - it's usually just assumed away.
You know whenever I see spats like this I feel compelled to point that governments cause such profound economic distortion that we really can't speak of what a 'free' society would be actually be like - it's so far removed from anything humanity has known in a very long time.
We're all (more or less) coders here, right? What happens when we tinker with a big, complex, undocumented system that nobody really understands? Government as a concept isn't so much tinkering as it is a blindfolded child refactoring by typing with his elbows.
The economy is itself a distortion caused by government. In the state of nature there are no economies because as soon as you accumulate a little capital someone clubs you on the head and takes it away. This is why most libertarians are of the statist variety. They talk about the economic distortion caused by government, but what they mean is the distortion caused by the parts of government they don't like (I.e. besides the police, courts, etc). This is a perfectly fine position, but is susceptible to the economic arguments I listed.
As an economist I assure you that if I noted a correlation between head clubbing and capital accumulation I would take offensive and defensive steps to protect my head. In fact most would, leading to a nice little equilibrium where head clubbing is not a worthwhile strategy. They may even form a protection racket, and call it "Police".
Economics is not the study of capital, it's the study of trade - which incidentally is so natural we even observe it in the animal kingdom.
Few libertarians would deny the need for at least occasional collaboration, but that is not the same as government. Governments are universally wasteful of resources, susceptible to corruption, resistant to changing needs, and have a nasty habit of claiming absolute moral authority on things...which in turn has a nasty tendency to start wars. It is, objectively, a limiting and archaic system that does us all a great deal of damage.
As an economist I assure you that if I noted a correlation between head clubbing and capital accumulation I would take offensive and defensive steps to protect my head.
With what? You're an economist, not an MMA fighter.
In fact most would, leading to a nice little equilibrium where head clubbing is not a worthwhile strategy. They may even form a protection racket, and call it "Police".
Right, so the nerds get together and beat down the MMA fighters and create laws against "murder" and "theft" and pretty soon you've got government. We're living in your nice little equilibrium.
The beauty of this protection racket equilibrium is that everyone gets exactly the amount of protection they can afford. This leads to rapid and efficient re-allocation of resources (via the mafia/police) when inefficient organizations cannot meet their obligations.
Comments
Private action in a free market suffers from numerous issues: free rider problems, collective action problems, problems involving positive and negative externalities, problems involving information asymmetries, etc. These are well-developed areas of economics that libertarian-minded policy folks tend to ignore, but which simply cannot be ignored. Most government programs, from environmental protection (negative externalities) to Social Security (irrational hyperbolic discounting), are rooted in one of these economic phenomena.
See the sibling comment about private equity fundraising after changes in ERISA. Some VC money does come from people taking money from past ventures and putting them into new ones. But the bread and butter of VC involves raising money from limited partners, specifically pension funds, mutual funds, etc. The other major sources tend to be endowments, banks, insurance companies, and sovereign wealth funds.
See: http://fisher.osu.edu/supplements/10/12707/LPReturnsJanuary2... (p. 1).
Getting the government to do the right things and do them well is itself a public goods problem, and one that as far as I know is as-yet unsolved. All of those "numerous issues" apply to public provision of goods at least as well as they apply to private provision. Your list of objections to private action ("free rider problems, collective action problems, problems involving positive and negative externalities, problems involving information asymmetries") would only constitute evidence supporting government action IF we had access to bureaucrat-gods - government workers who have perfect information, are perfectly benevolent, are motivated to do the right thing, never do anything that produces unanticipated negative consequences.
Since bureaucrat-gods don't exist, you need to at least argue that the problems of externalities and such will be lessened by public action. But I don't believe that argument has been made - it's usually just assumed away.
You know whenever I see spats like this I feel compelled to point that governments cause such profound economic distortion that we really can't speak of what a 'free' society would be actually be like - it's so far removed from anything humanity has known in a very long time.
We're all (more or less) coders here, right? What happens when we tinker with a big, complex, undocumented system that nobody really understands? Government as a concept isn't so much tinkering as it is a blindfolded child refactoring by typing with his elbows.
The economy is itself a distortion caused by government. In the state of nature there are no economies because as soon as you accumulate a little capital someone clubs you on the head and takes it away. This is why most libertarians are of the statist variety. They talk about the economic distortion caused by government, but what they mean is the distortion caused by the parts of government they don't like (I.e. besides the police, courts, etc). This is a perfectly fine position, but is susceptible to the economic arguments I listed.
As an economist I assure you that if I noted a correlation between head clubbing and capital accumulation I would take offensive and defensive steps to protect my head. In fact most would, leading to a nice little equilibrium where head clubbing is not a worthwhile strategy. They may even form a protection racket, and call it "Police".
Economics is not the study of capital, it's the study of trade - which incidentally is so natural we even observe it in the animal kingdom.
Few libertarians would deny the need for at least occasional collaboration, but that is not the same as government. Governments are universally wasteful of resources, susceptible to corruption, resistant to changing needs, and have a nasty habit of claiming absolute moral authority on things...which in turn has a nasty tendency to start wars. It is, objectively, a limiting and archaic system that does us all a great deal of damage.
With what? You're an economist, not an MMA fighter.
Right, so the nerds get together and beat down the MMA fighters and create laws against "murder" and "theft" and pretty soon you've got government. We're living in your nice little equilibrium.
A) you don't know that, B) everyone else would be an MMA fighter?
Premise construction
Magic
Conclusion
I can't even accuse you basing your argument on a logical fallacy, because there isn't an argument present.
The beauty of this protection racket equilibrium is that everyone gets exactly the amount of protection they can afford. This leads to rapid and efficient re-allocation of resources (via the mafia/police) when inefficient organizations cannot meet their obligations.