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  • EMERGENT RESEARCH is focused on better understanding the small business sector of the US and global economy.

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  • The authors are Steve King and Carolyn Ockels. Steve and Carolyn are partners at Emergent Research and Senior Fellows at the Society for New Communications Research. Carolyn is leading the coworking study and Steve is a member of the project team.

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« A Strong Middle Class - Biden Led Task Force Includes Focus on Small Business | Main | Fitting Regulation to the Size of the Business »

February 02, 2009

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Timothy

Oh boy. I'm a fan of small governments. Governments can't do anything to help during a recession. They try, and try again. And fail. Sometimes it just hurts the economy.

The economy, at least in the US, goes in cycles. About every 20 or so years it dips and we enter a recession. Which is actually normal and can be considered healthy. When this happens everyone panics and wants the government to intervene. First of all, why is it the government's responsibility? In my mind most people do not truly understand the role of the government. Anyway, people demand action, so the government acts. Stimuluses go out, business regulations are enacted. Etc, etc.

Then, the economy boosts back up (by itself). And people eventually forget about the recession. Then, with all of the left-over policies, businesses are held back and can't act as a normal free market. So they demand action. Again. And the government listens and slowly removes such policies.

This tends to cause the economy to do really well. The economy does the best when the government does not hinder business transactions. Eventually, though, some people take risky actions. This is pretty normal considering that the economy is doing really well and they consider the risk much smaller than it actually is. And when their transactions fail and the consequences build we enter the next recession.

Long story short, when the government intervenes more harm is caused than good. There is no stopping recessions. And it is crazy to assume that the government can fix all of our problems.

This may sound like a long rant, but it is actually rooted in empirical evidence. Governments are necessary, but not for these reasons. We need armies to protect us. We need (certain, not all) laws to protect us. We need lighthouses, street lights, and other goods and services that nobody would be willing to pay for otherwise.

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