Is It True that the State Produces Nothing?

There are different versions of a saying I just saw on Twitter: “The State can give you nothing, because it produces nothing.” The statement does not challenge anything fundamental I believe. On the contrary, it would seem to buttress some of my arguments. The problem, however, is that it is false.

The State certainly produces something in the economic sense, that is, goods and services that somebody is willing to pay for. The State may waste resources in its production, including by producing certain goods and services whose costs no consumer would be willing to pay. But many are willing to pay for the enforcement of the rule of law, which requires police and courts, as well as for national defense (which would be better named “territorial defense”). It is true that, given the inefficiencies of government production, people pay more in taxes for these and other public services, but this does not change the fact that there are goods and services that many are happy to consume even given their tax cost for them. Assuming there were no state, many if not most people would be willing to pay private producers (associations or for-profit companies) to produce some of the services they are now compelled to buy through taxes. And of course, if a state, on net, in some meaningful sense, destroys more value than it produces, anarchy would be the solution.

The reader intrigued by the last two sentences and who wishes to explore the economics of anarchy should find a few useful readings in my recent post “Politics, Anarchy: What We Know (Nearly for Sure).” There are many other books to read on this topic, including Anthony de Jasay’s Against Politics: On Government, Anarchy, and Order (Routledge, 1997). Believe me, the effort is worth it. (And effort there is, even if you are a professional economist and political philosopher.) Perhaps you won’t end up agreeing with all or with the main arguments for anarchy, but the worst that can happen is that you change your mind. There are worse things happening in the world.

Here is another illustration of what production is, taken from the private economy. In 1963, the federal government imposed tariffs on the imports of brandy and a couple of agricultural products. The tariffs became known as the “Chicken Tax” because they were retaliation for a European tariff on poultry. All these tariffs applied worldwide. The American automobile industry, which was starting to feel the heat of foreign competition, obtained the inclusion in the Chicken Tax of a 25% tariff on imported light trucks including pick-up trucks (see my EconLog post “Why the Chicken Crossed the Road,” March 30, 2018). The consequence, of course, is that the price of all light trucks, including domestically-produced ones, was pushed up toward 25%: that’s why the American automobile industry wanted it—to raise prices on the domestic market. Six decades later, the chicken tariff on light trucks still exists, which is one reason why many foreign producers such as Toyota and Honda established plants in the US to manufacture their pickup trucks. They thereby reduced the impact of the chicken tariff by incurring higher production costs here, which certainly means that prices are still higher than they would otherwise be. American purchasers of light trucks are still gouged by their own government, but saying that Ford, GM, or Stellantis produce nothing in America would be false. They just charge their customers a non-competitive price.

As formulated in the Twitter post I saw, the statement is literally false anyway. The state can give you something that it does not produce: it just has to take it from somebody else. Indeed, redistribution represents the largest part of contemporary government budgets. In a more general form, this is the main argument of Anthony de Jasay’s The State: the state governs, which, de Jasay argues, means nothing else than favoring some citizens to the detriment of other citizens.

Going back to my starting point, defending valid theories with bad ideas is problematic for at least two reasons. First, truth has a value of its own. When one incorporates false claims into a theory he believes in, he invalidates it or parts of it. Second, it is already difficult enough in our statist world to persuade our fellow humans of the validity of classical liberalism, libertarianism, or some shades of them, without using arguments that are false on their face and easy to debunk.