Localism

Something Nassim Taleb said in his EconTalk podcast reminded of a point Daniel Hannan made in his book, The New Road to Serfdom that I wrote about it here.

Taleb makes the point that local government is more effective than national government and one reason is that at the local level there is some skin in the game in the form of shame. That is, if you take advantage of your neighbors, they’ll frown upon it. But, at the national level, government is more about taking skin out of the game through bail-outs and insurance. Here is Taleb:

And government can be a local, neighborhood union. And then let’s figure it out from the history of countries that have been very successful, like Switzerland or Sweden, places like that. That people making the decisions are usually embedded in a community. And their skin in the game is typically shame. Because they are socialized by the community. Their skin in the game is shame. Whatever government official in Washington can make a mistake, and it’s a spreadsheet looking at him. It’s not someone in church on Sunday looking at him and making him feel shame. And that’s where the main difference is.

So let me go back to the point about government. It’s true, at the local, local level, there are some natural incentives. But at the national level, say in the United States, a lot of what government does is to remove skin in the game–bailouts, insurance policies, do-overs, ad hoc interventions.

Here’s Hannan’s version:

…localism under-girds the notion of responsibility: our responsibility to support ourselves if we can, and our responsibility to those around us–not an abstract category of the “the underprivileged,” but the visible neighbors–who, for whatever reason, cannot support themselves.  No longer is this obligation discharged when we have paid our taxes.  Localism, in short, makes us better citizens.

Update: The title of the post made me think of an inconsistency. The folks who advocate ‘buying local’ rarely seem to advocate ‘governing local’. Perhaps they should.

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