The Inherent Incentives Against Economic Localism

One of the central ideas of Austrian economics is that local knowledge cannot be encapsulated and transported into a different situation; however, relevant information can be transported within the price system. This insight suggests that only individuals will have the best information regarding their lives, and that only towns will have the best information regarding how that town should be governed, and that states and countries will understand their situation far better than an international governing body. While information is best accessed by the unit that actually uses it, there are several incentives within government that lead to this reality being consistently overridden. The fundamental responsibility of the government is to protect against worst case scenarios. While many would argue for a more expansive view of the government’s role, this most basic role is held by almost everyone, letting any conclusions drawn from it happen with little resistance. Although a subset of the population recognizes that local governments, businesses, and individuals are best suited to access the information needed to make the right economic decision, the role of government as a protector against worst case scenarios often leads to homogenization of things that should be given local freedom. 

Government action will tend to regulate areas that should not be regulated, because examples of freedom being used poorly are far more mentally available than examples of it being used correctly. Situations where a town has an extremely poor education system, or when a business’s freedom is abused can be very simply and convincingly used to call for more stringent regulations. While there are ways to guard against these worst case scenarios without giving over the entire industry in programs to the national government, the litany of examples of abuse of freedom make it difficult to explain why the solution is not simply more nationalization. While our argument for more individual and local freedom is objectively true, it is more difficult to explain in a way that will gain traction with the general public. People are hungry for clear and obvious solutions, and localism and individualism need apologists. While liberty is the best solution, it often does not have the most vocal and energetic defenders.

The government simply does not face the same restrictions as business. Any business, if given the ability to expand with little immediate consequences would do so almost indefinitely. Every employee of every department of every government has a specific job to do, and that job could conceivably be done better with more resources. This means that unless there is some opposing force, expansion is the default for most governments in most situations. Sometimes that opposing force is a financial crisis or a constitution, but for the most part, there is a slow institutional drift towards control of a greater fraction of society. This makes it extremely difficult for the freedom of individuals or locales to remain stable for long, as without active energy against the encroachments of the state, they will in most situations fall under more intense regulation. The slow drift of government is as unmemorable as the examples of individual misuse of freedom are memorable. When one road is large and inviting in another is a hidden detour, it is not likely that people will take both roads with the same frequency.

Almost inherent laws of human cognition make central governments tend to grow and overpower more localized forms of control. While central governments are extremely useful, this tendency must be recognized, and actively fought against if a sustainable allotment of powers is to be maintained. If a central government could access all layers of information that individuals and smaller forms of government could, they would still not be able to respond to issues as effectively, as their operational methods are more standardized, simply by nature of them being larger. Additionally, large organizations have higher levels of management, and this can often result in vast levels of inefficiency. For the sake of freedom and efficiency, people should be suspicious whenever a government claims that it will solve problems with a centrally created solution. The world is full of ideological battles, but we must always be aware of this slow tug towards central control. Even evaluating from a perspective that values national strength overall, most countries would be stronger if individuals and local governments were given more freedom, as can be seen in America’s dominance over Europe in innovation. Unless a government has very clearly defined a limit, it will naturally expand, until resisted.