Review of Austrian Economics - The Ludwig von Mises Institute

Higgs: Analysis of the Growth of Government 25
What actually fills the black box are the Two Big Collectivist Assumptions:
government officials know what needs to be done to promote
the public interest, and they act on the basis of that knowledge.
Apart from the implausibility of the theory because it has nothing
to say about the personal incentives and constraints of actual decision
makers, the theory does not stack up empirically. A reasonable survey
of how the government has grown—that is, an accounting of what it
has come to do more often and what it has undertaken now and then
to do for the first time—must conclude that only a small proportion
of all government activities has anything to do with externalities. One
need only examine an organization chart for the government, leaf
through the Federal Register, or scrutinize U.S. Statutes at Large,
not to mention the detailed budget documents. Evidence of the alleged
connection rarely appears. Studies that have sought to find a
relation between the growth of government and proxies for growing
externality problems (e.g., population density, urbanization, ratio of
manufacturing to agricultural activities) have found little or nothing
(Borcherding 1977, p. 53; 1985, p. 368; Mueller 1987, p. 119).
The theory of government as fixer of externalities is often quite
backwards. Governments themselves compose "the prototypical sector
in which decision makers do not take accurate account of all the
costs as well as all the benefits of each activity" (Yeager 1983, p. 125).
In reality, the government is more likely to cause a negative externality
than to reduce one. Since the recent revelations in Eastern
Europe and the Soviet Union, everyone has become aware of the vast
environmental destruction wreaked by government officials there,
but one need not rely on these egregious cases to establish the point.
According to studies of the United States cited by James Bennett and
Manuel Johnson (1980, pp. 133-34),
federal government agencies emit huge quantities of pollutants into
the water and atmosphere. The U.S. Department of Defense alone
discharges over 335 million gallons of human waste per day, of which
30 percent received secondary treatment or less. The Tennessee
Valley Authority (TVA) is the country's largest sulfur dioxide polluter,
accounting for 38 percent of total sulfur emissions in the Southeast
U.S., and its compliance record with pollution laws is only 16 percent
as compared to 74 percent for all utilities nationally.
Recent press reports tell us, and government spokesmen such as
Energy Secretary James Watkins admit (Wall Street Journal, November
27, 1989), that the government's plants for manufacturing nuclear
materials have been poisoning the surrounding air, land, and
water for decades while hiding behind their top-secret national security
classification. The Energy Department forecasts that the future