Government and the Economy

Matt Yglesias points discusses here one example of one of the oddest things about our current political discourse.  Matt's specifically discusses how in contemporary discussion of the economy, monetary policy is somehow treated as if it isn't a "government role" in the economy.  Given that the Federal Reserve is a government agency and the Federal Reserve determines monetary policy, monetary policy is most certainly a government policy. 

I think this is related to another odd thing about our discourse, namely the tendency to treat the government as some sort of alien entity which should normally be outside the economy, but which sometimes interferes with the economy.  This is nonsense.   When people form a government as a means to gain security (Hobbs anyone) the government is providing a service of some substantial value and is therefore part of the economy.  It can provide that service and charge a small part of the market value of that service or it could charge the full market value of that service, but it is an actor in the economy.  It does not, in any meaningful sense, "interfere" with the economy, it just sets pricies. 

It has been the general experience through history and around the world for the government to expand the services it provides.  Today in addition to the basic security that governments are created to provide, governments typically also provide the benefits of risk sharing via incorporation, copyright protection, guaranteed sole use of part of the electromagnetic spectrum, and a host of other services as well.  Note that none of the services in that list are among the things objectted to by conservatives.  This is true no matter to what extent these services involve government intrusion into your life (consider for example the various inconveneinces that copyright enforcement makes upon our lives.  Can I legally transfer my music CDs to my MP3 player?).  The only intrusion that conservatives object to with regard to these services is when government expects some compensation in return for providing them.  The central message of conservative philosophy is that these services should be provided, at least to the already wealthy and well connected, free of charge and with absolutely no strings attached.