The NZ Initiative's Rose Patterson argues the economy and society are built by people, not by governments

The government’s job is not to teach the grass to grow, but to get the damn rocks off the lawn. Image sourced from Shutterstock.com

By Rose Patterson*

In two weeks the New Zealand Initiative releases its centerpiece report on economic growth.

It may seem counterintuitive, but the researchers here at the Initiative don’t actually think it’s the government’s job to grow the economy.

Yet when many people think about economic growth, they conjure up an image of economists pulling policy levers to force it on people.

Au contraire. Most economists, and pro-market liberals in particular, do not think along these lines at all. The government’s job is not to teach the grass to grow, but to get the damn rocks off the lawn.

In other words, the only job of a government in the economy should be to remove barriers (usually put in place by governments of the past) to allow people to thrive, live their lives, and pursue their own objectives. Some of those objectives will be economic in nature. But most people would agree there is more to life than economic pursuit.

Political parties in power want people to think that it is the government that builds the economy. Take the opening line of Prime Minister John Key’s State of the Nation speech this year. “We are making great strides towards building a stronger, more prosperous country.”

Politicians (all of them, not just John Key of course) love to tell you they are building the economy for you. They want you to attribute greater prosperity to their being in power, so they get your vote next time around.

But actually, the economy is just the sum total of the activities of people and businesses exchanging goods and services with one another.

The verb ‘to grow’ was once an intransitive verb, meaning that it doesn’t take an object. Over time, people have started using it as a transitive verb, which implies someone makes something grow.

To illustrate, consider these two sentences, the former uses ‘grow’ as an intransitive verb (its correct use), and the latter as an transitive verb (the way politicians use it with the object ‘economy’).

The grass grows. Let’s grow the grass.

How about, again, let’s just get the damn rocks off the lawn so we can allow the grass to grow. The change in the use of the world ‘grow’ illustrates an attitude change in the populace that economy is done by design by an omniscient, omnipotent, omnibenevolent government.

If we take the more classical liberal view that it is not the government’s job to ‘grow’ or design the economy from on high, and that plays out in reality, then growth will resume its status as a verb that needs no object. Economic growth will happen naturally.

This is because people have different objectives. For many people, bringing in more money is one of their life objectives, because it helps them pursue other goals, whatever they might be. The only real way to earn more money is by providing more value. This is not necessarily about pushing your nose harder to the grindstone, but thinking about smarter ways to do your work and provide benefits to other people in the world using fewer resources. Or, you might wisely consider what skills are in demand in the world and work on developing those skills.

Other people will be content with a certain level of income and after this point will divert their energy elsewhere, perhaps into community causes, hobbies, or more time with the family. Everyone has a different point at which more money doesn’t equate to more value in their lives.

And some would love to have more money, but weigh that up against the time taken away from raising their families or other activities. They make that trade off and only people can decide for themselves what is right for them.Yes, people don’t always make good life choices and decisions. But on balance, people are far better at knowing what is best for them than government is.The government cannot possibly know the individual situations, dreams, and values of each and every one of us.

Human nature means that many people will choose to add more value to the world to earn more money. The upshot of this is economic growth.

That’s the outcome. It’s not by design. Economy and society is built by people, not by government.

Ivan Snook, a very left-wing education thinker, recently wrote that education shouldn’t be there to serve a national economy. I actually couldn’t agree more. Education should be there to serve each child, to give them the skills they will need in life to enable them to pursue their own objectives and flourish in their own ways. Snook says that literacy and numeracy are “important but they are merely requirements for education not education itself”. Totally agree.

Getting these building blocks for further education right in the primary school is of critical importance if today’s children are going to grow up to have the choices that will allow them to pursue their own objectives in life. Economic growth is the consequence, not the goal.

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*Rose Patterson is a Research Fellow at The New Zealand Initiative, a public policy think tank.

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24 Comments

Most economists, and pro-market liberals in particular, do not think along these lines at all. The government’s job is not to teach the grass to grow, but to get the damn rocks off the lawn."

Which is why the modern world is in such deep crap.

The governments job is actually 
(1) to stop someone stealing your lawn when you're removing or removed the rocks
(2) making sure someone else isn't dumping their rocks on your lawn
(3) to keep independant record of just whose lawn is whose it is before enforcing (1) or (2)

The problems we face are from governments trying to control lawns, run lawns, clear rocks, and steal everyones lawns and rocks for themselves (and making others clear rocks for them by legal statute).

And we even have people like Gareth Morgan saying things like:
The government needs a cut of your grass to operate so you should give them ownership of your lawn-land for the privilege of owning your lawn, because then that would work better.  (despite the obvious, that it will cause difficult as we all lose land for our lawn, and have to clear rocks on all of it)

Not seeing how your position is different from Rose's.  You seem simply to be providing different metaphors for the same concept:  Government should enforce, protect and not itself interfere with private property rights. 
 
Totally agree.

Governments love to take credit for growing the economy, but when it shrinks it's always someone elses fault.

"Education should be there to serve each child, to give them the skills they will need in life to enable them to pursue their own objectives and flourish in their own ways"
While worthy, it is un-realistic and overly-individualistic. In order to do so we have to have the spare (and increasingly so) energy/resources to allow such ever increasing specialisation.  That means somewhere, someone (eg farmers) are working to produce that excess while the overly specalists pursue thier of so important "dreams". 
I call these dreamers and ovely-specialists "carrot pullers" because in the future with less and less available NET energy, more and more ppl will be spending more and more of thier time getting the essentials which is food, heat, water and shelter.    Such specialists then will find thier  skills useless.  As an example a student in media studies I know who has completed her degree is a checkout girl in countdown.  Her skills while supposedly high are not in demand so she's on the minimum wage with large debt she will probably never re-pay.
Really its la la land stuff, so I could not agree less.

Up to a point, as they say.  I certainly think people should be free to decide on and pursue their own objectives.  However, that does not entail any obligation on the Government, or anybody else, to make sure that people successfully achieve those objectives, so I am not in agreement with Rose about "flourish in their own ways".  No Government action, or inaction, can ensure that everybody will flourish.
 
Let's look further at your case of the media studies graduate who has not (yet) been able to find employment in the media.     Your friend is reaping what was always a likely consequence of her choice of degree course, something which should have been quite clear to her when she chose the course in the first place.   As Rose acknowledges, some people make bad choices - in fact, pretty much all of us make bad choices sometimes.
 
But what exactly do you think the Government should do about such cases?  Should it have forced her onto a different course, regardless of her own wishes and abilities?  Which course do you think she should have been made to do?  Perhaps you will respond that you cannot answer that because you don't know enough about her individual circumstances - but then how do you expect the Government to do any better?

Good points.
Its an interesting Q/point, I was told for instance that the Govn was desperate for engineers, did that work out? no.  How many of the ppl I knew who become lawyers and accountants have done a lot better than me? why most of them if not all of them. How many times did they get made redundant v me? well 3 times in my case and threatened with it at least 2 more times in 35 odd years of working. Certianly young ppl can and do make more bad choices than older ppl but yes it is their own life/career.
One thing for me for sure we need to do a lot better in the near term, I'll admit I dont see how.
 
 
 
 
 
 
 
 

Most people dont have any choices they are too  busy working just to make ends meet.
 
Governments got off the banks grass and now we are in a world recession.
 
Are you being paid either directly or indirectly by the government. Sounds to me like you are still in a dream of your own.
 

Rose Paterson may be arguing for some subtle liberal position, that where possible government's shoud be less dictatorial and be more humble about how much real influence they have on the economy. I would be ok with that.
 
But she may just be arguing the old right wing line that economies need less regulation and lower taxes. We all know how that turned out. Quite quickly we found that less regulations often equal poor regulations, leading to such things as the bilion dollar leaky buildings syndrone.
 
Even if Rose is arguing for the former the generalities in her argument will mean those so inclined will interpret it as the later.

I like the circular reasoning of growing grass so you can mow it, lol. NZ has some of the most business friendly laws on the planet, so there is not a lot to cry about really. Not many laws to upset people, excpet for those who hate government because their religeous dogma is that tax is theft, and wages should be as low as possible.
The only other laws have to do with protecting natural capital, which I generally agree with.  We are one of the most prosperous nations on the planet and we actually do need to protect that from zealous capitalists who would attempt to exploit that natural capital and externalise all the costs.  As has happened in countries where the government has low to no taxes or minimum wage laws or protection of natural capital such as Afghanistan or Nigeria.  Take a good hard look at those countries before deciding to go down that particular path.

What business friendly laws are you talking about?
While setting up a business structure like a Company is quick and easy that is the only part.. All the other meddlesome compliance comes directly after you have aquired a Company name and number.......
 
I have no idea what business type your in Skudiv.......but I am thinking you have very little regulation to comply with !!! Or maybe your business is not fully compliant......because if your in business right now you will be ensuring your ahead of the game on changes in the Fair Trading Act, The new Health and Safety Reform Bill, Contract Act just to mention a few which are causing business to spend loads of money.

Yes and no.
A good, well run company will cover most of those areas pretty well and not need to make drastic (expensive) changes, if any changes. My company, after some audit checking, meets them just fine.
There is a lot of media about the big chnges but they really aren't that big unless you are currently ripping off your employees and/or customers.

The changes are actually big and have nothing to do with ripping anyone off. 
 
I'm involved in Agriculture, farm forestry and building and like everyone operating in any of these areas......we are experiencing major change and cost increases across all regulatory areas.  Maybe you don't operate in a multi-hazard zone where everything has potential to injure or cause death!!! I help feed and house people while earning some export income.....all the essential stuff and I can tell you right now......NO Business is ever meeting all the regulations...there are too many and too many being changed at any one time......and if you think you are meeting all regulatory requirements in whatever area your company operates in  then you should be aware that there is an antedote for being smug!!

I'm glad you mention that, health and safety is an excellent example of externalised costs. Now the employer has to share some of the costs formerly paid by injured employees and society.  Yes we all have to lift our game when it comes to H&S, but I can't say thats a bad thing.
 
It's not my opinion that NZ is the most business friendly, I have only done business in NZ.  Experts who are paid to find out, have studied the facts and shown that NZ is indeed one of the most business friendly countries on the planet.  My opinion is that when you pay an expert to do some research, you have to be pretty arrogant to ignore his opinion.

employers can't "share some of the cost".  It just doesn't work that way.
Either the customers share the cost or the staff share the cost.

Really?  Do you have that kind of flexibilty with pricing and wages?   Does the staff and customer share the cost of a breakdown as well? 

I am of the view that "Business Friendly" and Business Friendly Law" are two different issues.....You are interchanging the two in your posts!!
 
Now lets get the next issue straightened out.......Health and Safety costs have not been externalised as you suggest.......there would be no contribution via the Government if business hadn't generated the income first !! And then there are the direct charges for ACC.
 
You can have a zero tolerance health and safety policy and undertake all the training in the world but you cannot stop accidents from happening......if policy and training was the answer then Work Safe would be able to give full instruction on how to avoid all accidents and they won't/can't!!  I don't know anyone in the industries that I am in who isn't concerned at the momemt over Health and safety issues......would you rather NZ has a blanket freeze on high risk activities???  That would be Goodbye Sheep and beef, forestry, fishing, mining,quad bikes and tractors in fact anything that moves....
 
 
Accidents happen on our roads everyday ( most would be considered avoidable) yet the roads owners are exempted from liability.......strange little world we live in isn't it !!!
 
You go back to your ivory tower of your well-run busines with no hazards but be aware next time you eat, drink or use some imported component in your daily life that someone had to go out and take on risk to deliver you your lifestyle.....now don't go burning your lips on your hot coffee and then in surprise spill it to your nether region and make sure that you have all your electricals tag tested!!

Case in point.
Belgium had 2 years of no government soon after the GFC. The economy grew happily whereas the rest of the EU with all sort of govenrment intervention policies were stumbling.
 
NO government seems to be better for economic growth.

Try doing business in Libya then LOL.

With or without government "assistance"...or doesn't it make a difference?

There is no government anymore.

I don't mean to sound overly churlish, but what exactly was the point of this article? I read a lot of broad strokes metaphorical arguments but I didn't see any specific sugestions or examples or data. As such it's not likely to change my or anyone else's opinions!

Bravo

Pretty much.