Association for Public Policy Analysis and Management

The Coherence of the Concept of Limited Government

Author(s): Lawrence R. Cima and Patrick S. Cotter
Source: Journal of Policy Analysis and Management, Vol. 4, No. 2 (Winter, 1985), pp. 266-
269
Published by: Wiley on behalf of Association for Public Policy Analysis and Management
Stable URL: https://www.jstor.org/stable/3324630
Accessed: 03-09-2018 14:48 UTC

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266 Concept of Limited Government

strated over the past few decades make this caution particularly
urgent. At the very least, all of us trained in economics should
show a little humility when prescribing policy:

Doubt grows with knowledge,

Johann Wolfgang von Goethe

or at least it should.

DAVID HEMENWAY is an economist at the Department of Health

Policy and Management, Harvard School of Public Health.

THE
THE COHERENCE
COHERENCEOF OF Steven Kelman's recent article, "Limited Government: An Inco-
THE
THE CONCEPT
CONCEPTOF OF herent Concept,"' adds only confusion to the analysis of the ap-
LIMITED propriate role of government in society. Kelman attempts to dem-
GOVERNMENT* onstrate that the philosophy of limited government is "self-con-
tradictory or incoherent," but in fact Kelman's own criticisms are
Lowrence R. Cima themselves illogical and incoherent. His most basic error is that
Patrick S. Cotter he criticizes a misconception of the philosophy of limited gov-
ernment, one in which the principles of individual rights, including
property rights, and individual rationality are conspicuously absent.
We show that a philosophy of limited government which is based
on these principles is indeed coherent.
Kelman begins by defining his terms and his approach to the
debate:

This article seeks to analyze the coherence of the doctrine of limited

government. By such a doctrine I mean the view that the role of gov-
ernment ought to be limited to preventing the use of coercion in exchanges
and stopping people from harming others.

He continues his argument by discussing such extreme examples

as mugging as voluntary exchange, the right to charge a fee for
rescuing a drowning man, and the unpalatable choices of unskilled
workers facing starvation or hazardous employment. From such
cases he derives the far-reaching conclusion that the government
must intervene extensively in private transactions to "distinguish
between cases of voluntariness and of coercion." Thus, he concludes
that: "The inescapable necessity for determining how people are
entitled to behave in order to delimit voluntary exchange makes

* A previous version of this article was presented at the Annual Meetings of the
Ohio Association of Economists and Political Scientists, Baldwin Wallace College,
May 5, 1984.

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 Concept of Limited Government 267

the doctrine of limited government incoherent." F

considers the implications of defining property rights
following Ronald Coase's "The Problem of Social C
an example of pollution as an externality, Kelman
the problem of assigning entitlements is a government
with the need for extensive government involvem
cording to Kelman, property rights do not save the
limited government from incoherence.
We could rebut Kelman's argument point by poi
would take us beyond a "reflexion." Instead we fo
points which we feel are sufficient to invalidate hi
man's major error is that his point of departure, his
limited government, is his alone. It is a convenient st
which he attempts to refute legitimate positions th
presented. In fact, nowhere does Kelman indicate a
source for his proposition that limited governme
prevent coercion and stop harm. Thus, although K
onstrates that his misconception of limited govern
herent, he does not refute the concept of limited g
general.
The most serious omission in Kelman's definition of limited
government is the principle of individual rights. Let us begin with
a more accepted general statement of the view Kelman is attacking.
We recognize the limitations of choosing a single representative
position for a philosophical tradition with several variations, but
we suggest the following:

The only proper, moral purpose of a government is to protect man's

rights, which means: to protect him from physical violence-to protect
his right to his own life, to his own liberty, to his own property and to
the pursuit of his own happiness.3

Notice the crucial difference between this role for government and
Kelman's. Nowhere in Kelman's doctrine of limited government
does the term individual rights appear. It is not until the latter
half of his article that rights are addressed, and even then only
in the limited context of property rights as government entitlements.
In contrast, standard arguments for limited government base the
criteria for social interaction on the principle of individual rights.
This omission leads Kelman to search for criteria to draw dis-
tinctions between voluntary and coerced exchange, between un-
acceptable and permissible behavior. Consider Kelman's example
comparing the purchase of a novel and being mugged. According
to Kelman, limited government cannot distinguish between the
former as voluntary and the latter as coerced without violating
its own principles. But one can apply the principle of individual
rights, in this case property rights, and government's corollary
function to protect them, to provide the very criteria needed to
distinguish the two cases: Intervention is appropriate only in the
case of the mugging.
Furthermore, this principle stands outside of any government

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268 Concept of Limited Government

entitlement. Any use of force against an individual's life,

actions, or property deprives him of his rights. To prot
individual rights, men form governments. Rules for p
social behavior come not from arbitrary criteria such as those
suggested by Kelman, like whether there is "choice" or whether
the "choices are pleasant" or whether government "entitles" people
to this or that. In each of Kelman's examples, the principle of
individual rights clearly delimits behavior, and it is government's
role to insure that these rights are respected. The absence of in-
alienable rights leads Kelman to his allegations of inconsistency,
but this inconsistency is self-imposed.
Throughout his article, Kelman implicitly takes the position
that only government can create rights (entitlements). This position
denies that individual men are rational and asserts that only the
collective is rational, a conclusion with which we, and others,
disagree. This failure to acknowledge individual rationality is ev-
ident when he states, "It does not make sense, then, to conceptualize
voluntary exchange as an institution existing outside of government
... absent government, one cannot distinguish between merchants
and brigands." Such a conclusion must come as a great surprise
to anyone familiar with the history of commerce or anyone who
has ever attended a garage sale.
When Kelman discusses property rights, for example, he considers
them government entitlements and not basic rights standing outside
government's determination. He discusses Coase as an advocate
of limited government, and attempts to show that if government
tries to vest property rights, that is, to grant entitlements along
Coasian utilitarian lines, then government must become so pervasive
that the argument for limiting government's role to the prevention
of harm "collapses as incoherent." In the process, Kelman incor-
rectly ascribes to utilitarians the position that government must
prevent harm. Utilitarians argue that government should maximize
social welfare (minimize harm), a process which might entail great
harm to specific individuals. In addition, he incorrectly states that
utilitarians believe that government must not intervene in social
affairs. But utilitarians are not the laissez-faire advocates Kelman
would have us believe.4 Utilitarians argue only that markets are
a convenient tool to maintain or further social goals, whereas
direct public intervention is often excessive and even counter-
productive. Finally, and most importantly, utilitarian theorists,
and Kelman, view property rights as government entitlements, a
point that advocates of limited government would dispute.
In sum, Kelman's case against limited government rests upon
a misconception of the term. As a result, he shows incoherent only
his own definition of this philosophy. His further conclusions about
the concept in general are thus unwarranted and troubling. Kelman
ultimately ends with the assertion: "The interesting debates about
public policy are not over whether government should intervene
in our lives, but how." This conclusion does not follow from his
arguments. To the contrary, the debate over the proper function
of government has always been and should always be an important

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 Are Taxes on Lotteries Too High? 269

and
and legitimate
legitimatetopic
topicforfor
theoreticians
theoreticians
and policymakers
and policymakers
alike. We
alike. We
hold
hold that
thatthe
theonly
onlyrational
rational
formform
of government
of governmentis thatiswhich
that which
secures
securesthetherights
rightsof of
thethe
individual.
individual.
Kelman
Kelman
and others
and others
disagree.
disagree.
If
If Kelman
Kelmanreally
really
believes
believes
his his
article
article
has ended
has ended
the on-going
the on-going
debate debate
on
on this
thisissue,
issue,hehe
is is
profoundly
profoundly mistaken.
mistaken.

LAWRENCE
LAWRENCER.R.CIMA
CIMA
andand
PATRICK
PATRICK
S. COTTER
S. COTTER
are assistant
are assistant
pro- pro-
fessors
fessorsofofeconomics,
economics,John
John
Carroll
Carroll
University,
University,
University
University
Heights,Heights,
Ohio.
Ohio.

NOTES
NOTES1.1.Kelman,
Kelman, Steven,
Steven,"Limited
"Limited
Government:
Government:
An Incoherent
An Incoherent
Concept," Concept,"
Journal
JournalofofPolicy
Policy Analysis
Analysis
and and
Management,
Management,
3(1) (Fall
3(1)1983):
(Fall 31-44.
1983): 31-44.
2.
2. Coase,
Coase,Ronald,
Ronald, "The
"The
Problem
Problemof Social
of Social
Cost,"Cost,"
Journal Journal
of Law ofandLaw and
Economics,
Economics,3(1)3(1)
(October
(October
1960):
1960):
1-44.1-44.
3.
3. Rand,
Rand,Ayn,
Ayn,The
The
Virtue
Virtue
of Selfishness
of Selfishness
(New (New
York: York:
Signet Signet
Books, 1964),
Books, 1964),
p. 33.
4. See Coase, op. cit., especially section X, and Meade, James E., The
Just Economy, Vol. 4 of Principles of Political Economy (London: George
Allen and Unwin, 1976), especially Chaps. 1 and 2.

ARE TAXES State

State lotteries
lotteries have
havebecome
becomeincreasingly
increasingly
popular
popularin in
thethe
United
United
ON LOTTERIES States,
States, with
with total
totalgross
grosssales
salesexceeding
exceeding
$5.2
$5.2
billion
billion
in in
fiscal
fiscal
year
year
TOO HIGH? 1983. The main reason 17 states and the District of Columbia ran
those lotteries was to raise revenues.' The state retains the portion
Jon David Vasche of the total receipts from sales of lottery tickets that is not paid
out as prizes or administrative expense. In 1983 this implicit tax
on lottery wagering yielded over $2.1 billion in net state revenues.
The implicit tax rates for lottery wagering are extremely high,
averaging about 48% nationwide and ranging from a low of 43%
to a high of 56%. Previous research suggests that the implicit tax
rate on parimutuel horserace betting that maximizes tax revenues
is less than half the tax rate that states levy on lotteries.2 Do
"greedy" tax rates discourage lottery sales to the point where
state officials interested in raising revenues should lower these
tax rates?
To explore this question I analyzed, using methods of multiple
linear regression, the 18 lotteries operating in 1983. The dependent
variable in my analysis was per-capita sales of lottery tickets.
This variable ranged in value from under $10 to over $100.
A variety of independent variables, suggested by economic theory
and by previous empirical studies, were tested. It turned out that
nearly 83% of the observed interstate variability in lottery wagering
in 1983 can be attributed to six factors: per-capita personal income,
the number of years a lottery has been in existence, whether state
lottery receipts are used for specifically designated purposes (usually
for such socially popular programs as parks, education, and care

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