If you treat the populace as a closed system, and the government as an external actor, then these actions increase total utility by preventing larger losses to the external actor.
This is not true. Rational actors acting in their own self interest does not always approach a global optimum. An external actor limiting choices can trivially lead to better outcomes, the prisoner's dilemma being an obvious example. The tragedy of the commons is another, where the government historically either intervened to maintain good behaviour, or intervened to enclose the commons, in either case limiting the options of rational players.
Turnover in a city can be argued to be good or bad. Turnover across a city is more clearly bad, but as a said it's still arguable. In any case, I believe you're not making a great case as your basic argument that limiting choices of rational actors can never lead to better outcomes is incorrect, and I think it would be a good idea to read/watch the material I linked or referred to in order to get a better idea of what I'm arguing and so you can directly try to refute the rebuttals of points I'm going to be making. It's going to be faster than relitigating most of this conversation up until that point.
Also, consider the possibility that the underlying trade off is between societal coordination and efficiency vs liberties and wellbeing. Adding to “safe” also economic incentives to erode democracy with its less efficient liberties. In a similar way, corporations are more efficient than governments.
It reduces the number of entities a government needs to control or coerce (i.e. banks), in order to have some effect on the general population (e.g. expropriation). I'd imagine that net savers in Cyprus, the people least responsible for the financial collapse in 2007, would feel much the same way.
It seems to be a recurring theme that policies meant to protect special economic interests from things like prices and competition might seem good in the short-term, but over time are bad for everyone. Except government seems to follow a law of bureaucratic entropy: policies, exceptions and departments are a lot easier to expand than take-back.
This has been known literally for centuries. Its called the second fundamental theorem of welfare economics. I wrote about it in the "Soluctions to Sub-optimal Pareto Optimums" section of my article here: https://governology.wordpress.com/2016/09/04/the-role-of-gov...
If you're going to stand by your judgment, you should do so on both sides.
Actors within government are generally aware that their actions have some negative consequences. They have a lot of smart people who tell them about problems that can (and will) occur, along with some likelihoods of the magnitude and frequencies of those problems. So under your classification scheme, there really aren't many unintended downsides of governmental action.
You seem to be conflating the public marketing of a policy (it will be sunshine and rainbows) with the internal understanding of a policy (it will solve a few problems, create a few different problems, and hopefully net positive).
You have a good point here. I agree that governments are not exempt from the game-theoretic rules that affect everything else. While they are an effective solution to coordination problems of society, they suffer from coordination problems of their own (I think that might be one of the reason governments tend to develop layered structures; it's like turtles all way down, but here we have governments all way up).
> But it's necessary to argue why, if the society cannot produce the flood control systems, why it should be expected to produce a government that will produce the flood control systems.
I think one of the arguments for this would be the fact that it actually happens - i.e. people left alone tend to form governments that then make flood control systems :).
From what you wrote in your previous comment I understand that you believe, that if one would sum up all the benefits and all the costs of government regulation, one would end up with a negative number. Have I undestood you correctly? If yes, could you elaborate on why you believe the effect is net negative and not net positive? I.e. what makes the costs bigger than benefits?
That may be true but the assertion was that open systems tend to win. If you add the premise "except when there are external factors", there is really no argument left.
If you read the articles linked, and look at the other studies done on global development, you see that the places that did the most to lift those limitations and regulations, that disrupt the natural checks and balances of the market, saw the greatest improvement in quality of life.
That is why there is a strong and persistent negative correlation between government spending, as a percentage of GDP, and the rate of economic growth:
The government limiting its role to vigorously defending people's security of person and private property, and enforcing contracts, is the best way we have come up with to facilitate economic development.
You answered the question yourself; People are better off financially. Yes, that is due to entrepreneurs and workers, but the government is essential in creating the environment where that can happen.
Government has the power of force, which includes the power to circumvent the price system by taxing or borrowing against future taxes, irrespective of the information the price system conveys about the efficiency of the actions undertaken with that money.
Since the government's actions may not be subject to the pressures of the price system, a government solution is less likely to reflect economic reality as described by the price system. In more than a few ways, this means the government's actions are not likely to succeed, because the primary motivations for experimentation won't be economic, but political.
Individuals and groups without the power of force must create solutions that can stand up to the pressures of the price system. In this model, shifting experimentation to the scope of individuals and groups by liberalizing (if necessary) or fine-tuning economic policy is what works.
Of course, this explanation requires an well-functioning price system, and making the system function well is a subject in itself. There's also the question of how often actors in the price system actually act rationally, given the information they receive from the price system.
The methods definitely aren’t great but the effects may be. Although some of the goals the government has are not really about the populous and more about limiting private sector power vis a vis the government and not the populous.
What would a government, and specifically a ruling party gain from slowing down the economy and alienating its people (which always happens to some non-zero extent when you quarantine and constrain people)?
There's an independent variable in this: how broad the government's mandate is.
If the mandate is narrow, none of the above steps have much negative effect on the functioning of society. If the mandate of government is broad, or capable of becoming broader, all of them have a negative effect, and the third ensures that the mandate broadens, which grows the negative effect proportionally.
People are rational actors at optimizing their own well-being, as they see it. That holds in all cases but it isn't very helpful to the politicians.
What breaks is trying to get people to optimize for some other factor by manipulating economic signals (e.g. with inflation). Once they know about the manipulation they'll compensate for it. Not 100%, not always even in the right direction, but enough to make the eventual outcome chaotic.
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