When Wisconsin Congressman Paul Ryan and other hard-line conservatives talk about cutting the government’s budget, their primary rationale is that individuals can make better decisions with their own money than the government can. As Ryan himself said to an audience at Georgetown University, “We put our trust in people, not in government. Our budget incorporates subsidiarity by returning power to individuals, to families and to communities.” It sounds reasonable—of course we want individuals to have power, and of course we want communities to take care of their neediest members. And since conservatives have done a fine job of portraying the government as full of heartless, inept bureaucrats, allowing people to make their own decisions sounds better than the alternative.
The conservative approach to government stems from a basic tenet of free-market economics: that people always act rationally to maximize their own benefits, and that from this rises a general state of well-being for society as a whole. But this isn’t always true. One of the hottest academic disciplines to arise in the last few decades is behavioral economics, which explores the ways in which people behave irrationally. In addition, easy-predictable problems with certain markets prevent us from achieving the best outcomes. These two facts have consequences for how we should think about government in certain instances. There are many ways in which the government can make better decisions with our money than we can, and there are many ways that the Ryan budget would make society worse off by getting rid of government programs.