What is Government For?

I wrote this comment on a discussion at the blog at the Sydney Morning Herald:

If you all don’t mind an American jumping in here. (That’s what we Yanks do: go to places around the world where we’re neither invited nor wanted)
I see government as the monopolizer of land, meaning not just the ground but of all natural resources. If gold and oil were discovered on the moon, the moon would have a government, or be the colony of a government, within a year.

If I had a monopoly on land, and were dictator-King, I would try to increase the land’s value, much as a landlord would invest in improvements and amenities to increase demand for his rooms and increase rent. The landlord may guarantee the safety of the elevators, and may provide amenities and privileges to the tenant like a health club and swimming pool. He would provide these not out of a sense of compassion, but to increase demand and rent. But if the landlord based rent on the tenants personal income, rather than on the room, demand would plummet. And so it would if the landlord decided to make rules on what you could eat and drink, what drugs you could take, and how you could decorate your own room. People value safe and attractive public areas, but they also value their privacy and the freedom to make as much money as they can.

A King interested in profiting from the increased value of his land would provide:
1. A system of defense from foreign invasions and attacks
2. A reliable legal system for crimes of force and fraud, and for property disputes
3. Some degree of physical infrastructure, what private initiative can not provide. That may vary from place to place.

What the government would NOT do is inhibit anyone’s freedom to make money, or pass paternalistic “it’s for your own good” laws. Taxes would be collected from increases in land values, and on the exclusive use of natural resources, not on people’s incomes, savings, or purchases (all of which hurt the economy and overall wealth). In a democracy, any excess tax income would be distributed to the people equally as dividends.
In other words, government’s reach should be limited to the “common wealth,” and not to our personal affairs.