What are the benefits of having a government that is involved in its citizen's lives?

Let's say your house is on fire. Would you rather the fire department come and put it out straight away, without asking you how much you paid that year in taxes, or would you rather they charge you a fee set by the market. Well, your demand for their services at that moment would be pretty damn high. Maybe you can't afford it, so they let your house burn down. Maybe you aren't very wealthy or you live in a lower middle class neighborhood. Does the FD even show up?

Regulation is inherently a trade-off. Let's look at airlines, for example. Back in the day, air fares were regulated. That means a passenger going from New York to L.A. would pay the same fare no matter which airline they flew. So how did the airlines compete? Well, they offered great service and tried to convince passengers that they had the best food, the comfiest planes, etc. After airlines were deregulated, they quickly realized passengers will generally choose the cheapest flight, regardless of airline. So eventually air travel became a race to the bottom in terms of price, even if that meant eliminating meals, snacks, pillows, leg room, etc.

In the airline industry, you could make a reasonable argument for or against regulation. But in other areas of life, such as things generally considered common goods, I would submit that regulation by the government is a better result for society than any free market system could produce. These are things that individuals might not want (or be able) to pay for directly, but that benefit society as a whole. Public safety, fire and police departments, social welfare, road maintenance, public health (water supply, pollution, etc.), etc. The tax system allocates the cost of these things fairly -- i.e., a progressive tax where those who can't afford it are able to pay less. Everyone -- even the very rich who could afford private versions of some government services -- benefits from these things. The second part of this 2-minute video of Elizabeth Warren summarizes this point well: http://youtu.be/htX2usfqMEs

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