Centralized Government Does More Harm Than Good

This article is an excerpt from the Shortform book guide to "Skin in the Game" by Nassim Nicholas Taleb. Shortform has the world's best summaries and analyses of books you should be reading.

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What are the disadvantages of centralized government? Why does concentrating power in one central authority do more harm than good?

In his book Skin in the Game, Nassim Taleb argues that centralization of power is not just suboptimal, but damaging to human societies. Large governments manage such large, complex systems that their intervention and attempts at restructuring are far more likely to be harmful than beneficial.

In this article, we’ll explore Taleb’s argument against centralized government.

Intellect and Morality Don’t Scale

Taleb identifies one common misconception that he believes contributes to many of the world’s biggest problems: Those who support centralization mistakenly assume that the logic and ethics they use to make decisions on a small scale will have the same effects at a large scale. In reality, when those in power make decisions at a large enough scale, the intellect and morals used on the individual level fail to effectively do good.

Large nations are far too complex for even the most intelligent, insightful leaders to fully understand and predict. Any given decision could have multiple unforeseen consequences, and without skin in the game, mistakes go undetected, causing permanent, compounding problems that no one knows how to solve.

As for morals: It’s easy to believe that we should make decisions based on absolute morality—that the right thing to do is right no matter what. In practicality, however, in order to achieve the most moral results we must employ different sets of ethics for organizations of different sizes.

You can teach a child to share his toys with his brothers and sisters, hunter-gatherer tribes can learn to pool their resources and divide it according to need, but you can’t teach a nation to work hard and then give away the fruits of their labor. The moral principles fall apart when applied at a large scale. Attempts to implement them cause more harm than good.

Centralization’s Blurred Lines

Supporters of bigger centralized government point to success in Europe—by percent of GDP, countries such as France, Spain, and Germany have significantly larger governments than the United States, and sport lower poverty rates, longer life spans, and lower rates of teenage pregnancy. Nordic states like Denmark and Finland are even more extreme examples of the same trend. Higher government spending has shown to be effective.

However, although government spending is heavily correlated with centralized power, they’re not the same thing. The United Kingdom, for example, spends less of the nation’s annual GDP on its government than Germany, yet it has a single-payer healthcare system, unlike Germany’s more decentralized multi-payer system. Nordic countries with large governments are propped up by strong decentralized free markets. Most countries have found a unique balance between centralized and decentralized decision-making, showing that some goals may be better accomplished through centralization, and others through decentralization.

Centralized Government Does More Harm Than Good

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  • Why having a vested interest is the single most important contributor to human progress
  • How some institutions and industries were completely ruined by not being invested
  • Why it's unethical for you to not have skin in the game

Darya Sinusoid

Darya’s love for reading started with fantasy novels (The LOTR trilogy is still her all-time-favorite). Growing up, however, she found herself transitioning to non-fiction, psychological, and self-help books. She has a degree in Psychology and a deep passion for the subject. She likes reading research-informed books that distill the workings of the human brain/mind/consciousness and thinking of ways to apply the insights to her own life. Some of her favorites include Thinking, Fast and Slow, How We Decide, and The Wisdom of the Enneagram.

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