In The Fifth Risk, Author Michael Lewis Wants You to Appreciate Government

Bestselling author Michael Lewis wants to give you a new appreciation for government. In The Fifth Risk, released this fall, he takes the reader on a whirlwind tour of the Departments of Energy, Agriculture, and State as their Obama-era appointees await transition teams from the newly elected Trump administration. Funny thing is, hardly anyone shows up or seems at all interested in what they do.

Using his well-honed combination of character sketches and counterintuitive “aha!” moments, Lewis takes the opportunity to tell the reader the many things these departments do. Lewis appears to have a twofold purpose. The first is to expose the willful ignorance and recklessness of the current president. The second is to make a point about government more broadly: for all of its problems, government is filled with mostly competent and frequently passionate people doing unheralded but essential work that the private sector just won’t do.

This is where I’m supposed to tell you, from a less-government and freer-market perspective, why Lewis is wrong — except that Lewis isn’t all wrong. The rose-colored tint on the glasses through which he views government is vibrant and intense, and I’ll start by looking at some of the fallacies he unwittingly adopts. But for libertarians who want to see real, practical, and attainable change in the near term, Lewis’ arguments are worth taking seriously.

Governmental Fallacy

Essential to Lewis’ argument is the idea that the federal government provides “services that the private sector couldn’t or wouldn’t: medical care for veterans, air traffic control, national highways, food safety guidelines” (p. 24). With this idea, he makes the all-too-common mistake of viewing the private sector as a static entity rather than an unfathomably effective dynamic machine for solving problems. Closer to the truth would be that the private sector can’t or won’t provide these services while a multi-trillion-dollar organization is already attempting to provide them.

Lewis’ formulation imagines government saying, “Okay, private sector, next on the list is food-safety guidelines. Want to tackle that one? No? You sure? Okay, we’ll put that on our list.” In reality, the  speech looks more like this: “Okay, private sector, feel like adding anything to the thousands of pages we’ve already written on food-safety guidelines? We may or may not overrule what you add.” The unique, decentralized, and evolutionary mechanisms at work in the private sector could provide many of these services if given the chance.

Lewis also seems to forget that in government, one cannot easily separate the good from the bad. Perhaps his marquee example of both the competence and indispensability of government is the protection and cleanup of waste from our Cold War–era nuclear weapons program. As Lewis reports, these efforts constitute half of the Department of Energy’s current $30 billion budget.

But wait a minute. Who created this mess? The same federal government that now must spend billions annually to clean it up! This in no way trivializes the importance of the task; it is a formidable part of the challenge Lewis poses, which I discuss below. But it underscores that some problems deemed solvable only by the public sector are the very problems that only the government could cause.

Smaller examples also illustrate this fallacy of seeing government as an a la carte menu in which we can take the good and leave the bad. Lewis is almost giddy when writing about how government meteorological bodies have detailed photos through time of almost every farm in the country — photos that can be turned into data providing invaluable information on how to farm more effectively. But Lewis does not mention the obvious privacy issues on the flipside of the government being able to observe anyone’s property.

FInally, in his focus on presidential transitions, Lewis unwittingly puts emphasis on a dilemma baked right into our democracy: if the tasks he describes are so important and so necessary for the public sector to perform, should they really be subject to complete turnover in managerial personnel every four or eight years?

Even when everyone is playing on the same team, transitions are an extremely onerous process — one, as Lewis expertly describes, that government has spent decades with varying success trying to improve. Democracy, it would seem, imposes an unavoidable handicap to preserving institutional memory when institutions tackle the problems we entrust to the democratically elected.

Sweat the Details

Where does that leave those of us who don’t see federal governments as the right bodies to be tackling many of the issues Lewis describes? After exposing the fallacies discussed above, can we move on? Not so fast. In perhaps the most incisive lines in The FIfth Risk, Lewis writes:

If your ambition is to maximize short-term gain without regard to the long-term cost, you are better off not knowing the cost. If you want to preserve your personal immunity to the hard problems, it’s better never to really understand those problems. There is an upside to ignorance, and a downside to knowledge. Knowledge makes life messier. It makes it a bit more difficult for a person who wishes to shrink the world to a worldview. (p. 77)

This is food for thought beyond its intended purpose as a well-deserved shot at the current administration. How often do we, as commentators on all sides of an issue, avoid dirtying our hands with details that would complicate our arguments? While not entirely avoidable, it’s an impulse everyone should try to check.

I cringe when I see libertarians characterize the state as a uniformly bumbling or malevolent entity. It’s every bit as intellectually lazy as when the left talks about Wall Street or billionaires. Reach for your smelling salts if you must, but the truth is that most people working for the government are doing their jobs earnestly and doing them pretty well.

When we lean into this truth, instead of trying to drown it in theory or caricature, we make our arguments for less government intervention stronger rather than weaker. Social safety nets, utilities, public safety, and scores of other functions are important and currently performed by the federal government with varying degrees of success. For me, the crux of an argument for a smaller federal government is not that these functions are unimportant or will magically go away in a stateless society, but that we can do better when performing them in a decentralized, private, and voluntary manner.

I’ve written in the past about the difficulty of answering the question “How, exactly, will private institutions perform tasks x, y, and z in the absence of government?” The trouble is that private institutions need to evolve in the absence of government, so it’s hard to say exactly what they would look like. In other cases, government itself has created problems to which all but the least squeamish anarchists would be loath to let solutions slowly evolve. The problems created by our nuclear arsenal are front and center.

But accepting these issues as challenges does not mean abandoning basic principles. It means seeing the world as it is and working toward a research agenda and commentary that better publicizes alternative ways for society to help itself.

The book’s title comes from the fifth on a list of risks created by an Obama-era consultant to the Department of Energy. It is “program management.” It could be, for example, the impact of damaged caused by a Department of Energy that simply loses interest in the details of nuclear waste cleanup. But the lesson for libertarians or any other movement is clear: we stop sweating the details, especially the challenging ones, at our own peril.

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Max Gulker

Max Gulker is an economist and writer who joined AIER in 2015. His research often focuses on free markets and technology, including blockchain and cryptocurrencies, the sharing economy, and internet commerce. He is a frequent speaker at industry conferences, especially on blockchain technology. Max’s research and writing also touch on other economic topics, including governance, competition, and small businesses.
Max holds a PhD in economics from Stanford University and a BA in economics from the University of Michigan. Prior to AIER, Max spent time in the private sector, consulting with large technology and financial firms on antitrust and other litigation. Follow @maxgAIER.