Does the Government that Governs Least Really Govern Best?

Libertarians are fond of quoting Henry David Thoreau’s aphorism, “That government is best which governs least.” Thoreau was evidently paraphrasing his contemporary John O’Sullivan, but no matter who first said it, the quotation has become an axiom of those who love freedom. But is it true?

Let’s treat this aphorism as a hypothesis and test it against the data. To know what data we want, we first need to decide just what we mean by “best government” and “least government.”

“Best government” could mean one of three things.

1. It could mean the government that produces the best results in terms of human prosperity — not just high GDP, but good health; access to food, clean water, shelter and education; safe communities; clean environment; and so on. To measure those things, we will use the Legatum Prosperity Index (LPI).
2. “Best” government” could instead mean the government that allows the greatest degree of human freedom, including freedom of speech and religion, freedom in personal relationships, personal safety and security, security of property rights, freedom to trade, and so on. To measure those things, we will use the Human Freedom Index (HFI) from the Cato Institute.
3. Rather than a results-based measure, we could define “best government” in a procedural sense — a government that adheres to rule of law, maintains fair and impartial criminal justice, and is free from corruption. We can compile such a measure by extracting and combining relevant indicators from the LPI and HFI to construct a Quality of Government Index (QGOV).

Libertarians typically interpret “least government” to mean “small government.” We will use two alternative measures of size:

1. Cato’s HFI includes a “size of government” component — a composite indicator that includes measures of government spending, taxes, and government enterprise. It is measured on a scale of 0 to 10, with 10 indicating the smallest government. We will abbreviate this measure as SoG.
2. The SoG component of the HFI is subject to a number of methodological criticisms, so as a check, we can use a simpler measure, the ratio of government expenditures to GDP, taken from the IMF World Economic Outlook database. For easier comparison with SoG, we will convert this ratio, too, to a scale of 0 to 10, with 10 indicating the smallest government. We will abbreviate this measure of size of…