Both ideas are pure extremes and will never happen. That is exactly why they are useful. They strip away the slogans and force us to look at incentives, information, and outcomes. ### The two poles Everyone works for the government Central direction replaces markets. In the short run you get full employment and universal access to basic services. In the medium and long run the economy loses the price signals and residual incentives that allocate resources efficiently. Australia’s resource sector would still dig things out of the ground, but productivity, innovation and export competitiveness would erode. Living standards would stagnate or decline for most people, even if formal equality of access remained high. No one works for the government All public employment and tax-funded services disappear overnight. Private markets would rapidly expand in most areas and average material output would eventually rise. But pure public goods—national defence, basic courts, pandemic response, large-scale infrastructure coordination—would be under-provided or captured by whoever could pay. The short-term disruption for pensioners, NDIS participants, public hospital users and regional communities would be severe. Inequality of outcomes would widen sharply. Neither pole is stable. History shows pure command economies eventually collapse under their own weight, while pure absence of government tends to generate new forms of organised power that look a lot like government again. ### The pendulum Real societies swing between these poles. After crises (wars, depressions, pandemics) government expands. After periods of stagnation, over-regulation or fiscal stress, pressure builds to shrink it. Australia has ridden this pendulum too: post-war expansion of the welfare state, 1980s–90s liberalisation, recent growth in the care economy and public employment. The useful question is not “big government good, small government bad” or the reverse. It is which direction, on the evidence, tends to deliver higher material living standards to more people over time. Across countries and decades the pattern is consistent. Systems that keep markets as the primary mechanism for allocating most goods and services, while using government for a limited set of core public goods and a basic safety net, have produced higher absolute living standards for the broad majority than systems that place most economic activity under direct political control. The gains show up in real wages, life expectancy, consumer choice, and the ability of ordinary people to exit poverty. This is not a claim of perfection. Markets generate inequality and leave some needs unmet. Government failures—misallocation, capture, slow adaptation—are real and costly. The point is comparative: the mixed systems that lean toward competitive markets and residual claimancy have, so far, lifted more people further than the alternatives. ### Using the mental model The extreme thought experiment is a decision filter, not a blueprint. When a policy proposal appears, ask: - Does this move us closer to the incentives and information problems of full government employment, or closer to the coordination failures of zero government? - What does the historical and comparative evidence say about the material outcomes of similar moves? - Who actually bears the costs and who captures the benefits in practice? Australia’s resource wealth, high trust, and institutional quality give us more room for error than most countries. That is a privilege, not a licence for ideology. The goal should be the highest sustainable material living standards for the largest number of Australians, consistent with the freedoms and security that make those standards worth having. Extremes clarify the trade-offs. Evidence tells us which direction has delivered more for more people. The practical task is to keep adjusting the mix with that evidence in view.