Based on an email send to me by my colleague Rudolf van der Berg.
For me “citizen welfare” is always the goal. Government by the people, for the people as some used to say.
Despite their over-sized influence on debates, institutions such as companies, universities, associations, governments, unions, cooperatives etc. they are not citizens. They are temporary constructs for cooperation to attain the goal of citizen welfare. The welfare and existence of these constructs is relevant only in as much as that contributes to citizen welfare. How that welfare is achieved is determined by citizen choice. Choice in governance, services, and products. Competition and innovation enable the choice of the citizen and therefore are essential to achieve the goal of citizen welfare. Competition and innovation are generally achieved through institutions, regulation, and stability.
From studies of human life and civilizations, the best outcomes are attained where a strong government creates an environment where there is stability to deploy activities to achieve citizen welfare. A strong government is needed to check everyone plays by the agreed rules and to verify that the rules still contribute to the goal of citizen welfare. (Government only delivers the social outcome when a good set of rules and honest referees as well as players are in place).
If the rules do not achieve citizen welfare anymore, they must be altered in a way that befits the goal (breaking rules fast when in a crisis, slower and gradual if not). Without strong oversight, competition, and innovation the institutions will not deal with positive and negative external effects (ossify, seek monopoly rents, discriminate, corrupt, break the rules, pollute). Strong oversight does not mean that the government checks everything you do, but there are clear and swift consequences if you willfully infringe on the welfare of others. It also means that the government must balance the short term and the long-term implications of actions. The goal is not to punish, but to promote positive behaviour. Creating such an environment is of course mindbogglingly hard.
The debate surrounding citizen choice on the balance between those elements and the specific implementation is politics. Political systems govern how that debate is organised. Any political system that does not allow for change will break down. Any political system that is not stable will break down. Any political system that is not competitive with low barriers to entry (but some barriers) will break down etc.
A stable environment needs the dynamic of competition and innovation at any level. Competition and innovation in ideas, technology, institutions, regulations etc. For that to work there need to be low barriers to entry and few ways in which incumbents can exclude contestants to deliver similar or better ideas, policies, services, products. There also needs to be a level of protection for innovators. Citizens should in the end be able to choose the options they prefer. Competition and innovation must be balanced. Examples of where competition is not always beneficial are healthcare and education. You should have choice and innovation, but no holds barred competition is generally not beneficial. It generally leads to selection and exclusion.
This basically applies to all levels of the society and the economy. Here is an example from the education sector.
Competition between universities for better ideas, education, science etc is generally positive. It generally leads to choice and diversification. Competition between universities for the “best” students/researchers generally is not positive. Countries that have highly selective/competitive entry into specific higher education institutions, see that this generally benefits children from affluent and stable families in particular areas and groups in the country. Affluence and stability are always good predictors of school performance, but selection mechanisms should not promote them. It is the student that meets certain prerequisites that should be free to choose the university, not the university that chooses the student. In countries with selective universities, it matters if students went to or researchers work at Polytechnique, Oxford, Cambridge, Harvard, or Columbia, this despite there being no indications, that graduates of or researchers at any of the other universities somehow perform less well to their peers at any of the selective universities mentioned.