[Shalom Israel]

It's quite simple - people are not rational. Also they are fallible and are often unable to see what is in their interest.

Up to a point I agree with you. In fact, it's one of the biggest arguments against government: do you really want to be under the authority of a non-rational being that is often unable to see what's in his own best interest, let alone yours or mine?

[edsheppa]

There are a couple of problems with your argument. One is that rationality is not either-or, it exists in degrees. Some people are much better than others at thinking things through, at seeing the consequences of actions and policy. Suppose all the inhabitants of a country were, as you suggest, under the authority of a non-rational being. That is, this one being made every decision for everyone. If this being were more rational than everyone else, every inhabitant would be better off being ruled than if they made their own decisions.

Another problem with your argument is that, in the aggregate, people can be more rational than they are individually. An example of this is the so-called Delphi Effect in which the average opinion of experts is a better predictor than any single expert's opinion.

Now, those are pretty theoretical arguments and have issues, some easy to address and others hard. However, I claim that any social institution or theme that is as widely practiced in space and time as government has a net social benefit. The question is how to tune it to maximize that benefit.