Why does the government always get it wrong?

1. Government's incentives are misaligned. Politicians want to get re-elected. Bureaucrats want to preserve their jobs or expand their fiefdoms. Both of these desires promote the passage of more laws, of ever greater complexity, and a conservative "you can't blame me" approach. Often this means government ends up regulating things- like the internet- that it doesn't understand, with regulations that make no sense, or make things worse.

2. There's no real check on government. In theory elections are a check, but the government conducts the elections. This means that in every election the choices you can make are going to be limited by the choices the government finds acceptable. This manifests itself in such a variety of ways-- from the republican party changing rules on a day to day basis to thwart the Ron Paul campaign, to election fraud, to the fact that "disband the government" is never an option on any ballot. Naturally, of course the other branches that are supposed to be checks are filled with politicians or partisans put there by the parties they're supposedly keeping an eye on.

3. Once government gets in the regulation business, corruption is highly incentivized and never punished. For instance, if you're regulating the internet, you're highly incentivized to listen to the big media producers like the MPAA. Nobody is going to jail for passing legislation advised on by the MPAA and getting a campaign contribution from the MPAA. But is this not, at its base, corruption? Regulations in all industries tend to favor large corporations (who can afford to keep people on staff to manage compliance and who tend to influence the legislation to cause difficulty for would be competitors) and hurt smaller companies (for whom compliance hits the bottom line harder.)

4. Government simply doesn't have the bandwidth to address all these issues. Over time, government wants to regulate more and more and more areas, and there's really almost no stopping them (especially in the UK where they have less controls than the US's constitution.) There's thus never going to be enough bureaucracy to do everything that needs to be done, and in the end you often can't even get the government to answer questions about the regulations-- which are themselves contradictory. Politicians want to pass a law and move on, but bureaucrats don't want to ever get caught saying the wrong thing, and nobody has enough budget to provide the services they should to the industry they are regulating.