Tuesday, August 21, 2007

The problems with being a Libertarian

As a general rule, I have always considered myself to be of a Libertarian bent. But the article at the above link, states some problems that need to be worked out. Some of the best lines
Jeff Friedman, editor of Critical Review. . . noted this problem in his compelling essay several years ago entitled "What's Wrong With Libertarianism?" In a nutshell, he observed that libertarians make a moral case for their philosophy (i.e., it is wrong for government to push people around) which they are unwilling to push to the extreme, namely, to the point where they argue that their system of governance would be best even if one could prove that people would be materially better off in some system of stronger government. At that point they switch to what we call consequentialism, and argue that not only is the libertarian system more just by virtue of its minimal coercion, but that it is also produces more prosperity for its citizens.

The problem, Friedman rightly observed, is that we have shown no such thing. To be sure, economists have done a good job of demonstrating that heavy government management of the economy reduces economic growth by destroying property rights and incentives. Nobody has shown, however, that a libertarian system of nearly non-existent government would make people better off. We have anecdotes, we have some notion that we can extrapolate from partial analyses of more ostensibly libertarian times at the turn of the century, and we have the rational profit-maximizer of economics -- but we do not have a methodologically rigorous study that can even explain, for example, the inescapable correlation between sizable government (say, 20-40% of gross domestic product) and sustained economic growth.

Okay, just because the theory isn't perfect, doesn't mean that it's wrong. I will have to think about this some more, but I agree that libertarianism has a strong and compelling moral argument. Now, we just need to refine the details.


Dave Budge said...


The essay ends with:

"In short, there is libertarianism, the philosophy of governance, and there is Libertarianism, the creed. The persistence of the latter interferes, I think, with the development of the former.

There are other problems. Specifically, aside from the lack of rigor and the religious fervor, libertarianism suffers from a lack of attention to practical politics, and a growing and well-deserved association with libertinism, which is (or should be) another bag altogether."

I have been saying for several years that the problem with Libertarians (rather than (l)ibertarians) is that they do lack any sense of pragmatism. Hence there is an "all or nothing" mentality with the party zealots that defies practical politics. That "religion" is the impediment to actually getting anything done vis a vis reducing the size of government, and the rest of us get broad brushed as members of the ideological pure (nut cases) even if we bring with us a more pragmatic approach to change.

But the idea that we can, in fact" prove that the market will "cure in all cases" is impossible inasmuch as there really are very few "free" markets. The best we can do from an analytical standpoint is to show more consistently that less regulated markets tend to work better than more regulated markets. But in comparison to systems where government determines the distribution of scarce resources we can demonstrably show a history of failure. So the logical syllogism held out as a fallacy by libertarian's detractors is: if A fails and B has not been proven to fail then B is the solution. I propose, however, that since B has not been proven to fail it may not be the best answer but an alternative worth pursuing if for nothing more than it being the most fair system of allocating resources (the moral argument, if you will.)

Steve said...

Dave, your brilliance as always overwhelms me. But, I have been thinking about this article for awhile, and I think that there is an answer to the problem of showing where government can be of assistance. Highways. For instance, if the free market was to develop highways across Montana, the costs would be impossible to recoup in any one persons lifetime.
I think that the role that government can play is to reduce those "frictions" that the free market is unable to deal with: i.e. highways across vast spances of open space.
By building the Interstate system through Montana, the government has facilitated commerce at less cost than the free market could. The reason being is that people who have never been to Montana are helping to subsidize the costs.
But the benefit is that Montanans are now able to participate in the economy in a way that they would not be able to do in a purely "Free Market" system.
So, the bottom line is that government can remove certain "frictions" that the free market cannot handle.

Dave Budge said...

Steve, the issues of "public goods" and natural monopolies are indeed problematic under strident libertarian ideology. That said, I don't think that government involvement in such violates certain brands of libertarianism - particularly minarchism.

But again, the theory posed by ideologically pure libertarians can not be tested even in this context. For example, what can we speculate the outcome might have been if the interstate highway system had not been built in Montana? Would economic evolution have provided a vibrant light rail system better suited to the transport of goods and people? Secondly, even if the time required to realize a return on capital is in excess of many generations, would that preclude a private enterprise - and the associate capital markets - from funding such a project? Italy, for example, is full of private freeways where the compensation source is limited to the tolls collected. The state of Indiana has just leased a huge part of their toll system to a consortium of European investors on a 99 year lease. Lastly, it's not only a possibility but a likelihood that the construction of such infrastructure would be achieved at substantially less cost if the profit motive were injected into the equation in a more robust fashion.

But all of this remains largely hypothetical given both the magnitude of building large infrastructure across the expanses of land with which the U.S. must deal and the history that we haven't done so to any degree.

But I think if we refer to Von Mises and Nozik we'll find room for the government to manage such projects without severely violating the tenets of liberty.

Just my opinion.

Steve said...

Okay, I have to admit that your's is the more correct answer. I am not an anarchist, but I don't know how far away from that level I feel comfortable with.
Personal experience with government leads me to believe that there is nothing that they can't make worse. But that doesn't mean that there is some use.