Friday, July 27, 2012

Generalizing my last post a little, or, "how liberals should talk to libertarians"

Allow me to generalize my last post with a little advice (take it or leave it) for those of you who, like me, find yourself "to the left of the right" (I say it that way because I find myself feeling more left some days than others). This is inspired by the fact that I agree completely with Gavin on the differences between Smith and neoclassical general equilibrium but would still say forcefully that Smith believed in a generalized invisible hand, guiding private interest toward public good.


So here it goes: Libertarians are simply wrong when it comes to many economic questions that society faces (they're also often wrong on economics as a scientific matter, but that's a different conversation entirely).

In addition to be wrong, libertarians also have a tendency to claim the power of markets as their own solution to the problem at hand. It is their solution, that's true. But just because they're wrong and you know they're wrong and they claim markets as their own doesn't mean you are obligated to downplay the value of markets.

There are lots of ways in which free markets can be a disappointment. Market power privileges the wealthy few, externalities simply give us the wrong solution in lots of cases, and asymmetric information burdens the disadvantaged. The fact that markets exist in a social context of reproducing families also means that disadvantages that are transmitted intergenerationally can be exacerbated by markets.

All of this is true.

But you can say forcefully that this is all true without denying that as a general principle, markets channel private self-interest into a public benefit and that therefore we need market economies to guarantee human flourishing.

I personally find it frustrating that liberals like Joe Stiglitz - who is not an enemy of markets - criticizes markets as short-hand for criticizing what is really a libertarian view of the role that markets play in the broader constellation of social institutions. Because that's really where the difference is: not a disagreement over the value of markets, but over the value of other institutions (in most cases, government).

This way of talking about markets that a lot of liberals have forfeits the whole discussion to libertarians, who are implicitly treating governments and markets as opposites. We shouldn't forfeit that point. That's the whole discussion.

Liberals are pretty consistently supportive of markets and government. If you are actually not a fan of markets then you're really a part of the illiberal left - you're getting into socialist territory - and that's a whole different can of worms. But most Americans on the left are liberals and they are in the liberal tradition of free markets and free government.

Some of them need to start acting like it, and not forfeit the whole debate to the libertarians.


  1. Two points.
    1. Those of us who see ourselves as "neoliberals", partial to markets more than progressives and socially liberal but not committed to crazy ethical views, are often sorted into either the libertarian or the progressive groups and suffer from stereotypes of those groups.
    2. Much of the frustration with progressives comes with their comfort with the economically uninformed. If progressives, neoliberals, and libertarians could come together supporting free trade, open borders, tax reform, and occupational licensing reform, billions of people around the world could be better off. Instead we get useless infighting.

  2. "Market power privileges the wealthy few"

    Why exactly is this a problem? I think you are familiar with the "if he produces it by on his own without aid from the state, then what is wrong if he is rich" argument Daniel.

    So why then do you see some individuals earning high income as opposed to the rest as a problem as you seem to allude to?

    I am just curious on the thinking here.

  3. There's a fundamental difference in how these allocators of goods exchange. The market adheres to meritocratic parameters and tends to encourage the highest possible production for the consumer. The state is, like it or not, an involuntary institution seizes its revenue from its citizens under threat of force. Furthermore, its direction of resources will be arbitrary from the angle of the consumers. Relegating large swathes of private, market activity to the supervision, direction, and inspection of faceless government bureaucrats is always against the interest of society as a whole.


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