Monday, July 22, 2013

Putting parameters on libertarian utopias - or, Michael Lind channels the GMU oral tradition

I was reminded recently of one of my favorite James Buchanan (but not really Buchanan) lines, that "economics is the art of putting parameters on our utopias" when I read the beginning of the discussion between Michael Lind and Russ Roberts where he said "if you can't point to a single country out of nearly 200 sovereign states on this planet in 2013, that you approve of, then isn't your ideology fundamentally unworldly and utopian?"

The not-Buchanan quote could mean a lot of things in a lot of different applications, obviously, but one recent example has been Michael Lind's question to libertarians about why their ideas have not been tried. It was an excellent question. Lind is not an economist, but he could have been with that question because of its attention to the real world, its consideration of unintended consequences, and it's effort to put parameters on libertarian utopias.

For some reason, though, libertarians seem to have a terrible time tethering themselves to reality when it comes to evaluating their own ideas and the reaction to Lind was a great case in point. People were fuming and insulting to him, and often didn't really bother to grapple with the question.

The question is an important one. It is one thing to have a libertarian master plan in a treatise somewhere that looks great on paper, but if in practice it is (1.) not robust, or (2.) has unintended consequences then we've got to rethink the whole project. It's very difficult to get libertarians to really come to grips with this - they'll often dodge the problem altogether. Reagan, for example, identified as a "libertarian conservative", approved of Hayek, etc. etc. In practice, though, the Reagan administration was not what libertarians wanted to see. This should be a lesson in the public choice problems posed by libertarianism as it is actually practiced in the real world, but the reaction is usually to deny that libertarianism even came into the equation because they didn't like the results.

You might draw the conclusion from the Reagan experience, for example, that libertarianism is awful for the budget. And yet we never had a "Democracy in Deficit"esque critique of libertarianism from public choice theorists that I know of. In fact, public choice theorists often act as if public choice still vindicates libertarianism.

You might draw the conclusion that libertarianism opens the door to regulatory capture and crony capitalism. But if you try telling that to a libertarian they'll insist that because there was crony capitalism it clearly wasn't libertarianism in the first place!

With these kinds of arguments an evaluation of libertarianism isn't even possible. They assume their own conclusions. The question is, for example "does libertarianism result in crony capitalism", but the libertarian response is always "there is crony capitalism therefore this can't possibly be a case against libertarianism".

What the hell are we supposed to do with that?

Ideologies are complex beasts. Certainly we can contest all of this stuff and argue about it. But the more these problems are rationalized away as not being libertarian in the first place, the more libertarians bump up against the opposite problem of libertarianism being a pie-in-the-sky utopia that doesn't have any hope of being relevant in the real world.

Something's got to give here, and a good place to start is by taking that first Lind question more seriously.

I haven't gotten a chance to listen to the whole thing yet - if I do and I have more thoughts I'll share here. I'm not a huge Lind fan, but I do think he nailed it with that question and I was disappointed to see people attack him for it rather than provide a considered response.


  1. Somalia is currently experimenting with libertarianism as an organizing principle. Turns out that private sector transaction costs are higher than the Libertarians expected.

    Some might argue that Singapore is a Libertarian promised land but I don't see a lot of Libertarians moving there either.

    1. North Korea is currently experimenting with state control as an organizing principle. Turns out that a state controlled economy leads to famines.

      [Sorry Absalon, couldn't help it. But citing Somalia as evidence that libertarianism = bad is equally irrelevant. Besides, there are plenty of other African economies that are struggling w/o any experiments in "libertarianism."]

      No hard feelings, I hope. You're a smart guy, no need to recycle tired lines.

    2. What are you apologizing for?

      Isn't everyone pretty much in agreement that North Korea is a perfect example of why state control is awful? I don't get it. This is deeply relevant, isn't it?

    3. Apologizing for making a snarkier than usual comment. I generally dislike the hostile tenor of the blogosphere.

      Sure, everyone agrees that NK is a horrible example of state control. That's kind of my point. I think that bringing up NK as an example of why we should oppose Policy X that would increase govt spending or "control over the economy" in the US would be a pretty silly argument.

      So many ppl trot out the Somalia line as if it's some silver bullet against libertarianism. First, I doubt anyone besides Peter Leeson has spent even 10 min examining Somalia's actual circumstances. And second, does Somalia really tell us a whole lot about whether the *US* (or Europe) should move in a more libertarian direction (re: personal freedoms, education, health care, defense)? Leeson's work on pirates and Somalia seems interesting at a general level, but even I'd be pretty suspicious if he tried to give specific policy advice based on something he saw in Somalia.

      Basically, Somalia = strawman, as far as I'm concerned.

    4. Oh right, NK is definitely an awful example of any particular government policy, but I didn't think you were saying that.

      Somalia is, I think, an OK example of anarcho-capitalism. It's kind of tough because of the impact of the circumstances that gave rise to that situation, but maybe not because it's plausible to think that anarcho-capitalism will only ever emerge in a war-torn situation. And Somalia suggests that anarcho-capitalism is likely to result in the emergence of coercive warlords... which pretty much everyone but ancaps already realized.

      I would say the example isn't completely clean, but I'm not sure I'd call it a strawman.

    5. I'd say the use of Somalia is definitely closer to being a strawman than to providing any useful insight. The modern western democracy simply isn't possible without at least some tacit recognition in the rights of others. Absent the Enlightenment, I don't think western democracies would have happened. Given their most recent political history, I would be shocked to see even a social democracy working very well in Somalia (see the former USSR). I've not studied it in great detail but I do not think what is happening in Somalia is the result of the people deciding to go in the direction of anarcho-capitalism after having been steeped in Enlightenment era (and subsequent) rights-based thinking.

    6. What Steven said +1, esp. about the Enlightenment. You can't just copy-paste any institutional structure on non-Western peoples with totally different experiences and attitudes and expect to learn much about how said structure works in Western countries. Democracy has also proven to be not so robust in many African countries, yet I hardly think that says anything about the overall viability of democratic governance.

      Would democracy have even worked in Europe circa 1000 AD? Probably not--Europe as a whole wasn't ready for it until after the Commercial, Industrial, and Scientific Revolutions. On a practical level it wouldn't have worked b/c of low literacy, poor communication and transportation techs, and military threats from more militarily united entities. But that of course says nothing about whether democracy is appropriate for the Western world today.

      And as you are well aware, ancap is not the same as libertarianism. Ancap might be unworkable if imposed immediately (e.g. Rothbard's govt eliminating "button"), but that also tells us nothing about whether we should move in a libertarian direction or adopt certain libertarian leaning policies.

      For modern examples, I think Switzerland could tell us a lot about the benefits/practicality of decentralized governance and federalism (which I think should be embraced more widely as a 2nd best alternative to libertarianism; as Friedman said, it's important to be able to vote with one's feet).

    7. Right, this is why I said Somalia was not a clean example. The context of how anarcho-capitalism emerged is somewhat different. I think that's a long way from a strawman. I don't know, when people complain about it as a strawman it gives me the impression they're not thinking critically about their own views. Just like failed African democracies tell us about the weak-spots of democracy, failed African anarchism tell us about the weak spots of anarchism.

      Switzerland definitely tells us about the advantages of federalism, and we have lots of other good examples of that.

    8. "failed African anarchism tell us about the weak spots of anarchism."

      Sure, I'll accept that to some degree. But why is an example of anarchism always invoked in discussions about libertarianism? In my mind, there's an enormous gap btw minimal govt and no govt.

      Why is libertarianism always held to the supposedly "ideologically pure" extreme of anarchism? This seems like a double standard. To my knowledge, no modern example of direct democracy exists either. Is direct democracy workable or desirable? I really don't know (although direct democracy has worked very well in some contexts, such as democratic schools like Sudbury and Summerhill).

      But I would never in a million years think that the fact that direct democracy doesn't exist now is a good argument for why it wouldn't be desirable or practical. And I certainly would consider it a complete non-sequitur w.r.t the question of whether representative democracy is desirable or not.

    9. "Switzerland definitely tells us about the advantages of federalism, and we have lots of other good examples of that."

      Could you tell me some of the examples you have in mind? I'm very interested in this topic.

    10. 1. On why it's invoked - I don't know, ask Absalon. They're obviously related but I think I try to keep them distinct. I agree completely on the direct democracy example. It doesn't even really matter (to me - maybe it does to an advocate of direct democracy) that it doesn't exist because although I embrace democratic principles of government, I'm an advocate of constitutional republics, not direct democracies. They're different (just like libertarianism and anarchism).

      2. Well the U.S. obviously. Canada, Australia. I know Brazil and India are federal but I am less familiar with how to assess their performance. Speaking of African basketcases, Nigeria is a great example of a federal state with lots of problems which we could probably learn from and where it would be worth spending some time thinking about how many of their problems are related to federalism and how many are unrelated.

      Glad to hear you're interested - I am too. I think democracy and constitutionalism are widely recognized components for American success (among the public, I mean), but that federalism (at least since the mid 20th century) has been underrated. Some of that has started to change, of course.

    11. Are you familiar with the journal Publius? It's dedicated to federalism issues.

    12. Thanks for the tip on Publius (although I'm not affiliated with a school currently, so I won't be able to read it).

      Any book suggestions on federalism?

      Re: 1--yes, I realize you didn't bring up Somalia, but it's a *very* common response. It seems to carry lots of weight for many; perplexing, since I think it's 99% nonsense.

      Re: 2--US history would also seem to a fruitful area of research. Nigerian example is interesting, thanks. Would you say Switzerland is the most successful example of federalism? It seems to be the most decentralized (incidentally, with elements of direct democracy too).

    13. Since I'm not a political scientist I haven't had the opportunity to fully immerse myself in federalism. Aside from a general interest in the founding era, American history, and American history of thought I'm usually specifically interested in federalism with respect to some things that are probably better thought of as political economy questions in a federal framework:

      1. The fairly narrow, but to me very interesting efforts in the 1960s to rewrite the Maryland Constitution in a way that would have really empowered it to solve the social problems of the day without resort to the federal government. This goal of being independent of federal solutions was specifically discussed by the people involved. I'm interested in this because my great grandad was the president of the constitutional convention in 67/68. It failed the referendum vote.

      2. Devolution of a lot of the welfare state - lots of success with welfare reform and job training, and some initial success with health reform, but this there's a lot of resistance to this devolution in other areas (most recently, health reform). Right now I'm thinking a lot about the benefits of state minimum wages exclusively and eliminating the federal minimum wage. I've got a detailed outline and some data together for that project, but probably won't get to write anything until later in the fall.

      3. Fiscal policy and federalism. State balanced budget requirements and the trend towards offloading a lot of policy on the federal government has combined to ensure that states have been a big drag on the economy. I think a more functional federalism might help prevent this. At the same time, demand leakages across state lines may hamper that. I'm not sure how that works out in the end.

      4. Policies to attract businesses across state lines. Some of this is awful (special tax benefits for well connected big employers), but some of it is very good (general business friendly policies). I think state-level competition for business investment gets a bad name because of propaganda from old industrial states and confusion between the good kind of pro-business policy and the bad kind of pro-business policy.

    14. On Switzerland/US I think like Somalia it's a tough comparison. Switzerland has a lot of other things going for it so parsing out the impact of federalism is tough. Plus it hasn't been as entrepreneurial in its liberalism as the U.S., and I kind of like that about the U.S.

      But definitely both deserve to be called "successes" and federalism has at least something to do with the success in both cases.

      I like to think about what political institutions would actually work well in practice by thinking about the sorts of countries I'd personally like to live in. Switzerland is definitely on that short list. Switzerland, the U.S., Australia, Canada, New Zealand, Scandanavia.

      Singapore and Hong Kong are often on that short list for people. I'm sure that would be nice but I have this image of them as being crowded (I'm a suburbs kind of guy). When it comes to Asia I think I'd prefer South Korea.

    15. John S - Libertarianism does not merit any response beyond "tired lines". Libertarianism appears to be nothing more than an attempt to move the Overton window by staking out a position which in fact is completely unworkable in practice. When confronted with a Libertarian, one's choices are to engage with the Libertarian (which is like trying to nail Jello to the wall) or dismiss them with "tired lines". I choose the "tired lines" approach of pointing out that the Libertarians cannot point to a single successful application of their views.

    16. "I choose the "tired lines" approach of pointing out that the Libertarians cannot point to a single successful application of their views."

      You'd certainly agree that if one of these so called Libertarians you've conversed with can't even point to a single instance of freedom resulting in a positive outcome that it's fair to say these individuals aren't Libertarians?

    17. Daniel, I would agree that some (many?) libertarians / an-caps do not apply critical thinking to their views but I would also say that making the Somalia comparison isn't thinking critically about those views either. (For the record, I've said that I suspect that a large-scale, libertarian society would not be robust.)

      Absalon, if you mean Libertarian (political party) rather than libertarian (political theory) then I'd probably agree. But, the two are not the same. Whenever I see people make the claim that there are no examples of a successful application of libertarian views I wonder exactly what they mean. If they are referring to a large-scale government, see the comments above. If they are not, then I'm at a loss because there are elements of it all around us. Any time two people or groups engage on a voluntary basis it is, in a sense, 'libertarian'.

    18. re: "If they are not, then I'm at a loss because there are elements of it all around us. Any time two people or groups engage on a voluntary basis it is, in a sense, 'libertarian'."

      I think this is very, very wrong - in at least two senses.

      First, this is like saying communism works because child labor laws haven't turned out so bad. That kind of ignores the part of communism that everyone is concerned about just like this ignores the part of libertarianism that everyone is concerned about!

      Second, libertarians are quite obviously not the only people saying that voluntary engagements or transactions will have good results.

    19. Daniel, I understand your point - and that's perfectly fair. Do you think most people live their lives by what has been codified as law or by their own system of morals? I tend to think most Americans live by the latter. We follow the former when it isn't overly draconian but it is the latter that really matters.

    20. Daniel,

      Just curious: Do you feel that libertarianism can't be implemented within a constitutional republic or federalist framework? If not, then why do you often criticize libertarians? What specific libertarian policies/ideas do you oppose?

      Re: crony capitalism--one force which buttresses crony capitalism is the patent system, which disproportionately benefits mega-firms over SMEs. 1) Big firms can afford top notch in-house legal and patent application teams. 2) Patent trolls know this and thus disproportionately targets SMEs. 3) Big firms with large R&D depts are very likely to discover new techs first. But that doesn't mean the govt should grant them 20 year monopolies on using those discoveries.

    21. Re: "Michael Lind's question to libertarians about why their ideas have not been tried"--The historical window during which a libertarian country could have possibly arisen is extremely narrow (as in, a few decades).

      1) We can eliminate any pre-capitalist/pre-industrial society since highly coercive states were necessary to build and maintain the large irrigation systems needed to feed the population via taxation and corvee labor (this also eliminates the medieval feudal era; while serfs did have some limited mobility, it was nearly impossible to strike out on your own w/o a heavy plow and a team of oxen).

      2) With the advent of gunpowder weapons, libertarian political entities in Europe couldn't have survived militarily against strong central states that could mobilize large armies and fund them with massive tax bases. This eliminates the entire period until WWI.

      3) Monachies/lack of democracy. The 1848 revolutions completely failed (with the partial exception of France). Hans Herman Hoppe’s crazy contention notwithstanding, I think most libertarians will agree that the replacement of monarchies with democracy was a necessary prerequisite for libertarianism. It wasn’t until after WWII that most of the industrialized world consisted of democracies (and there were notable exceptions, like Spain).

      4) Rapidly rising postwar living standards. Lots of low hanging technological fruit: electronics, appliances, chemicals, plastics. Containerization. Computers. People in the industrialized world were living unimaginably better than previous generations. No surprise that there wasn’t a lot of agitation to politically rock the boat. This takes us through the 90s tech boom and housing bubble.

      But most of these conditions don’t apply now. The prospects for a libertarian turn, while not amazing, seem to be as good as they ever have been.

      To me, Lind criticism that a perfect libertarian society has not emerged in the past 20-30 years—one of the few windows when it might have been even possible—seems very premature. We're living in pretty much the only time a libertarian society is even conceivable! And it also ignores the fact that there have been examples of prosperous societies with small govts (US before WWI [7% total govt spending/GDP in 1900]; Singapore, HK, & Taiwan today in the low teens for tax/GDP) as well as politically popular movements toward smaller govt (Reagan, Thatcher) which one can argue were more successful than the previous progressive administrations.

    22. John S -
      Certainly libertarianism can be implemented in a constitutional republic. I'm not a proponent of just any ol' constitutional republic! I think there's a lot that the government can do to provide public education, a strong safety net, macroeconomic policy, public investments, etc. That's why I criticize libertarians.

      Agree that moving forward the prospects of libertarianism are better than they were. Actually in my opinion it's similar to the argument for why the prospects for stable socialism are better than they were (although the argument is inverted). Libertarianism is possible now because even the poor live pretty well relative to previous eras, so perhaps a system where inequality and lower growth will be a problem can still get along OK. By the same token, we're all wealthy enough now we can afford the luxury of egalitarianism which is why socialism may be more likely in the future too - inefficiency and lower growth is more tolerable than it would have been in the past.

      But I still think the robustness points raised by Lind's question are points that a lot more libertarians need to take al ot more seriously.

    23. "I think this is very, very wrong - in at least two senses."

      Daniel - I agree completely with the two points you make.

  2. Just because a society does not exist at the current moment does not mean such a society would be a utopia in the traditional understanding- perfection, cats and dogs living together.

    Certainly Buchanan did not see economics as forcing one to believe that the only possible societies exist currently. Economics instead shows that everything is a trade-off and by mathematical definition this eliminates the possibility of perfection/utopia.

    I think the jump from the opening line to the rest of the post is a stretch. Some very good points anyways.

  3. I think libertarianism has the same problem that liberalism or conservatism has - there is a gulf between the rhetoric that is spouted in their names and the actual policies that result. Reagan is a good example. Mr. Obama is another great reminder for civil libertarians. It would be hard for me to understand how libertarianism could lead to crony capitalism/regulatory capture, unless one misinterprets markets vs business and ends up idolizing big business (libertarians have fallen into that pit, for sure). Most of us think it's the institution of government that creates those things. So, it would seem that a "libertarian" politician would be a kind of paradox. I know that sounds like a True Scotsman kind of argument. It may just boil down to the impossibility of a government implementing a libertarian world, which might explain the absence of libertarianism in the world. And that certainly might make libertarianism impossible.

  4. The podcast was definitely worth listening to.

    I agree with this statement: " A lot of the stuff about the failure of America's K-12 system is pure propaganda." for the exact reasons he states. I also agree with him that we are likely spending too much money on education. We are spending close to 4 times as much as we did 50 years ago. I see educational shortcomings as more of a problem of whether individual families value education as well as various home life issues.

    I also agree with Lind that crony capitalism is prevalent in the industries mentioned: banking, housing, health care, and higher education. He half-jokingly referred to those as half of the economy. As I see it, these areas are taking much bigger bites out of paychecks as time goes on. When we have half (or at least a large part) of our economy walled off from the price reducing effects of competition, we should expect to have less spending power and to be more dependent on debt.

    " And that--whether they have a decent middle class lifestyle I think, that's the ultimate test, I think, of these different political philosophies. "

    I think his last statement presents a goal most would agree with, but I doubt that political philosophies will be given the opportunity to be tested.

  5. We ought to be careful to separate the long-term and the short-term. We all agree that often politicians won't do what they promise, that's not a point of difference between anyone. The important question is "How will things evolve over time?" Hayek argued that under Communism the "Worst will get to the top" eventually, over time that did seem to happen, though there were some exceptions. So, theories about these trends aren't clearly wrong.

    Take regulation as an example. The Public Choice school would argue that regulators become captured because their interests and the interests of the big businesses they regulate can become aligned. The burden of regulations lies heavier on smaller firms than on larger ones, so it benefits larger firms to encourage more regulation to hamper competition. The problem here is: "What's the alternative?" Saying "If a politician of my ideology were elected then they would clean-up regulator X" isn't helpful because it brings us back to the short-run question. We all agree that politicians mostly don't live up to their promises. Even if the regulator is "cleaned up" then if the public-choice argument above is correct then in a few years it will be nearly as bad as it was before. I'm not saying politicians have no power, just that their power can't be sensibly be compared with long-running trends.

    Suppose that instead of big regulators we have smaller ones. The problem then is that instead of making fewer rules those agencies may decide to make even cosier relations with businesses for financial reasons. I think this is what Daniel means when he says that smaller government may lead to more regulatory capture. Shrinking regulators without changing their scope is a dangerous idea (most libertarians would agree with me here), but not stupid in all cases.

    Instead, suppose that regulators were replaced by the courts. So, for example, FCC regs would still exist but as laws not regulations. Instead of the FCC running them civil courts would do it. A person could sue someone who they think has broken these laws, it would go to court and both sides could bring in expert witnesses. The problem with this is that it would cost a lot whenever something came to court. Small claimants wouldn't be able to sue, especially not over small issues. The courts would have to be much more steamlined than they are. I read recently an economist who claimed that the cost of legal proceedings is the main reason that the limitation on goods & services switched from courts to regulators in the late 20th century. It's a good theory. Public courts with open-testimony, fixed rules and proven procedures will be fairer than regulators acting with a great deal of discretion behind closed doors in most cases. In some contexts that advantage will offset the greater cost.

    Another possibility is competition. Lets suppose that the US were to split the FCC into two parts; FCC Alaska and FCC mainland. Now, the politicians of the Alaska could encourage their FCC to make their regs better to attract more investment. This does seem to work, continuing with the comms theme (it's what I know best), the European comms regulators have responded to competition. For example, several small countries offered special trial licenses for LTE. They did that to attract investment and in the hope that LTE deployment would come earlier to their country. But, that's a rather special case because footloose international capital was involved. Regulators have little incentive to remove burdens from established firms and having two of them creates more regulations for firms that must work with both. Still it has helped in some other cases too, such as sports car making in the UK.

    My overall point is that Pubic Choice arguments are reasonable, but in practice there has to be a good alternative institution. Libertarians aren't all ignorant of this. The argument is that evolution towards greater liberty should be undertaken by experimentation.

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