Friday, March 29, 2013

David Friedman is being far too interesting to talk with to let me get any work done

I may comment on this more, but this is an issue that interests me a great deal and I thought I'd except part of this conversation. Gene Callahan is also very good at highlighting these problems, FWIW:

David writes:
"On another subject, you write:

“It fits my story - I was conservative in high school, was a libertarian that dropped all the stuff I didn't like about conservatism when I moved into college, and as I learned more and more economics I became much less libertarian (some people may become more libertarian, but they probably have different starting points).”

It doesn’t fit mine. I was a classical liberal in high school, became a more extreme libertarian as I thought more about the question and learned more economics.

And I would expect, on average, that learning economics would make people more libertarian. The strongest argument against laissez-faire, although not the best, is the difficulty of seeing how a decentralized system can coordinate production. Understanding that is central to understanding economics, so learning it makes one more, not less, likely to approve of a laissez-faire system.

It’s true that there are more sophisticated economic arguments against laissez-faire, but there are also more sophisticated economic arguments against those arguments, most obviously public choice theory.

My expectation is consistent with my observation. Most economists are less libertarian than I am but more libertarian than other social scientists. And extreme libertarians in academia, although rare, seem to very often be economists."
I respond:
I think learning economics would make people value things like spontaneous order more. I find it grating that libertarians identify this so instinctively with libertarianism. Libertarianism and anarchism are examples of quite extreme social engineering in a lot of ways (obviously any given libertarian is going to vary in the extent to which this characterizes them - Hayek, for example, was very good at seeing the risk of things like this).

So I'd say if you came in not appreciating spontaneous order you ought to come out of economic education appreciating it a lot more. But that doesn't seem like quite the same thing as libertarianism to me. I may try to post on this this weekend, because I think the conflation of the two is pervasive.
I think it's wrong to think about something like public choice as a theory of why laissez faire works. Public choice is a theory about the behavior of public figures particularly as it relates to problems posed by social welfare theory. Libertarians that like public choice theory make certain public choice arguments, but non-libertarians use other types of public choice arguments (although it's often just called "political economy" in that case).

I think it's very dangerous to equate these positive ideas with normative allegiances.

David may not be familiar with stuff I've written in the past on libertarian social engineering, but I think most readers probably are. Libertarianism, in many renditions (as I noted, Hayek is [often] a very important exception), is very much a viewpoint that militates against spontaneous order, although it's more amenable to spontaneous order in some fields. Virtually any dedication to a radical reorientation of social institutions is going to have some tension with spontaneous order. I want to tinker around. I'm not terrified of social engineering. It's one of the neat things that we humans are capable - re-imagining our society and then doing something about it. But I don't think any of the changes I'm interested in making are anywhere near as radical or disruptive as what libertarians want to do.


  1. None of this is to say "libertarians aren't the real proponents of spontaneous order!".

    Of course they are - in their own way. And others are in other ways.

    Something I find interesting is that libertarians often don't even seem aware of the huge tensions their views have with spontaneous order.

    I feel like liberals and conservatives kind of know where the tension is for them. I don't think a lot of libertarians do.

  2. "I think learning economics would make people value things like spontaneous order more."

    So, do you think the free market could handle education and health care? I suspect you are opposed to school vouchers and completely privatized health care (correct me if I'm wrong).

    Even if unequal access to health care and education are problems, why do these need to be directly run by the government? We give food stamps to the poor; we don't have govt run supermarkets and cafeterias.

    1. School vouchers are fine by me. I don't know what you mean by "completely privatized healthcare", but given your reference to government run supermarkets I certainly don't think there should be government run hospitals.

      On health care I'd like to see a lot of state experimentation, an end to the differential tax treatment of employer provided benefits, a catastrophic public option available to anyone that wants to buy in, adequate infrastructure for HSAs (whatever that entails - I'm no expert), decent premium subsidies for low income families, and deregulation of the health workforce.

      Been a while since we've talked about health care on here but that's more or less my stance.

    2. Good points. I must say, you seem a lot closer to the libertarian end of the spectrum than the avg voter!

    3. Yes, John S, I was going to say the same thing. Obviously, the difference being in the supporting of some state-administrated programs, but I think that his opinion on this is far less state-centric than many of his cohorts. Now if we could just get him to change his stance on the police-state and imperialism, we'd be all good. ;)

  3. I think learning a little economics makes more libertarians, and learning a little more makes them not, though I wouldn't put it past many to see through the little bit that did. Real world experience can do that.

    1. Ya I think that's a good point.

      But it also matters a lot what you bring to the table. If you come to the table skeptical of markets of course you're going to look more like a libertarian in the end, even if libertarians are not exclusive in their appreciation of the market. If you come to the table with a libertarian mindset anyway economics is very likely to push you beyond that.

  4. "I think it's wrong to think about something like public choice as a theory of why laissez faire works. "

    That wasn't my point. Public choice theory is, among other things, a theory that shows why the alternative to laissez-faire doesn't work.

    One standard economic argument against laissez-faire is to point out that, under various circumstances, it gives outcomes inferior to the outcome that could be produced by a perfectly wise and benevolent central planner. That implicitly assumes a philosopher king model of government in which government regulators, given suitable powers, will produce the superior outcome, or at least a superior outcome. Public choice theory shows that, if we incorporate in our theory of political actors the same assumptions that go into our theory of economic actors, there is no reason to expect them to produce a superior outcome--indeed, I would argue, some reason to expect them to produce an outcome worse than that produced by an imperfect market. That's the subject of a talk I sometimes give on market failure considered as an argument both for and against government--you can find recordings of it on my web page.

    1. Well like I said in the post I think it's better to think of a public choice argument like this as a theory of the behavior of public officials.

      What that theory has to say about laissez faire is actually ambiguous. It depends on the incentives faced by public actors and the institutions shaping their actions. Any ultimate evaluation is also going to have to depend on the value we place on certain things. Someone may still reject laissez faire and you or I may embrace it if they value what the public sector is able to accomplish highly.

      In other words, I think it's important to keep normative and positive questions separate here.

      Public choice theory is positive science. Too often its treated as normative.

    2. I'm not sure if you are not following my point or if I am missing yours. Public choice theory is economic theory about people interacting in the political market. The alternative to laissez-faire is government intervention of some sort, whether regulation, full scale socialism, or some other form of intervention. So public choice theory is relevant to the choice between laissez-faire and the alternative--it takes a candidate to beat a candidate.

      If you analyze people interacting in the political market with our standard assumptions--rational self-interested actors--it is pretty close to impossible to conclude that they will act to maximize total social benefit, at least short of a world of zero transaction costs, and in that world laissez-faire is perfect too. If you look at the source of market failure--individuals making decisions most of whose net costs they do not bear--it should be obvious that that is the normal situation in the political market, a special case in the private market. So we would expect market failure--individual rationality failing to produce group rationality--to be more common in the former than in the latter.

      To put it differently, we have a first approximation of the private market which many but not all private markets fit tolerably well in which it does produce the optimal result. We have no equivalent model for the political market--a fact revealed by public choice theory.

    3. re: " Public choice theory is economic theory about people interacting in the political market. The alternative to laissez-faire is government intervention of some sort, whether regulation, full scale socialism, or some other form of intervention. So public choice theory is relevant to the choice between laissez-faire and the alternative--it takes a candidate to beat a candidate."

      Agree with all that.

      My disagreement with the second paragraph is that the ultimate conclusion comes down depending on the constitutional arrangements you have in place structuring the state and the comparative burden of the remedies you can incentivize a public actor to reasonably attend to vs. the obvious problems introduced by public actors and elaborated on by public choice theory.

      The broad acceptance of public choice theory and political economy generally (as I said at some point - a lot of people do public choice theory and it gets called either "public economics" or "political economy") by people who think there are worthwhile things for the government to do makes your strict characterization of it a bit of a puzzle for me.

    4. Can you describe a constitutional arrangement that results in something close to the philosopher king model which was implicit in the standard economic critiques of laissez-faire as they existed in the 1960's? I think they still exist, but I'll take that as an example of the argument pre-public choice.

      I wasn't claiming that public choice theory proved anarchy was the right answer--it doesn't. I was responding to your claim that knowing economics moved one away from libertarianism. That's false at the first step--understanding decentralized coordination moves you towards libertarianism, because not understanding it is the strongest reason for rejecting laissez-faire. It's true at the second, because the analysis of market failure shows that laissez-faire sometimes produces sub-optimal results. It's false at the third, because applying that analysis to political institutions shows that the same thing is true of them, so the previous step doesn't really demonstrate their superiority.

    5. re: "Can you describe a constitutional arrangement that results in something close to the philosopher king model which was implicit in the standard economic critiques of laissez-faire as they existed in the 1960's?"

      I can't imagine we can generate a philosopher king, can we? I can't think of a way. This is precisely why we advocate limited government, right?

      I think people overblow the "benevolent dictator" thing. It's a placeholder in a model. If you read Pigou and all this old literature you're referencing he went on at length about what we today call "public choice" problems. But if you're going to explain the concept of externalities to someone and think about the problems it raises, it seems reasonable to first bracket off other concerns.

      Does a benevolent dictator or a philosopher king actually exist? Of course not.

      re: "I was responding to your claim that knowing economics moved one away from libertarianism."

      Well it moved me away from libertarianism but I was already there. See my parenthetical in that sentence. I said it might move some people towards libertarianism. The broader point there was about academia in general - that it makes people less libertarian/conservative (the discussion was about why there are so few conservative/libertarian professors and that was one answer).

    6. If we could do what you're looking for - develop a constitution that gives us a philosopher king - then why isn't anyone proposing such a constitution? It sure sounds nice to me! I have my doubts...

    7. My point was precisely that we couldn't, that public choice theory points out that we couldn't, and that the standard economic argument against laissez-faire depended on the implicit assumption that we could.

      The form of the argument was "the unregulated market produces a result less good than could be produced if people did other things, therefor the government should intervene to make people do those other things." That depends on the unstated assumption that the government, if it has the power, will intervene in the right way. Implicitly that was the philosopher king assumption.

      To rescue the argument, you need to use public choice to show that some constitutional scheme will produce a government close enough to the philosopher king so that the interventions will, on average, improve on the imperfect outcome of the unregulated market instead of making it worse. In a world where tariffs continue to be the norm two centuries after Ricardo worked out the theory of comparative advantage, where the U.S. government continues to spend large amounts of money to increase the price of food,you may find doing so a bit of a challenge.

      Hence my third step.

  5. "Libertarianism and anarchism are examples of quite extreme social engineering in a lot of ways..."

    You keep on trying to frame your narrative that way and we'll keep on ignoring you.

    1. When you comment you're not being very successful at ignoring me :)

    2. The "Case Against Anarchy" you (Jonathan) link to doesn't actually present an argument against anarchy, merely arguments against being certain that anarchy is the best set of institutions and against trying to get to anarchy instantly--both of which I agree with, and neither of which is inconsistent with being an anarchist.

    3. But, if you knew that there was a non-anarchy set of institutions that would make you (us/society) better off, would you still be an anarchist? Otherwise, would you still be such a certain anarchist?

    4. Depends how much better off. If I thought anarchy would work catastrophically badly and some alternative would work pretty well, I would no longer be an anarchist. For marginal differences, I would be influenced by moral arguments against government.

      The piece you linked to, of course, does not demonstrate that there is a non-anarchy set of institutions that would make us better off, merely speculates that there might be. Part III of my first book, still in print and also available as a free pdf on my web site, sketched the reasons not to expect that there is.

  6. It is hilarious to see fools talk about laissez faire or spontaneous order or Public choice theory over the Internet which would not exist if people actually paid attention to such BS and mendacity.

    All three are junk thinking. Take a look at a couple of coming technologies.

    1. Driverless cars and all the standards that are going to have to be adopted, from roll out, licensing,etc. to communication between the vehicles. What will be needed will be smart, effective government, which we once had.

    2. Drones---same

    3. Mandatory real time medical monitoring.

    Here is the newest. Scientists in Switzerland are finalising work on a new implant that can monitor the levels of chemicals in the blood and send vital information to smartphones about a person's health.

    Now, people are going to want this and they will want it to work everywhere. And, second, the wise taxpayer will want everyone else to have one because it cuts costs. Why, as a taxpayer, should I foot the bill for heart attack (@150K +/-), when such can be prevented with early monitoring?

    I could go one, but the dorm room BS session here doesn't remotely start a serious conversation.

  7. Yeah Daniel's interpretation of spontaneous order is odd, to say the least. Whenever he uses it just substitute "status quo".

    Where as what I have in mind, or other commenters that have tried to explain, is the rate and kind of adaptation for a given social institution. Put differently, different institutions exhibit different degrees of spontaneous order both in the sense of how quickly adaptation occurs and the way in which organization is selected.

    With a market institution you're generally getting faster adaptation and a different form of adaptation than you will with a democratic institution (for example, in the production of some good). A democratic institution is slowly updated via political channels and voting, and it's not subject to the profit motive. If you just want to use the term "spontaneous order" as a binary adjective, then fine, you can describe both of these institutions - in fact any institution - as spontaneously ordered. I don't find that very meaningful and I think it largely ignores the whole point being made by those who use it.

    1. Well not "status quo" because you could have status quos that are centrally planned. The status quo in the Soviet Union certainly wasn't a spontaneous order.

      Spontaneous order does not have to mean anarchy (although you might think - under some conditions - of anarchy as a spontaneous order. I'd imagine those are very unusual conditions indeed but I haven't thought much about that specific question).

  8. "The status quo in the Soviet Union certainly wasn't a spontaneous order."

    It might help, for those of us who are not long term readers of your blog, if you explained what you mean by a spontaneous order. The status quo in the Soviet Union was an outcome of the political market in Russia--a market whose possible moves included killing people. In what sense was that less a spontaneous order than, say, the current political system of the U.S., or that of 18th c. England, or ... ? It wasn't imposed from outside--it was the result of the interaction of the individuals in that particular society.

    1. Well sure - any open system facing the pressures of exogenous forces can, from another perspective, be a closed system. And people make and execute plans in spontaneous order - so it's not just the emergent properties of the catallaxy - we are dealing with a spectrum depending on the nature and extent of those plans.

      But it seems to me the relevant definition in the Hayekian sense is the unplanned order that emerges in a community where the members respect each others rights to pursue their own plans, including the results of collective and individual efforts. The fact that human beings in a community like to figure things out collectively rather than individually means that this may not satisfy someone like Lysander Spooner, but that doesn't particularly bother me.

      It's clearly a spectrum to some extent. It may be an ideal type... I'd have to think about that. But the fact that order emerges out of violence and imposition of plans may be interesting in its own right (certainly that sort of order is relevant if you want to understand human society!) but it's not the sort of Hayekian spontaneous order that I think most of us have in mind.

      Now the Hayekian spontaneous order obviously isn't "what happens under anarchy" either.

  9. "The fact that human beings in a community like to figure things out collectively ..."

    All human beings in that community--every single one? If the majority of the community believe that homosexuality is sinful and executes anyone who practices it, does that count as a spontaneous order in your sense? If 95% of the community agree?

    Or in other words, how can it be true both that members respect each others individual rights to pursue their own plans and that they respect community efforts to pursue plans which might be inconsistent with the plans of some individuals?

    1. Well one need not get as salacious as homosexuality and execution to give an anarchist heartburn. The common law system is widely identified as a spontaneous order, and common law certainly imposes upon individuals in a way that many would prefer it didn't. We can amp it up to executing homosexuals if you really want to, but I think that gets is into questions of ethics and misses the fundamental point.

      Spontaneous order is an order that emerges when decisions and knowledge from a wide variety of sources coalesce into some over-arching order. The trouble with the Soviet Union as an example of spontaneous order is that that's not what was going on. Structure was imposed by a relatively narrow set of individuals. That's not to say we can't talk about an emergent order coming out of violence in political markets, but that doesn't seem to be what most people have in mind, so I'd personally bracket that interesting question off.

      There's no definite ethical content to a spontaneous order. Certainly we look at past instances and wince at what we consider to be unethical. Certainly in the future they'll do the same. Ethics seems to be a different question and one that I don't personally feel qualified to speak to analytically (I can muse on a few things - how I approach ethics - but that's all it would be).

      Is a spontaneous order automatically more ethical than a centrally planned order? No. Is it probably an ideal type and in reality exists on a spectrum, and is probably in the "I'll know when I see it" category with pornography? Yeah. In fact I believe Bruce Caldwell made that point at some point.

      This is why I said it's not a Lysander Spooner definition, it's a more Hayekian definition. If you want the Spooner version then don't hold your breath. Everyone imposes on everyone else in some way. To me, that doesn't seem like a very useful conceptualization of it, just like the point that even violent political markets have an internal order to them doesn't seem particularly useful.

    2. The key element, I think, is that the order comes from relatively widely distributed plans, actions, and knowledge rather than relatively centralized plans, actions, and knowledge.

      You can say you'd prefer to use the term for a minimalist state where all assent, but then I'd just come up with another term. As it stands people understand things like common law to be examples of spontaneous order so it seems to me best not to confuse matters by injecting Spooner or Nozick type themes into the term.

    3. Need to close up shop for tonight and get some work done - this has been really enjoyable.

  10. I'm not saying how I would prefer to use the term--it was your term, not mine. I was talking about a decentralized solution to the coordination problem when you introduced it.

    If I understand your usage, the Soviet Union would qualify if its design had come out of a civil war where lots of different people with different ideas engaged in conflict, propaganda, etc., and eventually that design emerged from their decisions and knowledge--which I think is pretty much what happened. If that isn't right, perhaps you could explain. Does what come out have to continue using the decisions and knowledge of lots and lots of people to qualify?


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