Opinion from a Libertarian ViewPoint

Posts Tagged ‘markets’

What libertarianism has become and will become — State Capacity Libertarianism

Posted by M. C. on March 25, 2020

The comments in the linked article are as enlightening or in the case of the post itself-entertaining- as the post.

by  Tyler Cowen

Having tracked the libertarian “movement” for much of my life, I believe it is now pretty much hollowed out, at least in terms of flow.  One branch split off into Ron Paul-ism and less savory alt right directions, and another, more establishment branch remains out there in force but not really commanding new adherents.  For one thing, it doesn’t seem that old-style libertarianism can solve or even very well address a number of major problems, most significantly climate change.  For another, smart people are on the internet, and the internet seems to encourage synthetic and eclectic views, at least among the smart and curious.  Unlike the mass culture of the 1970s, it does not tend to breed “capital L Libertarianism.”  On top of all that, the out-migration from narrowly libertarian views has been severe, most of all from educated women.

There is also the word “classical liberal,” but what is “classical” supposed to mean that is not question-begging?  The classical liberalism of its time focused on 19th century problems — appropriate for the 19th century of course — but from WWII onwards it has been a very different ballgame.

Along the way, I believe the smart classical liberals and libertarians have, as if guided by an invisible hand, evolved into a view that I dub with the entirely non-sticky name of State Capacity Libertarianism.  I define State Capacity Libertarianism in terms of a number of propositions:

1. Markets and capitalism are very powerful, give them their due.

2. Earlier in history, a strong state was necessary to back the formation of capitalism and also to protect individual rights (do read Koyama and Johnson on state capacity).  Strong states remain necessary to maintain and extend capitalism and markets.  This includes keeping China at bay abroad and keeping elections free from foreign interference, as well as developing effective laws and regulations for intangible capital, intellectual property, and the new world of the internet.  (If you’ve read my other works, you will know this is not a call for massive regulation of Big Tech.)

3. A strong state is distinct from a very large or tyrannical state.  A good strong state should see the maintenance and extension of capitalism as one of its primary duties, in many cases its #1 duty.

4. Rapid increases in state capacity can be very dangerous (earlier Japan, Germany), but high levels of state capacity are not inherently tyrannical.  Denmark should in fact have a smaller government, but it is still one of the freer and more secure places in the world, at least for Danish citizens albeit not for everybody.

5. Many of the failures of today’s America are failures of excess regulation, but many others are failures of state capacity.  Our governments cannot address climate change, much improve K-12 education, fix traffic congestion, or improve the quality of their discretionary spending.  Much of our physical infrastructure is stagnant or declining in quality.  I favor much more immigration, nonetheless I think our government needs clear standards for who cannot get in, who will be forced to leave, and a workable court system to back all that up and today we do not have that either.

Those problems require state capacity — albeit to boost markets — in a way that classical libertarianism is poorly suited to deal with.  Furthermore, libertarianism is parasitic upon State Capacity Libertarianism to some degree.  For instance, even if you favor education privatization, in the shorter run we still need to make the current system much better.  That would even make privatization easier, if that is your goal.

6. I will cite again the philosophical framework of my book Stubborn Attachments: A Vision for a Society of Free, Prosperous, and Responsible Individuals.

7. The fundamental growth experience of recent decades has been the rise of capitalism, markets, and high living standards in East Asia, and State Capacity Libertarianism has no problem or embarrassment in endorsing those developments.  It remains the case that such progress (or better) could have been made with more markets and less government.  Still, state capacity had to grow in those countries and indeed it did.  Public health improvements are another major success story of our time, and those have relied heavily on state capacity — let’s just admit it.

8. The major problem areas of our time have been Africa and South Asia.  They are both lacking in markets and also in state capacity.

9. State Capacity Libertarians are more likely to have positive views of infrastructure, science subsidies, nuclear power (requires state support!), and space programs than are mainstream libertarians or modern Democrats.  Modern Democrats often claim to favor those items, and sincerely in my view, but de facto they are very willing to sacrifice them for redistribution, egalitarian and fairness concerns, mood affiliation, and serving traditional Democratic interest groups.  For instance, modern Democrats have run New York for some time now, and they’ve done a terrible job building and fixing things.  Nor are Democrats doing much to boost nuclear power as a partial solution to climate change, if anything the contrary.

10. State Capacity Libertarianism has no problem endorsing higher quality government and governance, whereas traditional libertarianism is more likely to embrace or at least be wishy-washy toward small, corrupt regimes, due to some of the residual liberties they leave behind.

11. State Capacity Libertarianism is not non-interventionist in foreign policy, as it believes in strong alliances with other relatively free nations, when feasible.  That said, the usual libertarian “problems of intervention because government makes a lot of mistakes” bar still should be applied to specific military actions.  But the alliances can be hugely beneficial, as illustrated by much of 20th century foreign policy and today much of Asia — which still relies on Pax Americana.

It is interesting to contrast State Capacity Libertarianism to liberaltarianism, another offshoot of libertarianism.  On most substantive issues, the liberaltarians might be very close to State Capacity Libertarians.  But emphasis and focus really matter, and I would offer this (partial) list of differences:

a. The liberaltarian starts by assuring “the left” that they favor lots of government transfer programs.  The State Capacity Libertarian recognizes that demands of mercy are never ending, that economic growth can benefit people more than transfers, and, within the governmental sphere, it is willing to emphasize an analytical, “cold-hearted” comparison between government discretionary spending and transfer spending.  Discretionary spending might well win out at many margins.

b. The “polarizing Left” is explicitly opposed to a lot of capitalism, and de facto standing in opposition to state capacity, due to the polarization, which tends to thwart problem-solving.  The polarizing Left is thus a bigger villain for State Capacity Libertarianism than it is for liberaltarianism.  For the liberaltarians, temporary alliances with the polarizing Left are possible because both oppose Trump and other bad elements of the right wing.  It is easy — maybe too easy — to market liberaltarianism to the Left as a critique and revision of libertarians and conservatives.

c. Liberaltarian Will Wilkinson made the mistake of expressing enthusiasm for Elizabeth Warren.  It is hard to imagine a State Capacity Libertarian making this same mistake, since so much of Warren’s energy is directed toward tearing down American business.  Ban fracking? Really?  Send money to Russia, Saudi Arabia, lose American jobs, and make climate change worse, all at the same time?  Nope.

d. State Capacity Libertarianism is more likely to make a mistake of say endorsing high-speed rail from LA to Sf (if indeed that is a mistake), and decrying the ability of U.S. governments to get such a thing done.  “Which mistakes they are most likely to commit” is an underrated way of assessing political philosophies.

You will note the influence of Peter Thiel on State Capacity Libertarianism, though I have never heard him frame the issues in this way.

Furthermore, “which ideas survive well in internet debate” has been an important filter on the evolution of the doctrine.  That point is under-discussed, for all sorts of issues, and it may get a blog post of its own.

Here is my earlier essay on the paradox of libertarianism, relevant for background.

Happy New Year everyone!

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Markets Rely on Accurate and Honest Information — But Governments Want the Opposite | Mises Wire

Posted by M. C. on October 6, 2019

In contrast, when governments displace voluntary arrangements with coercive impositions, lies displace truth in two ways. Not only is the competition to get political power based largely on misrepresentations, but government’s coercive impositions also replace the truth revealed in voluntary market behavior with lies. What is the effect on society? It isn’t pretty.

…The reason people don’t always communicate truthfully is that our reason serves our self-interest. Sometimes we perceive a strategic advantage at other people’s expense from intentionally deceiving them. Our words are also often ex post rationalizations to ourselves and others of why whatever we chose or did was a good idea. But that often makes what people say a frail reed to rely upon. And when political power is involved, the incentives for such deception and self-delusion are put on steroids, because the payoffs are far greater when backed by government’s coercive power.

As a consequence, accurate information about the issues most important to our ability to co-operate with others is often among the scarcest and most valuable of goods. Making it worse, the unknowably vast amount of potentially useful information—the infinite permutations of who, what, when, where, why and how–exceeds any individual or group’s ability to comprehend and integrate it. But voluntary market arrangements based on private property rights provide a powerful mechanism of cutting that problem down to manageable size.

Most of the time, we don’t really want to know all the details that might affect our productive interactions with others. We mainly want to know “how much”–what are the tradeoffs others are willing to make between goods, services, current versus future consumption, labor versus leisure, etc. The reason is that, regardless of their specific determinants, others’ willing tradeoffs determine our possibilities and constraints in any society that honors members’ self-ownership.

Expanding the mutually beneficial arrangements that are possible by accurately revealing such information is a central aspect of effective social coordination, as the seminal works of Ludwig von Mises and Friedrich Hayek have made clear. No central planners knows the tradeoffs each individual would make; only the individuals involved know that information. That requires a process to honestly reveal that information to those who will make choices regarding it, or the information will be effectively thrown away, along with the societal wealth creation it would enable.

Markets provide that honest information. While what people say may often be misleading to themselves and others, people reveal the truth about the tradeoffs they are willing to make when they engage in un-coerced exchange. What you do is often far more truthful than what you say.

Regardless of your words, if you actually buy a product for $10 out of your pocket, you reveal that you believe it is worth at least $10 to you; similarly, if you sell a product for $10, you reveal that what the money could purchase was worth more to you than the product. And those choices reveal valuable information about the real alternatives available to those who might choose to deal with you. In contrast, since politics is based on what people say rather than what they actually do, it often short-circuits our central mechanism for discovering the truth to better enable our cooperative potential.

In fact, a vast array of government interference in individuals’ voluntary exchange relationships substitutes lies for the truth that would otherwise be revealed. And in a world where relative scarcities are frequently the primary things we want to know from others, to combine with our more intimate knowledge of ourselves and our situations, the harm is massive.

Consider price ceilings, like rent controls. In their absence, market rents tell you the prices at which you can find apartments, reflecting the opportunity costs landlords face. But rent controls impose a price divorced from landlords’ opportunity costs, and at which many will often be unable to successfully rent an apartment. That is, it misinforms people that the opportunity costs are cheaper than they really are, and in the process makes knowledge of the terms at which apartments can generally be successfully rented largely disappear.

Price floors, like minimum wages, act in a parallel manner. In their absence, market wages tell you the prices at which you can generally find jobs. But a minimum wage dictates a price divorced from prospective workers’ opportunity costs, and at which many will often be unable to successfully get jobs. That is, it misinforms people that unskilled labor’s opportunity costs are higher than they really are, and in the process makes the knowledge of the terms at which jobs can generally successfully be gotten largely disappear.

Taxes, which are the price of the artificial input, “government permission to produce and sell,” reflecting coercively imposed government burdens rather than opportunity costs of inherently scarce goods and services, tell buyers that products are scarcer than they really are. The same is true of import restrictions, like tariffs and quotas, which raise prices above opportunity costs. The burdens of government regulations and mandates also act like taxes. Government barriers to entry and operation in markets similarly raise prices above what relative scarcity would dictate. All of these result in artificially higher prices, underuse and waste, compared to free markets.

Subsidies act in a parallel manner to taxes, but in the opposite direction. They communicate to prospective buyers that products are less scarce than they really are, leading to artificially low prices to consumers, overuse and waste, compared to free markets.

Not only do voluntary market interactions better reveal the truth about relative scarcities through pricing, they allow more accurate evaluation of other aspects of trading, such as product and service quality, than government.

The key (though often ignored) factor is repeat business. The usual scare stories to justify the “need” for government regulation involve one-time interactions, in which others can gain by “cheating” on what they promise. But the relevant question is not whether they can, but whether it is in their interest to do so. We don’t need government protection against things people will choose not to do, even if they could. And since almost everyone we deal with economically wishes to continue in business, effects on future business (directly, as when current customers refuse to deal with such suppliers in the future, and indirectly, through reputation effects on other current and prospective trading partners) act as a performance bond against misbehavior, leading to far better outcomes than the scare stories imply. As students of game theory recognize, repeated games generate very different strategies than one-shot games.

Consider an example. I can cheat you today by providing lower than claimed quality, and doing so would generate $1 million in increased profits for me. If it would leave my future business relationships unchanged, I have an incentive to do so. However, what if I expect the resulting damage to my reputation will lose me more than $1 in future discounted profits? I can cheat you, but I won’t because I have no incentive to. The problem in this case is solved by markets’ reputation mechanisms. Even if the future losses don’t completely eliminate my incentives to cheat, they sharply reduce them, letting much of the air out of the “we need government regulation to protect you” balloon.

This mechanism, while ignored by “nothing can be done if the state doesn’t do it” acolytes, is far from new. For instance, the famous Maghribi traders of Northern Africa relied on reputations to deal with problems in international trade in the 11th century…

In contrast, when governments displace voluntary arrangements with coercive impositions, lies displace truth in two ways. Not only is the competition to get political power based largely on misrepresentations, but government’s coercive impositions also replace the truth revealed in voluntary market behavior with lies. What is the effect on society? It isn’t pretty. And even though it is an essential aspect of government intrusion into citizens’ affairs, not a single moral or ethical system endorses lying. Lies will not set you free. Not only does the truth set us free, but freedom in our cooperative endeavors reveals truths we have no other way of knowing.

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Thomas Sowell Quote: “Government central planning means ...




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On the American Ideology – LewRockwell

Posted by M. C. on April 30, 2019

Now, I tell you no secret when I admit that I hold this for a massive pile of rubbish…


Translated from German by Ohad Osterreicher[1]

“We paint the world to ourselves as we like – until everything breaks down and no longer holds.”

We live in the age of the American Empire. It can be that this empire will someday crumble. In the foreseeable future, however, it is here to stay, not on account of its military strength but first and foremost because of its ideological power. For the American empire has achieved something truly remarkable: the internalization of its core belief system as an intellectual taboo into the minds of most people.

Granted, all states rest upon aggressive violence, and the USA is no exception. The United States as well do not hesitate to annihilate everyone who opposes their legislative despotism. Though the USA had thus far employed little actual violence to have its orders submissively followed because the overwhelming majority of the population and especially of the opinion-forming intellectuals have accepted the system of values and convictions which makes up the American empire.

According to the official, USA approved belief system, we are all equally intelligent and reasonable people, who are confronted with the same “harsh reality” and are bound to the same facts and truths. Of course, it is true, that even in the age of the American empire, in the USA, people do not live in the best of all worlds. There are many more problems to be solved. Though with the American system of a democratic state, humanity has found the perfect institutional framework which makes the next step in the direction of a perfect world possible; and if only would the American system of democracy takeover worldwide, would the way to perfection be clear, smooth and free.

The single legitimate form of government is democracy. All other forms of government are worse, and any government is better than none. Democratic states like the USA are of the people, by the people and for the people. In democracies no one rules over the other; instead, the people rule over themselves and are thus free. Taxes in democratic states are therefore contributions and payments for governmentally provided services; accordingly, tax avoiders are thieves, who take without paying. To provide shelter for fleeing thieves is thus an act of aggression against the people, from whom they are trying to escape.

Though there are still other forms of governments around the world. There are monarchies, dictatorships, theocracies, and there are feudal landowners, tribes, and warlords. And for this reason, democratic states often must necessarily deal with non-democratic states. Eventually, all states must be converted to the American ideal, because only democracy allows for a peaceful and continual change for the better.

Democratic states like the USA and its European allies are inherently peaceful and do not wage war against each other. If they must fight any wars all at, then these are preventive wars of defense and liberation against aggressive and undemocratic states, that is, just wars. All countries and territories that are presently in war with or occupied by American troops or its European allies – Afghanistan, Pakistan, Iraq, Libyan, Syrian, Sudan, Somalia and Yemen – were therefore guilty of aggression and their war waging and occupation on behalf of the democratic West were an act of self-defense and liberation. However, there is still much to be done. Especially Russia and China still pose a huge threat and must be liberated, in order to make the world finally safe.

Private property, markets, and profits are useful institutions, but a democratic state must ensure that with the appropriate legislation, private property and profits are acquired and used in a socially responsible manner and that markets function efficiently. Moreover, markets and profit-seeking entrepreneurs cannot produce public goods and are thus incapable of satisfying any social needs. And they cannot take care of the truly needy. Only the state can take care of social needs and the less fortunate. The state alone can, through the finance of public goods and aid to the poor, increase the public welfare, and diminish poverty and the number of the needy, if completely not eliminate.

Especially the state has to put the private vice of greed of the pursuit of profit under control. Greed and the pursuit of profit were the leading causes of the most recent large financial crisis. Reckless financiers generated an irrational exuberance among the public, which ultimately had to crash into reality. The market was wrecked, and only the state stood ready to save the day. Only the state, through appropriate regulation and supervision of the banking industry and financial markets, can prevent such a thing from happening again. Banks and companies went bankrupt, yet the state and its central banks held ground and protected the money and jobs of the workers.

Advised by the leading and best-paid economists in the world, states and especially the USA have discovered the causes of economic crises and realized that in order to get out of an economic mess, the people must simultaneously consume more as well as invest more. Every cent under the mattress is a cent withheld from consumption and investment, which in turn impairs future consumption and investment expenditure. In a recession, spending must first of all and under all circumstances be increased; and when the people do not spend enough of their own money, the state has to do it instead. Prudently, states have this option, for their central banks can produce any necessary liquidity. If billions of Dollars or Euros are not enough, then trillions will do; and if trillions do not meet the goal, then surely quadrillions will. Only massive state expenditure can prevent an otherwise unavoidable economic meltdown. In particular, unemployment is the result of low consumption: people who do not have enough money to buy consumer goods; this problem must be remedied by providing them with higher wages or higher unemployment benefits. Read the rest of this entry »

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