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The Libertarian Big Idea

Friday, February 24, 2006
Keywords: Politics, Economics, Libertarianism

This is worth a read: Is the left out of ideas? Here is an excerpt, though you should read the whole thing:

The left used to have a Big Idea: The free market doesn't work, so the government will fix it. The social democrats disagreed with the Socialists and the Scoop Jackson democrats about how much fixing was necessary, but they all agreed on a basic premise, and could sell that simple message to the public. Then, after fifty years or so, people noticed that the government didn't seem to work any better than the free market . . . worse, actually, in a lot of cases . . . and it was awfully expensive and surly. Conservatives stepped in with their Big Idea: the government screws things up, so let's leave more stuff up to individuals, which, if nothing else, will be a lot cheaper. Obviously, liberals disagree with this . . . but they have not come up with a Big, Easily Sellable, Idea With Obvious Policy Prescriptions to replace it. Some of them have just kept repeating the old Big Idea, which it seems to me that fewer and fewer people believe, as the US continues to pull ahead of its economic peers. Others have focused on coming up with lots of little ideas . . . but those take up too much time and energy to attract voters. Gore tried to whang up anger against pharmaceutical companies, and Kerry tried to stoke anger against Bush, as replacement. But in politics, there's just no replacement for the Big Idea.

How about this for a new Big Idea: adopting moderate libertarianism as a new platform. By adopting Bush Sr.'s NAFTA and by slimming down welfare, the Democrats under Bill Clinton have already taken a step in this direction. Why not take it further?

Libertarianism? Surely you jest!

David Boaz of the Cato Institute notes that, according to the Gallup Poll's annual survey on government, 27% of Americans are conservative, 24% are liberal, and a surprisingly high 20% are libertarian. The 2004 exit polls back this up: about 45% of Bush voters supported gay marriage, and 29% of Kerry voters did not believe in big government. As for me personally, I hoped for a Kerry victory only because virtually anyone would have been better than Bush; if there was a third candidate that had even a semi-reasonable chance, I would have rooted for him instead (assuming that he was not worse than both Bush and Kerry, which would have been quite a feat). I think that there is sizeable support, and there would be even more support if the American people were told about it. How many people outside of the educated élite could tell you what the word "libertarian" meant?

Um, there is a Libertarian Party, you know...

What? There is a Libertarian Party? Oh, you mean those folks who could not even manage to pull in one percent of the vote? As you may imagine, I am not too fond of them, but readers of this blog should not be surprised at my stance on this. Hop on over to their website and take a look at their platform. To their credit, the platform is fairly sound on several points, including free speech and crime control, but on a number of other points, their positions are quite remarkable--and I did not intend that as a compliment. I believe that the problem with the Libertarian Party and, most notably, with the objectivist wing of libertarianism, is the absoluteness and tenacity with which they cling on to their basic principles; in short, they are too dogmatic. This is not a trivial condemnation, so I wish to take a few moments to clarify exactly what I mean.

Green grass meets green money, under clear skies...

Let us consider the Libertarian Party's position on the environment. They skirt the issue of environmental protection by ignoring the pollution produced by private entities and instead, shifting the focus to government pollution and mismanagement. I do not doubt that the government is quite capable of polluting, and I do not doubt that the NPS has suffered from instances of mismanagement (they neglect to mention that this has already been mostly fixed by making the NPS largely independent, relying solely on user fees, sales, and donations for its finance), and I do not doubt that reducing the powers and role of government would curb government-produced pollution and the many cases of government serving special interests. This position, however, completely fails to take into account private pollution and, most importantly, externalities. For example, if I dump waste into a stream, it would not affect just the portion of the stream that crosses my property; every person who encounters that stream will be affected. While I would bear the costs (loss of aesthetics, property value, etc.) of polluting my segment of the stream, I would not bear the cost of polluting everyone else's. Lumber companies will suffer the cost of devalued properties when they clear-cut a forest, but when the subsequent erosion leads to severe flooding (as is typical in many developed countries), they will bear none of those costs. Any first-year economics student can tell you about externalities, and every textbook on market economics will note that free markets will work utopian wonders only when, among other conditions, externalities do not exist, which is by no means a reasonable assumption. Yet, this platform fails to acknowledge this basic reality. The case could be made that environmentalism and externalities are very tightly intertwined; indeed, most economics textbooks refer to some form of pollution--whether it be water, air, or even sound--as a canonical example of an externality. If your neighbor's property was laced with various toxic chemicals, how concerned would you be, assuming that there is no way that those chemicals could somehow leak or seep onto your property? Would your concern level be higher if these chemicals could leak or seep onto your property? What if your neighbor was also fond of setting things alight and the smoke billowed through your back yard? It is largely because of externalities that environmentalism even exists, and it is largely because of externalities that government must have a role in protecting the environment.

That having been said, the current decree-style approach to protecting the environment is ineffective. Any sort of decree-style solution is bound to alienate many people, and this alienation has led to the politicization of environmentalism, which has led to absurd claims from both sides (imminent doom claims are often overblown, and the flat-out dismissal of global warming is even more absurd). Let us look at how the government deals with cars. We have very modest gas taxes, EPA fuel efficiency and emissions mandates, tax breaks for hybrid owners, and subsidies to encourage companies to develop efficient technologies. Not only is this complexity undesirable for proponents of smaller governments, but it also increases the opportunities for abuses, from the use of various loopholes by SUV makers to the incentive to lobby the government for favorable regulations. What if a hefty gasoline tax, similar to those in Europe was enacted? First, it would be relatively simple to implement, and this simplicity would result in cutting the administrative costs associated with a myriad of regulatory solutions. Second, it would increase the consumer demand for better fuel efficiency, leading the market to favor smaller and more efficient cars (companies are much more eager to respond to market demand than government regulations). Third, increasing the cost of gasoline would also cause the market to favor gasoline substitutes, thus generating market incentives to develop new fuels. Fourth, since there is a rough correlation between mileage efficiency and emissions, this would help reduce emissions (although there are other factors such as filtering that effect emissions, so this may not suffice to completely replace emissions standards). Finally, as an added bonus to national security, by using gasoline taxes to exert downward pressure on oil demand (rather than letting the prices associated with an ever-shrinking oil supply exert that same downward pressure), this allows the government to capture a portion of the profit instead of the oil producers, which would certainly ease the fears held by neo-conservatives that oil is a tidy jihad fundraiser. For those who would balk at the idea of using taxes to solve a problem, the revenue from this tax could be used to reduce other forms of taxes, such as the income tax. In the end, high gasoline taxes would represent a relatively simple way for government to place a price on the externalities of gasoline consumption.

This digression into environmental policy is, I hope, an illustration of how one might try to accomplish the same sorts of goals that we have today by using a simpler and natural (i.e., market-based) solution. The same could be said for cutting industrial carbon emissions: instead of draconian regulations, set a cap for total national emissions and let companies buy and sell this supply of emission allowances on the open market, just as they would buy and sell any other form of capital. This allows for Kyoto-style compliance and a gradual step-down of industrial emissions, while reducing regulatory overhead and letting the free market guide the implementation. Such solutions would be consistent with the spirit of reduced governments and free markets while also acknowledging that protecting the environment is important and that government does indeed have a role that it must play. Do government policies need reform? Yes. Does this necessitate throwing government out of the picture? No. By viciously denouncing the government while providing no real solution, the Libertarian Party fails to make any worthwhile contribution. For liberals who are skeptical of market-based solutions, I can understand such skepticism. It is important to not confuse the solutions that Bush peddled with true market solutions. This current administration's policies have been mostly opportunistic: it pays market-based solutions lip service while pursuing policies that cater mostly to special interests.

Enough about the environment, already!

Okay, so my foray into environmental policies went on for a bit longer than I had hoped. To be sure, that is not the only area where I think that the Libertarian Party concedes too much to its government-is-bad dogma. Although entirely eliminating welfare and replacing it with private charity may look good on paper if we also just ignore Keynes (which I do not suggest that we do), it is a very radical move, especially when there is little evidence to suggest that charity and a predicted economic boost would be sufficient. Economists have dreamed up of various ways to reform the system, including this one proposed in the 1970's: give every person, regardless of income, a fixed stipend. This would slash the enormous social services bureaucracy needed to administer the current system, make the system more "fair" by giving everyone a stipend, eliminate the penalties that people suffer when they try to move out of welfare by getting a job, and reduce somewhat the moral necessity for progressive taxes. Yes, it would involve higher taxes, but for most people, the stipend makes up for it, and yes, there are a number of other potential problems with this, but I do not wish to jump off on another lengthy tangent tonight. It also seems foolish on both moral and pragmatic grounds to abolish foreign aid, especially given its relatively low cost and the benefits that stability would offer if one wishes to enact the sort of open immigration policies favored by libertarians. Their calls to privatize utilities may be a good idea, but what about the natural monopolies? A heavily-regulated private utility is not much different than a public utility. Education should never been fully privatized because an education is an extremely important positive externality: it is crucial for democracy (and there are some moral arguments about equal opportunity as well). I could go into much more detail and specifics about these and other platform points, but I will save that for another day; what I hope to establish tonight is the notion that government does serve a purpose and that careful reform could reduce the size and role of government while at the same time achieving the same sorts of goals. As I have argued here and in another entry that I wrote a few weeks ago, one of my gripes against the most prominent versions of the libertarian ideal is that it can sometimes be blind to reality. As I am often fond of saying, pure libertarian ideals are very much like an object sliding on a frictionless surface, attached to a massless pulley, and economics represents a more pragmatic, but realistic approach to things. In the end, the best policies are those that embody the spirit of libertarian ideals while also acknowledging reality, and it appears to me that the Libertarian Party is too caught up in its doctrine to recognize this.

So, why the heck not?

If the economic morass that is Europe is any indicator, free market economics have been vindicated. The political climate in the United States would also suggest this. What resistance remains in the United States comes from a misguided fear of globalization (a topic for another day) and the ease with which the average person mistakes corrupt corporatism with true free market economics (i.e., one that compensates for externalities, natural monopolies, and at least some of the most serious issues of information asymmetry), which is a misunderstanding that the Republican party's special interests are partly to blame for. Market economics must be embraced; if liberals, excluding the far-left, have nothing beyond a few specific cases of corporatism and a paltry mix of globalization fears to use as ammunition, then it is time to finally accept market economics and its flaws. Mainstream liberals today do not directly condemn market economics, but by failing to embrace it and by couching some of their causes in strongly populist tones, they send an odd message. They should embrace markets while acknowledging the responsibilities that need to be undertaken to ensure that markets work, and by adopting a well-defined moderate libertarian platform, they can offer themselves as a shining alternative to an ever opportunistic Republican party that has grown too dangerously close to religious fundamentalists. Unfortunately, political realignments like usually happen over the course of many decades--if they happen at all--so I will not be holding my breath.

This entry was edited on 2006/02/24 at 02:25:52 GMT -0500.

Post a comment »

2006/02/24 10:48:10 GMT -0500Posted by Carl

Okay, so twenty percent or whatever of the American people have "libertarian" viewpoints. If that's the case, then shouldn't the main focus of the libertarian party be to attempt to attract these people to create a legitimate third party? And shouldn't they do this, even if it means softening their stances on non-intervention in various topics? It's all well and good to go on for pages and pages about policy, but the trick is finding policies that are agreeable to the average moronic American.


2006/02/24 11:48:09 GMT -0500Posted by Kai

Um, I thought that was the point that I was trying to drive across, that taking a hard-line dogmatic stance doesn't work...

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