On the Soapbox

Rant: The road paved with good intentions

Sunday, December 10, 2006
Keywords: Politics, Economics, Libertarianism

This article in the Washington Post makes me very angry. Especially the last line:

"I still think this is a great country," Hettinga said. "In Mexico, they would have just shot me."

Gee. What consolation that is. But why couldn't this country be even better?

This sort of thing is the main reason why I hate Democrats (and this new breed of equally corrupt big-government Republicans). I am certainly not opposed to government playing a role to correct natural market failures, but why do people always insist that government play a regulatory, rule-making role? If there is a market failure that needs to be fixed (externalities or insufficiently informed consumers), then fix the market failure. Why is there always this itch to go one step further and to start making rules to regulate and control? Want something to happen? Fine, go and incentivize it, don't force it. Even if people don't accept the moral argument against governments forcing behavior, why not the practical argument that regulatory policies--no matter how good-intentioned they may be at the outset--represent "security holes" (to use a software engineering analogy) that almost invariably invite "exploits"--corruption and abuse at some point in time; to those who say that libertarian policy is built upon idealistic wishing, I say that expecting government to always do good is even more unrealistically idealistic.

While I'm on the topic, the recent ban on trans fats in New York City is an excellent example of a gross regulatory overstep. Why is the city imposing a blanket ban on this stuff? Yes, most restaurants can do without it for most foods, but there may be some dishes that require odd ingredients that may contain some amounts of this stuff. Even if that were not the case, why go as far as ban it? Why not just inform the customers by requiring that restaurants post information about the trans fats in their foods, and let the consumers decide if they want to patronize someone using harmful ingredients (given the amount of money that is made hawking heart health products in this country, I think consumers do care very much about their mortality). Or if the city is concerned about the rising health care costs that result from these fats (since health care is taxpayer-subsidized), they could even tax trans fats to offset the costs to the taxpayers and also to give businesses a cost incentive to switch away from them. Any of those methods would've been just as effective and much less blunt (and immoral!) than just tossing in an outright ban.

A Tribute to Friedman's Libertarianism

Saturday, November 18, 2006
Keywords: Politics, Economics, Libertarianism

Since his death on Thursday, I have read a number of Milton Friedman tributes and obituaries. My favorite one so far has been this one at Salon by left-of-center economist Brad DeLong, which I think captures Friedman's world-view fairly well. DeLong's obituary is both amusing and insightful, and I highly recommend that people read it.

I think that Friedman's particular brand of libertarianism very closely matches my own. He believes in limited government, but unlike Ayn Rand and her wayward ilk, he believes that government does have a role to play because the natural order (e.g., markets) is imperfect and that, as a result, intervention is sometimes necessary. Like all economists, he is aware that perfect free markets do not (and will never) exist for a variety of reasons ranging from externalities to asymmetric information. For example, here is his take on externalities:

"Free markets" is a very general term. There are all sorts of problems that will emerge. Free markets work best when the transaction between two individuals affects only those individuals. But that isn't the fact. The fact is that, most often, a transaction between you and me affects a third party. That is the source of all problems for government. [source]

The DeLong obituary brings up the example of the London congestion tax, and in the case of environmental policy, Friedman has voiced support for controlling atmospheric emissions through a cap-and-trade system (the most well-known example of a cap-and-trade system to reduce pollution is the Kyoto Protocol). I have read comments from the left end of the political spectrum denouncing Friedman as heartless and as not caring about the losers problem of economics. While Friedman did support abolishing Social Security, welfare, and the minimum wage (all three of which I would like to see abolished as well), his calls for their abolition were not made in vacuum. Most people are not aware that he had championed for the negative income tax1 as their replacement. Unfortunately, the NIT never gained political traction, and today, Friedman is remembered more for his attacks against the minimum wage than for his support of the NIT.

Although I agree with Friedman in principle, I sometimes do not come to the same conclusions that he does. For example, while he advocates selling off public lands, I think that the market's tendency to fail to properly price future value (a common problem with non-renewable resources) will make this a bad idea. Friedman justified government intervention based on pragmatic cost-benefit analyses: if the benefit to be gained from a market correction outweighed the cost of giving the government that extra bit of power, then there should be intervention, otherwise, it's not worth it. I personally am not as skeptical of government as he is because, at least amongst civil servants (politicians are a different story), there are many people who genuinely believe in doing good and not abusing power. This is not to say that government can be trusted, but that because people tend to have a non-zero sense of ethics and principle, the cost of granting that power to government may be lower than he estimates, and thus there are a larger number of circumstances where the cost-benefit analysis works out. I also think he sometimes overestimates the efficacy of private institutions that could take over some of the roles of government. In the case of selling off public lands, the private institutions that have power and influence right now are generally industrial in nature (which is partly the fault of government having taken the place of private institutions in conservation and partly the fault of markets being unable to price long timescales), and in the time it would take for opposing private groups to gather in strength to counterbalance industry, a lot of irreversible damage could be done. In any case, the differences in conclusions come mostly from technical points and not from points of principle, which is why I, too, will say that Milton Friedman will be missed.

________________
1 Although I will not go into detail about the NIT here--the pros and cons of the NIT is something that I've been planning to write about in a separate blog post for some time now--the NIT would have not only served the same social welfare functions, it would have actually been even more effective at doing so.

Why are Libertarians disenfranchised?

Sunday, October 22, 2006
Keywords: Libertarianism, Politics

Excerpts from The Economist:

That is easily enough libertarians to tip an election. And their votes are up for grabs. In 2000 George Bush won 72% of the libertarian vote, to Al Gore's 20%, by repeating the mantra "My opponent trusts government. I trust you." But in 2004, after Mr Bush increased the size of government and curtailed some civil liberties as part of the war on terror, his margin dropped to 59%-38%.

[...]

Mr Boaz and Mr Kirby argue that wooing the libertarian vote could propel either party to electoral success. Yet with an election only weeks away, neither shows much sign of trying. Republicans are rallying their religious base with jeremiads about stem-cell research and gay marriage. Democrats, on the other hand, would put up taxes, block school choice and lead a witch-hunt against Wal-Mart.

Libertarians are ignored partly because they are hard to find, not least because they just want to be left alone. (There is a Libertarian Party, but it gets hardly any votes.) [emphasis mine] Politicians can reach social conservatives through churches or union members through their unions, but where do libertarians gather? Parties will always court the votes that are cheapest to court because, for once, they are spending their own money.

Well, The Economist is right about the cost part of the cost-benefit analysis, but I am not so sure about the benefit part. Sure, it is easier and less costly to fire up the religious right or the labor unions, but those are people who already support you, and there is a significant problem of diminishing returns with getting your base to turn out on election day.

But it is also worth asking why libertarians are a disenfranchised group in American politics. As the article rightfully points out, "[F]ew Americans are familiar with the term 'libertarian'." Well, why is that? The word itself should not be a problem; people are probably more familiar with the root word "liberty" than they are with "republic". Libertarians do tend to be more educated and academic, but there is really nothing inherent to preclude someone who is poorly-educated from saying, "Government should mind their own business." I think that the education bias may be a result of self-selection in the sense that, when an ideology is so obscure in the mainstream political landscape, those who are not well-educated will be less likely to be exposed to it. But this brings us back to the original question, why are libertarians so obscure in the first place? And for that answer, I direct the reader to the emphasis that I added to the Economist excerpt above: the Libertarian Party of America, I think, is the primary reason for this political obscurity and for the subsequent disenfranchisement.

The problem is that there is a large number of libertarians who believe in a very black-and-white view of libertarianism. But taken to such a polar extreme, there is really little difference between libertarians and anarchists. What makes a libertarian a libertarian and not an anarchist is that a libertarian recognizes that there is indeed a need for government, and that the goal is to meet those needs efficiently with as few unwanted side effects as possible. An unconditional desire to reduce government without any regard to the need for a government is the hallmark of an anarchist. However, the failure to recognize this distinction is not the fault of people, but instead, it is a fault of the history and perhaps even nature of libertarian belief. This distinction regarding the role of government is easy to see and to recognize in the realm of personal freedoms, as the role of government can be fairly easily defined, which is, in rough layman's terms, "let people do whatever they want as long as they don't hurt others, and government should exist to ensure to make sure people aren't hurting (killing, stealing, etc.) each other." This is, in a nutshell, what Locke and Jefferson believed in, but they also formulated their beliefs before Adam Smith and modern economics.

The world of Locke and Jefferson was one of autarky. Yes, there was trade, but there was, relatively speaking, very little of it, and most of that trade was local in nature. It is because of this that there was never much thought given to the role of economics in the political discourse. There was the protection of property and a general desire to limit the amount of taxation, but that was about it. This changed, of course, with the Industrial Revolution. People were no longer islands isolated from the world. As economic specialization grew (and as populations grew), people became more dependent on each other and with this greatly increased interpersonal interaction, the general condition of "not hurting others" became much more complicated to define in the economic context. What used to be a simple "don't steal other people's property" now included issues like factory working conditions, monopoly pricing, pollution, etc. There is, of course, much controversy, even to this day, of whether or not these sorts of things constitute the sort of malevolent action that, like murder or robbery, government should try to control: the traditional way of looking at government's proper role does not make provisions for the new conditions that arose out of the Industrial Revolution. Because of the tangled web of unclear rights and wrongs that emerged out of this (how does one weigh an employer's "right" to pay whatever wage s/he feels is appropriate with an employee's "right" to a minimum standard of living?) and because it is difficult for government to address these issues efficiently and in a way that does not cause more problems than is solved, libertarians have traditionally stuck with a traditional Jeffersonian view of the role of government: prevent obvious crimes like murder, robbery, etc. and leave everything else alone.

While this traditional form of libertarianism is seductively simple and free of the controversial and sticky gray areas, this comes at a cost of turning a blind eye to reality, as reality is never this tidy. Fortunately, the field of economics--especially the work that has taken place over the past five decades--offer a sort of clarity that had previously been unavailable. Not only has the study of economics offered a more systematic and comprehensive way to precisely identify and describe the sorts of problems that need government solving, it also offers solutions that are efficient and that also minimize undesirable side effects. (I will not go into more detail here, as I have already written about some of these things, and it is impossible to go into detail in a meaningful way in the limited space here, but I do promise to write more about these things in more detail later on.)

Unfortunately, many libertarians are still living in a Jeffersonian fantasy world. They recognize the need for government in the traditional contexts, but they fail to recognize it in the modern contexts. The principles are still the same: government does have a role to play, but it should pursue that role as efficiently and unobtrusively as possible. The difference is that moderate libertarians (a number of whom are economists) hold a more realistic view of the role of government and recognize that government does need to address, in additional to murder, robbery, etc., issues such as monopolies, externalities, and the need for wealth redistribution, but in ways that are efficient and consistent with free market economics (e.g., see my essay on the merits of pricing/taxation instead of regulation as a way to address environmental issues). (Aside: there is a huge difference between some of the solutions that a moderate libertarian would support and what a leftist would support; as I like to say, Republicans and traditional libertarians try to brush away the problem, Democrats valiantly try to fix the problem, but in the wrong way because they have been blinded by socialism, and moderate libertarians try to fix the problem the right way.)

There are invariably objections from traditional libertarians. Some will claim that government intervention flies in the face of free market economics. This is a common myth held by many who do not fully understand the nuances of economics. This flies in the face is laissez-faire economics, but not free-market economics, and the two are not the same. Asymmetric information, externalities, natural monopolies, etc. are features of real-life laissez-faire economics and are things that preclude an efficient free market. An efficient free market thus requires that these problems be addressed (but also addressed in such a way that does not destroy other aspects of free markets, which is why the moderate libertarian approach of pricing rectification is better, less intrusive, and more efficient than the socialist approach of regulation; the poorly-engineered regulations of the left are sometimes just as bad as the traditional libertarian approach of ignoring the problem). Another common objection is that doing this is increasing the role of government. I do not dispute that this is true, but I do dispute that this is a problem, considering that the goal of libertarianism (as opposed to that of anarchism) is not to blindly whittle down government, but instead to accomplish what needs accomplishing in a way that is efficient and unobtrusive, thus constraining the whittling down of government only to cases where it makes sense and is appropriate.

And this brings us back to the question that I was asking: why are libertarians out in the political wilderness? The Libertarian Party is a party of traditional libertarians who inhabit a Jeffersonian illusion and who are in denial of the realities of the world. This detachment has made the Libertarian Party a radical fringe party that many libertarians (such as myself) would not support. Yet, they are the closest thing libertarians in this country have to a banner under which to rally. Needless to say, there is very little in the way of libertarian leadership, and without this leadership, there is no infrastructure to organize like-minded libertarians, to educate voters about the party, and to get the libertarian name out into the public spotlight. Even the Green and Reform parties have more effective leaderships, which is quite remarkable for a country whose founding was so profoundly rooted in libertarian philosophy. As the age-old cliché goes, "Every journey begins with a step." The first step that libertarians must take if they wish to emerge from obscurity is to acknowledge that the traditional Jeffersonian flavor of libertarianism is an outdated relic from another era and that, with the help of economists, effective, efficient, libertarian-style solutions are possible. Once this first step is taken, the libertarians can finally begin to provide the rational political middle ground than this country has been in desperate need of for so long.

This entry was edited on 2006/10/22 at 16:28:11 GMT -0400.

What Democracy Means

Sunday, March 26, 2006
Keywords: Politics, Libertarianism

I was listening to the BBC in the car today, and there was a segment about the release of Abdul Rahman, the Afghan who was charged with conversion away from Islam. What was striking about this particular news segment was the report on the Afghan reaction. This is not a matter of a small number of fundamentalists calling for his death; in fact, the vast majority of the country believe that he should be executed per Sharia law. One man who was interviewed was quite passionate in his defense of the Afghan constitution, which holds this Islamic law as the basic law of the land. Like many Afghans, he was displeased with what is seen as Western meddling in their government, their own affairs, their constitution, and the sovereignty of the will of their majority.

At first, I was conflicted when those sentiments streamed through the radio. After all, I support popular democracy and the rule of law, and it is clear that in this particular case, intervention on his behalf and making an exception for him was in violation of all that. But I also know that the very notion that this man was being charged with what essentially amounted to a thoughtcrime is perverse and fundamentally wrong.

That state of internal conflict lasted for only a few seconds, as this entire controversy brought into perfectly clear relief the problems of majoritarianism, or as Alexis de Tocqueville famously put it, tyranny of the majority. There are a number of historical examples of this, the most famous being the (brainwashed) majority in Germany during the Nazi era. In American history, the South's treatment of blacks and the treatment of Native Americans are all fine examples of policies that were supported by the popular majority that we know today to be wrong. This particular incident is noteworthy because it is one of the few cases of very clear-cut majoritarian abuse outside the confines of history books.

This distrust of the goodness of democracy's majority rule is also one of the reasons why I am a libertarian: the less power the majority can wield, the less damage a misguided majority can inflict. So what exactly is the purpose of a democracy, then? Last month, The Economist ran an op-ed arguing that although the Bush Administration has blundered just about every aspect of Iraq, its promotion of democracy is one thing that it does deserve praise for (even if it is the result of an Administration war justification "flip-flop"). I believe that democracy is not an end; it is only a means to an end. But is it a necessary means? I think so, but I am not entirely sure, and I certainly do not wish to dogmatically answer yes. Thus, to the extent that I think that democracy is a necessary means, I agree with the editors of The Economist. But what exactly are these ends that we are trying to accomplish with democracy? Beyond sweeping generalities such as stability, rule of law, justice, freedom, etc., I do not have a specific answer, nor do I think that anyone does. What is certain, however, is that despite the introduction of democracy, movement towards these ends--whatever they may be--is slow, if not stagnant. Democracy is not perfect and it is not a silver bullet, and our foreign policy's naïveté about this nature of democracy is a cause for concern.

This entry was edited on 2006/03/27 at 09:32:19 GMT -0500.

Clarifying My Previous Post

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

Okay, I'll admit: 2400 words is far too long for a rant. After re-reading what I wrote last night, I realized how lacking in coherency my post was. So here's a condensed version: I think that libertarian ideals can constitute a compelling political platform, but in order for that to become a reality, hard-line libertarians need to recognize reality and abandon some of their dogmatic approach to things. Furthermore, in order to introduce libertarianism to the average person, the very first step that needs to be taken is the abandonment of the sorts of radicalism that the Libertarian Party of the United States advocates. There, how's that for a short 100-word condensed version? :P

This entry was edited on 2006/02/24 at 20:04:39 GMT -0500.

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.

My "Flip-Flop" / Political Realignment

Monday, February 13, 2006
Keywords: Politics, Libertarianism

I have to admit, I was probably a bit too smug and deriving a bit too much enjoyment from poking at the Republican Party when I was chatting with Carl on Sunday. But it did make me reflect a bit on my own political journey.

My chat with Carl

The focus of my gratuitous soapboxing was the idea that the Republican Party of today is not the Republican Party of, say, Lincoln or, less gloriously, Herbert Hoover. The old Republican Party was more closely aligned to the libertarians of today: they believed in limited government. But times change, and with the social upheaval of the 60's and 70's, Republicans found a power base in the form of social conservatives angry at the social changes embodied in the Warren Court, the Civil Rights Act, and Roe vs. Wade. This relationship between the "limited government" wing of the party and the "traditional values" wing has a long history, but with Reagan, this relationship turned into a marriage (incidentally, there are old Republicans like Gerald Ford who advocate for abortions). This admittedly over-simplified view of the party would be incomplete without the foreign policy hawks who have been resurgent ever since 9/11. Known as the neo-conservatives, they form the third partner in this group of strange bedfellows. But I am sure that many are already familiar with this history, so why am I rehashing this? These alliances have, I think, caused the Republican party to do a complete 180. Their principles of limited government retreated from the personal arena in the Reagan area when the religious right jumped on board, and in recent years, they are losing their fiscal conservativeness. With an aggressive foreign policy, the new projections of the federal deficit place it above $400 billion. Does it not seem odd that such a budget would come from a party that a just a decade ago was clamoring for the Balanced Budget Amendment? And what about the 10-fold increase (yes, a whole order of magnitude!) in the number of earmarks (i.e., pork barrel spending), from 1,439 in 1995 after the Republican take-over of Congress to 13,997 in 2005? Indeed, a growing number of Republicans are not of the traditional libertarian sort and are instead big-government conservatives who spend money like Democrats but without the same sort of respect for individual freedoms. Of course, the Republicans still give free markets lip service--they have no desire the lose the votes of the old Republicans, but that is all that it is: lip service. Instead of embarking on broad reforms to help the free market, they instead focus mostly on helping businesses in certain sectors, hoping that the voters will mistake "corporationism" for free-market libertarianism (I think that the Republican version of "free markets" over the years have given true free markets a terrible black eye, but that is a topic for another day). This is also why I feel that, as a moderate libertarian, the Democrats are much more closely aligned to what I believe because, if there is going to be a big government no matter what, I would rather have one that does not restrict civil liberties and one that is at least honest about its view of big government.

Of course, political realignments of this massive scale are not new. FDR created the most bizarre of political marriages when he forced together intellectual progressives and Southern whites. In time, the Southern whites bolted from their long-time party and joined the Republicans, converting the Democrats from the party of the South to the party that over 90% of blacks vote for. I always find it amusing that Republicans like to refer to themselves as the party of Lincoln even though they have broad support from southern Whites and virtually no support from blacks. Who they were a century ago is irrelevant, especially if they are the polar opposite today. Anyway, on the topic of political divorces, I wonder how long it will take for the old Republicans to realize that their party has been hijacked and that the time has come to abandon ship and join another party like what the white Southerners did.

My own political journey

Having spent the first seven years of my life in China, I came to the United States thoroughly brainwashed. This was just a few months after Tian'an'men, and I remember strongly believing how great the Communist government was for China's well-being and how terrible it was that the protestors were disturbing law and order. Yes, political indoctrination starts at a young age in China. ;) Incidentally, because of the Republican Party's favorable stance on immigration at the time and because of their anti-Communist policy (which translated towards sympathy towards those who have left China) at the time, my parents told me that they supported Bush, and so I did as well. So I started out as a statist and as a Republican.

In hindsight, I am surprised at how little political education I received before high school. Of course, there were lessons about American history, our founding fathers, patriotism, etc., but glorified pictures of Washington do very little towards touching on the core political values of this country. Those who knew me well in high school will remember that I was one of the few masochists who had very fond memories of Jane McCue's mercilessly grueling and superbly-taught classes. European History AP (or as I like to call it, History of the Evolution of Western Civilization) opened my political eyes, and I grew enamored with the writings of political philosophers such as Locke. Because I took the summer version with other do-gooders, American Government AP with McCue was filled with excellent students who made for lively debates and discussions. I came away from those the two McCue classes with a profound appreciation for the principles of civil libertarianism, and as the unfortunate souls who had to tolerate my overbearing soapboxing in my junior and senior years of high school could easily attest, I was solidly a bleeding-heart liberal and staunch Democrat (I still believed in the principles of large-scale government intervention in the economy). Further readings about the topic of civil liberties over the years only solidified and polished my stance on civil libertarianism. On that note, I was still very conservative in respect to my personal behavior (having been raised with traditional values), but in respect to politics and policy, I was a staunch civil libertarian, which led to a high school classmate to describe me at one point as "the most conservative liberal" she had ever met.

It was not until I started to study economics for USAD during my senior year of high school that I gained appreciation for the power of free markets. Many people learning economics are given at some point some sort of example that illustrates the concept of the winners and losers. For me, it was the parable of the Xerox machines, a fictitious tale of the importation of newly-invented Xerox machines into a society with no such technology and where a third of the population earned a living as scribes. Introducing such time- and labor-saving technology would certainly boost the productiveness and well-being of this society in the long run, but in the short run, it would entail a very angry scribe union and the loss of jobs for many if these devices were imported. Of course, the overall net economic benefit to the society would be positive and a protectionist scheme to block the imports would lead to long-term stagnation, but these benefits would be unevenly distributed as many people lose jobs. However, if government could step in and channel some of the benefits towards temporary welfare and job retraining, the "winners" will still reap a benefit (albeit diminished), the "losers" would not be so badly off, and the devices are imported, avoiding the stagnation of protectionism. It is interesting that, after all these years and numerous economics courses, this little example that I read as a part of my initial introduction to economics is still somewhat iconic of my beliefs. I believe that free markets are, on the whole, wonderful, but I also believe that it would be naïve to think of them as being perfect. I have come to believe that limited and very carefully-targeted government intervention is inevitably necessary to help free markets work because to be dogmatically opposed to any government role would be to deny the true nature of free markets (as an economics professor once quipped, "the first year is spent teaching textbook economics, and every year after that is spent teaching why textbook economics are not quite right"... it is a lot like Newtonian physics vs. relativity and quantum, actually). And so here I am, a moderate libertarian who believes in the principles of civil libertarianism and free markets. Quite a change for someone who used to be the polar opposite, no?

PS: Actually, shortly after being converted to free market economics, I was a libertarian who did not know what a libertarian was; I was still living in the world of right vs. left, and it was not until one of my high school friends pointed it out that I realized that the best label for me libertarian.

PPS: While most people receive their belief indoctrinations in college, I had already received mine before college. Studying economics in college helped solidify and refine my belief in the underlying wonder of free markets, and the extreme liberal campus activism turned me away from my old liberal stance a bit, but for the most part, college had surprisingly very little affect on me politically.

This entry was edited on 2006/03/24 at 17:31:39 GMT -0500.

What is a "Moderate" Libertarian?

Saturday, February 11, 2006
Keywords: Politics, Libertarianism, Ranting

The Economist posted an article (subscriber-only) a few days ago about the United States budget. Here are some excerpts:

George Bush's state-of-the-union address last week may have set a new standard for involuted meaning when he urged Congress to "act responsibly, and make the tax cuts permanent". At that time, the official White House projection of the budget deficit for the 2006 fiscal year was $341 billion, a substantial portion of which could have been erased by rolling back the tax cuts so dear to Mr Bush's heart. On Monday February 6th, the use of the word "responsibly" suddenly looked even more idiosyncratic, as the administration released a $2.7 trillion proposed budget, and announced that the 2006 deficit projection had grown to $423 billion, or 3.2% of America's GDP.
If a Republican Congress and president can only manage to cut their least favourite programmes by a paltry amount when faced with a budget deficit soaring towards the half-trillion mark, then it is time to concede defeat and raise taxes.
Bringing the budget back to balance will require a politically unpalatable combination of tax increases and spending cuts.

Here is a fairly libertarian news magazine advocating tax increases, but I think that it was being realistic about the issue. It concedes that if there is going to be a high level of spending (and it duly notes that the lion's share of the budget is taken up by military spending, debt interest, and health care, which are areas that cannot realistically be cut in the short-term), then it would be the responsible thing to do to raise taxes to cover this spending. This makes sense; taxes are born out of spending, not the other way around.

I was a bit surprised, however, at how negative some of the reactions that I read on the web were towards this notion of raising taxes. I guess this pretty much sums up what I mean when I tell people that I am a "moderate" libertarian and that I do not subscribe to everything that the Libertarian Party would subscribe to (one pet peeve of mine in regards to libertarian politics: cutting education spending; education is a public good in that it is necessary for democracy and, ironically, better education would bolster the the number of people who would subscribe to the aloof libertarian cause). Of course it would be great if the government does not spend so much money, but one has to be realistic: if the government is going to spend this money, then you had better raise taxes sooner or later. I guess "realistic" is the operative word; many of the hard-line libertarians that I have met are simply not that realistic.

Anyway, here is a great blog post (pretty humorous, too!) that I came across that discusses this issue.

This entry was edited on 2006/02/11 at 02:11:00 GMT -0500.

Reconciling Libertarianism and Socialism

Sunday, February 5, 2006
Keywords: Politics, Economics, Libertarianism

As the people who read this blog already know, my core philosophical/political principles are libertarian, and as such, I am a free market economist. But at the same time, I am also very centrist, and I view platform of the Libertarian Party as a platform of cold anarchy. Worse yet, I am a free market economist who is intrigued by Karl Marx--not the radical Karl Marx of the Communist Manifesto, but the economist Karl Marx of Das Kapital. I have long turned this around in my mind trying to find a way to reconcile and to unify these beliefs, and here is my (hopefully concise) attempt at doing so.

Libertarianism was born out of government abuses. It is believed that governmental powers pose the greatest threat to freedom, and as such, libertarians prefer a hands-off approach to virtually anything. Libertarians (generally) do not support anarchy, however, as they believe that the government is needed to provide justice (i.e., a way to deal with thieves, etc.) and to provide certain (limited) public goods. Marxists believe that the preservation of freedom involved eliminating concentrations of capital so that economics does not become a means of enslavement. The difficulty here is that this violates the property rights that libertarians hold dear, and although there are no specific provisions on precisely how reallocated capital should be managed, this, realistically, necessitates the transfer of authority to some form of governing body (though ideally, this would not be the case).

I want to start by trying to define what our goal is. Both conflicting views advocate freedom, but how should we define this freedom? I propose that we define it in terms of power. Random House Webster's dictionary defines it as the possession of control or command over others, which I think is a suitable definition for this purpose. Thus, in the absence of government, people can exert power on others through physical coercion (e.g., seizing of property, killing, etc.), and when government is formed, people surrender the right of physical coercion to the government, thus instituting and protecting freedoms such as property and life. Libertarians believe that government should not do much more beyond confiscating the powers of physical coercion, fearing (rightfully so, as history attests) that governments with too much power will tend to exert them in ways that suppress individual freedom. What is lacking from this perspective, however, is economics. In a world of abundant resources (capital), this may not have been a serious oversight, but it is nevertheless an oversight, and in our world, it is a serious one. But to what extent is economics power? If Mr. Smith decided to do work for Mr. Jones so that Mr. Smith would have the money to buy korfball equipment for his hobby sport, should this be viewed as Mr. Jones exerting economic power over Mr. Smith or should this be viewed as a voluntary economic exchange initiated by Mr. Smith in which he trades some amount of his time for equipment for his pet sport? What if the situation was a little different? Let's say that Mr. Smith is struggling to pay the rent on his run-down low-cost apartment and barely has any money for meager amounts of food, and he is working for Mr. Jones to pay for just these basic necessities of life. Would Mr. Jones' ability to have Mr. Smith do work on his behalf constitute power in this case? Would it make a difference if Mr. Jones was the only employer or if Mr. Smith could choose between different employers? A distinction needs to be made between economic activities where the parties act voluntarily and where there is a coercive element (a non-economic example of such a distinction would be Mr. Doe deciding whether to go to a police station so that he can interview the police chief versus Mr. Doe deciding whether to go to a police station because he's surrounded by policemen with guns drawn--while he technically has the option to resist, the consequences of that option are such that the option does not realistically exist). The study of free market economics addresses this to some extent with the notion of market power: monopolies, monopsonies, etc. and the notion of inelastic demand: demand for food and shelter, etc., but how does this fit into politics?

Classical libertarianism is somewhat myopic in this regard, as it focuses on the protection of people from the coercive powers of government and pays little attention to the possibility of coercive powers from other sources, mostly because a perfect free market economy would necessarily be free of these problems. However, just as many people could claim that a perfect Marxist society is an impossibility, so is the notion of a perfect free-market economy. Just as the frictionless surfaces of physics textbooks do not exist in the real world, many of the assumptions of free market economics are limited only to textbooks: perfect symmetrical information, lack of externalities, no natural monopolies, perfectly rational people, perfectly mobile capital and labor, etc. It is true that much of the power held by the rich are really the product of misapplied governmental powers (fine examples include the federal grants that established the crooked railroad monopolies of long ago and the corruption of government through lobbyists) and that a general reduction of governmental powers would reduce the amount of power that could be "bought" and abused, but there are many cases where power could be had without the help of a corruptible government, through deception (it has been proved mathematically that asymmetric imperfect information will produce undesirable economic results in a free market model), natural monopolies, natural monopsonies, the disregard of externalities, etc. Alan Greenspan's 1961 paper titled Antitrust is a perfect example of the commonplace libertarian view that economic problems like trusts are caused by government and that, had government not meddled in the first place, there would be nothing to fix. This perspective, as I have just argued, is flawed because while it may be true for certain cases (such as the railroad example brought up by Mr. Greenspan that so conveniently fit his argument), it is by no means all-encompassing. It should also be noted that even if the economy was perfect enough that it is able to correct itself, the process of correction can oftentimes be slow. It took about a decade for U.S. Steel to lose its grip on the market, Alcoa did not lose its monopoly until after a number of decades and a government jump-start of its competitors.

While classical libertarianism is naive in respect to the economy, Marx was blind in respect to government and the power and efficiency of free markets. Although Marx does not advocate a government per se, reality implies the necessity of granting government a lot of power if reallocation of capital of the scale he imagines is to take place, hence my motivation for a perspective that takes both concerns into account.

I would like to see a version of libertarianism that takes into account the realities of the economy and thus tries to address the kinds of issues that Marx tried to address without taking a radical approach to the allocation of capital. Locke believed that, as a whole, people were good and that if it were not for the small minority of aggressors, government would not be necessary. If these concessions can be made for the imperfections of human nature, why can they not be made for the imperfections of economics? While excessive government intervention in economics is undesirable (e.g., agricultural supports), government intervention is necessary to establish the foundations necessary for a true free-market economy, which in turn will ensure freedom. Laws are needed to regulate information disclosure, to force the pricing of externalities (e.g., pollution and gasoline taxes), to regulate natural monopolies (e.g., utilities), to regulate mergers and other anti-competitive activities, etc.

I suppose the difference between what I am advocating and socialism is that, as a libertarian, I believe in a different standard to which these laws must be held. Their purpose is not to help specific groups of people, but instead, they should be carefully targeted at the natural defects of the economy in the hopes that all groups of people will benefit once a true market economy exists, and as such, these laws need to be limited so that they grant the government only as much power as necessary. In the end, I believe strongly in the power and efficiency of a market economy. One needs to look no further than the high unemployment and discontent in Europe to see that, ultimately, free markets are the best that we have, and that with some ironing out of the natural kinks (a process that many hard-line libertarians oppose), it could do wonders for the world.

Anyway, this is just a short (though not as short as I was aiming for) preliminary sketch of my take on libertarianism. One of these days, I should flesh this out to something more carefully researched and written, but for now, I'm just curious to see what people think of it.

This entry was edited on 2006/02/07 at 19:23:43 GMT -0500.