The End of Libertarianism and Other Adventures in Financial Policy Fantasy

Don't blame free markets for the current panic

Jeffrey A. Miron | October 21, 2008

In a recent piece that appeared at Newsweek and his own web publication, Slate Editor in Chief Jacob Weisberg announces "the end of libertarianism."

Responding to commentators who believe that misguided government policies caused or contributed to the current financial mess, Weisberg asserts that the real culprit is the libertarian financial policy (which banned "any infringement of the right to buy and sell") that the U.S. has allegedly pursued in recent years. We're in the midst of "a global economic meltdown made possible by libertarian ideas," writes Weisberg, who adds that intellectually vapid libertarians simply cannot "accept that markets can be irrational, misunderstand risk, and misallocate resources or that financial systems without vigorous government oversight and the capacity for pragmatic intervention constitute a recipe for disaster." Libertarian policies have failed so miserably, he concludes, that it is time to toss libertarianism, like Soviet communism, on the trash bin of history.

Excuse me? Are you serious, Jacob?

Whatever one's views of libertarian policies, the incontrovertible fact is that the U.S. has not pursued such policies. Not in the past 10 years. Not in the past century. Indeed, except for a brief moment before Alexander Hamilton engineered the first U.S. bailout of financial markets, not ever. If the U.S. had truly been the "Libertarian Land" that Weisberg alleges, a huge range of policies that have helped fuel the current situation would have been radically different.

In Libertarian Land, banks would not be chartered, defined, and regulated by government, as they have been in the U.S. for over 150 years. In particular, banks would have the right to "suspend convertibility," meaning they could tell depositors, "Sorry, you can't have all your money back right now," during banks runs that threatened bank solvency. This is precisely what banks did in key financial panics during the pre-Fed period, when suspension was illegal but tolerated or encouraged by regulators. By so doing, banks reduced the spread of panics and solvent but illiquid banks did not fail in large numbers.

In Libertarian Land, the Federal Reserve would never have been created. This means the Fed could not have turned a normal recession into the Great Depression by failing to stem a huge decline in the money supply. This decline and the related bank failures occurred because the Fed's existence was taken as indication that banks could not, or should not, suspend convertibility, as they had done successfully in the past. Thus in Libertarian Land, the Great Depression would probably not have occurred.

If the Fed had never been created, Alan Greenspan would never have been its chairman. Thus he would not have given investors inappropriate assurances about the riskiness of derivatives or the long-term viability of the stock market boom of the mid-1990s. Absent the Fed, no Alan Greenspan would have kept interest rates low for an extended period and thereby fueled the housing bubble that has played a key role in turmoil of the past two years. Market participants would have made judgments on their own, and these would plausibly have been more cautious as a result.

In Libertarian Land, the Securities and Exchange Commission, along with financial market regulation such as capital requirements, would not exist. This means investors would have no assurance that government can keep "excessively" risky or fraudulent securities out of the marketplace. Many small investors would stay on the sidelines, leaving the risky investing to those who could afford to lose.

In Libertarian Land, government would not promote increased home ownership, so it would not have created Fannie Mae and Freddie Mac, or encouraged these institutions to extend subprime loans, or implicitly promised to bail them out if or when these loans failed. Thus a key ingredient in the recent financial turbulence would not have arisen.

In Libertarian Land, government would not protect private agents from the downsides of their risky decisions. This means no rescues or bailouts for banks, airlines, or car companies. No deposit insurance, no pension benefit guarantees, and so on.

In Libertarian Land, individuals and businesses would take risks, but they would think long and hard about these risks. Some individuals and businesses would profit handsomely from smart risk-taking, but many would earn modest returns on average because their seemingly "excessive" returns in good times would be balanced by big losses in bad times.

Reasonable people can debate whether consistent pursuit of libertarian policies would have improved U.S. economic performance over the past two centuries. They cannot claim, however, that recent events demonstrate the failure of libertarian policies, since those policies have not been employed.

Nor can they say, as Weisberg contends, that "libertarian apologetics fall wildly short of providing any convincing explanation for what went wrong." In fact, by theorizing, anticipating, and underscoring the inevitable failure of mixing free-market dynamics and politically driven interventions into the economy, libertarians explain both what's going on and how to avoid its periodic repetition.

At a minimum, the jury is still out on whether a truly libertarian policy regime is desirable. With luck, some government will one day have the courage to give it a try.

Jeffrey A. Miron is a senior lecturer in economics at Harvard University.

Comments

Paul|10.21.08 @ 3:14PM|#

Nice to see this article show up on Reason at about the same time news of Argentinian government's seizure of all it's private pension funds comes across the wires.

I am sure under the close supervision and strong regulatory environment provided by their bureaucrats, those funds will be in good hands...when they rob the funds blind. No wonder Argentinian bonds and stocks are taking a 12% hit so far in trading today.

fyodor|10.21.08 @ 3:21PM|#

Now it's Libertarian Land? What happened to Libertopia?

|10.21.08 @ 3:25PM|#

What happened to Libertopia?

The makers of Fruitopia successfully sued it for trademark infringement.

|10.21.08 @ 3:27PM|#

Libertopia implies utopia, and is thus illibertarian.

I prefer Libertaria.

Kyle|10.21.08 @ 3:31PM|#

someone really needs to make a "Libertarian Land" game

|10.21.08 @ 3:31PM|#

It is all about image not reality. Talk to your typical lefty and they will tell you that George Bush was the most radical conservative pro free market President in history. They believe that with all their hearts. Bush could have cut government to pre-Lochner size, eliminated the entire great society and inplimented a flat tax and they could not be anymore convinced that he is a radical right winger.

The reason I think is that people judge right versus left by social issues alone and assume anyone who is right socially is some tax cutting spend cutting feind. I think you could reverse this. That is if you were liberal on social issues and did something crazy like legalize drugs at the federal level and turn a bunch of drug offenders lose, you could destroy every liberal government program known to man and still be remembered as some kind of freaky leftist hippie.

|10.21.08 @ 3:34PM|#

If the Fed had never been created, Alan Greenspan would never have been its chairman. Thus he would not have given investors inappropriate assurances about the riskiness of derivatives or the long-term viability of the stock market boom of the mid-1990s.

Assurances about the long-term viability of the mid 90s stock market boom? I remember someone yammering about "irrational exuberance". Who was that?

|10.21.08 @ 3:47PM|#

I prefer Mustardayonnaise.

xx|10.21.08 @ 3:48PM|#

I live in my own land called noneofyourfucking business. None of your are invited, but if shit hits the fan (which it will) I will be willing to barter with you.

|10.21.08 @ 3:51PM|#

Weisberg is the Editor-In-Chief? I thought he was some whiny intern on a slow week. I'm truly stunned.

Some Guy|10.21.08 @ 3:54PM|#

In Libertarian Land, the Federal Reserve would never have been created. This means the Fed could not have turned a normal recession into the Great Depression by failing to stem a huge decline in the money supply.

That's true. If they didn't exist, they wouldn't be able to not do that.

I am also a fan of "Libertaria." Not that I think it is any more realistic to think that it can exist than a socialist society that's "done right."

|10.21.08 @ 3:56PM|#

"Assurances about the long-term viability of the mid 90s stock market boom? I remember someone yammering about 'irrational exuberance'. Who was that?"

It was a brief moment in one speech. Greenspan's overall record on the stock market boom around that time is overwhelmingly of the reassuring, "it's all a new productivity miracle" variety.

Bill Fleckenstein's "Greenspan's Bubbles" does a great job of laying out the facts on this.

|10.21.08 @ 4:04PM|#

Apparently Weisberg after the 1995 OKC bombings called Rush Limbaugh and Phil Gram un-American and somehow partially responsible for the bombings. What a douchbag.

alan|10.21.08 @ 4:06PM|#

That's true. If they didn't exist, they wouldn't be able to not do that.

I am also a fan of "Libertaria." Not that I think it is any more realistic to think that it can exist than a socialist society that's "done right."

It would be a good idea to purge the word 'utopia' of its meme state, that is -- a set of ideas can never come to fruition because x , or x or x . History and current events tell us that people routinely change the form of governments that they live under and try different things and concepts of social orgainzations, so it is not exactly a trip to Middle Earth to speculate what a true socialist republic or libertarian monarchy (loved the one in Cryptonomicon) or any other such combination would look like.

A mature political analyst looks at the situation and says in a 'a socialist society that's "done right"' shit will likely happen, in a libertarian society this other shit will likely happen. Whereas, an immature inside the belt way asshole like Jacob Weisberg screams, 'you can't do that! MOONBEAMS AND FAIRYTALES!'

|10.21.08 @ 4:08PM|#

What free markets?

If everyone would read (reread) Atlas Shrugged, they would clearly see that government, not a free market, is the problem.

Maybe we should give the free market a chance.

classwarrior|10.21.08 @ 4:11PM|#

Except that it WAS the essentially unregulated aspects of the financial markets (credit default swaps and mortgage backed securities), not to mentioned the conflicted ratings agencies that are supposed to let the market regulate itself and old fashioned fraud by private actors that are primarily responsible for this mess. Libertarians have a hard time accepting that the herd mentality that fuels financial panics always hurt a lot of innocent people. The market, left to it's own devices, cannot assure fairness, transparency, and orderliness. That's why government regulation is necessary.

President-For -Life|10.21.08 @ 4:19PM|#

Democratic People's Libertarian Republican Union

|10.21.08 @ 4:19PM|#

Anthony Gregory does a much better job, IMO, taking apart the Weisberg piece:
http://www.lewrockwell.com/gregory/gregory165.html

|10.21.08 @ 4:20PM|#

The market, left to it's own devices, cannot assure fairness, transparency, and orderliness.

Granted.

That's why government regulation is necessary.

Because nothing says fairness, transparency, and orderliness like the State.

I'm not one of those crypto-anarchists who try to pass as libertarians; I'm a minarchist, who sees a role for the state in society and the markets. But anyone who thinks that the current state role in the marketplace, especially the financial marketplace, is a net gain in fairness, transparency, and orderliness, is completely out of their minds.

Nick Wilson|10.21.08 @ 4:26PM|#

Posted this on another thread:

While the article by Weisberg was completely absurd to link libertarianism with the current crisis, I do think libertarians need to see some writing on the wall: we never should have affiliated with the Right-wing, we should be as critical of corporations as the Left, and we should have put the LP out of its misery a long time ago and tried something different.

First of all, attaching ourselves with the Right wing has left us with people like Neal Boortz (and even at times Rush Limbaugh or Michelle Malkin) as the most public figures to represent what we believe. In addition, libertarians are seen as economically and socially Darwinistic, when most voters are not. This is absolutely the wrong way for us to win elections or advance policy.

There is an alternative however: out-progressive the Left with libertarian ideas. This doesn't mean supporting redistributionism but instead redefining the bureaucracy and the establishment politicians as diametrically opposed to the interests of the poor, small businesses, minorities and the environment. The bigger and more powerful the government gets, the more powerful corporations and special interests become as well. Most national politicians are members of the upper class, and both sides have demonstrated a thorough misunderstanding of economics, leading the parties to craft policies that are counterproductive to the interests of those in most need of progress. The more centralized and distant the government gets, the more disenfranchised the lower and middle classes become as control over their political destinies slips away.

Like our intellectual forerunners, the classical liberals, we should have always been attacking corporations and monopolies as perversions of free markets. Corporations are government-created statuses that prevent the owners and managers from being liable and financially accountable for actions taken on behalf of the corportion. Adam Smith hated corporations as unaccountable and inefficient, and saw them as government market distortions. We should too.

While corporations are here to stay, we need to provide incentives for businesses NOT to incorporate, such as zero taxes for proprietorships and partnerships (beyond maybe land value taxes) and replacing corporate income and capital gains taxes with corporate value taxes. Corporations should pay for the legal protection the government structure is providing them. We also need to quit pushing corporations to merge and consolidate due to the excessive regulatory regime, where combining actually increases efficiency per market share. And we need to hold corporate criminals accountable who commit fraud and violate property and rights, instead of allowing them to hide behind the corporate veil.

Even more importantly, libertarians need to develop their sense of social justice as the argument for freedom. The more poverty we have, the more the electorate will rely on the government to fix that poverty. Supporting creative solutions like preventive care-based health cooperatives on the local level and a zero-tolerance policy on polluters are better alternatives to either excessive regulatory bureaucracies or to no structures at all.

For another example, fighting public schools is completely counterproductive - libertarians should instead be pushing competitive and successful public schools because of the return on investment. School choice is a great start; another would be to encourage school boards to push consumer finance and economics as mandatory high school courses. The better educated people are, the less they will rely on government to guide them through life. That's a fact proven by history.

The LP has actually destroyed the libertarian movement because its fringe radicalism and flirtation with anarchism over the course of its history has forced moderate or progressive libertarians to distance themselves from the party. Since the coup by radicals led by Murray Rothbard in the mid-1980s until the reform in 2006, the LP was been counterproductive to its stated goals, as proven by the continued growth of government and the continued distancing of both parties from libertarian thought. As a co-founder of the Libertarian Reform Caucus, I think even the reforms we passed, while helpful, will never be enough to change the party's image which is permanently ingrained among the political observers in the media and the electorate who are needed to give the party credibility.

The fact is we need a new third party that replaces the old, stale Libertarian Party with something new and different. I'm in the process of drafting the structure, strategy and platform for that new party. It needs to be a party that combines both liberty and progress, that doesn't follow the zeitgeist of Darwinism or Objectivism, that pushes localism as government structure and moves society towards a true meritocracy. Also, one that thoroughly learns from the lessons of the other failed third parties and doesn't waste all of its resources on races it can't win or put candidates on the ballot who are unfit for office.

I'll keep Reason updated on any developments.

Neu Mejican|10.21.08 @ 4:31PM|#

I am also a fan of "Libertaria."

I think Liberville is more realistic in terms of scale.

Not to be confused with Libreville, of course.

Geotpf|10.21.08 @ 4:32PM|#

The problem is, this is a loser of an argument. There's a good editorial in today's LA Times that explains why:

http://www.latimes.com/news/opinion/la-oe-berlinski21-2008oct21,0,3903518.story

"The problem, in this view, is not that the markets were free but that they weren't free enough.

This analysis happens to be largely correct. Nonetheless, the people who advance it tend to get a particular kind of fish-eyed stare in response. Deep down, they know what that stare means. It's the very look they themselves used to give the earnest coffeehouse Marxists who argued that the problem with communism wasn't that the theory was wrong but that it hadn't been applied properly."

Neu Mejican|10.21.08 @ 4:35PM|#

Nick Wilson,

Read that on the other thread.
It has some interesting points.

I have always contended that 3rd parties need to form coalitions to get things done based on common interest.

Libertarians and Greens share a goal of distributed power as opposed to centralized power. It seems that, as these are the two largest minor parties, working together on that goal despite other differences would be to the advantage of both parties. Arguments about how that distributed power is used are tangential to the shared goal.

BakedPenguin|10.21.08 @ 4:36PM|#

someone really needs to make a "Libertarian Land" game

Thinking about how we do in elections, you could play "Chutes and Ladders", only with no ladders.

ed|10.21.08 @ 4:37PM|#

I'm suffering whiplash. Is it my scotch-impaired imagination, or is this the third time this subject has been broached or breached or bitched-at today?

Sam Grove|10.21.08 @ 4:38PM|#

The market, left to it's own devices, cannot assure fairness, transparency, and orderliness.

And this is KNOWN by you, how?

Joshua Holmes|10.21.08 @ 4:48PM|#

I'm not one of those crypto-anarchists

Who's a crypto? Say it loud and say it proud.

DannyK|10.21.08 @ 4:49PM|#

Re: Libertarian Land -- I prefer "Earth-L", because this is an alternate timeline found only in comic books and L. Neil Smith novels.

And it's good to hear from Earth-L, really!

But what does this have to do with us poor buggers on the main timeline?

And isn't your argument exactly congruent to the modern Marxist argument that Communism hasn't failed, because it's never been tried? All those Communist countries were doing it wrong, the real thing would be totally cool and none of that bad stuff would have happened!

P.S. Damn, Geotpf beat me to it.

zoltan|10.21.08 @ 4:53PM|#

that doesn't follow the zeitgeist of Darwinism

Uh, what? Do you mean evolution? If so, I have not yet seen a political party that "follows the zeitgeist" of that specific scientific theory. If you're referring to the Libertarian party, they subscribe more so to the theory of gravity, what with their spectacular falls to the ground. Seriously, WTF does "zeitgeist of Darwinism"? And WTF is "Darwinism"?

|10.21.08 @ 4:54PM|#

Dear Mr. Weisberg,

Your educational background (Yale, Rhodes Scholar) suggests that you encountered the concept of "critical thinking" at some point. May I suggest that you step outside the tidy box of your existence and explore the libertarian's intellectual world? There is plenty of literature across the 'net that adequately explain laissez-faire capitalism and "free market ideas. Also, if would be so kind to If you need direction, I will gladly direct you to websites that I found most enlightening on the topic. Just send me a note. Also, we can also engage in a lively debate on the matter. Just name the time and the blog.

Sincerely,
Liberty4All

zoltan|10.21.08 @ 5:06PM|#

Rhodes scholar? I wonder what his sport was.

|10.21.08 @ 5:06PM|#

It's true that the American economy has never approached true libertarianism, but libertarianism has been an intellectual excuse for the corporatist tendencies of Republicans in power.

It does make one wonder, however, how people can be so devoted to an intellectual idea that has never been, and probably will never be, tested in the real world.

|10.21.08 @ 5:11PM|#

Libertaristan

|10.21.08 @ 5:15PM|#

Liberia!

Oh, wait.

Bill|10.21.08 @ 5:18PM|#

Reminds me of a perfect quote from Brian Doherty's Radicals for Capitalism it's long but I'm willing to take your scorn: pg 260-261

"War is the culmination of the breaking of libertarian principles, not once, but thousands of times. We are challenged to jump in at this point and apply our principles to get out of the unholy mess, built up over years and years of error on errors. I suggest it would be a very little different challenge had he posed this proposition: "You are a second lieutenant. Your platoon is surrounded. Your ammunition is gone. Two of your squad leaders are dead, the third is severely wounded. Now, Mr. Libertarian, let's see you get out of this one with your little seminars.
My answer-"demunicipalize the garbage service."
Now wait, don't give me up as a nut yet. I have a point. That second lieutenant is a goner. And so is the prospect of a lasting peace until man learns WHY it is wrong to municipalize the garbage service. You can't apply libertarian principles to wrong things at their culmination and expect to make much sense. It is too fundamental. You have to start back at the very beginning and that is precisely what our little seminars are for. There are people who build for tomorrow; there are people who build for a year; there are people who look forward a generation-the libertarian, a part of the "remnant," takes the long view-he is looking forward to the time when war will be looked on as we now look on cannibalism, a thing of the past. . . . What do we do in our little seminars? We make the case for freedom which cannot coexist with interventionism. . . . Again I say: We will never end wars until we at least understand why the garbage service should be removed from the jurisdiction of the police force-that is, government."

You see people who argue against ideology (or otherwise known as having a set of principles) are pretty disingenuous. You can call us Marxists if you like but do you not have a political worldview?

Also the problem with labeling us unrepentant Marxists is that Marxists could construct gulags and slit throats to enforce their will. We just have a lone representative in 535 member body and an unelected bureaucrat carrying out his patron's orders (which many in the movement disagree with vehemently...see Ron Paul and Greenspan on youtube).

Fortunately you'll never see the day when any libertarian will ever enslave and punish our ideological foes in the name of "Free Minds and Free Markets".

So we're pretty much fated to convince the political class to concede power whereas liberals and big government conservative can lobby our rulers to increase their own power.

Libertopia it ain't.

|10.21.08 @ 5:19PM|#

I, for one, am still stuck in my immature high school days totally entranced my Ayn Rand.

Obviously, my dangerous objectivist ideas are to blame. Don't tell me about Libertarian Land, I'm too busy killing this one with my thought-poison.

|10.21.08 @ 5:19PM|#

The current drumbeat of blame the market or "deregulation" for the financial market mess reminds me of Karl Polanyi's "The Great Transformation"

His anti market arguments are much the same.

Markets are bad, because there were nasty results from policy that government was forced to adopt when markets did not produce the outcomes those in power wanted.

|10.21.08 @ 5:22PM|#

Libertarians and Greens share a goal of distributed power as opposed to centralized power.

Libs are only secondarily interested in distributed power; they are mostly interested in very limited state power, with very much a sideline interest in devolving some share of the reduced state power to the states and localities.

Are Greens really interested in limited state power? Are they interested in devolving power?

Seriously, I had never heard that Greens were interested in distributed state power; I thought they had a bias toward centralized power as the only way to implement the large-scale change needed to address large-scale environmental problems.

|10.21.08 @ 5:24PM|#

Nick Wilson wrote, "For another example, fighting public schools is completely counterproductive - libertarians should instead be pushing competitive and successful public schools because of the return on investment. School choice is a great start..."

Except that as far as those wedded to the public school system are concerned, proposals of school choice DO fight public schools. Here in my own town of Santa Cruz CA, we have a famously effective public charter school, Pacific Collegiate School, which admits students primarily by random lottery from among those who apply. Except for the self-selection aspect of the application process, this is about as far as you get from "selective, elitist admissions." Yet, the public school fanatics continue to charge PCS and its supporters of elitism, racism, and an agenda that includes the gutting of the public school system. This schism has existed for years and shows no signs of abating any time soon. Many of the same criticisms are automatically hurled at anyone who suggests voucher funding to bring choice to public schools. After years of watching this kind of crap, I was convinced that there really was no point in soft-pedaling my vote of no confidence in the tax-funded, politically controlled public school system. Our attempts at "gradualism" and "incrementalism" here have been met with such vitriolic resistance that true improvement and reform isn't likely for decades more -- a lot longer than most of us in the fight now will be alive.

So what's to lose by taking the issue of public education's wrongness and failure, head-on?

In directly confronting the issue, however, Libertarians should be clear that they recognize and support the goal of a well-educated population, but also recognize the incapacity of the Prussian-model, tax-funded, politically controlled public school system to achieve that goal. It isn't the end we oppose -- since it is clear that our liberty can only be preserved by an educated public -- only the dysfunctional, counterproductive current means. We need to show how market-based means will more reliably and pervasively lead to the desired ends. But it will still be a long fight: Although it routinely places graduates in top colleges and universities, and is regularly recognized as at or near the top of high schools nationwide, PCS gets little love from the community here. So even success in the field is not likely to convince those who are fanatically devoted to the public school system. Although they would never admit it, they are almost exactly like religious fundamentalists, sometimes scarily so.

concerned observer|10.21.08 @ 5:32PM|#

@JAM-So you arent't at all concerned by the balkanization of the country that would almost certainly be caused by your voucher schemes? ONe of the most important functions of public education is to instill a sense of common identity in children. While I agree that in some places this is abused to indoctrinate children in Chauvinistic and nationalistic propaganda, that does not make the overall ideal wrong.

|10.21.08 @ 5:39PM|#

"That second lieutenant is a goner. And so is the prospect of a lasting peace until man learns WHY it is wrong to municipalize the garbage service."

Indeed. I get many a chuckle from a common incident in my area, which would otherwise incite road rage: Often I am cut-off, obstructed, tailgated, or otherwise irritated or even endangered in traffic by cars bearing bumper-stickers that say "visualize world peace," "practice peace," and "give peace a chance." This is, after all, Santa Cruz CA.

The laughter comes from the other drivers' dearth of vison, lack of practice, and failure to understand what peace really is, where it starts, and how it is built or crumbles.

Giving peace a chance means understanding what peace is and acting peacefully where you are, then encouraging your neighbors -- and REQUIRING your agents and representatives, especially in government -- to do the same.

I'm not nominating myself for Gandhi, mind you. But when I do something that pisses someone off, or that restrains, impedes, or injures someone in any way, at least I am aware that I have diminished the overall amount of peace in world by a tiny bit, and that tiny bits add up. It is hard to imagine that the bumper-sticker Gandhis I encounter on the road could even have a clue. For all I know, they are rushing to the County Elections office to vote early in favor of more taxes, restrictive propositions, and big-government candidates. All the while displaying slogans on their vehicles that their actions regularly undermine.

So instead of road rage, I laugh: The Human Comedy.

concerned observer|10.21.08 @ 5:42PM|#

@James Anderson Merritt-You're not nominating yourself for Ghandi, but you have a comfortable sense of moral superiority to your fellow human beings?

Neu Mejican|10.21.08 @ 5:44PM|#

Seriously, I had never heard that Greens were interested in distributed state power; I thought they had a bias toward centralized power as the only way to implement the large-scale change needed to address large-scale environmental problems.

Decentralization is one of "10 key values" in their platform.

They include decentralizing corporate power as well.

Neu Mejican|10.21.08 @ 5:47PM|#

Seriously, I had never heard that Greens were interested in distributed state power; I thought they had a bias toward centralized power as the only way to implement the large-scale change needed to address large-scale environmental problems.

Nope.
That would go against the scientific understanding of how large systems work. Environmentalists have some basic understanding of the concept of complex adaptive systems.

It is a common misconception to conflate "commie hippie" with environmentalist.

The commie hippies like the Green Party, but they are not the intellectual core, imo.

concerned observer|10.21.08 @ 5:48PM|#

@Neu Mejican-The problemm is that decentralization might hurt their precious corporations, which we know for a fact are the source of all good in the world, while the government is the source of all indescribable evil.

|10.21.08 @ 5:54PM|#

Dear Mr. Weisberg + all who agree with him,

Please read the statements and speeches of Ron Paul at his house.gov page. I think you may be interested to read how this libertarian critiques the type of government interventionism that is endemic to both major parties in Congress. I invite you to visit mises.org for more background and history in the economic theory that influenced Ayn Rand.

In addition, you seem to ignore the fact that our mixed economy is really a product of interventionism ala Keynes. What we have is NOT a free market but one that is under command by a third-party. Certainly, we've been taught to accept the virtue of government interference and that certain economic activities require more or less a form of regulation for a desired effect.

Neu Mejican|10.21.08 @ 5:55PM|#

The Greens would agree with Nick Wilson's assessment of corporations as a distortion on markets.

The state opposition to "state socialism."

They would not agree with most "free marketers," but seem to advocate a decentralized and mixed economic system.

Neu mejican|10.21.08 @ 5:56PM|#

THEY (the greens) state opposition to "state socialism" in their platform...


That is.

Concerned observer,
You might want to read upthread for a libertarian critique of corporations.

concerned observer|10.21.08 @ 5:57PM|#

Maybe I should join the Green Party. I had formerly assumed that no party existed in which decentralization and diversity were accepted without the usual wingnut declarations in favor of a plutocracy of property owners.

Sam Grove|10.21.08 @ 6:07PM|#

ONe of the most important functions of public education is to instill a sense of common identity in children.

I'd like to know who made that up.

We already have a common identity of some depth:

1. We're all human.
2. We're all Americans.
3. We're all citizens.


The Simpsons does a better job of providing common touch points than government schools.

|10.21.08 @ 6:18PM|#

Concerned Observer wrote, "So you arent't at all concerned by the balkanization of the country that would almost certainly be caused by your voucher schemes?"

Well, first of all, I never said that they were MY voucher schemes. Personally, I favor education tax credits and privately endowed need-based scholarship funds. I was just using the example of a commonly-proposed "incremental" education reform idea, which is nevertheless vehemently opposed by people (including, apparently Concerned Observer), who think that adoption of such ideas will cause the sky to fall.

Concerned Observer also wrote, "One of the most important functions of public education is to instill a sense of common identity in children. While I agree that in some places this is abused to indoctrinate children in Chauvinistic and nationalistic propaganda, that does not make the overall ideal wrong."

Of course the overall ideal is wrong. Who has the proper authority to "instill a sense of common identity" in ANYONE? Certainly not the government. Who is going to be the author and shaper of this identity? Not you, unless you happen to be among those with political pull and power. What is right about THAT? Hitler, Stalin, Mao, and other modern-day tyrants have used compulsory public education to instill "a sense of common identity," but do we agree that those identities -- much less the efforts to "instill" them -- were worthy or legitimate?

I understand that many people think that public schools are key means for the assimilation of immigrant groups into the vast American Melting Pot. I even observe that this effect has taken place in those institutions to some extent. But I don't think that public schools are the only, much less the best places for such assimilation to occur. Any school that teaches our Constitution competently, and makes students aware of the unique heritage and benefits of our system, gives those students all they need to count themselves lucky to live in America and proudly think of themselves as Americans. The USA is the largest society in history to be defined not by language, ethnicity, or race -- but rather by the adoption of a specific ideological creed within a particular geography, and an acceptance of a compatible political system. The creed is pretty much explained and illustrated by the Declaration of Independence and the Constitution, and the compatible system is specified in the latter.

As far as I can see these days, students are likelier to get a thorough grounding in the Declaration of Independence and the Constitution in private school -- thus acquiring the basis for a solid sense of American "group identity" -- than in public schools. This saddens me, as I will cheerfully admit to having had an excellent Civics teacher when I attended a public Junior High school back in the late 1960s. He started me on the road of reading and really thinking about the Constitution, a path I follow to this day. California students were required to study and pass a Final exam on the Constitution in the eighth grade, back when I was in school. Thanks to C.V. Moran, and the enthusiasm for the subject that he gave to all of us in his class, I surprised myself by submitting a perfect exam paper. From the looks of things today, public school students don't have it nearly as good as we did. If they get any sense of "common identity," it will be as members of a particular protected class, via a social clique, or perhaps in a gang. I'm not saying that this happens all the time, everywhere, but I am saying that it happened even back in my school days and before, but at least back then we had instruction in the Constitution and other aspects of our American society and system to counterbalance. Opportunity for such instruction seems to migrated mostly to the private schools and home-school situation, so I can't say that the prospect of millions of students abandoning the public schools for private institutions or home-study fills me with any dread of Balkanization.

|10.21.08 @ 6:27PM|#

I wrote this mangled passage, "I'm not saying that this happens all the time, everywhere, but I am saying that it happened even back in my school days and before, but at least back then we had instruction in the Constitution and other aspects of our American society and system to counterbalance. Opportunity for such instruction seems to migrated mostly to the private schools and home-school situation, so I can't say that the prospect of millions of students abandoning the public schools for private institutions or home-study fills me with any dread of Balkanization."

Please accept the following corrected version, which would have been posted except that I clicked "Submit" by accident:

"I'm not saying that this happens all the time, everywhere, but I am saying that it does go on, and even happened back in my school days and before. At least back then, we had instruction in the Constitution and other aspects of our American society and system to counterbalance. Opportunity for such instruction seems to have migrated mostly to the private schools and home-school situations. If so, I would actually welcome flight from public schools into private educational arrangements, as a way of mitigating the forces of Balkanization. At least then, students might get a sense of being an (unhyphenated) American and what that means."

|10.21.08 @ 6:38PM|#

Concerned Observer demonstrates a possibly willful missing of my earlier point by posting, "You're not nominating yourself for Ghandi, but you have a comfortable sense of moral superiority to your fellow human beings?"

Sounds like someone is passive-aggressively picking a fight. Why suppose that I have any sense of moral superiority? I merely observe that those who sloganeer for "peace," yet continue to stir up resentments in numerous day-to-day encounters, and who endorse political approaches and government programs that take property from or constrain the otherwise peaceful behavior of their fellow citizens, are acting in ways that undermine the very "peace" they exhort others to create. If I laugh at the absurdity, does that indicate I consider myself superior? Not really, just less stressed about the whole crazy situation.

concerned observer|10.21.08 @ 7:14PM|#

If no one is MAN enough to ARGUE with me I'll just have to do it myself!

concerned observer|10.21.08 @ 7:14PM|#

Oh please don't torture me anymore!

concerned observer|10.21.08 @ 7:15PM|#

Teh Wignuts are out to get me!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Know Your Trolls|10.21.08 @ 7:28PM|#

concerned observer = Lefiti = Edward

concerned observer|10.21.08 @ 7:48PM|#

@whoever's posting as me-Way to show how intelligent and mature you are, jackass!
@Know Your Trolls-I am not Lefiti or Edward.

Nick Wilson|10.21.08 @ 8:43PM|#

Uh, what? Do you mean evolution? If so, I have not yet seen a political party that "follows the zeitgeist" of that specific scientific theory. If you're referring to the Libertarian party, they subscribe more so to the theory of gravity, what with their spectacular falls to the ground. Seriously, WTF does "zeitgeist of Darwinism"? And WTF is "Darwinism"?

No, I'm not talking about science or evolution. I'm talking to the false idea that every person could or should be able to compete in a pure libertarian society and thus every person should be left to their own devices. This is the root of both Objectivism (where altruism is seen as evil) and radical libertarianism (where private charity alone is expected to be a solve-all). We're not a meritocracy, we don't have equal access to strong education, and cycles of poverty need to be addressed before libertarianism can work effectively; otherwise people will rely on expanded government in order to do so.

We need to make the case that libertarianism is MORE progressive than socialism if we want libertarian ideas to break through to the Left as well as the Right. We also need to ensure that libertarian downsizing of government and reduction in taxes need to consciously take into account impacts on the poor and the environment.

I guess this leads well into my response to James Anderson Merritt's point about schools: I'm not a defender of the current public school system and I think choice and charter schools are important solutions to increase educatonal access. But the fact is many libertarians want to eliminate all public schools and see the idea of government-run schools (and even vouchers and charter schools) as the enemy (or as brainwashing for statism). This is counterproductive.

And my point was, for return on investment, investing tax dollars in improving public schools (as well as implementing alternatives like charter schools or anything to increase educational access and quality) is the best welfare program the government can spend its money on. The better educated people are, the less they will need to rely on government handouts and welfare over the course of their lives. I think in many ways the public education system fails because it doesn't prepare people for real world financial decisions and doesn't teach economics. The system does need overhaul, and the federal government and hedging by teachers' unions has contributed to much of the problems in public schools, but I would oppose libertarian efforts to shut down public schools completely because they fill a necessary void - educating students who could not afford it on the private market. That's completely counterproductive to the long term goals libertarians wish to attain because widespread poverty has historically led to socialism or Keynesianism.

I take my political cues from Adam Smith and Thomas Paine, both of whom advocated for free markets and limited government but recognized that public education and naturally progressive taxation was important to give the lower classes a more level playing field in a free society. Libertarianism fails to attain widespread acceptance because it cuts off the latter half of the classical liberal equation.

Asharak|10.21.08 @ 8:55PM|#

I don't think libertarianism is dead, but I will say neoliberalism is at death's door.

Nick Wilson|10.21.08 @ 8:57PM|#

To further clarify on my "zeitgeist of Darwinism" point, for clarity I probably should have instead called it the zeitgeist of the survival of the fittest. Without proper planning, a rapid and reckless transition to a libertarian economy would likely lead to huge economic inequalities, and many libertarians don't seem to care or think that is important.

Latin America has cautionary tales for libertarians who ignore or diminish the impact of economic inequality on the political-economic system. If Obama wins and implements a new New Deal, it will be because neither free marketers nor corporatists on the Right paid attention to the problems of inequality and had no valid defenses when reality came crashing down.

Progress and freedom are not mutually exclusive concepts, and libertarianism can be made to factor in these realities.

Douglas Gray|10.21.08 @ 9:08PM|#

Wall Street bankers are going to get up to 70 billion dollars in bonuses this year. That is equivalent to about 230,000 houses worth about $300,000 each.

We should have a foreclosure lottery system. Those who are in foreclosure get a chance to win. Every winner gets $300,000. That would be a popular way to go.

Nick Wilson|10.21.08 @ 9:11PM|#

"The Greens would agree with Nick Wilson's assessment of corporations as a distortion on markets."

I do think, like many "fusionists" that there is common ground between a party like the Green Party and libertarians. In addition to opposition to corporate distortions of markets, both support localism. Local solutions to local problems (even if it involves government run healthcare, for example) is better than federal bureaucracies that reduce choice and diversity of policy. I say if San Francisco wants to be democratically socialistic and Las Vegas wants to be a "libertopia," why not? If you don't like the policies, taxes and politicians of your local government, its easier to change cities and/or get involved with the local government than it is to leave the country or attempt to take on the federal bulwark. It would be like a free market of policies, where the most successful policies would catch on while the failed policies would get reformed or die off. Easier to do at the local level than at the federal level.

Personally I disagree with the Green Party's reliance on regulation and nannyism as well as their distrust of market economics, but believe that they would be an important part of a new bigger tent party connecting the libertarian Right with the progressive Left.

|10.21.08 @ 9:56PM|#

Nick Wilson wrote, "...for return on investment, investing tax dollars in improving public schools (as well as implementing alternatives like charter schools or anything to increase educational access and quality) is the best welfare program the government can spend its money on..."

Except that, in practical terms, that's a fallacy. We're already spending a lot of money on education, and we have for many years steadily increased education spending precisely because so many people believe the thing that Wilson declared above -- they expect in vain that more money will improve our schools. Thus, when someone points out problems with the system, the lament always seems to be, "we need more money."

There may be a point, before which increasing real spending on schools in the current system can make a substantial, positive difference. But from what I can see, and I have been paying attention since the late 1960s, we reached and left that point far behind, long ago, maybe as early as the late 1980s or early 1990s. Some might say before. From that point on, however, it was important NOT to provide more resources to the system, but rather to make it work more efficiently to meet our goals -- or, if necessary, to change the system to whatever degree was necessary, including starting again from scratch, in order to meet the goals that it could not otherwise achieve. The free market would have recognized our arrival at that point and competitive market discipline would have worked to stabilize the education industry around that point. But that wasn't our situation, and so ultimately, we ended up where we are today.

As you might expect, my opinion is not very popular with the public educationists and those who support them. Any and all attempts to introduce choice or other factors that might bring something like market discipline to the schools -- whether vouchers, tax credits, charter schools, relaxation of credential requirements (except in "emergency" circumstances), or what have you -- have been bitterly, tenaciously opposed by the educationist establishment, especially the teachers' unions, with our experience in Santa Cruz being just one illustration out of many around the country in the past several decades. I think the educationists are right to resist choice, in the sense that if people realized they could opt out of the government system and do better by their own kids without having to pay double (once in taxes for the public system and once for private school tuition), the mass exodus from the government schools might deal them a fatal body blow. On the other hand, if the educationists could keep the welfare of the children front-and-center in their thoughts, they could decide to take the opportunity to improve to the point where they would actually be attractive to parents who had a choice. I know there are a lot of great people in the current system, who could organize and run competitive schools, whether in the public or private sectors. I say, let's give them a reason to make that happen.

Douglas Gray|10.21.08 @ 11:12PM|#

In some small sub-cultures, the basic features of libertarianism work great. For example, the Amish.

They just get together and build a house. No County Dept. is needed. Major law breaking is taken care of by exile, more or less. Minor infractions by public censure.

Nick Wilson|10.21.08 @ 11:26PM|#

James,

I wouldn't interpret that I said throw more money at the system, I just said I think it is stupid for libertarians to oppose public funding of schools, whether that involves government-run public schools, vouchers or charter schools.

We agree that the current system isn't working very well. The federal government's involvement is largely the cause. However, I think educational access is, as John McCain aptly put it, "the civil rights issue of the 21st century", and the current system restricts educational access and therefore should be changed. School choice is one of many areas where libertarians and conservatives are actually more progressive than the Left. This doesn't mean writing off public schools - instead it means allowing public schools to increase quality and accountability by acting more like private schools (i.e. giving parents multiple choices instead of sticking them in the one school in their district).

A system where the poor do not have access to sufficient education is a system that perpetuates the cycle of poverty and delays the democratic progress towards a freer and more equal society. Free markets can't work efficiently without access to education and information. Do you agree with this idea?

Travis|10.21.08 @ 11:32PM|#

"Libertaria"

I think my buddy caught that from a prostitute one time.

|10.22.08 @ 3:04AM|#

Fortunately the anti-market types are in the uncomfortable position of being on the side of power.

They have to convince the public that more power centralized in (if only) the right hands will solve their problems. Generally the people making this argument also happen to be the ones who have power, which makes it all the more suspect.

You don't often see too many poverty-line working class types advocating that more power be given to a bunch of wealthy elites. What you do tend to see are people adopting the cynical position that the thing to do is to keep screwing over "corporations", while simultaneously bailing them out to keep the jobs going.

That position also tends to be unconvincing to all but immature Marxists, who've never moved beyond reading the Communist Manifesto in high school.

The pro-government position runs naturally against the inclinations of all but the few people who are entrusted with it's power. Most people want to control their own lives, they really don't want the government running it for them. The people who claim they do tend to be ideologues already. People have to be indoctrinated with the idea that the government knows best. It doesn't come naturally.

By contrast, libertarianism is a much more personally empowering philosophy. It encourages people to solve their own problems, in a decentralized way of their own choosing.

The statists offer bread and circuses, free health care, tax credits, and welfare, that appeal to the economic self-interest of the people. But what they don't see is that it doesn't appeal to people's self-interest in terms of desire for autonomy.

People will sacrifice much in economic interests in exchange for freedom. Is it not recognized that a slave would give up his three square meals and a bed, and starve on the road and in hiding in exchange for a chance at freedom?

The people arguing against markets are arguing for power. They are arguing against individual self-determination, and in favor of regulating everyone's lives for their own good. Which puts them at odds with the basic human desire for freedom.

Big Cat Kahuna|10.22.08 @ 12:58PM|#

ONe of the most important functions of public education is to instill a sense of common identity in children.

I think you might find educators see that as a "reactionary" notion. Public education is a shrine to Multi-culturalism and pluralistic identities. The only effort at a common identity is to instill an unwavering commitment to government intervention to aid the cause-du-jour. The very concept of a common identity is anathema to the goals of public education.

From my perch, the hard sciences are our last best hope.

|10.22.08 @ 2:07PM|#

Seeing crap like Weisberg's attack on libertarianism in such a widely circulated magazine is just damn depressing. We already face an uphill battle and this intellectually dishonesty makes it that much harder. Sometimes, it is very depressing to be a libertarian.

|10.23.08 @ 2:18PM|#

After reading this article for the second time - and about a third of the way through for a third time - I began to get a headache.

I appreciate the attempt to defend the free market (or to defend the defenders of the free market), but I think this is just poorly written. The use of double and triple negatives is fine for a short paragraph, but I think it's a bad idea to write an entire article this way. And I think a definition of what is meant by "Libertarian Land" in the context of the article would have helped.

It's not incomprehensible. But I think it would be to a person who didn't know what article was about before reading it.

Keep It Simple. Too clever is not always clever.

beery vengeance|10.23.08 @ 6:36PM|#

Whatever one's views of libertarian policies, the incontrovertible fact is that the U.S. has not pursued such policies. Not in the past 10 years. Not in the past century. Indeed, except for a brief moment before Alexander Hamilton engineered the first U.S. bailout of financial markets, not ever.
So, if free markets were so nonexistent,what should the general success and properity of the country over 200+ years be attributed to?

Non-libertarian|10.24.08 @ 7:34PM|#

What a joke:

In Libertarian Land, government would not promote increased home ownership, so it would not have created Fannie Mae and Freddie Mac, or encouraged these institutions to extend subprime loans, or implicitly promised to bail them out if or when these loans failed. Thus a key ingredient in the recent financial turbulence would not have arisen.

Fannie and Freddie do not extend retail loans of any kind, subprime or otherwise. And the uber-Objectivist Alan Greenspan just testified before Congress that Fannie and Freddie had a small role to play in the meltdown.

This piece reads just like an old-school leftist explaining how "Communism has never been tried", in the Soviet Union, or some such.

DS|10.25.08 @ 8:38AM|#

"Fannie and Freddie do not extend retail loans of any kind, subprime or otherwise. And the uber-Objectivist Alan Greenspan just testified before Congress that Fannie and Freddie had a small role to play in the meltdown."

This may be the biggest problem right here - Alan Greenspan is not a libertarian, I don't care who he hung out with when he was young. He ran the single most statist, interventionist, unaccountable government agency on the planet. How does that make him a libertarian?

DS|10.25.08 @ 9:03AM|#

BTW,

This was a half-hearted defense of libertarianism by Mr. Miron. George Reisman absolutely demolishes these arguments over at Mises:

http://blog.mises.org/archives/008829.asp

I attribute the unfortunate position that libertarianism finds itself in mostly to the half-measures and libertarian-lite approach of the Koch funded organizations like Reason and Cato. Accept that the state is legitimate, work around the edges, try to affect change from the inside, and any conversations about the legitimacy of the state, the Federal Reserve or the Gold Standard are absolutely off limits.

The great irony here is that an approach whose strategy was to legitimize libertarianism has resulted in precisely the opposite, only now the Kochoctopus is not only irrelevant but compromised in principle. Very nice.

Nice work. Instead of advocating the abolishment of Social Security and moving towards a world where people actually saved their own money for their own retirement - you advocated that they take their government granted tax money and gamble it in the stock market! Bad timing.

Instead advocating the abolishment of the Federal Reserve - the single biggest destabilizing elelment in the economy - you adopted Alan Greenspan as your arch-typical libertarian hero who was so brilliant he could manage the whole economy with his will. How did that work out?

Instead of arguing for the abolishment of public education you instead supported ways to entrench government's educational monopoly by ensuring it's tax funding.

Instead of advocating eliminating vast swaths of the federal government you instead advocated making those departments run a little more effciently.

And, instead of supporting the single most libertarian presidential candidate since Grover Cleveland instead you smeared him and tried to scuttle his candidacy.

Very nice indeed. Congratulate yourselves, your have earned this trip to purgatory, unfortunately your taking the rest of us with you.

A prositute who provides fewer services at a lower price is still a whore.

DS|10.25.08 @ 2:14PM|#

"So, if free markets were so nonexistent,what should the general success and properity of the country over 200+ years be attributed to?"

That's an incredibly broad statement. I don't think anybody would claim that 100% Laissez-Faire is required in order to have any economic growth at all. I also don't think anybody would argue that the US has been a statist monstrosity for it's entire 200 year existence.

In short, US economic history can be broken into 3 distinct phases:

Founding to the Civil War: while not entirely free market this period was mostly free of top down government interference in the economy. The US was on the gold standard, while it had flirtations with central banking and government interventions such as subsidies, taxes were low, the federal and state governments were very small and relatively powerless, and the economy and the population grew by leaps and bounds. This was the most Laissez-Faire period in US history and certainly in modern Western history.

The Civil war to 1913: After the Civil War and the return to the gold standard this was an era without a central bank - although the treasury tried to perform that function on a limited basis with all the problems inherent in that - and the Federal Government tried to interfere in the economy more, although still limited compared by 20th century standards. The biggest difference was the generallly high protective tariffs during this period, often exceeding 50%. This was an era where market entreprenuers battled against political entreprenuers, and initially the market entreprenuers won - until the political entreprenuers pushed for regulation and anti-trust regulations to restrain their competitors (in stark contrast to the stated goals of these interventions - protecting consumers - which is of course who got screwed by these laws). This was a time of tremendous growth and a mild, benevolent deflation due to productivity growth under the gold standard. While this period was certainly no Laissez-Faire paradise, the government interventions were limited to corrupt politicians lining the pockets of their friends and a high tariff limiting foreign competition.

1913 to present: otherwise known as the "Progressive Era". During this period the combination the founding of the Federal Reserve and the constitutional amendment legalizing the income tax enabled the US to get involved in WWI and funded a massive incease in government. The period from 1913 through the end of WWII shows just how much damage expansive, interventionist government can do to an economy. First blowing up a huge bubble with massive spending on WWI, then a stock market, credit and real estate bubble in the 20's leading to a huge crash - all of this thanks to the new Federal Reserve and an expanding federal government. Then when the crash happened the government expanded massively under Hoover then even more under FDR. The result was a massive depression, with a double dip in 1937-38 when the second new deal really kicked in, to the even more massive spending (and death) of WWII. The economy never really recovered until the late 40's and that was mainly because the US was the only industrial economy left intact on the planet. This provided 20 years of being the exporter to the world and provided a false sense of economic security. Even with that advantage the US grew at much slower rates than the 19th century, until it started printing money and expanding debt in the 1960's. Not much has changed since then except along the way the country essentially went bankrupt (stopped paying its bills in gold in 1971), went from the worlds largest creditor to its largest debtor, and now has completely collapsed as the bills are finally coming due.

The first 2 periods were certainly "success and prosperity" the last period could be described as "serendipity and decline". Laissez-Faire is clearly the best path, and not at all practiced in the 20th century. We are now suffering mightily for that.