Mainstreaming Liberty

How five 20th century economists subtly remade the political landscape

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Libertarians like to complain that things are going to hell. And they do have some evidence for the claim. The U.S. is six years into a recovery that's worse than most recessions, for example, even as many of the most burdensome new government programs, such as Obamacare and Dodd-Frank, have yet to be fully implemented.

But there's a different story to tell about what's happening in the world, one in which libertarian ideas have subtly entered mainstream thinking in a number of important but overlooked ways. We may or may not be living through a "libertarian moment," as Robert Draper suggested in a prominent New York Times Magazine cover story last summer. But we certainly exist in an era that has been shaped to a surprising extent by a philosophy of limited government and free markets.

Ideas that once seemed crazy are now taken for granted because of the hard work of intellectual entrepreneurs such as Milton Friedman, Friedrich Hayek, James Buchanan, Gordon Tullock, and Ronald Coase.

In his 1962 book Capitalism and Freedom, Friedman launched an intellectual battle to end the draft, an institution he deemed "inconsistent with a free society." In a 1995 interview with reason's Brian Doherty, the University of Chicago economist said his role in eliminating military conscription in 1973 was his proudest accomplishment—as it should be. The practical effect that victory had on the lives of millions of young men and their families is immeasurable.

Friedman's ideas also revolutionized America's primary education system. Conclud­ing that parents deserve to be empowered to choose the right school for their children, he broached the idea in "The Role of Government in Education," a 1955 journal article. "The administration of schools is neither required by the financing of education," he wrote, "nor justifiable in its own right in a predominantly free enterprise society." Also in Capitalism and Freedom, he developed the idea further, arguing that "the injection of competition would do much to promote a healthy variety of schools." While Friedman would have preferred a totally private system, he called for at least giving parents more control over which schools their children attend.

Back then and for decades afterward, intellectual opposition to school choice seemed insurmountable. Yet today the idea is being implemented in various forms across the land, from Chicago to Philadelphia to the whole state of Nevada and nearly all of New Orleans. In New York, Gov. Andrew Cuomo, a champion of school choice, is battling New York City Mayor Bill de Blasio over the program. When liberals are fighting with each other over school choice—and in New York of all places—you know the ideas of freedom have caught on.

In 1944, Hayek's The Road to Serfdom warned that moving economic decisions away from individuals and into the hands of government would entail enormous costs to society. Keynesian central planning, which says bureaucrats can spark economic growth by increasing federal spending, was all the rage back then. Yet Hayek's book became one of the great classics of economic literature.

His ideas were hugely influential to Prime Minister Margaret Thatcher's revolution in Great Britain in the '70s and '80s. The story goes that, confronted with anti-market sentiment during a Conservative Party policy meeting in 1975, Thatcher retrieved a copy of Hayek's book The Constitution of Liberty from her briefcase, placed it on the table in plain sight, and exclaimed, "This is what we believe!"

More recently, the United States saw a revival of Keynesian ideas following the 2008–09 recession. But the appeal of those ideas was tempered, and many Americans turned instead to The Road to Serfdom. In 2010, a reprint of the book rose to the top of Amazon's bestseller list.

Friedman and Hayek didn't have to fight alone. In 1947, they founded the pro-market Mont Pelerin Society. Its first meeting included 39 scholars from 17 countries, and their mood was anything but cheerful. Europe had just emerged from the most terrible war the world has ever known. Collectivism had become the mainstream philosophy, and many economists were predicting that the United States would collapse as the end of wartime led to decreased government spending. According to Mont Pelerin's mission statement, it was "difficult to imagine a society in which freedom may be effectively preserved." Nonetheless, the members committed themselves to advancing the libertarian way of life.

Did they succeed? "Certainly the intellectual standing of classical liberal ideas has risen, especially during the past 20 years," answers the economic historian Robert Higgs. "Socialism, Hayek's bête noire, has been more or less discredited—at least in its more blatant forms—except in the sheltered enclaves of academia. Western policy makers now talk openly about privatization and deregulation, and occasionally take corresponding action."

The Mont Pelerin Society likely influenced a future generation of libertarian pioneers, including the late George Mason University professors James Buchanan and Gordon Tullock, founders of the public choice school of economics. Their novel insight was that political actors are just as likely as individuals outside the political sphere to act in their own interests.

Buchanan and Tullock's writings planted seeds of doubt in the minds of voters regarding Washington's effectiveness. In the 1960s, more than 7 in 10 Americans reported high levels of trust in government. By 2014, that number had fallen to just 24 percent. This growing distrust reflects the many policy failures of recent years, including the current "jobless" recovery. But it was the public choice school that provided an early explanation for why such failures are so common.

Here's another example: In 1959, when the economist Ronald Coase proposed auctioning off the right to transmit signals over the electromagnetic spectrum, the policy establishment mocked the idea as crazy. In fact, when he presented his proposal to the Federal Communications Commission that year, the first question put to him was, "Tell us, Professor Coase, is this all a big joke?"

Back then, Washington handed out spectrum to companies based on bureaucrats' (generally flawed) assessments of consumer needs. But by the 1990s, experts at the commission had come around to the wisdom of Coase's proposal. Auctions that began under the Clinton administration dramatically increased the efficiency of spectrum allocation and have since been implemented in countries around the world.

In the span of 50 years, as Friedman put it, ideas that had seemed "politically impossible became politically inevitable." We continue to benefit from this sea change. In the Great Recession's aftermath, many terrible policies were implemented. But no industries were nationalized, and despite enormous pressure, 1930s-era banking regulations were not resurrected. President Barack Obama was able to increase government spending far less than he desired, and after two years the window for anti-market policies narrowed considerably when Republicans took back the House of Representatives.

Today's consumers are pushing back against attempts by special interests to regulate to death innovators such as Uber, Lyft, and Airbnb. On July 1, the charter of a New Deal–era crony program called the Export-Import Bank expired for the first time in 81 years. Marriage equality has been enshrined by the Supreme Court, the push for marijuana legalization continues to make headway, and a growing number of lawmakers have begun challenging the surveillance state. Each of these achievements can be traced back to the efforts of scholars, think tanks, and grassroots organizations that fought for years to change the status quo.

Libertarians will lose some short-term political fights, of course. And some of these losses, like the passage in 2010 of Obamacare (and the two subsequent Supreme Court decisions wrongly upholding it), will be devastating. But each of these brawls will move us closer to the day when the anti-market policy in question ceases to exist.