Home > Economics - General > Not going Galt — Crooked Timber

Not going Galt — Crooked Timber

August 13th, 2010

Henry’s post linking to Charlie Stross reminded me of one I was planning to do on the question – why has there never been a serious attempt at a real libertarian utopia? Most other utopian ideologies have inspired at least someone to attempt a practical implementation. On the face of it, libertarianism seems ideally suited to the belief in a fresh start, with no messy pre-existing claims. All sorts of ideas have been floated – island buyouts, sea-steading, co-ordinated moves to New Hampshire and so on, but none has gone anywhere. The only explanation I’ve seen, that libertarians are too independent and ornery to organise a utopia doesn’t convince me.

Thinking about the discussion we had though, it strikes me that there is a simple explanation: Actually Existing Libertarianism (see below) offers a better economic deal for nearly all libertarians than any feasible version of Galt’s Gulch. Once you do the math on going Galt, it’s not hard to see why no self-respecting libertarian would actually do it.

Let’s start with our oppressed libertarian, paying a 50 per cent tax rate, and waiting every year for Tax Freedom Day (July 1). Say that half this money is spent (highly inefficiently) on public services and the rest is given to the undeserving poor, bureaucrats and so on. I’ll make him (gender assumed advisedly) a computer programmer, so he can continue to earn his living from the comfort of his cruise ship, island or whatever. So, immediately he makes the break for Libertopia (island, ship or whatever), his disposable income doubles.

But then the problems start. The state may not do a great job providing services of all kinds, but those services have to be replaced. Libertopia doesn’t sound like a very appealing place for schoolteachers, nurses, and so on, so most public services would probably have to be supplied by external contractor. The cost of that would wipe out any savings from eliminating government inefficiency. So, the net gain in disposable income falls to 50 per cent.

More generally, you have the Stross problem. Suppose a starting population of 10 000. That’s too small to provide more than basic goods and services, so everything else would have to be imported in small quantities. As everyone who has spent time on an island (even one close to the mainland), or a small remote community, knows, that means everything costs more (often double) and most things aren’t available at all. Even if all the registered Libertarians in the US (about 250 000) moved en masse they would still be heavily dependent on high-cost imports. Almost certainly, that would more than wipe out the gain from tax freedom.

Finally, while our hero would never become disabled or unemployed, it’s bound to happen to some people. That means either budgeting for organised charity or putting up with lots of beggars. Randians might appreciate this daily testimony to their own superiority, but I suspect others would prefer that these losers move elsewhere.

All things considered, it seems pretty clear that Libertopia would yield its residents a greatly reduced standard of living, compared to what they could get from a government. Of course, the ideal would be a nearby government jurisdiction that would provide the large-scale industry needed for a ready source of consumer goods, a home for contracted-in service providers, support for losers and so on, but would not be able to tax the Libertopians.

But once you think that you realise that a partial approach to this outcome already exists, and has millions of inhabitants across the US. They’re called suburban Republicans. The suburbs benefit from urban centers, but resist paying for them, mostly successfully. It’s not exactly Libertopia, but it’s obviously close enough to be more appealing than going Galt.

Doing the math on Libertopia

Posted via email from John’s posterous

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  1. Louis Hissink
    August 13th, 2010 at 21:46 | #1

    John, that’s easy to answer – utopia’s are intellectual goals of yet to be achieved outcomes, the arrival at which thinking, and thus life, stops.

    Libertarians, however, live the philsophophy that the means are then end.

    Others that the means justify the end, or that the end justifies the mean. Utopias are the goals of the previous sentence’s advocates.

    Libertarians don’t have an ultimate goal that their intellectual opponents seek.

  2. Louis Hissink
    August 13th, 2010 at 21:47 | #2

    Correction:

    “Libertarians, however, live the philsophophy that the means are then end.”

    ” Libertarians, however, live the philsophophy that the means are the end.”

  3. Austin
    August 13th, 2010 at 21:52 | #3

    I think I missed something. Why are the costs of replacing services the same as the tax rate? Isn’t the idea that Governments are wasteful (e.g. lots of extravagant purchases the public doesn’t want like pearls, diamonds, expensive toilet paper and the like) and that if only the raw input costs were charged (via private contractors and consumer choice) then we’d all be “better” off without the “waste”? I don’t see how this argument is quantitative at all. Surely some elasticities are needed or something.

    Mind you, I think your argument is probably the right one.

  4. SJ
    August 13th, 2010 at 22:32 | #4

    There have been (at least) two huge scale Libertopia experiments.

    1) American revolution.

    2) Post 1972 U.S.

    Both are based on colonial models.

    In the first instance, the settlers took the land from the native Americans, got rid of the British oversight, taxes, arms control, etc. Lasted until the Civil War and the First World War.

    In the second instance, rich assholes have appropriated the entire system of government, property and income, and are basically free to do whatever they want. The internet wannabe libertarians are really just a “cargo cult”, who seem to think that if they talk enough crap they’ll actually become a part of the real, existing class of libertopians who can’t really be touched in any significant way by taxation or law.

    It could be argued that there was another attempt in the US, post civil war that ended in the great depression.

  5. Rebecca Burlingame
    August 13th, 2010 at 22:46 | #5

    Interesting that you would bring up this question, as I have been working on a book project for the last six years which some might refer to as such a scenario. But what my ongoing project really tries to offer, are options for people who do not have regular access to money. It has taken me a long time to get my project off the ground, because everything attached to money is complexity itself, with all the laws, regulations and zoning which leave so many people unable to extend their skills directly to one another.

    I did not start out my work with any notion of it looking like libertarianism, I was only looking for survival solutions, when all other options for individuals including government, non-profit assistance, family and friends, and financial access have been exhausted.

  6. Tony G
    August 14th, 2010 at 00:01 | #6

    “a real libertarian utopia” would be anarchy, where people who normally derive their livelihood on the public teat, would no longer exist and thus would not get the luxury to spend their life posting crap.

  7. David C
    August 14th, 2010 at 08:50 | #7

    … or where people who obviously don’t work hard enough don’t have enough time to read things that they think are crap.

  8. Jim Rose
    August 14th, 2010 at 09:09 | #8

    @SJ
    you forgot to list Hong Kong. an obvious candidate.

    also, as for the Post 1972 U.S. huge scale Libertopia experiments, Nixon, Ford, Carter and the democratic party controlled congress up until 1994 would be surprised to learn that they are double-secret libertarians.

  9. August 14th, 2010 at 11:33 | #9

    So the problem with Libertopia, according to this, is that the market wouldn’t be big enough for economies of scale? That seems a reasonable argument. The rest, however, is pretty terrible.

    “Libertopia doesn’t sound like a very appealing place for schoolteachers, nurses, and so on, so most public services would probably have to be supplied by external contractor. The cost of that would wipe out any savings from eliminating government inefficiency.”

    Massive assumption that is critical for this supposed ‘math’. How robust are the findings to variations on this assumption?

    “Of course, the ideal would be a nearby government jurisdiction that would provide the large-scale industry needed for a ready source of consumer goods, a home for contracted-in service providers”

    Is there anywhere on earth where this is NOT the case? The article implies this will be a hard-to-fulfill criterion, but I think the reality is that it’s one that’s hard to escape.

    “That means either budgeting for organised charity or putting up with lots of beggars…I suspect others would prefer that these losers move elsewhere.”

    Ignoring the pointless insult, the first part is correct. But no mathematical analysis (which is the purported aim of the article) on why it couldn’t be done. Successful voluntary welfare systems have existed before. These are susceptible to the size-of-market problem, to be sure, but then it’s just a re-statement of the central argument.

    “All things considered, it seems pretty clear that Libertopia would yield its residents a greatly reduced standard of living, compared to what they could get from a government.”

    The article has singularly failed to show this at all. It has made one reasonable claim – that small communities don’t have it as good as large ones – but has been unable to show why it’s the level of government that matters.

  10. TerjeP
    August 14th, 2010 at 11:40 | #10
  11. TerjeP
    August 14th, 2010 at 11:45 | #11

    p.s. A lot of people seem keen to move to low tax areas like Hong Kong and Singapore. The main problem with these destinations is that they are so damn popular the land is very expensive.

  12. paul walter
    August 14th, 2010 at 12:31 | #12

    Quiggin’s last paragraph in his thread starter parallels a parable from a previous era, related in the New Testament, adressing a putative “Rush of the Gadarene Swine”.

  13. Alice
    August 14th, 2010 at 12:58 | #13

    @TerjeP
    Terje – have you recently blonded your hair??
    Strange things happen to people when they get mixed up with politics…. take Julia eg – overnight she went titian red!

  14. paul walter
    August 14th, 2010 at 13:47 | #14

    Market forces, Terje.
    Market forces.

  15. TerjeP
    August 14th, 2010 at 15:36 | #15

    Alice – it’s all natural. No artificial flavouring of any variety.

  16. Alphonse
    August 14th, 2010 at 21:23 | #16

    Practicalities aside, altrusim could subvert the whole enterprise.

  17. Alice
    August 14th, 2010 at 22:38 | #17

    @TerjeP
    Terje – all the same I wish you well in your campaign even if I dont agree with free markets. I have had some terrible market failures with my own hair in my time!

  18. TerjeP
    August 15th, 2010 at 05:56 | #18

    I think Jarrah is on the money. There are huge benefits to be had from being part of a large market. Libertarians don’t generally wish to escape society and it’s benefits. They want to reform government and remove it’s parasitic and wasteful nature. If abandoning big government also means abandoning society then few libertarians are interested. And more to the point few people are interested. However when this is not the case (eg Hong Kong, early USA) then people arrive in droves.

    In terms of utopia I don’t think human freedom can be perfected in a society. We will always be stepping on eachothers toes to some extent. That doesn’t mean we can’t do a lot better than we are doing.

  19. TerjeP
    August 15th, 2010 at 06:24 | #19

    For an account of how welfare systems would work without government involvement I’d suggest a look at the following article which examines how welfare systems functioned before the government took over.

    http://blog.libertarian.org.au/2009/10/18/the-old-should-pay-for-themselves/

  20. Chris Warren
    August 15th, 2010 at 06:39 | #20

    Under socialism workers co-operatives would be able to establish industry superannuation funds. There would be no need for governments

    But we could expand these now – even under capitalism.

    But you would need government involvement to set them up at a new scale to be truly able to fund workers pensions. A good start could be to take funding away from 10 jet strike fighters and use it as seed funding.

    But if the rich then start using this facility to dodge tax, then a government would still need to come in with new taxes or regulation.

  21. Alice
    August 15th, 2010 at 08:36 | #21

    @TerjeP
    Terje – market forces simply are not taking care of the large investments needed in transport infrastructure, now, in this country. PPSs have been an abject failure. Wendy Harmer is in the Sunday paper now saying what may of us have known for years here in Bronwyn Bishops true blue seat on the Northern beaches of Sydney.

    Its been hallmarked as a development location and it has been developed and the devlopment continues at breakneck speed but in terms of transport there has not been one decent initiative in years and the area is serviced by two small broken down underfunded health facilities that are actually dangerous for what they dont do (meaning patients need transfers elsewhere). The traffic is now a mightmare of congestion.

    The ALP doesnt care because its a blue seat but are more than happy to sit back and collect developer donations and stamp duties from every overpriced and crowded new unit sold. The liberals ignore the region completely smug in their indifference. The people clearly need to swing their votes here before anything will change. Im glad Ms Harmer is at last saying so.
    The telegraph is saying it supports Labor precisely because of needed things like investment in public transport (because your free markets have not and will not provide).

    Well public transport is on the greens policy and Ill be swinging my vote their way and if it helps this region get more marginal and less blue then its a bonus.

  22. TerjeP
    August 15th, 2010 at 10:47 | #22

    Alice – governments have actively opposed private sector initatives in the infrastructure space. We had a private sector consortium trying to do water harvesting a while back and the government wouldn’t allow it. We have Telstra being penalised when it does build infrastructure. Sydney has had most of the private bus services taken over by the public sector and the government has effectively banned toll road competition. The mining tax was handled in such a way that heightened investor concerns about sovereign risk. As usually you have a rather one eyed perspective on these things.

  23. Alice
    August 15th, 2010 at 11:14 | #23

    @TerjeP
    Terje – everything you say would be believable except for the fact that public buses and trams ran better around our suburbs 40 years ago than they do today. You keep hoping the market does it better Terje but you cant face growing unhappiness and the feeling many people have, especially in Sydney, that transport initiatives have been worse than a bad joke.

    What do the LDPs have to offer?? Nothing. What does Barry O Farrell have to offer? Ive heard nothing about increasing public investment. And what does Tony Abbott propose? Nothing (in fact less investment).

    The conservative parties live in a fools paradise.

  24. Alice
    August 15th, 2010 at 11:20 | #24

    @TerjeP
    Terje – a theme that keeps running through libertarian discourse is that when markets do well its the private sector that gets the kudos. When the private sector fails us…they have a convenient and oft rolled out tin horse scapegoat…”Blame it on guvmint interference”.

    Just doesnt wash Terje.

  25. Jim Rose
    August 15th, 2010 at 11:51 | #25

    @TerjeP
    retirement income provision is a by-product of massive increases in life expectancy in the 20th century. blame it on capitalism.

    not too many of the entire population made it to 65 about 100 years ago so funding their pensions was not a major expense.

    in 1913, australian life expectancy at birth was 59 years.

    as late as 1950 and 1965, life expectancy at birth was about 70 years – the joys of the Menzies era.

    Life expectancy had increased to 81 years in 2007, but such are the horrors of neoliberalism.

  26. August 15th, 2010 at 11:55 | #26

    “the fact that public buses and trams ran better around our suburbs 40 years ago than they do today.”

    Who took away the trams? The government. If they had been privately run, they wouldn’t have been ripped up.l

    “Just doesnt wash Terje.”

    Why not? If someone can show that government interference has had an effect, you can’t claim it’s ideology to do so.

  27. Alice
    August 15th, 2010 at 12:12 | #27

    jarrah says “Who took away the trams? The government. If they had been privately run, they wouldn’t have been ripped up.l”

    Well Jarrah – the private sector isnt immune from its own mistakes either….how many private PPS have gone to the wall (and sued us for our taxes)?

    If the private sector was doing such a marvellous job of transport – why is everyone in Sydney whinging? The private sector has had ample opportunity to “pony up” as JR might say – but instead I reckon they would have commuters “ponying up” for a hefty toll.

    Has anyone noticed the 25 metre tolled exit ramp to get off another tolled road (in addition to the normal toll) at Neutral Bay? That really is amazing…

    Jarrah – do you have any idea how much some people spend on tolls to get to and from work?

    Public transport solutions are obviously needed in major cities like Sydney. Prove to me why they are not. The evidence is all there that the private sector has failed to deliver.

  28. amused
    August 15th, 2010 at 18:02 | #28

    jarrah says “Who took away the trams? The government. If they had been privately run, they wouldn’t have been ripped up.l”

    Hmmm… Experience in Los Angeles doesn’t bear this out. The car companies bought up the trolley cars with the sole aim of closing them down. Google “Great American streetcar scandal”.

  29. Alice
    August 15th, 2010 at 19:03 | #29

    @amused
    Wouldnt be at all surprised if the car companies in Australia might have been behind the decision to close down the trams here as well…maybe we havent dug far enough into the decision amused??

  30. Jim Rose
    August 15th, 2010 at 20:09 | #30

    @amused
    Radial public transport such as trains and buses can work when many people converge on a common destination, but more and more trips are cross-town.

    A common proviso is high geographic concentrations of people so many get on at the same time, and frequent enough services for hour so commuters do not have to wait more than 10 minutes or so.

    Australian cities tend to be urban sprawls. The car is the preferred means of transport unless parking is expensive.

  31. paul walter
    August 15th, 2010 at 20:50 | #31

    Yes. of course Alice, it’s often turned up in teev docos, mags, the like..
    “preferred” for fat arses in beltway smugville doesn’t alleviate mass suffering elsewhere.
    Values?

  32. Stephen L
    August 15th, 2010 at 21:41 | #32

    “Life expectancy had increased to 81 years in 2007, but such are the horrors of neoliberalism.”

    Unlike Scandinavia of course, where life expectancy rates have crashed. Oh wait.

    It is of course impossible that Medicare could have had anything to do with this expansion of life expectancy, including the fact that Australia is now well ahead of the US in this regard.

  33. paul walter
    August 15th, 2010 at 21:46 | #33

    With age comes wisdom, Steven L

  34. Lord
    August 16th, 2010 at 03:01 | #34

    Libertopia would be most compatible with rural life but doesn’t offer the benefits of scale and specialization which is why the suburbs or smaller cities offer the best mix. One could even quantify the difference in income and living standards between rural and urban as the cost of Libertopia. The costs are significant, though there are some free benefits that lessen the difference in living standards. A factor of two is probably too small; a factor of four would probably be closer to reality though it has been a while since I looks at salary comparisons between that different of areas.

  35. Alice
    August 16th, 2010 at 09:25 | #35

    @paul walter
    Values Paul Walter? You ask and I wonder!

  36. Alice
    August 16th, 2010 at 09:33 | #36

    On the subject of Sydney trams it may appear that it was an early privatisation disaster??

    Comeng – a shortening of Commonwealth Engineering and whilst under Commonwealth control – the largest maunfacturer of rolling stock in the Southern Hemisphere. Alas the state government listened to three (not so) bright sparks from British Transport who advised them to rip up the trams and install double decker buses.

    Comeng privatised in the early 1960s shortly after this decision was made….and RIP the largest manufacturer of rolling stock in the Southern Hemisphere.

    Sad but true.

  37. Alice
    August 16th, 2010 at 11:33 | #37

    @Alice
    Oh and as what was left of Comeng passed hand to private hand – it ended up indirectly in the hands of Smorgon (well…steel recyclers..the trams were sold for scrap). The loss of the trams really was Sydneys greatest ever transport disaster..

    http://www.secretsofasydneypast.com/2009/05/sydneys-real-infrastructure-debacle.html

    But the pro markets amongst us like Jarrah here would have us all believe that in private hands the Sydney trams wouldnt have been ripped up. Damn right Jarrah. They wouldnt have been built in the first place to later be ripped up absorbed ultimately by private steel recyclers like Smorgon.

  38. TerjeP
    August 16th, 2010 at 12:40 | #38

    Alice – a theme that keeps running through statist discourse is that when markets do well its the government that gets the kudos. When the public sector fails us…they have a convenient and oft rolled out tin horse scapegoat…”Blame it on capitalism”.

  39. August 16th, 2010 at 19:11 | #39

    There are some unstated assumptions here:-

    - “All sorts of ideas have been floated – island buyouts, sea-steading, co-ordinated moves to New Hampshire and so on, but none has gone anywhere”. This assumes that this arises from internal causes, rather than outside intervention. However, governments themselves have often been the ones that put a stop to such endeavours, e.g. the Republic of Minerva.

    - “Once you do the math [sic] on going Galt, it’s not hard to see why no self-respecting libertarian would actually do it”. This presages many of these assumptions.

    - “But then the problems start. The state may not do a great job providing services of all kinds, but those services have to be replaced. Libertopia doesn’t sound like a very appealing place for schoolteachers, nurses, and so on, so most public services would probably have to be supplied by external contractor. The cost of that would wipe out any savings from eliminating government inefficiency. So, the net gain in disposable income falls to 50 per cent.” In many cases, no, they don’t have to be replaced. Furthermore, there is no necessity to replace funding them by charging for them, in those cases where they do have a public character (charging is only suitable for private needs). The usual historical pattern for such needs is to fund them from revenue yielding endowments, e.g. endowed monasteries supporting the mediaeval poor. Those would be set up separately using other resources than things taken directly from the denizens (think US college land grants).

    - “More generally, you have the Stross problem. Suppose a starting population of 10,000. That’s too small to provide more than basic goods and services, so everything else would have to be imported in small quantities. As everyone who has spent time on an island (even one close to the mainland), or a small remote community, knows, that means everything costs more (often double) and most things aren’t available at all. Even if all the registered Libertarians in the US (about 250,000) moved en masse they would still be heavily dependent on high-cost imports. Almost certainly, that would more than wipe out the gain from tax freedom.” That simply isn’t true – unless you build in a requirement to keep doing things the old way, and keep the network externalities that draw activity to hubs that are connected to the regions involved. Many of the comments at the Stross page explore how things can be done differently, citing historical precedents.

    - “Finally, while our hero would never become disabled or unemployed, it’s bound to happen to some people. That means either budgeting for organised charity or putting up with lots of beggars.” No, it doesn’t. Not only does organised charity not need such budgeting but only endowment (see above), it is not even necessary to provide it to the disabled or unemployed anyway – unless, again, you build in the old ways as a constraint, so that being disabled or unemployed means without private resources. But not only do extended families provide a long stop safety net in societies without government provision, they aren’t even needed when the individuals have adequate private resources beyond their own personal efforts. Think Distributism, or the practices and customs of both Old and New Testament Israel. “Patrimony” and “birthright” were not merely symbolic, but had substantive ramifications (the deal the Prodigal Son in the parable was making by asking for his birthright early was a standard arrangement, involving him taking on responsibility for supporting his parents from it – analogous to paying them an annuity in exchange for their life interest in the patrimony). A functioning Libertopia would by definition mean people would have such resources (though it does not answer the question of whether there could be such a thing; assuming one way or the other would be building in the conclusion).

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