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What’s left of libertarianism?

August 14th, 2017

Liberaltarianism

…..

This post (crossposted from Crooked Timber) is mainly an excuse for the pun in the title. But I do want to defend both parts of the pun.

First, liberaltarianism, as represented by the Niskanen Center (notable staff and associates include Radley Balko, Jacob Levy, Stephen Teles, Jerry Taylor, Will Wilkinson) represents an important shift of libertarianism to the left in the US context, and an important contribution to left-of-centre thinking. Compared to the left in general, the distinctive feature of liberaltarianism is scepticism about the effectiveness and beneficence of state action. The break with the Cato version of libertarianism, from which much of the Niskanen Center group has moved, is sharper, including acceptance of the need for income redistribution and action in climate change. We debated some of the issues raised by liberaltarianism in two posts about Jacob Levy’s “The Sovereign Myth”.

As my comments on that piece showed, I don’t necessarily agree with the liberaltarian view on lots of issues. But then, I agree even less with DLC Democrats. A majority coalition needs to encompass a wide range of views. More importantly, after decades of retreat, we need new ideas to respond to the failure of market liberalism and that means being open to a range of perspectives.

What I see as useful in the liberaltarian perspective is scepticism about the efficacy and beneficence of state action, and particularly detailed regulation as opposed to broadbased structural changes. Similarly, as we defend sanctuary cities and state-level action on climate change, it’s worth remembering that lots of progressives have been impatient with constraints on executive action by the federal government. Liberaltarianism provides a check on this.

Turning to the second part of the pun, apart from liberaltarianism, there’s nothing else of significance left of US libertarianism/propertarianism, either as an important political force or as an set of ideas that deserve attention and engagement.

In political terms, the 2016 election and, even more, its aftermath saw a complete failure on the part of propertarians. Electorally, there could scarcely have been a better chance for a propertarian candidate, yet Johnson pulled in just 3 per cent of the vote. Since the election, propertarians have either embraced Trump (notably Rand Paul) or maintained their standard position as mildly dissident members of the Republican base. Rand Paul is the most notable public example of the first kind, and Cato of the second. It’s startling to compare the vitriol directed at Obama (a lawless, warmongering enemy of constitutional government) with the respectful, if sometimes critical, treatment given to President Trump.

(Try Googling Cato+Obama and then Cato+Trump to check that these are reasonably representative)

More significantly, propertarians haven’t had a new idea in decades. As problems have emerged to which their ideology has no easy answer, they’ve resorted to making up their own facts. That’s most obviously true of climate change, where Cato and other propertarain thinktanks have been leading proponents of science denial (the honorable exception being Ron Bailey, who’s been pilloried by the Cato faithful for his relatively limited concessions to reality). But it’s also true of passive smoking (tobacco and coal hack Stephen Milloy got his start at Cato), inequality and lots more.

Engaging with this group is not worth the effort if the hope is to learn anything from the exchange. But, to the extent that any of them can be moved, the liberaltarians are best placed to do it. For example, here’s a piece by Brink Lindsey of Niskanen arguing that conservatives and propertarians should attack corporate welfare rather than the welfare state.

Considering what an outsized role libertarianism has played in US political debate, it’s encouraging to see that something can be salvaged from the smouldering wreck of orthodox propertarianism. I’ll look forward to more productive engagement with the Niskanen group and likeminded liberaltarians.

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  1. Smith
    August 14th, 2017 at 09:59 | #1

    Isn’t it just commonsense to be sceptical about state action? Some of the things that governments do, at both political and administrative levels, are so stupid, if not malicious, they beggar belief. Here’s some local examples: Centrelink recovery of (maybe) overpaid welfare benefits, the Census botch, the state prison systems, God-awful urban planning. Some people would be put all of this down to bad ideology – neoliberalism blah blah blah – but it has always been like this.

    This doesn’t mean that having a minimal state that does nothing but protect property rights – the wet dream of libertarians – is a good idea. It’s a really bad idea. But the notion that the state can fix all problems and right all wrongs, or even most of them, is a fantasy.

  2. Fran Barlow
    August 14th, 2017 at 13:21 | #2

    @Smith

    It seems to me that one of the problems in understanding the conduct of states, at least for those of us on the left is a reflexive defensiveness about the virtue of what may loosely be called ‘the public sector’. This is hardly surprising, given that insistence by large swathes of the right that states taint pretty much everything they touch (with the arguable exception of their repressive functions domestically and internationally).

    The left often positions itself as the mirror image of the right — skeptical of the armed forces, the police etc but fans of state intervention in pretty much every other sphere.

    Speaking as someone who works for a large government department, I’m only too well aware of the limits of virtue in state intervention. Public policy involves the distribution of scarce benefits and in a best of all possible worlds marked by scarcity, delivers these benefits non-arbitrarily and in the right quantities to maximise its public policy ends. That process entails robust structure and oversight,which almost by definition makes it inflexible and slow moving and too frequently, sub-optimal.

    With the best will in the world, and there genuinely is a lot of goodwill, it’s not hard to see room for improvements. Yet every attempt to do so runs the risk of yet greater complexity and thus error and arbitrariness.

    The private model of service however suffers from pervasive adverse selection processes and perverse incentives that are ultimately impossible to avoid. And of course, many public goods simply don’t lend themselves well to monetisation. So for the moment we are stuck debating the frontiers between private and public, knowing neither on its own can maximise public benefits, and unsure even what that would entail.

    And finally, given that the principal objective of almost all contemporary states is to protect the commodity property of all asset holders, a whole new rubric for state policy failure is opened up.

  3. Smith
    August 14th, 2017 at 13:44 | #3

    @Fran Barlow

    Reflexiveness defensiveness where you define your beliefs as the mirror image of what your opponents believe does not a constructive political program make.

    There is nothing inherently progressive about the state. Marx said it exists to manage the interests of the bourgeoisie. This is remains largely true. Just the other day two different arms of the state (the NSW Government and the Sydney City Council) were arguing over who should move on the homeless people in Martin Place, whose presence offended the aesthetic sensibilities of the bourgeoisie. Neither wanted to get their hands dirty, but they agreed it had to be done. More seriously, the state strokes the prejudices of the bourgeoisie by keeping open quasi-concentration camps on Nauru and Manus Island. More widespread, the state has managed to create a situation where what should be simple act of choosing an electricity retailer has become insanely complex. This is isn’t even in the interests of the bourgeoisie.

  4. Fran Barlow
    August 14th, 2017 at 14:15 | #4

    @Smith

    All true, and Marxists have long seen the state as intrinsically a repressive artefact of class society, in turn a product of material scarcity. In the opinion of Lenin, as scarcity was supplanted by abundance, first classes and then class rule would disappear and its servant, the state would disappear.

    I’d say we’re at best a long way from that occurring, but it affirms your point.

  5. paul walter
    August 15th, 2017 at 06:17 | #5

    Right-libertarians do not or won’t recognise the actual nature of the state, since this strand is largely a confection designed to hoodwink punters into precisely that misunderstanding.

    It has been designed to obscure the role of big business in the constitution and functioning of the modern Western state and without the understanding that differentiates left libertarianism from contrarianism, the critical and deliberately inculcated misunderstanding of what makes the state the State renders right-libertarianism the paranoiac very booster for the mindless, deep state controlled authoritarianism that it professes to abhor.

    Let us not forget what Charlottesville really is, as working example of the corruption of libertarianism to reactivism that involves want before need and reduces mindfulness to childish self-absorption.

  6. Greg McKenzie
    August 15th, 2017 at 09:32 | #6

    The suggestion, by Brink Lindsey about attacking corporate welfare, has a lot of merit. Corporations, especially the banks, cannot expect to reap public benefits whilst running super-normal profits. The Schrumpeter principle of creative destruction clearly states that corporations should be allowed to fail, if they cannot support themselves from their revenue sources. Corporate welfare “bludgers” cannot expect sympathy and should not get welfare.

  7. Jim
    August 15th, 2017 at 11:18 | #7

    I’m all fine with the idea of tackling corporate welfare, but what will happen to mining and agricultural sectors in Queensland????

  8. Newtownian
    August 15th, 2017 at 12:03 | #8

    Thanks John, Interesting piece.

    Related to this skepticism of government I have asked many armchair socialist friends what exactly is the alternative to capitalism operationally. Stony silence. Your article reminded me again of Herman Daly who in frustration with a certain ecosocialist economist proferred the work of Oscar Lange to illustrate what this would entail and to say ‘get real’.

    Daly’s position which seems to echo the libertarians you discuss seems to be illustrated for example by this article (and its companion) – Lange, O. (1936). On the economic theory of socialism: part one. The review of economic studies, 4(1), 53-71.

    Most striking is reference to the ‘Central Planning Board’ (Orwellian before the word was invented). Lange seems to be serious that this is the socialist solution. Interestingly this paper also includes many objections to one Prof. Hayek.

    Below are illustrative extracts. While I still sympathise with socialist ideals, the CPB solution sounds utterly monstrous. I wonder if socialist theorists have moved beyond this model?

    The funniest/most surreal bit is the ‘hat’ case study. It conjurs up mountains of pork pie hats as seen in episodes of Homicide. Coming slightly second is the image of the allocation process via “A Workshop” that different monster beloved of managerialism.

    ———————————–
    “Our study of the determination of equilibrium prices in a socialist economy has shown that the process of price determination is quite analogous to that in a competitive market. The Central Planning Board performs the functions of the market. It establishes the rules for combining factors of production and choosing the scale of output of a plant, for determining the output of an industry, for the allocation of resources, and for the parametric use of prices in accounting. Finally, it fixes the prices so as to balance the quantity supplied and demanded of each commodity. It follows that a substitution of planning for the functions of the market is quite possible and workable”

    “For the Central Planning Board has a much wider knowledge of what is going on in the whole economic system than any private entrepreneur can ever have; and, consequently, may be able to reach the right equilibrium prices by a much shorter series of successive trials than a competitive market actually does”

    “In such a system the Central Planning Board decides which com- modities are to be produced and in what quantities, the consumers’ goods produced being administered to the citizens by rationing and the various occupations being filled by assignment. In such a system also rational economic accounting is possible, only that the accounting reflects the preferences of the bureaucrats in the Central Planning Board, instead of the consumers. The Central Planning Board has to fix a scale of preferences which serves as the basis of valuation of consumers’ goods.”

    “Simi- larly, the Central Planning Board does not need to have an elaborate formula of its preferences. By simple judgment it would assign, for instance, to a hat the valuation of ten monetary units, when I00,000 hats are produced monthly, whereas it would assign a valuation of eight monetary units to a hat when I50,000 hats per month are produced.”

    “The Central Planning Board has to impose on the managers of production plants the rule that factors of production should be combined and the scale of output chosen so as to minimise the average cost of production. For each industry the rule must be adopted to produce exactly as much of a commodity as can be ” accounted for ” at a price equalling average cost, and on the managers of ultimate productive resources the rule must be imposed to direct them only to the industries which can ” account for” the price fixed by the Central Planning Board.”

  9. crocodile
    August 15th, 2017 at 13:29 | #9

    Greg McKenzie :The suggestion, by Brink Lindsey about attacking corporate welfare, has a lot of merit. Corporations, especially the banks, cannot expect to reap public benefits whilst running super-normal profits. The Schrumpeter principle of creative destruction clearly states that corporations should be allowed to fail, if they cannot support themselves from their revenue sources. Corporate welfare “bludgers” cannot expect sympathy and should not get welfare.

    They also provide about a quarter all government taxation revenue.

  10. Newtownian
    August 15th, 2017 at 15:11 | #10

    Interesting article here in Naked Capitalism on the movement from big government to neoliberalism in the US which seems related

    https://www.nakedcapitalism.com/2017/08/changing-guard-prescient-1980-book-foretold-democrat-love-affair-neoliberalism.html

  11. ChrisH
    August 15th, 2017 at 20:14 | #11

    @crocodile
    And how much of the nation’s wealth do they have? And how much of the nation’s income do they have?
    And how much of the claimed quarter is only them passing on other people’s taxes (mostly, withholding taxes and PAYG from workers’ earnings)?
    Try again, Crocodile!

  12. Ernestine Gross
    August 15th, 2017 at 21:09 | #12

    Based on the article referenced, it seems to me Brink Lindsey is a contemporary social democrat who perhaps values some insights from general equilibrium theory more than other social democrats (eg the importance of minimum wealth constraint and the idea that the primary notion of ‘welfare’ has something to do with individuals’ preferences – the two insights put together imply a degree of economic freedom that should be available to everybody; the recognition that not every aspect of human life can be coordinated through prices – incomplete markets; the recognition that the legal system is a human construction that does not always benefit humanity – micro-management type regulations, laws that enhance inequality and more). Refreshing.

  13. Ben Wolf
    August 16th, 2017 at 07:53 | #13

    @Newtownian

    There are two different perspectives in “On the Economic Theory of Socialism”: one in which there is consumer choice, and one in which there is not. Fred Taylor presents a method for price determination that simulates the market trial-and-error method on the assumption (with which I agree) that socialism by necessity must allow for consumer freedom. The Central Planning Board would determine production of primary commodities and capital goods, then essentially distribute a share to each citizen who may then determine how it will be utilized.

  14. Ben Wolf
    August 16th, 2017 at 07:56 | #14

    I would add that Taylor presented his price determination methodology in answer to Hayek’s “calculation problem” objection to the viability of a socialist economy.

  15. crocodile
    August 16th, 2017 at 08:33 | #15

    @ChrisH
    The claimed quarter is corporate tax and state payroll taxes. Zippo to do with PAYG and withholding taxes. They also stump up the super guarantee. So what if some of the tax pie is spent on them. It’s not like they’ve contributed nothing. Try again yourself.

  16. August 16th, 2017 at 08:49 | #16

    Soviet central planning did not collapse because it failed to solve the calculation problem. There was a lot of waste, no doubt even more than in a capitalist economy (which has different inefficiencies of rentiers and parasites). It collapsed because it failed to match capitalist growth rates in consumption and innovation in consumer goods. There were too few washing machines and TVs and cars and flats and they were of horrible quality. Eventually the gap was too wide to be denied, especially between the two parts of Germany. These had the same culture, very similar human capital, and the same ground zero in 1945. When East Germans were first allowed to travel to West Germany, they bought bananas.

  17. Greg McKenzie
    August 16th, 2017 at 10:36 | #17

    It is Schumpeter’s point that corporations have a used by date. For governments to put corporations on welfare support reduces the efficiencies obtainable in any industry. The less efficient an industry the more it reduces the growth potential of the whole economy. By allowing any business to fail, including banks, the government can increase its growth targets. Only through the creation of real wealth, not the replication of money wealth, can any economy become internationally competitive.

  18. crocodile
    August 16th, 2017 at 12:43 | #18

    @Greg McKenzie
    Not quite what I meant. There seems to me to be a view in some quarters that any form of access to government funding is automatically welfare.

    If all government spending in the corporate sector was directed purely to prop up old businesses that fail to innovate then I may agree with your position. This is not always the case. There are programs that are designed to assist the renewal process. I have no problem with this as I’ve already pointed out, a quarter of tax receipts come this sector.

  19. totaram
    August 16th, 2017 at 18:52 | #19

    @crocodile
    Please point us to programs put in place by the present govt. that “are designed to assist the renewal process”, as you put it.

  20. Ben Wolf
    August 16th, 2017 at 20:11 | #20

    @Greg McKenzie
    Consider the possibility that “international competitiveness” is a primitive holdover concept from the gold-standard era.

  21. crocodile
    August 17th, 2017 at 00:39 | #21

    @totaram
    For starters, the R&D tax benefits. Renewable energy. Schumpeter would just let them all fail I suppose. Are you suggesting that every cent is used to prop up ailing businesses ?

  22. Greg McKenzie
    August 17th, 2017 at 09:18 | #22

    There is an old law of economics that was called the law of diminishing returns. All these nineteenth century laws assume no government intervention. Marshall was very clear on this point. He used utility concepts, others just equated it to age and the increased competition that all industries eventually exhibit. Under this old law, a business starts as a monopolistically competitive firm. It may have a competitive advantage that gives it market leadership. Over time, according to this law, new firms enter the market and, simply put, do it better and cheaper. This is where the efficiency gains come from, they then flow on to benefit the whole economy. But the original firm may be burdened with diseconomies of scale, both internal and external. This stops the market leader from becoming as efficient as these new entrants. If not remedied, the market leader will fail. Now Schumpeter suggested that this should be allowed to happen, mainly because of the efficiency gains to the economy. Even whole industries should be allowed to fail, in Schumpeter’s view. So called sunset industries have to give way to allow scarce resources to be redirected to sunrise industries. It is the old glass too full argument, there has to be a spillover. In all of this, there is no role for government subsidies. The role of government is to retrain workers and remove red tape to allow new industries to flourish.

  23. ChrisH
    August 17th, 2017 at 13:39 | #23

    @crocodile
    General economic opinion is that payroll taxes are borne by labour income. So that’s a non-starter.
    Ditto super guarantee (which, crediting to individual accounts, whence raided by the super gravy train system, is about as much a piece of tax revenue as any other component of remuneration to workers).
    But whence the figures to suggest that corporate tax plus payroll tax is a quarter of all tax receipts in Australia? I’m having trouble getting close to that, if looking at taxes at all tiers of government (as I must be doing, to count State payroll taxes).
    And I haven’t even explored the point that corporate tax goes into imputation credit, for Australian shareholders, and functions as a foreign investor tax, for foreign shareholders.
    Still no answer about how the claimed tax relates to share of income, or share of wealth, either.
    Try again, Crocodile.

  24. crocodile
    August 18th, 2017 at 09:38 | #24

    @ChrisH
    You can use the argument that at the end of the day it is only people who pay taxes if you want. It does not in any way diminish the reality that it is still an on cost to business. The theme is a really simple one. Corporations pay a quarter of front line taxes in this nation. It is not that unreasonable to expect some attention at budget time.

    The tax breakdown can be found in the budget papers but I reckon you already know that. The percentages stack up.

  25. ChrisH
    August 18th, 2017 at 13:19 | #25

    Tax breakdown in budget papers doesn’t include state/territory payroll taxes. And doesn’t include tax expenditures. Your claims require great creativity with the figures – and don’t stack up to examination.

  26. ChrisH
    August 18th, 2017 at 13:20 | #26

    @crocodile
    And still no discussion of how claimed tax relates to share of income, or share of wealth.

  27. crocodile
    August 18th, 2017 at 15:18 | #27

    @ChrisH
    Of course you will need to examine the state budgets as well. I’m not that fussed about wealth or income shares. I’ve made no inference that tax expenditure should tally dollar for dollar with the source. The point is that corporations do pay tax and as such there should be no problem with consideration at budget time. That is all.

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