The Ethics and Efficacy of Libertarianism


Hi, John – I wanted to respond to the link you put on my Facebook timeline about Libertarianism.

Turns out – a Facebook comment doesn’t give me enough space to do my thoughts justice.  So, here they are. If you’d like to talk about this, we should get coffee sometime.

Disclaimer: I’m not a Libertarian, so everything I say here is probably wrong. If so, you should let me know in the comments.

What I know about Libertarianism


Libertarians believe:

  1. In the right of people to direct their own lives without undue regulation, oversight, or influence by the government
  2. That people and businesses should be able to set up any mutually agreeable contract so long as they use neither force nor fraud
  3. In the ability of the free market to optimally regulate the behaviors of people and businesses
  4. That competition among actors without outside influence creates superior outcomes to government regulation
  5. The American government should disentangle itself from global political affairs and should not get involved in foreign wars or foreign aid.
  6. Governments shouldn’t try to regulate discrimination or protect the environment, but should instead let them be determined by “market forces”
  7. The government shouldn’t collect taxes

 

Police in riot gear - A Libertarian Nightmare

A Libertarian Nightmare

The best parts of Libertarianism


I agree with the Libertarian viewpoint that the individual is sacrosanct and should not be subject to abuses of the government.

  1. Individual liberties are critically important to the proper functioning of society.
  2. Government power should be limited and subject to checks and balances.
  3. The government should be held to an extremely high standard of proof and oversight in any instance where individual liberties might be infringed upon.
  4. Governments should exist to serve the good of the people.
  5. The government should not be allowed to place an undue burden of tax or regulation on its people.
  6. It should be the right of the people to change their system of governance if it should cease to serve their needs.

As a great painting has many colors, a great democracy has many viewpoints. Libertarianism helps to make our democracy great by reminding us that individual liberties are essential to a free and well-ordered society. Libertarians make our society great by acting as a check on the power of government.  They fight for our rights and liberties, and for that, I’m grateful.

However…

The not so great parts of Libertarianism


I don’t want to take credit for thoughts that aren’t my own.  Throughout my comments I’m going to paraphrase several key points from a few books you should definitely read since the authors are much smarter than I am:

  1. 23 Things They Don’t Tell You About Capitalism
  2. Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism
  3. Algorithms to Live By

Individual freedoms without regard to the welfare of people

Libertarians, in my opinion, place a higher priority on the freedom of individuals than on the proper functioning of society.  They choose to ignore the fact that our societies are formed for the mutual benefit of the participants, and that much of the regulation that’s been created by the government creates value for everyone involved.  Repealing those regulations may make us freer, but it will also make life much worse for everyone, in a way that I don’t find acceptable.

Libertarians also assume that “Freedom from government regulation” = “Freedom to take part fully in the market” = “Freedom from force, duress, and abuse”.  As I’ll show below, I don’t agree with this assessment.

The “free” market doesn’t exist, and wouldn’t work if it did

Please stick with me.  I’ve had a lot of time to consider the matter, and I’ve done a lot of reading on the topic, so my opinion is neither frivolous nor poorly informed, and I’m not saying this just to get a rise out of you.

I do not believe in the proper functioning of an unregulated “free market” as idealized by Libertarians, Randians, and Free Market Capitalists.

And I have good reasons.  I’ll go into that in a minute.

Let’s stop there and just take that in with respect to the Libertarian viewpoint.  Libertarians believe we should all be free to do what we want and that the free market is the ideal solution to ensure that we act in our own and each other’s best interests.  So much of the Libertarian position depends on the free market to ensure the good faith of the actors in the marketplace that if you take away the “protection” of the free market, the door is open wide for really terrible outcomes on a social, environmental, nationalistic, and economic perspective.

Libertarianism, Competition, and Value Destroying Behavior


A truly “free” market – meaning a market free from any external regulation – destroys value that would be otherwise captured in a properly regulated market.

Individuals in the free market

Two appliance repairmen, Joe and Bob, live in a small town.  They’re the only repairmen in town, and they compete for business.  At first, they’re only open on weekdays, and they take calls on the weekends for emergency repairs.  Bob runs short on money one day and decides to get a few extra repairs in by keeping his doors open on the weekends.  Joe sees this and decides to do the same so that he doesn’t lose market share to Bob.

Now, neither of the two wants to work all weekend, and they’d both like to spend time with their families. Moreover, since they’re both now open all weekend, neither is actually getting to do any more repairs or make any more money than before.  In this case, they are both acting in their own self-interest, both acting in good faith and in accordance with the demands of the market, and both are destroying value for each other.

Game Theory and the Prisoner’s Dilemma

This is an example of The Prisoner’s Dilemma.  In a prisoner’s dilemma, the ideal strategy for an individual is one which, if pursued by both parties, destroys value for everyone involved.  When both parties in a game have reached the optimal strategy, that’s known as Nash’s Equilibrium, and in this case, the equilibrium is destructive.

Nash’s Equilibrium cannot be changed by the participants in the game.  Bob and Joe will always be incentivized to spend just one more hour than each other in the shop and will have a strong disincentive to go home to their families.  They can’t change that.

However, if someone (government, religion, legally binding contract) were to change the rules of the game so that neither Bob nor Joe was allowed to work on the weekend, or if any profits they made on the weekend went to their competitor, then they could both go home to their families safe in the knowledge that they wouldn’t be run out of business.

Companies in the free market

Two corporations are in the business of manufacturing cars.  Their CEO’s primary responsibility is to keep the company in business and profitable.   Each CEO influences hundreds of thousands of jobs.  Neither CEO wants to destroy the environment, create terrible working conditions for their employees, or create products that are unsafe for the public.  However, the companies compete on price.

Company A has a bad quarter, and share prices start to fall.  The CEO decides to buy some of his parts from overseas manufacturers to make up the difference.  He knows they use sweatshop labor and pollute the environment.  He rationalizes this as being the lesser of two evils when compared with closing his business and laying off thousands of employees.

Company B is now at a competitive disadvantage since they are incurring higher costs for the same products ethically sourced.  The CEO of company B decides – using the same logic – that the jobs of his employees outweigh the harms of overseas production and environmental pollution.

This mutually destructive escalation continues until both companies are producing products that are not safe for consumers and that pollute the environment.  Their workers are underpaid and overworked, and their products are mostly produced overseas with sweatshop labor.  And still, neither has gained a competitive advantage.

Perfectly rational, value destroying behavior

The “free market” cannot correct for this, because a new and ethical entrant to the marketplace cannot compete with the established companies selling at a lower cost, and the market cannot favor the competitor who is sourcing ethically by purchasing their products since neither of them is behaving ethically.

Here again, the participants want to take care of the environment and their workforce. They don’t want to support foreign sweatshops.  What choice do they have?  If they don’t, they’ll go out of business.  However, if an outside actor (the government) imposed a restriction though high tariffs on foreign bought products, environmental regulations, working condition regulations, etc…, both parties could both behave ethically, and continue to do business.

Another example of this is The Tragedy of the Commons.

 

For whom is the Free Market Free?


I know this sounds like esoteric economic theory.  It isn’t.  If you look at our current market, you can see the role that regulation plays in our everyday life.

Don’t believe me?  Try hiring a five-year-old to work in your factory.

Vulnerable parties

For a poor family, allowing a five-year-old to work puts food on the table.  In an ideal Libertarian world, those kids would be able to be employed.

Now you might say that if it’s ok with the family, the kid, and the factory, why not?  Three reasons:

  1. This allows those in power to take advantage of those who are most vulnerable.  If you can’t put food on your table, you aren’t truly free.  You are a slave to your own hunger.  Until we end poverty and starvation, we can’t claim that removing regulations makes everyone free.  Instead, we should realize that removing regulations only makes those with money free.
  2. This also doesn’t consider that those giving consent to a contract may not fully understand the ramifications.  A child who goes to work at five years of age may know that he’s helping his family.  Do you think he realizes that he’s perpetuating the cycle of poverty and giving up his voice in the democracy and his ability to change his own circumstance?
  3. De-regulating things like child labor can address the symptom (poverty/starvation), without addressing the cause (income and education inequality).  The free market responds to outcomes, not to causes, so giving a family a terrible solution to the symptom prevents “the market” from ever adjusting to address the underlying cause.

Moreover, in order to be truly just, a contract should require the consent of ALL impacted parties.  Environmental regulation is one area where this presents a challenge.

Parties not represented

Let’s go back to Companies A & B above.  Now they are both having a hard time selling their cars because they are in a recession.  If they dump toxic waste into the rivers, though, they can cut the costs enough to make a profit.  Moreover, both companies have the support of the local community, most of whom work at the factory (see above point on vulnerable populations not being “free”).  You might say that the companies are both acting in their own self-interest and that they are making a contract without force or fraud.

But what about the people who live further down the river?  Do they need to agree as well?

Ok, so you might say that if we involved all the people who lived on the river, then it’d be ok.  That’s enough people to freely agree to the terms of the contract, right?

But what about future generations?  We can’t ask them if it’s ok for us to destroy the planet that they’ll have to live on.  So if a contract is only valid if all the affected parties agree, then we need to wait until the end of time to check with all future generations.  Alternatively, we could disregard them completely and recognize that absent any current regulation their need for a clean planet will play no role in our decision-making.

Parties subject to abuse and discrimination

The free market cannot cure systemic discrimination.  The nature of capitalism and unregulated free markets is that those with power get to shape the market to their own benefit.   A millionaire gets a million votes in the free market.  You and I do not.  Those below the poverty line barely have a voice.  This makes a free market resilient and stable and protects it from major upheaval.  It reinforces the status quo by gathering money, power, and influence to those who already have it.  However, what would end discrimination isn’t the concentration of power to existing power centers, it’s upheaval and redistribution to a more equitable mean.  The “free” market maintains things like discrimination, abuse, slavery, human trafficking, and poverty, and it does so with brutal efficiency.

I reject the Libertarian view that the free market promotes equality or in any way benefits the disadvantaged.  The free market will eventually lead to income inequality and centralization of power into the hands of the few given no regulation to the contrary.

Other miscellaneous objections


International Affairs

In my view, the Libertarian belief that we should disentangle ourselves from foreign wars and that we should not take part in foreign aid programs is both misguided and heartless.

The geopolitical landscape has an enormous impact on our day-to-day lives.  Our international relations shape the products we buy, the people we meet and work with, and the cultures to which we’re exposed.  Positively impacting the world also helps to avoid acts of terror and unnecessary wars.  Having allies requires our participation and “entanglement” in foreign politics, but also deters our enemies from starting wars with us.  This reduces both the number of lives lost in major wars and avoids unnecessary military buildup.

On foreign aid: not only is it the right thing to do – it creates a more stable economic environment, which in turn prevents the creation of new hotbeds for terrorism.

Taxes

This is the point I least understand in the Libertarian view.   Without taxes, how exactly do Libertarians expect the government to fund the national defense?

Or perhaps they’re suggesting that people would freely choose to fund the government.  Aside from being demonstrably unrealistic, contributing to the common good would put an individual at a competitive disadvantage.  Eventually, free market forces will either reform or eliminate them.  See the Tragedy of the Commons link above.

In Conclusion: I’m not a Libertarian  


I value liberty, equality, individual rights, and personal freedoms.  If that’s what you get out of being a Libertarian, I understand.

Maybe what you’re suggesting is that the government has imposed too many regulations.  If so, I think that becomes a question of execution, rather than a question of ideology.  I would certainly be open to that discussion.

Are you saying is that the government spends too much money or wastes too much money?  I think again that comes down to execution, and I’d be open to that discussion as well.

However, if you’re saying “I want no government regulation on anything” – then I respectfully disagree. In my opinion, effective government regulation improves, rather than hinders, the functioning of society and the market.  I do not believe that a deregulated market, isolationist international policy, and a laissez-faire approach to discrimination and environmental regulation is what is best for a nation’s citizenry.

Moreover, I believe that we all have a moral and civic duty to contribute to the common good.  I’m proud to pay my share, and I question the decency of those who have enough and still refuse to contribute undert the guise of “personal freedom”.

All the best,
Brett


About Brett Noneman

Hi! I'm Brett. You're on my site! I live in Northern Indiana with my wife and my two beautiful daughters and our grouchy but lovable old dog Nasdaq. I enjoy writing, playing board games with friends, and spending time with my girls.