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The Libertarian Vice
Analytical vice, that is.
The libertarian vice is to assume that the quality of government is fixed. The libertarian also argues that the quality of government is typically low, and this is usually the bone of contention, but that is not the point I wish to consider. Often that dispute is a red herring.
If the quality of government is fixed, the battle is then "government vs. market." Not everyone will agree with libertarian views, but libertarians are comfortable on this terrain.
But sometimes governments do a pretty good job, even if you like me are generally skeptical of government. The Finnish government has supported superb architecture. The Swedes have made a good go at a welfare state. The Interstate Highway System in the U.S. was a high-return investment. In the area of foreign policy, we have done a good job juggling the China-Taiwan relationship. Or how about the Aswan Dam for Egypt? You might contest these particular examples but I assure you there are many others.
The libertarian approach treats government vs. market as the central question. Another approach, promoted by many liberals, tries to improve the quality of government. This endeavor does not seem more utopian than most libertarian proposals. The libertarian cannot reject it on the grounds of excess utopianism, even though much government will remain wasteful, stupid, and venal. More parts of government could in fact be much better, and to significant human benefit and yes that includes more human liberty in the libertarian sense of the word.
Libertarians will admit this. But it does not play a significant role in their emotional framing of the world or in their allocation of emotional energies. They will insist, correctly, that we do not always wish to make government more efficient. Then they retreat to a mental model where the quality of government is fixed and we compare government to market.
It is possible to agree with the positive claims of libertarians about the virtues of markets but still think that improving the quality of government is the central task before us. One could love markets yet be some version of a modern liberal rather than a classical liberal. This possibility makes libertarians nervous, thus their desire to fix the quality of government in advance of making an argument. (For one example of this, see Glen Whitman's commentary.)
Libertarianism and modern liberalism differ in many regards, and usually I am closer to the libertarian point of view. But I am also a contrarian by nature. If you want to make me feel more like a modern liberal, just go ahead and commit The Libertarian Vice.
To be fair, here is my post on the modern liberal vice.
Addendum: Here is a look at drug policy from both libertarian and liberal points of view.
Posted by Tyler Cowen on August 11, 2006 at 07:00 AM in Political Science | Permalink
Comments
Who wrote this post? Was it Tyler or Tyrone?
Posted by: EclectEcon at Aug 11, 2006 7:08:41 AM
I can tell you this, based on my personal experience working for the Government for 15 years as a contracting officer: the issue is not the inherent efficacy of government, or even the "public-versus-private performance" one, but competition.
If there's only one guy who can do the job--be he the government or a private contractor--it will be done less efficaceously and more expensively than if there are two or more competing for the same job. Period. I never found an exception to this rule, in fifteen years of Federal service.
Posted by: David Hecht at Aug 11, 2006 7:48:54 AM
David Hecht makes a good point but I'd like to add that it isn't just the thread of competition but also the threat of unemployment (for the individual worker) and bankruptcy (fort he organization) that provides the whip to spur productivity.
Posted by: jult52 at Aug 11, 2006 8:31:26 AM
"The Finnish government has supported superb architecture. "
Well, it depends on what you call "superb" architecture. I call the Peter's Dome or the Cologne Dom superb architecture and I think none of the Finnish can compete with that :)
"The Swedes have made a good go at a welfare state."
Not every Swede would agree with you... Also, the Swedes have started out completely different with a more free market approach and they are still living off those savings.
Also, while the Welfare for the poor is good, the welfare for all others has dropped. Just go to a Swedish medical institution...
Well, you live in the USA, so your first hand experience with what government does in the long run is probably limited (US government is even more inefficient than German government). The problem is that the government has no standard of success or failure. If it wastes a lot of money, well so be it, there can be no failure.
If you live in a socialist country, such as Germany, you are overwhelmed with beaurocracy. You cannot really move without being harassed by a myriad of different laws, regulations and so forth.
It is not even the big thing, like social security (which is wasted), like pension funds (which are losing money constantly) or health care (which is on the brink of being nationalized and steam-lined), it is especially the small regulations, which are tidious and counter-productive:
You cannot paint your house in red, because it would "destroy the communal feeling", you cannot built your house higher than two stories and even half a meter would cause you to rebuilt it from scratch. You can't built cheap houses because of hundreds of security regulations ( of course for your own safety... but at the same time you are allowed to built near water-ways, which repeatedly sink all buildings around it...).
I again and again hear from people travelling to, say Turkiye (Turkey) or Mexico, how easy it is to do things over there. They come back and are struck by how they did not miss government one bit. Then they have to accustom to German and European intrusiveness again...
I am sorry, I generally like your posts, as they are thought-provoking, but this was obviously beside the point, because for every successful government product are tenth of unsuccessful ones.
Posted by: Max at Aug 11, 2006 8:44:39 AM
"If there's only one guy who can do the job--be he the government or a private contractor--it will be done less efficaceously and more expensively than if there are two or more competing for the same job. Period. I never found an exception to this rule, in fifteen years of Federal service"
Yep.
Thanks Tyler for expressing these thoughts. They are very similar to my thoughts on the use of government and usefulness of markets and competition. There is no doubt that a realistic survey of 'how we can get better' will not have market solutions exclusively.
One more thing you might add to this critique, and one I've been thinking a bit about latey, is applying the concept of risk adjusted returns to our overall growth. Libertiarians, almost by reflex, argue that going to a pure market based economy would increase our overall rate of growth and therefore, in the long run, we are all much better off. I think this would be likely result of implementing the libertarian world-view.
However, any sophisticated market practitioner doesn't just care about absolute returns. They are primarily concerned with risk adjusted returns. They take into account the risk of ruin. They look at what the odds are of underperforming for extended periods. They consider the fact that they would prefer 4% a year for three years over returns of 20%, 20% and -20%, even though the latter gives a slightly better overall return.
Whats the alpha of Libertarian thinking?
Posted by: mickslam at Aug 11, 2006 8:52:08 AM
What enrages libertarians is the idea that government bureaucrats think they know better than the people whose money they are stealing what constitutes a "good investment" or "superb architecture".
I agree that the quality of government is not absolutely fixed. It's just predictable to many decimal places. The real problem is that the "quantity" of government isn't fixed. It's extensible to the entire resources of the country it governs.
Posted by: Robert Speirs at Aug 11, 2006 8:59:15 AM
What is the point here? Let's say that government did a good job on "X," whatever X is. Doesn't the libertarian just have to say, "Yes, that's true, but it could have been done better and more cheaply outside of government," and then you're back to the original argument.
Moreover, the argument seems to have a giant hole in it. That is, how do you determine ex ante which things government will be so good at that we want it to do those things? I'm not sure how you answer that question, so I think the libertarian position, that the government should do as few things as possible, is not displaced at all by this argument.
Posted by: John Jenkins at Aug 11, 2006 9:05:15 AM
Oh, and there's no requirement that the quality of government be fixed for the libertarian to be correct. The quality of goverment just must be lower relative to the market solution. Just because the government did a great job, let's say, with X, doesn't mean we should entrust all X's to the government if the market solution would have been better. This criticism is a straw man.
[something seems screwy with the MR template on comments, the window is sliding under the right column for me. Anyone else getting that?]
Posted by: John Jenkins at Aug 11, 2006 9:08:44 AM
The quality of government may not be constant, but is it something you or I can choose? Everyone agrees that the federal income tax is ridiculously complicated, but it can't be reformed. It is what it is, because democracy gives more power to concentrated interests than to dispersed interests.
Posted by: Eric Hanneken at Aug 11, 2006 9:20:11 AM
I didn't realize that libertarians believe the quality of government is fixed. I thought the idea was that the quality of government was always lower than the quality of the equivalent market-based solution, i.e., not that the government can't do a given job well, but only that it can't do the job better than a well-conceived market system. The statement that "libertarians believe the quality of government is fixed" smells of a strawman.
David Hecht's comment about competition is apt, but there's got to also be something to the idea that a self-sustaining system based on well-defined rules and open participation will always succeed more naturally and robustly than one based on political considerations. Libertarians spend great amounts of time designing market-based systems which are more-or-less self-sustaining and lead to good results emergently, but I'm not aware of any similar systems in government other than "throw lots of money at it." Perhaps those who hired all those brilliant Finnish architects, alluded to above, don't actually need to worry about such pedestrian concerns as rents per square foot or occupancy rates.
Government solutions are also non-repeatable. What is it about Finland that produced great architecture? What about the other 200 countries in the world? What about the unmentionably horrible "brutalist" architecture produced by governments during the later 20th c? Maybe Finland got lucky for a little while. Unless you can account for the reasons for the success, and create a model for replicating that success, then you've got nothing more than sheer luck; and if you can't demonstrate why a market-based solution in fact fails under certain conditions which a government-based solution provably addresses, I'm not going to be convinced that government can do better than a market-based solution, only that a suitable market-based solution hasn't been devised yet.
Posted by: Hovig at Aug 11, 2006 9:31:59 AM
It is amazing, um...how many of these comments take the quality of government as fixed!
Posted by: Tyler Cowen at Aug 11, 2006 9:37:22 AM
Here is one libertarian who really doesn't believe the quality of government is fixed:
by William D. Eggers:
1. Government 2.0: Using Technology to Improve Education, Cut Red Tape, Reduce Gridlock, and Enhance Democracy
http://www.manhattan-institute.org/government2.0/
2. Governing by Network: The New Shape of the Public Sector (Brookings Institution Press, July 2004)
3. Revolution at the Roots: Making our Government Smaller, Better and Closer to Home http://www.amazon.com/gp/product/0028740270/ref=ase_manhattaninstitu/104-2966185-9335130?n=283155&tagActionCode=manhattaninstitu
4. Cutting Local Government Costs Through Competition and Privatization.
and coming this fall by Eggers and Stephen Goldsmith, Governing by Network: The New Shape of the Public Sector.
http://www.governingbynetwork.com/GoverningbyNetwork.pdf
Posted by: Dave Meleney at Aug 11, 2006 9:52:40 AM
Tyler, I'm beginning to appreciate just how contrarian you are. The basic point of public choice theory is that government quality is "fixed" in the sense that I think you're using the word: not able to be changed by human intention. Now, if you're *really* contrarian, you'll start arguing that the quality of the market is also not fixed. For example, public goods don't *have* to be underproduced -- not if we don't want them to be, not if we consider improving the quality of the market to be the central task before us.
Posted by: Eric Hanneken at Aug 11, 2006 10:22:31 AM
Max,
So you are packing your bags for Turkey? No one would choose to live in Turkey if they could live in Finland or Germany.
Finnish architecture is the best in the world.
Posted by: whit at Aug 11, 2006 10:44:54 AM
Well said.
To take one recent example, the city of Los Angeles owns the Water & Power utilities, so Los Angelenos were not taken to the cleaners by Enron and other crooks during the electricity deregulation disaster of recent years. (Unfortunately, Los Angelenos got stuck with bailing out other parts of the state.)
It was blatantly obvious that the market would not work well in this situation due to the "last mile" natural monopoly problem, but economists failed to warn the state legislature.
This is nothing compared to the damage done to Russia in the 1990s by libertarian economist advice, even when the economists were just naive and not corrupted like Andrei Shleifer.
Posted by: Steve Sailer at Aug 11, 2006 11:08:04 AM
The modern liberal vice is to think that everyone can be taken care of, and/or to rule out foreigners from the relevant moral universe.
To rule out foreigners from the relevant moral universe? Are the torture scandals, etc. the result of the actions of a liberal government?
Posted by: Bernard Yomtov at Aug 11, 2006 11:09:19 AM
Thank you for a great post that helped me understand how to think about these matters -- or in some cases how I already incoherently thought. I'll be linking to it at chicagoreader.com.
Posted by: Harold Henderson at Aug 11, 2006 11:13:26 AM
It's likely that the popularity of libertarian theories drives down the quality of government today.
Compare the remarkable things the government got done in the midcentury, from say the New Deal through the moon landing in 1969, versus the ineptitude we see in so many places today. How many decades would the Manhattan Project take today. In late May 1942, the Pearl Harbor drydock got 90 days worth of repairs on the Yorktown aircraft carrier done in 36 hours so it could fight at Midway. Compare that to how the with the last space shuttle disaster, NASA didn't even bother to look for a problem because they couldn't have imagined they could have done anything about it in only two weeks.
Or compare the brilliant jobs American officials did in reforming after WWII Japan, a quite alien culture, to how well we are doing with Iraq. That was the masterpiece of the New Dealers, far more impressive than the New Deal itself.
One way privatization saps government quality is by encouraging the better government workers to quit and get outsourced jobs. For example, if you are good sergeant in Iraq, you can come back as a Blackwater mercenary for 5 times your pay. That sucks out the best workers and demoralizes the rest.
Posted by: Steve Sailer at Aug 11, 2006 11:18:56 AM
I think Tyler's comments are right on. Its especially interesting when certain libertarians, who appear to be freaking out in response to Tyler's argument, assert that "market solutions" are "always" superior. First of all, we should note that the term "always" is an extremely strong word. Second, we should note that the concept of superior depends on how we measure an outcome. Person X can think that outcome A is superior to B. Person Y might think that B is superior to A. Ultimately, what outcome is "superior" is a function, to some degree, of personal preferences. It is also a function of the weights we assign to the various results that constitute outcome A versus outcome B. The point here is that the claim that one approach is "always" superior to another indicates that the person has not given much thought to what "superior" really means. It is not one thing - and even if it was, it is incredibly foolish to think that one can assert this in "all" cases when one does not even have a grasp on the infinite number of possibilities.
Lets examine this claim. Market solutions are always superior. Okay. So, should there be a market solution to the protection of private property rights? What does that mean? That the judge is paid by the parties in a dispute? That the person who is willing to pay the judge the most wins the case?
We know from Coase that market solutions are not always superior to command with a firm. When a firm outsources, it is essentially using market transactions. When it produces things in house, it is essentially using command. The fact that corporations use command and not just the market should indicate to any rational human that corporations don't always believe that the market is more superior (or more efficient). Sometimes it makes more sense to produce in-house, rather than outsource.
Why should it be any different in the case of government? Surely, certain actions that we want to be done on behalf of the people are better done via command and others are better done using market mechanisms. The free market has already demonstrated that sometimes command is superior in certain contexts - otherwise there would be no such thing as an employee (only independent contractors).
These silly libertarians, and they do render themselves silly with their panic in response to Mr. Cowen's sensible arguments, fail to see that "always" is a very difficult argument to make and is usually wrong. In this case especially. As is often the case, there are tradeoffs with respect to various approaches to solving problems and evaluating these tradeoffs is not as simple as libertarians would imagine.
Posted by: Vorn at Aug 11, 2006 11:20:20 AM
I think Tyler's comments are right on. Its especially interesting when certain libertarians, who appear to be freaking out in response to Tyler's argument, assert that "market solutions" are "always" superior. First of all, we should note that the term "always" is an extremely strong word. Second, we should note that the concept of superior depends on how we measure an outcome. Person X can think that outcome A is superior to B. Person Y might think that B is superior to A. Ultimately, what outcome is "superior" is a function, to some degree, of personal preferences. It is also a function of the weights we assign to the various results that constitute outcome A versus outcome B. The point here is that the claim that one approach is "always" superior to another indicates that the person has not given much thought to what "superior" really means. It is not one thing - and even if it was, it is incredibly foolish to think that one can assert this in "all" cases when one does not even have a grasp on the infinite number of possibilities.
Lets examine this claim. Market solutions are always superior. Okay. So, should there be a market solution to the protection of private property rights? What does that mean? That the judge is paid by the parties in a dispute? That the person who is willing to pay the judge the most wins the case?
We know from Coase that market solutions are not always superior to command with a firm. When a firm outsources, it is essentially using market transactions. When it produces things in house, it is essentially using command. The fact that corporations use command and not just the market should indicate to any rational human that corporations don't always believe that the market is more superior (or more efficient). Sometimes it makes more sense to produce in-house, rather than outsource.
Why should it be any different in the case of government? Surely, certain actions that we want to be done on behalf of the people are better done via command and others are better done using market mechanisms. The free market has already demonstrated that sometimes command is superior in certain contexts - otherwise there would be no such thing as an employee (only independent contractors).
These silly libertarians, and they do render themselves silly with their panic in response to Mr. Cowen's sensible arguments, fail to see that "always" is a very difficult argument to make and is usually wrong. In this case especially. As is often the case, there are tradeoffs with respect to various approaches to solving problems and evaluating these tradeoffs is not as simple as libertarians would imagine.
Posted by: Vorn at Aug 11, 2006 11:21:37 AM
The Interstate Highway System in the U.S. was a high-return investment.
The Economist isn't so sure.
Posted by: Wild Pegasus at Aug 11, 2006 11:32:27 AM
There seems to be an obvious mistake in the criticism of libertarianism that libertarians assume 'the quality of government is fixed'. The elephant in the room with that statement is the notion of 'quality'. This would appear to assume a) that there's some independent means of judging 'quality' and b) that libertarians believe that free markets are the best means of attaining it.
But it seems there's a more modest libertarian position that holds that whatever 'quality' is, few indidividual, non-distributed institutions or people are particularly and reliably good at getting it, over time. And there's a still more modest libertarian position that holds that liberty is the only 'quality' that really matters--architecture is just not the kind of thing that can mitigate against it. With regard to the former, whether some governmental solution has achieved a 'quality' result is likely to be either the result of the very same distributed mechanisms (competition, etc.) that libertarians cherish or just plain luck (I put most of Finland in the latter category--the people there are clearly victors in many natural lotteries). But the key point is that we can't go around bandying terms like 'quality' about as if that was an argumentatively neutral point.
On the yet more modest reading of libertarianism, the whole point about 'quality' is a complete non-starter, unless by 'quality' one means 'done within a libertarian framework'.
Posted by: Stephan johnson at Aug 11, 2006 11:38:57 AM
I used to work in the Oil Industry for about 6 years out of my 24 years of business experience. This has got to be the most wasteful, lazy business that was ever created. Much more than any government run business. The levels of sloth and graft are astronomical. I was so personally offened by the levels of these sins that I had to leave. I've never had a government job but I can't imagine that the people that work at it are dull and corrupt as the people in the Oil business.
Posted by: qingl78 at Aug 11, 2006 11:47:12 AM
That was the masterpiece of the New Dealers, far more impressive than the New Deal itself.
In what way was the New Deal particularly impressive, beyond sheer novelty, size and intrusiveness. At it's stated goal, ending the Great Depression, it was an abject failure. For that matter many of the individual means used for it (cartelization, price controls) were notably counterproductive to the desired ends. Many of the rest (farm supports, Davis-Bacon) cause long-term damage to this day, including damage to the efficiency and perceived efficiency of government.
Posted by: Dave at Aug 11, 2006 11:56:24 AM
Libertarians don't want to make government more efficient, it is true. They look at the example of Milton Friedman and income tax withholding: maybe it was really needed at the time, but by making it efficient it allows that program to continue indefinitely. Libertarians don't want government programs, even of improved quality, to continue indefinitely. If libertarians ignore quality, it is because they consider there to be a trade off between improving quality now and eventually getting rid of the system in the future. The delta between a market solution and an improved quality government solution is usually high enough in the mind of a libertarian to make it worth ignoring the improved quality in return for a small chance of real market reform. They realize that an efficient government isn't going away and therefore find efforts in that direction to be counter-productive.
It could be that the best approach is to ignore that supposed trade off between efficiency and eventual market reform and get people used to listening to market oriented ideas about incremental improvements that work. It is highly debatable.
Posted by: Jeff Lonsdale at Aug 11, 2006 12:02:01 PM
