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A Defense of libertarianism (and response to Zed, etc.)
90 points by grandalf 3091 days ago | hide | past | web | 175 comments | favorite
A few notes in defense of libertarianism:

In response to the recent slew of articles posted to HN criticizing libertarianism, I have decided to jot down a few points that I think were overlooked.

First, George W. Bush and the Republican party are NOT libertarians. Zed's argument was essentially this, and it's about as logical as declaring that you're going to write an essay about the flaws of vegetarianism and then proceeding to mention a bunch of bad things about pepperoni.

Republicans occasionally use some libertarian rhetoric, but they do not follow it at all. George W. Bush has increased the size of government tremendously, and he's intervened in international affairs and created all kinds of entangling alliances, etc. Libertarians are also strongly opposed to the "family values" rhetoric used mostly by Republicans and by some democrats. Libertarians have been opposed to nearly everything Dubya has done, from No Child Left Behind to the Iraq war to the Treasury's bailout of wall street.

Before we continue, I'd like to recommend two books for those curious about what libertarianism actually is -- Milton Friedman's "Capitalism and Freedom" and David Boaz's "Libertarianism: A Primer". Both articulate a lot of the philosophical and pragmatic aspects. Of course, Atlas Shrugged is interesting for its presentation of a moral argument in favor of capitalism. Notably, it is mainly a critique of crony capitalism, something I think most people would agree is quite different from what capitalism should be.

I've found that many times, people stop at the superficial goal of a government program when determining how they feel about it. Social Security is an example: The idea of everyone paying 1% and then being able to offer everyone basic financial security in old age is not controversial -- I'd say most libertarians would consider it very low on the list of programs that ought to be changed. However may people seem to stop with the program's initial goal and forget about the trends -- increasing costs and increasing retirement age, and no guarantee that the congress (and the public) will support the necessary tax increases needed to keep benefits remotely the same.

So some consider the program "good" because it has a noble end, and others express scepticism because of the various deficiencies.

It's worth noting that if we judged all programs by the nobility of the proposed end, there would be absolutely no reason to think any of them would be successful.

One argument I am quite sympathetic to is that with federalism we get "50 experiments in democracy" to paraphrase the Federalist Papers. Doing a program at the federal level is like using 1 Petri dish, and doing it at the state level is like having 50... which seems more scientific to you?

I'd like to see state legislatures, governors, etc., challenged to come up with creative ways of solving the nation's great problems... this doesn't really happen today. Instead, both parties raise vast sums of money fighting over "wedge issues" that are extremely unlikely to change any time soon. It would take a 2/3 majority to create any of the amendments that the parties promise/refuse, and that's just not likely to happen the way congress is at present. Federalism is a good example of a concept embraced by libertarians -- it respects the basic "engineering" that the legislative process actually is, and recognizes that the first solution may not be the best one. I think it's hard to read the Federalist papers without seeing the whole process as a massive engineering work in progress. So it's just good QA to have a lot of tests running simultaneously.

It's probably not necessary to mention this, but libertarians aren't opposed to regulation, they just try to have a clear-headed view of the actual outcome regulation without getting attached to the stated goal of the regulation. One study that was done by Regulation magazine (affiliated with Cato) showed how an EPA law about polution failed to account for how wind blows pollution between municipalities. Anyone who cares about the planet would hope that environmental regulation be as effective as possible. Cato wasn't throwing stones at the idea behind the regulation, just the alpha version of it (which was the first and only attempt, and current law). Critics would claim that Cato's critique proves that the institute opposes environmental regulation of all kinds, an assumption which couldn't be further from the truth.

People respond to incentives, and every law or regulation creates winners and losers and sets in motion incentives that will have effects over time. Libertarianism is about having a scientific view of this and not getting attached to the first attempt. I see how this is possible when everything seems like it's winner take all, which it is at the federal level, which is yet another reason why it would make more sense to focus on state laws as trial versions of important regulation, so that after a few years other states would modify their laws to include the best ideas of other states, not just on paper but the ideas that actually got the best results and lent themselves to the most effective enforcement.

I should add that libertarianism does try to maximize freedom, both social and economic. People should be able to have adult sex lives free from government intervention -- anal sex, oral sex, gay sex, etc. But they should also be free to engage in whatever they want to do economically -- buy some marijuana, take a job that pays $1 per hour, invest in risky stocks, etc.

Compared to libertarians, those in both parties are extremely paternalistic about some or all of these things. Paternalism is the idea that someone sitting on high is in a better position to decide what you should be ALLOWED to do than you are.

Part of the allure of many politicians is, I think, the "Frodo Baggins" similarity -- an inexperienced yet pure of heart leader to vanquish evil and usher in drastic change. Ironically both George W. Bush and Obama fit into this mold. Libertarians are skeptical of this top-down wisdom and are hesitant to put too much power in the hands of one person. I forget who said this, but "power corrupts. Absolute power corrupts, absolutely". One question to ask is, if people had trusted George W. Bush less or if he'd had less power, would we have had a hugely expensive, wasteful, futile war?

Bottom line: libertarianism is about economic and social freedom, an engineering approach to legislative problem solving, and a scientific assessment of the actual effects that regulations cause. Ironically, libertarianism is painted as extreme when it's actually the least dogmatic of the major political persuasions. Note that you may have gotten quite irate at the mention of states deciding Roe v Wade, at the thought of discontinuing social security, etc. If you did, it's because you are reacting in a dogmatic, not a scientific way. Libertarians have the courage (and the philosophical obligation) to continue to question reality at the expense of loyalty to the grand causes of either party.




As an engineer and an ex-libertarian that managed to (thankfully) outgrow it, I have to say that what you describe isn't actually libertarianism as practised and understood by libertarians at large, but your own personal interpretation of it. Is is actually somewhat close to my current views and I would never call myself a libertarian, nor would libertarians call me one of them.

You seem to believe in a weak central government and strong state governments that try new approaches and get shit done. This is nice, except most libertarians believe in weak governments in all levels of government. No, not a government that works as well, not an efficient government, but a minimal government.

As an example, take the health care debate. Compared to some european countries with good healthcare systems, the US spends substantially more (~15% vs ~9% of GDP) covers substantially fewer people (the millions without coverage) and the overall health of the population is poorer. By nearly all objective measures, a good public system is much better than an all-private system and yet, we know this is not compatible with libertarian ideology - you will have to search far and wide to find a libertarian group that supports a public healthcare system.

Like I mentioned above, the libertarian ideology is one of minimal government, which is sometimes, but not always the best type of government. This is why libertarianism relies on simplistic catch-allisms (government=bad, regulation=bad, private-good) and parodies of reality like Atlas Shrugged and other Ayn Rand fiction-pseudo-philosophy writings and not your idealistic "engineering and scientific assessment of reality" idea.


You seem to believe in a weak central government and strong state governments that try new approaches and get shit done. This is nice, except most libertarians believe in weak governments in all levels of government. No, not a government that works as well, not an efficient government, but a minimal government.

To have a minimum, you have to have a set of constraints. There's no reason those constraints could not lead to "weak governments in all levels of government"

I must be misreading you. I keep finding people making these broad over generalizations about libertarianism. Yes, libertarians are for minimal government, but minimal is a term you can drive a truck through. Simply because one libertarian believes that limited government is minimal, tiered, distributed government and another thinks it means single-layer, centralized government doesn't make one person libertarian and another person not.

The terms you mention are not simplistic, they are broad. There's a big difference. It lets a lot of people have libertarian leanings and prompts the individual to continue the definition process at a personal level, which is exactly what you want in a democracy, right?


>minimal is a term you can drive a truck through

That's why many Libertarians believe in a _Constitutional_ government. I.e. there is absolutely a standard for what size the US federal government should be (and what purposes it should serve). It's the US Constitution.


How much time did you spend in Europe to get the idea that the health care systems are good?

Having lived there for 25+ years and now 10+ in the US I can discern no difference. Both systems are broken with a capital F.

I consider myself a libertarian so I would love to see a simple health care option e.g. provides low level emergency care, low level preventative measures.

So you get a busted bone set, colds/infections treated, child birth and pre/post natal, annual check up etc.

But major stuff is not covered e.g. you have a heart attack you're on your own, you need a lifetime of expensive drugs no chance, hip replacement nope.

The idea being that costs are minimized and a clear directive can be written. Like all things you want better treatment you need to put your hand in your pocket.


Thank you ajmoir. So what do I do? I have diabetes and a couple of heart attacks in my history. I can't get health insurance now or under your system. If I have another my choices are die, go bankrupt, or live in poverty for the rest of my life. Thanks a bunch.


One option is charity. Keep in mind that the government pulls in $1.2 trillion from personal income taxes per year (ironically enough, that's the size of Obama's proposed stimulus package).

Anyway, in a libertarian USA, most if not all of that $1.2 trillion would stay in the hands of the people; that fact, along with a few other libertarian ideals, would mean a more prosperous people.

A more prosperous people, with the knowledge that the government no longer provides inefficient health care to others with their hard-earned money means... you guessed it. Also, a libertarian USA would mean cheaper /everything/ (including health care) because of the Austrian economic, free-market principles.

I truly believe it. I've got some excellent ideas based around for-profit charities. Imagine famous, fancy restaraunts situated in the big cities. The bottom floor sells wonderful food to the celebrities and rich folks. The rest of the building houses and feeds homeless people. Of course, it doesn't even have to be a fancy restaraunt, and it doesn't have to house homeless people.


in a libertarian USA, most if not all of that $1.2 trillion would stay in the hands of the people

Including $11 billion that would otherwise have been spent on tax collection.

http://www.whitehouse.gov/omb/budget/fy2009/treasury.html


But then why is it that Europeans fly to the US for cutting-edge (no pun intended) surgical methods that aren't available here?

Also minimal government is not the same as weak government. A libertarian government wouldn't do much, but the things it would do (such as operating the courts) it would do with absolute authority. What we have now - in most of the Western world - is large, weak governments.


Your discussion of health care systems is simplistic. For example, the US system has a track record of innovation and there are very good reasons that some non-US populations have higher average health that are completely unrelated to health care.

While I'm not a libertarian, libertarians don't encourage small government just to hear themselves speak. If one doesn't err on the side of limiting government, you tend to get one useless bailout bill after another as people with power, but not much more brains than yourself, frantically fling money around trying to solve problems they don't really understand. Unfortunately, it's not play money.


> Your discussion of health care systems is simplistic.

People have written books on the subject. Any internet discussion of it is bound to be "simplistic" to some degree.

Really, though, wheels sums it up best:

http://news.ycombinator.com/item?id=419503


European health care systems are a double edged sword for startup founders. I have lived in several european countries and researched the matter for some others as well because I like to move around. I'll spare you the details because they are mind boggingly complicated.

The issue is that in most countries there is no separate health care system. There is an integrated social security system, including pensions, etc. The problem is that there is a minimum charge that you have to pay irrespective of your actual income.

This "standing charge" varies a lot. It's negligible in the UK ($15 per month) and (I believe) in Ireland. But it's awfully high in most of continental europe ($300 per month). That increases the burn rate for self funded startups by about a third.

The reason why it's so high in some countries is that you don't get to choose what kind of risks you want covered. The assumption is that you pay for the older generation so that the next generation pays for you.

It's one size fits all, decoupled from individual choices. You must pay into the retirement system even if you decide (as I have) that you are never going to stop working unless you're unable to (which should be covered by a basic disability insurance which is much cheaper)

As a result, many people (including myself at this moment) have no health coverage at all. Either because they cannot afford it or because the rules are so complicated, inconsistent and inflexible that people with unusual CVs slip through the net.


> This "standing charge" varies a lot. It's negligible in the UK ($15 per month)

Do you have a reference for the "standing charge" in the UK? I've never heard of it.


Yes as I said in the other post, the self employed pay class 2 and class 4 NI contributions: http://www.hmrc.gov.uk/nic/background-nic.htm

The rates are here: http://www.hmrc.gov.uk/rates/nic.htm

If you earn below 5715 per year you only pay class 2 NI contributions, which is 2.4 pounds per week.

[edit] I forgot to mention that you can apply to be exempted from class 2 NI altogether. I didn't do that because 2.4 pounds per week seemed already very low to me.


My understanding is that income tax as well as NIC contributions go towards funding the NHS. Anyone is eligible for NHS treatment, even foreigners, so it seems inaccurate to say that your contribution to the NIC is what pays for your health care.


I didn't say that and I really don't know how much of the NHS is being paid for by NI contributions.

The point is that in the UK you pay according to your actual profit wheras in other european countries you pay a lot starting on the day you register your business.


I believe he's referring to National Insurance. But as far as I remember NI is the government pension scheme and not related to health insurance.

I can't remember if I had to show my NI card when going to the doctor when I was at university there.

Later on when I was working I normally paid for my own private doctors, due to my experience with the horrible NHS system during my student days.



Standing charge in the UK? Not sure where you get that idea - treatment with the National Health Service is free.


The self employed pay 2.4 pounds per week class 2 NI contributions + 8% class 4 NI contributions for earnings between 5700 and 43875 a year. So if you don't make a profit you pay 2.4 pounds pw which is around $15 per month.


You seem to be getting caught up in the most extreme version of libertarianism.

Consider this: If more big problems were solved in various ways at the state level, there would be COMPETITION and government might be BIGGER in some areas and SMALLER in others.

My guess is that in many cases it would be smaller if there were more competition between regulatory ideas/approaches, but this is probably not going to be the case in every area.

Libertarians don't believe in small government at all cost, only that government should be put under competitive pressure so that it's as minimal and efficient as possible, and so that there are not perverse incentives and special interest entrenchment created.


I don't think "weak" and "minimal" should be used interchangeably. MY personal beliefs, which I generally describe as libertarian (though I admittedly don't know, understand, or agree with ALL beliefs that may be called libertarian), are that a government should be very strong and able to do WHAT IT NEEDS TO DO. I use the term libertarian simply to mean prioritizing personal liberty. A government should be able to protect your liberties, and should perform that task above any other. Libertarians in the US surely all agree that the FEDERAL government should be small, and most probably believe the State government should stay out of your lives as much as possible as well. However, I think most would agree that the more local the government, the more of a true voice the individual has, so regulations/taxes/etc. are more acceptable at more local levels of government. For example, speaking only for myself, I have a problem with federally funded, regulated, and mandated public schools, but I DO NOT have a problem with a local tax to fund local schools being on a local ballot. Depending on where the funds would be used, the perceived necessity of the funds, and perhaps my own financial status, I would choose whether to vote for the tax, and would have no problem with the tax being passed if the locals voted for it.


>As an example, take the health care debate. Compared to some european countries with good healthcare systems, the US spends substantially more (~15% vs ~9% of GDP) covers substantially fewer people (the millions without coverage) and the overall health of the population is poorer. By nearly all objective measures, a good public system is much better than an all-private system and yet, we know this is not compatible with libertarian ideology - you will have to search far and wide to find a libertarian group that supports a public healthcare system.

I haven't been feeling my best lately.[1] I apologize for not supporting my argument, but I believe Chile has a reasonably good healthcare system, where the rich go to the private system and the rest go to the public system.

[1] I just moved to the US from Chile.


Libertarianism is about the most basic pragmatic view of life. There simply isn't enough variance in human intelligence for a few people at the top to be able to make effective decisions for everyone else. Libertarians believe in three basic rights - life, liberty, and property. All government should do only/everything necessary to preserve those rights. It follows then, that Libertarians are strongly against regulation unless it is absolutely necessary (as this leads to corruption, monopolies, etc).

From the perspective of environmental issues, the government is not doing ENOUGH to protect people from corporations that violently destroy citizen's rights to life and property. The corporations do not own the air in the sky, they don't have a right to pollute the river you drink from, and they certainly don't have a right to cause you to be diseased by Mercury poisoning.


On the other hand, there /is/ enough variance in human intelligence (or at least human capability) for huge disparities in wealth even in social democratic societies. How much more pronounced must this difference be in a libertarian society?


Libertarianism is all about distributing power, instead of consolidating in. This results in less violations of individual liberty (you don't have governments stealing from the poor and giving to the rich, or corporations polluting the land the poorer live on, or large media conglomerates effectively brainwashing people into submission). This results in mostly and increase in prosperity for the poorer folks, while the rich of the rich might not be able to sustain their position (although there will still be rich people).


I admire the desired outcome (and that of Shimrod in a different reply), but I'm skeptical because of the history of inequality that capitalism has manifested, which has only increased with the liberalisation of markets.

It may be possible to successfully argue, as you and Shimrod do, that inequality is, in significant part, because of rather than in spite of the government. I'd rather like to see such an argument. As I understand it the classic libertarian arguments have focused on increasing production and efficiency rather than decreasing inequality.

(NB decreased inequality is a very different thing from decreased poverty)


Please show me this capitalist country so I can move there.

It is true, Libertarianism does not focus on decreasing inequality - at least not in the sense of absolute privilege, because it is a meritocracy - Libertarianism does, however, focus on decreasing inequality of opportunity. If you decide to slack off like the cricket during the summer - your fault. But you learn, that maybe next time you should work, instead of getting bailed out and then noone has incentive to ever do any real work. This is why communism failed. The truth is, that if you want people to not go hungry, and live prosperously, the only way to do that is to craft the game, such that the Nash equilibrium is beneficial, rather than harmful. And yes, there are some people incapable of taking care of themselves - they might be handicapped, or get in a car accident - however, in a society of prosperity and freedom, people will have enough extra, and not be afraid of everyone trying to steal what they have, that charity will increase. So, first, you decrease the poor population to a size that is pretty much as small as theoretically possible, and then those people are taken care of by the abundance of all others. I mean, if you had $1million dollars, and you didn't have the government trying to take it all the time, would you really pass up helping out those in need? The reality is, that there will always be poor people, and history has shown that socialism certainly does not solve that problem (the more socialist countries have more poor people). If you claim the US is a capitalist system, well it might be compared to some other countries, but then again, we are more prosperous compared to those countries as well.


Probably less so. Those with more wealth wouldn't be able to lobby a powerful government for favorable legislation and bailouts.


I'd recommend reading some Murray Rothbard before anything by Milton Friedman or Rand. It's even free online here:

http://mises.org/rothbard/ethics/ethics.asp


Rand is not a libertarian.


And arguably neither is Rothbard, who is much closer in his view on ethics to Rand than to von Mises.


Social Security taxes are actually a rather large 12.4% of income. (this includes the employer contribution, which is economically part of a worker's compensation.)

http://www.ssa.gov/OACT/ProgData/taxRates.html

Worker "contributions" also are immediately spent on unrelated programs (the trust fund is given special government IOUs that are valueless) leaving an unfunded liability in the trillions of dollars. On a cash-flow basis, the program will begin to run in the red as the first boomers retire in 2017.


Boomers have already started retiring. The first wave became eligible in 2007. Perhaps you mean the peak?


Right, sorry, 2017 is the year the total paid to retirees is greater than the incoming contributions.

Medicare is already running in the red, by the way.


That is terrifying.


Lord Acton said "power corrupts":

http://mises.org/story/1086

I think that an important part of libertarianism is its fairly consistent position for negative liberty:

http://plato.stanford.edu/entries/liberty-positive-negative/


This brings up my key critiques of libertarianism.

First, libertarians seem to enjoy attacking other political parties specific positions while taking only a rhetorical one themselves. This feeds into #2:

Second, until the libertarian party actually puts together a platform, they aren't a real party. The reason's simple: first, nobody can tell what they're really voting for in terms of deltas to the legal codebase, and second, without going in with a plan, I don't think we'd even get the libertarians to agree with each other for doing anything.

To sum it up, I haven't seen a political party that's taken a real stance, but would rather sit on the sidelines and throw stones. Call me when you have a platform, not rhetoric. I don't want argument, I spent 11 years in a college town -- I've done it to death, I want actual proposals that I can personally evaluate. Until then, all I hear is ideology, and that's the last thing I want in government.


The Libertarian party is a fringe party that is mostly concerned with hemp legalization. I know libertarians (small l) who vote for each major party some of the time.

The point of discussing libertarianism is to see the philosophical difference between someone who advocates personal freedom and economic freedom vs someone who doesn't.


Ron Paul, IMO, has shown there doesn't need to be a separate party. Ron Paul is a libertarian in many ways and yet he's been a Republican congressman since 1976, save for the few years in between that he went back to practicing OBGYN.

He actually ran for President as a Republican in 2008.


So, I lean libertarian on many things. However, the problem I see with libertarianism is that it posits that people aren't that effected by those around them. Gay sex is fine because it's a personal decision - yeah, I totally agree. Taking on billions in risky loans that cause economic collapse is fine because it's a personal decision - I really disagree.

I hate the idea of paternalism and as someone involved in the small business arena I really wish the government out of my way most of the time. However, people affect others. You buying an SUV increases the aggregate demand for gasoline which raises the price of gasoline and so I pay more at the pump because you bought an SUV. Maybe that shouldn't be regulated, maybe it should. You pollute and lower my standard of living. Maybe it should be regulated, maybe it shouldn't.

The problem is where libertarianism typically draws the line. Shooting me: not ok! Investing in risky stocks that destabilize the economy creating a panic that loses millions of jobs and causes enough chaos in my personal life: that's ok (according to the original poster).

I do have a lot of respect for Milton Friedman - in fact, he argued that one of the functions of government was to combat the neighborhood effect of things like pollution. However, most libertarians I know today aren't so keen on things like pigovian taxes to correct differences between marginal social cost and marginal private cost.

And part of this goes down to freedom of choice. Let's say I decide that a fireworks display would get people together watching it, having BBQs, etc. I could get dominion over the most choice seating from the government, but plenty of people would be able to watch for free - a positive externality. So, there is an argument to be made that this should be subsidized because people won't create enough fireworks displays if they have to pay for it themselves since they can't capture the revenue from the benefits because people can freeload. However, not everyone gets to decide for themselves whether they would appreciate this event. Maybe you hate people and don't want to socialize. Either way, it's unfair to take money from you to pay for something that you might not want.

So, there are two issues: first, there's the issue that I don't want people messing up my life too much. So, there should be (in my opinion) limits on how much stupid risk someone should be allowed to take given that those risks often affect other people. You want to destabilize the economy? No, not ok. Second, there's the issue on how much we should be individuals or how much we should be a society when it isn't such a dire situation. Should the government chip some money into a parade? Should the government encourage community? How far should the government go on pollution? I'm sure no libertarian would argue that the government shouldn't regulate dumping nuclear waste into my drinking water, but what about a coal plant, what about CO2 from cars?

Libertarians aren't foolish people. It's just that often times I find myself thinking, "well, that's fine and good for you, but it doesn't scale." Like, it's fine to let someone like Warren Buffet do whatever the hell he wants. He's responsible, stable, and smart. As we've seen recently, even CEOs commanding many millions a year in compensation aren't able to work without a net.

The problem really is that freedom doesn't exist. There's definitely more freedom and less freedom, but freedom doesn't exist. Why? Because your actions affect me. The fact that some geniuses at Citibank and others screwed up makes it harder for me to switch jobs, means raises are going to be nil this year, etc. The freedom they had took away freedom I had. And so it becomes a balancing act and often I get lectures about freedom as if it isn't such a balancing act.

How do you deal with this balancing act? I don't know. It's hard. You want to maximize happiness. This is probably my biggest beef with libertarianism because freedom != happiness even if there is a strong correlation. Maximizing freedom for freedom's sake just seems silly to me. Anyway, it isn't always clear how to maximize happiness and in some cases you just try to do the best you can and fail. I really hate any pure philosophy. I just don't think any of them apply in life. And libertarianism, in its pure form, just doesn't work. People affect each other. If you're willing to bend libertarianism a bit and keep a strong eye on freedom while making sure you keep in mind how one's actions affect others (both directly and indirectly), I respect you.

Hopefully that was halfway coherent. We'll see tomorrow morning.


You need to break these problems down further.

Let's take Citibank.

The government is involved in changing behavior right from the inception of a corporation. It is called limited liability. We as a society accept this as we believe it encourages people to take more risks. It used to be that a corporate charter could be revoked if it were decided that the company was somehow harmful to the public. I am unaware of the last time this has actually occurred.

The government also encouraged risky behavior through GSEs (Freddie and Fannie). There was an implication that the government would take care of things when they went bad.

I personally believe that all of these problems are exacerbated by large public companies. Other than the possibility of having to find another job there is generally little risk in performing poorly or even maliciously at an individual level. Those at the top likely make enough money to survive a lifetime if they were fired tomorrow.

Now let's shift to the issue of energy.

Every drop of fuel you put in your vehicle is subsidized by the government. We spend trillions of dollars to fight wars in order to secure energy resources. These costs are externalized through taxes and it is thus feasible to drive vehicles which are not fuel efficient.

I have only scratched the surface on these two issues. I'm not advocating abolishing all regulation and government institutions. I do wish for more discussion which considers the effects that the government has on society. As the original poster alluded to, good intentions are not enough.


Thank you for this.

I think that the field of game theory, and as the most simplistic example, the prisoner's dilemma, shows that libertarianism, as defined by the idea that individuals acting in their own self-interest will create the greatest common benefit, is flawed. Specifically, this will limit the benefit of each individual as well as the aggregate.

Individuals acting in their own self-interests categorically do not arrive at optimal solutions for themselves or for the whole society. It's a complete joke, mathematically provable, and thus ridiculous that it's still being argued. We need coordinators. All forms of government have been imperfect at achieving perfect coordination, which has inspired libertarians and objectivists and etc., but that doesn't invalidate the coordinators' work. Instead, a meaningful endeavor would be to improve the scientific rigor and quality of the policy-based coordination. This is what my research as an undergraduate was based around...

Libertarian, I invite you to go start an investment bank and act in your own unfettered best interest. I'd be hard pressed to see you not end up in a similar situation to investors in any of the past bubbles and collapses.


To your example I would add the "Tragedy of the Commons":

http://dieoff.org/page95.htm

The tragedy of the commons demonstrates that with certain shared resources, when everyone freely pursues their rational self interest not only is utility not maximized, sometimes the result is catastrophic.

Libertarian solutions to the tragedy of the commons usually involve attempted parcelization and privatization of existing commons, and while that's practical in certain cases, in many others -- fishing grounds, air quality, global warming, etc... -- it is not.


Privatization of fishing grounds, in the form of fishing rights distributed by auction, is a widely used means of managing fisheries. It works well when property rights are actually enforced (e.g. a body of water controlled by only one nation).


This makes some sense -- I guess I was thinking mostly of the devastation of fishing stock that has occurred over the last few decades in areas that aren't managed. However, I'd question whether the notion of fishing rights is truly libertarian. It obviously requires a fair amount of government intervention and management, to the extent that the more extreme anarcho-capitalist types would find it unpalatable.


Libertarians do not oppose this stuff, they merely want to consider other approaches. I think pollution can be dealt with purely from a property rights framework, not a greater good framework.

Again, this is a low priority issue, and the thing to look out for is when planners try to use the 'greater good of all' to give handouts to special interests, as has been overwhelmingly the case with eminent domain lawsuits around the country.


Parcelization of fishing areas was used by Turkish fisherman of the Anatolian coast, with dramatic improvements in fishery productivity.


Counterpoint to "Tragedy of the Commons":

http://links.org.au/node/595


When you cross the street at a traffic light, do you look at the color of the light and immediately propel yourself into the intersection? Or do you take a few seconds to glance from left to right to make sure that there isn't a vehicle careening toward you?

My guess is that you double check the government when it comes to your personal safety. So why should anyone believe automatically that just because the SEC exists, any investment bank will be a safe bet and act in precisely the way it ought to?

Any firm is prone to conflicts of interest, fraud, deception, lack of transparency, etc. Investment banks are no different.

It's a reality of life that sometimes people/groups will try to defraud/deceive others. Self-interest (being symmetric) offers a backstop against this, UNLESS regulation gets in the way.

The analogy I'd use is this? SEC regulations on iBanks were as effective as a paper seatbelt. In other words, not effective at all. What did the SEC spend last year doing while the financial meltdown was brewing? It shut down prosper.com!

You may think that it's optimal to declare that everyone should put on a paper seatbelt and that when things get bad just do a bailout, but libertarians would prefer to let people make decisions based on facts the whole time.


Are you arguing that no seatbelt is better than a paper seatbelt?

Just because the seatbelt is broken, doesn't mean we should abandon seatbelts. It means we should work harder to make better seatbelts.

An argument I see when libertarians are faced with such questions is that libertarians aren't 'against' seatbelts, but they want to explore the alternatives. And yet they don't seem to come up with any other alternatives...


I'm arguing that a paper seatbelt is a deception. Metaphorically, if you know a car doesn't have a seatbelt you'll drive more cautiously, or possibly have a seatbelt installed that you know works. In other words, you'll use your cognitive faculties to assess the risk and then manage that risk.

What we should not do is idealize the paper seatbelt or pretend that it works when it does not, or pretend that the design of that paper seatbelt hasn't been heavily influenced by corporate lobbyists, corrupt politicians, etc.


Society is more akin to an iterated prisoner's dilemma: the same game, but played lots of times. In that situation, the ideal strategy is actually to cooperate.


Cooperation only happens when you iterate every time in a one-on-one fashion with the same players over and over again. For example: the relationship with your local grocer, who has a reputation to build. But it is the wrong metaphor for most real issues in social policy. Pollution is a tragedy of the commons problem.


This is a more important point that I think most people realize. The classic "flaw" in Libertarian thinking (both among self-described Libertarians and those who criticize it) is neglecting higher-order effects. The prisoner's dilemma is a perfect example of this. The game played once is very different from the game played repeatedly. You'll find the same sort of differences in numerous other game-theoretic situations.

Unfortunately, most supporters of Libertarian policies only get to the first-order implementation and then stop and are rightly criticized for the limitations and flaws that result. All of the complexities of higher-order effects are neglected, but those are the parts that actually make the theory workable in the real world.


I don't think you offer any evidence to support your point.

I'd argue the opposite, that a big, opaque regulatory state is the perfect environment for corruption.


I think you mistook my comment as an argument against Libertarianism - it was not intended to be such. My point was that people oversimplify both the implementation and the analysis of Libertarian principles. A system with many, many free actors can be amazingly complex, and what I'm suggesting is that for people to see the value of the system they need to recognize and embrace that complexity.

For example, the basic principles of a free market (e.g., supply and demand) are easy to state but result in complex transactions. When things don't "work out" for someone in the real work and they raise an argument against "free markets" (as in the current housing bubble), we need to be ready to point out all the complex ways that the free market worked correctly but where the non-free parts distorted it (government policies encouraging loans to unqualified applicants).

In complex systems with non-linear behavior, we need to be very careful that we understand the full context of an event or we won’t be able to extrapolate the results. That’s why first-order approximations fail so often in mathematics and in real life.


Excellent point. You're right, a basic humility about the human ability to understand and control complicated systems is at the root of libertarian principles.

I think it's somewhat absurd that Obama and Bush even pretend they can do anything about the financial crisis.


"Investing in risky stocks that destabilize the economy creating a panic that loses millions of jobs and causes enough chaos in my personal life: that's ok"

How can investing in stocks destabilize the economy? If I invest my money in stocks that aren't worth it, then I will lose my money but noone else. If my investment temporarily causes stocks to rise, and people therefore buy (hoping it goes higher), then it's obviously their fault and they too will lose their money. But if you don't invest in stocks, how can you be affected? The only way for this to happen is when government intervenes and takes money from taxpayers to bailout organizations that took too big risks.


How can investing in stocks destabilize the economy?

http://en.wikipedia.org/wiki/Stock_bubble#Positive_feedback

-

But if you don't invest in stocks, how can you be affected?

Market shocks affect the entire economy (through expanding and contracting credit, etc.). If one does a cannonball into a pool, how can it affect anyone else in the pool?

http://images.google.com/images?q=pool+cannonball


I wrote in my post that it might lead more people to buy stocks, but that's entirely their fault. I don't see how one rising stock might affect anyone who is not investing in the stock market. The cannonball analogy doesn't hold.


> most libertarians I know today aren't so keen on things like pigovian taxes to correct differences between marginal social cost and marginal private cost.

Which is weird! I've never understood why libertarians seem to discount external costs so deeply.

I think there is a breed of libertarian that values them sanely, but that it's the less rabid sort that tends not to rant on the internet. I'd include Friedman and Megan McArdle in this group.

I don't agree about valuing happiness instead of freedom, though. It's shouldn't be the government's job to worry about how happy you are, it should be government's job to make sure you're free to pursue happiness should you so choose.


> I've never understood why libertarians seem to discount external costs

Most libertarians are aware that the Government meddles heavily in the economy, and everything bad about the economy that's blamed on capitalism wasn't a fair test b/c it wasn't actually laissez faire capitalism that was tested. There is no good reason to expect external cost problem to be worse under a genuinely free market than they are now. So libertarians needn't say much about the issue.

And anyway, what do you expect libertarians to say about it? Either one can say that Government is the answer, or isn't. Libertarians are exactly the people who have knowledge about why Government is bad at solving problems, so they are the last people you'd expect to want the Government trying to solve this one.


> And anyway, what do you expect libertarians to say about it? Either one can say that Government is the answer, or isn't.

Ah, we've pinpointed the nonsense! I'll leave you with some words from Milton Friedman on the New Deal:

> The other part of the new deal policy was relief and recovery … providing relief for the unemployed, providing jobs for the unemployed, and motivating the economy to expand … an expansive monetary policy. Those parts of the New Deal I did support. (…) Because it was a very exceptional circumstance. We'd gotten into an extraordinarily difficult situation, unprecedented in the nation's history. You had millions of people out of work. Something had to be done; it was intolerable. And it was a case in which, unlike most cases, the short run deserved to dominate.

With the point being, sometimes government is necessary and sometimes it's not. It's not an all-or-nothing endeavour.


Milton Friedman is not the only person to sometimes say unlibertarian things. To start with, you can add to your list David Friedman, Ayn Rand, and F A Hayek.

Next you can add me. I think libertarianism today is too isolationist regarding war and terrorism.

But we cannot find the truth by analyzing who said what. The important thing is which ideas are right, not who said them.


Capitalism and human nature tell us that lobbying and corruption will be a consequence of regulation. Libertarians simply realize that regulations are not just the "grand vision" that they are presented as... they create winners and losers, beneficiaries and those who are made worse off. As such libertarians constantly re-evaluate how effectively regulations accomplish the grand vision in the environment of the perverse incentives that are often created and grow over time.

At a very basic level this is simply a scientific, non-political world view. It's evidence-based. If you read through many of the threads on HN you can feel the deep sentimentality that people feel about things like Social Security, etc. It's an emotional, irrational, unscientific response.

Why are you critical of libertarianism? Do you support some special interest group that stands to lose simply from smaller government? Or are you sentimentally attached to the grand vision presented as the persuasive argument for some piece of historical regulation? Or are you a career burocrat :)


> Why are you critical of libertarianism?

I'm a bit confused. The post you've replied to was in favor of libertarianism.


I may have inadvertantly replied to the wrong post...


>Most libertarians are aware that the Government meddles >heavily in the economy, and everything bad about the economy >that's blamed on capitalism wasn't a fair test b/c it wasn't >actually laissez faire capitalism that was tested.

Isn't that what the defenders of communism say about the USSR and China? (Stalinim and Maoism respectively, rather than pure Communism as Marx et al. intended)

The point being that 'pure' libertarianism is possibly just as realistic as pure communism, or perhaps even democracy (either in the sense of 'pure' (i.e. direct) democracy at a national level, or even, with representative systems, that the majority of the population is well informed regarding issues at hand and actively participates in the democratic process).


Agreed. Absolutes only exist in theory, whether it's communism or libertarianism. The best we can do is a delicate balancing act.


Balanced by who? Jesus? Greenspan? Paulson? Bush? Obama?


>The problem really is that freedom doesn't exist. There's definitely more freedom and less freedom, but freedom doesn't exist. Why? Because your actions affect me. The fact that some geniuses at Citibank and others screwed up makes it harder for me to switch jobs, means raises are going to be nil this year, etc. The freedom they had took away freedom I had. And so it becomes a balancing act and often I get lectures about freedom as if it isn't such a balancing act.

To be clear, the items you state here aren't _rights_. Rather, they're privileges that aren't guaranteed. If you work and do a great job, you're not entitled to a big house in the suburbs, but you're increasing the odds of being able to afford it.

The Constitution guarantees rights to life, liberty, and property, as well as several other rights in the Bill of Rights and other amendments. But nowhere there will you find a right to have a job or right to make x% interest in the stock market (or right to be bailed out if you get in over your head in the real estate market).

As a nation we have a real problem of mistaking opportunities for rights, and feeling entitled to things that we want.


When it comes to it, I think Libertarianism goes hand in hand with a sort of weighing principle. It only works as long as the actions taken do not infringe on any other individual's rights. Of course, this is impossible to always follow (rights will always conflict), so in steps the weighing principle to encourage people to act towards the perceived greater good of society. The real question that libertarianism brings up is, who enforces the weighing principle? This is the point at which libertarianism must merge with some sort of governmental structure. Because even though it would be great if everyone just followed the rules, it just isn't going to happen.


Libertarians generally tend toward a property rights framework to handle things like this, as opposed to a "greater good" framework.

In other words, if you put toxic waste on your property, that's fine UNLESS it leaks onto someone else's property. So there is no need to open the discussion of how pollution impacts the greater good, because polluters just can't harm the neighbours' good!

The perverse incentive for planners to identify the "greater good" is the same as the way priests and religious leaders do so -- and they are likely to shake their finger just as judgementally.


I think the meat of your comment is in the story about how Citibank's failure makes it harder for you to find a job.

First, note that if it weren't for regulators deciding on the amount of reserve capital Citibank was required to hold, the market would probably have demanded that it hold much more. For a long time iBanks have been benefiting from the Fed's power to bail them out. Unlike banks, whose asymmetric liquidity is due to customer deposits, iBanks are risk-taking businesses who are just trying to make people rich. If Yahoo can fail, why not Citibank?

So you were actually a temporary beneficiary of SEC and Fed policies that led to the over-leveraging of Citibank's capital and your previous ease at finding a job. Your major life decisions were perhaps influenced by this false sense of reality.

On to your thoughts on happiness: Would people be happier if they weren't allowed to eat junk food? What about if they weren't allowed to drop out of college? What about if they believed in a specific version of the Christian God? What if they wore an American flag arm band at all times in public?

It's highly subjective what makes people happiest. I personally don't want anyone telling me what will make me happiest.


I have serious trouble believing that "the market" would have led to Citi keeping larger amounts of reserve capital around. In fact, I'm pretty sure that it was the banks pressuring the government to let them hold less in reserve.

I am registered Libertarian, as I believe in marketizing problems whenever possible; however, the markets must be set up correctly to be truly free, and only the government can do that.


True, but have you ever been driving on an icy road and seen people going the speed limit, 55 miles per hour?

The psychology people seem to have is to believe that if the government regulates it, then anything that falls under the regulation requires no independent thought.

On the icy road, the safe speed maximum is probably about 30 mph, but many accidents are caused by people going the posted limit, as people seem to trust the wise planner above their own ability to judge.

Similarly, people assume that a firm that is regulated by the SEC and backed buy the FDIC is going to be a safe place to put money, which is not always true.

I agree with your last statement, but note that 1) the SEC required insufficient reserves, and 2) because the government set the reserve limits, there is the implication that it ought to bail out the firms that were "just following the rules".

Hence the view of firms being "too big to fail" comes from the idea that regulation is perfect and if only it's followed then everything will be fine.

In a better, more libertarian world, banking crises would result in some failures, and once-burned investors would look carefully at what reserves actually mean, look sceptically at rating-weighted reserve requirements, and expect that if things go wrong there will not be a bailout.

This would help put money into firms that actually know how to act in a trustworthy, sound way, not just the firms that are able to successfully lobby the SEC, the way Madoff's did.


The problem that I have with your examples is that it requires all actors, including consumers, to have nearly perfect information access, and to be able to act on that.

In the car example, I think we have a difference of philosophy. I think that regardless of the posted speed limit, some people will not exercise the proper judgement because they have evaluated the conditions differently.

In the example of reserve funds, imagine a world with similar information asymmetry to today. Banks are semi-transparent, and deposits are backed to some extent by the FDIC. However, the SEC takes less of an active regulatory role, the result of which is that some unscrupulous banks have started offering insanely high interest rates based on dangerous fractional reserves. People will likely flock to those banks, especially given that the FDIC is backing their investments... and then the whole thing collapses.

One solution is to get rid of the moral hazard inherent in the FDIC, and make it clear that the only way to hold your money safely is in cash, in your home. But one of the signs of civilization is increased specialization of labor; I should not have to do the job of banker and regulator all rolled into one, just to have a place to keep my money. Worse, it's not even clear that this is possible, because of inherent information asymmetry.

We can argue about whether an adequate ad-hoc bank insurance solution would arise, however, I'm not sure that such an invention would increase efficiency in the market.

As for regulation, there doesn't really seem to be any real alternative, unless the direct consequences for the operators of failed financial institutions became much more dire. And criminalizing poor business decisions doesn't seem very Libertarian at all.


Why is perfect information required?

If I walk into a bank and consider depositing my hard earned cash, perhaps I'd demand enough transparency to determine whether to trust that entity with my cash, in exactly the same way that I must trust Amazon when I place an order online, etc.

Information will always be imperfect, but it's in both parties' interest to increase transparency. It's barely even a coordination problem in today's world.

As a note to your remark about my speed limit explanation, why is it then that on an extremely icy road people go exactly the posted speed limit rather than, say, 90 miles per hour? Clearly they are taking the sign literally and at face value.

So one regulatory approach that would be an improvement over the current one might be to require a reserves "rating" to be published, much like the smoking causes cancer warning. Perhaps right under the bank's logo it would have to say "This bank has a reserve score of 71 (moderately risky)".

And yes, there would be room for 3rd party ratings to be applied to bank solvency as well. I'm not sure what the best approach would be, but consider that most securities regulations were made in the 20s before the information revolution (ironically, the "Financial Services Modernization Act" removed a few of the depression-era regs that were actually smart and prevented moral hazard and conflict of interest). Surely there would be a lot of clever approaches. One idea that intrigues me is that the government could offer its rating, but banks would be required to obtain several. I'd love to see someone like Michael Moore create his own such agency and use his genius to publicize it.

Analogously, consider the FDA drug approval process. Everyone knows that the FDA process is flawed, as people are routinely killed by side-effects of drugs. So why not have several ratings: One from a consortium of insurers, one from the AMA, and one from the FDA -- each group has a slightly different downside risk (and upside) to approving a dangerous drug or failing to approve a safe one in a timely fashion. Why not have a grid of 3 checkboxes on every drug. The absence of an AMA approval might be a warning sign to some, but not others.

If you think this idea is silly, consider what happens when the FDA gets it wrong and lots of people die because of a drug... exactly nothing but a too-late knee-jerk reaction. Usually the drug is immediately pulled even if it has other valid uses, etc. One perverse example: many doctors knew the dangers of Vioxx well before the scandal (the same risk exists in lesser form with all such drugs, even Ibuprofen) and good ones didn't use it on patients at risk for bleeding without great caution. Yet it took a few years and then bang, it's gone from shelves even though there are a few essentially identical drugs that stayed on the market and do still occasionally kill people when used without caution by docs.

I'm not claiming to have the whole idea of optimal regulation for the 21st century figured out, but I'm just brainstorming. Surely there would be a lot of great and clever ideas. The current, one-size-fits-all approach leads to massive and often ineffectual regulatory apparatus.

Why shouldn't coming up with ad-hoc regulatory / information-dissemination / transparency-reducing systems be something that startups do? Why not in the case of medical trials have data published to the web so that people can make mash-ups with all the data that is being considered by regulators? A few weeks ago the SEC approved a plan to put financials in XML format, but it's all very primitive and is unlikely to be all that useful, but the core idea of transparency through an API is a good one, I think.

The role of the "regulator" of the future, I think, is to design a good API spec (metaphorically and literally) and possibly make a list of all of the watchdog groups offering analysis. State and federal governments could fund their own watchdog groups too -- maybe I notice that Wyoming's prescription-drug watchdog group has been right a bunch of times in a row, so I begin trusting it more than the one in my own state. Maybe I decide to trust Michael Moore's group or Paul Graham's. Over time the best would rise to the top and every mistake would give new groups a chance to enter the limelight -- maybe a YC startup was the only one not to approve Vioxx, for example.

Toward the libertarian goal of efficient, small government, we should be focusing on regulation that increases transparency and also increases the number of entities that can act as private watchdogs. It's exceptionally telling that the SEC received repeated complaints about Madoff's fund from various sources and still did nothing. One might argue that the SEC is understaffed, but it found the staff to shut down prosper.com, a startup that was making humanity better off, on a technicality, not even on any remote accusation of fraud. More likely, prosper.com competed with the established finance powerhouses, so the SEC was probably just acting to keep competition out of the industry.

Most of what all of the regulatory agencies do is coordinate information, and if the modern world (and the internets) have done one thing, it's make such problems extremely easy and inexpensive to solve. My basic argument is that the antiquated structures create a false sense of security and get in the way, as well as soak up tons of industry lobbying dollars to the point where industries tend to become highly regulated and highly protected, the two biggest characteristics of libertarian dystopia. The military industrial complex and now the financial and auto industries are that sort of thing. Big agriculture is too, as well as many others.


> The psychology people seem to have is to believe that if the government regulates it, then anything that falls under the regulation requires no independent thought.

But according to your own line of thought, shouldn't people be fully responsible for their own conduct, regardless of the surrounding circumstances? If so, how is lack of governement regulation going to help people determine the correct speed to go at on icy roads?


My point is just that a rational person generally uses his/her cognitive faculties to assess risk, but that regulation often leads to short-circuiting of critical thought.

The heuristic becomes one of people believing that the government must have already looked out for all dangerous possibilities, so anything that is legal is safe.

I don't feel the need to look down my nose and say "people should be individually responsible" because I don't consider that productive. I think people are naturally responsible enough to look out for their own interests, unless they are misled.

One example: investors in Madoff's hedge fund were misled by the SEC stamp of approval on that fund. Don't you think that normal scepticism about the returns ought to have led to some scrutiny?


Regulation sets a minimum reserve, not a maximum one.


Speed limit signs set a minimum and a maximum speed, yet I always see drivers careening along on icy roads at the posted maximum. They must have more faith in planners than I do, as I try to determine how icy the road is and go at a safe speed.

I don't think financial regulations are any different, but unfortunately most people take the fact that a firm is regulated to mean that it's totally safe. Similarly, many foods that will result in an early death are perfectly legal and consistent with the USDA food pyramid.


To be clear: you are suggesting that banks have kept low reserves because they took their government requirements as a sign of what was prudent to lend. Rather than asking their many teams of risk analysts, they made lending decisions based on an arbitrary number set by the government, despite the fact that this level has not been raised or lowered in decades, is uniform across all banks, takes no heed of the current financial situation and has never prevented a crash in the past.

If this were true (and it certainly is not!) then the market really would be just as incompetent as its critics say it is.


Not at all.

In an environment where the government decides what is prudent, there is no incentive for a bank to say "We are sounder than our competitors because we keep more reserves". Why not? Because they would be competing against the government for their definition of soundness.

Sure it could happen theoretically, but it would be a tremendous competitive disadvantage.

The way it is today, any bank that is legally allowed to operate is considered equally sound by borrowers and investors, and banks have no incentive to try to prove to customers that they are actually more sound than their competitors.

In a highly regulated environment, that works for all banks because they know that if there is a major economic downturn everyone will get bailed out.

Notice that all banks were required to accept TARP loans whether they needed them or not. Why? To avoid SIGNALING which banks were hurting and which were not. Why? To avoid capital flowing to the banks that were actually sound!

Why? Well, partly because government wants to avoid a crash, and partly to keep the status quo going strong. Also, consider what all of the major industry players in banking want... what does any firm want? No competition. They were all happy to share a big market and to have as few as possible attributes on which to have to compete for business.

Simple, smart, behaviorally sensible regulations make sense, but the SEC has been notoriously behind the curve for years. The missing piece has been to regulate appropriately while allowing there to be an incentive for banks to actually compete on the basis of soundness. The decision not to let the concept of bank soundness enter the brains of mere citizens must be a knee-jerk reaction to the great depression.

Instead, in exchange for various political concessions, banks were given every incentive to be extremely leveraged. Consider the impact of the GSEs on housing prices, MBS prices, etc? The implicit guarantee of Fannie and Freddie alone probably led to banks thinking (rightly, it turns out) that any housing related crash's impact on banks would be bailed out.

Side note: Are the banks going to be better off after the bailout? Of course they will be. The desired "sweet spot" for most firms is to be in a heavily regulated, heavily protected industry, as it means that there are huge barriers to entry and the profits (though sometimes essentially set by regulators) roll in year after year. See the military industrial complex for an example of the idealized sort of model.

Market forces have been very far from banking for a long time. Why else would financial services be the biggest donors to both parties. Libertarians are not opposed to regulations, just not ones that create perverse incentives and lead to massive bailouts! Any time a firm would rather spend its money on lobbyists and campaign contributions rather than innovation, there is a big problem.


> First, note that if it weren't for regulators deciding on the amount of reserve capital Citibank was required to hold, the market would probably have demanded that it hold much more.

This was your original point. Let's stay on track.

Your claim that regulators decide how big Citibank's reserves should be is false. They set a minimum, not a maximum.

You then tried to draw an analogy between speeding and regulation, one that, as I have explained, is totally inappropriate.

You then claimed that "most people take the fact that a firm is regulated to mean that it's totally safe", which is a massive exaggeration. If that were true, bank bonds would be considered as safe as government bonds and bank runs would never happen. All other regulated industries would be exactly the same. Also, you are confusing reserve requirements with broader regulation as a whole.

You then claim that banks raising their reserves would be "competing against the government for their definition of soundness", despite the fact that no government has ever claimed any 'definition of soundness'. This appears to be something that you have invented.

You then give an argument as to why other forms of regulation encourage banks to hold lower reserves. This contradicts your original point, which was that if reserve requirements were abolished then the market would force banks to raise reserves. What you have demonstrated is that the market, bail-outs and broader regulation would actually force reserves to even lower levels in the absence of reserve requirements. You have changed your argument from one about reserve requirements to one about broader regulation, and bail-outs such as TARP.


I don't think you have refuted my speeding analogy. Do you ever drive in an area with ice on the roads? I recommend that you observe the phenomenon before you dismiss it.

I do not think you have refuted my claim that regulation leads to people suspending critical judgement about risks.

Reserve requirements are a good example of this effect. Industry lobbyists try very hard to have the limit decreased while benefiting from the public perception that the regulator has assured that the bank's assets are sound.

If you don't buy my argument then you probably believe that people are so stupid that without regulation banks would hold $0 in reserves.

The alternative view of humanity is that people are sensible enough to demand sound practices from institutions they deal with on important matters.

My argument is that banks don't use reserves as a way to win customers the way they would if regulators weren't giving an A+ to every bank that holds the minimum :)

One exception is Goldman Sachs. It did not need TARP funds to remain solvent. Yet Treasury forced all banks to accept the funds. What did Goldman do? It immediately paid a huge dividend to its investors.

What happened? Goldman actually had more sound practices than the rest of the industry and was not in danger of failing. It would probably have waited for bankruptcy proceedings and picked through the assets of the other banks, strengthening its already strong balance sheet.

Regulators did not want more money to flow to the firm that had good practices, so it insisted on bailing everyone out. This was to hide information from investors and customers. Goldman angered regulators by paying out the dividend right away, but managed to signal its health.

To understand the point of libertarians on this issue, consider the world in 10 years from today. We might have had a world where chastened investors and customers looked a lot more carefully at the risk management practices of banks before trusting them. Instead, we have a world in which our government owns 30% of all banks and regulators are being hailed as the saviors of the banking industry.

Do you want to live in a world where people act based on reality, or one where taxpayer money is appropriated without congressional approval and given to selected industries, and the appropriators are hailed as heroes that helped the little guy keep his job, prevented another great depression, etc.

It all comes back to the burden that people take upon themselves to assess the riskiness of the decisions they make. Industry loves to have its status quo practices rubber stamped by regulators, to add additional credibility. It all works out well as long as there can be another bailout, etc., but it's not based on reality and represents the slow transfer of wealth from the most productive companies to the ones with the most effective lobbying.


>I don't think you have refuted my speeding analogy.

My point was that you analogy doesn't apply. Pointing to ice on the roads is completely missing the point: that the analogy doesn't hold in the first place.

>I do not think you have refuted my claim that regulation leads to people suspending critical judgement about risks.

I did not say this! I said that specifying a reserve requirement does not reduce bank reserves. Please keep this argument to reserve requirements, not general regulation.

>If you don't buy my argument then you probably believe that people are so stupid that without regulation banks would hold $0 in reserves.

The UK does not have reserve requirements and they don't have zero reserves. But they did not raise their reserves to safe levels either, refuting your original point.

Incidentally, it's you that's arguing that regulation encourages banks to hold lower reserves than they would without reserve requirements. You are constantly conflating reserve requirements and general regulation, moving an argument about one to a conclusion about the other.

You then go on to talk about TARP again, illustrating my point.


The ice on the roads creates a risk of the car going out of control. Unanticipated volatility in the market creates the risk of a bank being insolvent.

To manage the risk of your car going out of control, you choose a safe speed.

To manage the risk of a bank becoming insolvent, it chooses an amount of capital to keep in reserve.

I seriously doubt you take exception with any aspect of the analogy so far...

A speed limit sign suggests a speed that is safe to drive. However like any regulation it is only an imperfect estimate. Yet people seem to drive at that speed under adverse weather conditions completely irrationally.

A reserve requirement suggests an amount of reserve capital that is safe for operation of a bank. However like any regulation it is an imperfect estimate. Few banks carry reserves in excess of those set by the requirement.

These are completely identical scenarios. In each case, humans cluster around the regulation without exercising independent judgment. Drivers slide off of the road all the time, and a bit of recent price volatility sent many banks into insolvency.

Your example about the UK is noteworthy but I would argue that due to the dominance of US banks (and US regulations) in financial markets, UK banks are inclined to mirror US policies in order to remain competitive with US banks. Analogously, a Russian firm may adopt some US accounting practices if it wishes to attract investment from the US.

There are two factors: The first is the way that the bar is set by the regulation in the first place. T

he second is the grouping/incentive effect. If your competitor has too few reserves then you are at a disadvantage for not copying that behavior unless the economy crashes (such that your competitor goes out of business and you don't).


>A reserve requirement suggests an amount of reserve capital that is safe for operation of a bank.

In one case we have members of the public who have passed a driving test. In the other, we have the foremost experts in the field, using the latest theories of risk, working with millions of dollars of modelling and statistical equipment, with their jobs on the line. For what good reason would a single one of them look at the reserve rate and say "Although the government doesn't claim that this is a safe rate for banks to operate at, but instead sets it completely arbitrarily, and admits to the fact that it's totally arbitrary, and has not changed this rate in several decades because it is an obsolete tool of monetary policy, I am nevertheless going to take it to 'suggest' a safe level of reserves, totally ignore all of my models and education, and just pick that number on a completely irrational basis."


Not at all. There are experts who decide what the posted speed limit should be on all roads.


That just makes my point even better. Experts set safe speed limits for non-experts to follow. Minimum reserves are set arbitrarily and experts that decide actual reserve levels will not pay them any attention.


regulation leads to people suspending critical judgement about risks.

We have a name for that.

http://en.wikipedia.org/wiki/Risk_compensation

risk compensation is an effect whereby individual people may tend to adjust their behaviour in response to perceived changes in risk. It is seen as self-evident that individuals will tend to behave in a more cautious manner if their perception of risk or danger increases. Another way of stating this is that individuals will behave less cautiously in situations where they feel "safer" or more protected.


Thanks for the link. I thought I'd invented it :)


Risk compensation is also called "moral hazzard": http://www.econlib.org/library/Enc/bios/Mirrlees.html

Mirrlees also did highly theoretical work on another incentive problem: “moral hazard.” As is well known to those who study insurance, insurance coverage gives the beneficiary an incentive to take more risks than would be optimal. This is called “moral hazard.” Mirrlees’s insight, based on a complex mathematical model, is that the problem can be solved with an optimal combination of carrots and sticks. Insurance payments are essentially a carrot. But “sticks” could be designed also, so that an insured person who takes risks pays a penalty for doing so. With this combination of carrots and sticks, the insured person acts almost as if he is uninsured, and the insurer acts almost as if he were the insured.


I didn't read your entire comment, but as for personal financial decisions ruining the economy, I don't think this would happen in a free/more free market economy where the idea of market failure was allowed to take place. Federal bailouts are what expand bubbles and cause them to be worse later. If a bank knew for sure it would fail if it took on such risky loans, rather than just being bought out by a larger bank or paid off by the government, they would probably choose a more rational lending policy.


The only ration lending policy -- on an individual level -- is to discount any systemic risk you create by 100% minus how much of the system you make up. If everyone else does this, systemic risk is ballooned and it doesn't matter if you do it or not, you are still going to fail. If no one does this, it is imperative to you do it--after all, someone else is eating ~90% of the costs and you are getting the benefits.


One way to understand the difference between the typical Democrat/Republicanism mainstream majority and libertarianism and is to consider at what level each analyzes government action. The typical politician asks if a law encourages people to do the "right" thing. The libertarian asks what special reasons exists to use government force and if there are special reasons, what is the least intrusive way to accomplish the goal.


So what is the libertarian position on monopolies, oligarchies, and antitrust? What do libertarians do when individual corporations have so much power that they distort the market? What do they do when the corporate self interest is contrary to society's interest?


Can somebody who understands Libertarianism help me with the following thought experiment?

Suppose Libland is a libertarian state. The occupants of Libland stay alive by eating Food. Xia is another state. For whatever reason, they don't like Libland, and for whatever reason, they can produce Food much more cheaply than Libland.

Xia starts flooding the Libland market with cheap Food, so that it's is uneconomic for anyone in Libland to produce Food, and the Food industry disappears.

Suddenly Xia cuts of Libland's food supply, and invades several days later. Libland has no means of producing food in short order, and they cannot buy it from anyone else for some reason (for example Xia is the only other state, or it would take too long to open trading routes with other states).

How does Libertarianism cope with this situation?

[edit: please don't treat me as stupid or a troll. I genuinely want to understand libertarianism, and extreme counter-examples are a method of understanding that I find very helpful]


This is an interesting example but I think it's not very really helpful in understanding Libertarianism.

First let me answer your question directly: in this example, Libland is undoubtedly screwed because Xia has a monopoly on the food supply. The people of Libland would not be able to cope with this situation and they'd most likely be overrun. Sure, there will be pockets or resistance with guerrillas doggedly fighting on for years or decades, but as a state, Libland would no longer exist.

Nevertheless, I think that the example isn't helpful because of two positions:

1) The unexplained reason why Xia can produce food so cheaply. 2) That it would be uneconomical for anyone other than Xia to produce food.

In the real-world, there would be a competitor for Xia to supply food. Even if Xia started off as the only supplier, someone would realise that they could enter the market supplying food that's a little cheaper, higher quality or just a little more different. The people of Libland, knowing the dangers of relying on only one source, would then also start purchasing from the competitor _in_addition_ to Xia.

I therefore think that your hypothetical scenario wouldn't exist outside of the 'thought laboratory'.


the example isn't helpful because of [...] 1) The unexplained reason why Xia can produce food so cheaply.

No explanation is needed.

http://en.wikipedia.org/wiki/Absolute_advantage

http://en.wikipedia.org/wiki/Comparative_advantage


Well, I think an explanation in real-world terms is needed, not theoretical definitions. For example:

1) Does Xia have better climatic conditions? If so, why wouldn't neighbouring countries have similar conditions to become a viable competitor?

2) Do the have better packing and transportation technology? If so, why can't another country develop/buy/steal the technology?

3) Etc, etc.

Hence, my point is that the imposed constraints may not normally exist.


Interestingly, substituting gas for food, this very scenario is playing out while we speak. http://news.google.com/news?q=ukraine+gas+crisis


Given this situation (two and only two competing states), libertarianism is probably less viable. In the real world, however, you have a greater number of players.

If Libland has positive economic relations with other states (as most free people seem to prefer), it would theoretically have alternative sources of food from those allies. In addition, unless Libland's government had irrationally incited Xia's actions (theoretically, an unlikely choice for a free society), other states would see this a flagrant attack on Libland and come to its aid.

The example is certainly viable for a case where one state (out of over 200 in the real world) has a monopoly on producing any essential good, or where Xia's military is more powerful than the combined strength of all potential opposing states. I don't think the example extends beyond those corner cases, however.


My hypothesis is extreme and doesn't necessarily correspond with the real world, but proposing it and modifying it as others come up with criticisms is one pedagogical tool I would like to apply in this situation.

To answer your points:

* yes, Libland could buy Food from alternative sources. To extend the discussion I would need to adjust my hypothesis.

* no, the other states would not come to Libland's aid. If they were libertarian, they would not get involved in other states' disputes, and in any case they would know Libland would never come to their aid, so why should they reciprocate?


But the other states don't matter! If Libertarian country A is in trouble (from an aggressor, not of its own doing) and free citizens from Libertarian country B want to get involved, they are free to do so. It's none of B's government's business! It would not even occur to a Libertarian that he or she might require the government's permission.

Tho' given that the Libertarian value is long-term freedom, it's unlikely for a Libertarian nation (not the same thing as s state) to be caught napping. A Libertarian country is likely to have a well-trained and well-armed militia, but not much equipment or experience or inclination for expeditionary warfare.


Indeed, people do go abroad(independently of government decree) to fight for causes they believe in. Just look at the Spanish civil war.


Or American pilots joining the RAF in WW2.


Once Xia initiates the use of force the gloves are off basically. Libertarianism doesn't permit initiation of force but does permit an overwhelming and decisive response. Xia would find itself "liberated" in short order.


On empty stomachs versus well feed soldiers? Who might be conscripted and organized?


Now you're just being ridiculous. What country wouldn't have food reserves? Even tinned food in supermarkets, let alone military stockpiles.

Unless Xia managed to perfectly conceal its dislike for its neighbour, that is. Perhaps they had MAGIC UNICORNS to help?


What country wouldn't have food reserves?

The United States does not have food reserves (other than grain stored in grain elevators, which grain Tome implied Libland would instead be importing just-in-time). Here is what the United States has to look forward to in a national disaster:

http://www.google.com/search?q=you+will+survive+nuclear

You are a survivor. Doomsday has occurred and you are a survivor. While you are waiting for the spouse and kids to get home maybe you should do something practical. Like go down to the supermarket and lay in a bit of an extra stock.

You may notice that the little corner store has closed. If he has believed the rumor, he wants to save his stock. And besides, your money may not be worth anything tomorrow. You thought you had seen rapid inflation before but this is like from zero to a million in sixty seconds.

At the supermarket, if you are early enough, you will find pandemonium. If not, you will find practically nothing. Maybe a large bag of dog food (take it) and some cans of floor wax (forget it). The rest of the stuff was all in those carts that you met come flying up the walk as you came running down.

There won't be any girls at the cash registers, (they have done their shopping and gone). Besides, the cash registers aren't working anyhow, with no power. It may have taken the hired manager a little longer to figure out that he should grab what he can and head home to his family, but he has probably gone now. The only cops you will see are the one's grabbing stuff themselves.


Why would anyone in Libland be interested in the motives of its neighbour? Foreign policy and intelligence is normally the realm of a government. Who performs that role in Libland, and what is their incentive to do so?


Err, the government does.

Perhaps you ought to go to Wikipedia and look up the difference between Libertarianism and Anarchy?


Foreign policy is not mentioned on the Wikipedia page for Libertarianism.

How does a Libertarian system decide which roles (like researching the intentions of foreign states, and defending against them) a government should play, and which (like presumably researching the weather, and defending against natural disasters) it shouldn't?


Moreover, how does it morally confiscate wealth to finance programs from those inhabitants that don't want to pay for said activities?


So Xia fights Libland until its food reserves are depleted.


Precisely. My point is that once the situation I described has been arrived at, there's no hope for Libland.

Therefore, I presume, Libertarianism has a way to prevent the situation arising in the first place. What is it?


If the residents of Libland sense that they might be attacked, they would obviously keep food reserves or start buying only home-grown food in order to support their own industry.


It's not in their interest to do that individually, but only as a matter of domestic policy.


Of course it is. If there's a huge uncontrollable risk, people will insure themselves against it. If people know that they might be attacked and don't have enough food, they will hoard some.


My point is that unless the nation collectively hoards food for the military then it's not worth doing.

If they hoard individually it buys them a few more months of survival in dire circumstances. What's the point? They might as well spend their money to best enjoy their remaining time before invasion.


If everyone stockpiles individually for themselves and their families then you have a massive distributed cache that is more resilient that a centralized warehouse that can be bombed.

You seem to think the responsibilities of "the state", "the military" and "individuals" are distinct. They're not. Some individuals like to pretend they are, and rely on the government to do X (and some governments play the same game and rely on individuals to do Y) but reality will always eventually assert itself, whatever system of government you prefer.


But they won't stockpile individually, because it's in no one's individual interest to stockpile. (This is an example of the Prisoner's Dilemma).

I agree with you that "reality will always assert itself" but I'm having a hard time understanding how anyone things that Libertarianism can be that reality.


Libertarians act in the interest of preserving freedom in the long term, not maximizing personal wealth in the short term. That's one of the key differences between Libertarians and Anarcho-Capitalists. A Libertarian might stand up and say, look, our neighbours our hostile, I really think we ought to stockpile food, and if people are convinced (because it's true) then they'll do it. But the government will not say "we need to stockpile food so we're introducing a stockpile tax". Do you see the difference?

I completely agree that Libertarianism can't be retro-fitted onto any existing human society.


I do see the difference, I just happen to fancy my chances better under the system where the government imposes a stockpile tax than the system which leaves it up to the market -- even more so when, as I've mentioned in other posts, it's not about stockpiling, but about maintaining self-sufficiency in the face of an alternative that is more "efficient" economically.

Regarding your second paragraph, and completely independently, how do you propose we reach a libertarian society from the position we are now?


And how do Libertarians ensure that those they share a state with act "in the interest of preserving freedom in the long term, not maximizing personal wealth in the short term" in the particular cases where that may be non-rational?


They can't. That's the flaw. You basically have to start again with a bunch of Libertarians who raise their kids Libertarian (this is the easy bit) without it descending into a cult (this is the hard part).

The problem with retrofitting it is unless you already have the no-coercion culture and infrastructure in place, too many people acting in their personal short-term self-interest find coercion easier. Which doesn't mean mugging people in the street; it's as mild as "my vote for your handouts of their money".


If I tell you there would be no food in a month, then you wouldn't stockpile some? I don't believe this.


Well it depends on other factors, but that's not the point. In this situation:

* Firstly, who's to tell Liblanders that they risk invasion? It's not clear that Libertarianism supports the notion of foreign policy, diplomacy, espionage etc.

* Secondly, all the food in the country is coming from Xia. Once demand grows Xia realises that Libland has recognised the threat and invades immediately.


The same way we find out about anything. Companies like Reuters and CNN tell us while the CIA is still snoozing.

It is entirely clear that Libertarianism does support those things and one of the two roles of a Libertarian government is the physical security of the nation and its citizens.


OK, I'll grant you the existence of the media reporting from foreign countries (although I fail to see how the "What's Xia up to" branch of Reuters makes any money).

Now, a worthy chap sees a report about Xia on CNN and gets suspicious. How's he going to get enough money to mount a publicity campaign warning Libland citizens of the danger?


There might be food insurance companies. They would have advertisements telling people of a probable military intervention by Xia and recommend people to buy food insurance in order to be safe. Regarding your second point: The realization that Xia might attack will probably not come suddenly but slowly. So people will gradually begin investing in food insurance. It's unlikely that Xia turns from friend to enemy in a matter of days.


The realization that Xia might attack will probably not come suddenly but slowly

Just like 9-11, Dec 7, 1941, the anschluss, mongol invasions...the Hitties and Philistines versus the Israelites, yeah, military ops are always telegraphed.


"In 1993, Ramzi Yousef used a truck bomb to attack the World Trade Center in New York City" - http://en.wikipedia.org/wiki/Al-Qaeda#1993_World_Trade_Cente...

"War between Japan and the United States had been a possibility each nation had been aware of (and developed contingency plans for) since the 1920s" - http://en.wikipedia.org/wiki/Attack_on_Pearl_Harbor#Backgrou...

"Austria was merged into Nazi Germany on 12 March 1938. There had been several years of pressure from Germany and there were many supporters within Austria for the "Heim ins Reich"-movement, both Nazis and non-Nazis." - http://en.wikipedia.org/wiki/Anschluss

Your less specific in the details of your other facts so it's hard to get specific counter-facts on them.


You didn't talk of a military in your first post. Assuming that there exists a military paid for by taxes, than it would probably have its own food reserves. If there is no government military, then private corporations would start offering protection services, which would probably also have food reserves.


I'm not trying to make a point about military. I'm trying to make a point about self-sufficiency at the state level.

The military may well have reserves, but if they are supplied by Xia, all bets are off once those reserves are depleted.

If Libland does not have the capacity to generate Food during a protracted war then it is vulnerable to external aggression. However, I don't see a way that a Libertarian state can ensure that sufficient Food production capacity is maintained in the presence of cheap Food available on the international market.

And the point is not food either. "Food" is an arbitrary good that people rely on to survive.


If Libland did not have the capacity to generate Food, I would think Liblanders would have unique and unusual ways of being resourceful with Food and its storage, knowing full well that they are dependent on Xia for it. Canning, freeze-drying and other methods of preservation would probably be innovated to an extreme in this massively unrealistic metaphorical Libland.


What's the incentive for them to innovate that?


Survival.


As a collective, yes. But what's the incentive for any one individual to attempt to innovate, especially given the high chance of his attempt failing? He might as well just wait for someone else to innovate.

Indeed everyone else will wait for someone else. Prisoner's Dilemma. Oops.


If that individual has progeny to nurture and protect, I would think that individual would take measures to innovate methods to do so, including grouping together with other individuals with common goals. Even if he or she didn't, the survival instinct would still persist. If that grouping no longer serves those inviduals, then they would likely want to disband it, especially if there were a sub-group of parasitic individuals within it that existed simply to maintain that group if that was their only method of survival.

If you're going to cop out with intellectual laziness rather than provide your own opinions and observations, I think I am justified in referring to someone else's work on this topic who has addressed everything you are anemically trying to assert: http://www.jrbooksonline.com/PDF_Books/why_govt_doesnt_work....


Thank you for the reference. There was no need to be rude.

Regarding the title of the reference, I'm happy to accept that government doesn't work, but I can't understand why libertarians think that libertarianism does. I shall save further comment until I've had a look at the reference.


How is flippantly pointing out some simplified abstraction like the Prisoner's Dilemma not rude? Anyway:

"In Game Theory, simple mathematical ``games´´ such as the prisoner's dilemma or the ``chicken´´ race, model situations where there is a potential benefit for players in finding a way to coordinate their action. All the ``theorems´´ about such games merely restate in formal terms the informal hypotheses that were put in the model. It certainly does not follow that government is the right way to achieve this coordination — though such is precisely the non sequitur claim of statists. Actually, it is possible to apply game theory to compare coordination through government coercion with coordination through market competition; and this exercise in game theory will easily show how dreadful the effects of government intervention are."

Libertarian thinking is predicated on the concept of minimal government, such as the author of that document (who was the Libertarian Party candidate for President). I'm confused as to why you would accept that government doesn't work, yet think that is somehow in conflict with libertarianism.


Having now read it, it doesn't deal with my original point which is essentially:

Libertarianism risks outsourcing manufacture of vital goods to foreign states of dubious intent, leaving domestic industry to die with no means of resurrecting it in an emergency.

The closest the above reference comes to dealing with this issue is:

* with free international trade, nobody will want to attack Libland because they can get at all its resources cheaply anyway, and

* Xia won't actually be able to invade Libland because they'll be too busy dealing with their own citizens, who, impressed by Libland's affluence, are too busy trying to convince Xia's rulers to convert to Libertarianism.


People will keep reserves big enough, so that they last long enough to rebuild their national food industry. Or as I said earlier they might continue buying domestic products in order to keep that industry alive. Even if most people neglect the risk, there will probably be individuals who keep operating food industries (even at a loss) in hope that in the resulting war they might make huge profits.


People will keep reserves big enough

How big are your food reserves that you have on hand right now? One year? Two years? Ten years?

http://a.abcnews.com/images/abc_doomsday_080812_mn.jpg

You don't tell your neighbors about it, do you? They might say, "Oh, I don't need to store any food. I'll just go over to cx01's house and eat his food."

What would your neighbors think if you told them in advance that they couldn't have any of your food, that you personally sacrificed for in the form of opportunity cost? Would they think that you're not very neighborly? When the National Guard comes around to collect all of your stored food so that it can be distributed equally among your neighbors, are you planning on handing it over peacefully?

http://proliberty.com/observer/20070917.htm

Paul James, 85, standing beside some 200 cases of Mountain House freeze dried food. Purchased and trucked all the way cross country from Oregon in 1975, this "mountain" of food was recently pulled down from where it was stored for 37 years. [...] The year was 1975. At that time many Americans were concerned that the Cold War with Russia could turn hot. People all over the country were building bomb shelters in their backyards and storing large quantities of food.

I was one of them. I didn’t build a shelter, but I did order $10,000 worth of Mountain House freeze dried food


My arguments should be understood in the context of tome's posts, not regarding my current situation.

Personally I don't keep reserves because there's no risk of war (at least I think so). If there was war and I had reserves, then libertarian ethics would allow me to defend my reserves (with force).


The context of Tome's posts is that the war risk is secret. Why would another nation think that it had a good chance of successfully invading a nation that was prepared for such an invasion? Did Germany decide to invade France because the former figured the latter new well in advance of, and was well prepared for, the invasion plans?

The nation that does not prepare for war, is at risk for war. If you personally do not have any food stored, and you and I live in the same nation, it puts me personally at risk of war.


"http://en.wikipedia.org/wiki/Maginot_Line"

Massive French government fortification program designed to protect their borders with Germany and Italy.

France knew perfectly well that the Germans were a clear and present danger. They just could not do anything about it - despite having that great protector: government military.


If war risk is secret then a government won't help and that's what we're debating about.


And it's not in the government's interests to do it either, if it would cost votes.


Indeed, and I'd put similar points to anyone who proposed "true" direct democracy.


I think it is important to look at what I see as the two main sides of 'libertarianism'.

-The Moral Argument-

Libertarianism is about rights & opposing coercion. Other people & by extension governments should stay out of other people's business. Don't tell me where to work or what to do. Don't tell me to wear a seatbelt. Mostly that works fine

-The Economic Argument-

There is the second argument that (when it being criticised) gets called 'idealistic' or 'religious.' This is the idea that by not intervening in peoples' lives & by extension in companies, everything will work out good. Markets will function better. Economic output will be higher. Public good would be increased. This relies on economic theories, theoretically anyway. So far, most countries are really a balance here.

These are seperate & the arguments for them are seperate. On the first, I am pretty clear where I stand: I agree mostly with the libertarian position on personal rights. I am against drug/alcohol/seatbelt/smoking/exercise bans, prohibitions or requirements. I am willing to relax that if the negative public effects are substantial & prohibition side effects are less substantial. So if we legalised drugs & found we ended up with a severe amphetamine problem, I would consider reinstating the prohibition.

My biggest problem is the welfare approach. For a similar reason to the amphetamine prohibition above, I think that welfare/health is essential & should be provided by the state. If it is provided by non-state bodies to a sufficient level, the state doesn't need to do it. I would even extend that to international welfare.

The economic arguments get very technical. It is also an area where theories are rarely good at being predictive. I see the connection between the moral & economic theories. But I am not as worried about the rights of a corporation as I am the rights of an individual.


> For a similar reason to the amphetamine prohibition above, I think that welfare/health is essential & should be provided by the state.

I think you will find that a libertarians actually don't mind it being provided by a /state/ government (myself included) The issue comes in when the /federal/ government provides it. This is not freedom, because unless you move from the USA you are forced to subsidize what is arguably an inefficient system caused by bad government policies.

I'm a strong believer in the 10th Amendment. If it ain't in the Constitution, it's for the states to decide. If the people of a state want welfare, they'll vote someone in who will give it to them; whoever opposes can move to another state. 50 different implementation possibilities for everything. That's freedom.


I'm not American. But frankly, I don't know what it is you guys have with your constitution. It's part of the legal framework. It's OK. The US Constitution was a legal framework for operating a problematic place & it did that job quite well. But I have no idea why it keeps getting referred to as if it's some sort of ultimate moral authority. The Bill of Rights is also a good sort of a document. But I don't see why it is better then any other high level statement of morality.

Some parts of it seem outdated. The US isn't an ungovernable collection of states that need Federation only for dealing with other countries anymore. There is also nothing wrong with Federation if it works. Even if you decide to work at county level, that's fine. But as with anything, you end up risking income discrepancies & the consequences of this (migration, resentment, estrangement, etc.)

But anyway, that's a completely administrative issue. How you should form a Government (states//Federation, Republic, Kingdom) is one thing. Deciding what this government should do is a seperate issue.

If you are not opposed to Government provision of health/welfare (or as I prefer Government guarantee of these, but the de facto difference is quite small), I think you are pushing the definition of libertarian.


I enjoyed reading your post. Eric Raymond made a good faq on libertarianism that I think helps support your position. http://www.catb.org/~esr/faqs/libertarianism.html


As someone who generally considers myself libertarian, yet admittedly doesn't fully understand all the philosophies and intricacies of it yet, I enjoyed this read. I have a question about your marijuana comment: can you point me to a good read about a consistent libertarian drug policy? I'm certainly for legalizing marijuana simply because alcohol and tobacco are far more dangerous, but for more dangerous drugs it's a bit harder to argue for legalizations. However, while I haven't completely formed my opinion on drug policy, I tend to think that every drug SHOULD be legalized, and that doing so wouldn't harm society much. I can't really back up my opinion yet, other than by listing these two points: 1) We are allowed to do things like climb mountains and drive cars, given a certain amount of training and/or a test, not to mention eat whatever we want and refuse to exercise, even though all these are objectively shown to be rather dangerous. 2) I personally would not start trying all the dangerous drugs were they suddenly legalized, so I suspect reasonably wise educated people also would not, and there would not be some huge decay of society just by legalizing drugs. In fact, I have no research to back me up, but I tend to think legalization (which really is just decriminalization since we all know drugs are quite available and common) would introduce competition, drive the prices of drugs down, probably make drugs more safe (i.e. not mixed with other, worse substances), and remove the association of drugs with slums/high-crime areas. I welcome more educated libertarians to comment on my ideas and educate me more fully.


There is a real-world example against prohibition of narcotics, and that is prohibition of alcohol. It did not work. Billions are spent on the War on Drugs, and yet it's clear that it's easier than ever to get drugs on the street. Posession of marijuana is the number one most committed crime.

The point you made at the end is essentially the argument for why legalization of drugs will solve a lot of problems. Competition will bring in ligitimate sellers (as in the alcohol industry) and get rid of all of the crime that comes from the local dealers who "own" street corners.


If you are interested in Libertarianism but you instinctively are suspicious of capitalism or even currency, perhaps you would be interested in Anarchism. You can read about many interesting aspects of Anarchism with regards to its relationship to other ideas such as Capitalism, Marxism, State Socialism, and the current system we have in America. http://www.infoshop.org/faq/index.html If you think the abolition of money and markets is the abolition of economies, you are wrong and I invite you to read this very short intro to Anarcho-Communism, a post-capitalism way to live and organize. http://struggle.ws/wsm/rbr/rbr10/communism.html


"Zed's argument was essentially this"

grandalf, I think you missed one of Zed's main points. Here's a more entertaining, less rambling, version from Belle Waring:

http://examinedlife.typepad.com/johnbelle/2004/03/if_wishes_...

In the real world there are large, extemely powerful, centralized power structures. And they don't plan to go away, only to become more powerful. If your libertarian politics doesn't include an actual plan to diminish the power of these centralized social organizations that want to control people's lives then it's not politics, it's fantasy.

The 'A' is not really 'B' the way I define 'B' in my fantasy world argument is used by idealists of every stripe. Ask any Marxist about the Soviet Union.


> If your libertarian politics doesn't include an actual plan to diminish the power of these centralized social organizations that want to control people's lives then it's not politics, it's fantasy.

The plan is simple: education. Libertarianism is so unconventional you'll be lucky to hear the media bring it up once or twice a year. Ron Paul (probably not a "pure" libertarian, but pretty close) is starting to change this with his huge grassroots following.

I'd venture to say 98% of Americans have never heard of libertarianism, and if they have, they simply dismissed the ideas as illogical, without actually researching the ideas. This needs to change.

The people ultimately decide who gets into Congress and who gets elected President. Once the people are educated and accept the ideas of libertarianism, it's cake.


I consider the government one of those "large, centralized power structures". It has its pluses and minuses. At present I pay it thousands of dollars every month to help fund a massive war in the middle east and an enormous bailout of Wall Street and Detroit. If I stop doing this I will be put in prison.

Dow Chemical is one other such organization, as is General Motors, as is Google, as is Canada, etc.

Why do you presuppose that it is necessary to diminish the power of some of these organizations?

I would argue that one of the main reasons that corporate interests become "large, centralized power structures" is because they are able to manipulate government regulation to their advantage.

There was a Stanford Entrepreneurial Thought Leaders talk where one guy said how much he loves starting companies in heavily regulated industries -- because there is such a high barrier to entry that once you do the extensive paperwork and legwork and politicking get approved there is very little competition.

The real "sweet spot" for firms is to be in a heavily regulated AND heavily protected industry (aka too big to fail). The military industrial complex is one such example, as is the financial services industry (as of the past few months) and also now the US automotive industry.

So rather than viewing the world as one in which government protects me from these entities, I view it as one where these entities conspire to prevent revolutionary innovations from threatening their dominance.

Further evidence that countries do this is the big trend toward treaties to prevent "tax competition" between countries. France doesn't want Poland luring companies in with low corporate taxes, etc. This is blatant collusion. Why are state taxes typically lower than Federal? Not because state regulators aspire to less grand programs than Fedreal ones do, but because it's easy to move to a different state, not so easy to move to a different country.

Consider how many businesses spend more money on a presence in Washington DC than they do on innovation. Google learned from Microsoft's mistake and now has an active office in DC trying to build influence -- and with Schmidt's appointment has the ultimate influence in the new administration.

To maintain its status as legitimate, one of these entities, government, must constantly reinforce its own story through pageantry and pomp. Did you know that George W. Bush conducted more ceremonies than any other president?

We're supposed to believe that all other "powerful, centralized power structures" are evil (various companies, Saddam's Iraq, Castro's Cuba) and that the only hope lies in unquestioning, unthinking loyalty to the US government. We're taught to see all regulation only as the "grand vision" associated with it, not as a law that creates incentives, winners, and losers. We're taught to fear and to trust. We're given black and white messages like "good and evil", etc.

I just refuse to believe this. I live in a country where "The Patriot Act" takes away rights and where the financial services industry -- for quite a while the biggest industry donor to both major parties -- gets a massive bailout from the Treasury department. We live in a place where eating according to the USDA food pyramid will lead to heart disease while benefiting the dairy and beef and corn industries.

Why do I not just think we should strive to improve regulations against "evil corporations"? I think people are capable of processing information and using basic cognition. In many cases, such as the SEC, regulations only lead to a false sense of security. Isn't it a bit crazy that in the same period that Madoff's firm conducted the biggest scam ever, the SEC was warned of this by multiple parties and instead chose to shut down prosper.com on a technicality?

I'm not anti-government, but I would like to see more competition -- in the form of more being handled at the state level so that we can see the effects of multiple approaches to solving the same problem, as well as move to a different state if we find its regulatory environment preferable.


Actually in most cases libertarianism is simply the position of arguing that the Government is causing whatever problem happens to be being discussed at the time. Unfortunately the idea of libertarianism isn't against regulation is a bit of a fantasy, because no matter what, someone can and will take the more extreme position against regulation and this person will be seen as more libertarian. I think ideologies are in general are flawed in their ability to be more easily defended if taken to the extreme.


> Actually in most cases libertarianism is simply the position of arguing that the Government is causing whatever problem happens to be being discussed at the time

s/libertarianism/internet "libertarianism"


which is exactly why no ideology should be taken to an extreme. You end up with Hitler, Mussolini, and Stalin.


On the whole, the Founding Fathers were extremists for liberty. They were quite radical, by the standard of their day and certainly by today's standards.

Extreme liberty == Articles of Confederation (the first failed U.S. government, wasn't strong enough) versus extreme national socialism == 10s of millions dead.


Can you find any examples where libertarianism has failed, instead of saying that people have failed libertarianism?

If not, it's a religion rather than a political philosophy.


One example that is often cited is the so-called "deregulation" of energy markets.

There was not actually deregulation. The markets were still highly regulated, so the act of deregulating part of them threw the whole system out of whack and everyone wanted to reinstate regulation.



So a deregulation failing proved libertarianism right?

Libertarianism is like prayer. If it works, the religion is right. If it doesn't, you did something wrong and it's right.


Take the passage of Prop 8 in California -- libertarians do not think that marriage should be something that the state meddles in at all.

Examples abound. I just mentioned one deregulation example because such things are often touted as libertarian accomplishments when in fact markets are often still highly regulated and the deregulation was just a handout to one interest or another.



Real hackers use anarcho-capitalism.


If you want to know about libertarianism, then listen to Free Talk Live's podcast.




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