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Saturday, March 28, 2020

An Approach to Collective Problems

Libertarian political philosophy, as a practical matter, does not offer a prefabricated set of solutions to collective problems. Rather, it's a liberty-based approach to ameliorating collective problems that begins by acknowledging (among other things) the dispersion, incompleteness, and tacit dimension of relevant knowledge. Thus, the approach favors decentralization, competition (in ideas and services), and choice about what trade-offs to make and with whom to cooperate. Perhaps ironically, to succeed, individualism requires and produces the collective intelligence that only markets embody.

Friday, March 27, 2020

TGIF: Libertarianism in Emergencies

Libertarians have always acknowledged that emergencies -- severe extraordinary conditions of limited duration -- can justify actions that would be unacceptable under normal circumstances. This doesn't mean that all the rights-based rules disappear, only that some measures are deemed permissible that otherwise would be beyond the pale. Danger, however, lurks in this principle, requiring eternal vigilance.

For example, if someone collapses unconscious in the street, you may do things intended to help him without his consent. This does not justify a general policy of paternalism. Another common hypothetical is that of the person caught in a life-threatening blizzard in the wilderness who happens on a cabin (which, let us say for simplicity's sake, is unoccupied at the time). To save his life, the stranger breaks in, builds a fire, and eats the food. No reasonable person would fault him for not first seeking permission of the owner. What happens after the emergency passes is an interesting topic for discussion -- should he offer compensation? should the property owner demand and accept it? -- but let's not get into that now. (Yes, the hypothetical could be made far more complicated than mine, but that's also for another time.) Yet this cannot justify the abolition of property rights.

We might call those situations micro emergencies. They affect one individual or a few, while other people may experience nothing extraordinary at all. So what about a macro -- society-wide or global -- emergency -- a widespread epidemic, let's say? I can't see why the principle of emergencies would not hold. The aim of ethics (politics being a subset) is human flourishing, not blind slavishness to duty.

Unfortunately this might mean that in today's world -- where a dangerous communicable disease threatens to overwhelm the medical system -- governments would reasonably have freer rein to do things than they have in normal times. Most people would expect that to be the case and, moreover, would want it that way. I say unfortunately not only for reasons obvious to libertarians but also because the existence of the state has over a long period impeded and even forbidden the gradual spontaneous emergence of alternative, protean, voluntary public-health and mutual-aid institutions that would be better suited to responding to pandemics (and other disasters) than the centralized collection of politicians and bureaucrats we call the state. To see the point, you need only meditate on the leading government public-health agencies' prolonged botching of the matter of coronavirus testing. (Although it's been stretched nearly beyond recognition for obvious public-choice reasons, public health is a legitimate concept in light of the existence of serious communicable diseases.)

That we must regretfully do without those alternative institutions in the present emergency (although not entirely) should teach everyone a lesson for the future. But what can we do now? A libertarian who says he would "push the button" and at once abolish the state (or in the case of a limited-government libertarian, merely eliminate the welfare state) has little of value to say today. Does he think that alternative voluntary institutions would spring into existence? Institutions -- and the constellation of customs and expectations they embody -- need time to grow. I'm not saying that people working together consensually wouldn't do much good on their own in the meantime -- they are doing so now -- but the limits in the short term would be significant.

Besides, no such button exists, so why would we even talk about it? A radical scaling back of the state at this time would not find widespread support, so even if it could be pulled off, it would quickly be reversed because, like it or not, most people regard the (welfare) state as legitimate, even if they have objections to various parts of it.

So we're stuck with the state as it is in this emergency. Where does that leave us? Some restrictions on normal activities will be regarded as reasonable, targeted quarantines, for example. That doesn't mean we should suspend judgment and accept every restriction the politicians or bureaucrats come up with. (What's with the curfew? Where's the necessary connection with banning gatherings?) An emergency is no time to abandon one's critical faculties. Nevertheless, things that would and should be condemned in normal times will reasonably be deemed acceptable -- with regrets -- even by libertarians for the duration of the emergency. Exactly what all those things might be I'm in no position to say with any confidence. A reasonable restriction could certainly be pushed too far. How far is too far? It's not always clear, although we'll often know it when we see it. We will be in an improvisational mode for some time to come -- which is why decentralization, competition, and openness to information from far and wide should be the rule of the day. (See this.)

Of course, libertarians have a critical public role at this time. First, we should never cease to point out that much of what the government has done to mitigate the COVID-19 pandemic has been in the nature of suspending restrictions on private conduct essential to responding in this emergency. The loosening of restrictions regarding trade, medical practice (including testing and tele-medicine), vaccine development, occupational licensing, and more demonstrates how routine and commonly accepted government activity has dangerously hampered the private sector's ability to anticipate and react to the pandemic. (Unfortunately restrictions on the price system, specifically, anti-price-gouging laws, are still in force. Trump has reinforced this.) When this is all over we must not let society forget how government stood in the way. What grounds could possibly exist for reinstating those restrictions that threatened our lives during the pandemic? They and others should be permanently repealed.

Second, we ought to be showing people that markets work in emergencies and that we need them more than ever. When hand sanitizer (which was not in common use a few decades ago) ran short, distilleries started making it. Hanes turned from making underwear to making masks. I'm sure other examples could be found. What if the whiskey and underwear industries had been shut down as nonessential? No bureaucrat can know all of the "nonessential" production required to support "essential" production. F. A. Hayek's insights about the market solution to the ubiquitous "knowledge problem" are more important than ever.

Our very lives depend on entrepreneurship, which is alertness to overlooked opportunities to improve people's well-being by transforming scarce resources from a less-valued to a more-valued form. Profit is not the only thing that motivates entrepreneurship, particularly in emergencies, but we must not discount its vital role. Thus "people before profits" is a false dichotomy that has devastating consequences, especially for the most vulnerable. (Profits from rent-seeking, that is, government favoritism, is what we should condemn.) When markets are free, serving others is profitable. Thus Trump should not use the Defense Production Act to command manufacturing. The price system is a faithful guide to action that helps others. Let it work. A corollary: globalization, the kind that is unguided by governments, is good and is saving lives now. The welfare-enhancing division of labor is limited by the extent of the market, Adam Smith wrote.

Besides suppression of the coronavirus we need the production of wealth, but only savings and investment through markets can produce new wealth for everyone (as opposed to special interests only). Government produces only the illusion of wealth by conjuring up apparent purchasing power through money creation -- raising the price of what's already been produced -- and moving existing resources around -- inevitably creating fertile ground for cronyism, pork-barrelism, and electioneering -- while consuming a large share in the process. Everyone will pay a huge price for the government's promiscuous fiscal and monetary "stimulus" -- which could conceivably be far worse than the coronavirus.

To state the obvious, we must find the best balance of mitigation of the spread of the virus and economic activity, which itself is required to conquer the disease. We have no grounds for confidence that politicians and bureaucrats can find this balance. Decentralization, with many information-generating centers, is indispensable. And let's not forget that "the vulnerable" include not only the medically vulnerable but also the economically vulnerable. (Also see this.)

Unfortunately, American governments have shut down much market activity. (Strangely, "socialist" Sweden has not shuttered businesses and prohibited gatherings.) So what can we do now? I'm persuaded that mass testing would pave the way for the resumption of more or less normal market activities, for it would identify those who have the virus antibodies and thus constitute no danger to others. (See this and this.)

Third, advocates of liberty and respect for people should demand that the U.S. government end all economic sanctions against other countries. In normal times, economic warfare is crueler than cruel since it deprives blameless people -- not rulers -- of food, medicines, and other necessities. Can you imagine what sanctions are doing now?

Fourth, libertarians should demand that any government emergency spending ought to come first from the so-called national-security budget, which, if you count everything, comes to over a trillion dollars a year. Liquidating the empire should be the order of the day. It's always been bad for Americans' and other people's health.

Fifth, we libertarians must teach our fellow men and women about what Robert Higgs has named the "ratchet effect." This is the well-documented phenomenon that extraordinary, intrusive government measures adopted during a crisis do not go away entirely once the crisis ends. (For details, see Higgs's classic, Crisis and Leviathan: Critic Episodes in the Growth of American Government.) We can't let the extraordinary become ordinary.

Sixth and related, libertarians must help people to understand that measures adopted during a bona fide emergency are unacceptable in other circumstances. Politicians and bureaucrats might enjoy their expanded powers in a crisis and so might try to invoke them under more typical conditions -- but we cannot let the bar be lowered.

We must not let our society come to see restrictions on individual liberty as the new normal. This is an emergency, and we must not forget it.

Thursday, March 12, 2020

We Need Markets Now More than Ever

Jeff Tucker's "In a Disease Panic, the Free Market Is Your Friend" ought to be atop everyone's reading list. As libertarians well know, people who are under the delusion that government is a creative element in society, rather than a predator, will never let a good crisis go to waste. (Barack Obama's first chief of staff, Rahm Emanuel, put it just that way.) The historian and economist Robert Higgs has documented the history of exploitation of crises to expand power and consume liberty in America in his classic, Crisis and Leviathan. We can see this process on vivid display with the outbreak of the coronavirus, or COVID-19.

What propels the expansion-through-crisis process is the belief that only government can respond effectively to the crisis. Most people, busy with their lives, don't know enough about economics and politics to see the flaw in the statist's case. By and large, and through no real fault of their own, they operate at a primitive level intellectually. Plus they take for granted what they've enjoyed all their lives: the increasingly accessible abundance of necessities and luxuries, which even a couple of generations ago would have made people green with envy. That is all the result of the fact that, despite all the obstacles, government has not managed to abolish markets, the price system, and entrepreneurship.

Enter Jeff Tucker's article:
The truth is that the market loves you right now, more in the midst of a disease panic than ever before. It would love you even more if companies were not being browbeat by government into curbing sales of essential items. Let the prices of sanitizer and masks rise and you draw more into production and distribution. Throttle the market and you reduce supply. 
The market would have loved you more had the Centers for Disease Control not failed to authorize private companies to test for the virus. It was only after the aggressive protests of the governor of New York that the CDC gave in and let people do what they wanted to do....

In a disease panic, we are learning, people lose their minds and stop thinking clearly about things that matter. They also reach out to authority to save them. All of this is expected. And it’s very sad. Even sadder is how the unscrupulous power mongers among us use such times to enhance the power of the state over our lives and claim it is for our own good. 
Libertarians need to speak up -- now more than ever.

Price-Gouging Laws Violate the First Amendment

Laws against so-called price gouging -- that is, price spikes during emergencies -- violate our natural right to engage in voluntary exchange at mutually acceptable terms. As economics has long taught, price ceilings that defy market forces make the affected goods vanish from the market. Instead of a product being available at a price more-than-X, it is instead unavailable at a price less-than-X. Small comfort for the consumer. (Try to find masks and hand sanitizer on ebay or at the supermarket.)

Here's another way to look at those laws: they violate freedom of speech (expression) and hence the First Amendment. Civil libertarians should be up in arms.

How can those laws violate the First Amendment? It is rather simple. The market's price system is a communications process, a means of expression. In the market, people's demonstrated preferences with respect to scarce resources are translated into highly usable information in the form of prices. Typically, when the quantity demanded for something rises, so does the price tend to rise. (Other things equal, as the economists say.) And vice versa. Adam Smith explained this beautifully in The Wealth of Nations. (See my article "The Market Is a Beautiful Thing.") Through the price system consumers (without realizing it) tell producers what to produce and in what quantity. And producers use it to tell us when we need to economize (that is, buy the product only for our subjectively most important purposes, leaving some for others). This is important because we live in a world of scarcity. To produce more of good A, we might need to produce less of good B. If we want the market to be sensitive to consumers' priorities, we'll want the price system to be free of political and bureaucratic molestation. It's as simple as that.

It follows, then, that if price controls -- such as law against so-called gouging -- are enforced, our voices are muffled if not silenced. That violates our freedom of expression and thus the First Amendment. When the price of hand sanitizer is bid up during a pandemic, the higher price is like a broadcast summoning producers to bring more product to the market. Laws against price spikes are like the gagging of consumers. It's true that empty shelves are also a form of communication, but unfortunately, price controls also remove the incentive for people to produce more of the goods that are suddenly in short supply. Prices are the irreplaceable tool of economic calculation, as Ludwig von Mises spelled out a century ago in his case against central planning.

No good comes from stifling the market -- that is, from interfering with peaceful cooperation.

Friday, March 06, 2020

TGIF: Democracy Can't Fix Socialism

However you feel about democracy, it can’t fix what’s wrong with socialism. 
In theory, modern representative democracy — unlike ancient Greek direct democracy — means that people vote for so-called representatives to fill various executive and legislative government offices. Those officials then enact and enforce rules that people are expected to obey under threat of fine and/or imprisonment. 
In theory, socialism has mostly been understood as direct government economic planning through public, that is, state, ownership of the means of production. In no real sense can a public own — meaning control — factories, farms, etc. In reality public ownership means control by the collection of politicians and bureaucrats called the state. Thus socialism until recently has been understood to entail abolition of private property, money, and markets. Competition, cooperation, and exchange give way to monopoly, command, and compliance.
(For the record, in the late 19th and early 20th centuries, socialism in some circles was an umbrella term for any “left-wing” alternative to [state or political] capitalism. Thus some left individualist anarchist libertarians, such as Benjamin Tucker and his compatriots, embraced the term while joining with other nonstate socialists to oppose corporatism, or neomercantilism, the alliance of state and favored business interests. In a linguistically more perfect world, socialism would denote the opposite of statism. In that sense, market anarchism is socialism because the arena of decision-making is society — the network of voluntary relations — rather than the state — the network of coerced relations.)
These days, at least in America, socialism no longer means only formal government ownership of the means of production and central planning. (It’s useless to complain: like it or not, words “move” and always have.) By socialism, Bernie Sanders and his followers intend it to mean a much bigger welfare state: “free” medical care for all, higher education, etc. Sanders says his models are in Scandinavia, but those are not socialist countries; rather they are highly market-oriented welfare states. At least these days, Sanders does not propose to abolish private property and markets. He does propose, of course, to interfere with market relations through taxation and decrees such as minimum-wage legislation. He seeks not to abolish markets but to forcibly modify their outcomes more to his liking. (Not that he deserves praise for that.)
Socialism (in the older sense) and welfare-statism, along with other forms of interventionism, for all their similarities and common shortcomings, are not identical, as Ludwig von Mises noted. (For the common shortcomings, find a copy of Israel M. Kirzner’s classic essay, “The Perils of Regulation: A Market Process Approach.” Also see Kirzner’s “Competition, Regulation, and the Market Process: An ‘Austrian’ Perspective.”) For example, Medicare-for-all and free college would be better described as welfare-statist because, as envisioned, the government would not own all the hospitals and colleges or employ the doctors, nurses, and teachers. The services would be regulated by bureaucrats and paid for by the taxpayers whether they like it or not.
I hasten to add that the difference I’m alluding to between socialism and interventionism is not moral but economic and institutional. Whether politicians and bureaucrats direct our behavior directly though government ownership or indirectly through regulation of nominally private arrangements makes little difference morally. Either way, our rights and freedom are violated.
Leaving the distinction between socialism and interventionism aside for now, let’s understand that socialism, however defined, would not have its intrinsic flaws eliminated by placing democratic in front of it, that is, by having officials elected. The reason is simple. If socialism were to have any chance of delivering on its extravagant promises, politicians, bureaucrats, and the public would have to know things that they could not possibly know. Here I invoke the rich critique of centralized power provided by Mises and F. A. Hayek. 
Mises showed, beginning a century ago, that the abolition of markets — which would necessarily include the elimination of authentic money prices — would bring chaos because the prices generated by people’s marginal decisions about scarce resources in markets are indispensable for economic calculation. Calculation is important because resources are scarce and we don’t want to waste them. Prices, which contain vital information, guide action throughout society. Without them, no one could make smart economic decisions for himself, much less for an entire society.
Hayek emphasized that central planners necessarily would be ignorant not only of prices but of the scattered, incomplete, and ever-changing underlying knowledge about supply and demand, including subjective consumer tastes. Specifically, he showed that much of the information that generates prices is not explicitly known data even to the relevant actors; we all possess tacit knowledge that influences our actions when we face unanticipated alternatives between two or more goods or courses of action. Not only is it the case that central planners could not know this information; we could not convey it to them even if we had a timely way to do so. Economic planning without true prices is like flying in a fog without instruments. The choice is between free pricing (which requires private property, markets, and free exchange) or what Mises called “planned chaos.”
Relevant to this discussion, Kirzner, in The Perils of Regulation, showed that a regulatory state would suffer from a similar “knowledge problem” as socialism. The regulators could not know what they would have to know to efficiently regulate an “economy” that accorded with the preferences of the individuals they ruled. Their ignorant interventions would distort prices, leaving the hampered economy less able to serve us. (In reality, there is no “economy”; there are only people who trade goods and services. We are the economy that demagogic politicians seek to regulate.)
So we ask: how could the knowledge problem be solved by democracy? As individuals, voters may know much about their own and their families’ situations, but how much do they know about their neighbors’, not to mention the rest of the country’s. I am certainly not qualified to choose among candidates offering competing plans for how much steel, aluminum, etc. should be produced next year and at what price, what kind of cars should be manufactured, or how much wages should rise. Are you? Freed markets (unmolested by politicians) do this reasonably well. And unlike politicians, markets constantly correct for errors.
Clearly, democracy cannot fix the economic flaws of socialism or interventionism. It can’t fix the moral flaws either. However you define socialism — unless it’s in the Tuckerite sense — it must entail state interference with peaceful cooperative interaction. (I reject the bogus distinction between personal and economic activities, just as I reject the distinction between personal and economic liberty. What’s more personal than our decisions about what to buy and sell?) Whether the intrusive government officials are elected or not makes no moral difference. Just as no autocrat ought to be able to tell me what peaceful actions I may and may not engage in, so no politician appointed by 50 percent plus one of voters ought to be able to tell me what I may and may not do.
I suppose the adjective democratic is meant to convey that the advocate wants socialism without the nastiness that Castro et al. brought with them: including the jailing in labor camps of various “undesirables” and enemies of the revolution, such as gays and independent-minded librarians. (It seems odd for Sanders to praise Castro for his literacy programs when the dictator also expressly rejected freedom of the press.) But as Hayek pointed out in The Road to Serfdom, what begins as democratic socialism may not stay that way. It could become autocratic socialism as the legislators talk endlessly about how exactly the economy should be planned or guided. After all, even if everyone believed that the government should plan society, it wouldn’t follow that everyone agreed on the plan’s details. So at some point an impatient president might decide to put a stop to the idle chatter and take matters into his own hands through executive order.
Democratic or not, socialism and interventionism are unfit for human beings. 
TGIF — The Goal Is Freedom — appears occasionally on Fridays.