Imagine Libertopia

In this post I’ll talk primarily to people who, like me, lean libertarian. The rest of you can take a break.

Libertarians want to move more products and services from being provided directly by government, to being provided privately. And for those that are provided privately, libertarians want to weaken regulations. These changes would increase liberty.

Libertarians tend to offer arguments that are relatively abstract and theory-based. That is, they focus more on why more liberty is more moral, or why it should in theory give better outcomes. They focus less on showing that liberty has in practice worked out better. When libertarians do focus on data, they tend to be very broad, or randomly specific. That is, they talk about how West Germany is better than East Germany, or South Korea better than North Korea. Or they pick on very specific examples, like regulations limiting eyeglass ads, and leave audiences wondering how cherry-picked are such examples.

It seems to me that libertarians focus too much on trying to argue abstractly that liberty would be better, and not enough on just concretely describing how liberty would be different. Yes for you the abstract arguments seem best; they persuade you plenty, and they bring the most prestige in your circle. But typical libertarians today are a distinct personality type; most people are not like you. Most people just cannot be comfortable with a proposal for change if they cannot imagine it in some detail, and imagine that they’d like that detail. Such people don’t need more abstract arguments and examples; they instead credible concrete descriptions.

True, people have sometimes written fiction set in libertarian settings. But such fiction doesn’t usually come with a careful analysis of why one should believe in its many details. Yes, part of the attraction of liberty is that it frees up people to innovate in ways that one can’t anticipate in advance. But that doesn’t mean that we can’t go a long way to better describe a world of more liberty.

On reflection, I realize that when I try to imagine more liberty, I mostly draw on a limited set of iconic comparisons, such as comparing airlines, trucks, and phones before and after US deregulation, or comparing public to private schools and mail in the US. Alas, we and our audiences should worry that we cherry-pick such examples to support conclusions we like.

We should be able to do much better than this. By now there are vast literatures discussing many industries in many places before and after regulation or deregulation, and describing specific times and places where certain products and services provided directly by governments, or provided privately. From this vast literature we should be able to identify many concrete patterns and “stylized facts” about how government-provision and heavy-regulation tends to change products and services.

I recall these suggestions for typical features of industries with more liberty:

  1. Less “gold-plating” in materials and methods
  2. More product variety, including more low quality versions
  3. Faster innovation and product cycles
  4. Fewer guarantees to workers or customers
  5. Price, features vary more with customer features
  6. Workers have less school and seniority
  7. Less overhead spend on paperwork
  8. more?

Some people should work to extract patterns like these from our vast related literatures – I’ve looked, and there just aren’t many such summaries today. With such patterns in hand, we would be in a much better position to credibly describe how familiar products and services would concretely change if we were to provide them privately, or to regulate them less. And such credible concrete descriptions might allow many more people to become comfortable with endorsing such expansions of liberty.

This sort of project seems well within the abilities of the median grad student. It doesn’t require great creativity or technical skills. Instead, it just requires methodically surveying and summarizing related literatures. Perhaps some libertarian students should shy away from it in hopes of impressing via more difficult methods. But surely there must be other students for which this sort of project is a good match.

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  • Jess Riedel

    For those like me who weren’t familiar with the term “stylized fact”:

    > In social sciences, especially economics, a stylized fact is a simplified presentation of an empirical finding.[1] A stylized fact is often a broad generalization that summarizes some complicated statistical calculations, which although essentially true may have inaccuracies in the detail.

    > A prominent example of a stylized fact is: “Education significantly raises lifetime income.” Another stylized fact in economics is: “In advanced economies, real GDP growth fluctuates in a recurrent but irregular fashion”.

    • RobinHanson

      Thanks for the reminder to explain terms. I added your link to the post.


    Since this is directed at libertarians I’d like to use this opportunity to ask people who describe themselves as libertarians a few questions (don’t worry, I’m not here to debate the merits of libertarianism).

    1) Do you want a nightwatcher state (primarily to run a justice system and perhaps to institute environmental legislation, or do you somehow (I have no idea how it could be done) want to privatize environmental legislation and the justice system, including the criminal justice system?

    2) Do you think a libertarian system should be preceded by some kind of (partial or full) wealth-reset, perhaps to see how sincere people are about its principles rather than just being today’s rich people who want cheaper servants and less rules, or perhaps because you simply believe tto much of the existing wealth distribution comes from things that violate libertarian principles?

    3) Do you think libertarianism can work if it doesn’t cover the whole world (could it hold out against organized militaries belonging to nations or could it keep its poor from emigrating to countries with a welfare state)?

    • vaniver

      A brief reply:

      1) I want a nightwatcher state because I’m a libertarian on Hayekian grounds (i.e. figure out the right level for each decision to be made at, and then make the decision there). Sometimes regional decisions need to be made by a regional decision-maker, and then everyone coerced into following along. It seems to me *possible* to privatize environmental legislation, the civil justice system, and the criminal justice system, but it’s not obvious how desirable it is. One could imagine, say, auctioning off a river, and then the owner of that river suing people who pollute the river / collecting money from people who benefit from the river. For some things (fish stocks are the classic example) this seems like an obvious improvement; for other things it seems dubious at best (what does it mean to auction off the air?). I think the historical record is pretty clear that competition between criminal justice systems (see: mob wars) is a bad idea, and you want a monopoly, but it seems to me that while you need to have a ‘court of last resort’ it’s also healthy to have an ecosystem of courts to meet individual needs (binding arbitration, etc.).

      2. It seems difficult to do one wealth reset without opening the door for other wealth resets. So we’ll need a general wealth reset principle we’d be willing to apply anytime, and some wealth reset principles are very in line with libertarianism. The main example here is in Hernando de Soto’s The Mystery of Capital, where he talks about squatting transferring title as a feature of the American history of capital and a missing piece in the Latin American history of capital. This means that industrious pioneers can displace absentee owners- if you work the land for, say, seven years without the owner complaining, you’re the new owner now. One can imagine similar things for intellectual property that would prevent useful things from falling into the void. (Abandonware is the term for video games.)

      3. Yes. I think it can hold out against organized militaries if it has its own organized military, or is allied to one; Minerva failed because they decided they weren’t interested in fighting for it, but it’s easy to imagine a history in which they did fight for it and won. As well, Costa Rica remains the go-to example of what happens to countries that demilitarize, and things there look pretty good relative to their neighbors.
      The poor emigrating to countries with a welfare state seems like a feature to me, not a bug.

      • Ken Arromdee

        The poor emigrating to countries with a welfare state is a feature for them, but a bug for the already present inhabitants who are forced to pay more into the welfare state because of them.

      • Tige Gibson

        It sounds like your version of libertarianism applied globally would expect the poor to start their own private concentration camps.

  • lump1

    I think that one reason why I find libertarians so unconvincing in particular arguments for liberalization/deregulation is because they refuse to even acknowledge potential downsides. Any sane libertarian should have some sort of a metric by which they can say “Liberalization works best in cases with features like A through M, and badly in cases with features like N through Z.” Then we could have an argument about whether the features are categorized correctly, or whether the case in question has the promising features.

    But that’s not how arguments with Libertarians tend to go.

    • terry_freeman

      I’d take statists more seriously if they understood institutional analysis. I’ll take your bait: statist solutions work best if we posit a utopia where people who have no financial incentives to get the right answers, nevertheless magically come up with intelligent, benevolent solutions which actually work, because they were born with godlike omnipotence and benevolence, as well as spurs to goad mere peons into doing the right thing.

      • Dan Browne

        And see my post above for why libertarians solutions don’t work at all for transactions/actions with multiple external effects across a wide range of actors. Such as day to day living in a city.

    • Dan Browne

      What you’re describing is hard core libertarians who are really just misers in disguise. Small l libertarians realize that the real world doesn’t operate like economics 101 and there are shocks that absolutely cannot be planned for which create problems for the group. The hard core miser type libertarians just say “It’s not my problem”. But it really *is* their problem. The range of behaviours you can execute as a free individual are significantly reduced by the addition of more and more invididuals into a limited area because they will cause wrongs to take place to large numbers of third parties and it is just simply *impractical* to negotiate a contractual settlement with each party for each situation. For that reason we institute a *vote* that everyone agrees to be bound by. Hard core libertarians don’t like that. They only want to do what they want to do and they say that they are being *compelled* by the violence of the majority. The answer is the hard core libertarians are unable to get past “I’m not going to do what you tell me, and I’m keeping all of my money no matter what” and cannot see that their system only works out in the country where you have limited numbers of people. This is intuitively why you tend to find “statists” in cities and libertarians in rural areas. Because “I’m going to decide everything for myself” just doesn’t work in practise when you have larger societies. That said, we should as a “free society” construct laws to create the minimum amount of limitations on freedom as we can because voluntary transactions (inasmuch as they are possible) in general create the lowest cost transactions and the most wealth for the society as a whole.

  • Stephen Diamond

    These changes would increase liberty.

    You thus define ‘libertarianism’ as desiring more liberty at the margin. (I suppose this is what it means to “lean” libertarian.)

    I should probably hesitate to speak for libertarians–as I’m an interloper in this discussion–but I don’t think most libertarians are seeking evidence that increasing liberty at the margin is desirable. They think liberty is the basic metric for political desirability, and try to convince others of the same.

    Folks like you that put efficiency above liberty don’t in any deep sense “lean libertarian.”

    I’ll grant you the label “conservative,” but not “libertarian.”

    • TGGP

      Conservatives aren’t defined by prioritizing efficiency. And Robin has a lot of radical ideas, even if he is willing to temper them and start small.

      I doubt most self-described libertarians are pure anarcho-capitalists, they presumably allow for criteria other than “liberty”. Dan Klein talks a lot about liberty as a “maxim” and his identity is more strongly tied to libertarianism than many ancaps. Even aside from that, Robin using the term “libertarian leaning” here in an attempt to give suggestions to self-identified libertarians or other leaners seems fine.

      • Stephen Diamond

        Let me ask you this, TGGP: Do you think a prototypical libertarian would warm up to em society?

      • TGGP

        I don’t know. I’m relatively favorable toward it, and I stopped identifying as a libertarian in part due to OB/LW. A lot of the pushback Robin has gotten on it has come from the egalitarian left. But I don’t think I can generalize from that.

      • Handle
    • terry_freeman

      I’d call the author “utilitarian,” rather than “conservative,” since he’s clearly advocating radical, un-conservative changes. You’ll find the conservatives calling for “going back to the basics,” or “stopping Common Core,” and possibly “local control,” but not for getting government out of schools.

      Arguments for the latter may depend upon explicitly libertarian arguments; they may depend upon Natural Law; or they may be based upon utilitarian considerations. They’d not be “conservative” unless, perhaps, one were making an “argument from history” – such as a study of Colonial and early American history might provide.

      • Dan Browne

        Going on a tangent. I agree with getting government out of school as a principle. But we are then left with the externality of employers having to be able to determine the relative merit of one system of education/credentials over another. From that perspective I recognize that a standards based system may be better. The market could conceivably produce a standards based system that schools could adhere to or *not*. It happens in English language testing right now for example. It’s possibly easier to implement today with the internet and free flow and easy access to information via search engines than it was previously.

      • IMASBA

        I’m going to play the contrarian here and say Americans complain too much about their primary and secondary education systems and complain about the wrong things. Private schools get the majority of their edge from being selective in their choice of pupils and teachers and even then they don’t do much better than the countries with the best state-run education systems.

        American schools perform comparatively worse per dollar because a) American wages and costs are high, b) American schools pay for many extracurricular activities, c) funding is locally based: rich districts have rich schools, but that brings diminishing returns so they doesn’t compensate for the poor schools.

        Last but not least, many Americans who complain about government in schools and the performance of schools are themselves part of the problem, they are often the ones preventing proper science or history classes when they think there isn’t enough “god, guns & gays” in them. It never ceases to amaze me how people who want “intelligent design” and/or some mythical version of history and geography to be taught in schools subsequently complain that foreign education systems are performing better.

      • Stephen Diamond

        c) funding is locally based: rich districts have rich schools, but that brings diminishing returns so they doesn’t compensate for the poor schools

        There you have the main problem, but it’s something to complain about.

        [I don’t think you’ll get many good teachers until we decide to pay them far more than anyone is today willing.]

      • IMASBA

        I agree the widely different levels of funding are the main problem.

        It’s amazing how progressive Americans always think their teachers aren’t paid enough, almost as amazing as the conservative Americans who want “intelligent design” to be taught and yet want America to compete with Asia and Europe in science (almost). American teacher pay isn’t actually that low, it’s at least on par with their European counterparts, it gives a lot of security, is one of the few jobs that allows highly educated people to earn a livelihood outside of the big cities and there’s the health insurance benefit that often gets overlooked. Perhaps it would be a good thing to pay rare teachers a bit more, ie the ones who teach physics, math or any foreign language besides Spanish.

  • terry_freeman

    If there were no underlying theory, I might worry about “cherry-picked examples” – but the theory suggests the benefits, the examples demonstrate that the benefits exist where data is available.

    For instance, we can make comparisons about education not only in present-day America, but also in other countries and times – as James Tooley (The Beautiful Tree), Andrew J. Coulson (Market Education), E. G. West (The State and Education) have done. We can even show that the entire paradigm of K-12, 12 years times 180 days of carefully-regulated production of education is completely silly (Summerhill, Sudbury Valley Schools, the home- and un-schooling movements).

    The case for government regulation and provision of education can be shown to be quite slim, given all that evidence. There is also quite a body of theory; consider “Reclaiming Education,” by James Tooley, as an example. Given that about half of the cost of local and state government is devoted to education, this is no small criticism.

    There are equally compelling arguments for “free banking” – banking without state provision and regulation, beyond ordinary constraints against fraud, the requirement to deliver what one has promised.

    • Tige Gibson

      You have this magical theory that eliminating government regulation of education would not naturally result in widespread illiteracy, ignorance, and religious extremism and that paradigm wouldn’t have disastrous consequences for society as a whole.

      But for banking, despite what you believe, initially without regulation there would be a long period of disaster making the Great Depression look like a picnic, but eventually the banks would be forced to regulate each other for their own sake, not for ours.

      It’s that gap which is most troubling, but I get the feeling that libertarians are only interested in getting to the gap, paradise, and don’t care about getting beyond it.

      There’s an easy way to introduce private alternatives to government services. The problem is that private companies don’t actually want to compete with government, they just want to strip off the profit and leave the costs to the government. This means taxes must be higher. The only way to solve this is to denigrate people who can’t afford the services they need, to strip them of hope and dignity. Libertarianism is eugenics.

      • Don Geddis

        “banking … without regulation … would be a long period of disaster making the Great Depression look like a picnic.” That seems highly unlikely in the extreme. At the least, controversial enough that you can’t base an argument using it as an assumption.

        Economic depressions are caused by a failure of monetary policy (Friedman, “A Monetary History” … or the current Market Monetarists like Scott Sumner). Banking regulation has nothing (directly) to do with economic recessions and depressions.

      • Tige Gibson

        Regulation is based on policy, but you don’t want to have either, at least not from the government. The magic in your belief is that the economy would be stable or even functional without any policy or regulation at all. We already know exactly what this looks like in reality so it isn’t necessary to play the libertarian game of theorizing and pretending that the theory is the only thing we need to know.

        Libertarians only ever think about the benefits to people who either already have their share or are prepared to take it. They discount the vast majority of people who either know they won’t or don’t yet know they won’t be on the benefiting side of the sharply divided libertarian society.

      • Don Geddis

        I want good monetary policy (probably NGDPLT), with no banking regulation. What, “exactly” does that look like, “in reality”? Can you offer the specific details or evidence?

        “the benefiting side”. You seem to assume that policy changes require clear winners and losers, and political fights are all about self-interest for the eventual winners. But economics teaches us that there are lots of “win-win” scenarios, where everybody is better off. (At least, everybody except possibly those who are successfully gaming the current system.) Many libertarian suggestions are of this no-loser kind. E.g. eliminating taxi medallions and occupational licensing. Those suggestions don’t result in your feared “sharply divided” society with a small “benefiting side”.

      • Dan Browne

        Don I think you are confusing free banking (as existed in Scotland in the 1800s) with “limited banking regulation” as in the banks as they are today are able to trade actively in the financial markets. Those are NOT “banks” as in “free banking” but instead are merchant bank/classical bank hybrids which expose the real economy to risk in the financial economy. I agree with your proposal that “free banking” is a net good thing. I utterly dispute and reject the theory that banks should not be restricted from operating as a combination of merchant banks and classical banks.

      • Dan Browne

        The current problem was caused by *deregulating* the rules restricting banks from becoming investment banks which Clinton was responsible for. When the losses became too big to bear (as they inevitably would have – the older regulations were *better*) the sheer scale of the losses would have caused a great depression had the government not bailed the losses out. But now we have the same problem taking place *again* and the government has not yet been paid back for bailing out the financial system. The problem we face is that the banks are exposed to the financial markets at the same time as trying to provide traditional banking services to the real economy. If the banks are saddled with financial market losses it now makes it the problem of the real economy.
        We need the rules reset to the way they were before Clinton deregulated and banking and financial speculation separated. Investment banks should be allowed to go bankrupt as long as they are materially separate from the banking system and the system should be re-regulated so that is the case inasmuch as possible.

      • Don Geddis

        Dan, you have misdiagnosed “the current problem”. You make a claim that “the sheer scale of the losses would have caused a great depression”, but that is false. Depressions are not caused by bank failures. Depressions are caused by poorly managed monetary policy.

        I agree with you that investment banks should be allowed to go bankrupt. I wouldn’t bother with your “as long as…” part. Regular banks should be allowed to go bankrupt also. Banks going bankrupt don’t (necessarily) become a bigger problem for “the real economy” (assuming a competent central bank). So just let them go bankrupt.

      • IMASBA

        “Depressions are not caused by bank failures. Depressions are caused by poorly managed monetary policy.”

        What pamphlet did you get that from? Depressions can be caused by 1001 different things, basically anything that destroys capital or destroys trust. If multiple very big banks are caught lying about their financial state and their dealings then trust has been destroyed and it takes time to restore that with new players, in the meantime a lot of people are out of work. Hell, if the world was still run by gold instead of paper money you could get a depression if several of the world’s major gold-deposit and transportation companies went bankrupt and the others were exposed as lying cheats who’ve been stealing gold and/or lying about their security and size of their reserves. You can choose to see such things as natural fluctuations, necessary to get rid of the rotten apples, but they could definitely cause several years of high unemployment like we’re seeing right now.

      • Dan Browne

        Hard core libertarians don’t believe people would rip each other off unless the government makes them do it. Greed, lying and evil don’t exist. And if they did, it would magically be easy to determine who was deceitful, who was evil and who was lying with minimal effort. Also, it would be possible to negotiate a personal contract for each and every situation and each and every transaction and you would have the ability to repeal any laws that affected you that were written before you were born.

        I am a small l libertarian and I believe we already have an approximation of libertopia.

      • Don Geddis

        No, IMASBA, what you are narrating may be “common-sense” economics, but it is not correct.

        Individual industries have booms & busts all the time. There was a stock market crash in 1987, a dot-com crash in 2000, a housing crash in 2006, 2011 Japanese tsunami. But none of that necessarily causes a Depression, an economy-wide elevated unemployment for an extended time. Destroying capital (like the tsunami!) can of course depress real output (RGDP) … but that’s not at all the same thing as a recession.

        You’re correct that you could get a depression if you were on a gold standard, and then had sudden major changes in gold supply. That’s exactly my point: recessions are caused by sudden unexpected major changes in the value of the unit of account, Fortunately, we’re no longer on the gold standard, so lack of stability in the value of money is solely the responsibility of the central bank (monetary policy). And, with fiat currency, they have all the power they need to keep it stable.

        Bank failures have no direct link to widespread unemployment. You’re just wrong about that.

      • Stephen Diamond

        Your notion that currency regulation alone can prevent depressions is far from being the professional consensus in economics.

      • Don Geddis

        You are correct, Stephen, and you offer a very well-worded criticism. In response, I would suggest Milton Friedman’s “Monetary History” analysis of the Great Depression, and the compelling arguments offered by the Market Monetarist economists analyzing the current Great Recession. The counters by other macro schools are weak, and it’s actually shameful and an embarrassment for the whole field, that the economics profession does not have consensus on this topic. But you state the facts correctly: at the moment, they don’t have consensus.

      • Dan Browne

        I’ll debate you on Friedman. I love Friedman’s position mostly but he stated that he believed going on to fully floating exchange rates would have solved the balance of payments problem. But it hasn’t. He has missed something.

      • Don Geddis

        Dan, this is getting far, far off topic. But the short answer is that there is no balance of payments “problem”. E.g., and from let me quote Sumner: “Australia’s been running big current account deficits for decades, and they can continue doing so for many centuries to come. … Australia gets some cars and TVs built with Chinese labor, and China gets some retirement condos on the Gold Coast built with Australian labor. Believe it or not economists call that sort of mutually beneficial business deal a “deficit.” … Don’t be fooled by words, focus on reality.”

      • Dan Browne

        OK fair point. There is no “problem”. Friedman *did*, however, say that with freely floating exchange rates the balance of payments would always be equal. And they aren’t.

      • Dan Browne

        Don, you’re misinterpreting what you think I said in the first paragraph. The second paragraph is exactly right.
        I’m saying the current situation is caused by Clinton allowing banks to become a mixture of merchant bank and classical bank. That DID happen. And it DID happen that those hybrid banks are the ones with the massive losses. It’s also true that the financial economy is much, much bigger than the real economy. AND because the hybrid banks are the ones with the losses they are unable to service the real economy side of their business because they need to paper over their losses, thus meaning that many people in the real economy are exposed to the losses in the financial economy. Even if they didn’t take part. That means their classical banking savings are forfeit and possibly other classical banking instruments such as mortgages etc etc etc
        The whole thing has been caused by deregulation of the banking industry allowing banks to act as merchant banks. It’s the scale of it.
        If they left enough alone that would not happened. The financial economy needs to be decoupled from the real economy in the classical banking system in order to return to health. If they weren’t exposed to the massive losses, as you say, normal banks going bankrupt wouldn’t have much of an effect but the scale is immense and too big for the real economy to handle.

      • Don Geddis

        No, Dan, you’re still not correct. The banking system is ALREADY “decoupled” from the real economy. You say “the scale [of banks] is … too big for the real economy to handle”. That’s false. You don’t need to re-regulate the banks. They can go bankrupt exactly as they are. That does NOT mean the real economy would need to suffer a recession.

        “their classical banking savings are forfeit”. Also false. FDIC insurance means that, while the OWNERS of a bank may lose their wealth when a bank goes bankrupt, the DEPOSITORS do not. (At least, most of the ordinary ones.)

        “hybrid banks … with the losses … are unable to service the real economy side” Also false. In general, profitable retail banking business units generally continue operations (and typically get sold to a more healthy bank as a unit), even when the original bank conglomerate declares bankruptcy.

      • IMASBA

        I don’t think you appreciate the scale of these banks. FDIC is not unlimited, several countries opted to give emergency loans to the banks precisely because invoking their national savings insurance would have been even more expensive or even impossible. Most of the banking system was, and is, rotten to the core, not even the banks themselves trust each other anymore and you don’t just replace multitrillion banks with new ones in a day.

      • Dan Browne

        That’s right. The banks would never have gotten to the scale they are today without being allowed to operate in the merchant banking space. The scale of losses is so big more than 90% of the banking sector is insolvent. As a result, since the rest of us in the real economy have our savings in those banks, we have effectively lost our savings. So have all the corporations with bank accounts. Then there are the linkages to the counterparties of the corporations. The scale of the mess is crazy. “Letting the banks fail” won’t work right now unless *all* of the banks are split and returend to retail banking on the one hand and investment/merchant banking on the other. We also need the losses somehow absorbed by the financial sector and the financial sector only. After that happens, then, yes, retail banks can be allowed to go bankrupt in any crisis in the future.

      • Don Geddis

        Remember, IMASBA: the argument is not whether the entire banking industry might or might not collapse (the way dot coms crashed in 2000). The question instead is whether a collapse of the banking industry necessarily causes widespread unemployment in steel, airlines, agriculture, railroads, etc. I.e., a depression. I’m offering no comment on the health of the banking system. I’m only questioning your assumption that there must be a linkage between that, and a subsequent Depression.

      • IMASBA

        The collapse of any major industry that is intricately linked to other major industries can lead to a depression. When the banking industry pretty much collapsed that hit financial reserves, insurance contracts, investments, savings, pensions, etc… of many other industries. Even to this day it’s noticeably harder for small businesses to get credit because no one trusts each other anymore. Below Dan Browne touches on savings and that’s a very good point: savings, pensions and mortgages are all threatened by weak banks and cause the consumer to spend less. The major banks are so f-ing huge that they take everyone down with them when they fall, I mean when a bank falls it could easily owe $10 trillion to other banks and businesses, most of that used to be virtual “poker chips” but becomes a real debt when the bank falls, imagine you own pieces of that bank’s debt or you’re their insurance company, or a government that has guaranteed the savings stored in that bank. Retail and investment banks really need to be split up to prevent this whole thing from happening again (most governments probably couldn’t handle it if something like the events from 2008/2009 (continued into the Greek crisis) were to happen again within the next five years.

        If a more libertarian society wants to prevent such things it might help that in their society the banks know they won’t get a bailout or savings guarantees from the government, but there’d probably still be a severe boom-bust cycle.

      • Don Geddis

        “The collapse of any major industry that is intricately linked to other major industries can lead to a depression.” I don’t believe you, sorry.

        “Even to this day it’s noticeably harder for small businesses to get credit” Yes, agreed. “because no one trusts each other anymore” No, that’s not the reason at all. (Instead, it’s because we’ve been in a multiyear recession, so projected future revenues are too low for many projects.)

        “there’d probably still be a severe boom-bust cycle.” No, bank failures are not the cause of a boom-bust cycle. (Case in point: the “Great Moderation” of good monetary policy lasted ~1982-2007. The huge Savings & Loan crisis happened ~1986-1995, right smack in the middle. ~1000 out of ~3000 total S&Ls in the US failed. And it had essentially ZERO impact on the overall macroeconomy. Your claim that bank failures cause recessions is supported by neither historical evidence nor theory.)

      • Dan Browne

        OK Don. I’m going to bow out gracefully. The numbers don’t back your case so I’m not going to continue the line of debate any more.

      • terry_freeman

        Sorry, Tige, history and facts do not support your doom and gloom. Start here:

      • terry_freeman

        Tige, you didn’t even bother to look at the empirical data. Are you paid to troll, or do you do it as a hobby?

  • Tige Gibson

    >Less “gold-plating” in materials and methods

    I think you need to elaborate on this, as it sounds like Libertarianese. As someone who deals with real gold plating, it sounds like an analogy from ignorance. As expensive as gold is, it’s still viewed as a cheap solution to certain types of problems. We need to actually improve our processes (methods) in order to be able to use cheaper materials. It’s a trade-off, like so many things in the real world.

    >More product variety, including more low quality versions

    Any individual organization isn’t going to produce both low quality and high quality products simultaneously. Libertarianism only favors what we would consider now knock-offs of high quality products by low quality manufacturers. Organizations attempting to compete with their own knock-offs are forced to lower their quality to match. Some knock-offs will then be able to charge a premium over the original by actually doing a better job making them. Libertarianism doesn’t affect this outcome except by making knock-offs more legitimate, which hurts innovation much more by targetting smaller startups.

    >Faster innovation and product cycles

    A surprising proportion of the market is commodities which don’t change over long periods of time. Products all tend towards becoming commodities. Companies seeking growth always ditch those product lines which become commodities for short term gain.

    At the same time, innovation is limited by the mainstream and quite libertarian delusion that innovation does not require teams of people who do not produce any billable goods: scientists.

    >Fewer guarantees to workers or customers

    The funny thing is that guarantees are the easiest thing to offer. Companies producing the lowest quality at the cheapest price have no problem offering long warranties because statistically few warranties pay out and it makes it seem like they believe in their products even if they don’t.

    In terms of non-salary benefits and assurances to employees, only companies that want to keep their best people offer these. To understand what libertarianism means for the average worker, you have to turn back the clock to before the New Deal.

    >Price, features vary more with customer features

    This is really more a matter of how companies react to their competition. If a company is trying to commoditize their product, they will stifle customization both in-house and by third-parties. If a company realizes that its products have greater potential they will not only offer customization, they will also support and encourage third-party customization. This doesn’t have anything to do with politics.

    >Workers have less school and seniority

    The real problems with schools aren’t being addressed by libertarianism. Libertarianism is driving the cuts to spending on schools, which stifles innovation within the school systems. Ask yourself, how would Intel innovate their CPU designs if they had to spend a lot less on research?

    Seniority isn’t a valuable quality in itself no matter what political position you hold. It’s a substitute for a mishmash of difficult to quantify qualities such as personality compatibility, leadership, reliability, and skill. He’s very good at not getting fired.

    >Less overhead spend on paperwork

    It’s so libertarian to kneejerk blame the government for regulation. Believe it or not there are third-party standards that companies voluntarily submit to. There are concrete benefits to standards that companies calculate are more cost effective in the long run. Libertarianism is such an easy way for companies that want to cut costs to do things that are harmful to the common good.

    As to the actual paperwork, the cost of these processes comes from for-profit companies similar to the government in that once you are doing business with them it is almost impossible to break it off. These companies are big and powerful and absolutely aren’t going to make things easier for you, unless you pay them to. And why don’t companies pay other companies to improve their processes? Because whatever they are doing now works and costs less.

    • David Burns

      “gold-plating” is an old cliche for what happens when someone is spending Other People’s Money. The agent enjoys luxury items bought for the office with the principal’s money.

  • Regis Quando

    Can you really claim to “lean libertarian” when you equate cuckoldry to rape? Personal autonomy and its relationship to the NAP are cornerstone libertarian principles — I think those, along with rejection of the need for a free market and transparent/minimal government, are deal-breakers when it comes to defining someone’s libertarian leanings.

    I think one of the major issues the libertarian movement faces of late is that fiscal/social conservatives have grown tired of being associated with a Republican party that comes across as advocating for bureaucracy or populist ideology, so have decided to take up the libertarian label on a whim.

    Based on your posts, I would define you pretty starkly in the conservative/utilitarian camp.

    • Tige Gibson

      In practicality, we have to accept that people are what they call themselves, regardless of whether their views line up with the label. Toxicity sticks to labels not to the ideas it represents. Lots of bad people identifying with a label used for good ideas taints the label. Lots of good people identifying with a label used for bad ideas reinforces the label. That’s how we ended up with feminists and Catholics.

    • RobinHanson

      How exactly does my asking about the relative harm of cuckoldry and rape harm or reject personal autonomy?

      • Stephen Diamond

        This seems an easy question from the commenter’s perspective: rape is taken as an attack on autonomy, whereas cuckholdry isn’t. (I don’t think a typical libertarian would regard cuckholdry as involving “coercion.”)

      • hoodathunkit

        So forcing a person to fork over a quarter-million dollars for a situation they would never knowingly agree to is (in Stephen Diamond’s opinion) “not coercive”. Hmmm. . . .

        The price, even if only $125,000, comes from a person’s autonomous work, their personal autonomy. Add their time investment and emotional investment over 20 years. If not discovered it is closer to fraud. If discovered it becomes pure and simple coercion by the state.

      • Stephen Diamond

        You have a point: coercion and force aren’t equivalent. As I recall, libertarians find coercion in two distinct wrongs: violence and deceit.

        Rape is violence and cuckoldry is deceit.

        But do libertarians really equate violence and deceit. My impression is that they have a particular allergy to violence, but you tell me.

  • stevesailer

    Noah Smith is trying to sic the Shirtstorm Social Media Justice Warrior mob on you:

    Nice guy …

  • Don Geddis

    Your list offers features that (may) happen to companies, which are able to take advantage of more liberty (less government intervention).

    You might at the same time compile a list of non-market (aka government) failures. It seems the natural dual of your discussion of how capitalism could work better: also talk about how government intervention typically functions worse than naive common-sense would suggest. Regulatory capture, unintended consequences, concentrated benefits but diffuse gains, bureaucracy judged by the size of the budget instead of the cost-effectiveness of providing the service, etc.

    There are lots of ways that, EVEN IF government intervention could work well “in theory”, we find instead in practice that real-world government intervention typically falls far short of the theoretical ideal.

    • RobinHanson

      Yes of course I’d want to see patterns outside of for-profit firms. But I want data, not just theory.


    It might be interesting to see what happens to the very foundation of corporations in libertopia, after all there might not be laws shielding shareholders from corporate debt or crimes committed by the corporation.

    • terry_freeman

      What do you imagine the shareholders would do? And what makes you think that libertarians care about corporations? Have you somehow confused libertarians with crony capitalists?

      • IMASBA

        The mises institute cares, and a lot of libertarian writing is about how corporations could solve this or that problem more efficiently than governments, so can you forgive me (a non-libertarian) for thinking a lot of libertarians do care about what happens to corporations? Moving to an unlimited liability would certainly change the dynamics of corporate business, it might mean more externalities get transferred from governments to corporations, reducing the efficiency edge corporations have, but at the same time it might make corporations more honest.

      • Dan Browne

        While what you say is true it would have the unintended consequence of eliminating the service altogether as nobody would be idiot enough to start a business in which they would have unlimited liability and not enough funds to cover even a single blow. The solution to your postulated problem is NOT the elimination of LLCs, it’s forcing liability insurance onto any trading entity.

      • IMASBA

        Or the business takes up insurance… It’s not true that no one would start a business without limited liability, small businesses (as in compliant with the European definition of the word, not the meaningless, overstretched definition the US uses). Of course if everyone has to have insurance a chain reaction could follow, but that is true of many aspects of libertarian systems and generally accepted (if it’s ok to let orphans starve then investors losing a little money shouldn’t be a concern).

      • IMASBA

        I was going to say that small businesses do have unlimited liability already, technically the owner goes bankrupt but since that hugely influences his personal situation it’s close enough to unlimited liability (certainly much closer than any banker, CEO or shareholder ever gets to accountability).

      • Dan Browne

        Yeah but that’s very different than limited liability small businesses.

      • Dan Browne

        I’m not sure what you’re saying here because insurance is regulations which is something that libertarians are generally against. And I stand by my point. In a situation of unlimited liability and only limited funds to cover damages, in the absence of insurance, there would be much much lower numbers of entrants into the market as suppliers/providers.

      • IMASBA

        Ah, the devil is in the details. Insurance wouldn’t be mandated, just an option (that you’d be foolish to ignore, but according to the libertarian definition you wouldn’t really be forced to get insurance). I’m not sure that without liability insurance there would be less entrants into the market: entrants are either very small (which means unlimited liability even today) or backed by a large existing corporation (which can cover any losses), the system would be less stable, then again we probably don’t even want to know what would happen in a world where all liability was handled through insurance companies who can repackage and resell their insurance any way they like…

        I’ve always been under the impression that libertarians believe no amount of disasters that could plausibly happen within a short time span can be truly catastrophic. I think that kind of thinking is ignorant of the advances in technology and globalization that have taken place since the 19th century (it seems they still think of the world as a bunch of small businesses with pre-atomic technology, that no matter how badly you screw up people living 100km away would be fine and that there will always be a multitude of at least similar-sized competitors to jump into any opening left by a failing business).

      • Dan Browne

        I consider myself to be a libertarian, at least to the same extent as Friedman. But I have found myself frequently arguing with others who say they are libertarian and I am statist. I think, however, I don’t wilfully put my head in the sand and ignore reality in favor of ideology twisted to make sure they don’t take any forced losses to benefit the group over themselves as individuals.

    • blogospheroid

      I read an article a while ago, probably from the site, saying that while contracting for limited liability is something that should be allowed by natural law, there should be atleast one partner in the corporation who would continue having unlimited liability. That, according to the article, was the only way to reconcile natural law and limited liability.

      I have thought about this and am not able to think of any other solution as the right one in this context.

      • IMASBA

        Limited liability should be allowed, but not required. Creating a limited liability corporation should not be illegal but parties should have the right to go to a competitor with unlimited liability. I see it as very disingenuous that the the mises institute thinks limited liability should be part of the “natural law” in Libertopia (and therefore enforced by whatever judicial system Libertopia would have), that reeks of today’s rich people wanting to have their cake and eat it too.

      • Stephen Diamond

        The problem with limited liability for libertarianism comes not from contractual liability but liability in tort. As long as I’m undeceived about the liability conditions, I can exercise my prerogatives of offer or acceptance. But what happens when a limited liability corporation commits acts of negligence affecting random folks?

      • Dan Browne

        IMASBA is right. There should be the choice to not have limited liability corporations. But it’s really two distinct issues being conflated into one in any case. You could quite easily compel all sole proprietors, partnerships and the various flavors of LLCs to have liability insurance by means of regulation and that would level the playing field and still have the benefits of encouraging startups who only have a small amount of capital to invest.

      • Dan Browne

        Yeah. My big problem with many “hard core” libertarians is not the concept of maximum freedom and minimum regulation but that they are really deep down miserly SOBs who don’t want to risk losing any money ever. That’s not really libertarianism at all but it is very often presented as such.

  • Handle

    One of the problems with pattern recognition is that the kinds of changes in the way life would be experienced if policies were more Libertarian might themselves shift as society goes through some inflection in an economic transition. Let me explain.

    The big issue is about the whole broader spectrum of social pressures that try to control behavior and expression. But there are carrots and sticks, and a ‘negative carrot’ can feel an awful lot like a stick, just like a ‘hole’ or localized absence of electrons in semiconductor can act like a positive particle.

    Libertarians are overly fixated on the formal state and it’s particular set of familiar coercive sticks. They tend to ignore the negative-carrots, and they tend to ignore the sticks and negative carrots of the non-state sector.

    And I think that made a lot of sense in the past. But I don’t think it makes as much sense today, especially because there is so much entangling connective tissue binding the state to the purportedly non-state (or quasi-state) sectors.

    For instance, it’s common knowledge that the government can get ‘private’ universities to do just about anything by threatening to take away the carrots upon which they are reliant and without which they would become hopelessly uncompetitive or suffer a steep drop in status. The State Action Doctrine has fallen into substantial interpretive disuse.

    Today, I think there is a severe chilling effect on people expressing their honest sentiments and exercising their autonomy, even within the formal technical permissions of the law, and without the ugly prospects of imprisonment, torture, execution, and property confiscation.

    There is an increased power of weaponized sanctimony to generate negative social consequences and turn someone into an unperson and eject them from respectable society and the ability to maintain employment, status, and the ability to afford a decent standard of living.

    When people were more independent, economically self-reliant, isolated and poor, and when it was easier to escape one’s past and practically start over someplace new, then the practical importance of these social factors was mitigated. But today, most people are heavily economically dependent and rely on steady employment to afford to live in good neighborhoods, the price of which is bid up by all the other people who are maintaining decent-status employment.

    And everything they say is available to everyone, everywhere, instantly, at no cost. Without something like ‘tenure’ to protect them, the threat of having the carrots of conformity permanently taken away is more than enough to make most people tow the line, and either pay lip service or keep their mouths shut.

    The closest analogy is to what the religious punishment of excommunication and becoming a pariah might have meant to someone five centuries ago. Consider what happened to Brendan Eich.

    Libertarians are often quick to draw hard lines of legal semantics with regards to ‘censorship’ and contrast the right of public-relations-focused, at-will disassociation of private organizations with the government’s duties of due process and viewpoint neutrality.

    But my point is that those lines don’t have as much practical importance to people anymore insofar as they perceive the network of behavioral incentives and consequences they face for exercising their autonomy.

    Here’s an illustrative example. Imagine that there were lightly-enforced, infrequently-investigated speech-controlling laws that punished heterodox or contrarian statements with small fines. Prosecutorial discretion and all that.

    But, on occasion, when an incident becomes a sensation or scandal, the fact that a high-status person once violated the law becomes a big issue that his opponents like to exaggerate even if they don’t usually care too much about it if it’s someone they like. (Like, say, a presidential candidate doing drugs or having an affair).

    Ok, now imagine that the Libertarians have won the day and passed the First Amendment and everyone has free speech right.

    But what actually changes for most people on a practical level given our contemporary social context? Probably not much. Sexist expressions are now no longer crimes, but they are still firing offenses, and still harnessable to stir up the Social Media Warrior hornets’ nest, if that’s the fad of the day.

    In other words, the little state sticks weren’t the incentives that actually mattered for most people, who will still keep their mouths shut for fear of losing their carrots. And the it was mostly the fear of losing contracts, customers (or being investigated for having an unacceptable environment or cultural climate), and not the law, that genuinely governed employment and association decisions.

    In that example, it would be very difficult for a person to imagine in concrete terms what a slightly more Libertarian policy environment might mean for them, because it wouldn’t mean anything significant.

    Now, it might be possible to get them to imagine the additional insulation from consequences if the state handed out significantly less reliance-inducing carrots, but if you think about it, carrots are much harder to define and control than sticks, and savvy people have gotten incredibly skilled at obscuring the means and methods by which they can have the state apply pressure using these unconventional tools, and then having allies in the judiciary self-validate the formal legitimacy of those tactics.

    The point is, if we live in a society in which carrots matter more than sticks for some specific element of autonomous action, and Libertarian proposals are more able and willing to deal with sticks than carrots, then it might not make much difference at all.

  • terry_freeman
  • Grant

    I agree, though think Robin might be being too generous. There exist voluntary mechanisms which may out-perform government in the provisioning of many or all of its goods and services, yet you rarely ever hear libertarians mentioning or designing them specifically. We have online services which offer funding through assurance contracts, but they are mostly used to fund private goods!

    I want to hear how markets can build the roads, protect the environment and care for the poor. Saying “the free market solves all problems” isn’t even an abstract argument, its just lazy hand-waving.

    The success of projects like Bitcoin and Uber erode support for statist philosophies. I think we need fewer libertarian philosophers, and more libertarian engineers.

    • IMASBA

      It seems (and this is my personal opinion) that most libertarians aren’t ready for libertarian engineering. Libertarian engineering would mean doing actual cost/benefit analyses which would mean admitting there are actual costs, weaknesses and losers in any libertarian system and that seems to be very difficult for the average libertarian. There are exceptions of course, such as the libertarians who support the negative tax idea (essentially a basic income) because they admit there will be poor people in deep trouble in Libertopia.

      • Grant

        I’m referring to the creation of the institutions necessary to support a Libertopia; this is what requires engineering. While the regulatory landscape certainly does not support all such possible institutions, many more would be needed than currently exist.

        For example, with Uber’s existence we can point and say “see, we can do taxis, and do them better than state-run taxicab markets”.

        Regarding cost/benefit analysis, I think the issue here is that most libertarians seem to be deontological.

      • IMASBA

        Them being deontological makes it very difficult to do libertarian engineering: saying “Uber is better than regulated taxis because it adheres closer to libertarian values” is not going to convince anyone who isn’t already a libertarian. You’d have to say “well, see, Uber may have some problems, extra social or financial costs, here and there but here are some efficiency benefits that outweigh those”, in other words normal economic reasoning, but that’s impossible as long as you refuse to admit there would be some extra costs in libertarian systems.

      • Grant

        I suppose, but normal people aren’t deontological and they are the ones we’d like to win over. They just use uber and think “cheaper, cleaner rides”.

      • IMASBA

        No, normal people not being deontological is exactly why libertarians should make an effort to point out and prove that something really is better by non-deontological standards. Most examples of libertarian institutions are not so obviously better and some aren’t better at all, people have legitimate reason to be skeptical and thus want to hear more than only deontological arguments. Sure it’s nice that Uber taxis are cheap and everyone can see that, but are they reliable enough? Who knows, you’d need to do an honest study for that and that’s where libertarians are severely lacking because it seems hard for them to imagine that other people aren’t deontologically predisposed.

  • danijelkecman


  • Dan Browne

    I am libertarian *leaning* but I suspect that the idea of taking responsibility for every single action so that when you fail you starve and accept it meekly doesn’t wash too well with the feelings of the average human being. From that perspective I suspect we have evolved an *almost* libertopia as much as it is possible given the human condition. While we’re musing: you often hear many libertarians being hard core hayek fans and denying elements from other areas of economics: such as people refraining when using force when they are on the bad side of a trade because people are *naturally* honorable OR…. monopolies *never* happening without government being in cahoots etc etc. I also struggle with the concept of externalities and network effects. But in fact in the US it’s pretty hard to imagine more freedoms especially if you read about why freedom to do whatever the heck you want is restricted in places with more than just you in them. I think the general rule is: the more people there are around you, the more your possible range of actions will cause problems for someone else, thus you either negotiate a mutually beneficial agreement or else they impose one on you (if there are more of them than there are of you). But this is a huge digression. I love thig blog.

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