Libertarians are interesting people. I first discovered them when I stumbled onto Ron Paul in the presidential preliminaries of summer 2007. As I was growing up and growing disillusioned with the Republican establishment, I was a ripe vessel for the libertarian ideology of less government and vast personal freedom. After all, they argued, that’s what true conservatives used to be like, anyway. I spent hours and hours in a Facebook group forum, watching – and sometimes participating in – grand conflicts of the mind. There was no problem in the world that was not caused by an overreaching government, and no problem that could not be solved by the beauty of the free market. And if anyone dared to accuse libertarian dogma of causing problems in the real world, there was always an explanation that it wasn’t really libertarianism at play – there was a meddling governor or lobbyist or bureaucrat somewhere causing it to only pretend to be a free market and soiling its reputation. I learned about the heroes, from Smith and Hayek to Rand and von Mises; I learned all the lingo and jargon, from the wonders of Austrian economic theory to those dreaded RINOs and neocons.
I also learned that libertarians are often jeered and accused of living in an old-fashioned fantasy. It “sounds good in theory,” but it “just doesn’t work in the real world.” But the logic of libertarian ideas was always so convincing, and the accusers never seemed to explain why it just didn’t work. If they couldn’t disprove the logic, than maybe there was just something imperfect in the execution, some way that it wasn’t true libertarianism, but the actual philosophy was still true. Some would make vague accusations that libertarianism promotes a greed that consolidates wealth and ruins the poor, but that wasn’t very good either. The logic of libertarians said that greed helps things by forcing sellers to meet the desires of buyers, and so forth. So those were only vague attacks on the vice itself, doing nothing to defeat the logic of how that vice improves things instead of destroying them.
And yet…. things didn’t always add up. I saw real evidence of real greed destroying things in the real world. I saw laws and regulations being enacted because horrible things were happening without them. I was still skeptical of the ability of governments to be smart enough, competent enough, or pure enough to make them better, but I was no longer convinced that pure libertarianism held the path to a perfect world, either. I learned more about economics and took a class on game theory, and I am finally at a point where I can identify four logically based reasons why pure libertarianism fails.
That’s why I call myself post-libertarian. I am still grounded in a general aversion to the power of government and an appreciation for the power of the market, but I am not dogmatic about it. I am willing to admit when these ideas fail, but I don’t have to vaguely blame such failures on poor execution or on greed. I am also willing to admit that the world is a complicated place and I don’t understand everything, and I try to understand the point of view of someone who disagrees with me so I can better understand the truth. In fact, all of this is really simply a pursuit of truth.
So what’s wrong with pure libertarians?
1. Libertarians tend to underestimate externalities. An externality is a fancy economic word for an activity that affects someone who had nothing to do with the activity itself. The sort-of classic example is pollution. Big company dumps pollutants into river; little fisherman downstream can’t fish anymore. You might think that a libertarian would use the oversimplified “regulations-are-bad” dogma and say that this is perfectly OK, and this turns a lot of people off to libertarianism. Now a lot of libertarians will actually pay lip service to the existence of obvious negative externalities like pollution (you can also craft an argument on this particular case based on property rights), and they may say it’s perfectly acceptable to regulate activity that negatively affects others, because at its core, libertarian philosophy is “do whatever you want if it doesn’t hurt someone else“.
But these kinds of externalities are everywhere (especially in a world so complex that the debt of a tiny European country has an affect on the price of filling up my tank), and libertarians often don’t think about them in their haste to criticize an over-regulating big government. I think that a lot of times when statists attack libertarians because they see the outcomes of some particular policy as being terribly unfair, it’s an unfairness that actually comes from a negative externality that a libertarian might not have thought about.
2. Libertarians tend to overestimate the perfect flow of information in the market. One of the extremely important assumptions in the functioning of the free market is the flow of information. If someone is extra greedy and charges too much for a product, then someone even greedier will come along and charge less for that product because he can get all the customers. If someone is greedy and sells an inferior product, everyone will find out and stop buying the product. This logic is sound, and it happens all the time in the real world, but only when enough people figure out what’s happening. A libertarian may claim that there’s no need to regulate the food industry because if some producers produce bad food, people will find out and stop buying from them, so producers have an incentive to produce good food. And yet, even in a nation that may have too much food regulation, we frequently hear about bad food reaching the grocery stores. This means that the built-in incentives and the regulation failed. Why? Because the information that the product was inferior did not flow properly to the regulators or the consumers until people started getting sick or worse. (I am not suggesting what should be done to improve food safety, but simply that we must keep the flow of information in mind when we discuss what should be done one way or the other about this and many other issues.)
3. Libertarians tend to underestimate the importance of the rule of law and participation thereof. The rule of law is another important assumption in the philosophy of “do whatever you want if it doesn’t hurt someone else.” In the aforementioned case of two greedy businessmen lowering their prices to attract customers, such a scenario only plays out if both businessmen follow the rule of law, or, if it makes more sense, the “rules of the game.” If one businessmen spreads lies about the other’s product or burns down the other’s store so he doesn’t have to match the prices, then the consumer stops winning. That’s why society creates basic laws about slander, theft, murder, and so on – the rules of the game, the rule of law.
Now here the pure libertarian will object that any businessman who goes about burning down competitors’ buildings will not be in business very long himself, and thus he has an incentive to abide by such behavior whether they exist as rules or not. But now he has committed fallacy #2 – an overestimation of the flow of information. If nobody knows who burned the other building down, than nobody has a reason to dislike the first businessman, and the law enforcement has no reason to enforce the law. Dishonesty is not incompatible with free markets if the dishonesty is found out – and the sooner, the better – but deception that covers up dishonesty prevents the market from working. When greed plays by the rules the market works, but if there is no religious/moral/ethical compulsion to play by the rules, and if it is possible to prevent discovery that the rules are being broken, then greed will break the rules every time. This is the supreme cause of all the fraud and corruption that statists think about when they accuse libertarian greed of being destructive. The statist assumes that the greed will never be discovered quickly enough to prevent the damage, and the libertarian assumes that it always will. (The truth is probably in the middle, so instead of denouncing or praising greed as bad or good, we should think about ways to either encourage the compulsion to play by the rules and not hurt others, or increase the flow of information so that the people-hurting rule-breakers will be more quickly discovered. My belief in Christianity relates to the former, although I realize that may not be the most popular “solution”…)
4. Libertarians tend to completely ignore game theory. My father explained the prisoner’s dilemma to me as a curious novelty years ago, but it was only when relearning about it in a college Game Theory philosophy class that I realized I had solid logical proof of a failure of the core principle of libertarian philosophy. The philosophy of freedom, from Adam Smith down on through Ron Paul, said that if everyone pursued their own interests, everyone would be better off. The buyer gets a product he wants, the seller receives money she wants, and so on. The logic worked. Greed was good. But the prisoner’s dilemma was an undeniable scenario where two players each pursue their own best interest and each end up worse off. Now most everyday economic interactions aren’t prisoner’s dilemmas, of course, but we discussed various real-world scenarios that are prisoner’s dilemmas, and every one feels like a strike against libertarian thought. I had never heard of this in libertarian forums! Never accused and never defended!
I believe prisoner’s dilemmas are relatively rare in the real world, but anywhere such a scenario exists, we must concede that the me-first philosophy will fail and think about ways to change the incentives to encourage the players to cooperate, even if that (gasp) means regulation or some other intervention. Related game theory concepts, from the free rider problem to the game of chicken, also have interesting implications for libertarian thought, sometimes for and sometimes against. The important takeaway here is simply not to assume that a “me-first” philosophy will always lead to optimal outcomes for all involved parties, even if it usually does. I recommend a Game Theory class, or at least a book, for anyone interested in economics and politics.
And this is what I call postlibertarianism. I was actually surprised to see that there do not seem to be such things as postlibertarians on the Internet (except for one definition I found that was really just regular libertarianism presented more softly than usual), so I am defining it here and making myself known. A postlibertarian accepts the basic premises of libertarianism, but also tries to understand how and why it sometimes doesn’t seem to work, and tries to use that wisdom not to denounce it, but to make it work better. (e.g. When are problems caused by a lack of information, and how can we make that information flow better?)
My economic and political philosophies have changed more in the last four years than in all of my first eighteen, and they may change even more in the next four. I don’t have all the answers, and I’m willing to admit it. This is meant to be a launching pad, not a stone screed. But I believe in the power of markets to create positive outcomes and I believe that there are also frequently overlooked limitations, as I have outlined here. I don’t know how pure libertarians will react to such thoughts, and I don’t know if regular conservatives or liberals will like it very much, either. (If you feel I’ve mischaracterized you, please let me know.) That’s the problem with trying to be so reasonable and conciliatory. But such is the pursuit of truth. Whether you join me, question me, or accuse me, you are helping the pursuit. Thanks for reading.