Deirdre McCloskey's factual case for free markets
Over at the excellent Bleeding Heart Libertarians blog, Deirdre McCloskey has weighed in with a tour de force post. The blog's philosophical symposium on free market fairness is, she says, "factually mistaken". The assumptions philosophers make about reality are misguided; modern history tells us much of what we need to know:
The master narrative of High Liberalism is mistaken factually. Externalities do not imply that a government can do better. Publicity does better than inspectors in restraining the alleged desire of businesspeople to poison their customers. Efficiency is not the chief merit of a market economy: innovation is. . . .
Anyone who after the 20th century still thinks that thoroughgoing socialism, nationalism, imperialism, mobilization, central planning, regulation, zoning, price controls, tax policy, labor unions, business cartels, government spending, intrusive policing, adventurism in foreign policy, faith in entangling religion and politics, or most of the other thoroughgoing 19th-century proposals for governmental action are still neat, harmless ideas for improving our lives is not paying attention.
In the 19th and 20th centuries ordinary Europeans were hurt, not helped, by their colonial empires. Economic growth in Russia was slowed, not accelerated, by Soviet central planning. American Progressive regulation and its European anticipations protected monopolies of transportation like railways and protected monopolies of retailing like High-Street shops and protected monopolies of professional services like medicine, not the consumers. “Protective” legislation in the United States and “family-wage” legislation in Europe subordinated women. State-armed psychiatrists in America jailed homosexuals, and in Russia jailed democrats. Some of the New Deal prevented rather than aided America’s recovery from the Great Depression.
Unions raised wages for plumbers and auto workers but reduced wages for the non-unionized. Minimum wages protected union jobs but made the poor unemployable. Building codes sometimes kept buildings from falling or burning down but always gave steady work to well-connected carpenters and electricians and made housing more expensive for the poor. Zoning and planning permission has protected rich landlords rather than helping the poor. Rent control makes the poor and the mentally ill unhousable, because no one will build inexpensive housing when it is forced by law to be expensive. The sane and the already-rich get the rent-controlled apartments and the fancy townhouses in once-poor neighborhoods.
It's an inspiring piece. Read the whole thing.
Do we need government?
After Tim Evans's great speech on private policing at our Next Generation event on Wednesday, I came across the video above, which goes into more detail than Tim had time for. Ed Stringham argues that government might not be necessary even for the "night watchman" roles that most assume it is required to play. Is government the only agency that can provide law enforcement? Stringham says "no", lucidly and engagingly.
I anticipate some negative reactions to my posting this video. Even many liberals and "minarchist" libertarians find anarcho-capitalist ideas frustratingly utopian and a distraction from the challenges of the real world. I can sympathise, but I think it's also important to take nothing the state does for granted. I could be (and, honestly, I probably am) persuaded that we need some kind of Leviathan state to minimise violence, but I don't see why we should assume that.
New at AdamSmith.org: The Case for Single-Issue Activism
In recent years, believers in a small state have largely failed to convert good intellectual arguments against interventionism into concrete political achievements. Whig argues for a change of gears by liberals, away from politics and towards a focus on single-issue group campaigning.
Classical liberals, libertarians or indeed anyone arguing for a smaller state (I’m going to use ‘Liberals’ as shorthand) have a serious problem. We don’t seem to be very successful at converting the corpus of intellectual work and powerful arguments against interventionism into concrete political success. Whilst the Archbishop of Canterbury, Polly Toynbee or Michael Sandel, to name a few, seem to think we are living in an era of unbridled free markets, any sensible observer can see that this is not the case; state capitalism or corporatism is the status quo. In reality, the trend of the last twenty years has been a move away from free markets with growing taxation and more regulation. What can be done to reverse this trend or at least to revive the momentum of support for limited government?
While there are some elements of the Conservatives and perhaps Liberal Democrats with (some) Liberal ideals – and one or two Labour politicians have sensible ideas on particular issues – there are no elements of mainstream political life we can call home. Fortunately, one might say the same for out-and-out socialists but I would argue that, given the size and reach of government and the state of public discourse, they are rather more at home in contemporary politics.
The morality of taxation
Eamonn Butler discusses the morality of taxation, which he wrote about for the Taxpayers' Alliance's excellent new report, The Single Income Tax.
Free Market Fairness
In the video above, Professor John Tomasi talks about his new book, Free Market Fairness. His central thesis is that social justice can and should be the moral basis for classical liberalism and libertarianism. The idea that a society is judged best by how the people at the bottom fare is typically associated with social democrats, but Tomasi argues that this kind of thinking is Hayekian and lends itself well to advocacy for free markets. Free Market Fairness is available now.
Individuals matter
Allister Heath’s ‘Editor’s Letter’ in City AM is one of my daily must-reads. Even if you can’t pick up a copy of City AM in the morning, you can catch up on Allister’s latest thoughts here.
He’s been on top form this week. Yesterday’s piece on inflation was excellent, but the pièce de résistance was Tuesday’s letter – ‘UK is wrong to have turned its back on individual freedom’. This is, quite simply, one of the best things I’ve read in a newspaper for a very long time:
Our country is dominated by busybodies and collectivists who believe that they and the state have the right and duty to tell us all what to do, to spend our money for us and to control what we can eat, drink, trade or say. It’s all gone too far. Individual freedom and its twin sister personal responsibility are the cornerstones of successful Western, liberal capitalist societies; yet these are being relentlessly undermined…
So this is my plea: let’s put the emphasis back on the individual. Let’s stop trying to ban everything. Let’s stop describing a tax cut as a “cost” to the government or – even worse – as morally identical to public spending. Let’s stop assuming adults should no longer have the right to eat fast food, or smoke, or drink, or paint their walls bright green, or build a conservatory in their back garden, or whatever it is they wish to do with their own bodies and with their own private property. Let’s once again speak up for the rights of consenting adults to choose how to live their own lives, even if we disapprove. Let’s allow people to hold, discuss or display their beliefs freely, especially if we disagree.
Here at the Adam Smith Institute, we couldn’t agree more.
"It's not that I'm against social justice, it's that I say it has no meaning!"
The video above is a nice snippet of FA Hayek's view of "social justice". Hayek wrote that, "To discover the meaning of what is called 'social justice' has been one of my chief preoccupations for more than 10 years. I have failed in this endeavour — or rather, have reached the conclusion that, with reference to society of free men, the phrase has no meaning whatever." Just so.
Libertarian academic John Tomasi disagrees and, indeed, has attempted to reconcile Hayek's ideas with the principle of "social justice" in a new book, Free Market Fairness, which has been remarkably well-received. I'm sceptical, but am looking forward to (maybe) having my mind changed: Tomasi will be speaking on his ideas at the ASI on May the 3rd. The event is open to all, so come along and see what he's got to say.
Social Darwinism?
In a recent exchange of compliments, US President Barack Obama accused GOP budget commissioner Paul Ryan and likely presidential nominee Mitt Romney of being “Social Darwinists”. The budget cuts called for by the Republicans enraged the President, who believes government must take an active role in education, R&D, and infrastructure. Never mind that government 'investments' almost always fail due to bad incentives and inadequate information, and prevent sustainable patterns of specialization and trade from emerging. Anyone opposing this civilisational aspiration for humanity to be led and controlled by the government is apparently a Social Darwinist.
That term is always pejorative. Why? Because Social Darwinism implies survival of the fittest; an application of Darwin’s natural selection law into a society. In the animal kingdom, the strong survive and succeed, while the weak fail and are left to die. The stigma of Social Darwinism is that it implies that the poor shouldn’t be aided in a system where wealth is a sign of success.
But this definition needs clarification. Survival of the fittest does not, in economics, mean that those who fail should die. It simply means that a free society should be a constant trial and error process, in which people gradually work out better ways to do things. No one reaches success immediately; we all undergo a trial and error process, whether through looking for jobs, applying for schools or looking for a place to live. Our experience gained through a series of trials and errors ensures a process of constant cognitive learning. Good ideas survive, bad ones die – this is the essence of progress.
In a competitive marketplace, such behaviour is more than welcome. Firms that treat their customers poorly will be considered weak and will go under, while those who offer an extra service and value to the customer will be considered strong and will be able to prosper. Trial and error means that good companies which offer added value will succeed and expand while bad ones will wither and fail. Surely this is a good thing, socially darwinist or not?
In the animal kingdom, natural selection ensures that only the strongest of the species survive. A competitive marketplace applies the same logic to firms. But this doesn’t mean that people who are left behind due to natural disadvantages should be left to die. I don’t think anyone within really thinks this way, and I don’t think this is implied in the definition of Social Darwinism. When it comes to human beings everyone should get an equal opportunity to prove him or herself based on merit. When it comes to companies the same rule should be applied. Call it Social Darwinism or call it competitive meritocracy; unlike its ideological opposite - socialism - at least it hasn’t killed anyone.
P.S. You can find more of my thoughts about the Ryan budget here, on my personal website.
How I learned to stop worrying and love the future
Jeff Tucker, writing from his new home at Laissez Faire Books, extolls the virtues of technology and the future:
True confession: I was once among the late adopters. I freely put down the techno enthusiasts. I wrote a highly negative review of Virginia Postrel’s provocative book The Future and Its Enemies, which turns out to have seen what I did not see. After the digital revolution advanced more and more, I began to notice something. By being a late adopter, I gained no advantage whatsoever. All it meant was that I paid a high price in the form of foregone opportunities. If something is highly useful tomorrow, chances are that it is highly useful today, too. It took me a long time to learn this lesson. . . .
In World War II, we saw technology used for mass murder and ghastly accomplishment of human evil as never before seen in history. Then we went through almost 50 years in which the world was frozen in fear of the uses of technology. It wasn’t called the Cold War for nothing. When it finally ended, the world opened up and we could turn our energies again toward technology that serves, rather than kills, people.
The real “peace dividend” you hold in your hand. It’s your smartphone. It’s your e-reader. It’s the movies you stream, the music you have discovered, the books you can read, the new friends you have, the amazing explosion of global prosperity that has visited us over the last 10 years. This is technology in the service of the welfare of humanity.
In conclusion, no, we are not oppressed by technology. We can embrace it or not. When we do, we find that it brightens both the big picture and our own individual lives. It is not to bemoan, ever. The state of nature is nothing we should ever be tempted to long for. We are all very fortunate to be alive in our times. My suggestion: Try becoming an early adopter and see how your life improves.
Hear, hear. Matt Ridley had a similarly optimistic post today, called "17 reasons to be cheerful".
I'm still a little pessimistic, though. Even if it isn't outright war, things like email surveillance, phony "anti-terror" erosions of our civil liberties and the medicalization of alcohol and tobacco make me worry. For all the quality of life improvements that technology brings, states can still wipe away everything we have at the push of a button.
Video: Daniel Klein on "Mere Libertarianism"
This lecture was delivered at the Adam Smith Institute last week, on Prof Klein's paper "Mere Libertarianism", which I recommend reading. You can download the slides for the talk here, and watch a longer version with questions and answers here.
Prof Klein's new book, Knowledge and Coordination: A Liberal Interpretation, is one of the best non-fiction books I've read in a very long time. You can read my review here, and buy the book here.