Libertarianism is an Ideology Built on Neoclassical Economics

One of the things that has always put me off libertarianism is that it clearly has neoclassical economics at its heart. The only difference is that all of the flaws – assumptions, rational economic man, framing issues as governments versus markets – are transposed onto a political ideology. After all, it’s no coincidence that much of what libertarians perceive to be objectively bad for the economy is also morally objectionable to them. But once you analyse from a  non-neoclassical perspective, a number of substantial flaws appear.

For example, the central libertarian idea that people should be ‘Free to Choose‘ becomes nonsensical once you analyse it from the premise that people are not rational.  The problem here, as Thaler and Sunstein detail in Nudge, is that people are constantly having their decisions influenced by advertising, culture, framing and various cognitive biases. Saying that governments are ‘intervening’ in people’s choices makes little sense because people’s choices are always influenced. In fact, the most libertarian argument is for governments to regulate packaging and advertising so people’s choices are influenced as little as possible. If you disagree with this because you don’t have faith in the government being able to steer people’s decisions right, then you are putting your faith in the government being able to frame choices in a way that doesn’t steer people’s preferences at all, which is actually far harder and probably impossible.

The ‘property rights, contracts, force, fraud and theft’ prescriptions of the more hardcore libertarians are reflective of neoclassical economics, as they are, in fact, all that would be necessary for the world to resemble a demand-supply diagram, if the assumptions held. Unfortunately, people do not behave like robots, so they need strong political and social institutions that create trust and cohesion to engage in transactions (trust has actually been cited as a major reason for the slow growth of many developing economies). Defining property rights and fraud is also incredibly complex and open to debate, but neoclassical economics doesn’t really discuss the law in any detail, so, naturally, neither do libertarians. Furthermore, the naive idea that force, fraud and theft can just be rattled off like that ignores the fact that those 3 words basically describe the history of mankind. Again, this is simply not mentioned in textbooks.

Taxation as theft also has its roots in neoclassical framing. In neoclassical economics, the economy is presupposed as arising out of nowhere, and the government then ‘intervenes’. Taxes are a distortionary, external effect on the ‘free market’. This is analogous to the idea of the government coming along and ‘taking’ your income that pervades libertarianism (and often popular culture). This ignores the fact that pretax income is just a money flow that has arisen due to the institutions set up by government, and as a result of the way these institutions were set up. If government policy were changed, the pretax income of many would change; there is nothing inherently just about it. Furthermore, even after tax, income is far higher than if the government didn’t exist, because then the economy as we know it would not exist. The concept of taxation as theft becomes nonsensical as libertarians are forced to accept that they are privileged to be taxed.

Libertarianism completely neglects work and workers. The idea that it is a freedom maximising individualistic belief system ignores work in the exact same way neoclassical economics does – the firm is a ‘box’ where inputs go in and outcomes go out, and we don’t really look into what happens inside it, outside of various ‘marginal’ curves.  Libertarianism, like neoclassical economists, is based around the notion of consumer sovereignty, and so the only way it can deal with work is simply to ignore it – the only time Libertarians discuss work are with dismissive assertions like ‘workers should negotiate their own conditions’. The problem is that this ignores power (like neoclassical economics), and the fact that capital is scarcer than labour (despite teaching this explicitly elsewhere). This means working conditions, wages and hours are not determined by individuals engaging in mutually voluntary transactions but by capital*, which naturally has more bargaining power.

How do libertarians deal with the fact that their ideology is built on highly flawed theories? By mocking the real world! Lecturing workers for not accepting pay cuts (which their theory is wrong about, incidentally), attacking institutions that conflict with their policy prescriptions, ridiculing inequality considerations as simple ‘envy‘. Furthermore, they simply implement their policies without considering the starting point, much like neoclassical economics. Effectively, they are saying that even though the world doesn’t behave like the textbooks, we should act like it does, and ridicule or ignore it when it doesn’t. Obviously, that has worked out pretty well.

*I am aware capital is not homogeneous but it can be thought of as an emergent property – even individual firms do not have control over the length of the working week, for example.
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  1. #1 by BobbyFlint (@BBFlint) on December 17, 2011 - 12:17 pm

    This is a tremendous takedown of the libertarian delusion that they are exempt from criticisms of neoclassical economics. I agree with every point in this post and particularly the point about property/ contract rights etc – these areas are hugely complex with a vast amount of literature written on them, yet they are often taken as given by the more dogmatic and unreflective libertarians.

  2. #2 by Guillermo on December 18, 2011 - 3:02 pm

    Hmm, I agree with some of your points but I’m not sure Libertarian ideology is built on NC economics. Some of the most dogmatic Libertarians I’ve encountered follow the von Mises wing of “Austrian” economics, which AFAIK is anti-neoclassical. There’s also the “philosophical” Libertarianism of people such as the late Robert Nozick. I would conjecture instead that NC economics and Libertarianism perhaps reinforce each other due to similarities in “world view” such as those that you listed above (e.g. a tendency to take capitalist institutions as a “given” with states “intervening” into these externally, a focus on markets and exchange instead of bureaucracies, contracts and power
    relations, etc.) even if technically NC economics can accommodate diverse political view points.

    • #3 by Unlearningecon on December 18, 2011 - 6:52 pm

      I regard Austrianism as a wing of neoclassical economics as it still suffers from many of the same issues – framing governments versus markets, utility maximising individuals, lack of emergent properties, ignoring work – and also comes to pretty much the same policy conclusions (government=bad).

      Furthermore, their philosophy is based on the same premises as their economics. There’s the same amount of cognitive dissonance when you talk to them, it’s just ideological rather than technocratic.

  3. #4 by Warren on December 19, 2011 - 7:48 pm

    I don’t think its all “built on neoclassical economics.” There’s a lot of what I’d consider liberal political philosophy I’ve read that is 1) From before Neoclassical Economics became the dominant paradigm or even was a paradigm 2) Doesn’t rely on any Neoclassical economics to argue that a Libertarian society would be just.

    I think its flawed too, for non-economics related reasons (mainly because I only get my economics through blogs and a single econ 101 class so I never feel comfortable criticizing anything on these grounds), but I do think you hit upon a good line of argument when you criticized the underlying liberal assumption of the individual as a rational, utility-maximizing actor. I can see why people chose it for economic modeling, but people arguing for its use outside of this case have less of an excuse.

    “Taxation as theft also has its roots in neoclassical framing.”

    Its also not necessarily wrong in and of itself, but it only follows to someone who has already fully accepted the Libertarian property rights framework (or is simply inclined to see taxes as theft). When its used as an “argument” against someone who considers taxation justified it comes off as a bad proxy, because the real work is being done in the (implausible in my opinion) conception of property rights that this person doesn’t accept.

    • #5 by Unlearningecon on December 20, 2011 - 2:14 pm

      Classical liberalism certainly predates neoclassical economics but libertarians are deluded if they consider themselves the ‘children’ of the classical liberals like Smith, Ricardo and Mill. Those people were completely ready to concede a positive role for government and had a massive part of their theory devoted to land rent, which most libertarians ignore.

  4. #6 by Nyx on December 20, 2011 - 1:49 am

    Hello,

    I just found your blog recently, and while you have raised some very interesting points, I am troubled by the discourse in which you situate them. For one, you have repeatedly directed your criticism at “economics”. But how exactly do you define “economics”? By criticizing “economics”, you are implying that economics is a homogeneous entity. Yet clearly we know that this is not the case — there is plenty of debate within the field of economics. Unless, of course, you’re implying that post-Keynesian economics or qualitative economics, for example, are somehow “not economics”. I don’t think most people would agree with this view, and I’m not sure you would either.

    Either way, the discourse you’re setting up creates a dangerous dichotomy between “economics” and “not economics” and establishes the value that “economics = bad”. Perhaps it is only my personal bias, but I am suspicious of any argument that claims to somehow invalidate a whole academic discipline. Since you mostly criticize neoclassical economics, why not rephrase (and reframe) your arguments in opposition to “neoclassical economics” rather than “economics” as a whole? You run the risk of ignoring the complexities of the field and of caricaturing and straw-manning it otherwise.

    (I know you’re not the only one to use such exaggerated claims, and that you have at times taken pains to distinguish neoclassicism as your target, but it still bothers me that such a view seems to underlie your arguments. Apologies if this point has already been raised by someone else.)

    • #7 by Unlearningecon on December 20, 2011 - 2:06 pm

      Honestly I’ve used the terms ‘neoclassical’ and ‘mainstream’ economics so many times I’ve wondered if I should tone it down! My about section makes it clear that I am critical of neoclassicism and consider myself a post-Keynesian. I don’t want to seem rude but I think you should read a bit more carefully.

  5. #8 by Lord Keynes on December 20, 2011 - 1:40 pm

    I think it is a mistake to consider all libertarianism as derived from neoclassical theory. The Austrians and the cult of Rand are not really based on neoclassical analysis.

    Here is a schema:

    I. Randians

    II. Austrians
    (1) the Anarcho-capitalists, like Rothbard and Hoppe;

    (2) The minimal state Austrians like Mises (with his praxeology);

    (3) Austrian supporters of Hayek’s economics, with a minimal state;

    (4) The “orthodox” Austrians who have a moderate subjectivist position (like Israel Kirzner and Roger Garrison);

    (5) Austrian radical subjectivists like Ludwig Lachmann;

    II. Non-Austrian libertarians (but influenced by Austrian economics)
    e.g., George Selgin

    III. Neoclassical libertarians

    (1) followers of Robert Nozick’s libertarianism;

    (2) followers of David D. Friedman’s anarcho-capitalism.

    (3) other non-Austrian, neoclassical influenced libertarians (e.g., Tom Palmer, Bryan Caplan and Tyler Cowen).

    • #9 by Unlearningecon on December 20, 2011 - 2:09 pm

      I agree that there are different shades but all of them suffer from similar framing issues, and I think the libertarian movement as a whole finds many of its roots at the time when neoclassical economics was born.

      How Austrians can claim to be outside the mainstream when they come to almost the exact same policy conclusions as ‘neoclassical’ free marketeers bewilders me. I might have some time for their approach if everything didn’t have a preordained conclusion of government=bad.

  6. #10 by Obnoxio The Clown (@obotheclown) on December 22, 2011 - 9:59 pm

    “In fact, the most libertarian argument is for governments to regulate packaging and advertising so people’s choices are influenced as little as possible. If you disagree with this because you don’t have faith in the government being able to steer people’s decisions right, then you are putting your faith in the government being able to frame choices in a way that doesn’t steer people’s preferences at all, which is actually far harder and probably impossible.”

    I’m sorry, this doesn’t make a blind bit of sense to me. Next thing you’ll be saying all cars should look the same, be engineered the same, have the same fabric on the seats, because that’s the libertarian thing to do.

    People buy into the ethos of products. Buying into the myth of Vorsprung Durch Technik is no different from buying into the myth that Britain is a liberal democracy.

    The difference between Audi’s advertising and government diktat is simple: I can choose to ignore or accept Audi’s smooth words, there are other options but I can’t choose to ignore government diktat.

    People *aren’t* rational. But they should be free to make their choices and bear the consequences of those voluntary choices.

    Governments can’t frame things in a way that don’t influence decisions at all. They’re populated with holier-than-thou, self-righteous twats who know better than everyone else. That’s why they’re dangerous.

    And people shouldn’t be “nudged” into a different way of life because some politician, or even worse, an entirely unaccountable faceless bureaucrat thinks he knows better.

    And speaking of nudging, seriously, you quote a book that advocates governments influencing things as a basis for governments influencing things? What did you think they were going to say?

    This whole post is so silly, I don’t know where to begin or end pulling it apart. I’ll leave it there.

    • #11 by Unlearningecon on December 23, 2011 - 2:34 pm

      ‘I’m sorry, this doesn’t make a blind bit of sense to me. Next thing you’ll be saying all cars should look the same, be engineered the same, have the same fabric on the seats, because that’s the libertarian thing to do.’

      Erm, what? I’m not advocating Communism – that was an astoundingly poor reductio ad absurdum.

      ‘The difference between Audi’s advertising and government diktat is simple: I can choose to ignore or accept Audi’s smooth words, there are other options but I can’t choose to ignore government diktat.’

      That is simply not how people operate. They make decisions based on rules of thumb, heuristics and biases. An Audi advert can work because – among other reasons – the availability heuristic will come into play when someone’s buying a car. It’s not about being ‘free’ to do anything.

      ‘People *aren’t* rational. But they should be free to make their choices and bear the consequences of those voluntary choices.’

      People are influenced by a lot of things and they can never make their choices neutrally – they are always nudged into one outcome or another. The only safe conclusion is that decisions need to be steered into something positive.

      ‘Governments can’t frame things in a way that don’t influence decisions at all. They’re populated with holier-than-thou, self-righteous twats who know better than everyone else. That’s why they’re dangerous.’

      Correct, at least on the first point. Decisions are always influenced by state apparatus so the libertarian idea of being ‘free to choose’ is nonsensical.

      ‘And people shouldn’t be “nudged” into a different way of life because some politician, or even worse, an entirely unaccountable faceless bureaucrat thinks he knows better.’

      But the shareholders and CEOs of corporations are allowed to nudge people into whatever way of life they will profit from? You are implicitly assuming ‘nudge neutrality’ in the absence of government.

      ‘And speaking of nudging, seriously, you quote a book that advocates governments influencing things as a basis for governments influencing things? What did you think they were going to say?’

      This isn’t an argument so I can’t respond to it. I mean, at least read the book!

      ‘This whole post is so silly, I don’t know where to begin or end pulling it apart. I’ll leave it there.’

      It doesn’t make sense to you because you are so deep into a neoclassical/libertarian hole. If you try to pull it apart it will just be more typical libertarian ranting about politicians, overuse/misuse of the word ‘free’ and a lot of hidden assumptions and framing issues that I will have to discuss with you for about 30 posts.

  7. #12 by Jacob S. on December 23, 2011 - 8:40 am

    @darjeelingzen ‘s video response to @UnlearningEcon ‘s contentions about libertarian theory and Neoclassic economics: http://youtu.be/Kyr9thKs5nw

    • #13 by AZ on December 26, 2011 - 10:09 am

      Interesting… I think darjeelingzen has correctly sensed that the argument here is not terribly coherent because it does not identify exactly who libertarians are. Indeed, “libertarianism” means different things to different people, and it would have been better had unlearningecon provided a detailed outline of his understanding of libertarianism at the beginning of the post. Even better, perhaps, would have been to focus the critique on one specific libertarian’s theory.

      My feeling is that what offends unlearningecon can be summarized as follows:

      The combination of ethical foundations of libertarianism and efficiency arguments from economics creates a formidable, or formidable-seeming, political theory with which to analyze the world. This theory seems especially appealing because it contains semi-scientific elements, such as ideas of comparative advantage, which other political theories lack. However, in unlearningecon’s estimation, people would not be swayed nearly as much by these ideas if they were aware of the serious logical gaps in the arguments coming from economics.

      Along these lines, I think it is instructive to elaborate on the belief that government taxes are theft, which is one place where I think darjeelingzen makes a weak argument against unlearningecon. Darjeelingzen’s argument is that the quote “pretax income is just a money flow that has arisen due to the institutions set up by government, and as a result of the way these institutions were set up” would apply equally well if “government” were replaced by “the Mafia”. Since people generally agree that extortion by the Mafia is theft, we cannot therefore conclude that taxation is not theft.

      Darjeelingzen takes the quote of context, as the quote does not represent the crux of unlearningecon’s argument. It is logically coherent to believe that taxation represents an overreach of government power constituting theft. However, one can only coherently hold this belief at the cost of repudiating all government systems which use taxation. Few people would go this far.

      In reality, taxation as theft is too extreme a view for the vast majority of people to hold seriously (it is still a popular quip for those who are mainly interested in rhetoric). Most people believe that the best level of government power lies somewhere between anarchy and totalitarianism, but there are differing views on what level of government is morally just and what level(s) of government are economically optimal. Perhaps what people really mean is that *excess* taxation is theft–it leads to an economically suboptimal level of government, costing people wealth. But calling something “theft” is also a moral judgment, so implied here is some equivalence of economically optimal and morally just levels of government.

      Libertarians maintain that the best level of government is quite low. There is nothing immediately wrong with this belief if they mean “best” in either the sense of justice or the sense of economic optimality alone. When they engage in rhetoric like “taxation is theft” (and to their credit, most do not), the implication is that these two notions of “best” coincide under their framework. The justification comes from neoclassical economics, which shows that free markets are efficient in a certain sense; with a few logical leaps, one intuits that small government leads to free markets leads to efficiency.

      However, because of the essential role of government in markets, there is no conclusive evidence that the libertarian’s version of government would in fact lead to economic outcomes that are optimal in any usual sense. Implicit in unlearningecon’s argument is that taxation cannot be separated from government (in particular, government generally cannot exist without taxation); since having taxation-and-government most likely increases your wealth in relation to the alternative, it cannot be regarded as theft. The quote cited by darjeelingzen was part of unlearningecon’s attempt to explain this larger point. The Mafia example is different because extortion-and-Mafia is not preferable over the alternative. Once we discredit the libertarian’s justification that very limited government leads to economic optimality, mantras like “taxation is theft” are nothing more than ideology.

    • #15 by Unlearningecon on December 26, 2011 - 4:23 pm

      I am writing another post, but a couple of small points:

      (1) I did not actually read that Wikipedia article. I have just come to conflate the two schools because of my repeated encounters with them and the fact that they often present similar arguments (with similar flaws).

      (2) The point about the Mafia: if we just changed the name to ‘The Mafia’ but they were performing the exact same role as the government, legitimately, then I would not consider it theft.

      My argument doesn’t stem from the validity of the use of force because it is used – that would be begging the question. Instead, it stems from the observation that income is not solely ‘earned’ by an individual but derived from the system he is in, and as such a portion of that ‘income’ going to the system should not be considered theft.

      (3) The ‘workers are consumers’ evades my point. My point is that workers are placed in hierarchical institutions in which they have little to no control over the conditions. The idea that this is OK because, when they are not working, they can demand products they want opens up a massive ethical can of worms (see Thorstein Veblen).

      (4) No offence but did you even follow any of my links? I provided some throughout to support my assertions with evidence and to prove I wasn’t attacking straw men.

      OK, I appreciate that the links i gave were to slightly insane people like Caplan, who does all of the things I listed (read my sticky wages post and the links to him in it). However, if an ideology seems to invite those types of people – which libertarianism honestly seems to – surely it reflects at least something about the ideology? One thing I rarely/never see said about liberals is that they are nutty or insane.

      The force thing is a red herring, because Caplan’s argument actually wasn’t really about force. It was more about policy prescriptions – he doesn’t like democracy because it doesn’t come to free market conclusions. He thinks that voters are ‘irrational’ because they don’t see the world like free market economists. This is silliness!

      An example of the ‘no starting point considerations’ is Thatcher/Reagan. They wanted to make their countries more like Hong Kong so they just deregulated and privatised willy nilly. Naturally, what followed shows that you have to consider the starting points – China, for example, have a mixture of ad-hoc public private policies and are gradually moving from state control to Western style capitalism. Had they just gone all out from the get-go, do you think it’s fair to say it would have been successful? Look what happened in the former USSR when they did that.

      (5) Stagflation is not theoretically impossible in Keynesianism, only in neoclassical-synthesis Keynesianism which uses the Phillips Curve (interpreted completely wrongly from what Phillips said, btw, and rejected by Keynes).

      http://socialdemocracy21stcentury.blogspot.com/2011/06/stagflation-in-1970s-post-keynesian.html

  8. #18 by Jacob S. on December 28, 2011 - 8:15 pm

    My reply to Moira’s response: http://youtu.be/Gj4bXMkSgO0

    • #19 by Jacob S. on December 29, 2011 - 7:38 am

      Perhaps I have not made myself clear, as I am perceiving the impression, that perhaps my position has been misunderstood; it is not my position that, “government by consent is a contract”, rather I argue that meaning of the phrase implicit in Moira’s use of it, seems to imply the hidden premise of ‘previous consent’ of individuals, which perhaps comes from some kind of contract theory. The arguments that followed, demonstrate why the presupposed contract, would in no way conform to any other kind contract (non-producible, no signatories, unequal parties, ‘consent’ under duress, ‘consent’ assumed by mere birth, no admittance of impartial third parties to arbitrate, etc, etc. a fubar contract, if we may permit the expression) and could in no way serve as a legitimate agreement between parties.

      The Magna Carta, the Constitution, the King as feudal overlord and theocratic ruler, are all representations of the hidden premise, that some should rule and others should be ruled; to a lesser and greater extent of course.

      It is my position, that there has never been any legitimate consent for any of it, and how could there be? Why would any one consent to be ruled? And even if one did decide to be ruled, why would they not put their dominion under auction, to get the best ruler possible, negotiate for terms at a good price, to get the best security for the lowest possible price? But why would even this indentured servitude even be necessary? If the ruler, was ever supposed to be providing a service, called security, why commit forever? Why not negotiate on a yearly basis with mercenary companies or perhaps various private security firms? Why commit to one ruler indefinitely, why the patriotic propaganda, why the requirement that some religious notion justifies the rulers, why the need to falsely justify such couched in the terms of a rational ethic such as “consent of the governed”, unless the entire program is truly one of ruler-ship backed by force, taking the form, not of consent of the governed, but the coercion of the ruled; and these various means of propaganda are instituted to create cognitive dissonance in the feeble-minded?
      As Thoreau has written: “Must the citizen ever for a moment, or in the least degree, resign his conscience to the legislator? Why has every man a conscience then? I think that we should be men first, and subjects afterward. It is not desirable to cultivate a respect for the law, so much as for the right. The only obligation which I have a right to assume is to do at any time what I think right.”

      I am very pleased with Moria’s statement, “Any party to the contract can decide there is a breach.” As this could be interpreted as a admirable stand for ethics and human rights; I just hope that the assumption of the contract, whose terms are bare assertions at best, does not then imply that individuals who claim a breach of this apparition of a contract, are then presumed to be due some punishment or forced removal from some arbitrary geographic borders. For it should not be the individuals who claim breach of the supposed contract that should have to be responsible for damages, but for if any party has the right to compensation, it would be the the non-consenting individuals themselves:

      I am reminded of this letter by J.W. Logen, which I believe is quite appropriate as a capstone to the topics we have discussed so far, Loguen had escaped slavery and lived in Syracuse, where his memoir of his days in slavery had come to the attention of his former master’s widowed wife, who had sent him a request for $1,000 of compensation for his escape to freedom. Loguen’s reply to her was printed in the abolitionist newspaper, The Liberator:

      Mrs. Sarah Logue.
      .. . You say you have offers to buy me, and that you shall sell me if I do not send you $1000, and in the same breath and almost in the same sentence, you say, “You know we raised you as we did our own children.” Woman, did you raise your own children for the market? Did you raise them for the whipping post? Did you raise them to be driven off, bound to a coffle in chains? . .. Shame on you!
      But you say I am a thief, because I took the old mare along with me. Have you got to learn that I had a better right to the old mare, as you call her, than Manasseth Logue had to me? Is it a greater sin for me to steal his horse, than it was for him to rob my mother’s cradle, and steal me? . .. Have you got to learn that human rights are mutual and reciprocal, and if you take my liberty and life, you forfeit your own liberty and life? Before God and high heaven, is there a law for one man which is not a law for every other man?
      If you or any other speculator on my body and rights, wish to know how I regard my rights, they need but come here, and lay their hands on me to enslave me.. . .
      Yours, etc. J. W. Loguen

      So to Moira’s new questions: “To what extent is this dichotomy translated into the modern government?” and “To what extent are these same principles reflected through libertarianism and neoclassical economics?”
      The dichotomy persists in modern government to the extent that the many are ruled by the few, who call themselves under various names of “representative” and “agent”, and the difference is now the “agents” largely remain constant but the “representatives” rotate around periodically. The consent of individuals is not needed, as it is presumed by the assertion of the ruling party and the dismally deficient contract is enforced, ultimately at the point of a gun.
      As Thoreau wrote, “The State never intentionally confronts a man’s sense, intellectual or moral, but only his body, his senses. It is not armed with superior wit or honesty, but with superior physical strength. I was not born to be forced. I will breathe after my own fashion. Let us see who is the strongest.”

      “To what extent are these same principles reflected through libertarianism and neoclassical economics?”
      I want to be as kind as possible to UnlearningEcon, for in all of our interactions, UnlearningEcon has been most gracious, but in my humble estimation, the connection is tenuous at best. My best explication of the argument thus far, is that UnlearningEcon seems focused on the relative similarities of the conclusions of both Neoclassical economics and libertarians (that in UnlearningEcon’s estimation both conclude with, “government=bad” therefore, both must be equivalent), yet it is my estimation is their premises differ significantly. This is why I have attempted to discuss his/her thesis on the level of ethics to show, how while I come to a similar conclusions, yet I might differ from both. UnlearningEcon ‘s true argument seems to me, to be really, that government is good. A premise that I do not think that UnlearningEcon has made explicit or defended…

  9. #20 by Jacob S. on December 29, 2011 - 7:26 pm

    “If all mankind minus one, were of one opinion, and only one person were of the contrary opinion, mankind would be no more justified in silencing that one person, than he, if he had the power, would be justified in silencing mankind.” ~ John Stuart Mill

  10. #21 by Jacob S. on December 29, 2011 - 7:56 pm

    To really support this thesis, the kind of evidence I would expect, would be various libertarians, across the entire spectrum of libertarian ideology (not just a few, or a few from a particular sub-set), themselves either 1.) Self-identifying themselves as Neoclassical economists OR 2.) Espousing EVERY essential tenet of Neoclassical economics.

    (even then, this wouldn’t be conclusive evidence, until we had ALL libertarians on record doing the same, but it would be something upon which you could “hang your hat”)

    @UnlearningEcon has worked on the very beginnings of the second approach in the second article related to this one, but it seems by no means well developed. It is fallacious to look at the possible similarities of the conclusions of Neoclassical economics and libertarianism and thereby reason that their premises must be identical; for there may be several different sets of premises that might lead one to similar conclusions on one particular aspect or another…. just because you can find some agreement between Democrats and Republicans, doesn’t mean that they begin with ALL of the same premises (though they might share some, or even quite a few)

    Furthermore… even if this evidence could be presented, what then? If libertarians are somehow shown to have strong connection to the premises of Neoclassical economics…. has genuine and explicit argument been put forth that Neoclassical economics is untenable? And what if we show that it is completely untenable? Won’t the libertarians, merely just readjust their economic beliefs to something more defensible? Where is the payoff to this discussion? I feel that this discussion, either has some ulterior motives… or is misguided from the start. If there is some hidden or implicit argument that is at the heart of this discussion, I would be curious for some on the boards who find agreement with the original thesis to make an attempt to make that argument or premise clear.

    Thank you. :-)
    @darjeelingzen

    • #22 by Unlearningecon on December 29, 2011 - 8:17 pm

      I think you have misinterpreted what I’m trying to say.This is not based on conclusions, but rather general world view. Many of the conclusions of neoclassical economics could be described as left leaning.

      What I’m saying is that libertarianism transposes economic assumptions and framing onto ethical argument. The libertarian idea of being free to choose is based on rational economic man from neoclassicism. The libertarian idea of capitalism and trade spontaneously arising out of more or less nowhere is analogous to neoclassicism, which completely neglects historical and political context. The libertarian framing issues as markets versus governments is straight out of neoclassical economics.

      However, once you criticise this framing (which I have done elsewhere), it raises a lot of ethical problems for libertarians. Free to choose becomes nonsensical. It becomes apparent that force fraud and theft’ is not all that’s necessary to create the social dynamics required for trade to function effectively.

      And neoclassical economics has been demolished repeatedly by Sraffa, Keen, Hudson, Smith, Orrell, Vienneau, Chang and any number of their followers, as well as by the repeated crises that it is unable to model or predict.

      Economics cannot be value free, and the values it does present are prevalent in libertarianism – I’d strongly recommend checking out a book called ‘The Skeptical Economist’ by Jonathan Aldred, which explores this point in more detail. Also here:

      http://anarchism.pageabode.com/afaq/secC1.html#secc11

      I don’t have an ulterior motive – I am simply trying to show libertarians that a lot of their ideas are built on flawed premises.

      • #23 by moiracathleen (@moiracathleen) on December 30, 2011 - 2:19 am

        “free to choose becomes nonsensical.”

        Is freedom as choice nonsensical when it is balanced with equality? Government as a mechanism that balances free to choose with equal opportunity. Free to choose probably does become nonsensical when not balanced with equality because one person’s choice will necessarily infringe on another person’s choice unless there is some mechanism that will balance free to choose principle with equal opportunity.

      • #24 by Jacob S. on December 30, 2011 - 7:50 am

        Thank you so much! This explanation clears up a lot of the question-marks in my head, regarding this thesis. I do have a few more questions.

        “I think you have misinterpreted what I’m trying to say. This is not based on conclusions, but rather general world view.”
        Are you referring to your world-view, or the world-view that you claim the libertarians have? For now, I’ll assume you mean the what you perceive as the world-view of the libertarians. What do you mean by ‘world-view’? Are you referring to a general psychological insight or to basic philosophical assumptions? I would like to assume that you mean philosophical assumptions but I hope we are not venturing into the realm of psychology here…. for that would really begin to obfuscate the thesis…

        “Many of the conclusions of neoclassical economics could be described as left leaning.”
        Could you define “left-leaning”? What is the significance of this phrase? Let us say that it is true, why is this an important or significant statement?

        “What I’m saying is that libertarianism transposes economic assumptions and framing onto ethical argument.”
        What is your evidence for this? I would expect that the evidence required to verify this statement, we would need the intellectual history of at least several, to perhaps include a significant majority of so-called ‘libertarians’, to demonstrate that when they began to accept various ‘Neoclassic’ principles, this lead them to the ethical argument of ‘libertarianism’. Other wise, what would stop the ideational causation from moving in the other direction? Why couldn’t a libertarian accept the basic ethical arguments first, which lead them to look for political and economic positions consistent with that ethical position? This seems to me to be the far more reasonable progression in my own experience. People are rarely persuaded by arguments to utility or greater economic production, as these arguments are too theoretical with no empirical evidence that can be brought to bear in either direction (as history is a subject that cannot claim to be able to control for variables), and theory is always confined to premises and the conclusions derived from reasoning from those premises.

        “The libertarian idea of being free to choose is based on rational economic man from neoclassicism.”
        I think I already went over this, but if we permit Austrian economics to have voice in the matter, the ‘rational economic man’ in Austrian school economics, does not seem to conform to the ‘rational man’ as a phrase that you seem to refer. The Austrian derives rationality from the actions of persons as a kind of tautology, given the Austrian’s praxeological premises, that people act, due to a condition of felt uneasiness (they somehow feel dissatisfied with their conditions) and they select from their available means (possible actions they might take) to affect a more preferable end-state. Therefore, for Austrian economics, the volitional actions of all persons, may be said to be rational, in as much as people are selecting the means, that they themselves, think most efficacious to produce a preferred end-state. This isn’t the kind of “rational” that might mean that all people are at high-level of intellectual functioning in the means selection, or in their ability to predict the actual outcomes of selected means. It does not mean “rational” as one who does not consider subjectively felt emotional needs/desires; in fact Austrian economics embraces the subjective nature of value and preference. For the Austrian, ‘rational’ only means, the selection of means (possible actions) that for affectation of producing a more preferable end-state. It is possible however, though I do not claim to have the evidence to support this, that Rand and the Objectivists might themselves accept the ‘rational man’ in the way you seem to use the phrase, as their theory of value is like the Neoclassic objective value theory (as contrasted with the Austrian theory of value which is subjective – a radical departure). Also, I do not believe there is anything inconsistent the Austrian praxeology and the idea of ‘rational’ and the idea that people might be variously affected through a variety of influences, manipulations or exploitations. Ultimately, the praxeological assumptions of Austrian economics, are not propositions that are derived empirically or inductively, and therefore, could not be denied through empirical evidence, rather they are derived a priori through deductive reasoning, and would require a argument appealing to more fundamental/consistent premises, in order to deny the premises.

        “The libertarian idea of capitalism and trade spontaneously arising out of more or less nowhere is analogous to neoclassicism, which completely neglects historical and political context.”
        If we make an ethical critique, in the 1840′s, about the issue of slavery, would an appeal to the use of slavery in history be relevant to the ethical critique? Are the historical and political contexts relevant to philosophical questions? To say that ‘slavery has always existed, from time immemorial’ does not appear to me, to be a reasoned philosophical argument legitimizing the institution of slavery. (Indeed, one could say it commits the fallacy of arguing from tradition) Also, could you define your meaning of ‘capitalism’ for me?

        “The libertarian framing issues as markets versus governments is straight out of neoclassical economics.”
        Even if we accept that neoclassical economics makes similar critiques, why are we to assume that libertarians and neoclassical economics are connected? Couldn’t they have similar conclusions based on different premises? If so, it would seem to me, that the thesis should criticize the actual conclusions without using the terms ‘libertarian’ or ‘neoclassical economics’ and if not, then it would similarly appear to me, that they thesis should be reframed to criticize the premises, again without the use of ‘libertarian’ or ‘neoclassical economics’. As the terms for both are slightly amorphous, without commonly agreed to definitions, while you might provide your own definitions, people can reject your argument by simply rejecting your definitions (or just saying that your definitions beg the question). I feel that your thesis is getting better as you are in the process of refining it but there is still a lot of smoke. I’m already of the changed opinion (not definitive but cautiously acceptant) that Rand and the Objectivists might have overly relied on Neoclassical economics and are vulnerable to its criticisms; while Mises and Rothbard would still emerge unscathed as they rejected many core premises of Neoclassical economics.
        “However, once you criticize this framing (which I have done elsewhere), it raises a lot of ethical problems for libertarians. Free to choose becomes nonsensical.”
        Unless this is just a figure of speech, I think a lot of clarity and development is needed to justify the ‘nonsensical’ nature of ‘free to choose’. There seem to be hidden premises here which might justify the thesis, but as it stands, it appears to hang upon nothing, a bare assertion.
        “It becomes apparent that force fraud and theft’ is not all that’s necessary to create the social dynamics required for trade to function effectively.”
        Did you possibly make an error in the construction of this sentence? I would think it obvious that libertarians are making the opposite argument; that force, coercion and theft are diametrically opposed to free trade or voluntary interactions between persons. The utility argument of many libertarians is that that trade and all social interactions are more productive (they satisfy more of the human wants and needs than they would otherwise) when force, coercion and theft are absent.
        “And neoclassical economics has been demolished repeatedly by Sraffa, Keen, Hudson, Smith, Orrell, Vienneau, Chang and any number of their followers, as well as by the repeated crises that it is unable to model or predict.”
        The Austrian economic model would have this in common with the Neoclassical model, that modeling and prediction are theoretically impossible to do verifiably. This comes as a result of the subjective theory of value of Austrians, if something is only valuable, because it fulfills a human want/need and is at least in some respects, scare, then it is impossible for economists to model or predict economic systems (though they can make possible explanations). This is not to say that Austrian economists never try to predict, but rather they think those predictions are necessarily always imperfect and are more a function of experience and intuition, than calculations. Because people act to remove or ease, a feeling of felt uneasiness, by a selection of means to affect ends, an economist who would wish to model or predict an economic system in real-time, would need as her data, the thoughts and valuations of each individual in real-time, and have the knowledge of how those thoughts and valuations would change in the future; for this is the true economic system, not a conglomerate of GDP, but of individuals acting upon subjective preferences, each with their own part to play in the over-all aggregate, which is nothing more than a conception for a reality, that our minds are unable to fully comprehend simultaneously (such would require the king of omniscience that might allow one to follow the motion of every sub-atomic particle in a solar system). Therefore, the Austrians make little effort to try to mathematically model or predict economic systems. Perhaps when the data becomes available, and each mind might be tapped for subjective preferences and chosen means, then such modeling would be more than a Ptolemaic system.
        “Economics cannot be value free, and the values it does present are prevalent in libertarianism”
        You’ll need to explain this, as it is not clear to me why economics couldn’t have a value-free theory but it is also not clear to me, why economics shouldn’t have a value-free theory

        “I don’t have an ulterior motive other than trying to show libertarians that a lot of their ideas are built on flawed premises.”
        I do not wish to be overly-critical and I do not accuse you of ill-will as you seem genuine and sincere in wanting to really discuss these ideas but there appear, in my humble estimation a mine-field of undeveloped or hidden premises (those which are assumed but not explained or justified) in your original thesis and I am getting the sense that there might be better ways to approach the thesis you intend to make in a much clearer way. I would really like to thank you and your contributors, as I expected to make only a few replies to the original post and discretely exit when the discussion became uncivil, but to your credit and those of your contributors, the discussion, though contentious, has nearly always remained polite and civil and that’s a real commendation to any blogger who wishes to spread ideas within an interested community. This last response you have given me is already much clearer and perhaps it is my inherent misunderstandings or lack of intellectual capacity to grasp that which is beyond my reach but if I might make a few humble suggestions: for any term you might choose, no matter how much you think others would agree with your definition and use of the term, always make the definition explicit, try to avoid generalizations and strong general language (such as “all libertarians….” there’s always somebody that doesn’t fit into the general group but they still self-identify), acknowledge that there are other uses of the term, but remind people, that for the sake of discussion, to agree to your definition of the term; if there is still contention, then rather than use a term or label at all, use the definition instead, and you’ll know what you mean, and those that object to the label itself, have lost ground to contend with you.

        Also, really try to make your arguments as clearly as possible, use criticism to strength your argument, not as an accuse to attack your critics (I’m not saying that you’ve done that, I’m just saying it’s a tendency many people have) but let people know that you made a change to your position (they’ll feel like you’re really listening to them {and I hope you are} if they know that occasionally you make modifications to your position in response to criticism).

        Remember the distinction between deductive and inductive reasoning, don’t use inductive reasoning against a deductive argument. Deductive arguments must be attacked either in their premises or in their reasoning, but never the conclusions (for if the premises and reasoning are sound, then the conclusions are sound by definition). Inductive reasoning can most successfully attacked at their conclusions (which are never definitive) or in the factual claims (but this is less productive and requires field-work & hard evidence).

        Try to explain every idea, term, and argument, as if your audience is hearing all of your ideas, terms and arguments for the first time.

        If you think it would be productive, perhaps we should chat on a Google+ Hangout sometime. :-)

        Thank you for your response and your clarifications. :-D
        @darjeelingzen

      • #25 by Jacob S. on January 1, 2012 - 7:09 am

      • #26 by Unlearningecon on January 1, 2012 - 4:24 pm

        Hmm I’d be careful with Mises.org, they aren’t exactly a shining beacon in the world of scholarship. When you criticise Say’s Law they seem to retreat to a tautological reiteration of it and evade the issue.

        Also ,bear in mind that Say seems to have concede that demand-side recessions could occur:

        http://socialdemocracy21stcentury.blogspot.com/2011/12/say-repudiated-says-law.html

        http://socialdemocracy21stcentury.blogspot.com/2011/12/jean-baptiste-say-on-failures-of.html

        The post you linked me to seems to go on an awful lot about how Keynes himself and his supporters but doesn’t make many arguments. They don’t even mention liquidity preference!

  11. #27 by Unlearningecon on January 1, 2012 - 4:48 pm

    My latest post addresses some of your points, particularly the ‘free to choose’ issue which keeps coming up. I’d recommend ‘Nudge’ by Thaler and Sunstein to get a better idea of where I’m coming from.

    ‘Are you referring to your world-view, or ‘

    If you look at my post ‘how to unlearn economics’ it addresses my problems with the perceptions of neoclassical economists. I feel many libertarians approach issues from a similar perspective.

    ‘Could you define “left-leaning”? What is the significance of this phrase? Let us say that it is true, why is this an important or significant statement?’

    Left leaning meaning a substantial positive role for government. I’d say the average professor would advocate some public healthcare and education, as well as regulation and environmental measures.

    It’s relevant because you are focusing on the similarities of conclusions between neoclassicism and libertarianism. My point is that the conclusions of neoclassicism – as opposed to those of libertarianism – are actually fairly moderate, and my focus is not at all on conclusions.

    ‘Why couldn’t a libertarian accept the basic ethical arguments first, which lead them to look for political and economic positions consistent with that ethical position? This seems to me to be the far more reasonable progression in my own experience.’

    Neoclassicism predates modern ‘libertarianism’, which was initially a word used to describe anarchists. I have detailed the areas where I feel they cross over elsewhere.

    Praxeology basically rejects objective reality and says ‘whatever people do they did it for a reason so shhh’. I know this sounds dismissive and isn’t an actual argument, but this kind of thinking is simply ridiculous and was falsified centuries ago, most notably by Immanuel Kant.

    My view of human actions is that they can be objectively evaluated and we can infer various cognitive biases from them and come to conclusions about how and why they were taken.

    ‘To say that ‘slavery has always existed, from time immemorial’ does not appear to me, to be a reasoned philosophical argument legitimizing the institution of slavery. (Indeed, one could say it commits the fallacy of arguing from tradition)’

    These two claims are highly different:

    (1) Capitalism requires social and political institutions to function.
    (2) Slavery is OK because it has existed.

    (2) Is simply begging the question, whereas it is possible to explore (1) empirically, which I did briefly in my post. There are 0 examples of capitalism spontaneously arising without social/political institutions or without people who had previously experienced capitalism. Also ,if you look at the former USSR, Chile etc., they are primary examples of ‘capitalist’ reforms being steamed through without any consideration for this fact, and it not working.

    ‘Also, could you define your meaning of ‘capitalism’ for me?’

    Bit of a red herring, but I guess ‘private ownership of the means of production’ and the wage system are the best way to define capitalism.

    You are right that I haven’t fully explored my premises – I guess I rely on a fair amount of intuition. For example, take governments versus markets. Do you think it is more likely that this is an ethical premise or an economic one? To me, the answer seems obvious, and the fact that neoclassical framing predates the real ‘surge’ of the new libertarian movement (Mont Pelerin Society etc.) supports this.

    But perhaps the question of which came first is a red herring – my main point is that the two are intertwined. Thus, I think many of my criticisms are still valid even if libertarianism *did* precede neoclassicism.

  1. Libertarianism is an Ideology Built on Neoclassical Economics « Ако знам све знање, а љубави немам, ништа сам
  2. The Different Types of Libertarian « Unlearning Economics
  3. Libertarianism and Neoclassicism: Rebuttals to Some Objections « Unlearning Economics
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