Libertarianism and Neoclassicism: Rebuttals to Some Objections

I received some skeptical feedback on my earlier post contending that Libertarianism is built on Neoclassical Economics. I was expecting this, although what surprised me the most was that the majority of it was from people who do not identify themselves as libertarians.

I should clarify what exactly I mean by ‘libertarian’. Here is a simple outline:

Libertarians:

(1) Generally reject positive liberty and seek only to minimise negative liberty.

(2) Seek to minimise government.

(3) View private property as a vital part of any society.

They differ to some extent; some reject the state completely, such as Rothbard, whilst others actually advocate a reasonable level of public provisions, such as Milton Friedman and Friedrich Hayek. However, a libertarian of any strand would surely accept the above characterisations.

I should also clarify what I mean by ‘built on neoclassical economics’. Libertarians themselves do not necessarily derive their arguments from neoclassicism. However, almost every strand of libertarianism lifts some elements from neoclassical economics, and, had neoclassical economics not been born, libertarianism would not have as clear a framework with which to present the world. As is often the case with blogging, a commenter put it far better than myself:

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.

This is why my post was primarily a critique of the elements of neoclassicism that I believe are most prevalent throughout libertarianism, rather than directly of libertarianism itself.

In my ‘Free to Choose’ paragraph I effectively tried to sum up an entire book in a short space, and apparently did a bad job. The central point is that, though choice is vital to liberty, choices cannot be presented neutrally and as such the idea that a government is ‘intervening’ in our choices when it regulates advertising and bad products is flawed. The fact is that our choices were already ‘intervened’ in by various other things – including already existing state apparatus – and so were being pushed in a certain direction. Thus, pushing choices in a ‘good’ direction (e.g. a healthy food instead of an unhealthy one) is no less libertarian than pushing them in a ‘bad’ direction, but is of course more morally agreeable. The point here: the central neoclassical idea of rationality is at the base of libertarian perceptions of freedom.

I should also follow up on my point on the importance of political and social institutions. Both neoclassical economics and libertarianism ignore historical context and think that trade spontaneously arises wherever property is defined and people are safe from force. However, a quick look at the history of the world would demonstrate this isn’t the case. Western Capitalism never really took off until democratic institutions were established, and ancient Islamic empire created the religious unification and clear boundaries required for trade. As David Graeber details, there are literally zero examples of barter-style economies arising like magic. Again, the cold, calculating machines of neoclassical economics would not ‘need’ these institutions, but real people do.

But I digress; the specific issues can be debated endlessly. My point is that neoclassical economics and libertarianism are intrinsically linked, not because they come to similar conclusions, but because they present the world from a similar point of view. As such, the ethical foundations of libertarianism can often be linked to the assumptions of neoclassical economics, and criticising one often damages the other.

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  1. #1 by Paul Rosenberg (@PaulHRosenberg) on December 29, 2011 - 3:16 pm

    On the subject of always already being subject to influences, are you familiar with the work of work of Jon Hanson, who runs the Situtationist Blog out of Harvard Law? He used to be a Law & Econ guy, and in part because of that has a profound insight into self-blinding that whole approach is.

  2. #4 by yorksranter on December 30, 2011 - 7:26 pm

    whilst others actually advocate a reasonable level of public provisions, such as Milton Friedman and Friedrich Hayek

    …although they defame, attack, and abuse anyone who suggests actually having such a thing.

    • #5 by Unlearningecon on December 30, 2011 - 9:13 pm

      Something that always struck me as strange was that Milton Friedman made arguments against redistribution whilst simultaneously advocating a negative income tax. He also made arguments against other things he actually supported. I’m not sure what the implications of this are, but it seems weird…

  3. #6 by chris y on January 1, 2012 - 4:52 pm

    I’m not sure what the implications of this are, but it seems weird…

    IME this usually means simply that the person in question enjoys having red blooded arguments and will take whatever position is needed to start one when they’re in the mood. It would be interesting to know which of Friedman’s various contradictory positions he actually supported, if any.

    • #7 by Unlearningecon on January 1, 2012 - 5:50 pm

      I think it’s possible that Friedman simply loved arguing – there’s no denying that he was good at it. However, verbal debates – in Friedman’s case, often based on pure logic – are not how public policy should be determined; we need to look at the success of policies in the real world. Here, Friedman doesn’t stand up too well.

  4. #8 by benp on January 1, 2012 - 10:56 pm

    I’m assuming you are aware of the classical defintiion of Libertarianism vis a vis Propertarianism.

    • #9 by Unlearningecon on January 2, 2012 - 3:06 pm

      Are you referring to anarchist libertarianism?

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