I have a couple of thoughts on libertarianism that I can’t manage to squeeze a whole post out of. So, well, here they are.
Institutionalised law breaking
A major problem I have with the (minarchist) libertarian approach to law enforcement is that it fails to take repeated and systemic violation of laws into account. Libertarians, generally speaking, think that the state should prevent ‘force, theft and fraud‘, but they don’t seem to think this through: these three things are incredibly pervasive and do not only occur as isolated incidents that can be prosecuted on a case-by-case basis. When discussing problems with capitalism, libertarians seem to presuppose a virtually infallible police state where all the problems with regulatory capture melt away and any violations of these three are ‘outside’ the libertarian ideal.
The libertarian blind spot on this point can be seen in Milton Friedman’s view on corporations. Corporations have no social responsibility, except to maximise profit whilst ‘playing by the rules.’ But Friedman failed to realise that, like the regulations he disapproved of, corporations are happy to work around whichever ‘rules of the game’ happen to be in place. Moral considerations tend to melt away under competitive conditions, when things become ‘just business.’ Corporations have long history of force, fraud and theft, and as abstract entities these things simply don’t factor into their considerations. In a system based on private accumulation, they will use their profits to corrupt the legal system, hijack public funds, get the best lawyers, and make their operations as opaque as possible to avoid prosecution, no matter the charge. None of this is a bug of capitalism; it is a feature.
Fraud in particular is an incredibly common phenomenon, and characteristic of any market system – even grocery stores regularly mislabel products to trick consumers into buying more than they otherwise would. At a higher level, there are occurrences like the LIBOR scandal and general fraud surrounding the crisis. Furthermore, the Leveson Inquiry has revealed quite how many resources society has to pour into uncovering past wrongdoing by corporations. It is far more sensible to advocate various transparency standards and requirements that prevent these things from happening in the first place.
The consequence of this is that many regulatory agencies are actually compatible with libertarian aims for what is needed for a functioning market economy. Libertarian counters about regulatory capture simply beg questions about capitalism itself, questions which they surely don’t want to get into.
Governments versus markets, yet again
All too often, I see libertarians respond to a purported problem with markets by saying ‘well government has that problem, too.’ But this is a superficial treatment that can be used as a cookie cutter for any issue, without actually exploring it.
Sometimes we might identify a problem and ask how the government can alleviate it – e.g. information asymmetry can be partially dealt with by various transparency standards. However, more often the correct debate is not ‘x is a problem, what can government do about x’, but ‘x is a problem that causes y - what can government do about y?’
For example, The Radical Subjectivist asks what governments can do to eliminate uncertainty. The answer is: not a lot! Of course they can’t alter the fundamental fact that the future is unknowable. But this doesn’t really get us anywhere; what we really need to ask is what uncertainty leads to. And according to Keynes’ theories, it leads to a rate of interest that is too high to precipitate full employment; it also leads to the use of rules of thumb and waves of optimism and pessimism in financial markets. So policymakers should act to lower the rate of interest, and also stop trade when financial markets become too heated. Notice that at this point the issue we were originally discussing - uncertainty – has become largely irrelevant.
This can be seen particularly with libertarian economist’s reaction to behavioural economics. They respond by saying policymakers have the biases too (and the even more pathetic response that the people who study the biases also have them). But any real treatment of a particular bias will reveal that they create systemic problems that can be identified and remedied through alternative means – for example, Type 1 and Type 2 thinking apply to all people, but somebody who is using Type 1 thinking can easily be exploited by somebody using Type 2 thinking. This is a big problem when signing contracts and requires that people are protected when doing so. The same person who writes the law (and writes the book about the bias) will have the bias. But this doesn’t impede their ability to deal with it on a systemic level.
Of course, it is entirely possible that government cannot do anything about problem ‘y’, or that it would be too expensive, intrusive or what have you. It’s also true that policymakers themselves will suffer from certain biases that will affect their decisions making. But libertarians cannot dismiss every purported problem with markets by suggesting that it also applies to government – this does not engage the specific issue at all, but is a superficial attempt to escape important challenges to their reasoning.