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Against A Ruthless Libertarian Criticism of Everything Existing

June 3, 2011

Jeff’s post below inspired some lively discussion. I think that those who Steve Horwitz calls “one-drop libertarians”–those for whom a single drop of association with the state is cause for immediate dismissal of anything that is otherwise a manifestation of free market forces–are missing the point in a couple of ways.

First, consider Las Vegas. Here’s Jeff Tucker’s take from FreedomFest last summer. Vegas is one of my favorite cities because it illustrates just what people can accomplish. Vegas is probably where it is in part because of policies that have distorted markets for water and land, but Vegas still represents a lower bound on what we could achieve if we didn’t have so many hurdles to jump over or taxes, subsidies, and regulations distorting action.

Second, purity tests can lead us to absurd conclusions. Even if you decided to become a hermit, some of the air you would breathe and water you would drink would be air and water that was, somewhere and somehow, cleaned as a result of some kind of government mandate. Whether the state also pollutes is, in this case, irrelevant. Galt’s Gulch might seem like a road to libertarian purity, but think again: when you breathe state-cleaned air and drink state-cleaned water, you’re breathing and drinking communism. Think you’re not living for the sake of another or asking another to live for yours? That’s nice. Enjoy your next deep breath, comrade.

To turn this from absurdity to scholarship, I think the point one-drop libertarians are missing is just how radically different the way firms like Wal-Mart and Taco Bell made their money is from how people have gotten rich historically. A mix of Deirdre McCloskey’s “Bourgeois Era” series and the discussion of limited access and open access social orders by Douglass North, John Joseph Wallis, and Barry Weingast makes me appreciate this even more. The novel thing about modern commercial society is not that Wal-Mart and Taco Bell are occasional (or even regular) beneficiaries of state largesse but that they made their money through production and trade rather than slavery and other forms of expropriation and exploitation.

I forget who said this, but the appropriate question isn’t “where did slavery come from” but “where did freedom come from?” American history is a study in contradiction, with one of the most obvious being that some of the men who signed their names to a document proclaiming that all men are created equal also owned some of these alleged equal men as chattels. And yet the really remarkable thing was the absolutely radical notion not merely that all men are created equal, but that this truth was self-evident. At an IHS seminar I taught at in 2009, the Institute for Justice’s Robert McNamara said something that will stick with me forever, not word-for-word but at least in paraphrase: we Americans have not always lived up to our ideals, but we have always had ideals worth living up to.

Adam Smith was right that “there is much ruin in a nation,” but the ratio of ruin to dignity, liberty, and prosperity has fallen dramatically over the last couple of centuries. The one-drops are missing the point by ignoring this. Yes, we would be wealthier and freer without agricultural subsidies and eminent domain, we would certainly avoid a lot of injustice, and we would probably eat different (and healthier) diets. The remarkable fact, though, is that Taco Bell and Wal-Mart make the lion’s share of their money not by stealing, enslaving, or buying monopoly privileges from a powerful ruler, but by buying and selling things people want in competitive markets. That’s what sets them apart from organizations in traditional rent-seeking societies.

Wal-Mart, for example, hired its first lobbyist in 1998 in part because threats to free trade are threats to the firm’s existence.* What worries me isn’t that that Wal-Mart, Yum! Brands, and other firms have extensive lobbying operations. What worries me is that they would be destroyed if they didn’t.

Finally, a few people touched on this in the comment thread on Jeff’s post, and I hope Steve Horwitz takes this up in one of his FEE columns. It would also make a great paper. In a society soaked with interventionism, how are we to know what the prices would be or what the structure of production would look like without the interventions? We can probably make some adjustments on some margins, but we run into the calculation problem explored by Mises and Hayek. Can we know the prices that would have emerged in the absence of interventionism? If not, what are we to use as guides to action?

*-See Emek Basker’s 2007 paper “The Causes and Consequences of Wal-Mart’s Growth” in the Journal of Economic Perspectives for a summary. The lobbyist info is mentioned page 193.

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