Monday, August 15, 2005

A Non-Paradox for Libertarians

In "A Paradox for Libertarians" I said:
Some aspects of liberty must be circumscribed in order to preserve most aspects of liberty.
That statement pertains to such matters as freedom of speech (which can't be absolute if society is to defend itself effectively) and the apparent (but debatable) necessity of taxation to defray the cost of defending liberty.

Glen Whitman, writing at Agoraphilia, raises a parallel issue, which I'll state after quoting Whitman.
[T]ake Alex [Tabarrok]’s hypothetical, posed to him (and Robin Hanson) by a philosopher:
Suppose that you had a million children and you could give each of them a better life but only if one of them had a very, very terrible life. Would you do it?
Alex and Robin, both economists, said “yes” without hesitation. But to the philosopher who posed the question, the intuitively correct answer was clearly “no.” Who’s right? Alex suggests that we should simply overcome our gut intuitions and think logically here, and the logical answer is to favor the greatest good. Will [Wilkinson of The Fly Bottle] and Carina [Cilluffo of An Inclination to Criticize] both correctly reply that Alex, too, is relying on intuition – the utilitarian intuition that we can (in some rough-and-ready way) compare satisfaction across persons. So we can never fully escape the appeal to intuition.

But does that observation dispose of the matter? Can we just pick out our favorite intuition and run with it? Alex is still right that our intuitions are inconsistent. One intuition tells us that individuals have personal claims that should never be violated. Fine. But another intuition tells us it’s absurd to impose monstrous losses for miniscule gains. The lifeboat situation is a classic example of where this alternative intuition kicks in. . . .

Moreover, it turns out the intuition that answers “no” to Alex’s hypothetical is highly dependent on the frame of reference. . . .

. . . Take Alex’s original hypothetical, but add in some extra context:
The million children who stand to gain are the starving and oppressed people of an African nation. The one child who stands to lose is the son of the local tyrant.
Feel free to modify the context to explain why the tyrant’s son’s life will suck after his dad is dethroned. With the context filled in, I suspect most who said “no” before will say “yes” now. Why? Because we no longer think the status quo creates any rightful claims to its continuation. . . .
The parallel issue raised by Whitman is this: What if a society's transition from a regulatory-welfare regime to a regime of liberty were to result in losers as well as winners? How could one then justify such a transition? Must the justification rest on an intuitive judgment about the superiority of liberty? Might the prospect of creating losers somehow nullify the promse of creating winners?

I argue here that my justification for libertarianism -- although it is of the consequentialist-utilitarian variety -- rests on a stronger foundation than an intuitive judgment about the superiority of liberty. As I wrote in Part III of "Practical Libertarianism":
The virtue of libertarianism, as I will discuss in Parts IV and V [and its addendum], is not that it must be taken on faith but that, in practice, it yields superior consequences. Superior consequences for whom, you may ask. And I will answer: for all but those who don't wish to play by the rules of libertarianism; that is, for all but predators and parasites.
By predators, I mean those who would take liberty from others, either directly (e.g., through murder and theft) or through the coercive power of the state (e.g., through smoking bans and licensing laws). By parasites, I mean those who seek to advance their self-interest through the coercive power of the state rather than through their own efforts (e.g., through corporate welfare and regulatory protection). There is, of course, a lot of collusion between predators and parasites. (See Bruce Yandle's "Bootleggers and Baptists - The Education of a Regulatory Economist.")

To borrow from Glen Whitman, why should we favor the status quo in order to give privileged status to predators and parasites? I dismiss them out of hand.

The only potential losers worth thinking about are those seemingly honest, hard-working individuals who might be made worse off by a transition to liberty. But who are those individuals? They are the unwitting predators and parasites who do not actively seek privilege but who nevertheless enjoy it as "free riders" on welfare programs, compulsory unionism, minimum-wage and "living wage" laws, reverse discrimination, special tax exemptions and deductions, tariff protection, and on and on. I dismiss them out of hand because, unwitting as they may be, they are predators and parasites who take from others. (I do not dismiss them out of hand as human beings. I dismiss out of hand any claim that they are privileged by the status quo, which is the product of overt predators and parasites.)

What about those individuals who are neither predators nor parasites but who might be worse off in a state of liberty, in spite of their diligent efforts not to be worse off? I submit that there could be no such individuals because anyone who isn't a predator or parasite must, perforce, be a victim of predators and parasites.

A transition to liberty, as it turns out would benefit almost eveyone, including most predators and parasites. I say that because the likely gains from liberty are so great. First, as I said in Part IV of "Practical Libertarianism,"
think of yourself as a business. You are good at producing certain things -- as a family member, friend, co-worker, employee, or employer -- and you know how to go about producing those things. What you don't know, you can learn through education, experience, and the voluntary counsel of family, friends, co-workers, and employers. But you are unique -- no one but you knows your economic and social preferences. If you are left to your own devices you will make the best decisions about how to run the "business" of getting on with your life. When everyone is similarly empowered, a not-so-miraculous thing happens: As each person gets on with the "business" of his or her own of life, each person tends to make choices that others find congenial. As you reward others with what you produce for them, economically and socially, they reward you in return. If they reward you insufficiently, you can give your "business" to those who will reward you more handsomely. But when government meddles in your affairs -- except to protect you from actual harm -- it damages the network of voluntary associations upon which you depend in order to run your "business" most beneficially to yourself and others. The state can protect your ability to run the "business" of your life, but once you let it tell you how to run your life, you compromise your ability to make choices that are right for you.
In sum, when people are deprived of incentives through taxation, regulation, and welfare, they are less able and willing to strive for themselves. And it is self-striving that leads people to do things that are valued by others. Regulation and welfare impose costs where there otherwise would be no costs, and distort the free-market signals that tell people how they can do better for themselves by doing better for others.

Now, I suppose there are some persons who couldn't handle liberty and who would want their lives shaped by others. If that's the way they want to live, fine, just don't use the state to impose restrictions on the way the rest of us run our lives. There's no reason, in a state of liberty, that those who crave direction could not buy it from others. Given the economic gains from liberty (which I'm about to summarize), there would be a booming market in personal agents of various kinds, not to mention vastly improved information sources and decision tools for the rest of us.

In addition to the nonquantifiable psychic benefits of running one's own life, there are quantifiable economic benefits. Here's the bottom line, drawn from Part V and the addendum to Part V of "Practical Libertarianism":
  • In 2004, real GDP (in year 2000 dollars) was about $10.7 trillion.
  • If government had grown no more meddlesome after 1906, real GDP might have been $18.7 trillion.
  • That is, real GDP per American would have been about $63,000 (in year 2000 dollars) instead of $36,000.
  • That's a loss to the average American of more than 40 percent of the income that he or she might have enjoyed, absent the growth of the regulatory-welfare state in the past 100 years.
  • That loss is in addition to the 40-50 percent of current output which government drains from the productive sectors of the economy.
I submit that only predators and inveterate parasites could possibly be worse off were per capita GDP to rise by 75 percent (the increase from $36,000 to $63,000), and were government to exact a toll of only 10 percent (instead of 40-50 percent) on those who produce. Most of the poor would be rich, by today's standards. And those who remain relatively poor or otherwise incapable of meeting their own needs -- because of age, infirmity, and so on -- would reap voluntary charity from their affluent compatriots. There's a bit of a judgment call in that last statement, but just a bit.

To put it another way, a transition to liberty might not instantly make everyone better off economically, but everyone could be better off. That's simply not the case with the regulatory-welfare state, which robs some for the benefit of others, and ends up making almost everyone poorer than they would be in a state of liberty.

Liberty is a win-win proposition for everyone except those who deserve to lose.