For the Greater Good

… the greater good

Libertarianism is a very diverse ideology there’s a real blend of intellectual systems within it and much of the reason for that is that libertarianism is a purely political philosophy, it doesn’t address how non-political morality should be constructed.  Take me and Jason for instance, unlike Jason I’m a consequentialist so I can’t really get his arguments for liberty as a bottom line. If I believed Socialist style central planning or heavy corporatist industrial policy or Bloomberg style “Public Health” laws improved people’s lives I would be inclined to support them. Of course, this hinges crucially on one’s definition of “improve” (more on that later). This means different people will often have radically different explanations for their libertarianism. Today I want to give you mine.

My path to libertarianism came through my study of economics, and without question the defining issue in 20th Century economics was the Calculation Debate.  This debate was on the merits of central planning, and while grand mal central planning is no longer a live policy issue, I think the calculation debate has insights into the merits of less extreme forms of government intervention.  It has certainly influenced my view of what government can and should do.

The best known interlocutors in the calculation debate (at least in English) were Keynes and Hayek, though this was an issue that extended though the whole profession, starting in the mid-1940s (after World War 2) and ending in the late 1980s (at around the fall of communism).

The pro-calculators argued that markets are fatally flawed (hence the Depression) and the success of war-time economics showed that government could outperform the market in setting prices and production. The development of computers only spurred the pro-calculators on – maybe figuring out prices was too hard in Adam Smith’s day, but surely computers could do it with ease.

The anti-calculators had many replies to this – war and peace are fundamentally different, it would take far less intervention than full industrial policy to prevent another Depression. But I want to focus on two related points that I think are most relevant in a post-socialist political framework:

1)    It is impossibly hard to account for what people want when setting policy.

2)    People tend to react in adverse ways to the policies you set.

These challenges to socialism apply to less interventionist government policy, though to a lesser extent.

The relatively seamless operation of markets belies the enormous complexity of what they do. Markets have to take all the preferences and purchasing power of everyone on the planet, match them against the production capability of every producer of goods and account for the availability of natural and human resources.  Consider this – the human brain is the most complex thing known to exist, and the market is a system that processes information from 7 billion of these brains at once, plus a bunch of other stuff. We haven’t managed to model one human brain yet, the idea that a computer could replicate this work is pure folly.

Central planners are faced with an impossible problem – to figure out what everyone wants and then balance those wants against each other. It’s a problem no one can solve, so in practice they solve a simpler one – decide what people ought to want, and create a plan that produces it. You see this impulse most clearly today with “nanny state” issues like smoking, obesity and drug use. The logic seems to go:

1)    X is unhealthy

2)    It is irrational to harm your own health

3)    It is good to stop people from irrationally harming themselves

4)    Therefore it is good to restrict or even ban X

The problem here is in premise 2. It is good to be healthy, no question. But as someone with a penchant for baked goods I am also acutely aware that it is pretty good to eat double chocolate muffins too. And while I don’t smoke or drink or take drugs, I’m given to understand that people find pleasure in those too. There is no objectively correct way of trading off one good against another, and it is hubris to believe otherwise. This is why I would be unwilling to support Bloomberg style dietary laws even if it was shown they made people healthier. If you stopped me eating cake and hamburgers I’d lose weight, but I wouldn’t thank you for it. Now if my consumption of deliciously fatty food causes measurable harm to others, then some kind of tax may be appropriate (be sure to measure the externality correctly though), but it’s up to me to decide whether the weight gain is worth the deliciousness. Might I be making an error of judgement? Sure, but so might you, and I know my mind better than you do, and I’m the one who bears the consequences one way or the other. What is true of my vice is no less true of others, it is not legitimate to ban or restrict something based on the harm the user does to themselves (there’s room for an exception for children or people with diminished capacity here) not necessarily for moral reasons, but because you can’t be sure you’re actually helping them.

The second problem with central planning defines one of the fundamental differences between the social sciences and the physical sciences. Namely that people are tricky. You can’t just tell people to do something (or not to do something) and assume everyone is just going to go along with it. People will react to your prescriptions. Maybe their reactions will produce outcomes bad enough to wash out the benefits of what you are doing. The classic case here is prohibition. Massive gang violence is a high price to pay to prevent drunkenness. And it didn’t prevent all that much drunkenness since the other way people can react to a ban on something is to keep doing it, but in secret. Adam Smith said it best, decades before communism was even considered:

The man of system, on the contrary, is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests, or to the strong prejudices which may oppose it. He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might choose to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder.

People react to stimuli in very unpredictable ways, and this will trip up the best laid plans.

All too often I see well-meaning liberals and conservatives calling for governments to ban a behaviour apparently assuming that the mere act of banning something will obliterate it. Banning guns does not necessarily disarm criminals (criminals operate in a violent environment and tend to be lax at obeying laws) and banning talk of contraception in sex ed classes doesn’t prevent teens from having sex (you don’t actually have to convince teenagers to have sex, they’ll act on their own initiative). When evaluating a policy it’s vitally important to consider how people will really react to your policy, not how you wish them to react.

Socialism failed because it can’t figure out what people really want and it can’t deal with how people will undermine attempts to control them. While modern forms of government direction, like corporatist economics or lifestyle paternalism, are less encompassing and prescriptive (and therefore suffer from socialism’s problems to a lesser degree), they still have a fraction of the original problem. That doesn’t mean government’s can’t or shouldn’t intervene, but you need to know what you’re getting into. Don’t try to prescribe your outcomes, but rather used market-based incentives (taxes and subsidies, tradeable permits) to get people to change their ways.  And think really carefully about whether someone’s actions are really irrational, or just actions you don’t like. And whatever you do, do your best to understand how people will actually react to your policy, rather than just assuming your good intentions will make everything work out. People can’t be controlled like cogs in a machine. A wise government doesn’t try to.