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Last week I wrote critiquing a vaguely-held but nonetheless influential new-age faith in win-win solutions solving everything. Today I want to talk about its equivalent in economics and hint at a parallel between new-age niceness and Tea Party libertarianism that will be the subject of a later article. Read More
Society
I don't understand your logic. Since society, as you admit, is just made up of individuals, then how can it somehow perceive the needs of the poor, old aged, the children and so on, if it is just made up of people who are interested in short term gains? The same question applies to the government. Why are the people in the government able to subvert their impulsive desire to benefit themselves and work only towards the betterment of the future (particularly when there is a democracy and all the other impulsive, self interested citizens are voting them into power)?
Sorry for the late response,
Sorry for the late response, but I think the reason we can look out for the needy and elderly and so on, is precisely because we are individuals.Everyone is different. Some are well off while others lack financial stability. By giving everyone a voice, you learn about everyone's needs. And also, because we're designed to be impulsive doesn't mean we always are. We often think about what would be a win in the long run (I won't eat that donut (short term loss) because I don't want to get sick (long term win)) nowadays. There are people who do work on impulse, yes, but they generally don't fare as well (impulse buyers).
For your second question, we elect officials who (we believe) look out for the long term. Many criticized Obama because they believed it would hurt us in the long run (but that's a whole other debate that I'd like to stay away from for now). And my statements from above apply to the officials as well. The president can be as corrupt as he wants (short term win), but he knows he will be removed from office (long term loss).
I'm not sure what you mean by
I'm not sure what you mean by "giving everyone voice", but if you are referring to democracy then I would heartily disagree. Democracy is fundamentally about giving the majority power, there can be a myriad of minorities that have differing opinions about legislation, but the majority by and large gets what it wants in a democratic government.
Secondly, you raise a point that I really struggle to understand. If the voters are informed enough, farsighted enough, and caring enough to vote into power people who think they will care for the elderly, the sick, the children, and so on, then why do they need to vote politicians into power to do this in the first place? For instance, if we are smart enough to see that we will need money in old age, then why don't we just save our own money? Why is that we need to have social security forced on as if we are too stupid or impulsive to save our own money?
Fundamentally, either people are good enough and intelligent enough to freely make their own decisions about their lives without being forced to do things by the state, or they are too stupid or too depraved and force must be used despite the fact that the people in the government must also be stupid and depraved. Perhaps I'm wrong, but I see no other alternatives.
I think this is a really
I think this is a really useful way to explain economic thought, and the huge divide between the progressive philosophy and libertarianism (NOT the same thing as being a member of the Tea Party, by the way).
Progressives agree with your understanding that sometimes win-win solutions lead to win-win-lose.
You characterize libertarians as believing that policy should favor win-win scenarios for Pareto-optimality, but this is I would argue that this is incorrect. Libertarians take the next step and recognize the unintended consequences of top-down solutions.
In other words, libertarians really believe in win-win-win-win solutions, that is, win-loss-win transactions forced by top-down policy solutions eventually lead to loss-loss-loss thanks to the 2nd order effects of the loss of information flow that occurs as a result of the band-aid fix. That is to say, society has a remarkable ability to self-correct when allowed to operate without interference from government. So a win-win-loss is really a win-win-loss-win that will over time lead to a win-win-win-win. If that makes any sense, haha. I would direct you to F.A. Hayek's very short (16 pages) essay; "The Use of Knowledge in Society" for a better explanation than I am capable of. That article makes up what I believe is the economic cornerstone of libertarian thought.
So in practice; the win-win transaction between an employer who needs low wage labor, and a a low wage laborer is a win-win solution with a loss to society. So government intervenes and imposes a minimum wage. win-loss-win, right?
The problem is that the minimum wage leads to unemployment (a 2nd order effect) instead of low-skilled workers getting higher pay. So now you have a win-loss-loss-loss as a result of interventions into the market.
Public policy is rife with 2nd order effects. Prohibition leads to Al Capone, Drug war leads to prison-overcrowding and mass graves in Mexico among numerous other 2nd order effects, education policy leads to uneducated students, etc...
I believe that the progressive policy is REALLY about signaling moral wins and ignoring economic effects.
In other words, the real progressive formula is;
win - loss - (short-term moral)win - (long-term societal)loss
And it makes sense that politicians would have the incentive to ignore long term effects, because supporting short-term moral wins is a BIG win-win for votes!
Rife
Hi RFMR,
Thank you for your kind and thoughtful response. I appreciate the argument you make. I understand about 2nd order effects, and the examples your provide are quite familiar to me. My question is are these second orders so rife as to be demand the universal elimination of government? If not, how does one decide where government participation is worth it and where it isn't?
My biggest problem with current libertarian thought is that it oversimplifies the problem by focusing only on government blunders and not on the necessity and more-efficient-than-not functions of government. It pretends that the hard problem of deciding where government belongs and doesn't either is a non-issue or an issue that can be handled either by Friedman's original formulation or by the rule of thumb that less is always better.
That and that libertarianism's surge seems a convenient and disingenuous cover for the Republican agenda, a real case of short-term moral win and the cost of very big society loss.
Libertarianism argues for small government but the medium is the message. Ultimately it seems to be an argument from small thought, no more sophisticated or up to the task of addressing our current issues than the lightest weight hippie platitudes of the 60s.
That's my opinion. I could be dissuaded of it if I heard more than lip service from libertarians about the virtues and necessity of government and how to decided where it belongs and where it doesn't.
Also on unintended consequences, it's worth noting that, since foresight is never anywhere near perfect, all organisms and organizations produce unintended consequences. The larger the organization and the greater its leverage the larger the potential for unintended consequences. What about corporate unintended consequences? You can tell that Libertarians either aren't thinking hard or are thinking hard of ways to ignore evidence so they don't get distracted from their simplistic ideology when you see them turn their backs on for example BP, and the big bank's unintended consequences so that they can maintain their "government makes blunders" argument.
I'd welcome a response. Tell me what I'm missing please, if I'm missing something.
And again, thank you for writing.
Jeremy
The wrong examples
When people talk about corporate unintended consequences, they often look to exactly the examples you provided: BP, big bank failure, etc...
I hope you understand that these are not "corporate" failures so much as "corporatist" failures.
The bank failures either would not have happened or would have had profoundly less negative impact had they not been the huge conglomerates that they are, a factor set in motion when the federal government began pushing for fewer, larger banks in the New Deal. Not only that, Fannie Mae and Freddie Mac, which you and I are now bailing out through taxes, had a huge role to play in the financial crisis because they were carrying out Congress's short-sighted and foolish plan to get people into houses who couldn't afford them. BP is just as much a failure of poorly distributed property rights as it was a single companies failure.
You claim to understand unintended consequences, but your response indicates that you really don't. Because we operate in a mixed economy, it is, frankly, almost never possible to distinguish between a "market" failure or a "governmental" failure.
Most sensible libertarians understand that businesses and corporations can fail just as easily as a government can, but the nuance you fail to capture is that government sets the ground rules and, in large part, the incentive structure of corporations in a mixed economy, meaning that most examples people point to as market or corporate failure are really the long-term, usually predictable, negative, unintended consequences of government policy.
Yes, businesses fail, but when a business fails in a free economy, only that business and those who freely chose to place bets with that business suffer. When government fails, everyone suffers, because those who didn't do anything wrong are forced to pay for the mistakes of whomever is favored by the government. Just ask the Georgetown, Kentucky Toyota plant assembly line worker who is still trying to figure out why he doesn't make "American" automobiles while the GM assembly line worker who puts the Mexican engine in the Pontiac he's building in Canada does according to the government.
more thoughts
To believe that we are "born libertarian" (and this is coming FROM a libertarian) flies in the face of all kinds of evolutionary evidence that the human brain was forged in the collectivist kin groups of the EEA. We are, if anything, born with moral instincts that favor redistribution and collectivism, not "libertarianism."
I would strongly echo the earlier commenter's suggestion that you, especially as an evolutionary epistemologist, read some of Hayek. "Use of Knowledge in Society" can be found here: http://www.econlib.org/library/Essays/hykKnw1.html . You will also find in Hayek and the other Austrian economists a very different way of thinking about economics from the neoclassical vision you are criticizing here. I also recommend Hayek's book *The Sensory Order* for the philosophical/psychological/neuro-scientific underpinnings of the argument.
Finally, as someone who considers himself a radical libertarian and a progressive (and who wants nothing to do with most of the Tea Party), I would suggest that you rethink your understanding of libertarianism. Isn't it at least possible that many libertarians think that our preferred society is a better way to reach the same goals that many "progressives" have? Isn't possible that we aren't all about "me first libertarianism" and really see our preferred social order as better for all concerned? See here: http://www.thefreemanonline.org/headline/left-alone/ and here: http://bleedingheartlibertarians.com/ and here: http://storeyinstitute.blogspot.com/2011/04/disaster-of-me-libertarianis... .
I hope this is helpful.
Steve Horwitz
Charles A. Dana Professor of Economics
St. Lawrence University
As an addendum to Prof.
As an addendum to Prof. Horwitz point, here's further evidence suggesting your claim that we are born libertarian may not be entirely accurate; http://mercatus.org/publication/experiment-demand-encompassment
Here is the 'blurb' for the study: "The idea of political community is appealing on a gut level. Hayek suggested that certain genes and instincts still dispose us toward the ethos and mentality of the hunter-gatherer band, and that modern forms of political collectivism have, in part, been atavistic reassertions of such tendencies. Picking up on Hayek, Klein (2005) has suggested a combination of yearnings: 1) a yearning for coordinated sentiment (like Smithian sympathy), and 2) a yearning that the sentiment encompass the whole group. This paper reports on an experiment designed to explore the demand for encompassment by having subjects sing together. In each trial, one person in the room was designated not to sing unless every one of the others in the room had made a payment sufficient so as to have that person sing. Subjects chose to sacrifice money to achieve encompassment 47.4 percent of the time, with 59.6 percent of the subjects doing so in at least one trial. An exit questionnaire showed that subjects‘ chief reason for making such a sacrifice was a belief that the singing would be more enjoyable if it encompassed the whole group, and reported enjoyment is significantly higher with encompassment. We discuss the experiment as a parable for a penchant toward political collectivism."
Thank you Steve I know Hayek
Thank you Steve
I know Hayek a bit but I will review the resource you offer here.
As a first pass analysis, it is fine to say that the EEA fostered moral instincts that favor redistribution and collectivism, not "libertarianism" but I'm guessing that you would agree that there would be a balance of we vs. me impulses in all of us from the beginning and always. Having decided to love our fellow humans the questions "how much?" and "which fellow persons?" persist. I agree with you that man wasn't born free and only now is everywhere in chains. Still I don't agree that the libertarian impulse is divergent or an overlay on our basic EEA-borne nature. The question remains one of balancing the tension between collectivist and individualist costs and benefits. The core premise of libertarianism-successfully conveyed to its many and increasing supporters still seems to be "individualism is good." Yes, that's true but also bad, and collectivism is good and bad as well.
I'm especially interested these days in the extended double standard, whereby I can feel more generous for saying "I demand more" if I turn it into "We demand more." Generous to my kin at the expense of the larger sphere. I'll read Hayek if you'll watch the interviews in the Academy Award Winning movie "Inside Job." Here it is www.mindreadersdictionary.com/Movies/insidejob.zip
On your second point, yes I don't doubt that some libertarians are earnest about creating a better society. In other words I do think with some it's a case of S.E.A.M. Same Ends Alternative Means. We are tied together by common goals just divergent about how to reach them. I would not engage in the same kind of rhetoric popular among libertarians, the assumption that, if you're progressive you must not love America. Would you also agree that as with some progressives a great many libertarians, while earnest in their desire to have done much good for society, are not willing to think through the complexities of policy enough to face the potential downsides their ideological formulas entail? A political theory carries the full baggage of its wide range of supporters at least insofar as the simpler and more ideological theories (communism for example) breed their equivalents to the tea party. These days it is excusable if we ignore some of the subtleties of libertarian theory distracted by the likes of Sarah Palin.
Really thanks for engaging. I would love to hear your take especial on the interviews with Harvard and Columbia economics professors in "Inside Job."
Jeremy
Unfortunately, I don't have
Unfortunately, I don't have time for a full response on Inside Job, which takes time. Suffice it to say that mainstream economics has tons of problems, not the least of which is that sort of revolving door.
Mentioning "Sarah Palin" and "libertarian" in the same sentence as if they had ANYthing to do with each other is really problematic. There's nothing libertarian about her. There's clearly two strains within the so-called Tea Party - a Palin strain that is nationalist and somewhat religious fundamentalist and only believes in limited gov't when it's convenient (e.g. not on foreign policy nor my bedroom) - and a Ron Paul strand that is more genuinely libertarian, though not without problems if its own.
More another time. Feel free to email me privately Jeremy.
And one more quick
And one more quick comment:
Libertarians don't have "faith" in win-win solutions. We have abundant contemporary evidence around us every day, not to mention hundreds of years of history, that demonstrate empirically that markets are win-win, or at least, in the words of Deirdre McCloskey, win-win-lose-win-win-win-win etc...
And history/evidence aside, there's some good theoretical reasons to. Belief in the win-win of free markets is not an article of faith, it's an empirical observation backed by theoretical arguments. Does that mean EVERY kind of market transaction is win-win? That's worth debating, but to call it, as your title does, a "faith" is demeaning and wrong.
I would no less call your
I would no less call your confidence from extrapolations from interpreted empirical evidence "faith" than I would call my equivalents "faith." Faith in my definition and I think it's a reasonably universal one is the fallibilistic closure one experiences and demonstrates when one draws an association with high confidence. Perhaps you think that you are empirical and therefore not vulnerable to faith. I don't think any of us are. I have great confidence or faith in the inability of any of us to operate without faith in something or other. Your robust assumption is that markets are win-win. Indeed, the closure is evident from your rounding up on Deirdre's estimates.
Faith is not demeaning in my book. And if anyone in today's political climate demonstrates faith I think you'd have a hard time empirically demonstrating that Libertarians don't take the cake. And I know. It's because you think you've got a really good and important and singular cause. I appreciate that, though I disagree.
Best,
Jeremy
Thanks for taking the time to
Thanks for taking the time to condescend to me, I appreciate it.
Perhaps there has been a misunderstanding.
Hi Steven,
I very much liked how you approached me with your suggestions at the beginning of this exchange and I still plan to give Hayek more of a chance based on your suggestion. You seem a thoughtful guy. I also meant to respond in kind. In my last comment I was responding to your argument that calling it faith was "demeaning and wrong." I assumed you mean that you found them to be demeaning and wrong rather than that they were by some objective standard and I meant at least to give you a substantive response.
I understand that you found my response "condescending." I'm sorry to here that. I appreciate the time you've taken communicating with me and meant to keep the exchange alive online or off.
One oddness I find with libertarians is a tendency while arguing that there should be plenty of room to agree to disagree to nonetheless use terms like "condescending and demeaning as though they were deductive or objective truths, and to do so with alarming double standards. I hope our exchange doesn't reflect that you participate in that kind of name calling. But if so, I guess one more data point.
Best wishes and feel free to stay in touch here or privately. Sometimes conversation here degenerates into posturing to regain lost ground before an audience, neither of us academic should stoop to that.
Jeremy
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