Six differences between liberals and libertarians [op/ed]

[Iosef Cross]

Just about everything Libetarians believe is explained in Econ 101 and a bit in Econ Theory I: You start out with the assumptions of perfect competition and the market works fantastic. However, once you get into the higher courses, Economic theory is all about studying how the assumptions of perfect competition don't hold in the real economy and how that changes the analysis and creates room for government. Libertarians don't like these additions and continue to assume that perfect competition is the best model for any market. Fields like "Environmental Economics" wouldn't exist if the Libertarian view was anything near mainstream in economics. Libertarians are stuck in econ 101, as everything beyond it suggests that a mixed economy is needed.

Very ignorant remarks: you said that libertarians are ignorant of economics, hence stay libertarians. If somebody knows economics he is not libertarian. You are saying that being a libertarian is to economics the equivalent of a young earth creationist to the theory of evolution. That's simply not true, many Nobel prize winning economists were/are quite libertarian.

The fact is that market failure theories are quite complex and there are a lot of different views about them. It is plain ignorance to say that they prove that the "mixed economy" is optimal.

For example, ever heard about Public Choice theory? It basically one government failure theory.

Go into any representative economics department, and the general belief will be in a mixed market.

That depends on what you consider "mixed". Overall, mainstream economists are more libertarian than the average Joe and much more libertarian than the average academic (with tend to socialism).

[Iosef Cross]

In any case, most libertarians would support government action to correct externalities (e.g., Milton Friedman: "Obviously there are externalities [from pollution]. There is a role for government and the question is what are the means that you use. And the answers of a free market environmentalist is you use market mechanisms. Instead of setting quantitative limits on pollution, you impose a tax."), so it is not correct to paint libertarians with such a wide brush.

In principle, yes, but you're relatively unlikely to see libertarians taking the initiative on this stuff. Most of the libertarians I've talked to will admit, when pressed, that there are such things as "externalities," but they're so insensitive to them that they never notice externalities in action.

I'm impressed when I see a libertarian who can come to a problem and quickly look it over and go "Oh, right. This is an externality problem and a market solution alone will not solve it." It happens so rarely.

That's because it is a thinking shortcut: If somebody suggests some kind of intervention, it has to be analyzed deeply. Since as a rule of thumb intervention tends to be not good. It has a very good rationale behind it.

[Stark]

Friedman can't be a very hard libertarian if he understands that there are roles where the free market will never do jack shit. I read one of his books many years ago, and he often said things like Surl's quote; he thinks much government intervention is poorly thought out or has negative effects.

[Vaporous]

Friedman can't be a very hard libertarian if he understands that there are roles where the free market will never do jack shit. I read one of his books many years ago, and he often said things like Surl's quote; he thinks much government intervention is poorly thought out or has negative effects.

You see the same thing in Hayek. Since neither or them were idiots, they accepted roles for the State in economics-a limited one, admittedly, but they agreed that something was needed. The enemy in their day wasn't regulation; it was full government control and central planning.

This brings me to a question. Hayek and Friedman are often cited as the two big intellectual theorists of modern libertarianism, and yet even they have a good word for the State now and again. So when and how did "mainstream" libertarianism become the morass of lunacy it is now? Obviously Ayn Rand had a hand in it, but it has to be more than that.

[K. A. Pital]

Economic theory doesn't say that markets maximize "welfare". That doesn't makes sense.

Yes, verily so (at least in what amounts to serious science - popular "economics" has become more and more of an ideological tool rather than a real discipline). However, while there's nothing about markets maximizing welfare of society in the economic science, libertarians do tend to say that - in other words, in long-winded metaphors, in ideological statements or otherwise.

One problem of modern mathematical economics is that a fully satisfactory model of how the equilibrium is reached is lacking, so that we do not have as much knowledge about the properties of these processes as we have of equilibrium states.

The very concept of general equilibrium is not uniformly accepted in the economic theory. I guess the problems in modern economics run quite deep - but that aside, you have basically explained some econ theory 101 which I passed in my first year of university. Just what exactly was your point when you spoke about Pareto-optimal solutions? What relation does it have to the fact that libertarians consider (or should I even say, preach) the market as the ultimate solution to any issue in society - or at least claim so in public?

Since as a rule of thumb intervention tends to be not good. It has a very good rationale behind it.

Since when did that become a "rule of thumb"? Did someone do the analysis of Y million government interventions in all the nations of the world and their outcomes to determine the percentage of success, failure and/or mixed results? See, you're speaking like a libertarian. You trot out a statement, which is not corroborated by hard statistical data, and then say it's a "rule of thumb" and "good rationale".

I don't know of what type of libertarian that you are talking about. But overall, libertarians tend to know more about economics than people with other political ideologies.

Since when did anarcho-capitalists or extreme minarchists, which form a significant fraction of libertarians, and which I am talking about, became knowledgeable about economics?

And also, much of modern economic research is moving towards explaining phenomena with tend to give strength to libertarian views. To say that libertarians want to freeze economics in the present state is wrong and bad for their own outlook. Since the direction of progress tends to favor their political views.

And which is that? Interventionless capitalist anarchy or minarchy? The direction of progress certainly does not go that way. There's a multitude of examples which prove it, not only on the microeconomic scale, but on the macroeconomic scale and world economic scale, too.

Which are the phenomena that give strength to libertarian views? You profoundly misunderstoof my point - the libertarians don't want to freeze modern economics - they don't want to learn it. They want to learn only those parts of it which conform to their ideology. Anything going against their doctrine is automatically rejected or ignored.

It is plain ignorance to say that they prove that the "mixed economy" is optimal.

Capitalist anarchy is not viable, and does not exist anywhere except the hellholes of the Earth (e.g. Somalia). All other governments have a form of mixed economy, or a planned economy. Both mixed economy and planned economy can fail, but what is remarkable is that no such failure has produced a long-term viable capitalist anarchy, IIRC. Extreme capitalist minarchy only exists in micro-states.

Mixed economy tends to be the most survivable out of the current selection of economic models present in nation-states, and therefore (at least under the current level of productive power development) seems to be optimal. Maybe the evidence is not conclusive, but it's there.

[Illuminatus Primus]

It bears repeating that there is not a single case of "free market capitalism" extant in the world today, historically, or that any advanced industrial society industrialized and accumulated capital through anything like it. The major corporate capitalist societies today rely on significant state intervention, policy preference, and instruments in order to function, just as they did dramatically so throughout their expansion and modernization. The mainstay of the Western high-tech sector was first developed by state planners through the military research, development, and procurement sector; then turned over to the private sector after risk and costs of fundamental start-up were covered at the public's expense. The great "inefficiency" of the USSR is only sustained using absurdly unfair comparisons (the U.S. or Western Europe versus the Soviet Union and the Eastern Bloc, even though the latter was much more poorly developed than the former from the start of the comparison) or chosen sectors of time (ignoring the "American System" and historically high protectionist barriers and state subsidy during start-up) or by avoiding unfavorable cases (the market societies of the Third World, which don't count for 'exogenous' factors, though no such extra variables are permitted to excuse the ideologically unfavored system). It may be true (and I would maintain that is both is, and is undesirable and contrary to human liberty) that state planning is less efficient, but certainly not in the ideologically colored and warped sense and for the privileged purposes that the "libertarian" prefers.

[TheKwas]

Very ignorant remarks: you said that libertarians are ignorant of economics, hence stay libertarians. If somebody knows economics he is not libertarian. You are saying that being a libertarian is to economics the equivalent of a young earth creationist to the theory of evolution. That's simply not true, many Nobel prize winning economists were/are quite libertarian.

No genuis, I'm saying that the statement: I don't know of what type of libertarian that you are talking about. But overall, libertarians tend to know more about economics than people with other political ideologies.

and

To say that libertarians want to freeze economics in the present state is wrong and bad for their own outlook. Since the direction of progress tends to favor their political views.

Are both bollocks. There's no trend in Academia towards libetarianism. Infact, there's been a trend away from it ever since Keynes, even including monetarism (which only backtracked slightly from Keynesianism, but never promoted the same sort of free-market that pre-Keynesian, classical economists did).

There are noble prize winners with libertarian swayings, but that's a long shot from establishing a trend.

The fact is that market failure theories are quite complex and there are a lot of different views about them. It is plain ignorance to say that they prove that the "mixed economy" is optimal.

Good thing I never used the word "prove" eh? I said "suggests" and that's true. Take any eco class above the 100 level and they will almost always outline ways in which the government should/could play a role. For example, this year I took:

Industial Organization (3rd year)
Development Economics (4th year)
Intro to the economics of developing countries (2nd year)
Microeconomic Theory 3
Macroeconomic Theory 3
Health Economics
Environmental economics

Guess how many of the above courses explicitly outlined a positive role for government? All of them except Micro 3, which was basically a math class.

That depends on what you consider "mixed". Overall, mainstream economists are more libertarian than the average Joe and much more libertarian than the average academic (with tend to socialism).

Mixed: more or less the current state of affairs in western countries. With the private market making up the majority of the economy but government playing an essential role in the economy as well.

Economists may be more libertarian/right-leaning than your average academic since marxism holds sway over large portions of the humanities, but we're not comparing libetarians to average academics, but libertarians to liberals.

At my university, for example, my econ profs tend to be more liberal than the average citizen, since they nearly all (all that I know of, actually) dislike the current conservative government that has significant popular support (I'm Canadian). And that right-wing government isn't even right-wing enough to be considered 'libertarian' by most standards.

[Iosef Cross]

Economic theory doesn't say that markets maximize "welfare". That doesn't makes sense.

Yes, verily so (at least in what amounts to serious science - popular "economics" has become more and more of an ideological tool rather than a real discipline). However, while there's nothing about markets maximizing welfare of society in the economic science, libertarians do tend to say that - in other words, in long-winded metaphors, in ideological statements or otherwise.

Actually, second to traditional economics, you can make a market equilibrium follow a welfare maximization function. You just need to give the right allocation of endowments at the start of the model, then the market equilibrium reached will satisfy the properties of the welfare maximization function.

That's the second theorem of welfare economics: Any pareto optimal allocation that you chose (like one where every individual has the same weight in the aggregate utility function) can be reached by the market from some set of initial distributions of endowments.

One problem of modern mathematical economics is that a fully satisfactory model of how the equilibrium is reached is lacking, so that we do not have as much knowledge about the properties of these processes as we have of equilibrium states.

The very concept of general equilibrium is not uniformly accepted in the economic theory. I guess the problems in modern economics run quite deep - but that aside, you have basically explained some econ theory 101 which I passed in my first year of university. Just what exactly was your point when you spoke about Pareto-optimal solutions? What relation does it have to the fact that libertarians consider (or should I even say, preach) the market as the ultimate solution to any issue in society - or at least claim so in public?

The first welfare theorem is pretty much the usual mainstream argument for free markets. There are some developments of it with can be applied to explain most, if not all, economic phenomena. So if you like, you can analyze the market as always perfect. Some Chicago school economists to that.

I personally think that the main problem with economic theory today is the lack of adequate theory to explain the movement towards equilibrium. But that's a very complex matter, however I think it will have a great deal of importance in determining the role of state.

Since as a rule of thumb intervention tends to be not good. It has a very good rationale behind it.

Since when did that become a "rule of thumb"? Did someone do the analysis of Y million government interventions in all the nations of the world and their outcomes to determine the percentage of success, failure and/or mixed results? See, you're speaking like a libertarian. You trot out a statement, which is not corroborated by hard statistical data, and then say it's a "rule of thumb" and "good rationale".

The fact is that the market tends to generate tendencies were the factors if production tend to reflect underlying consumer preferences. This process tends to reach a state were the factors are allocated in a optimal way to satisfy the consumers. This mechanisms works through the price system, if resources can be used to supply more urgent needs of the consumers, then its current price would be lower than the price the consumers wish to pay for them, that's because its current price is a reflection of entrepreneur's expectations of how much the consumer wishes to pay for these resources. Hence, there is a profit opportunity when there is inefficiency. And with the passage of time the market tends to correct it.

Now, let's assume that the market fails, in other words, that in some sectors of the economy there are barriers that block the exploitation of these profit opportunities, hence of inefficiency correction. Then these inefficiencies don't tend to be corrected.

What would be the incentive of the government to correct these inefficiencies? In a dictatorship the State doesn't have any incentive to correct economic inefficiencies, in this world the State only uses the population under it to satisfy it's own ends. While in a democracy voters don't have much information: That's because it doesn't makes sense to know much about who they are voting too, because his vote doesn't really matter (1). Hence, the State doesn't have systematic tendencies to allocate resources into their best uses, unlike the market.

When the market fails, that means that a benevolent and omniscient government could correct it. But the government is not omniscient nor benevolent.

What about some empirical evidence instead of philosophy? Well, second to Economic Freedom
of the World 2009 Annual Report (2), there is some very hard evidence that free market policies tend to generate better IDH. See pages 19 onwards of the report.

(1) Read : "The Myth of the Rational Voter": http://www.amazon.com/Myth-Rational-Vot ... 241&sr=8-1.

(2) http://www.freetheworld.com/2009/report ... 9_BOOK.pdf

[Simon_Jester]

That's because it is a thinking shortcut: If somebody suggests some kind of intervention, it has to be analyzed deeply. Since as a rule of thumb intervention tends to be not good. It has a very good rationale behind it.

But that's retarded. First of all because of a HUGE lack of evidence supporting this rule of thumb, and second of all because it is almost never a good idea to use a rule of thumb to analyze a situation before stopping to consider whether the rule of thumb applies.

If you start by assuming "government bad!" before looking around to see whether there are externality problems that would make government good in this situation, you're going to make a lot of foolish mistakes and ignore a lot of practical problems.

Capitalist anarchy is not viable.

Worse than that, it's a contradiction in terms. Capital in an anarchy falls into the hands of whoever has the most firepower, and that qualification does not make them well-placed to use their capital in ways that "capitalist" societies normally do.

Now, capitalist minarchy is at least not an oxymoron, even if it isn't a good form of government. Because there you have a powerful organization enforcing property and contract law.

Since when did that become a "rule of thumb"? Did someone do the analysis of Y million government interventions in all the nations of the world and their outcomes to determine the percentage of success, failure and/or mixed results? See, you're speaking like a libertarian. You trot out a statement, which is not corroborated by hard statistical data, and then say it's a "rule of thumb" and "good rationale".

The fact is that the market tends to generate tendencies were the factors if production tend to reflect underlying consumer preferences. This process tends to reach a state were the factors are allocated in a optimal way to satisfy the consumers.

All right; where's the corroborating evidence that such systems work better as they are less regulated? You've made an argument from theoretical principles with an awful lot of "tends" in it; such arguments are often wrong. Supporting evidence is vital here.

"X tends to do Y" is not sufficient without math to show how it does Y, to what degree, and under what circumstances. Because it may not always do Y, or it may not do nearly enough of Y to offset problem Z, or Y may not actually be worth doing on further examination.

You link to a study which shows a correlation between "economic freedom" and other positive indicators... but there are confounding variables at work here. Many "economically unfree" nations are also on the low end of the curve when it comes to matters of economic development, which is correlated with both "unfree" policies and indicators like life expectancy.

Moreover, the study fails to show a strong correlation. The "freest" countries are also the richest and best off, but there's no one to one correlation: the US is high on the "economic freedom index," but relatively low among developed countries in indicators like life expectancy, education, and such. Rates of economic growth are nearly the same among the first, second, and third quartiles of countries when those countries are organized by "economic freedom." Rates of foreign investment are nearly the same among the second, third, and fourth quartiles, with virtually all developed nations lying in the first quartile.

So the question is: how much of this correlation between economic freedom and economic success is a coincidence?

What would be the incentive of the government to correct these inefficiencies? In a dictatorship the State doesn't have any incentive to correct economic inefficiencies, in this world the State only uses the population under it to satisfy it's own ends.

How is this not an incentive? I, for one, routinely feel an incentive to improve the quality of the tools I use.

When the market fails, that means that a benevolent and omniscient government could correct it. But the government is not omniscient nor benevolent.

Yes. However, this does not prove your desired conclusion: "Therefore, the government cannot correct the market."

To see why, consider: "If my car is parked in the wrong place, Superman could move it. But I am not Superman. Therefore, I cannot move my parked car."

This is obviously wrong. The fact that A matches a certain condition doesn't mean that B doesn't. Compare this to the Masked Man fallacy: "I do not know who the masked man is. I know who my father is. Therefore, the masked man is not my father."

You haven't shown that governments need to be perfectly benevolent and omniscient in order to correct market failures, so the fact that real governments aren't perfectly benevolent and omniscient is irrelevant to the question of whether they can correct market failures.

[Iosef Cross]

Friedman can't be a very hard libertarian if he understands that there are roles where the free market will never do jack shit. I read one of his books many years ago, and he often said things like Surl's quote; he thinks much government intervention is poorly thought out or has negative effects.

You see the same thing in Hayek. Since neither or them were idiots, they accepted roles for the State in economics-a limited one, admittedly, but they agreed that something was needed. The enemy in their day wasn't regulation; it was full government control and central planning.

This brings me to a question. Hayek and Friedman are often cited as the two big intellectual theorists of modern libertarianism, and yet even they have a good word for the State now and again. So when and how did "mainstream" libertarianism become the morass of lunacy it is now? Obviously Ayn Rand had a hand in it, but it has to be more than that.

Well, because even thought these guys never personally said that they were minarquists or anarchocapitalists, their theories have very powerful defenses of these radical positions. Like Einstein's general theory of relativity, with predicted black holes, but the man itself didn't like the idea, these radical political ideas came from thinkers with didn't advocate them.

Also, note the difference between Friedman and Hayek. Friedman was a marshallian economist and a positivist. His ideas were firmly inside the economic mainstream in the US during the 50's and 60's (by the 70's Friedman's economic ideas became obsolete to the mainstream of the US). It is said that Friedman and Samuelson teached the same price theory, the difference was that Friedman applied it.

Hayek's defense of the free market was altogether different and much more sophisticated than Friedman's. He came from the Viennese tradition of economic theory, a tradition that doesn't exist anymore. his defense of the market was based on a unified theory of social phenomena, where the limitations of knowledge in the mind's of each individual imply that society cannot be guided by a single planning mind. He based his theory on methodological individualism and subjectivism (with states that economic and social phenomena exists only in the minds of individuals), hence only individuals plan. In that sense society doesn't plan, however, a group of individuals can make a central plan for all society, where each would agree with the other, but such plan must exist in the minds of each (for each to agree with the others). Hence, any central plan must be limited to what each person can comprehend. But society is more complex than anything that people can fully understand, so only with decentralized decisions making it would be possible to make a complex society like yours work.

A citation from his "The Constution of Liberty: vol .1"':

"The preservation of a free system is so difficult precisely because it requires a constant rejection of measures which appear to be required to secure particular results, on no stronger grounds than knowing what will be the costs of not observing the rule in the particular instance. A successful defense of freedom must therefore be dogmatic and make no concessions to expediency, even where it is not possible to show that, besides the know beneficial effects, some particular harmful result would also follow beneficial effects, some particular harmful result would also follow from its infringement. Freedom will prevail only if it is accepted as a general principle whose application to particular instances requires no justification. It is thus a misunderstanding to blame classical liberalism for having been too doctrinaire. Its defect was not that it adhered too stubbornly to principles, but rather that it lacked principles sufficiently definite to provide clear guidance, and that it often appeared simply to accept the traditional functions of government and to oppose all new ones. Consistency is possible only if definite principles are accepted. But the concept of liberty with which the liberals of the nineteenth century operated was in many respects so vague that it did not provide clear guidance."

Pretty radical, isn't it?

[Iosef Cross]

I don't know of what type of libertarian that you are talking about. But overall, libertarians tend to know more about economics than people with other political ideologies.

Since when did anarcho-capitalists or extreme minarchists, which form a significant fraction of libertarians, and which I am talking about, became knowledgeable about economics?

At my university, most libertarians are economic students, graduate and undergraduate, and professors. And they usually give more thought to economic theory than their average mixed economy types.

And also, much of modern economic research is moving towards explaining phenomena with tend to give strength to libertarian views. To say that libertarians want to freeze economics in the present state is wrong and bad for their own outlook. Since the direction of progress tends to favor their political views.

And which is that? Interventionless capitalist anarchy or minarchy? The direction of progress certainly does not go that way. There's a multitude of examples which prove it, not only on the microeconomic scale, but on the macroeconomic scale and world economic scale, too.

I meant that in the last 60 years many of the development of economic theory tends to gradually support less government intervention. So, this is a movement of ideas in the direction of libertarianism in the economic side. I don't know if the other aspects of libertarianism are moving in their direction.

Also, what you and TheKwas saw in undergraduate economics courses represents theory that is about 50-60 years old. In those dark times the mainstream views of the economy were pretty much the closest to socialism that economics ever was.

Which are the phenomena that give strength to libertarian views? You profoundly misunderstoof my point - the libertarians don't want to freeze modern economics - they don't want to learn it. They want to learn only those parts of it which conform to their ideology. Anything going against their doctrine is automatically rejected or ignored.

That kind of generalization is very bad for you. If you meet some dogmatic libertarians, well, that's normal, there are dogmatic people everywhere. And usually, they are the majority of population of the group.

It is plain ignorance to say that they prove that the "mixed economy" is optimal.

Capitalist anarchy is not viable, and does not exist anywhere except the hellholes of the Earth (e.g. Somalia). All other governments have a form of mixed economy, or a planned economy. Both mixed economy and planned economy can fail, but what is remarkable is that no such failure has produced a long-term viable capitalist anarchy, IIRC. Extreme capitalist minarchy only exists in micro-states. Mixed economy tends to be the most survivable out of the current selection of economic models present in nation-states, and therefore (at least under the current level of productive power development) seems to be optimal. Maybe the evidence is not conclusive, but it's there.

Only if you consider political stability as evidence of economic optimality. I don't see a reason for that. Only if you believe in the march of history theory that the economic/political systems always tend to evolve into better ones.

Also, anarcho capitalism is a very different creature from minarchist. You can be 100% minarchist and don't agree with anything that makes a unique part of anarchism.

I personally think that anarchocapitalism is impossible, not because of economic reasons. But due to the fact that the market needs a government to "exist", the State need to protect property rights and contracts.

[Surlethe]

In any case, most libertarians would support government action to correct externalities (e.g., Milton Friedman: "Obviously there are externalities [from pollution]. There is a role for government and the question is what are the means that you use. And the answers of a free market environmentalist is you use market mechanisms. Instead of setting quantitative limits on pollution, you impose a tax."), so it is not correct to paint libertarians with such a wide brush.

In principle, yes, but you're relatively unlikely to see libertarians taking the initiative on this stuff. Most of the libertarians I've talked to will admit, when pressed, that there are such things as "externalities," but they're so insensitive to them that they never notice externalities in action.

I'm impressed when I see a libertarian who can come to a problem and quickly look it over and go "Oh, right. This is an externality problem and a market solution alone will not solve it." It happens so rarely.

I think most libertarians feel like the government's perceived negative influence in markets is a significantly greater problem than externalities, so they devote their attention to fighting it. Friedman, IIRC, once said that he thought anarchists were dead wrong, but he wished them luck because he felt like society really needed to move in that direction.

[Surlethe]

Consider the US through what Krugman calls "the long Gilded Age", from the 1870s to the 1920s. The median standard of living much improved between 1880 and 1929, and I am fairly certain that the improvements are not due solely or even largely to the first legislative victories of the progressive movement in the 1900s and 1910s.

Except you are comparing a situation with no regulation morphing over a period of time. The proper comparison is one where it is regulated, but regulations are eliminated to achieve higher growth. Are people on average better off at the end or does most of the wealth flow into the hands of the few?

Three points. First, it's a long-run dynamic equilibrium question, not one where there is an 'at the end'. Second, because it's a long-run equilibrium question, it's a counterfactual designed to try to get at the costs of regulation and redistribution. Third, your last sentence is a black-and-white fallacy - you can have people on median become better off and still have most of the wealth flow into the hands of the few. (Also, as a nitpick, people on average will be better as long as total income rises faster than population; you really care about the median and the quartiles, not the mean.)

I wouldn't call the value systems "warped"; an individual's choice of moral systems is ultimately perfectly arbitrary.

No, the goals people choose are arbitrary. Methods to achieve them aren't- they must logically follow.

This doesn't contradict what I said. Moral systems are effectively the same thing as goal systems.

[Iosef Cross]

It bears repeating that there is not a single case of "free market capitalism" extant in the world today, historically, or that any advanced industrial society industrialized and accumulated capital through anything like it. The major corporate capitalist societies today rely on significant state intervention, policy preference, and instruments in order to function, just as they did dramatically so throughout their expansion and modernization.

There never has been a true socialist economy either. Nor a true mixed economy, in the scientific sense.

Societies never followed ideal types literally. That doesn't mean that they are useless. Pure socialist never existed, that can be verified by noting that in the USSR there was a huge black market, private markets for agricultural goods, and that there were prices for the means of production, plus that they traded with the rest of the world and oriented their development by mirroring the western nations.

Let's talk about the so called "mixed economy". Why does state interference exists? The usual story is that government interference exists to correct market failures.

For example, it is said that public education exists to correct the positive externality caused by education. Since educated people produce a better society all around, that means that the social benefits of education aren't fully reflected in the increased wages that educated workers receive. Hence, the government must subsidize education (not pay for it entirely), to produce the optimal number of education years per capita.

What happened was that in the 19th century, decades before the concept of externality was developed, people clamored for free education because they wanted other people to pay for their son's education. It was seem as a right that the state must provide. There wasn't any rational economic reasons behind it.

Another example: trade barriers. Some economists said that trade barriers exist to protect nascent industries, they need protection because they generate positive externalities, in the form of new technologies and production methods that spill over the economy. The fact is that protectionist barriers exist because corporate magnates want to maintain their wealth and prevent competitors (present and potential) from reducing the prices in the domestic market. That's because there are centralized benefits (to few domestic producers) and decentralized costs (to the millions of consumers). Hence, each consumer would get only a few extra bucks, for the ending of protectionism, and producers would lose millions. As a consequence the producers have the incentive to form lobbies while each individual consumer doesn't have the incentive to do anything, since the costs of getting up to work on it are higher than the benefits. Even though the optimal state would be without any protective tariff at all!

And yes, corporations hate the free market. Mainly because corporations hate competition: In a market where there are no restrictions to make new firms and sell new products, the pressure to constantly innovate is very high. Too high for many corporations, so they use lobbies to use the powers of the State to restrict competition, and reduce competitive pressure on them. Tariffs are an example that I have already analyzed.

[Illuminatus Primus]

It bears repeating that there is not a single case of "free market capitalism" extant in the world today, historically, or that any advanced industrial society industrialized and accumulated capital through anything like it. The major corporate capitalist societies today rely on significant state intervention, policy preference, and instruments in order to function, just as they did dramatically so throughout their expansion and modernization.

There never has been a true socialist economy either. Nor a true mixed economy, in the scientific sense.

Societies never followed ideal types literally. That doesn't mean that they are useless. Pure socialist never existed, that can be verified by noting that in the USSR there was a huge black market, private markets for agricultural goods, and that there were prices for the means of production, plus that they traded with the rest of the world and oriented their development by mirroring the western nations.

Certainly not, but clearly the Soviet state-collectivist model is held up in the popular libertarian literature as a stereotype and caricature of state-intervention of virtually any purpose, without substantiation. And as an aside, as a Brazilian, I think the average favela inhabitant probably would have been better off as a janitor or farm laborer in the Eastern Bloc for all basic purposes.

Let's talk about the so called "mixed economy". Why does state interference exists? The usual story is that government interference exists to correct market failures.

For example, it is said that public education exists to correct the positive externality caused by education. Since educated people produce a better society all around, that means that the social benefits of education aren't fully reflected in the increased wages that educated workers receive. Hence, the government must subsidize education (not pay for it entirely), to produce the optimal number of education years per capita.

What happened was that in the 19th century, decades before the concept of externality was developed, people clamored for free education because they wanted other people to pay for their son's education. It was seem as a right that the state must provide. There wasn't any rational economic reasons behind it.

Simple slander of the deviant people. Did or did not the American education system produce better labor for industrialization? Are you capable of grasping the concept of any basic positive rights? Do you have no loyalty to democratic values, and therefore maintain that there is no basic exogenous political need, in principle, for public education?

Another example: trade barriers. Some economists said that trade barriers exist to protect nascent industries, they need protection because they generate positive externalities, in the form of new technologies and production methods that spill over the economy. The fact is that protectionist barriers exist because corporate magnates want to maintain their wealth and prevent competitors (present and potential) from reducing the prices in the domestic market. That's because there are centralized benefits (to few domestic producers) and decentralized costs (to the millions of consumers). Hence, each consumer would get only a few extra bucks, for the ending of protectionism, and producers would lose millions. As a consequence the producers have the incentive to form lobbies while each individual consumer doesn't have the incentive to do anything, since the costs of getting up to work on it are higher than the benefits. Even though the optimal state would be without any protective tariff at all!

If the U.S. lived under comparative advantage from the outset, we'd be a resource colony and backwater for the developed world. One need only contrast those living under the Washington Consensus and its fore-bearers with the protectionist, export-oriented powerhouses of Asia (the lauded liberalized China of course maintained barriers and directed development along strictly guarded and nationalist lines). Again, where is the brilliant nation or state which industrialized successfully without state intervention? You are correct that this exists for the benefit of privileged dominant elites, but the implicit converse - that sans-intervention, everything would be much better - does not follow automatically. In fact, much circumstantial evidence points to the direct opposite, that economic liberalization and lowering of barriers exists to benefit hegemons and the powerful centers of industrial capitalism based amongst them, at the expense of the impoverished and underdeveloped periphery.

And yes, corporations hate the free market. Mainly because corporations hate competition: In a market where there are no restrictions to make new firms and sell new products, the pressure to constantly innovate is very high. Too high for many corporations, so they use lobbies to use the powers of the State to restrict competition, and reduce competitive pressure on them. Tariffs are an example that I have already analyzed.

Regurgitating theology is not the same thing as analysis. You provided no empirical evidence that a nation-state would develop more quickly and more fairly if it obeyed your dictums. Where is the historical case? My reading of history would imply that there exists no highly-developed society that did not develop on nationalist, even protectionist, grounds. You, in short, completely dodged the central issue I raised.

For your benefit:

It bears repeating that there is not a single case of "free market capitalism" extant in the world today, historically, or that any advanced industrial society industrialized and accumulated capital through anything like it. The major corporate capitalist societies today rely on significant state intervention, policy preference, and instruments in order to function, just as they did dramatically so throughout their expansion and modernization.

If you wish to refute what I said, please provide historical evidence to the contrary. That would constitute a genuine refutation, as opposed to red herrings and over-generalizations.

[Illuminatus Primus]

Tardy edit:

My first reply's second sentence ought to read: "And as an aside, since you are a Brazilian, I think the average favela inhabitant probably would have been better off as a janitor or farm laborer in the Eastern Bloc for all basic purposes. Human outcomes and quality of life matter. And sometimes matter more than raw economic productivity of the national economy; unless you're an extreme authoritarian and think human life is merely for the benefit of the state."

For clarity of meaning: I'm not a Brazilian.

[Samuel]

This doesn't contradict what I said. Moral systems are effectively the same thing as goal systems.

Since we were talking about

So, according to this strain of thought, economic coercion may be bad, but it is passive; active coercion, even it it ultimately improves situations, is worse.

what I mean is that this doesn't make sense unless the goal is to reduce active coercion. Is there another goal system that would promote passive over active coercion as acceptable?

[J]

One problem of modern mathematical economics is that a fully satisfactory model of how the equilibrium is reached is lacking, so that we do not have as much knowledge about the properties of these processes as we have of equilibrium states.

The very concept of general equilibrium is not uniformly accepted in the economic theory. I guess the problems in modern economics run quite deep - but that aside, you have basically explained some econ theory 101 which I passed in my first year of university. Just what exactly was your point when you spoke about Pareto-optimal solutions? What relation does it have to the fact that libertarians consider (or should I even say, preach) the market as the ultimate solution to any issue in society - or at least claim so in public?

This particular part is of great importance. Mainstream economics treat and model the economy as an equilibrium system. It isn't. Attempting to treat it as such results in the economist being blindsided by events such as the current recession since it theoretically isn't possible in their models. Prof. Steve Keen provides a quick primer on the subject in this blog posting, and the Dahlem Report goes into more detail on the failings of equilibrium models with repecto the the current recession. If you want to go even more in depth there's Prof. Keen's paper on modeling Minsky's Financial Instability Hypothesis.

[Darth Wong]

To deny economic coercion exists is to be fucking blind. Which libertarians are, quite obviously.

I'll bet libertarians would also say that economic coercion is morally preferable to government coercion. This is for the reason I cited in the OP: the pervasive moral intuition that action that causes harm, even resulting in a greater good, is more reprehensible than inaction that results in harm. (This is, I believe, the work of Hauser - it is cited in Dawkins, The God Delusion, p. 223-4.) So, according to this strain of thought, economic coercion may be bad, but it is passive; active coercion, even it it ultimately improves situations, is worse.

That's a classic circular logic fallacy: simply define some of your preferences as moral axioms, then declare that your system is superior because it is more moral, according to these axioms.

Christians do exactly the same thing on a regular basis: define various beliefs as moral laws, then declare that their system is superior because it obeys these moral laws.

[Darth Wong]

The very concept of general equilibrium is not uniformly accepted in the economic theory. I guess the problems in modern economics run quite deep - but that aside, you have basically explained some econ theory 101 which I passed in my first year of university. Just what exactly was your point when you spoke about Pareto-optimal solutions? What relation does it have to the fact that libertarians consider (or should I even say, preach) the market as the ultimate solution to any issue in society - or at least claim so in public?

This particular part is of great importance. Mainstream economics treat and model the economy as an equilibrium system. It isn't. Attempting to treat it as such results in the economist being blindsided by events such as the current recession since it theoretically isn't possible in their models. Prof. Steve Keen provides a quick primer on the subject in this blog posting, and the Dahlem Report goes into more detail on the failings of equilibrium models with repecto the the current recession. If you want to go even more in depth there's Prof. Keen's paper on modeling Minsky's Financial Instability Hypothesis.

I haven't studied economics sufficiently to really get into the nuts and bolts (although frankly, I consider it a junk science compared to the real sciences anyway, since it seems to be chock full of made-up axioms posing as empirical observations), but if it's true that economics generally assumes the economy to be in equilibrium, that's pretty funny. It would suggest that these people don't have the slightest concept of what equilibrium means, since an equilibrium system would not be changing.

[Darth Wong]

It bears repeating that there is not a single case of "free market capitalism" extant in the world today, historically, or that any advanced industrial society industrialized and accumulated capital through anything like it. The major corporate capitalist societies today rely on significant state intervention, policy preference, and instruments in order to function, just as they did dramatically so throughout their expansion and modernization.

There never has been a true socialist economy either. Nor a true mixed economy, in the scientific sense.

Explain what a "true mixed economy, in the scientific sense" is. I can totally understand someone saying that there has never been a pure capitalist economy, or a pure socialist economy, but how the hell can there not be a true "mixed economy", when every real-world economy seems to be precisely that, with socialist and capitalist elements mixed together?

For that matter, what the hell does "scientific" mean when you say it? Economic systems are not observed in the wild, nor are they theorized from observation of natural processes. All economic systems are essentially social engineering schemes (sorry for the people who think "social engineering" is a synonym for "fascism", but it's true).

[Surlethe]

To deny economic coercion exists is to be fucking blind. Which libertarians are, quite obviously.

I'll bet libertarians would also say that economic coercion is morally preferable to government coercion. This is for the reason I cited in the OP: the pervasive moral intuition that action that causes harm, even resulting in a greater good, is more reprehensible than inaction that results in harm. (This is, I believe, the work of Hauser - it is cited in Dawkins, The God Delusion, p. 223-4.) So, according to this strain of thought, economic coercion may be bad, but it is passive; active coercion, even it it ultimately improves situations, is worse.

That's a classic circular logic fallacy: simply define some of your preferences as moral axioms, then declare that your system is superior because it is more moral, according to these axioms.

When it's axiomatized, yes. But I'm arguing that people's inclination to axiomatize those particular preferences can be explained by the empirical fact that most people's intuitions follow those preferences.

[Darth Wong]

When it's axiomatized, yes. But I'm arguing that people's inclination to axiomatize those particular preferences can be explained by the empirical fact that most people's intuitions follow those preferences.

What about the popularity of the "Good Samaritan" story? I would say that selfish people tend to cook up excuses for a moral code that guarantees things for them but never asks anything of them. I would also say that a lot of people are selfish, but certainly not all, and there is an evolved altruistic trait in humans.

[Vastatosaurus Rex]

frankly, I consider it a junk science compared to the real sciences anyway, since it seems to be chock full of made-up axioms posing as empirical observations

The Austrian school of economics, the school to which libertarian idols like Ludwig von Mises and Friedrich von Hayek subscribed, actually rejects the scientific method.

[Darth Wong]

frankly, I consider it a junk science compared to the real sciences anyway, since it seems to be chock full of made-up axioms posing as empirical observations

The Austrian school of economics, the school to which libertarian idols like Ludwig von Mises and Friedrich von Hayek subscribed, actually rejects the scientific method.

Seriously? How is such idiocy accepted in any kind of academic environment? It must be radical artsies at work here.