Tuesday, October 11, 2016

Why Are Libertarians Irrelevant?

Classical liberalism was the foundation of the American Constitution and is based on utilitarian reasoning that is still popular academically. However, the major parties use libertarian principles selectively: Democrats are pro-choice with respect to abortion, drugs, and gay marriage, while Republicans are pro-choice with respect to business, guns, and schooling. The Libertarian Party, meanwhile, caters to the few who feel very strongly about the gold standard, open borders, or marijuana.

In canonical models of economy, maximizing individual preferences is the self-evident goal. Consider all standard models of social welfare:

Individuals maximize the present value of their wealth
Individuals maximize the present value of their wealth and the equity in their society
The top earners form a coalition with the bottom to expropriate the middle

In any case, a libertarian argument seems to be a perennial force, always arguing at the margin for lower taxes and regulation. Even in the latter case, which I think best reflect most market economies, the mandarins at the top and the patronage workers at the bottom need the entrepreneurs to generate enough taxes to subsidize them. Everyone would agree that some level of taxation less than 100% is optimal due to the incentive effects (for example, France’s 2014 75% top rate tax was quickly rescinded back to 45% because of weak revenue). The question is merely what that number is. Politics would be a boring battle between those who want taxes to be 40% and those who want them to be 50%—the libertarians vs. the egalitarians, each acknowledging that their difference of opinion is merely a matter of degree.

Strangely, this is not the case, and libertarianism is not foundational within either party.

How Libertarianism Crashed

During the West’s period of tremendous growth prior to World War I, countries consisted largely of aristocratic Republics. Just as Athens only allowed male citizens to vote—approximately 10% of the population—in early America, most states had property and other requirements that limited voters to society’s elite, with the result that less than 20% of the population voted throughout the 19th century. Most Americans then were practicing Christians, which implied they favored moral equality among individuals, but also the idea that the government exists to protect individual free will rather than individuals living to support the government.

No one can read the US Constitution without concluding that the people who wrote it wanted their government to be limited severely; the words “no” and “not” as applied to government power occur 24 times in the first seven articles of the Constitution, and 22 more times in the Bill of Rights. This is because the Puritans, Quakers, and Cavaliers who dominated early America all thought living under the others’ ways would be tyranny, and they were right.

In such an environment, libertarianism was a strong ideology. John Locke’s liberalism focused on life, liberty, and property, a free economy with minimal government interference (zero government is a straw man caricature). To the extent that people are poor, unconditional charity makes them worse, as poverty is primarily the outcome of a lack of purpose and discipline rather than food and shelter. Thus, workhouses for the poor had codes of conduct and required hard work. Regardless of circumstances, the poor can achieve better lives. The formula is neither complex nor mysterious. The key choices are to work steadily and stay on the right side of the law. For example, if one follows 3 simple rules—finish high school, get a full-time job and wait until age 21 to get married and have children—only 2 percent of such people are in poverty today.

Then, two things happened. First, Democratic Republics began to emphasize democracy over republicanism. Universal suffrage occurred in the early 20th century in most Western countries, and more offices became directly elected (e.g., Senators). Second was the death of God, as intellectuals believed organized religion was simply a relic of the past, like our belief in the divine right of Kings. No longer was it sufficient to merely be right with God, but rather, to do good on earth by minimizing suffering. This new progressive ideology was based on the idea that if we apply scientific reasoning to societal problems, as we did to physical questions, we can rid society of poverty just as we eliminated smallpox.

In the 1920s, American farmers were suffering because the WWI boom in agricultural exports was reversed, causing agriculture and land prices to fall. Farmers wanted the federal government to intervene in the market by buying crops at high prices and dumping them abroad cheaply, so Congress passed a farm relief package. President Coolidge vetoed it. That was the last time our federal government adopted a libertarian approach to a national crisis. Democrats became a party energized by economic intervention, as there is no limiting principle to ever more 'democracy,' meaning state regulation. Republican doctrine became dominated by conservative Christians more worried about protecting “traditional values” in general than liberty. The net result has been to increase the size and scope of the government consistently.

Libertarians Need a Tribe

Many libertarians, such as business owners or professors, are somewhat successful, and they benefit directly from being left alone. This is fine if you are talented and ambitious, but the majority is not. Either libertarians will have to wait until a poll tax is reinstated in which only the wealthiest 10% vote or they must appeal to people who desire primarily to become part of something larger than themselves. Utilitarianism does not capture this, because if maximizing one’s income is all that matters, one only has to convince a majority that even the unskilled will make more money in a more libertarian society. Yet merely having more absolute wealth is not very energizing for those in the bottom half.

The little platoons of life that take us outside ourselves are tribes that protect and promote us. Tribalism makes a lot of sense, in that when you are navigating within an atomistic world, having a set of insiders amongst whom you have influence gives you an advantage in the same way a hoplite phalanx can defeat a rabble. A tribe not only helps us materially but also addresses the universal craving to be appreciated. People want to be part of something larger than them, something they are proud of, that values them. To merely make more money but still be relatively poor, is not an attractive objective because it implies they are not valued. There are many such groups to join, as people are interested principally in doing well among those to whom they relate, groups in which they feel most appreciated. These typically are based on ethnicity, profession, or a common cause.

Two of these tribes are toxic. Ethnic tribalism is a scourge, and the best way to stop discriminating based on race is—as Justice John Roberts puts it—to stop discriminating based on race. Encouraging blacks, Hispanics, women, gays, to form advocacy groups that champion their own self-interest, not by changing what they can control (themselves), but rather by changing others (meet our quotas to rectify discrimination), does not help disadvantaged groups and encourages dissension. Top-down attempts to create ethnic equity encourages people to become more ethnically tribal, where people are first judged as part of an ethnicity and then as an individual.

Economic tribes, such as trade unions, are simply factions that benefit from state-sanctioned monopolies. For example, when a city sets a cap on the number of taxicabs we are helping current taxicab owners, but not the net of all potential taxicab drivers and their customers. Thus, auto and steel union were very strong in the 1950s, and those 1950s members did quite well, but the cost was fewer such jobs in the future decades; teachers do not have to worry about losing their jobs for poor performance, but then education is the one area of the economy where real costs of educating students keeps going up, while the real cost of making most things (corn, cars, computers) tends to fall. Some think everyone should be able to work in a field that has monopoly benefits like tenure, so people do not have to deal with the anxiety and costs that come with losing a job. Yet, the collective costs of this would be to eliminate productivity growth, as then labor would not reallocate to where it is best needed. The essence of the market’s superiority to socialism is that in market economies capital and labor is allocated away from where it destroys value and towards where it creates the most value.

That leaves those with a common cause, and as religious zealots founded liberal America, we should go back to those roots. Since the 19th century, Libertarians have derided Christianity because of its pious tendencies, especially with respect to sex and drugs, while Christians are skeptical of libertarians, who seem to encourage a disorderly, hedonistic, and degenerate society. However, they can compromise, because these fears are overblown and they are more simpatico than they realize currently.

Christians should appreciate Libertarians because one’s relationship with God is direct, from one’s heart to God. Libertarianism does not promote sin; rather it allows it. Christians should know they cannot fix the world with laws designed to prevent people from sinning because the world has always been sinful. Protecting people’s right to sin makes a Christian’s conduct more pure because then one is not merely following a rule, but making an authentic choice. In Christianity, it is easy to see how a simple life performing deeds in the humility that comes from wisdom generates the appreciation of a loving God, so merely having this freedom is sufficient to live a righteous life.

Libertarians should appreciate Christians because their virtues are synonymous with the bourgeois and stoic virtues libertarians have always prized; it is a simple argument that a small government is consistent with Christian ethics. Honesty, discipline, courage, justice, temperance, and wisdom are all praised highly in the bible, and create a flourishing society. The recent success of gay marriage and the last century’s failure to prohibit alcohol should convince Christians that morality should be the provenance of mores, not law, lest that authority turns around and force its morals on you. Both Trump and Republican convention speaker Peter Thiel highlight that LGBT issues are a distraction from the bigger issues, and they are right: the federal government should not be defining marriage or what drugs people ingest in their homes; that is the essence of liberty and the exercise of our God-given free will.

If Christians learned about the consilience of libertarianism and Christianity, they could be powerful advocates for libertarian principles in the public sphere, and this objective would appeal to non-Christians afraid of a crypto-Fabian strategy of converting everyone to Christianity. Most importantly, libertarianism would then appeal to the untalented, in that libertarians offer that demographic nothing that would give them a sense of being valued. The Tea Party had strong support from Christians but seemed almost embarrassed by them, yet “smaller government” as an objective has no traction unless it can appeal directly to those who are not among the talented tenth. Christians see all men as made in the image of God, as moral equals, giving them a status they probably will not achieve economically in their lifetimes. That is, Christians address people’s longing to be appreciated, not merely regarded as necessary unskilled labor.

It’s hard to adopt an ideology where you dislike the other people who hold it, and Christians and libertarians are at extreme ends in their lifestyle choices. They should remember that this difference is really similar to the difference they share within their own tribes, in that some libertarians are all about drugs, others gold; some Christians emphasize faith, others acts.  The key, as our American founding tribes understood, is freedom. Posterity in their own lives and, perhaps, the next, will punish or reward those who make foolish choices with their freedom.

Another tribe to encourage is the nation, in the case of the USA, Americans. As we are a diverse country, this cuts across ethnicities and , so it is a uniquely inclusive tribe, all the more salutary if we add the objective of minimizing foreign entanglements (aggressive nationalism is bad for everyone). We have enough problems managing our own 320 million people. Yet the key here is helping those on the bottom. Open borders encourages employers to hire immigrants over residents for unskilled labor, because 3 billion people survive on less than $2 a day, and their influx keeps low-skilled wages from rising. This only helps low-skilled immigrants and the rich who employ them. Labor participation rates for those with only high school educations have fallen dramatically since 1970, and this is especially pernicious because such people are especially helped by developing the discipline and soft skills that come from having a job.

Lastly, the long-run implications of importing low-skilled immigrants seems certain to move our nation’s away from classical liberalism. Immigrants today are encouraged to retain their culture as opposed to 100 years ago when Henry Ford forced his immigrant workers to learn English and civics. Democrats want more immigrants, taxes, and regulations because they encourage each other. Even libertarians like Milton Friedman believe you cannot have a welfare state and open borders, so this is not hypocrisy, in that every principle at some point runs into paradoxes (e.g., Popper's paradox of tolerance).


Brink Lindsey tried to argue for a left wing Libertarianism, which he called Liberaltarianism. It got nowhere. The top-bottom coalition is the key to the left and the reason that the Democrats have strong support from the poor and the elite. The poor benefit from direct aid, and the middle class Left includes many holding sinecures with average salaries but no chance of losing their job and a hefty guaranteed pension.

Then there are the new victim groups. From the book of Exodus to the Civil Rights struggles of the 1960s victims have been portrayed as suffering because they are noble, which gives them a sense of meaning and purpose. Seizing on Bertrand Russell’s observations that all movements go too far, the left has taken its Civil Rights victory to such an extreme that it now sees every disparity as modern day Jim Crow, if not actual slavery, so that any member of a historically disadvantaged demographic deserves its own stakeholder status in every jobs program or regulated industry.

The elite left contains the typical collection of baptists and bootleggers. That is, those motivated by principle, and those motivated by hypocritical self-interest. The latter include businessmen who make money off government regulations, especially those regulations practice hurt competition, and thus we should not be surprised that billionaires and Fortune 500 CEOs prefer Clinton over Trump: many capitalists, especially those adept at managing our current regulatory labyrinth, do not want more competition. Then there are simpler rich, like Al Gore or Jose Manuel Barroso, who become big company executives for their political connections.

The principled left elites, however, don’t really like the poor—few choose to live amongst them—they just really hate the rich. Since Plato, intellectuals have resented a market-oriented economy. In their formative years, these people did what their teachers asked very well, and thought their intellectual skills implied objectively that they had the highest merit in society. Yet outside of the classroom, lesser students dominate the intellectuals. Money is not the main point; it is the implication that these intellectuals are not appreciated as much as they feel entitled to be. The intellectual wants society to be as it was in school, the formative environment in which they excelled and were praised accordingly. This is why the verbally adept are more liberal than the quantitatively adept, because in general teachers like the verbally adept.

The free market resembles the anarchy of the schoolyard, in which jocks and ebullient extroverts have higher status, which is what makes intellectuals’ antipathy so visceral—not because of resentment against an abstract system—but rather against the type of people who have bested them. That is why intellectuals do not mind entertainers and professional athletes making millions, as they never considered these people competition within their social circles.

The Left used to be the party of social liberty, but the past 30 years has shown that this principle was merely a tactic adopted when they were in the minority. Democrats are now pushing for more restrictions on speech or forcing bakers to make same-sex wedding cakes because such behavior is not merely an individual choice, but evil. The aggressive moralism of the old Puritans now is the property of progressives, who fight evil motivated by righteous indignation. If you have a higher conception of the good, it seems fine to those in power to push it as far as possible in the public sphere, as most people think their  normative values are objectively good, not mere preferences.

Progressives think that more democratic government power is better in every area of our lives; there is no limiting principle to democracy, including liberty. Progressivism is politics under the assumption that every current problem has a top-down solution and that government is pragmatic, its trial and error mechanism no different than the market. They find government solutions better than emergent phenomena because the latter is not democratic. This leads to an ever growing set of democratically implemented state powers.

Given the large number of patronage jobs (e.g., the SEIU and Teacher's unions), the envy that motivates intellectuals, or all the money big corporations have invested in satisfying existing regulations, libertarians are not going to get anywhere on the merits of their economic arguments with the Left, as redistribution and regulation are their foundational motivation, and what energizes their intellectual leadership: managing others via decree, not pell-mell competition. The Left  merely contends with the Laffer curve the way a parasite contends with the constraints of its host.

Top-down Policy Fails

Libertarianism remains our best hope for tomorrow because it works. One might think that minimizing suffering is a humble goal, eminently achievable via policies designed and managed by rational bureaucrats. Yet as Walter Bagehot once wrote, “the most melancholy of human reflections, perhaps, is that on the whole, it is a question whether the benevolence of mankind does more good or harm.”
  • If you give single mothers more money for being single mothers, you get more single mothers, and thus, in 50 years illegitimacy has soared, the effects of which no government program can offset.
  • Prohibition encouraged crime and disrespect for the law, and hurt the majority of Americans who drink responsibly.
  • We put a $1M surtax on salaries in 1992, which gave firms an incentive to generate more stock options, and exacerbated the internet bubble of 2001.
  • Government agencies and regulators encouraged mortgages with no money down and no income verification because home-ownership was correlated with good things, but then the housing bubble burst, leaving the poor no better off than prior to this boom-bust cycle.
  • We created income security for older Americans, but now few have saved for retirement, fewer are connected to family members, and when the social security Ponzi scheme hits the wall it will create an unprecedented disaster.
  • We made it harder for banks to foreclose on delinquent properties, but this increased the bank loss rate, which goes into the pricing of new loans, thus mainly hurting new borrowers for something they didn't do
  • The Volker rule discourages banks from proprietary trading, so in the next crisis there will be less liquidity (eg, see  July 8 2015
  • More regulation means higher fixed costs and less banking competition, bigger banks to amortize that fixed cost
  • When Teddy Roosevelt set up the Park Service in 1903 to manage Yellowstone, they tried to increase elk by eradicating wolves, but then the elk ate all the grasses and trees the beavers used, so the beavers vanished, causing the meadows to dry up, and the trout and otter to disappear. 
Society is an evolving, dynamic system, and top-down correctives usually make things worse. The inherent weakness of a democracy that elects a powerful government is that the intelligence of half the voters is one standard deviation below that of the average college graduate. To the extent these people are unable to manage their self-interests, they are even less competent to judge who has the best plan to manage the self-interests of others.

Further, those in government are not like the altruistic, social-welfare optimizing angels modeled by academics, but rather, just as selfish as any businessman; they simply want government-sanctioned monopolies that restrict competition under the pretext of protecting consumers or ensuring quality. In this environment, a top-bottom coalition built on political patronage has an obvious advantage and inevitably creates a bureaucracy that measures productivity by inputs instead of output.

Libertarians have an endless list of anecdotes that make for excellent debating points, cases in which government rules and regulations have been instrumental in the failure of our inner cities, or skyrocketing healthcare and education costs. As regulations have proliferated and sundry overlapping agencies promote vague objectives based on worst-case scenarios, there are no longer any shovel-ready projects (most of the 2009 $700B stimulus simply went to transfers and shoring up deficits, 3% was spent on infrastructure).

For the past century, progressives have argued for top-down policies, and macroeconomics has been a major influence because it presumes that if you add up the various components of GDP—consumption, investment, state spending—you can fiddle with the money supply or fiscal policy and get on a “turnpike” to optimal growth. That has never worked. In contrast, Aristotle taught that the primary task of the state was to encourage virtue, as a society of virtuous citizens who interacted freely would create a flourishing society, bottom up, without direction. The focus, again, should be on individual virtue and responsibility, rather than top-down solutions that treat individuals as agentless ciphers.


It’s clear that at the margin, Trump’s bias is towards lower tax rates and fewer regulations, Clinton’s bias the opposite. As a libertarian, that’s key. Unfortunately, Trump’s cross-over appeal was that he wasn't a prudish Christian like Mitt Romney yet anti-PC enough to imply he'd stop persecuting Christians, which correlated with the remarks that probably doomed his candidacy.

Trump dominated Republicans because he combined the libertarian goals of lower taxes and regulation that all other Republicans were for with non-libertarian immigration and foreign trade restrictions. This appeals to the many low-capital wage earners who are worried that cheaper foreigners are usurping their jobs. An immigration policy like those of Australia, Canada, Singapore, or New Zealand would allow people who can support themselves to come here, and thus would protect the unskilled, whose only bargaining chip is scarcity.

We need to move away from Libertarians who still believe the key issues are the gold standard and legalized marijuana, to those who will embrace Christians, and American workers over unskilled immigrants. Christians need to embrace libertarian principles because it alone offers them protection against a state that finds their values despicable and increasingly illegal. The key is not to agree on ends, as hard-core libertarians and Christians will always disagree on matters relating to swearing, sex, drugs, and God. The focus should be on what politics should be about: setting up a system in which people with disparate goals can get along and flourish.