Till death us do part

There’s all sorts of questions like this I want to ask libertarians. Like:

1. Should corporations exist? If so, they were created by the government–why can’t the government regulate them?

2. Are there legitimate government functions? What, exactly, are they? I can guess that military defense makes most people’s list, as does a police force and some judicial system to protect personal bodily security and private property, and enforce contracts. I thought roads would also be fairly uncontroversial, but I was told by at least one person that “the jury is still out.” I guess I can see his point–if roads are ok, it’s hard to think of a good argument against public transportation, and goodness knows we can’t have that. What’s the logical distinction, other than “let’s quit while I’m ahead”, between legitimate and illegitimate government functions?

3. Do you believe in externalities? If so, what do you propose to do about them?

4. What exactly do you make of the history of the late 19th century/early 20th century in Western Europe and the United States?

5. Also if so, why is government power intrinsically dangerous and private power intrinsically–if not harmless, then benign enough to eliminate any real need for government regulation? “The armed might of the state” is all well and good but it’s easy enough for a private citizen to pay for their own police force and arm themselves heavily.

etc. etc.

The State won’t fight the Church’s view of the matter, either. If you’ve undertaken a Catholic marriage and then get a State divorce, the State won’t force the Church to grant you a new Catholic marriage with your new partner. You will have to settle for a different form of marriage.

The (modern, liberal) State leaves people free to make what relationship bargains they will. It, however, chooses to privilege only one. Which one it privileges varies from State to State and time to time.

I don’t think this is a point against libertarians.

Chis’s question is similar to the slavery question: should people have the contractual ability to give up their freedom and become slaves? In a sense, the important question is not about entering into such contracts, but as digamma said, how such contracts shall be enforced. Some of the libertarians I have spoken with about this issue maintain that one should be allowed to enter into a slavery contract, but that the penalty for violating the contract can only be monetary. I don’t recall the justification, but I agree it is an interesting question worthy of further exploration. Since my libertarianism is justified through consequentialist rather than deontological arguments, it doesn’t really have much of an effect on my beliefs, but for others it may.

On to Katherine’s questions:

1. It depends on what you mean by corporations. When most people ask this question, they are really asking about limited liability. As to whether limited liability laws should exist, I’ve written a little about this question on my website here and here. One of the possible libertarian responses is from Bob Murphy, in his article “Limited Liability Corporations in a Free Society.”

Murphy argues that corporations would still “have the option of issuing (limited liability) stocks and bonds to raise capital, but such actions would in no way limit the ethical and legal obligations of the founding members.” Employees of the corporations “can sign contracts … in which the “corporation” pledges to assume full liability for any damages caused by the [employees] while … on the job.” The only stipulation Murphy makes is that ultimately, someone – some human person, and not a legally created pseudo-person – must be held accountable at the end of the day, if the assets of the corporation are not enough to cover its debts.

“If so, they were created by the government—why can’t the government regulate them?”

Suppose we say that marriage is created by the government, in the sense that the government is the sole (monopoly) provider marriage licenses. Does the fact that the government claims a monopoly on granting marriage licenses also give it the right to regulate marriage, perhaps by saying that only heterosexuals may marry?

Libertarians, at least those I have spoken with, would maintain that the corporation shouldn’t be created by the government anyway.

2. Are there legitimate government functions? It depends on which libertarians you ask. Anarcho-capitalists, being anarchists, will say no. Minarchists will say yes. Defense against foreign invasion is probably the most difficult service for non-state entities to provide because of the vast public-good problem associated with it, and for this reason is the most difficult issue for anarcho-capitalists. On the other hand, government itself is a large public good problem, so the problem exists on both sides.

As for the logical distinction, it would depend on whether one is a deontologist libertarian or a consequentialist. The distiniction for a deontologist would either be the anarcho-capitalist position, under which all government is necessarily illegitimate (because government necessarily initiates force) or the minarchist position, where the goal is to minimize rights violations (Nozick’s “rights as side contraints” argument).

The distiniction for a consequentialist wouldn’t be a distiniction as such, but a disagreement over which government functions, if any, are more efficient than if they were provided privately.

3. Yes, libertarians believe in externalities. As Ronald Coase discovered, the important question is not about externalities, but about transaction costs. There are a number of private solutions to externality problems, so long as the transaction costs are small enough. In cases where transaction costs are large, anarcho-capitalists run into the same problem they have with national defense. The question for them is then whether the public goods problem is larger for producing good government or producing solutions to other large public goods problems like national defense and environmental externalities.

For minarchists, externalities would be treated the same way as any other rights violation, and either addressed by the courts or the legislature.

4. A lot happened during that time period; you would need to be a bit more specific about what you are asking. If your question is about the Great Depression, both mainstream neo-classical economists and Austrian economists have produced a large body of work demonstrating that the Depression was not a result of a free market gone amok, but the unintended (and in some cases, intended) consequences of widespread government intervention and mishandling of the economy.

5. “[W]hy is government power intrinsically dangerous and private power intrinsically [not dangerous?]

Two responses here:

* Government power is necessarily an initiation of force; private power is not.

* Private power is (generally) kept in check through market competition; government power is supposedly kept in check through democratic oversight, but libertarians deny (I think correctly) the ability of voters to properly regulate the actions of elected (and unelected)officials. A basic premise of Public Choice theory in economics deals with this issue.

Marriage contracts are reducible to the same elements as any other form of contractual agreement, as long as marriage is defined as a relationship between two (adult) people. But at its most essential marriage is about reproduction.
In that, these points aren’t too different from the debates about abortion that have polarized us so effectively.
The tone of this libertarian/governmental argument treats children as an addendum to the contract, an option, something like real estate or an investment portfolio. But the strictures and interventions that are being discussed are in place because of that, because control of reproduction now is control of the future, later.
It’s about the nature of humanity. A primary and ennabling illusion for that control is the static gene pool, the idea that it doesn’t matter who contributes, who breeds, it’s all numerical. But that’s false.
A dominating presence, that insists on submission to authority before the right to reproduce is granted will obviously create a population of submissive individuals eventually. And, eventually, a population for whom submission is no longer a choice, but a necessity. There’s the real tension in this.

My understanding of some libertarian positions is that “permanent” marriage or slavery comes under the same heading as specific performance. Here is the argument.

A contract is simply an exchange of property rights. Here is an example: If you paint my house by Jan. 15, I will pay you $500. If not, you must pay me $1000 as a penalty. The firm of Dewey, Cheatham, and Howe will decide if the terms of the contract are satisfied.

You can see, nowhere in this contract does it say that you must paint my house; it just says who has title over what property under particular conditions. That is all a contract does.

So, I do not have the right to force you to do something, just to exchange property rights. “Not being able to force you to do something” is (sort of) what lawyers mean when they say “No specific performance.”

For example, if I hire Pavarotti to sing at a particular time and place, and he decides he doesn’t want to, then the most I can do is penalize him (sue him, or use a penalty clause in the contract); I cannot force him to sing.

Similarly, then, if you make a marriage contract with me and then refuse to be married to me any more, then I cannot force you to be married to me. If you make a contract that says you will give me your kidney, then decide not to, I cannot force you to give it to me. If you make a contract that says you will be my slave, then decide to leave, I cannot force you to remain enslaved. In any of these cases, the most the contract can do is to exchange property rights; I can sue you for non-performance, but cannot compel specific performance.

As any lawyer will tell you, things can get quite a bit more complicated, but this, I think, is one libertarian position.

Bill,

Yes, that’s the argument I was thinking of when I mentioned the distinction some libertarians make between monetary and non-monetary penalties. Of course, the question then becomes why contracts involving the exchange of property rights are permitted but contracts for specific performance are not. I mentioned that the distinction a consequentialist might make would involve the efficiency loss associated with mistaken judgements. I suspect that a rights-based libertarians would argue something along the lines of inalienable rights – property being alienable, self-ownership not.

Micha: “For minarchists, externalities would be treated the same way as any other rights violation, and either addressed by the courts or the legislature.”

The externalities of today’s markets are incredibly huge and diverse, and are just what ideologies like communism explicitly set out to address (by – in the case of communism – controlling or even trying to wipe out the market mechanisms which they assert are the root cause of the problem).

But minarchists propose to mitigate abusive externalising of costs by (a) laws against initiation of force, and (b) civil lawsuits.

There are several problems here. Firstly, US-style libertarians (which I take it this discussion started off being about) tend to have quite bizarre views on what does – and doesn’t – constitute “initiation of force”. (I’ve heard it said, quite sincerely, that contract-breaking – which could be due to simple forgetfulness, note – is “initiation of force”.) Similarly, and relatedly, they will tend to disagree with the left about what externalities it is valid to address via government (and what means the government should use if so, of course).

Let’s take a concrete example. I move that the succession of mergers and mega-mergers in the US media industries over the past century or so have had negative effects on political and cultural diversity in US mainstream media, especially in less populous regions (and that is why anti-trust is very important in a mixed capitalist economy). Since the parties to a “merger transaction” are the N companies being merged, any effect on anyone else is an externality by definition, no? I’m not an economist, but it seems to me that way.

But clearly, externalities go way, way beyond the hackneyed example of the polluted stream going through a neighbour’s property, and things start to get an awful lot more complicated. One begins to think that one might need an awful lot of laws (or case law, written by judges as they decide on individual cases) just to deal with all the kinds of externalities there might be. Doesn’t sound very minarchist to me, in effect.

Robin,

I must take issue with your very first sentence, “The externalities of today’s markets.” Huh? I thought we were talking about environmental externalities like pollution. Pollution is a result of many things, but “markets” is not one of the causes. Please try to be a bit more specific on what kind of externalities you would like to discuss instead of simply lumping everything you do not like under the catch-all of “markets.”

I move that the succession of mergers and mega-mergers in the US media industries over the past century or so have had negative effects on political and cultural diversity in US mainstream media

Putting aside the factual question of whether or not this is actually true. (Incidentally, I do not believe it is; much of the work done by Tyler Cowen shows why this is not the case.) But even if we assume for the sake of argument that it is true, you would first have to establish why ensuring cultural diversity is a legitimate role for government. As long as people are free to create whatever cultural or media entities they and others are willing to support, I see no reason other than paternalism for people like you to step in and say, “Sorry folks, your success offends my sensibilities of what the media and culture should be like. It’s time for the government to shut you down.”

(and that is why anti-trust is very important in a mixed capitalist economy).

Curious. Do you feel the same way about labor unions? They are a collusive monopoly, after all.

Since the parties to a “merger transaction” are the N companies being merged, any effect on anyone else is an externality by definition, no? I’m not an economist, but it seems to me that way.

The problem with such a loose definition of externalities is that one can use it to label anything an externality. It doesn’t seem very useful. I don’t know how an economist might define externalities so as to include pollution but exclude things like lower profits to a firm as a result of increased entry of competitors, but I don’t think economists spend much time worrying about such problems. Instead, as I mentioned earlier, externalities are not even the central issue here – transaction costs are.

Doesn’t sound very minarchist to me, in effect.

Why not? Even anarchist libertarians do not object to laws – even many laws – provided they are necessary and just. Libertarians do not object to laws per se; we object to unjust intrusions of government into areas where it should not be (assuming it should be in any), and/or inefficiencies in areas where the market could perform the same or better than the state could at a lower cost.

Micha:

I thought we were talking about environmental externalities like pollution.

Katherine asked if libertarians believe in externalities. She did not specify “environmental externalities” in particular, she just asked about externalities.

Pollution is a result of many things, but “markets” is not one of the causes.

Unrestrained markets are a divisive and anti-social means of allocating resources, as we can clearly see in almost any country where severe neo-liberal economic reforms have been implemented. Argentina, for instance. Markets under-value the needs and wants of the poor (including, say, the need to have clean breathable air) while over-valuing the needs and wants of the capitalists.

It is not correct to argue that the value of an item is what people are willing to pay for it. This is because economic value is not identical to human value. Not everything can be reduced to money. Sex, for instance, is often considered to be better when it is free, which makes little sense under the “economic value = human value” nonsense.

Please try to be a bit more specific on what kind of externalities you would like to discuss

All of them.

The problem with such a loose definition of externalities is that one can use it to label anything an externality. It doesn’t seem very useful.

I am using this definition of externalities. Indeed, as you suggest, almost any effects on non-parties to a transaction can be labelled externalities. I think this is a fairly commonplace definition, so I don’t think you’ve shown good cause to upbraid me for using it.

I do however take your point that not all negative externalities should be considered as harms that create an obligation to redress, ameliorate or prevent those harms. But actually, Katherine never claimed that. She merely asked how we should deal with them.

Anti-trust law, fraud laws, and libel laws are all examples of laws that evolved to (at least putatively) try and draw the right dividing line between legitimate and illegitimate harms to market competitors. (Fraud can be framed as an illegitimate tactic to get ahead of your competitors in business, for example). We already have a complex, ever evolving legal system for judging what are acceptable and unacceptable externalities (as well as internalities!). And it clearly can’t be reduced to initiation of force, or even initiation of force and fraud. That is probably why hardcore US-style libertarianism is so unpopular – even in the US. Most intelligent people (including, I suspect, some purported libertarians at libertarian think tanks) realise that libertarianism is too simplistic.

Libertarianism is ultimately a deeply regressive, authoritarian and conservative ideology because it elevates financial power to the status of morally legitimate power. Boiled down, it is like saying “He has power therefore he should have power”. If I have the financial power to enslave people in sweatshops, it effectively says, that is moral. What nonsense!

In this way it is similar to fascism, except that fascism is far less subtle in that it explicitly valourises all forms of power, including direct physical force. Libertarians at least claim to eschew initiation of force – except that their convenient notions of what does and does not constitute initiation of force logically permit them to support, say, violence against peaceful protestors, because trespass is “initiation of force”; or the non-physical violence of a tyrannical corporation towards its employee’s emotional, physical and mental well-being.

What libertarians fail to grasp is that the choice between a job and starvation is no choice at all – and thus any contract, and any power relations, arrived at under those conditions are, to a greater or lesser extent, morally illegitimate.

Citizen’s income now!

Robin,

Unrestrained markets are a divisive and anti-social means of allocating resources, as we can clearly see in almost any country where severe neo-liberal economic reforms have been implemented. Argentina, for instance.

I’m not terribly familiar with Argentina, but of all the “neo-liberal” market societies I am familiar with, such as the U.S., certain parts of Western Europe, Hong Kong, Singapore, and a handful of other “Asian Tigers”, it seems to me that “unrestrained markets,” at least relative the the restrained markets of other countries, have demonstrated enormous success in allocating resources.

You claim that “economic value is not identical to human value”; very well, but then how do we define human value? I do not believe that anything in this world has intrinsic value; rather, value is a product of human subjective desires. Markets excel at maximizing this sort of value; other values, perhaps those based on your own personal conception of how you would like the world to be, may not be satisfied by markets. Oh well.

And it clearly can’t be reduced to initiation of force, or even initiation of force and fraud. That is probably why hardcore US-style libertarianism is so unpopular – even in the US. Most intelligent people (including, I suspect, some purported libertarians at libertarian think tanks) realise that libertarianism is too simplistic.

Well, the formulation as you just presented it may be too simplistic, but at least speaking for myself, that is not how I would describe libertarianism. The non-initiation of force axiom is a useful shortcut for getting to the heart of an issue, but it is not the end of the argument. I think of it as a rough guide to getting things right.

Libertarianism is ultimately a deeply regressive, authoritarian and conservative ideology because it elevates financial power to the status of morally legitimate power.

I appreciate the platitudes, but I don’t quite understand your argument (assuming there is one for me to understand). You seem to object to power in and of itself, regardless of how it is used. Why? What is morally illegitimate about the mere existence of power? How far would you like to take this argument? Would you be willing to shackle the strong in order to match their strength with their weaker counterparts, ala Harrison Bergeron?