Thursday, 24 November 2016

Libertarianism & The Possible PR Problem

I saw recently that the Adam Smith Institute, to whose Blog I contribute from time to time, has disassociated itself from the term 'libertarian' in favour of the definition 'neoliberal'. I have sympathy. If you believe a set of things, labels don't often do them justice, and they can frequently give people the wrong end of the stick. As long as you're not someone who seeks comfort and fulfilment in group identification (which I definitely am not), you're probably wise not to get too identified with labels, as they are so often open to all kinds of loose interpretations.

Although I lean heavily towards the pro-market ethos of libertarianism and its concomitant liberal attitude to our freedoms (most associated with the Philosophers John Stuart Mill, John Locke and David Hume - and Adam Smith, of course), I am equally aware that libertarianism, like most groups, has extreme ends of the spectrum where one will find all kinds of radical, immoderate zealots with whom one has little in common. Hereafter, when I use the term libertarian I am defining it in a relatively moderate form that embraces freedom and markets, desires far less interference and regulation by self-serving politicians, but does recognise the role of the state in our lives.

Under that definition, I find libertarianism has the only genuine regard for a system that works for everyone, because it cares about all the people in the world, it understands that trade and competition are the main determiners of what works for human beings, and it is unbound by geographical borders and nationalistic preferences. Almost any sane mind wants a government to interfere in our liberties only when the benefits of their interference outweigh the costs.

To be a libertarian, I find, is simply to show that you understand the economic, logical, empirical and philosophical arguments regarding when it is good for the state to be involved and when it is bad. It is about understanding that there are vital thinking tools that people well-informed in economics have that most other people do not. These tools are roughly translatable as being the following 8 things that need to be understood but frequently are not.

1) Almost every action has tangible and intangible benefits, and tangible and intangible costs, and if you haven't considered all of those factors thoroughly you do not understand enough about what you're doing.

2) Just because there are good intentions and a perceived ethical stance behind a view or an action, this does not mean what you have is a good idea. In fact, quite often good intentions and a perceived ethical stance actually mask the reasons why many ideas are bad ones.

3) Just about everything in life is a trade-off, where something happens at the expense of something else (primarily time, money, and material resources) - and there is rarely anything you can do, or ought to do, that lies outside of this consideration.

4) If there is one thing that should almost never be interfered with it is the mechanism of prices that are dictated by the supply and demand market. Prices are not just sums that tell us the value of something, they are vital information-carrying signals that inform us of the outcome of billions of transactions throughout the world. No politician can know the market clearing price of anything better than the market knows itself.

5) The economic pie is not fixed, nor is it zero sum. If I have a slice of it, this does not mean it leaves less for you, because the economy can keep growing, creating wealth and value for both of us.

6) The principal drivers of human prosperity, increased well-being and economic growth are trade and competition.

7) Just as in the market of goods and services, tax is also something that also ought to be opened up to competitive forces.

(Note on 7: Just as shops and restaurants compete with one another for your custom, so too do governments of nation states in their rates of taxation (they would be able to do this more successfully were it not for the fact that so many people are under the misapprehension that society would be better if the rich were taxed more). Governments are competing with governments of other countries for foreign investment, where attracting more external workers and more capital investment from foreign entrepreneurs benefits the nation. People want to work and invest in nations where they are not taxed too heavily on their income and their investments, which is why sensible politicians will not tax too heavily).

8) To properly understand economics you have to understand incentives. When one person goes out to complete a transaction based on self interest, he (or she) adds a little bit of value not just to his own circumstances, but to every agent involved in the transaction (the seller, the transporter, the manufacturer, those mining for raw materials, and so on). Multiply that one transaction by the billions that have been going on every day in the past century and a half (in particular) and the result is the Smithian invisible hand mechanism that aggregated to all the increased prosperity and well-being the world has seen.

Understanding these 8 points provides the bedrock on which you can build pretty much your entire arsenal of economic understanding, political analysis and societal commentary. Virtually everything you need to speak rationally on any of those three things is bootstrapped by the wisdom of 8 points above. When I associate with the libertarian ethos, it is the above with which I am identifying when I call myself a libertarian.

But as I alluded to a moment ago, and this is where I am of a similar view to the ASI and the IEA, I certainly do recognise the important role that a state plays in society even if, as I covered in this paper, there are an awful lot of ways in which politicians distort and harm trade. Incidentally I do think there are several institutions and services that are currently state-provided that will one day not be, but in many cases the transition will likely be gradual, because it has to occur evolutionarily, not as a sudden change in the status quo.

Not only should it be acknowledged that the state (for now, at least) provides important functions in our lives - we also have to remember that people's decisions are affected by the information they have - and sometimes they need regulatory protocols to ensure they obtain that information about goods and services. So clearly, for this reason, being a libertarian doesn't mean adopting a 100% erosion of state influence.

Many regulatory laws are superfluous, but not all of them are. We need laws that protect factory employees from working in dangerous conditions unbeknown to them. If Jack is employing Jill and surreptitiously putting her life at risk due to faulty equipment or dodgy wiring that she could know about, I don't want Jill to be devoid of protection through the law. Nor do I want Jill to be a victim of trade description issues, or poor quality of product, or banking malfeasance - basically all the things that we as consumers wouldn't wish to be victims of due to asymmetry of information.

There are also some cases in which state regulation protects consumers from monopoly power, and also makes businesses accountable for their negative externalities. But by and large, with the qualities of the free market you are all but guaranteed (through price theory) to facilitate the most rational, incentive-driven allocation of resources possible, as well as minimising inequality, lifting masses of people out of poverty, and maximising the successful co-existence of humankind and the natural world.

The other thing you have to think about is the question of what kind of society you want to live in, and what kind of society is most likely to engender that. We can first ask which elements of daily living are most important, and then ask which political services are most important. So, for example, seeing what people are always saying they value, I would say off the top of my head regarding the question of which elements of daily living are most important, these are the following 8 things:

1) A country in which no one is unfairly discriminated against due to colour, gender, ethnicity or sexuality.

2) A country in which reason, logic, evidence and free enquiry are of primary value.

3) A country in which every citizen has enough food and a place to live.

4) A country where individuals are the rightful owners of their own lives and therefore have inherent freedoms and responsibilities

5) A country in which religious beliefs remained personal, and are largely kept separate from politics and legislation.

6) A country in which every couple can have a formal union with their beloved (either marriage or civil partnership) based on their beliefs and preferences.

7) A country in which free speech is afforded to its citizens, to the extent that (except for very extreme cases) anyone is free to say anything they want to anyone they choose.

8) A country in which the terminally ill have the legal right to assisted suicide (providing stringent legal precedents to avoid manipulation).

As for the political services, a government should largely be focused on doing the following:

1)  Protecting our freedoms and rights through the rule of law.

2)  Administering justice.

3)  Providing a military defence for its citizens

4)  Lightly regulating the economy

5)  Providing all the services the public sector currently provides more effectively than the private sector.

What you may notice about the above is that as things currently stand the 8 qualities are the ones best served by our having a free and open choice-driven society, whereas the 5 that follow them are, for now at least, qualities and services that the majority of us are happy to be looked after by the government.

On that note, one also has to consider present perceptions against future perceptions. For example, as I hinted above, there are some services that the state currently performs in the present that markets will be able to perform better in the future. But naturally in some cases the transition will take time, and some libertarians are fine with the notion there is a time and a season for specific optimum changes.

To finish, I should mention that to the perception of many, libertarianism also comes with a stigma of being ethically questionable, as people are quick to accuse capitalism of being about selfish, uncaring pursuits of individualism, driven primarily by the greedy profit motive. This is both unfair and short-sighted. The truth is somewhat opposite: libertarians understand something that makes the left very uncomfortable - that it is the people themselves, rather like in a democracy, that decide how society progresses - it is bottom up, not top down - and this makes control freaks very uncomfortable. The reality is, there is no proletariat revolutionary class within the bowels of the free market capitalism - mere organs controlled by the body of the bourgeoisie - the people are in charge and always were, as Mises was shrewd enough to pint out in the 1940s...

"The real bosses, in the capitalist system of market economy, are the consumers. They, by their buying and by their abstention from buying, decide who should own the capital and run the plants. They determine what should be produced and in what quantity and quality. Their attitudes result either in profit or in loss for the enterpriser. They make poor men rich and rich men poor. They are no easy bosses. They are full of whims and fancies, changeable and unpredictable. They do not care a whit for past merit. As soon as something is offered to them that they like better or that is cheaper, they desert their old purveyors. With them nothing counts more than their own satisfaction. They bother neither about the vested interests of capitalists nor about the fate of the workers who lose their jobs if as consumers they no longer buy what they used to buy."

The principles of the libertarianism I've described cannot therefore be immoral or uncaring, because its ethos is built on the championing of progress for everyone, not minority groups, which is what its opponents advocate (often without knowing it). We build our more formal ethics on our reasoning, but initially more so on our intuitions about instances that exemplify wrongdoing according to our conscience. These are the pivots around which ethical codifications revolve.

The free market, as regular readers will know by now, is literally the aggregation of all the world's mutually beneficial transactions. That's what it is in a nutshell. And by mutually beneficial transactions, we mean an act when both parties get a surplus from a transaction - that is, the buyer gets consumer surplus from the purchase, and the seller gets producer surplus from the same transaction.

The free market simply couldn't evolve into the complex multi-faceted nexus of connectivity it is now without the underpinning moral and ethical concomitants. However, given the up and running ethical substrate on which trade and competition can occur (the two biggest drivers of human prosperity), one should only desire government involvement in areas where the market doesn't already engender optimal outcomes - and that is the quintessence of my beliefs, however one chooses to label it.