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 7 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.
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.
