The extraordinary success of liberaltarianism

I was reading the comment section of Will Wilkinson’s blog, and came across this assertion:

The libertarian effort to convert liberals will be about as successful as the libertarian effort to convert conservatives. Liberals would at base have to share some common ideology with libertarians for that to work, but since they don’t, it won’t.

I couldn’t disagree more strongly.  Liberaltarianism is basically libertarians attempting to knock some sense into liberals on economic issues.  As you may know, I think both left and right wing liberals have basically the same (quasi-utilitarian) values, but different worldviews.  And as you know, I think the right wing worldview is more accurate on most economic issues (although now I guess I have to exclude monetary policy.)

Let’s review what liberals used to believe, before libertarians knocked some sense into them:

1.  In the US, they believed the prices of goods and services should be set by the government.  Ditto for wages.  This took the form of the NIRA in the 1930s.  It took the form of multiple industry regulatory agencies like the ICC and CAB.  By the late 1960s and early 1970s they favored “incomes policies” which were essentially across the board wage and price controls.  Today they generally favor letting the market set wages and prices.  Very liberal Massachusetts recently abolished all rent controls.

2.  In the US, they believed the government should control entry to new industries.  They have abandoned that belief in many industries, and based on recent posts by people like Matt Yglesias, are becoming increasingly disillusioned with remaining occupational restrictions.

3.  They favored 90% tax rates on the rich.  Today they favor rates closer to 50% on the rich.

4.  In most countries liberals thought government should own large corporations.  Today most liberals around the world think large enterprises should be privatized.  Over the next few decades there will be trillions of dollars in new privatizations, and very few nationalizations.

Sure the recent crisis has created setbacks, such as the government takeover of GM.  But the long run trend around the world has been strongly liberaltarian, and will almost certainly remain so for the foreseeable future.  Just the other day Denmark decided to cut unemployment benefit eligibility from 4 years to 2 years.  Think about what that means.  Two French researchers (Algan and Cahuc) found that Danes had the most liberal/civic-minded attitudes on Earth.  They argued that Denmark was the country most suited to have social insurance programs, because the non-deserving would be less likely to abuse the programs in Denmark than in any other country.  Yet even in ultra-honest Denmark it was found that a large number of workers mysteriously found jobs immediately after their unemployment benefits ran out.  So they are cutting back.  Denmark already has the freest markets in the world, and now they are shrinking their welfare state.  No wonder the Danes are so happy, despite dreary weather.

I see people like Brink Lindsey as trying to make pragmatic libertarians better understand their role in the ongoing policy debate.  We are not engaged in some sort of Manichean struggle between good and evil.  We are trying to convince well-meaning policy wonks like Matt Yglesias of the virtues of free markets.  Whether success on that front would actually change public policy depends on how civic-minded (or “liberal” in the original sense of idealistic) the society is.  In very civic-minded societies liberaltarian ideas are accepted much more easily that in less civic-minded societies, where rent-seeking may be endemic.  In the long run, the only hope for those societies is a change in attitudes.  I believe that occurs through the narrative arts.  Progress seems slow, because the problems seem so overwhelming.  But taking the long view, the progress we have already achieved has been mind-boggling.

Good luck to Brink and Will in their new jobs.


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63 Responses to “The extraordinary success of liberaltarianism”

  1. Gravatar of Contemplationist Contemplationist
    24. August 2010 at 13:10

    Scott

    Let me provide the cynical view.
    Until Woodrow Wilson came along, laissez-faire was the norm (mostly) and the dominant ideology among economists. Then came Progressives, Leftists and Socialists and destroyed laissez-faire due to conservative excuse-making and ridiculous monetary policy by the Fed in the Depression.
    Since then we’ve tried and succeeded in moving the socialist tilt of policy quite a bit back to laissez-faire, knowing that laissez-faire was (mostly) GOOD.

    So, again, short of impending destruction, how do us laissez-fairists feel good about these affairs?

    Just a cynical view!

  2. Gravatar of Tomasz Wegrzanowski Tomasz Wegrzanowski
    24. August 2010 at 13:21

    Have Lost Decade affected your thinking about capitalism? Generation of Japanese that entered adulthood in 1990s seems damaged at least as badly as in post-Soviet Union, and there’s really no way to blame it on government.

    It’s quite likely we’ll see mild (hopefully) version of it in States and Europe as well.

  3. Gravatar of Contemplationist Contemplationist
    24. August 2010 at 13:31

    Tomasz

    On the nominal side Scott would probably point to Ben Bernanke’s papers and say the BOJ has played a big part in Japan’s decline.

    On the real side, he would probably point to demographics (which are hard to change) and very-centralizing corporatist policies like bailouts.

    Out of these two sides, BOJ and corporatists policies are part of, or produced by the Government.

    Just making a case :)

  4. Gravatar of DWAnderson DWAnderson
    24. August 2010 at 13:34

    Don’t ignore all the market distortions imposed by pervasive well intentioned regulations and subsidies (including those under the tax code). For example, note the new regulation that fines airlines for long waits on the tarmac. (Just one of many.)

    Some progress has been made in modern liberal economic thinking, but the urge to remake the world with the power of the state (unintended consequences be damned) is still quite strong.

  5. Gravatar of Tomasz Wegrzanowski Tomasz Wegrzanowski
    24. August 2010 at 13:50

    Contemplationist: Yes, it was combination of private banks and conservative Bank of Japan, not anything lefty/socialist.

    Demographics is NOT hard to change – it was as direct result of Lost Decade that Japanese demographics got so drastically bad – not only people stopped having babies, they stopped having sex altogether. In 1990 Japanese total fertility was 1.6 (birth rate 11/1000) – not high but very similar to Western European numbers. Communist countries had much higher fertility – for example Poland had fertility 2.1 (14 births/1000). (Soviet numbers are not good idea to quote as different post-Soviet republics had very different demographics, Poland is next biggest Communist country in Europe).

    After both Japan and Communism crashed, Japan is down to 1.27 fertility (7.6 births/1000), while Poland to 1.23 (10 births/1000).

    These are both severe demographic disasters caused by economic factors.

  6. Gravatar of Justin Dailey Justin Dailey
    24. August 2010 at 13:53

    Speaking of right-wing accuracy on economic issues, your favorite small Asian economy clocked in 17.9% GDP growth in the first half (I checked, and it’s not annualized – the annualized quarterly rates have been off the charts http://www.bloomberg.com/apps/quote?ticker=SGDPQOQ:IND).

    http://www.bloomberg.com/news/2010-08-24/singapore-bond-sales-beat-record-as-economy-fires-borrowing-costs-plunge.html

  7. Gravatar of scott sumner scott sumner
    24. August 2010 at 14:19

    Contemplationist, I would not want to go back to the “good old days” before Wilson. I am a libertarian, and there were massive restrictions on the freedom of women, blacks, gays and many others. Things are much better today, even with the horrendous income tax.

    Tomasz, Let’s see, when Japan was booming in the 1980s, it showed how bad laissez-faire capitalism is. America needed to copy the Japanese planned economy (according to the foes of laissez-faire.) Now that it isn’t doing well . . . it again shows how bad capitalism is.

    As far as the BOJ being conservative, I agree. That’s why I am a liberaltarian, not a conservative. What does the BOJ have to do with capitalism?

    Why is a low birth rate a disaster? Would the world be better off with lots more people?

    DWAnderson, Yes, there is still much work to be done.

  8. Gravatar of ssumner ssumner
    24. August 2010 at 14:26

    Thanks Justin, Of course in small economies there can be big swings–I think the trend growth rate is more like 5%. But I do like their low tax high saving fiscal model.

    They grew more in 6 months than we will grow in 5 years–maybe 7.

    And that new resort hotel looks impressive.

  9. Gravatar of Tomasz Wegrzanowski Tomasz Wegrzanowski
    24. August 2010 at 14:41

    Scott: Japan was never that much of planned economy, but what you’re saying is accidentally somewhat right.

    1980s’ Japan had corporation-based welfare state, fairly interventionist government, loose monetary policy, and very low Gini around 25. It followed all liberal policies and was highly successful.

    Now it’s much more laissez-faire, has tight monetary policy with extremely stable prices, and Japanese Gini last time I checked was already nearing 40. It follows all conservative policies and is an unmitigated disaster.

    (I know that you place all blame on monetary policy of BOJ, but is this really fully exogeneous?)

    Low birth rate is a disaster, as people in developed countries are positive externalities. The world would be far better off with lots more people, as long as these people got enough nutrition, education, and capital to become productive.

    From more practical point of view, Japanese ratio of workers to pensioners is becoming more and more severe burden to economy. Nobody has a solution to that yet.

    In both Japan and Poland (and Poland is supposedly a big success story of transition from communism to capitalism) it seems that low birth rate is mainly caused by poverty among poor people. You don’t see this in statistics as they get a lot of support from their parents, but demographically it is a horrible disaster. It seems to follow insider / outsider story – good jobs/houses/etc. are taken by insiders, and nearly all young people are outsiders – too poor to support a family. By the time they reach insider status they’re no longer biologically capable of having babies. A few decades of that and there’s not much left of a country.

  10. Gravatar of Benjamin Cole Benjamin Cole
    24. August 2010 at 15:17

    Boy, I sure enjoy reading Scott Sumner. I have had so many similar notions (not nearly as well-articulated) over the years, and yet could find no economist or political group–left or right–that agreed with me.

    I may still be crazy, but at least I feel a little less crazy after reading Sumner.

  11. Gravatar of scott sumner scott sumner
    24. August 2010 at 15:27

    Tomasz, That’s a real stretch. Japan was a welfare state in the 1980s, and stopped being one in the 1990s? I’d never heard that before. I presume you have Japanese government spending as a share of GDP data to back that up.

    Of course it is widely known that Japan did not deregulate nearly as much as other countries, and remains highly regulated. So that argument doesn’t fly either. I think you are grasping for straws.

    And I don’t know why you keep assuming I am a conservative. Did you not read my post?

    You said:

    “From more practical point of view, Japanese ratio of workers to pensioners is becoming more and more severe burden to economy. Nobody has a solution to that yet.”

    Singapore has a solution—private accounts, fully funded. it was what you call a “liberal” idea to have these unfunded social insurance systems, which are giant Ponzi schemes.

    Poverty causes low birth rates? The birth rates tend to be very low in Japan and Hong Kong, and much higher in poor Asian countries.

    Thanks Benjamin.

  12. Gravatar of david david
    24. August 2010 at 15:38

    Some non-libertarian notions built into the market-oriented progressive (liberaltarian?) platform (that I don’t see going away for the forseeable future):

    - that regardless of whether the government does or does not impose limits on economic activity, it has a legitimate claim on doing so

    - that where the government resorts to the market as an allocative mechanism, it takes moral responsibility for any market failures – and, as a corollary, has the moral obligation to intervene to prevent them, or prevent luck-based injustice (however defined)

    - that non-state coercion is possible, and that formal government-run safety nets create more freedom than traditional family or community welfare systems

    etc. These indicate a fairly large difference in philosophy; what market-oriented liberals and libertarians share is choice of method; their underlying motivations can be quite different. DWAnderson mentions the tax on waiting on the tarmac; well, in another age we might have seen legislation fixing the maximum wait time, instead of just setting a price and allowing people to make incentive-based judgment calls. A market method, but still with interventionist aims.

    The broader moral legitimacy – responsibility – to ‘remake the world with the power of the state’ is still upheld.

  13. Gravatar of david david
    24. August 2010 at 15:57

    You said:

    “From more practical point of view, Japanese ratio of workers to pensioners is becoming more and more severe burden to economy. Nobody has a solution to that yet.”

    Singapore has a solution—private accounts, fully funded. it was what you call a “liberal” idea to have these unfunded social insurance systems, which are giant Ponzi schemes.

    To nitpick, Singapore does have an element of unfunded welfare schemes; the private accounts just relieve the state with the burden of taking care of the middle and upper class as well. So it only needs to find funds for the rock bottom who have insufficient or no savings.

    And to fund those, well, Singapore shot from 5% foreign to 25% foreign in the span of a decade. Developed countries with a 1.5~ replacement rate don’t explode from four million to five million on their own in a decade (countries need 2.1 just to remain constant!). It is maintaining its high worker ratio by generous immigration and elaborate social engineering to prevent any immigration-related conflicts. True, it doesn’t actually desperately need all those young workers to fund pension schemes, but I presume they allows it to create wealth more easily.

    But immigration – even strictly controlled immigration a la Singapore – is a solution Japan is reluctant to explore for other reasons.

  14. Gravatar of Tomasz Wegrzanowski Tomasz Wegrzanowski
    24. August 2010 at 16:07

    Scott: Measuring welfare state by government share of GDP is like measuring monetary policy by nominal interest rates – correct metric is something like Gini coefficient. Japan had social safety network based on lifetime employment in huge state-supported corporations – in 1990s this system fell, and people outside the system (young) face either unemployment or underemployment with no safety network other than their parents.

    Not coincidentally this kind of welfare provided by state-backed corporations is also how Communist Poland operated.

    And how do you measure how much countries deregulated. I cannot imagine any metric by which Reagan’s deregulation was larger than that of Poland, Russia, or Argentina.

    I know you don’t consider yourself “conservative”, but tight monetary policy and obsession about price stability you hate seems linked with neoliberal reforms you love far too much for you to just ignore it.

    As far as I can tell, relative poverty of people in reproductive age seems highly related with low birth rates, but if you have data showing otherwise that would be extremely interesting. In any case this cannot be treated exogenously.

    Singapore is tiny country with very rapidly growing population thanks to immigration, so it doesn’t count. Once you hit sufficient ratio of pensioners to workers, it really doesn’t matter how you “fund” it – by taxes, mandatory savings, high housing prices, or anything else – you’re taking a huge chunk of real wealth away from workers.

  15. Gravatar of Contemplationist Contemplationist
    24. August 2010 at 16:26

    Scott

    I’m also a libertarian and I thought it was needless to say, but I guess was not that I was ONLY talking about economic policy and political economy, not the other awful stuff.

  16. Gravatar of Mike Sandifer Mike Sandifer
    24. August 2010 at 16:27

    Scott,

    Apparently you’re referring to more thoughtful moderate and pragmatic libertarians such as yourself. The extremists, such as those who want to abolish the Fed and replace it with nothing, might think you very unlibertarian and certainly won’t be working with liberals on most economic issues, being purists.

    It is the surge in this purist ideology that concerns me.

  17. Gravatar of david david
    24. August 2010 at 16:31

    @Contemplationist

    Are economic policy and social policy so easily separable? As far as we are talking about broad-ranging ideology, the two are tightly linked. Accepting civil rights reform through the dread state required repudiation of some elements of laissez-faire ideology.

  18. Gravatar of Tomasz Wegrzanowski Tomasz Wegrzanowski
    24. August 2010 at 16:49

    I found some data about poverty among people aged 16-29 in Europe. It’s not obvious how to interpret this but very high poverty among young people who leave home, even higher poverty rates among young parents (both single and couples), high number of young people living with parents, and low fertility are present throughout Europe.

  19. Gravatar of Justin Dailey Justin Dailey
    24. August 2010 at 17:08

    Scott,

    Singapore’s GDP growth figures certainly are volatile.

    I pulled GDP by industry, seasonally adjusted, and calculated a compound annual growth rate of 6.2% since 2007Q2. That’s quite a performance given the time period in question although population growth over that same period puts GDP per capita growth closer to 2% annually (which would have been fantastic here).

    http://www.singstat.gov.sg/stats/themes/economy/natac.html

    The unemployment data are fantastic also – very modest unemployment despite all of that output volatility is an impressive achievement.

    http://www.mom.gov.sg/Home/Press_Release/Pages/20100129-ESQ42009.aspx

  20. Gravatar of John John
    24. August 2010 at 17:57

    I think, as @David demonstrates, that actually what you’re saying is that utilitarian libertarians have a lot in common with liberals. As long as you’re pragmatic and have similar goals, you can prove someone wrong.

    @David on the other hand seems to exemplify someone who, not unlike Arnold Kling, is religiously against the government ever doing anything (although I’m a little hazy on where they draw the line since I’m not sure they admire Somalia much). In contrast to pragmatic liberals and libertarians, if someone ‘knows’ that all government activity is intrinsically evil (or intrinsically necessary as I guess some liberals might), you can never prove them wrong.

  21. Gravatar of david david
    24. August 2010 at 18:04

    @John

    Oh, no, I actually identify with the progressives. But I am aware of all the bullet-biting that this entails. I approve of the three non-libertarian elements I identified.

  22. Gravatar of Joe Joe
    24. August 2010 at 18:53

    Professor Sumner,

    The chief regulatory view of liberals in the past was that government should manage markets directly. Perhaps this was a result of Keynesian views that the economy is naturally prone to fluctuations.

    Today, most regulations are about “protecting” workers and consumers. How on earth are we to get rid of those?

    My chief arguments to my liberal friends is the following: The sheer deadweight loss from such regulations far outweighs to benefit to workers and consumers. It is better to let the states take over such regulation because through trial and error different states will develop new and innovative strategies.

    Its worked a few times. If I simply say, “get rid of them,” its too radical for me.

    Best,

    Joe

  23. Gravatar of david david
    24. August 2010 at 19:05

    @Joe

    Seems susceptible to race-to-the-bottom dynamics and other interstate fighting. Americans already complain about assorted foreigners working for a fraction of their wages and workplace protections, imagine that hostility between American states.

  24. Gravatar of Tomasz Wegrzanowski Tomasz Wegrzanowski
    24. August 2010 at 20:03

    Going back to my remark about measuring deregulation, here’s Cato’s Economic Freedom of the World index, with ratings from 1980 to 2006.

    According to Cato, USA did not liberalize at all – its 2006 score is lower than its 1980 score, as is Hong Kong’s. Chile, UK, Denmark, and China liberalized significantly just as you said. But then Argentina was liberalizing far faster than Chile until 2000 crash, and Greece liberalized nearly as much as Denmark.

    The biggest change happened in Central/Eastern Europe, Middle East (Turkey, Iran, Israel), South America – none of them really miracles of economic growth.

    Cato economic freedom scores are just a crude proxy, but as far as I can tell this is much more compatible with Krugman’s story of neoliberal revolution than yours.

  25. Gravatar of David E David E
    25. August 2010 at 04:29

    Scott,

    I hope you are right, but I fear that the Democratic party and liberals in general are hopelessly tied to labor unions (both public and private sector) as well as tort lawyers. There is a limited amount of reform of liberalism possible as long as they are tied to these groups. I also question how willing they are to give up on “experts” aka bureaucrats running our lives.

  26. Gravatar of A new pinnacle of chutzpah? « Foseti A new pinnacle of chutzpah? « Foseti
    25. August 2010 at 06:05

    [...] new pinnacle of chutzpah? At The Money Illusion, it is written – apparently in all seriousness: But the long run trend around the world has been strongly [...]

  27. Gravatar of scott sumner scott sumner
    25. August 2010 at 06:27

    David, Those broad principles are consistent with the pragmatic libertarianism of Friedman, Hayek and myself. We all favor income redistribution to the poor. So don’t equate “libertarian” with “dogmatic libertarian.” Many of the greatest libertarians have been pragmatists (essentially utilitarians.)

    Of course there is no reason to regulate airline waiting times. But we do desperately need to:

    1. Allow foreign airlines to fly within the US.
    2. Privatize airports as those socialists in Europe have done.
    3. Privatize air traffic control as those socialists in Europe have done.
    4. Privatize airport security as those socialists in Europe have done.

    To achieve the liberal goals you discuss, we need the government do do far less in most areas, and do far more in areas where it is really needed (carbon tax, etc.)

    David, I know about Singapore aid to the poor, and I approve. But there aren’t enough poor to require a big, high-tax welfare state. Most social spending goes to the middle classes. So my broader observation remains approximately correct. They are a low tax/high saving society.

    Tomasz, You said;

    “Scott: Measuring welfare state by government share of GDP is like measuring monetary policy by nominal interest rates – correct metric is something like Gini coefficient.”

    OK, you win. If capitalism is defined as countries with high Gini’s, then I concede it is true that capitalism makes societies more unequal. In fact it is a tautology.

    Japan’s government didn’t stop supporting their companies in the 1990s, the companies started losing money. It was a recession, not a switch from statism to laissez-faire.

    You treat the pension problem like a zero sum game. In 25 years Singapore will be twice as rich as Japan in per capita terms. (wealth, not income.)

    Australia is very neoliberal, and they have good monetary policy. Ditto for Singapore, Sweden and many other countries.

    When did I say Reagan’s deregulation (it actually began with Carter) was more than Russia? That’s nuts. Russia is still more statist than us, but they’ve done far more reforms because they started from rigid communism.

    Contemplationist. Yes, but I suppose it depends how one defines ‘economics.’ To people like Gary Becker, that term includes almost everything. But I do understand your point, and on many issues of taxes and regulation I certainly prefer the earlier era. But Jim Crow was economic regulations.

    Mike, I agree. There are pragmatic and dogmatic libertarians. Only the pragmatists are utilitarian/liberaltarian. I call them (me) right-wing liberals. Other terms are classical liberals, or neoliberals. It excludes dogmatists of the Ayn Rand school, who think taxation is theft.

    David;

    “Are economic policy and social policy so easily separable? As far as we are talking about broad-ranging ideology, the two are tightly linked. Accepting civil rights reform through the dread state required repudiation of some elements of laissez-faire ideology.”

    I strongly disagree. Jim Crow was enforced by the state, even when it involved private business (segregated lunch counters, etc.) Read Richard Epstein.

    Tomasz, I’m confused. I thought people like you regard Europe as the welfare state utopia. And now you tell me they have lots of poverty and a low birthrate?

    Justin, Yes, it’s a great economy. It’s a pity about the political system.

    John, I agree.

    Joe, The single most costly regulation in the area you mention is the lack of freedom to engage in pain management. The war on drugs results in 50% of cancer patients suffering from excessive pain due to lack of medication.

    There are some glimmers of hope here with medical marijuana, etc. But we have a long way to go. The harm here is 1000 times worse than any torture of terrorists committed by the CIA. millions of people are suffering unnecessary pain and our Puritanism prevents us from doing what is needed.

    Tomasz, I don’t accept your data. When I looked at the similar Fraser Institute data from 1980 to 2005, all but 4 countries liberalized. The US did become freer, although it is now reverting back. More liberal or idealistic cultures like Denmark liberalized much faster than the less liberal cultures. Chile is ranked around 5 or 10 last time I looked, depending on the source, and Argentina around 135. So its no surprise that Argentina did poorly. They did do some liberalization around 1990, which led to fast growth for 7 years. Then tight money wrecked everything in 1998, and they reverted to statism. Chile is the model for Latin America.

    Among the 28 developed countries Greece is dead last in economic freedom, so they are hardly a poster boy for neoliberalism. Yes, they are less bad than before, but they are also much less poor than before, even with the crisis. So it’s all relative.

    Among developed countries there is a very strong correlation between the freedom rankings and per capita GDP. You can check my paper on neoliberalism, which is online at econlib.

    I also have a paper online somewhere (at SSRN) called “The Great Danes” which discusses those ranking in detail, and many other related issues about neoliberalism.

    David E, That raises an issue I alluded to at the end. There is the question of what idealistic liberals believe, and there is the issue of corruption. It is clear that deep in their hearts liberals don’t think the teachers unions are great for education, but they feel they must support them. So that slows down change. In more idealistic countries like Sweden they have already gone to a 100% free market in education, with even for profit companies allowed to operate voucher schools, and all parents allowed to send their kids there. We’ll get there eventually, but it will take time.

  28. Gravatar of Awful Things Most Liberals Don’t Believe Anymore – Hit & Run : Reason Magazine Awful Things Most Liberals Don't Believe Anymore - Hit & Run : Reason Magazine
    25. August 2010 at 06:53

    [...] monetary economist Scott Sumner, who describes himself as a "pragmatic libertarian," offers an encouraging list of the sorts of things most standard American liberals used to believe, but don't any [...]

  29. Gravatar of David E David E
    25. August 2010 at 06:58

    Scott,

    I’m afraid I don’t see much evidence of high minded liberals speaking against the excess of unions. Micky Kaus has, and he has been excommunicated by liberal commentators. Also, although it may be placing too much emphasis on recent events, liberals support of the monstrosity that is the recent health care bill shows little evidence that they really have learned anything.

  30. Gravatar of Joe S. Joe S.
    25. August 2010 at 07:47

    Unions as a Liberaltarian Outcome:

    Workers decide they are better off banding togther and do so to negotiate as one voice and do so. I have doen it in small shops where becuase of our actione we all becaoem equity owners in the small business. It is a very good negotiating strategy, just like Wal-Mart pushing for lower prices on goods they purchase from suppliers due to their sheer size.

    Joe S.

  31. Gravatar of Casey Head Casey Head
    25. August 2010 at 08:08

    Libertarians are upholding the best parts of what the two party duopoly used to stand for.

    We believe in civil rights like the Democrats used to. We believe in small government and fiscal discipline like the Republicans used to. And we believe in leaving people the heck alone…like America used to.

  32. Gravatar of Gabe Gabe
    25. August 2010 at 08:25

    Libertarians also have to convince liberals that things like torture, and government wiretapping are bad and states rights are not racists….when someone is as dumb as a democrat or republican things are near hopeless.

  33. Gravatar of Cliff Cliff
    25. August 2010 at 08:57

    Joe,

    No problem with unions, as long as the government is not forcing the 49% of workers who did not vote to be a member of the union to join anyway, and the same with new hires.

  34. Gravatar of david david
    25. August 2010 at 09:19

    David;

    “Are economic policy and social policy so easily separable? As far as we are talking about broad-ranging ideology, the two are tightly linked. Accepting civil rights reform through the dread state required repudiation of some elements of laissez-faire ideology.”

    I strongly disagree. Jim Crow was enforced by the state, even when it involved private business (segregated lunch counters, etc.) Read Richard Epstein.

    It was enforced by states and dismantled by federal authority, to be sure. But even today you will see libertarians waving the flag of state’s rights. For an example, I refer you to Exhibit A, Gabe, at 08:25. Why libertarians would prefer illibertarian states and a weak federal government to weak states and a neoliberal federal government is a mystery.

    But, yes, I have read Epstein, and Becker. It would be incorrect to assert that Jim Crow-era segregation was wholly a product of state-enforced laws; many businesses segregated when it was not required (e.g., theaters in the North). We also have segregation in the South when state laws permitted but did not require it, and, importantly, unequal treatment in the remaining cases where segregation was required by law. There are a variety of important dynamics here that are not covered by a naive reading of Epstein or Becker.

    To my knowledge Epstein favors active prohibition of discrimination where monopsony power exists; he, of course, denies that monopsony power has a meaningful existence.

    Justin, Yes, it’s a great economy. It’s a pity about the political system.

    Singapore’s economic system and political system are, sadly, not separable; separate them and you get Hong Kong, busy legislating itself some minimum wages and other shiny new welfare laws. Countries cannot operate as Singapore does without preventing economic interest groups from gaining political momentum.

  35. Gravatar of Tomasz Wegrzanowski Tomasz Wegrzanowski
    25. August 2010 at 09:30

    Scott: From your “Great Danes” paper: “The neoliberalism column was derived by deleting 3 of the 10 Heritage categories (corruption, taxes, and government spending)”. Good government values have absolutely nothing to do with “neoliberalism” as Reagan and Thatcher would have understood it.

    What you’re saying is pretty much that low corruption/good government correlates with high economic growth. Then you stick “neoliberalism” on it in a way that doesn’t make sense.

    Gini coefficient is decent way to measure welfare state / social safety network – regardless of system being capitalist, socialist, or whatever else.

    Europe since 1980s has definitely not been any kind of socialist paradise, it is far more neoliberalism and like Krugman says, growth slowed. Chile and Argentina had very close Frasner scores up to 2000 (7.3 / 7.2) so your theory really doesn’t work. (and Frasner/Cato/Heritage scores all include components that are more about success than about policy, so post-2000 data are less meaningful than you make them)

  36. Gravatar of Dan H. Dan H.
    25. August 2010 at 09:36

    Trying to analyze where libertarians fit by examining the current grab-bag of economic policies pushed by the right and left is not a very useful way to look at things. Politicians on both the right and left wind up supporting all kinds of things for reasons other than pure political philosophy.

    The root issue here is philosophy. Libertarians naturally align with conservatives because both come from the same branch of philosophical thought. The divide between right and left goes back hundreds of years, but it perhaps best examined as the split between Locke and Rousseau and their respective visions of humanity.

    Locke believed that man was born free, that his role in society was one of interacting with others in mutual self-interest. The role of the state is to maximize freedom of individuals while maintaining social order.

    Rousseau was a communitarian. He believed that man is born into a community to which he responsible, and that the community has the right to impose conditions on an individual’s existence within that community for the purpose of promoting the overall welfare. He was the original “It Takes a Village” liberal.

    This has been the basic philosophical divide between the right and left since then. Hillary Clinton believes that it takes a village to raise a child. Conservatives believe that it takes a family. Liberals are community organizers. They believe in the fundamental correctness of using government, as a representative of the community, to control and regulate individual and corporate behavior in an almost unlimited manner.

    However, both Conservatives and Libertarians derive from Locke. They believe in individuals. They don’t think the state has a right to dictate the day-to-day activity of people in the community for a ‘higher good’.

    Now, religious conservatives overlay religious rules on some aspects of private life, which makes them less than ideal from a libertarian standpoint. But their instincts are generally compatible. Even ‘family values’ conservatives are at least promoting a social structure that puts choices back in the hands of the individual and his chosen social graph.

    And of course, conservatives can have their principles corrupted by parochial concerns, just as Liberals do. A Liberal president just signed a bill that will divert food stamp money from the poor to pay for salaries for relatively well-off teachers. That’s certainly not liberal dogma – it’s a parochial decision made to protect a political constituency. Likewise, Republicans may support farm price supports even if it means big government, because farmers are a natural conservative constituency.

    But in the end, while Republicans and Democrats are both heavily flawed from a libertarian standpoint, Republicans and Libertarians at least share the same core principles. Libertarians and Liberals do not.

    That’s not to say it’s a bad thing to try to find common ground with Liberals and use that to attempt to expand the sphere of influence of Libertarianism. But it’s a much tougher task than finding common ground with Republicans.

  37. Gravatar of David E David E
    25. August 2010 at 10:05

    Joe S,

    The problem is not that people voluntarily want to unionize, it’s when the unions have excessive influence on the government (see e.g. using TARP money to bailout GM and Chrysler, public sector employee pension plans, resistance to education reform, special deals for union members in health care bill).

  38. Gravatar of david david
    25. August 2010 at 10:17

    @David E

    Good news on GM, incidentally.

  39. Gravatar of qq qq
    25. August 2010 at 10:48

    “Gini coefficient is decent way to measure welfare state / social safety network – regardless of system being capitalist, socialist, or whatever else.”

    On the one hand, you mentioned Japan’s increased Gini and lack of growth as evidence against Scott’s views of neoliberal reforms, yet fail to consider its lack of neoliberal reforms; on the other hand you mention Europe’s slowed growth with “more neoliberalism” as evidence against Scott’s views of neoliberal reforms, yet fail to consider its increased Gini. How do you reconcile the two?

    “Europe since 1980s has definitely not been any kind of socialist paradise, it is far more neoliberalism and like Krugman says, growth slowed. Chile and Argentina had very close Frasner scores up to 2000 (7.3 / 7.2) so your theory really doesn’t work.”

    What’s the counterfactual? Are there countries out there that have been less neoliberal since the 1980s yet have grown faster than Europe and Asia?

  40. Gravatar of qq qq
    25. August 2010 at 10:50

    Sorry, I meant “low Gini” for the European countries.

  41. Gravatar of More on liberaltarianism « Foseti More on liberaltarianism « Foseti
    25. August 2010 at 11:36

    [...] on liberaltarianism Ok, apparently a lot people think this is a good article, so I’m going to rebut each point: 1. In the US, they believed the prices of goods and [...]

  42. Gravatar of Brian Moore Brian Moore
    25. August 2010 at 12:00

    This is perfect:

    “I believe that occurs through the narrative arts. Progress seems slow, because the problems seem so overwhelming. But taking the long view, the progress we have already achieved has been mind-boggling.”

  43. Gravatar of Pat Pat
    25. August 2010 at 12:11

    You’re giving too much credit to the liberaltarian people. 90% tax rates don’t work. Most liberals figured it out from experience not the tender touch of sympathetic liberaltarians.

  44. Gravatar of David Tomlin David Tomlin
    25. August 2010 at 12:36

    Mike Sandifer:

    . . . abolish the Fed and replace it with nothing . . .

    Why not?

    Producing money has historically been a sovereign monopoly, but it’s not a public good. Barons, kings, and bishops outlawed private mints so they could gain monopoly profits on the seigniorage.

    The U.S. and Britain went the opposite way, charging zero seigniorage so that private mints were unprofitable. But when gold and silver were discovered in the American west, the government was a bit slow to establish a branch mint. A private mint quickly sprang up in Denver, charging seigniorage a bit below the cost of shipping metal to Philadelphia and back.

    The Fed doesn’t need to be ‘replaced’, not by the government anyway. The market will provide money, one way or another.

    I know, we would have to do without all the brilliant policies that central bankers use to smooth out the trade cycle. But they aren’t working out so well, are they?

    The U.S. had its first trade-cycle downturn in the 1820s, when the Second Bank of the United States was in operation.

    Has our economy been generally less unstable with central banking than without? Maybe so, but I think it’s far from obvious.

  45. Gravatar of Floccina Floccina
    25. August 2010 at 12:54

    I think that liberaltariansism would work well if they focused on redistribution over public ownership. I think the economy can support a lot of cash redistribution from rich to poor.

  46. Gravatar of Student Student
    25. August 2010 at 15:35

    “As you may know, I think both left and right wing liberals have basically the same (quasi-utilitarian) values, but different worldviews.”

    I think one should be very very very very careful in using the word utilitarian in the same line as the word libertarian. When many libertarians express some version of “taxation equals theft”, I’m pretty sure they don’t mean to add “…because it diminishes the value of my social welfare function.”

  47. Gravatar of Blackadder Blackadder
    25. August 2010 at 16:47

    Tomasz,

    I think the Cato data is a bit misleading because the basis for the rankings changes over time. There are a bunch of subcategories ranked for 2006 that aren’t ranked for 1980. If you look at the United States, it’s generally not the case that the U.S. was doing well on a subcategory in 1980 only to see it decline by 2006 (that’s true for a couple of cases, but not most of them). Rather, what’s happened is that new subcategories get added in later years on which the U.S. has a low score, and this brings down the overall score. I suspect that if the U.S. had been ranked on all subcategories in 1980, its 1980 score would have been a lot lower, and lower than the 2006 score.

  48. Gravatar of Blackadder Blackadder
    25. August 2010 at 16:50

    Btw, Scott, if you haven’t already, you should read William Voegeli’s Never Enough.

  49. Gravatar of Extinct Species Extinct Species
    25. August 2010 at 22:27

    Yes, liberals are coming to their senses, but libertarians never will.

  50. Gravatar of scott sumner scott sumner
    26. August 2010 at 06:54

    David, Yes, health care is a setback.

    Joe. Abolish the public schools and the Wagner Act, and unions will be weakened. I am neither pro nor anti-union.

    Casey, I agree.

    Gabe, I don’t agree they are that dumb.

    David, I think you misread Gabe, he was supporting states rights, not state enforced segregation (which is prevented by the Constitution, and was in 1950 as well.)

    I agree that there was some segregation in the north w/o legal mandates. Epstein recently said he favors the 1964 civil rights act.

    You said;

    “Singapore’s economic system and political system are, sadly, not separable; separate them and you get Hong Kong, busy legislating itself some minimum wages and other shiny new welfare laws. Countries cannot operate as Singapore does without preventing economic interest groups from gaining political momentum.”

    This is wrong. Or if it is right, it applies to all countries. People use this against me all the time, and then turn around and point to some other country like France or Sweden that they like. Well we also don’t have their political or cultural systems. The fact is that we can learn for successful and unsuccessful fiscal regimes, regardless of who runs them. There is no reason Singapore’s HSAs can’t work in the US. Policy is not completely determined by political regime or culture–otherwise policies wouldn’t change over time.

    Tomasz, My econlib paper that finds the strong correlation between Heritage rankings and per capita GDP uses all ten categories. That’s the point I made in my comment. The Great Dane paper was looking at completely different issues.

    There is a reason it is called neoliberalism and not neoconservatism, and there is a reason why people like Tony Blair were considered neoliberal.

    Idealistic people on both the left and right support good governance, my whole point is we have to get beyond this left/right compartmentalization that you are stuck in and look for common ground between liberals and libertarians. Countries like Denmark, Switzerland and Singapore are good places to start that discussion.

    The Gini coefficient doesn’t measure the safety net at all, it measures income distribution. Brazil has a high gini and a huge level of social spending. There are Asian countries with lower ginis and smaller welfare states. Again, you are simply asserting a tautology if you claim gini measures the economic system, and then claim the economic system you like provides more equality.

    As I said, Argentina did do neoliberal reforms in the early 1990s, but things have since moved the other way. Argentina grew rapidly from 1991-97. Then they ran deflationary monetary policies.

    Dan, You are talking about dogmatic libertarians, who believe in natural rights. I am not interested in that group. I am interested in the quasi-utilitarians like Friedman and Hayek, who favored income redistribution. Pragmatic libertarians. They are linked to liberalism through the classical liberals. Mill is a key turning point, as liberalism moved to the left during his lifetime. Mill remained a liberal, but liberalism changed.

    David E. Yes, that is the problem.

    David, No matter how well GM does, the bailout of the UAW, I mean GM, was a disgrace. The policy failed in its objective to prevent bankruptcy.

    Thanks Brian.

    Patrick, Even if true, it wouldn’t change my argument that liberaltarian ideas are triumphing. Everything from gay rights to lower MTRs is all part of the agenda. It doesn’t matter who causes the change. But I do think libertarians played a role. The big rate cuts followed soon after Mundell launched supply-side economics.

    Floccina, And it wouldn’t really cost that much, as Singapore has shown. You can do it with low tax rates, very low in fact. Their government spends about 1.5% of GDP on health care, and they have universal coverage. We spend 7%, and have huge gaps.

    Student. I agree, but I am talking about pragmatic libertarians. It is the dogmatic libertarians who think taxation is theft. They are not part of liberaltarianism.

    Blackadder, I’m sure you are right, the US has gotten considerably more neoliberal in the Fraser rankings.

    Extinct Species. Again, it depends on whether you mean pragmatic or dogmatic libertarians.

  51. Gravatar of Jeff Jeff
    26. August 2010 at 07:16

    Scott, I think you are kidding yourself. Let P denote the percent of economic decisions made by governments at all levels (local, state, and federal), including decisions foreclosed by things like land-use regulations, influenced by tax codes and subsidies, etc… Surely you are not arguing that P has been going down over time? Combined government spending at all levels has been growing for as long as I can remember, except for a minor dip here and there.

    Likewise, government regulation of all kinds has been more or less monotonically increasing since the thirties. Zoning for “land-use” purposes used to be a rarity, now it is the norm everywhere but Texas. Software patents are now allowed. Have you been to an airport lately? Filled out a tax form? A census form? Tried to test potential employees IQ? Why are there so many more lawsuits today than 50 years ago?

    Against all this, about all you can point to is airline and trucking deregulation, both of which (i) happened more than thirty years ago, and (ii) were pushed through by Carter over the opposition of most liberals. Ask yourself if Carter could get those measures through today’s Congress.

    I’ll grant that the end of the draft was a big win, but it is more than offset by the increasing intensity of the wars on drugs, immigrants, and “terror”. Even the advances of the civil rights movement of the sixties has been perverted into affirmative action for people that were never discriminated against, and pernicious “disparate impact” lawsuits.

    I think it indisputable that liberty in this country has been mostly declining for a long time, with both liberals and conservatives to blame for, but mostly liberals. I am astonished that you can observe the recent health-care monstrosity and think that liberals are coming around to a libertarian point of view.

  52. Gravatar of sourcreamus sourcreamus
    26. August 2010 at 10:28

    Liberal policies have changed because political reality has dragged them rightward but at the margin they have not changed at all. Ask a liberal at any point over the last 50 years whether government should be more or less involved in the economy and the answer has always been more. The answer will always be more because they are trying to use government to immanentize the eschaton. If you knock some sense into a liberal on economic policy, they are no longer a liberal they are a convert and a neo-con.

  53. Gravatar of david david
    26. August 2010 at 14:41

    You said;

    “Singapore’s economic system and political system are, sadly, not separable; separate them and you get Hong Kong, busy legislating itself some minimum wages and other shiny new welfare laws. Countries cannot operate as Singapore does without preventing economic interest groups from gaining political momentum.”

    This is wrong. Or if it is right, it applies to all countries. People use this against me all the time, and then turn around and point to some other country like France or Sweden that they like. Well we also don’t have their political or cultural systems. The fact is that we can learn for successful and unsuccessful fiscal regimes, regardless of who runs them. There is no reason Singapore’s HSAs can’t work in the US. Policy is not completely determined by political regime or culture–otherwise policies wouldn’t change over time.

    Yes, but policy is influenced by regime and culture, and thus the relative costs of policies are affected.

    Take HSAs. They will be less effective in the US. No country – not even Singapore – is going to let people die in the street, so it always comes down to how aggressive means-testing is when it comes to treatments we are not prepared to demand a payment for.

    Singapore is willing to demand that you sell your house, or car – if you have a big house, change to a smaller house. If you have a small house, change to a studio. And so on. Resistance is minimized because if you have no house, the government will provide one, and it will be a decently acceptable house in a safe neighborhood, not a slum. And there are no slums because the government aggressively replaces whole neighborhoods in the name of urban redevelopment – Kelo is nothing in comparison. And the government can afford to replace buildings at this rate because when it has to tell a hundred businesses to shut down for five years – likely permanently – it does not need to worry about political fallout.

    Likewise, you won’t really need the car you have. The government will make sure the trains run on time. So, having carefully delivered an efficient transport system – albeit by shooting striking bus drivers a few decades ago, and credibly threatening to do so again if trouble ever started – the government can demand that you sell your car to fund the bypass surgery. You won’t like it, but it isn’t a life-destroying change.

    But the US federal government can hardly demand the same, can it? Can you imagine standing up and telling Americans that, no, they are not entitled to live in their fantastically expensive house, even if they and their parents and grandparents lived there and it only became expensive due to surrounding gentrification? Or demanding that they move into a housing project and all its problems? Singapore doesn’t have these issues, of course.

    You mention France and Sweden, but these European countries have some semblance of class identity. Middle class people accept that they are the bourgeoisie, so to speak; populist politicians pretend that they are working class. The US is noted for not having a sense of national class identity – almost everyone self-identifies as middle class. In Singapore, where ethnic identity dominates class divisions, the government imposed its own order – regardless, either way, the US lacks either, which makes telling people that they are actually well-off enough to pay for their own retirement and healthcare extremely unpopular.

    For all that, could HSAs still function well in the US? Well, yes – they could replace payouts toward the upper middle class. Almost certainly better than the status quo. But the US will still be paying a lot of people a lot of minimally-means-tested money and paying a lot for healthcare – certainly not 1.5% of GDP – and even then it will still be immensely unpopular; the US upper middle class consistently self-reports as feeling financially squeezed.

  54. Gravatar of MG MG
    26. August 2010 at 19:46

    Please see
    http://www.Libertarian-International.org
    for information on Liberal-Libertarian initiatives underway.

  55. Gravatar of ssumner ssumner
    27. August 2010 at 12:57

    Jeff, Sorry, but you have your facts wrong:

    “Against all this, about all you can point to is airline and trucking deregulation, both of which (i) happened more than thirty years ago, and (ii) were pushed through by Carter over the opposition of most liberals. Ask yourself if Carter could get those measures through today’s Congress.”

    Liberals did support this (Kennedy, Nader, etc), and I have cited other gains like welfare reform, lower MTRs on the rich, deregulation of many other industries, freer trade. All supported by many liberals.

    Many of the negatives you cited like the war on drugs are true. But even there the picture is mixed. Marijuana is gradually becoming decriminalized (in my state.) Gambling is being gradually allowed across the country.

    But you make some good points.

    sourcramus, You are talking about left wing liberals. But even there I don’t agree. Almost every single country did big neoliberal reforms in the 1980s and 1990s. Probably half were done by left wing governments.

    David, You said;

    “For all that, could HSAs still function well in the US? Well, yes – they could replace payouts toward the upper middle class. Almost certainly better than the status quo. But the US will still be paying a lot of people a lot of minimally-means-tested money and paying a lot for healthcare – certainly not 1.5% of GDP – and even then it will still be immensely unpopular; the US upper middle class consistently self-reports as feeling financially squeezed.”

    This is exactly the point. Forget the upper middle class, let’s talk about the middle class. We both know the US has the richest middle class in world history (in terms of consumption, and excluding a few tiny countries.) So why do we feel poor? Because we don’t have Singapore’s high saving policies. Even the poor Chinese save 40% of their income. When I was poor I saved a lot, and it’s a nice feeling you always have money for emergencies if you need it. If Americans were forced to save we would becomea mjuch richer country, just as Singapore is becoming much richer than us. That would make it much easy for people not to rely on the welfare state. It is absurd that Americans feel poor, it shows how dysfunctional our savings policies are. We rely on taxes rather than saving, which is incredibly inefficient. Relatively little of our welfare state goes to redistribution, so the cost to the government to aid the poor would be very low.

    None of your arguments about housing have anything to do with HSAs. They would be supplemented by insurance for catastrophic illnesses.

    You can’t treat the 16% of GDP we spend on health care as a given. If it was purchased out of pocket (HSAs) providers would have to charge much less. It’s not like it can’t be done, every other country in the world charges much less. Ever wonder why it is so expensive here? We are the only place where neither consumers or governments have effective pressure on medical costs.

    Thanks MG.

  56. Gravatar of Rumors of left-libertarianism’s death are greatly exaggerated | The League of Ordinary Gentlemen Rumors of left-libertarianism’s death are greatly exaggerated | The League of Ordinary Gentlemen
    27. August 2010 at 14:28

    [...] closer to libertarian policy positions and conservatives further from them. As Scott Sumner points out, the left has accepted many of the key economic reforms of the 1970s and 1980s. Few liberals want [...]

  57. Gravatar of Twilight of Socialism…or Its Metamorphosis? « HBD Talk Twilight of Socialism…or Its Metamorphosis? « HBD Talk
    28. August 2010 at 13:22

    [...] of Socialism…or Its Metamorphosis? Is socialism as an ideology dying?  Reason links to a blogger who lists things liberals used to believe in but don’t any more. Let’s review what liberals [...]

  58. Gravatar of DWPittelli DWPittelli
    29. August 2010 at 06:00

    “Very liberal Massachusetts recently abolished all rent controls.”

    Actually, Massachusetts voters eliminated rent control in a referendum back in November 1994. Their liberal politicians would never have done so, and plenty of liberals were appalled. The referendum passed by just 51/49, and failed in the 3 cities which had rent control.

  59. Gravatar of ssumner ssumner
    29. August 2010 at 06:54

    DWPittelli. Those are good points:

    1. When you are old as me 1994 seems like yesterday.

    2. It’s true that Massachusetts has liberal politicians. I presume it has something to do with the attitudes of the voters who elect them. So the same electorate that elects 100% liberals to the House of Representatives, voted against rent control.

    3. I think it’s fair to say the action has been a huge success, as the cities involved (particularly Cambridge) have improved dramatically since 1994.) I would hope those liberals who were opposed have changed their minds.

    (I am of course ignoring those few liberals who want to turn all of America into a third world slum, so that poor people can afford to live wherever they want. I don’t think they represent the best of liberalism.)

  60. Gravatar of A Pessimist Manifesto «  Modeled Behavior A Pessimist Manifesto «  Modeled Behavior
    3. September 2010 at 05:53

    [...] of that has to do with the success of the general Libertarian project, as Scott Sumner outlines here. Many free market ideas have now simply become conventional wisdom among wonks of all [...]

  61. Gravatar of Balloon Juice » Blog Archive » Payroll tax holiday vs direct government spending Balloon Juice » Blog Archive » Payroll tax holiday vs direct government spending
    7. September 2010 at 10:10

    [...] of that has to do with the success of the general Libertarian project, as Scott Sumner outlines here. Many free market ideas have now simply become conventional wisdom among wonks of all [...]

  62. Gravatar of Sintetia » Lecturas recomendadas Sintetia » Lecturas recomendadas
    8. May 2012 at 14:59

    [...] Sumner discute hasta qué punto ha influido el liberalismo economico en el pensamiento progresista durante el últi…. Argumenta que, a nivel mundial, el progresista de hoy es mucho más liberal que hace tiempo, con [...]

  63. Gravatar of Around the Web | Notes On Liberty Around the Web | Notes On Liberty
    20. May 2013 at 13:33

    [...] Economist Scott Sumner on Swedish liberaltarianism [...]

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