Embracing Markets, Opposing “Capitalism”

If you’re against regulations and subsidies that distort market outcomes, fine, so are all libertarians (I hope). But the typical “liberal” response to such things is to clamor for (and obtain) privileges for “the losers.” The end result is even worse (for almost everyone) because it leads to the establishment of massive and costly government regulatory bureaucracies; the enforcement of anti-market regulations in the name of health, safety, etc.; the theft of property rights by government-backed unions, and the lower employment and higher prices that result from unionization; the transfer of income from those who earn it (not all taxpayers are “crony capitalists,” you know) to those who don’t, via Social Security, Medicare, Medicaid, and (if the Supremes don’t do the right thing) Obamacare; and on and on.

Jeff R.: I’m not sure what I said that suggested that I might favor cartelization or state action. I’m an anarchist, so I oppose the state action across the board. And I deny that cartelization occurs except by force: voluntary association simply isn’t cartelization. My point was that adopting the radically pro-free association position taken in, say, the 2000 LP platform (http://www.dehnbase.org/lpus/library/platform/2000/uacb.html) would tend to reduce employer power in the workplace significantly.

This is an extremely interesting and provocative post. It is also true that much of the power of the state is used to benefit those in privileged positions of power. As an example, think about the Copyright Term Extension Act which extended copyright on all existing works for 20 years all to benefit Disney and to protect Mickey Mouse as an example… There is no way that one can argue with a straight face that increasing the length of copyright protection for existing works provides much incentive for the creation of new works, especially given that copyright before the extension already extended significantly beyond the life the creator before the act. (And that is the purpose ‘to promote the progress of science and useful arts” specifically mentioned in the Constitution for giving Congress power over copyrights. ) So, this is just one example of a law, among many, meant to benefit a narrow, powerful, and privileged interest at the expense of freedom for everyone else.

Here is the problem I have though. While not denying that danger of “capture” or the concerns brought up most prominently in the public choice literature, I believe it is possible for the state to have an extremely positive role in advancing everyone’s shared interests (i.e. basic science research, the funding of universities, the provision of universal education) and also in advancing the interests of the disadvantaged. Or to put it another way, just because we should try to stop the state from doing bad things, that does not mean we should try to use the state to do good things. I think that one area where liberals and bleeding-heart libertarians are likely to partially part ways is that bleeding-heart libertarians are much more likely to be extremely skeptical of even the “good” functions of the state. Nonetheless, I do think that caution and concern about the possibility of state power being corrupted or having unintended (as well intended) consequences should, in theory, be something that liberals and bleeding-heart libertarians can agree on.

Or to put it another way, maybe bleeding-heart libertarians might productively think about how to counteract “capture” in a perhaps second-best world where the state is taking on more of a role that they think is perfectly optimal. And maybe liberals could think about how market mechanisms might be taken advantage of in areas that have traditionally been used by the state, even if this is not their first-best scenario. For example, maybe liberals should think about whether school vouchers that could be used at private schools might be a better alternative to more centralized control, whether by local school boards or state and federal governments, given the difficulties that schools that face too many mandates may have innovating. And maybe bleeding-heart libertarians could compromise and consider whether the amount of vouchers and total education spending could be increased to address concerns that liberals may have about access to high quality schools for poorer students, and also whether regulations that prevent schools that accept vouchers from denying access to “undesirable” students might be necessary. Basically, if a bleeding-heart libertarians prefers less education spending, and a liberal is worried that inadequate resources devoted to education will perpetuate socioeconomic disadvantage, perhaps there is room for compromise that will make everyone better off.

Anyway, I think this is a really nice post. It is true that state power is often twisted to give advantages to those (like Disney in my example) who do not need any such special solicitation. The perhaps much more difficult question is how to reform state power so that it can play a more productive role, given the reality that no one is likely to get their way all of the time. In my school voucher example, bleeding-heart libertarians would be expected to allow overall education spending to go up, even though they may be very skeptical about the size of government. Liberals would be expected to trust parents to choose good schools for their children, even if they are skeptical that all parents would exercise this power responsibly and would no doubt continue to worry about students who fell through the cracks as a result. Also, if vouchers are in the hands of parents, wouldn’t this partially address public choice and capture concerns? Sure, private schools would have an incentive to lobby for greater funding for their own benefit. But, since that money would ultimately go through the hands of parents who would be empowered to change schools, it would be hard for private schools to direct increased funding to their own pockets without providing increased services (which would mean increased expenses, thus making lobbying somewhat less desirable).

Just a thought.

How do free markets not inevitably lead to the negative form of capitalism? Free exchange and property rights amplify small advantages (or great ideas) so that a small percentage of the population gain most of the wealth, which they can then use to influence government (or in the case of a weak state, directly coerce others) to accrue even more wealth. Families do this over generations, and you get what we have today. I don’t see how, if we could somehow reset society to a libertarian ideal, it doesn’t go back within a few decades.

This reminds me of the things I read on C4SS. In any case, my support of general redistribution like basic income is predicated on a similar complaint to that in paragraph four. I think this problem gets renewed with each generation, however, because I’m not sure “too bad you weren’t born earlier” is or should be a relevant objection to a person’s natural claim on all the property of others.

I have to admit that the libertarian world-view is so contrary to my own understanding of human nature that it is usually hard for me to know even where to begin with it. This post is very interesting, but my main response to it is perplexity.

I have to ask: Where do libertarians think “states” come from in the first place? What is their account of power, and the sources in human nature from whence it derives? What forces do libertarians think motivate human action?

It often seems to me that libertarians (and certainly anarchists) think that voluntary and non-coercive states of human affairs are in some way natural, and the fact that we do not live in these non-coercive conditions is the fault of intrusive – and mysteriously inexplicable – alien entities, those awful “states” that disrupt the harmonious natural order of human affairs by introducing “distortions” into it. They also frequently believe in some natural or pre-existing order of rights, more fundamental and important than the socially created rights that are the fruits of human social ingenuity. If only it weren’t for these blasted alien states, we could all live in a non-coercive laissez faire harmony in which no one’s “rights” were ever violated! These states from Hell cause all the trouble!

I have a very different vision of human life and human nature, one that is, I suppose rooted in the thinking of people like Hobbes, Spinoza, Hume, Machiavelli and the ancient classical writers. Here is a somewhat haphazard and partly repetitive bunch of statements that express that vision:

1. An enduring state of human affairs in which numerous free participants act non-coercively and voluntarily is an idealization not to be found in the actual world. It does not even approximate any complex human society – that is, one containing more than a handful of people – that has ever actually existed.

2. Coercion is a perfectly natural, ordinary and non-pathological part of human social life.

3. This ideal, non-coercive condition is also not a natural or “equilibrium” condition. If one were to exist, it would not represent some kind of self-sustaining ecological balance. It would instead be a highly unstable system. It would be almost impossible to create; and if it were created in a social vacuum with no external constraints it would rapidly and acceleratingly degrade into a social system filled with high degrees of coercion.

4. So, to the extent that even a semblance of such a non-coercive system exists anywhere in the actual human social world, its natural tendency is to evolve in fairly short order out of that non-coercive condition into a highly coercion-filled condition.

5. Stable societies require not the absence of coercion, but instead vibrant patterns of customary and institutionalized coercion in which the powers of individuals and groups are routinely checked and balanced by exertions of the coercive power of other individuals and groups. The intellectual recognition of the success of these customary and institutionalized arrangements often provides increasing supplies of motivation to preserve them over time.

6. If a society is successful enough, then over time the need to exert countervailing power diminishes somewhat, since the mere recognition that power lies in dispositional wait to be exerted is sufficient to deter other expressions of disruptive power. We call this condition of relatively diminished coercive exertions “civil peace.”

7. Durable and deeply non-coercive states of human affairs are sustained only by high degrees of intimate and unconditional love, and therefore characterize only very, very small human societies.

8. Some small groups are not bound together in this way by love, but are instead fundamentally master-slave arrangements, small enough that a single dominating individual can control a small number of other human beings, either because he keeps them in a constant state of fear, or because a previous condition of constant fear has evolved into a disposition of obedient submission.

9. Small groups of human beings of any kind are naturally disposed to seek beneficial, interdependent arrangements with other groups of human beings, sometimes cooperative and sometimes domineering or exploitive, thus forming larger groups that create the conditions hospitable to the fecund growth of widespread coercion.

10. Thus, small groups in a non-coercive and relatively isolated state will typically socialize their way out of that state into a larger state filled with coercion.

11. People are capable of intellectually recognizing both shared interests with other people, and the means to achieving those interests that are available to people acting in a larger coordinated group.

12. The intellectual recognition of an interest that is served by behaving in a certain way sometimes engenders a motivational force sufficient to check the expression of the primary instinctive motivations. One such way of behaving is to behave cooperatively.

13. People form coalitions. The basis for the coalition’s solidarity is the mutual recognition of a common interest in achieving some cooperative goal – often including thwarting the power of some other human beings or human groups.

14. Wealth confers power. Wealth consists in the objects of human desire. Human beings are moved by their desires. Thus, those who possess wealth possess in the same degree one form of power to move others.

15. It is inherent in human social nature that individuals with power will use that power to coerce other individuals, unless they are prevented from doing so by some agency which wields countervailing power.

16. In any system consisting of competitors who are roughly equal, the natural result over time is for some competitors to win the competition. Winning consists in capturing the wealth of all other participants. The winner might be a single competitor, or the competition might temporarily stabilize in a coalition of competitors victoriously aligned against the faltering rivals. However, once the coalition succeeds in totally immiserating and dispossessing the competitors outside the coalition, the coalition members will turn on themselves. Competitive balance naturally evolves toward monopoly.

17. The main instinctive tendencies of human nature propel people, through the pursuit of self-interest, to eventual aggregate outcomes that are very much sub-optimal, i.e., by following their main instinctive tendencies, all or most members of the group arrive at a state which is worse than the state they would be in if they had not-been driven by those primary instinctive tendencies, but been driven by cooperative tendencies instead.

18. Over time, people are capable of recognizing the inherent instability of their social arrangements and the routinely suboptimal outcomes that are produced by the power struggles inherent in human systems driven by the primary instinctive tendencies.

19. The intellectual recognition of the potential for these outcomes is often sufficient to generate fear of their repetition, and thus a motivation to take steps to suppress the full expression of the primary instinctive tendencies, both in oneself and others.

20. Human beings can be thought of as “self-domesticated animals.” They are animals that possess the ingenuity and motivation to apply coercive, behavior-regulating pressures to themselves in order to tame their wilder tendencies.

21. Thus people are capable of forming coalitions animated not entirely by fear of outside threats, but also by fear of the potential internal threats resulting from local expressions of the primary instinctive tendencies – including the tendencies to advance one’s interests through coercion.

22. People don’t coerce others only as a means to some further end, but because they also frequently take some pleasure in dominating, ruling, humbling or dispossessing others.

23. One form of vigilance against the internal threats posed by the domineering tendencies of individuals or subgroups within the larger group consists in promulgating rules and maintaining the institutionalized disposition and capacity to enforce the rules.

24. The rules must be such as to prevent individuals or groups within the system from acquiring sufficient power to provoke a cascade of destabilization sufficient to destroy the coalition or thwart its fundamental purposes.

25. Since power follows wealth, preserving a social coalition requires the enforcement of rules that prevent imbalances in the distribution of wealth.

Excuse the treatise. I tried to write down just a few claims, but it grew.

Damnit, Google apparently doesn’t see fit to award me with a username.

-Watoosh

Capital in the hands of an individual with some sort of comparative will always provide greater utility to those around him than could capital in the hands of the community at large. Townsfolk aren’t going to revoke the discretion the furniture maker has over his tools, lumber, and shop. In other words, in a good deal of situations, capital ownership would be preferable to all.

Dan:
The point is more about “unnecessary/unjustified coersion” not no coersion whatsoever.

Zingales wrote a book ‘Saving Capitalism from the Capitalists’ which is really about how capitalists lose their moral and social standing when they seek to capture state powers to deprive customers of choice. With that, I wholly agree.

However your broader implication that capital ownership impinges on freedom I think is wrong. The accumulation and right to dispense with capital, earned through voluntary trade with others, is both the well-deserved benefit from making good trades, and is an engine of progress all in itself.

You make a good point which is that there are too few non-parasitic alternatives in modern society to generating wealth. Perhaps we should have federal land set aside for those who would prefer to engage in subsistence agriculture. I think such people do their offspring no favors, but certainly it would be an appropriate exercise of their freedom, which we all could reasonably fund to the extent of land set-asides.

Watoosh, I think you missed my point (because I digressed into tangential issues). Managers of large accumulations of wealth (like large corporations, hedge funds, etc.) have a duty as agents of their owners to use their power to influence government to apply its coercive power to enhance their profits and wealth. If we reset to an initially ideal libertarian state, they will still have that duty and things will go downhill fast.

The fact that large accumulations of wealth are temporary in the ideal libertarian state is irrelevant, since that state will not survive their initial creation.

Or, if the government is too weak to give advantages to large corporations, then warlords will step up to do it instead.

I actually think this is one of the most pervasive myths today. When people criticize the free market when what they really have in mind is our present system I can’t help but immediately write them off as ignorant of all literature on true free markets. State priviledge and intervention run VERY deep and it wasn’t until I read Kevin Carson that I understood how deep.

Daniel Shapiro:
I don’t see how the state has taken actions to restrain unionization.

You’ve never heard of the Taft-Hartley Act?

To a very significant degree, the economic system we have now is one from which peaceful, voluntary exchange is absent. An interlocking web of legal and regulatory privileges benefit the wealthy and well connected at the expense of everyone else (think patents and copyrights, tariffs, restrictions on banking, occupational licensing rules, land-use restrictions, etc.)… the state’s involvement at multiple levels in guaranteeing and bolstering economic privilege makes it hard to describe the economic system we have now as free.

Left-libertarians put a lot of weight on this claim. But the arguments given to support it are mostly hand-waving. This is an empirical claim and requires empirical support. What we need is data on the magnitude of the effects of policies. For example, you might think that the minimum wage does a lot to hurt the poor; but in fact it only affects 2% of workers, so compared to other policies it’s not that important.

The fact that we live in a mixed economy is very important for left-libertarianism. But to do this argument justice we need to move beyond hand-waving and do good empirical work on the effects and magnitudes of government intervention.

Tibor R. Machan said…
It seems to me pointless–or maybe even weak kneed–to cave in to those who want to keep dissing capitalism by holding out in favor of free markets. After all, many would argue that free markets are not REALLY free at all, only socialist systems are!

Quite the contrary, it seems insightful to detach the corrupt capitalism as it exists today, from the free market as it could operate in the future. It forces those people who associate the two to consider the free market on the principles it embodies. Somehow, your support for capitalism is based on such principles, but it must absolutely not be pointed out that the principles are not currently respected. And you would thus let people use evidence of the current economic order, against capitalism or free markets, without a word of protest. If that is not weak-kneed and self-defeating, I don’t know what is. Do you even wish to be understood?

Anyone I communicate with about political economy knows well and good that by “capitalism” I have in mind the fully free market system of economy. Several books of mine, such as Capitalism and Individualism (St. Martin’s Press, 1990), are cases in point. There is no misunderstanding about what “capitalism” stands for in the title and in the body of the book. (Same goes for dozens of essays, articles, columns, and papers of mine in which the term occurs.) Many others who chime in to support the fully free, libertarian society, also hold that the economic system of this polity is capitalism. No confusion here until some begin to introduce misplaced nuances. No knowledgeable supporter of capitalism has in mind the current mixed economy or welfare state. And most critics know this as well.

Machan: I think you’re missing Gary’s point. You say that “no knowledgeable supporter of capitalism has in mind the current mixed economy or welfare state” when you talk about ‘capitalism.’ Fine and good. But wouldn’t you be the first to acknowledge that knowledgeable supporters of capitalism do not constitute the majority of our citizens? I think Gary wants to be clear on what kind of ‘capitalism’ he does and doesn’t support because he wants to make his views clear to people who don’t already agree with him. To that end, it’s important to point out that he does not support the system that most people who don’t already agree with him intend to pick out when they use the word ‘capitalism.’ I’m not a libertarian, so I don’t really have a horse in the race here, but my views of libertarianism and anarchism have changed quite a bit since I came to appreciate that what at least some libertarians support is not ‘our current system’ or even the ideal system that most of the ‘right wing’ members of our government would put in place if given the chance.

This is, coincidentally, why Samuel is wrong to think that this is merely a “semantic battle.” As Gary suggested, it doesn’t matter what you call it so long as you make yourself clear. But when the people you want to convince associate the word ‘capitalism’ with a bunch of stuff that you don’t actually support, you probably don’t want to use the term ‘capitalism’ to describe the system you support.

At least, that is, if you’re actually interested in rationally winning people over to your position.

Looks like my rebuttal was rejected as not worth publishing here. Why?