What would a libertarian society look like? Which changes in that direction are most important?
Miron: Welcome to the last of the 12 lectures. In this last lecture, I’m going to emphasize a few central themes and try to put things together a little bit. I will take as given the main conclusions from above about all the various specific policies. I wan to focus on some general implications and some general questions related to the overall perspective.
I’ll briefly summarize consequential libertarianism. I will briefly describe what I call libertarian land, a place that doesn’t currently exist but we hope will again some day. I’ll talk about the consistency of the libertarian perspective. I’ll address the question of if government is so bad, why do we have so much of it? And then I’ll talk about what I think are, at least for the U.S. at the moment, the categories of worst current policies and things maybe one should focus on to make a really big difference.
To summarize what I’ve said, to summarize the consequentialist perspective, I just want to emphasize that it is never sufficient to identify a market failure, to say that some aspect of private arrangements isn’t working quite right or isn’t working perfectly. We always have to ask what is worse, private arrangements or the government interventions that aim to, that claim to address those private arrangements? The interventionists’ view just assumes in many cases that these interventions are going to make things better, but that’s a question that always has to be addressed. And obviously, in the analysis that I’ve given, government typically makes things worse, not better.
A different way of summarizing is to say that there is a defense, by no means the only defense. But there is a defense of the libertarian policy conclusions that derives essentially from standard economics and from the evidence that economists and other social scientists have produced about the way the policies actually work, as opposed to the way that they are intended to work. Whether this view, this consequentialist perspective convincingly implies the consequential conclusions, the libertarian conclusions in all cases or any cases is of course for others to think about and debate and decide for themselves. But I certainly hope that the framework I’ve proposed of systematically examining all the consequences helps facilitate those debates.
A crucial aspect of this framework that I mentioned before but want to emphasize again is the consistency. The consequentialist approach applies thoughtful skepticism across the board to social policies and foreign policies and economic policies, whereas liberals, conservatives tend to selectively apply their skepticisms of government to one kind of policy or another kind of policy. Libertarians apply the same skepticism to the left and to the right. It applies with every policy. It’s always willing to go back to the most basic principles to say, “Well, we’re having a hard time figuring out what makes sense here, but maybe it’s because we’re taking as given a bunch of preexisting policies. And if we went back and said why was government in this area in the first place or what if we eliminated a whole bunch of things that government does, then this particular analysis would be much simpler.”
Take the case that’s come up recently of whether the people who work for Uber are employees or independent contractors. If you look at the rules a government has about what determines whether you’re one or the other, it’s a mess. There’s this 20-step test. A bunch of them clearly apply both to many employees and both to many independent contractors. Any given individual working in any organization isn’t going to perfectly fit 20 out of 20 or even 15 or 10 out of 20. So it’s a crummy, divisive, complicated system that’s just going to generate all sorts of lawsuits and things like that. Why do we have to decide that? We only had to decide that because the federal government is involved in labor markets in the first place. In libertarian land, we’ve eliminated all the policies enacted in the 1930s and all the amendments and additions since then: the Wagner Act, the Federal Labor Relations Act, all that sort of stuff. If government is taking no stand on wages, no stand on hours, no stand on independent contracting, then it doesn’t matter whether we call someone an employer or independent contractor. That’s purely an arrangement between employers and the people or the groups or the agencies or the subcontractors or whatever that they want to hire.
So libertarianism not only adopts this consistency, but it tries to always go back to the most basic questions to ask whether government should be involved. And the claim is that when we attempt this systematic, inconsistent view, we come to the view that across the board, there are many, many negatives from intervention. Therefore, radically smaller government in most cases, if not zero government involvement, is far better than current practice.
Let me describe libertarian land very briefly, just to fix ideas before we wrap up. In libertarian land, the federal government basically does one thing: national defense, and even there much less than it currently does. It of course will have to raise some taxes because it’s going to be buying some missiles and some tanks and paying some soldiers and such. And of course there are few federal judges to deal with things like treason or piracy on the high seas, counterfeiting money, but really tiny compared to current practice. We could talk about what tax system the federal government would have, but that’s not very interesting. If it’s really only spending as much money as I’m proposing here, as would be the case in libertarian land, almost any tax system would be okay because the rate would be so low that it would just not distort anything very much. So some kind of flat tax on income or consumption would be more than sufficient.
At the state and local level, in libertarian land, there would be criminal justice systems that would be similar to what we have now, enforcing property rights, contracts, tort liability, not doing nearly all of what current criminal justice systems do but similar in the overall intent. There could certainly be some local-level government doing fire protection, building some roads. And for some libertarians, state governments or local governments might be involved in some modest support of education and some very modest amount of redistribution via a small negative income tax.
In terms of regulation, there would be essentially none of what we currently see. A few things would be exceptions where government has a legitimate basis to want to define and enforce property rights. But given the nature of the problem, like defining property rights to the heir, it’s hard to do that directly. So you have no choice but to maybe impose some ex-ante restraints on putting pollution into the air in the first place.
Those sorts of exceptions aside, essentially, the entire regulatory apparatus that’s grown up over the last hundred some years would be gone. In brief, libertarian land would look like the U.S. in the ‘90s, and as I mentioned earlier, I mean the 1790s.
That brings us to an important question: If all this government is so bad, why does the United States, why do most countries have so much of it? Indeed, U.S. had what was pretty close to libertarian nirvana in the 1790s, and yet here we are today with way, way more. To talk about that, we have to talk more about the political process and about economics. So I’m getting somewhat outside my depth. But the standard economics view goes as follows. It says that many policies have a set of beneficiaries who get significant benefits. And yet the costs of those policies are spread over many, many people and in relatively minor amounts. So when there are very concentrated benefits, those people who benefit have a clear incentive and ability to identify each other and lobby and push in favor of those policies. Those people who are hurt don’t have nearly as much incentive, and it’s not as easy for them to do that because there are zillions of people they’d have to coordinate with, and the benefit of so doing would be very minor.
Take as an example agricultural subsidies in a rich country like the U.S. or Western Europe. Who is harmed by agricultural subsidies? Everybody pays taxes to pay for those subsidies and, depending on the exact nature of the subsidies, the higher prices for food. So everybody should at some level be against them. Yet we still pay hugely generous subsidies, and those subsidies don’t go mainly to small mom-and-pop farms who were the backbone of America or anything like that. They go to big agri business. They go to very wealthy people who are running very, very large farms. Why does that happen? Because any one individual, if he or she thinks about it at all, says, “Gee, I could lower my food bill by $4 a year if we didn’t have to pay agricultural subsidies. It’s not worth forming a lobbying group or making campaign contributions over that issue. But the big farms which get a lot of money, get $20 billion a year roughly from existing agricultural subsidies—that’s for the U.S., not for foreign—but still substantial amounts of money, they have an incentive to create these lobbying groups and make sure that these bad policies continue.
So that’s one reason why we have so much government. People figured out that when they have common benefits, when they can identify each other, when they can work together, they can create government which helps them. And the people who are hurt are not necessarily hurt enough to ever take actions to fight it in a big way.
A different reason we have big government is that government entities, once created, are like any other entity. They want to survive. How do you survive? To a significant degree, by getting bigger. So there’s mission creep, there is expansion, governments make all sorts of arguments to try to justify their existence. They frequently control a lot of the information that would be useful to evaluate whether they’re in fact doing what they’re supposed to do. So they can massage that and process that in a way that makes people think that they’re doing something worthwhile. If you look at all the stuff on the Drug Czar’s website or the DEA’s (Drug Enforcement Administration) website, you’ll se tons of assertions, claims about all the great things they’re doing about how horrible every new drug is or how horrible is the scourge of drugs – grossly exaggerated, not based in evidence, not based in science. But it’s there on official government websites, so people tend to believe it. So the entities that have this incentive to perpetuate their existence and have government get bigger control the information and push very hard to make the government bigger.
So where does that leave us? Where does that leave libertarians? It means they have to work really, really hard. It’s going to be hard to convince people. There are many, many ways in which the deck is stacked against us. There are not easy fixes. But that also says that it’s really important to fight back, to explain to as many people as you can why government is in fact doing more harm than good.
If you were benevolent libertarian dictator for a day, if you could wave your magic wand and get rid of a bunch of stuff, what is the single most important thing one would go after? Or if you were going to create a platform for a libertarian presidential candidate, what would you put to the top of your list? I’ll give you some thoughts. Libertarians will of course disagree about my list, but it’s just useful for discussion. At one level, even though it’s not really fun libertarian topic, it doesn’t get the juices flowing quite the same way as some others, reducing the growth of entitlements is crucial. Why? Simply because they are growing so fast relative to how fast the economy could plausibly grow that they will become everything, and they will cause crisis and collapse. So any policy that is doing that needs to be modified to some degree. It doesn’t by itself mean we have to eliminate Medicare and things like that. But if Medicare is growing 2 percent faster than GDP forever, Medicare takes over the whole economy. That can’t happen, so that’s something which clearly has to be addressed, and ideally, sooner rather than later.
Second on my list would be avoiding foreign policy aggressions. The damage that can be done and typically is done by things like the Iraq invasion are huge, and that’s not just the money. The money is not trivial. It’s certainly trillions of dollars. But that’s only a piece of it. It’s not just all the loss of life of American soldiers. It’s all the American soldiers who are injured and so on. It’s not just the innocents in Iraq or elsewhere who are killed. It’s the fact that it is counterproductive. It makes the world a less safe place. It causes us to do all sorts of other things in the hope that we’re making ourselves safer, rather than realizing this is a case where to feel better when you’re hitting yourself on the head with a hammer, stop hitting yourself in the head with a hammer. A huge amount of it is self-inflicted. So these foreign policy aggressions are incredibly costly. That would be very near the top of my list.
Next thing I put on my list would be eliminating federal intervention in education. It’s impossible to convince very many people for a long time to really restrict government from subsidizing education. And of course some of the education that people get with government subsidy is useful. It has some value. It’s not as though all that money we spent on education is totally wasted. But the federal role has the potential to be super dangerous because that is the path to through control. And the government gets to say what the curriculum is, who gets to study what, ways you have to teach it, and so on and so forth. So as long as the federal government is out, competition between states, competition between cities and town within states will discipline many of the worst practices in state-run education systems, and it will be tolerable, even if it’s not perfect.
I’ve put on my list legalizing drugs, legalizing all drugs, not just marijuana, partially because we spend a decent amount of money on it. We waste the opportunity to collect tax revenue. If we did that, it would allow us to lower other tax rates in a way that would make sense. Also because legalizing drugs is a crucial part of having a less harmful criminal justice system, in particular, criminal justice system that polarizes whites versus blacks and generates huge hostility from the African American and Hispanics community toward law enforcement, toward whites generally. When drugs are legalized, the police are doing their jobs by harassking people. They’re doing their jobs engaging in stop and frisk. They’re doing their jobs by thinking that they should be interfering in all of this purely private, voluntary behavior, and giving people a hard time simply for having a particular plant or substance in their pocket. That is a crucial part of – certainly not all but a crucial part of – all the animosity and all the hostility and all the excess violence and police abuses that occur in inner cities on a regular basis. So for many, many reasons, I think legalizing all drugs is a very important policy change.
Second to last, I would say, is enormous expansion in legal immigration. Personally, I would simply open the borders. That of course is a hard sell, but there’s tons of room to have much, much more legal immigration, even if you don’t literally open the borders. That is of course incredibly good for all the people who would immigrate here. And my personal view is we should care just as much about people who are suffering and aren’t here yet as people who have been suffering and happen to come here 10 years ago or 100 years ago, like my ancestors. So from that perspective, but also even from a purely selfish perspective, expanding legal immigration lowers labor cost. It makes businesses more productive. It brings new ideas. It brings entrepreneurship and energy and activity. It’s good for the economy. It’s good for society. So at a minimum, enormous increases in the amount of legal immigration.
Final on my list, just to hit things which are large, would be enormous reforms of a tax code. It’s going to be very hard to reform the tax code without first making enormous cuts in expenditure. But even if we were stuck with the level of expenditure that we currently have, that tax system could be vastly simpler. That would save all the time that people waste – using TurboTax or going to H&R Block or whatever – to fill out their taxes. It would save all the time that people spend trying to reduce their tax burdens because there would be many many fewer ways you could do it. You would simply say, “State your income. Here’s 20 percent times your income, mail it in.” So the scope for avoidance and evasion is much, much lower. On the corporate side and the business side, all of the things that businesses spend tons of energy doing to reduce their tax burden are gone. Corporate books look much more transparent to everyone. So people can figure out where fraud is occurring much more easily. So that could be substantially productive, even if we were stuck with the current level of expenditure.
To sum up, to many people, libertarian land sounds bizarre. When they hear me describe it, they think life in libertarian land would be chaotic, violent, disease-infested, and there would be a few rich elites living off the labor of the masses, and so on and so forth. In fact, the U.S. was reasonably libertarian until the first quarter of the 20th century till roughly the early 1900s. And of course life wasn’t perfect. The level of wealth was much lower than it is now. There was disease. There were all sorts of bad things that happened. But over that period where we had very little government – some increases but much, much less than now – the U.S. went from being not a country to being essentially the richest country in the world. There were huge amounts of freedoms for religion, for speech, for assembly, for all the things that libertarians value. The gains were widely shared, of course not equally shared. Some people got super rich, but lots of people got jobs in factory that made them much richer than the jobs they had had as farmers and so on and so forth. It was unbelievably successful, both from the perspective of freedom and from the perspective of wealth.
So more generally, the evidence consistently shows that less government, small government is associated with greater wealth and greater freedom. So the libertarian prediction that having less will lead to better outcomes is exactly what we observe in the data. That’s my bottom line. Everything we know, both a priori and from the evidence, says libertarian land would be a much better place than what we have now. So that’s the goal to which we should aspire. Thank you very much.