• On Libertarianism

    Count me among the perplexed, and no more so than about applying libertarian ideals to real problems. It’s not for lack of desire or effort to understand. I’d love nothing more than to find a set of ideals I can adopt ex ante and that actually work reliably when push comes to shove ex post. But they’re hard to come by. Everything seems to be a work in progress. I don’t think libertarianism has any more “truth” than many other ideologies.

    Edward Glaeser shares my skepticism, or I his. In a gem of an Economix post today he writes,

    Consider the purely hypothetical case of a massive oil spill in the Gulf of Mexico. The traditional libertarian would argue that regulation is unnecessary because the tort system will hold the driller liable for any damage. But what if the leak is so vast that the driller doesn’t have the resources to pay? The libertarian would respond that the driller should have been forced to post a bond or pay for sufficient insurance to cover any conceivable spill. Perhaps, but then the government needs to regulate the insurance contract and the resources of the insurer.

    Even more problematically, the libertarian’s solution requires us to place great trust in part of the public sector: the court system. At times, judges have been bribed; any courtroom can be influenced by the best lawyers that money can buy. Andrei Shleifer and I have argued that the early regulations were appealing precisely because of a sense that the courts couldn’t be counted upon to protect private property.

    “Keep the hand of government off my freedom and out of markets!” sounds like a sensible slogan. I’ve yet to understand how it’s possible. Where’s the line between the helping vs. heavy hand? Anyone claiming to see the absolute demarcation has impressive confidence.

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    • This strikes me as a bit of a straw man. If I’m reading you and Glaeser correctly and not being oversensitive, you’ve attributed to libertarianism a position (“no government regulation of industry, ever”) more consistent with anarchocapitalism or agorism (though, yes, the tort/regulation example comes from Milton Friedman). A libertarian (well, this libertarian 🙂 ) would be more likely to point out the collusion between BP and the Minerals Management Service and suggest that we can’t rely only on federal regulation to prevent oil companies from taking stupid risks, since those oil companies can (and have) easily co-opt(ed) their regulators.

      I see the regulators as a single point of failure — it seems to me (especially in light of data like these) that BP decided it was more cost-effective to spend money gaming the regulators than it was to spend money improving safety. I don’t see any obvious solutions, and I’m not reckless enough to suggest that if we only remove all regulation the market will magically fix things, but as a long-time admirer of the Pigou Club my first instinct is to link BP’s taxes to their safety record. Whether that’s even close to practical is obscure to me.

      For the record, I don’t see a line between the helping and the heavy hand — or rather, my best-fit line has huge error bars — but I do see the hand getting lighter over time. Call me an asymptotic anarchist: government goes to zero as time goes to infinity.

      • @bluntobject – Glaeser (and I) may be reacting to the popular face (caricature) of extreme libertarianism (Rand Paul-ism). I don’t like to name bloggers if I don’t have specific evidence (and I don’t feel like looking for it but I know it is out there), but there are a few prominent economist bloggers in higher education that have also gone a bit too far in my opinion. Still, your point is good. There’s a continuum and not all libertarians are as radical as some.

        Note also that Glaeser wrote of Professor Miron’s book and that “Miron’s libertarian mix of love of liberty and skepticism toward the state leads to his view that ‘radical reductions in government make sense for any plausible assessment of the effect of most policies.'” (Bold mine.)

        One does have to have quite a lot of confidence in one’s assessment of the limitations of government to go that far. I couldn’t do it.

    • Arnold Kling may or may not be one of those prominent bloggers you’re thinking of, but he has a Coasian look at the problem in reply to Glaeser’s post.

      I’m going to give this a kick over on my blog — thanks for the link, and for the push to consider the topic in a bit more detail. My first reaction coming in was “Given that regulation failed to prevent systemic safety violations throughout BP’s operations, why should we expect more of the same to do any better?”, but I’ll need to think that through in more detail.

    • @bluntobject – Yep, saw Kling.

      Regulation will fail. So will markets. It’s the nature of things. Given that, I’m not convinced one ideology fits all situations. Of course, I really know about health care. Nobody could convince me to get government out of it given what I’ve seen in the market and in other nations. But I’m open to more market than exists (e.g. real price competition in Medicare Advantage).

      On drilling, well I’m no expert. It’s hard to fathom a minimalist government solution to energy, climate change, and all that’s related. But, I’ll try to keep an open mind.

    • “A libertarian (well, this libertarian ) would be more likely to point out the collusion between BP and the Minerals Management Service and suggest that we can’t rely only on federal regulation to prevent oil companies from taking stupid risks,”

      Another take on this is that MMS was doing what BP wanted. When you have deep capture, the regulators believe the same things as those they regulate. It was not so much collusion as capitulation, the same as would happen if there was no government organization regulating at all.

      Steve

    • The MMS was not captured by industry. It was given over to industry by an administration that was avowedly anti-regulation, particularly in the area of natural resources extraction. It does not support the libertarian theory that attempts to regulate are frustrated by the phenomenon of regulatory capture. It is an object refutation of the libertarian theory that we are therefore better off when we choose not to regulate.