October 21, 2008

The End of Libertarianism?

I'm still on the newsletter of the Penn Libertarian Association, which has pointed me to an article on Slate entitled "The End of Libertarianism". Author Jacob Weisberg believes the current US financial collapse proves that libertarianism is not viable in the same way that the fall of the USSR proved that Communism is not viable. I offer two brief practical responses and one theoretical response.

Firstly, without any government involvement, it is unlikely that any of this would have happened. (I am not an economist, so correct me if my facts are wrong on this first point.) For one thing, bad loans were thought 'safe' in part because of the involvement of Freddy and Fanny. For another, a government agency rates the quality of the derivatives, and rated the mortgage-backed securities as 'safe', so everyone bought them. Everyone can, I hope, agree that this latter should not have occurred.

Secondly, libertarians do not unequivocally oppose all government intervention in anything. Libertarians believe that government has a very specific purpose: the prevention - and, failing that, the punishment - of acts of force or fraud against its citizens. According to some of the early news reports, Alan Greenspan was alerted years ago to shady dealings related to subprime mortgages and said there was nothing the Fed could do about it. What he should have done was turn it over to the FBI, and they should have prosecuted these cases aggressively. There was all kinds of secrecy and dishonesty involved in the circumstances leading up to this situation, and none of it should have been permitted. This would have been the right kind of government involvement. Now, the government has failed, and some people are homeless because of it. I'm not opposed to the government setting up some sort of expedited process to help people keep their homes if there is a credible accusation of fraud, and then trying to recover its losses by suing whoever needs to be sued. This seems to me to be a reasonable way of dealing with some (not all) of the problems we are dealing with.

Finally, on a more theoretical note, Weisberg doesn't understand what libertarianism is. Libertarianism is not a theory of how to create the wealthiest or happiest society. It is not a theory of what kind of government people 'like' or what kind of government benefits whom. Libertarianism is a theory of the moral permissibility of the use of coercive force. (Or, perhaps more accurately, to make it easier to draw my distinction between public and private morality, it is a theory of the impermissibility of coercive force.) Libertarianism, furthermore, is radically deontological - that is, it claims that certain actions are right in and of themselves, and other actions are wrong in and of themselves, without regard for consequences. Libertarianism is the Kindergarten ethic: it's wrong to take other people's things. To this extent perhaps Weisberg is right in calling libertarians "intellectually immature" - we never learned to rationalize away the moral principles we learned in Kindergarten. Perhaps everyone else has come up with rationales for theft and coercion ("it's ok if the majority bands together and uses the power of government to do it"), but we haven't. As such, no matter what the practical consequences of libertarianism may be, these are not objections. Perhaps people who behave at even the minimum standard of public morality will be impoverished. Such is life in a world like ours. But at least they'll be doing the right thing.

Empirical claims are not normative claims. Normative claims are not empirical claims. I would like to see our nation continue in its material prosperity. I would also like to stop drug use. For that matter, I would like everyone in the world to be a practicing Christian. But I will absolutely not cooperate in the use of force to achieve any of these ends. Period. So some smart economists can tell us what is the best way to achieve material prosperity (I couldn't possibly answer that question), but this will not answer the question what should we do. Is the financial crisis the end of libertarianism? Not a chance.

Posted by Kenny at October 21, 2008 10:24 AM
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Comments

Quick correction: Credit ratings are actually done by private agencies. See http://en.wikipedia.org/wiki/Credit_Rating_Agency

Posted by: Paul Ferree at October 21, 2008 12:00 PM

Hmm... so the question then becomes, did the agencies actually defraud anyone. I have been thinking for some time about posting a more general treatment of the room libertarianism leaves for legislation/regulation, but haven't got around to it. However, it seems clear to me that the second point is absolutely the case - the government was completely negligent in protecting its citizens from fraud. How exactly it is allowed to act in order to prevent fraud is a more complicated issue than how it can punish fraud, but it is obvious that the government didn't even show any interest in doing the latter, and, really, the feds still haven't shown much.

Posted by: Kenny at October 21, 2008 1:53 PM

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