Challenging CLW: Is small government superior?

In my last post, I asked whether libertarians, like liberals, are holding on to some Conventional Wisdom that has been proven false. I became disillusioned with conventional libertarianism several years ago, and expressed the feelings in Mistakes of Libertarian Idealism:

This makes me wonder if I've uncovered an element of hypocrisy in the libertarian vision, or at least wishful thinking. Libertarians sneer at socialists for ignoring aspects of reality that don't fit their ideals, like the fact that people won't work very hard if decreased effort yields the same reward. Or that centrally planned economies are far less efficent than decentralized markets. And libertarians are right about these flaws in socialist visions. But don't libertarian visions ignore aspects of reality that don't fit their ideals too? How about all the theories about why governments spring up, grow, and flourish: rational ignorance, the problem of dispersed vs. concentrated interests, the free rider problem, public choice theory? How are these empirically observed and theoretically sensible effects any different than their socialist counterparts? What is the point in proposing systems that are efficient if they are unstable?

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Libertarians don't just produce idealistic visions, they produce useful knowledge ... But it does seem to me that they waste a lot of time thinking about efficiency that would be better spent thinking about stability. On imagining great worlds that will never be, instead of figuring out how to improve this one.

We will not bring about a more efficient, libertarian world without finding ways to change societal equilibria and design systems that are efficient *and* stable. Making converts is not the solution, since even if we convince people to try a libertarian system, it will devolve like all the rest. We have to *admit* that big government is an equilibrium, *understand* why, and *figure out* if there are feasible equilibria that are better.

Here is an example: Many people believe that if we had a country with very free markets, it would be a great place. I believe this is about as true as saying that a pencil balanced on its point is really cool. It is really cool - for the microsecond that it lasts. The problem is that freedom is not stable: free markets are not an equilibrium point[1]. And a good government, unlike a party trick, needs to last to exert its beneficial effects. Calling an unstable system superior seems rather inaccurate, since its "superior" for at most a brief period (or never if there are some transition costs.)

Public choice economics offers us a simultaneously illuminating and depressing insight. Its explanation of why governments *do* suck serves equally well as an explanation of why they *must* suck. See also Bryan Caplan's upcoming book, which I hope to have time to review someday[2]. Many libertarians seem to focus on how to push the pencil closer towards balance on the point (government reform), and a few on how to keep it balanced there (constitutional protection), but I see this as futile[3]. Instead, I think pragmatic libertarians should focus on one of two paths for reform[4].

The first is using technology to reduce the impact of government. Technology alters the incentive fabric of the world so that different things happen, regardless of people's ideological beliefs. Encryption is much more effective than anti-wiretapping laws at protecting your conversations, and earning/spending cash is much more effective than tax reform at reducing your tax burden. And developing technologies that reduce the parasatism of government is a profitable endeavour, so there is incentive for individuals to do it.

The second is to conceive of radically different governing systems which are not subject to democracy's flaws. As I have written earlier, the main candidates I know of are ancap[5] and dynamic geography. Ancap makes good law a private good, and dynamic geography reduces the barrier to entry and consumer lock-in of the governing industry. I don't know if either one is feasible, but I think that trying to find an object which sits steadily in a desirable orientation is much more likely to result in Libertopia than endlessly watching pencils falling.

Note that seasteading (or spacesteading) actually follows both of those paths by using technology to enable radically different forms of government. If that combination can be made profitable, it is far more likely to bring about a libertarian revolution than any amount of proselytizing or incremental reform of the current system[6].

[1] It's sad but true: democracy has given us a mountain of evidence showing a consistent tendency towards high levels of regulation and government spending. The only cases I know of where countries have moved to a substantially free market were under despotic rulership, like Singapore and Hong Kong. Which is not to say that countries don't sometimes get freer (the Celtic Tiger), but such movements are way outside the bounds that libertarians want. Countries are rarely in the minarchist's ideal zone, and once they leave, they never return.

[2] As a new parent, I get time to read & write blogs while my son naps, but it turns out I need long blocks of time to read books, hence my literary life has languished.

[3] Note that what I mean here is futile in achieving a libertarian state. Reforms are fine if your goal is to reduce the problems with the current state. Indeed, for those less optimistic than I about the possibilities of radical alternatives, reforms are the only way to improve the status quo.

[4] Note that those who are not-reform oriented can simply give up on global reform and focusing only on maximizing their personal liberty. This is a fine path, but not my main interest.

[5] I see it as no coincidence that Caplan, who is literally writing the book on the failures of democracy, is interested in ancap.

[6] Again, not to say that incremental reform is not good. But I don't think that democracy can be incrementally reformed into a minimal state.

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The problem is that freedom

The problem is that freedom is not stable: free markets are not an equilibrium point....It’s sad but true: democracy has given us a mountain of evidence showing a consistent tendency towards high levels of regulation and government spending.

I think you've misspoken here. Why is the tendency of a democracy to devolve evidence that a free market tends to devolve, since the two are different kinds of arrangements?

I do agree with your conclusion, however, that democracies cannot successfully be reformed into free-markets; history seems to suggest major changes within regions usually only come after a bunch of violence happens, and then the new system usually isn't much better than the old.

I see no evidence concerning

I see no evidence concerning the [in]stability of free markets which I think you're conflating with the ample evidence for the stability of big government democracy.

We know it is hard to get from big government democracy to free markets, not that the latter are unstable.

The U.S. jurisdiction 1776-present is not evidence that free markets are unstable. The move to big government occurred almost entirely in the past 100 years, during which ideological support for collectivism swept the world.

My feeling is that there is far too little evidence to claim that modern "big government" is the inevitable outcome of concentrated interests competing within a democracy and the like. We have only one twentieth century to go by, and in that sample of one, ideology played a huge role.

With that in mind I find it incredibly heartening that collectivism has been largely discredited in the past couple decades. The changes resulting from this ideological shift will take a long time to play out, but will be very positive.

I agree that government and constitutional reform are low payoff and very high cost approaches and that technologies that facilitate jurisdiction arbitrage are more interesting.

Another worthy approach is to foster ideological change -- but not at the electoral or political reform levels. Although I can't support them so long as they associate with Hoppe and I have quibbles with Austrian economics, I think the Mises-Rothbard Institute's approach of "radical scholarship" is right on. The viability and stability of systems are altered by the ideological milieu, so change that.

Mike & Stefan - I meant

Mike & Stefan - I meant free-market democracy specifically. The arguments about the inevitability and regulation all hinge on the nature of democracy (or the even worse natures of alternative forms of government).

Mike - we have far more than one example by country. Many countries had different ideologies, and they all ended up with huge private sectors. Even when conservative ideology was popular in the US in the 80's, we still had a huge public sector.

The public sector is not big because of ideology. The concentrated interests buy the politicans under any ideology. They just use different rhetoric to explain the public benefits of the laws that benefit them.

Admittedly, the exact degree of the massive waste depends somewhat on ideology, ie the US vs. Europe or Scandinavia. But they are both a long way from minarchy.

Sure, collectivism was popular during the last 100 years. But also, people got rich enough that they could have a lot of money stolen and not starve. And technology made it easier to centrally administer a large state. Neither of those factors is going to go away - in fact, they are going to get worse.

Even limiting to free market

Even limiting to free market democracy, I see no evidence that such is inherently unstable. If marginal spoils are small enough it may not be worth the effort to pursue them, leading to a stable free market democracy, just as large marginal spoils will make a democratic state grow ever larger. The trick is of course getting to a free market democracy, or free market anything.

There are many countries, but they are nothing like independent trials. Nationalism, socialism, etc. deeply impacted every country on earth last century. The contrast between the US and Sweden is not that great.

Ideology, technology and dominant political systems are obviously deeply intertwined, but I don't think they strictly determine each other. I believe the 20th century could have been one characterized by peace and free markets (probably free market democracies) if not for the pernicious influence of collectivist ideologies.

It is all extremely path dependent. I don't want to overplay the role of ideology, but I think the following massively underplays it:

The public sector is not big because of ideology. The concentrated interests buy the politicans under any ideology. They just use different rhetoric to explain the public benefits of the laws that benefit them.

Some ideologies give politicals a whole lot more explanatory power, if you will, than others.

I agree the factors you cite will get worse, though it is far from clear that technology making a large regulatory state easier will going forward outweigh the impact of technology making it possible to choose jurisdiction, which is also key to constraining the amount they can get away with stealing.

I'm not following you well.

I'm not following you well. What's your argument or evidence that markets are unable to resist encroachment by government, and are unstable?

First of all, Patri, when

First of all, Patri, when you compare the theoretical efficiency of socialism to the theoretical efficiency of true free markets (ancap I guess) in that they are both pictures of an ideal world that goes contrary to human nature and to history, you miss a crucial point I think.
Even though a market anarchist state of existence seems to go agianst the grain of our social nature (given historical examples), the presence of markets is always a net good for society. It enables tremendous increases in standards of living, and through the expansion of wealth and avialable choices (either from technology or from expanded avenues for using wealth)it expands the degrees of individual freedom. Socialism, on the other hand, does not result in these things. Full socialsm/communism is totally, abysmally impossible, and even varying degrees of it in a society cause misery. There are no net benefits that come from the implementation of communism. So the way I see it; It is incorrect to assume that both philosophies are the same in their impracticality. Markets are beneficial by default (given individual human nature), while communism/socialism is only beneficial by ideal and only within an ideal that radically warps the nature of individuals.
Furthermore, and I think this one is a corollary of the above, It is very possible that what we know as anarcho-capitalism might come into bieng by evolutionary defualt. As increasingly sophisticated markets and technology advance, they will almost certainly soon fly beyond the ability of governments to keep up in their controls. This could especially hold true in the case of mass human space travel. Since the boundries of space are so vastly distant, humans could easily end up spreading towards them beyond the states ability to meddle. I believe that, since such development is only possible through the process of free markets, it will be these unfettered markets that will be the rule and not the hal hearted exception in our future. By default, whether any one group or ruling class likes it or not. This should also easily hold true on a lesser scale here on earth (Cryptography and the internet for example)

I have increasingly been

I have increasingly been coming to see libertarianism as two related-but-different projects of social technology.

The first, and perhaps less immediately important of these is the anarchist project: The development of social institutions and mental models that could make some point north of big-government democracy a stable point. This includes notions like seasteading, development of insurance market technlogy that can recreate the "social safety-net" in a voluntarist fashion, systems of private adjudication and arbitration, and the like. People will never choose to go to or remain in a free society unless they can get certain things that the state has traditionally provided, and the state has a serious advantage since its monopoly has stifled development of these fields and given it centuries of head-start on us.

The second, and perhaps more immediately important of these is the liberal project: The maintainance of states free enough that people can work on the anarchist project. Once upon a time the "killer app" here was revolution. These days "killer app" seems to be constitutional democracy. It is no coincidence that the United States has been home to most of the recent work on the anarchist project. You can't be totally free in a democracy, and a democracy cannot help but slowly erode its constitutional bounds, but classical liberalism bought us a good century to play with, and it has not been squandered.

So to me the questions are, first, what are the remaining holes in the anarchist project -- what is the to-do list before kicking off a seastead or what-have-you -- and, second, what must be done to keep liberty alive for the century or two needed to get those done.

All political philosophies

All political philosophies must come to terms with our quickly evolving view of human nature. Pinker (http://pinker.wjh.harvard.edu/books/tbs/) and others have shown how this understanding undermines many assumptions of the socialists, but it may cause libertarians to think as well.

Ultimately, I think these new theories support many libertarian positions (see Ridley's "Origin of Virtue") but we may have to reconcile ourselves that we are a species that will always have a tendency to seek collectivist and authoritarian solutions.

There are no net benefits

There are no net benefits that come from the implementation of communism. So the way I see it; It is incorrect to assume that both philosophies are the same in their impracticality. Markets are beneficial by default (given individual human nature), while communism/socialism is only beneficial by ideal and only within an ideal that radically warps the nature of individuals.

Voluntary communists like the Hutterites would disagree with you. They see their lifesyle as a net benefit for them. Remember that just as their can be state-socialism and state-capitalism, there can be anarcho-socialism and anarcho-capitalism.

Stable? Even the Dark Ages

Stable?

Even the Dark Ages weren't stable. They're gone except for the intellectual aspect.

As far as I can tell, nothing in the freakin' universe is stable.

Grant - your viewpoint makes

Grant - your viewpoint makes a lot of sense.

Mike - You're right that the trials are not independent, but we massively disagree on the importance of ideology vs. individual incentives. I view the expansion of government as the natural consequence of how democracy harnesses human selfishness, and I think ideology has little to do with it, except to serve as a convenient excuse.

If I am analyzing the actions of consumers or businessmen, their ideology is a far, far smaller factor than the simple assumtion of selfishness. Why is democratic politics any different?

If marginal spoils are small enough it may not be worth the effort to pursue them, leading to a stable free market democracy

Well, it may not be worth taxing the 100th penny out of each dollar. Or even the 80th. But how does this argument contradict my claim that taxing only the first penny or five is unstable? The point at which marginal spoils are low is awful far down the welfare state road. Or are you talking about a country in extreme poverty? I'm not quite sure what situation you imagine where there is a small-government free-market democracy, and it isn't worth the politicians time to line their pockets at taxpayers expense. Or the businesses time to convince the government to help them at taxpayers expense.

If I am analyzing the

If I am analyzing the actions of consumers or businessmen, their ideology is a far, far smaller factor than the simple assumtion of selfishness. Why is democratic politics any different?

Because voters don't vote in their self interest, they vote to express themselves.

Small marginal spoils are only half of what I imagine for a stable free market democracy -- high cost of obtaining those spoils is the other half. I'd argue that ideology, or more broadly what is deemed socially acceptable, helps determine the cost.

I woudl argue that voters

I woudl argue that voters vote to express themselves because its in their self-interest to do so. Voters not voting in their own best interests is rational - and part of the theory I'm talking about. Also rational is for government officials and legislators to act in their own self-interst. And the result of all this rationality is government growth catering to concentrated interests and screwing over dispersed ones.

Yes, of course expressive

Yes, of course expressive voters are acting in their self interest. I forgot to put the word instrumental in front of self interest.

The flip side of concentrated interests is that unless they are super concentrated (e.g., a single company) they face collective action problems and may not be able to coordinate to do all of the mutually beneficial (for the interest group) stealing otherwise possible.

This points to another reason small government might be stable -- in a free market firms may be smaller (lower cost of entry due to lack of regualtion meant to keep out competition, among other reasons), thus latent groups of rent seekers will have a harder time organizing.

Stephan, State capitalism is

Stephan,

State capitalism is not exactly capitalism. I believe that its a rather poorly concieved term for what would be better described as either Fascism (which does not have to involve swastikas and weirdos with pussy mustaches), or as interventionism. That aside, you make a good point about private communism. However, since it does not involve coercion and since exit is always possible, it does not quite have the same characteristics as large scale communism. It, I think, has more in common with markets due to its voluntary nature. Furthermore, what the hutterites practise can only exist in small voluntary organizations, such as families and religious orders like the above mentioned. Unlike markets, its totally unviable on any large scale that involves mutually unfamiliar actors. And I have still heard of certain small communes failing despite their members bieng within a small closely knit group.

oops, I meant

oops, I meant Stefan...........thief

You're infringing on my

You're infringing on my trademark, so beware.

Patri, I’m sure you know

Patri, I’m sure you know about all this stuff but how about this?

http://www.slate.com/id/2030/

What good is a perfect

What good is a perfect libertarian society if a bunch of communists move in and wreck the neighborhood, or worse yet invade it with an army.

Maybe you should subscribe to a better defence agency. :beatnik:

"But it does seem to me that

"But it does seem to me that they waste a lot of time thinking about efficiency that would be better spent thinking about stability."

Exactly. Many of my problems with Libertarianism can be categorized this way. Everything from immigration to defense. What good is a perfect libertarian society if a bunch of communists move in and wreck the neighborhood, or worse yet invade it with an army.