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Friday, June 1, 2007

The Four Mistakes of Nonlibertarians

Nonlibertarians Overestimate the Problems of Freedom and Ability of Government to Solve Problems; Underestimate People's Ability to Solve Problems and the Damaging Effects of Government Intervention

George Leef  is book review editor of The Freeman.

In Libertarianism: For and Against (Rowman & Littlefield, 2005), two philosophers debate the merits of libertarianism. Arguing in favor is Professor Tibor Machan, a contributing editor to The Freeman. His opponent is Professor Craig Duncan, who attempts a refutation of libertarianism and seeks to persuade readers that they should embrace “democratic liberalism.”

It is always welcome to find a debate over a serious topic, and whether we would be better off with government limited to libertarian “night watchman” functions or with whatever government emerges under “democratic liberalism” is to my mind as serious as philosophical questions get. I found the debate in the book enlightening, especially for the insight it gives us into the mind of the nonlibertarian.

Like many Americans, Duncan commits four errors that are common among non-libertarians both of the “left” and the “right.”

The first mistake in this set is to overestimate the problems of a free society. To nonlibertarians, the thought of a truly free society is frightening. They imagine that a few wealthy individuals would crush the rest with their enormous economic power, abuse the environment, establish monopolies, underpay workers, discriminate against people in unpopular groups, ruin the morality of the people, and much more. Nonlibertarians don’t think their own freedom should be curtailed, but believe that in the absence of laws to make others behave properly, the nation would become a Hobbesian horror.

Closely related to that mistake is the underestimation of the ability of free people to solve problems. Poverty, pollution, discrimination—those and many other problems—will fester and grow in a free society because the poor, oppressed people can accomplish nothing against them. To suggest that voluntarism can work usually gets the nonlibertarian’s eyes rolling, accompanied by a dismissive shake of the head. We just can’t rely on voluntary action to take care of society’s problems.

Nonlibertarians don’t just misjudge the free society; they also misjudge government. The first of their errors here is to overestimate the capacity for laws and coercive programs to actually solve socioeconomic problems. Many nonlibertarians believe, for example, that poverty will be alleviated if only the state spends enough money on a welfare “safety net.” Many others believe drug addiction will go away if only the state tries hard enough to enforce the laws against drugs. And if poverty and drug addiction persists after decades of government efforts against them, the explanation is never that government is the wrong instrument to use, but that insufficient money has been appropriated, corrupt or uncaring people have been in charge, or that something else has undermined the efficacy of the programs.

The second of the errors regarding government is to underestimate the harm done by laws and policies designed to help people. Let someone propose a new government program to solve a socioeconomic problem and rarely will you hear a nonlibertarian utter a sentence beginning, “But if we do that, the following harmful consequences will ensue. . . .” So if someone advocates price controls to keep a necessity, say medical care, “affordable,” do not expect a nonlibertarian to point out that artificially low prices will lead to shortages. In fact, the counterproductivity of government action is usually not merely underestimated but completely ignored.

With that discussion as background, let’s turn to Duncan ‘s argument that libertarianism is unacceptable. To understand why he insists on a coercive and far-more-extensive state than libertarian theory prescribes, we must first try to comprehend his belief that the most important function of a political system is to advance “human dignity.” While he uses the term repeatedly, he never clearly explains it. There’s an imposing ring to the term, but exactly what does Duncan mean?

His favorite phrase, one that seems to capture his sense of what “human dignity” means, is “the ability to shape one’s life.” Now a libertarian would say, “Sure—leave people alone and they can shape their lives as they think best.” But Duncan maintains that the state must take positive steps to enable people to “meaningfully” shape their lives. Mere freedom is not enough. Government must do things for and give things to the mass of people who wouldn’t be able to live a “dignified” existence without its assistance. (“Dignity” seems to boil down to a rather misleading synonym for “comfortable.”)

In Duncan’s view, poorer people can’t “shape their lives” unless assisted by the state with money, housing, medical care, and so forth. Furthermore, the government needs to intervene in the labor market to prevent discrimination that would keep members of unpopular groups from finding employment and also to have minimum-wage legislation ensuring that all workers will be paid “decently.” A complete list of all the actions required of government by the supposed need to help people lead dignified lives could go on for pages.

If we examine the statist egalitarian measures Duncan advocates, we see the four errors on exhibit. He makes both estimation errors about freedom and both estimation errors about government action. To illustrate, I propose to examine a policy that Duncan insists on and which is widely favored among nonlibertarians—the minimum wage.

The Minimum Wage and the Free Society

According to Duncan , the libertarian policy of nonintervention in the economy is flawed for many reasons, among them that it allows employers to pay workers at rates that aren’t adequate for the workers to “shape their lives” and live with “dignity.” He writes, “Wages below a decent minimum treat workers more like disposable instruments for others’ needs than people with their own lives to live. The current level of $5.15—which totals a mere $10,300 a year for a full-time worker who works fifty weeks per year—is surely too low.” (The national minimum wage was just raised to $5.85, and will rise to $7.25 in the summer of 2009.) Duncan doesn’t inform us how high the minimum wage needs to go, but he is absolutely certain that it must be raised significantly.

Recall the first type of error in the quadrant, that of overestimating the problems of a free society, and then note Duncan ‘s fevered rhetoric. Employers who pay workers only the minimum wage are said to treat them like “disposable instruments.” That makes it sound as though people employed at the minimum wage are rather in the same situation as were prisoners in the Soviet Gulag, where millions of them actually were disposed of—literally worked to death under astoundingly inhumane conditions. Now Duncan isn’t saying that the American minimum-wage employee is worked to death, but his “treating them like disposable instruments” talk is calculated to make the reader think that workers are suffering terribly and that their employers are hardly better than slave masters. Is freedom, even when limited in the mixed economy, really so awful as this nonlibertarian depicts it?

Duncan ‘s eagerness to attack the morality of those who employ workers without ensuring that they are paid enough to “shape their lives” is the first point we should examine. Their actions certainly don’t indicate that they regard low-paid workers as “disposable” since they want them to continue working for them and frequently grant pay increases to induce them to stay rather than look for other employment. No employer can force anyone to work or prevent an employee from quitting. When an employer contracts with an individual for labor, he is not mistreating the individual simply because the rate of pay is lower than Duncan would accept.

Next, let’s ask how serious the supposed problem of minimum-wage employment is. Undoubtedly it would be hard to support yourself, much less a family, on only the earnings from a minimum-wage job, but very few people do. The typical minimum-wage worker is a teenager living with his parents, earning some spending money. Many others are older people with other sources of household income besides the minimum-wage job. People like that can “shape their lives” tolerably well. It is only a small fraction of those who work at the minimum wage who fit Duncan ‘s image of struggling, suffering people. But there are some, and that brings us to the next mistake Duncan makes.

Nonlibertarians underestimate the ability of free people to deal with problems. If some people struggle and suffer because they can’t earn enough money, why not assist them through voluntary means? Duncan, however, does not want to hear about voluntarism, airily dismissing the idea that there could ever be enough funds and donations to solve the poverty problem. Why? Because, he points out, many individuals and businesses take advantage of tax “loopholes” to minimize their taxes. This is a non sequitur. The deduction for charitable giving is one of the main “loopholes” Americans take advantage of. Duncan never explains how he concludes that private charity could never be sufficient from the premise that people and businesses prefer to keep as much of their income as they legally can. There’s simply no logical connection. The fact that people would rather put their money toward purposes of their own choosing rather than see it go to the vast array of government expenditures—most of which have nothing to do with the alleviation of poverty—tells us nothing about the extent of their desire to help others in need.

A libertarian polity would have far lower government expenditures and would therefore impose far less drag on the economy. More resources would be available for production; more jobs would be created and prices would fall. As a result, there would be less poverty. Furthermore, private charitable groups would expand to replace inefficient government programs and agencies, and consequently there would be more effective assistance to the poor than currently. Actually, it is the mega-state that ensures there will never be enough resources to alleviate poverty.

Evidence for the efficacy of voluntary programs to relieve poverty abounds. Long before there were government welfare programs or any income tax to avoid, America had a vibrant network of charities to assist the poor and self-help mutual-aid societies. Anti-libertarians who pooh-pooh voluntarism would do well to read David Beito’s book, From Mutual Aid to the Welfare State. With the revolution in communications and information of the last decade, it is now easier than ever to identify and assist individuals who truly are struggling in life. Contrary to Duncan ‘s beliefs, voluntary action would be much more effective than the blunt, clumsy policies of minimum-wage laws or welfare entitlements.

Mistakes Regarding Government

Looking at Duncan’s case for the minimum wage and increasing its current level, we also see the predictable mistakes that nonlibertarians make regarding government action.

First, he overestimates the capacity of government to solve the supposed problem of poverty among low-wage workers. Although Duncan doesn’t say exactly how much higher the minimum wage needs to go to guarantee all workers enough income to “shape their lives,” let’s assume that if we doubled it, that would be sufficient. Make it illegal for an employer to pay any worker less than $11.70 per hour and poverty goes away for those workers who used to earn between the current minimum and the new amount. Right?

Not so fast. Employers tend to make adjustments when the cost of any factor of production goes up, and the cost of labor is no different. Putting aside the likelihood that some workers would be terminated—we will get to that in our fourth error—employers have ways of offsetting the mandated increase in the cost of labor, which would affect all workers who had been making less than the minimum previously. Break time might be reduced. Previously “free” benefits such as uniforms might be charged against pay. Unless the minimum-wage advocates are prepared to also legislate away managerial freedom (as some are), workers won’t benefit as much as expected from their vicarious generosity.

Furthermore, since most workers who start at minimum wage earn pay increases within a short time, all that the mandatory wage increase does is to accelerate somewhat the time at which they start earning more. While the minimum-wage advocate may think that by increasing it, he “lifts people out of poverty,” the truth is that most workers lift themselves out of poverty. Government action accomplishes much less than people like Duncan believe.

Now we come to the final quadrant of the matrix of mistakes, namely, the tendency of nonlibertarians to underestimate the harm done by government action. If they don’t underestimate it, they ignore it entirely.

With regard to the minimum wage, economists have long understood that if government sets a price floor below which no transaction may legally be entered into, the result will be a surplus of the item. There won’t be enough demand to buy up the supply. In the labor market, the word for that is unemployment. Therefore, most people who have studied labor markets conclude that raising the minimum wage will lead to some job losses among current workers and a reduction in job opportunities for people who will be trying to enter the labor market in the future. Raising the minimum wage benefits workers who keep their jobs—predictably, those regarded as the most productive and promising employees—but at the expense of the workers who are laid off immediately and all future workers who will find fewer opportunities available to them. Fewer legal opportunities, anyway. People who are priced out of legal employment will often resort to illegal employment.

Duncan is aware of that criticism, but he dismisses it. He does so by pointing to a 1995 study by economists David Card and Alan Krueger, which found no disemployment effect in the fast-food industry when New Jersey raised its minimum wage. That’s enough for Duncan to brush away the argument that this interference with the price system is harmful. His conscience is clear.

It shouldn’t be. The Card-Krueger study certainly does not disprove that raising the price of labor reduces the demand for labor. All it shows is that the authors did not find a short-run increase in unemployment in a small slice of the labor market at a time when the economy was growing robustly. It is logically impossible to get from the findings of that study to Duncan ‘s conclusion that increasing the cost of hiring low-skilled workers will have no effect on their employment prospects.

As an aside, one reason why nonlibertarians ignore the harm done by government intervention is that the harm usually is felt by other people. If Duncan were thinking of taking some medicine but his wife pointed out that a dozen clinical studies show that the medication often has serious side effects in men his age, would he dismiss all that evidence just because he read that one doctor somewhere said he didn’t think it hurt his patients? I doubt it. People tend to behave more cautiously when they stand to bear a personal cost from being wrong. When it comes to grand social experiments, people who are well-off aren’t so cautious about the harmful effects their experiments will have on others.

Besides creating higher unemployment among low-skilled workers, the minimum wage has another bad consequence, namely that it encourages people to look to politics to get what they want. Duncan thinks he sees a brighter future for the poor through legislation that supposedly helps them, but many other people will also use politics to get things they want, things that may undo whatever benefit Duncan expects from the political actions he favors. Business firms will try to obtain competition-stifling laws that drive up prices or subsidies that come at taxpayer expense and divert resources from more productive uses. Professional groups will seek government favors, especially licensing laws that keep down the number of practitioners in their field, thus increasing the cost of services. (The legal profession plays that game beautifully, with the result that many poor people cannot afford legal assistance when they need it.) Regulations promoted by environmental organizations will drive up the cost of housing, gasoline, and many other items everyone needs. The liberal democracy to which Duncan and others like him look for the passage of minimum-wage laws, welfare programs, and so on inevitably grows into a Leviathan that will do just about anything except leave people alone. In the effort to help a few people shape their lives, Duncan ‘s political meddling opens the floodgates to limitless government tampering that misshapes everyone’s life. Unfortunately, that’s a problem he can’t see.

Nonlibertarians advocate a vast array of governmental laws and policies that drain away people’s liberty. Most of the time the problems they want to eliminate are real, but have their roots not in freedom, but rather in existing laws and policies that benefit a few at the expense of the many. They want to mandate that we behave in certain ways and prohibit us from behaving in others. I submit that whether it’s the minimum wage, Social Security, public education, welfare, the war on drugs, or anything else, when you examine their arguments, you always find the four errors I have outlined here. They overestimate the problems of freedom while underestimating the ability of people to deal with the problems that do exist without the use of coercion, and they overestimate the ability of government to solve problems while underestimating the damage that government does when it interferes with the spontaneous social order.

The next time you hear someone say, “We need to have the government do this . . . ,” examine his argument carefully. See if you don’t find that he has made those four mistakes.

  • George Leef is the former book review editor of The Freeman. He is director of research at the John W. Pope Center for Higher Education Policy.