Libertarianism's Time Has Come and Gone

Government actions can lead to more individual freedom, not less.

Fun while it lasted.

Photographer: George Rose/Getty Images

Stanford historian Ian Morris is fond of saying that "each age gets the thought it needs." According to this maxim, ideas like the Enlightenment, communism or even Christianity are a product of the economic and political circumstances of their times.

It's easy to believe that libertarianism might have been a good fit for the late 20th century. Coming out of World War II, governments were huge, bureaucratic and militaristic. The Soviet Union and Mao's China were implementing particularly destructive forms of top-down economic management. It made sense to fight these forces with a philosophy that emphasized individual liberty and limited government.

Libertarianism -- at least, the kind that most economists know -- takes a stark, simple view of human relations. Individuals are atomistic entities, acting in voluntary contractual relationships. The government has a monopoly on all forms of violence, so only the government can compel people to do things not of their own free will. Any government intervention beyond the prohibition of violence, the protection of property, and the defense of the nation -- sometimes called the night watchman state -- is, in principle, an unacceptable infringement on personal liberty. This is an idealized version of the libertarianism preached by economist Milton Friedman and philosopher Robert Nozick.

Plenty of people criticize libertarian values. For example, this perfect free-market utopia could lead to horrendous poverty. But most economists I talk to accept the basic framework. There's only the government and the individual. The idea that there might be intermediate levels of power and violence between those two poles doesn't often come up, or tends to be dismissed.

But for people in the real world, the idea of non-government power is all too real. Organized crime dishes out plenty of violent coercion -- just look at Mexico's drug wars. Sports teams and fraternities haze their members. Plenty of assaults go unpunished by the cops.

Nor is power always exercised through violence. Your church might ostracize you from your community, forcing you to choose between moving away or enduring the condemnation of your neighbors. Your boss can force you to do menial tasks if he doesn't like your haircut. Those are forms of power, too.

With multiple levels of power -- what I once called local bullies -- the neat and tidy universe of classic libertarianism breaks down. What if the government can intervene and stop a local bully from bullying? Would that make people more free, or less? This clearly came up in the civil-rights struggle, where government forced businesses to cater to and to hire people of any race. Though a few libertarians decried the move, the vast majority of society believed that government enforcement of civil rights was leading to more individual freedom, not less.

Economists have been slow to catch on to this idea, but there is some progress. Typical of this day and age, it usually comes not in the form of a flowery literary argument, but in a formal, mathematical model. A great example is a recent paper by top economists Edward Glaeser, Giacomo Ponzetto and Andrei Shleifer.

The paper, titled "Securing Property Rights," makes a very simple assumption: government isn't all-powerful. No matter how much libertarians would like, it can't perfectly secure property rights for everyone. Government enforcement is patchy, and rich people can often spend money to buy politicians and officials. Glaeser et al. use the simple, classic example of a mine owner who pollutes his land, leading to big losses for a nearby farmer.

When government can't perfectly enforce property rights, it needs to use regulation as a cudgel. Instead of forcing a mine owner to pay a farmer for the damages caused by the pollution, the government can make the economy better off by stopping the miner from polluting.

So the weakness of government in some areas makes a case for doing more intervention in other areas. Glaeser et al. show that it's the failure of the night-watchman state that makes it necessary for the government to go beyond that simple role.

Of course, this kind of formal model-based argument is likely to carry more weight with academic economists than with libertarians outside the profession. But it illustrates a basic flaw in the classic, 1960s-vintage libertarianism. Because the government is imperfect and flawed, it's physically incapable of creating the idealized free-market utopia libertarians often imagine -- and that makes the case for more government intervention than Friedman or Nozick might have liked.

I think that libertarianism yielded many benefits in the 20th century. But in the 21st, people are starting to realize the limitations of the concept. We're beginning to look for new political philosophies that preserve some of the character of the old ideas but accept a bigger role for government. Let's hope this age will also, as Ian Morris says, get the thought it needs.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

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