The real challenge of Libertarian populism

According to Wikipedia, the night-watchman state (a foundation of Libertarianism) is defined as:

A night-watchman state, or a minimal state, is variously defined by sources. In the strictest sense, it is a form of government in political philosophy where the state's only legitimate function is the protection of individuals from assault, theft, breach of contract, and fraud, and the only legitimate governmental institutions are the military, police, and courts.

The bolding was added by me.

I think the real challenge of Libertarianism is not issues like Libertarian populism but rather the requirement that a Libertarian state protect against fraud.  I think that this is a more important the weaker that government gets, the more critical each function becomes.  Yet modern corporations are increasingly being allowed to get away with Fraud (and with changing of contracts).  These are huge problems because if you are going to enforce contracts against the politically weak, you also need to enforce them against the politically strong or you really do get feudalism. 

Trials like that of the S&P ratings schemes (where they argued ratings were puffery) are critical because it may be the case that a reasonable person might well think that misrepresentation was a form of fraud.  Saying that "lies=marketing" seems to be a rather obvious attempt to evade the antifraud portion of the states function. 

In the same sense, changing the rules under which a corporation operates can be an extremely dodgy move.  Changing the rules can be okay, but the optics are terrible when a major corporation shifts the rules when an initial attempt to do something fails.  It doesn't matter that the main victim is Carl Icahn. who is hardly at risk of poverty. 

To me, this is really the central issue of the modern Libertarian approach.  It isn't impossible that you could have a Libertarian populism, but I think the backbone of this approach would have to be that the same rules apply to everyone (even if they have a lot of money). 

A response to a response -- honest libertarians

Following up on Joseph's follow up to this post, there's an important distinction I'd like to make with regard to this argument from the Cato Institute (as reported to Business Week):.

Some believe the Census Bureau does too much already. “They waste a share of their budget on studies that no one actually uses,” says Chris Edwards, an economist with the Cato Institute, who cites periodic surveys on such items as the total hog count in the U.S. to prove his point. “A lot of that could be done by the private sector.”

As I pointed out before, Edwards is basically saying (in reverse order) that:

1. the private sector could perform major functions of the Census (which is demonstrably wrong since, as I pointed out before, the private sector has tried to do this repeatedly without ever coming close to matching the quality of government data) ;

2. no one uses reliable data about American agriculture (which is too laughable to waste any time addressing).

What's interesting and depressing here is not just the bad arguments that Edwards made but the valid ones that he didn't (or at least that he didn't make forcefully enough to be quoted). To understand these other arguments, it's useful to think of a simple value function for evaluating government projects

V = Returns - Traditional Costs - Libertarian Costs

Traditional costs are what you normally think of for a project, direct expense, opportunity costs, negative impact on other economic activities. Libertarian costs are the losses of liberty that go with any action where the majority forces the rest of society to take collective action.

Most of us don't give a lot of thought to LC but it's not zero and libertarians are performing a valuable service when they bring it up. In this case Edwards could have made the following valid arguments:

We're financing the census by taxing people who in some cases object to it.

The census is an invasion of privacy by the government.

A relatively small group gets a disproportionate share of the benefits.

I don't happen to agree with those arguments but they are valid and it's worth noting that Edwards chose to use invalid ones instead. We've seen this sort of thing before -- libertarian groups like Cato pushing flawed reasoning rather than make the honest but difficult-to-argue libertarian case. It's a practice that undermines their credibility.

Or it would if anyone cared about credibility anymore.

Libertarianism and it's limitations

I have long held that the weak underbelly of libertarian theory (in the modern form) is how to justify current wealth distributions (and thus hold current property rights inviolate). Brad DeLong does a good job of laying out the mental steps required:

Well, let me sketch out the logic of Robert Nozick's argument for his version of catallaxy as the only just order. It takes only fourteen steps:

1. Nobody is allowed to make utilitarian or consequentialist arguments. Nobody.
2. I mean it: utilitarian or consequentialist arguments--appeals to the greatest good of the greatest number or such--are out-of-order, completely. Don't even think of making one.
3. The only criterion for justice is: what's mine is mine, and nobody can rightly take or tax it from me.
4. Something becomes mine if I make it.
5. Something becomes mine if I trade for it with you if it is yours and if you are a responsible adult.
6. Something is mine if I take it from the common stock of nature as long as I leave enough for latecomers to also take what they want from the common stock of nature.
7. But now everything is owned: the latecomers can't take what they want.
8. It gets worse: everything that is mine is to some degree derived from previous acts of original appropriation--and those were all illegitimate, since they did not leave enough for the latecomers to take what they want from the common stock of nature.
9. So none of my property is legitimate, and nobody I trade with has legitimate title to anything.
10. Oops.
11. I know: I will say that the latecomers would be poorer under a system of propertyless anarchy in which nobody has a right to anything than they are under my system--even though others have gotten to appropriate from nature and they haven't.
12.Therefore they don't have a legitimate beef: they are advantaged rather than disadvantaged by my version of catallaxy, and have no standing to complain.
13. Therefore everything mine is mine, and everything yours is yours, and how dare anybody claim that taxing anything of mine is legitimate!
14. Consequentialist utilitarian argument? What consequentialist utilitarian argument?

To be able to successfully explain Nozickian political philosophy is to face the reality that it is self-parody, or perhaps CALVINBALL!

It is step 11 that seems to be the most interesting to me. Nobody really wants to argue for anarchy but that doesn't mean that pools of wealth are good, either. I suspect a false dichotomy is present as other options exist as well.

Furthermore, the system also ignores the influence of wealth on process. Differences in prestige, corruption and credibility can lead to issues with step 5, as well. So I think we need to be careful about making property rights primary. Obviously ownership has important effects in making a specific person responsible for an item (otherwise you can get the "Tragedy of the Commons" issues). But that effect works best on small pieces of property that are directly used by the person (a car, a house, a factory) and seem to become less helpful on larger scales (like in a corporation where you need to hire a management team who then bring in principal agent concerns).

Definitely something to consider.

Libertarian dreams

From Jacob Weisberg:

Though I criticized Ryan for his unsupported rosy assumptions (shame on you, Heritage Foundation hacks), I reacted too quickly and didn't sort out just how laughable Ryan's long-term spending projections were. His plan projects an absurd future, according to the Congressional Budget Office, in which all discretionary spending, now around 12 percent of GDP, shrinks to 3 percent of GDP by 2050. Defense spending alone was 4.7 percent of GDP in 2009. With numbers like that, Ryan is more an anarchist-libertarian than honest conservative.

It is interesting to be reading this as I just finished the book the Moon is a Harsh Mistress by Robert Heinlein. What I found interesting about this book was the assumption that one could so easily eliminate all of the functions of government (and yet have highly patriotic individuals willing to die for this version of a state).

But what I found interesting is how these ideas of government cannot be easily reconciled with a strong military. In the novel, Heinlein has the settlers of the moon act as a voluntary militia that is able to hold off another power. But these ideas are simply incompatible with a role as a "global policeman".

So there is a tough decision to be made about the role and scope of the US government in international affairs, if we really are going to put serious libertarian ideas of the state into practice.