Liberty Matters

Viktor Vanberg’s reply to Steven Horwitz


Steven’s distinction between the rent-seeking state and the discretionary state is useful. It highlights the difference between discriminatory legislation and arbitrary enforcement of rules as two ways in which governments can obstruct the very principles on which a society of free and equal people – forming a democratic polity as a “cooperative venture for mutual advantage” (Rawls) – ought to be based. There is, though, a commonality between the two vices. Both are equally inimical to what Hayek emphasized as the “essence of the liberal position”: “the denial of all privilege, if privilege is understood in its proper and original meaning of the state granting and protecting rights to some which are not available on equal terms to others.” Just like any privileged treatment that legislatures grant to rent-seeking interest groups, so every discretionary intervention into the “game of catallaxy” necessarily means that the state bestows privileges on some players at the expense of others.
When Steven speaks of such discretionary and discriminatory state activity as retrogression “to a pre-modern understanding of the state,” he restates in different terms what the founders of the ordo-liberal Freiburg School of Law and Economics (Vanberg, The Constitution of Markets, chapter 3) have described as “refeudalization.” They applied this label to the discretionary state whose privilege-granting interventions into the economic process represent in essence a movement back to the kind of discriminatory order of privileges that had been characteristic of the feudal society. The interventionist state, so the Freiburg ordo-liberals argued, is only seemingly all-powerful, but is actually a rather weak state. It is its very “power” to grant privileges that makes it inevitably the target of special-interest demands, turning it into a “playball of interest-group pressures” and weakening its capacity to perform its proper task of serving the common interests of the citizenry.