Problems and Solutions

     

In this comment I wish to discuss not how libertarians can change public opinion per se but how we should frame some of our arguments. This pertains to an important debate among 19th-century liberals, namely, whether freedom depends for its advance primarily on the progress of knowledge, especially in economics, or whether an improvement of moral sentiments is more fundamental. I subscribe to the latter position; unless sufficient numbers of people have a due regard for the moral autonomy of individuals, the diffusion of knowledge about economics will have relatively little effect.

It is clear that antislavery crusades were grounded in moral arguments, especially the right of self-ownership, even though economic arguments played a role as well. Even libertarian crusades that seemed economic in character, such as the campaign against the English Corn Laws, had strong moral components, as when free-market types emphasized how tariffs exploited the middle and lower classes for the benefit of the landed aristocracy. And Adam Smith did not hesitate to emphasize the moral injustice of apprenticeship laws. As he wrote in The Wealth of Nations:

Economic arguments are among the most powerful weapons available to libertarians, but close attention should be paid to the context in which these arguments occur. Frequently the libertarian will try to show how the free market would solve various social problems, without asking whether, or in what sense, a problem may be said to exist in the first place. This brings me to an important strategic principle: He who determines what constitutes a "social problem" will also determine what qualifies as a "solution." More often than not, social problems are defined in such a way that nothing but governmental intervention will count as a solution. This is nowhere more evident than in what economists call the "public goods problem."

According to the standard account found in textbooks on microeconomics, a "public good" is definable by two objective characteristics of the good itself: first, it must be nonrival in consumption, which means that consumption by one person does not diminish the quantity consumed by anyone else. The second characteristic is nonexclusion, which means that it is impossible or too costly to confine the benefits of the good to those who pay for it.

The typical example of a public good is national defense, because it protects everyone simultaneously and cannot be limited only to those who pay for it. Those who benefit from a public good without paying for it are known as "free riders." These free riders, it should be noted, are not irrational people. On the contrary, free riding is said to be “rational” when public goods are involved. According to many economists, a public good should be produced, in the sense that everyone would benefit from it. Yet it will not be produced in the free market, because every rational calculator will prefer a free ride. Therefore, neither the economist nor the consumer is to blame for this supposed "problem"; rather, it is the market that has failed. Of course, having defined the "problem" in this manner, any market "solution" is disqualified beforehand. Thus does government enter center-stage, able and willing to solve the problem of market failure.

Although the public-goods argument is typically said to be value-free, it actually reduces to the claim  that the market will not produce what I (or others) think it should produce, so we ought to abandon the outcome of real market decisions and call instead on the nonmarket decisions of government. Through coercive taxation, government will enable consumers to enjoy a product that we would gladly have paid for voluntarily if only our rational decisions (to be free riders) had not prevented us from satisfying our rational preferences (for public goods).

The concept of a public good, as traditionally employed, is a muddy brew of ill-defined terms and value judgments. A conclusion about alleged market failures, which is where the public-goods argument has been designed to take us, shares these flaws while adding another one to the list, viz., the anthropomorphic fallacy. The concept of "failure" presupposes a purposeful action that does not produce the desired result.  To conceive of market failure in literal terms, we must anthropomorphize the market, transforming it from a process into a purposeful being with desires and goals that it strives, unsuccessfully, to fulfill. It is as if the market were a flesh-and-blood person with rational preferences who, huffing and puffing, undertakes a task for which it is constitutionally unfit. In truth, of course, the "market" is nothing but a collective abstraction that denotes the innumerable economic decisions of singular human beings. The market can neither achieve, nor fail to achieve, anything.

The anthropomorphic metaphor occurs in the old joke about how many libertarians it takes to screw in a light bulb: none; the market will take care of it.  Now, this metaphorical usage is sometimes appropriate, within limits. It indicates, first, that consumer preferences will be most efficiently satisfied in a free market; and, second, that, owing to multitudinous variables, we cannot be very specific about market outcomes. However, when explaining how "the market" will "solve" a social problem, we should guard against inappropriate applications of this metaphor. The correct response may be to attack the arbitrary nature of the supposed problem, for if that “problem” goes unchallenged, libertarian “solutions” will be often defined out of existence in advance.

In my judgment, the most egregious contemporary example of how the term “problem” is misused is the so-called “drug problem" in America today. Stripped to its bare essentials, this means that many Americans like to use drugs and that many other Americans don't like their behavior. The majority, when it disapproves of a minority, is likely to classify the behavior of that minority as a "social problem," thereby opening the door for a governmental "solution." 

Nineteenth-century American nativists didn't like Catholicism, so they postulated an "immigrant problem" or an "Irish problem" and then campaigned for a "solution" in the form of common schools that would "Christianize the Catholics." Obviously, it would have been wrong, not to say absurd, for a libertarian to argue that the market would take care of the "Catholic problem" on its own without government schools. What would we think of an economic argument that said, in effect: "A free market in education and religion will tend to reduce the demand for Catholicism and thereby solve the Catholic problem automatically"? Clearly, the libertarian, rather than offer this kind of "market solution," should simply deny the very existence of a "Catholic problem," attributing to it no meaning other than the personal preference of some Protestants.

Yet some libertarians respond to the "drug problem" in a similar manner. They tell us how the market will "solve" the "drug problem," or at least make it less severe. This, as I said, is similar to the response given earlier to the "Catholic problem," and it is equally problematic. It is mistaken because the market does not determine preferences; it merely reflects them. If there is a demand for drugs, then a free market will fulfill that demand in the most efficient manner possible. 

This is why I regard as disingenuous the standard “market solution” for the “drug problem.” Some libertarians do not want to associate themselves with unpopular minorities or be perceived as defending their behavior, so they swallow the mythical "drug problem" and propose an equally mythical "market solution." What they should do, of course, is to deny the legitimacy of the problem itself—or at least be crystal clear about exactly what that alleged problem means. 

I do not wish to be understood as minimizing the importance of economic arguments in presenting the case for individual freedom. But I do wish to suggest that libertarians should analyze “social problems” more carefully than they often do. We should not accept a “social problem” at face value and then search for a “market solution.” More often than not, such problems will turn out to be nothing more than the value-laden constructs of people who disapprove of how others live their lives.

[104.] Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, ed. R.H. Campbell and A.S. Skinner (Indianapolis, Ind.: Liberty Classics, 1981), I:138. Online version: Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations by Adam Smith, edited with an Introduction, Notes, Marginal Summary and an Enlarged Index by Edwin Cannan (London: Methuen, 1904). Vol. 1. Book I. Chapter X: Of Wages and Profit in the Different Employments of Labour and Stock. Part II: Inequalities occasioned by the Policy of Europe </titles/237#Smith_0206-01_431>.