Monday, June 20, 2011

Noah Smith on Libertarianism

The economics blog 'Noahopinion' has an interesting post on the U.S. strain of libertarianism:
Libertarianism and the Tamerlane Principle.


"This is why modern American libertarianism is so very, very flawed. The ideology professes to value liberty above all else, but it ignores the dynamic aspect. There is liberty today, and there is liberty tomorrow. Sometimes violations of liberty today (such as an income tax) are necessary to protect the body politic from far, far, far more heinous violations of liberty tomorrow".

"Most libertarians recognize this, and freely admit that defense is an exception to the "small government" rule. But an army is not going to be a very effective Tamerlane repellant without a large GDP and advanced technology to back it up. And what modern American libertarians either fail to understand, or refuse to accept, is that public goods are essential for a high GDP."


Anti said...

You write this as if these extremist American libertarians are rational, or even intelligent.

TomatoBasil said...

Modern American Economics is so very, very flawed...

schwapj said...

Utter nonsense. First, an income tax is not the only tax that might support an army, not to mention the fact that when you sacrifice liberty today it's already lost. What the hell's the difference what happens tomorrow, since there's nothing left to protect? Second, libertarians don't need an exception to the small government rule, since the U.S. Constitution clearly provides for defense (as opposed to heinous nation building)--as one of the few things the government actually does well. Third, even the economist who coined GDP considered leaving it out of the equation because it gives the impression that war is good for the economy when all empirical evidence says that is absolutely false.

schwapj said...

My apologies: the "it" in the third point is, of course, "government spending".

libertarian89 said...

I assume you are speaking to the economic theory in which most libertarians subscribe too, which is primarily the Austrian school. Although come Chicago school people consider themselves to be libertarians, and although the Chicago School is considered “free market,” it is very different from the Austrian school.

Libertarianism is more of a philosophical view on property rights, and the Austrian School is an economic school of thought. For the most part, the two go hand in hand, but try to avoid equating the two together.

Public goods necessary for a high GDP? Whoever said a high GDP necessarily means that the economy is growing in any meaningful, sustainable fashion? GDP numbers don’t tell the whole story about what is going on with the economy. The economy can be booming without a rising, or even a large GDP for that matter.

Public goods are not “essential” for a strong economy, if that is what he was referring to with the GDP reference. Economies can grow, develop, and prosper without government financed “public goods”

George Riesman explains to us why that is here:

Patrick Barron also has a great piece explaining it as well:

If any of you are interested in understand some of the problems with emphasizing equations and GDP numbers in economic thinking, I encourage MMT’ers to take a look at those articles. Its time MMT proponents attempt to understand their Austrian critics, beyond merely reading blog comments. Someone step up to the plate.

Tom Hickey said...

Looked them over and we disagree.

Oliver said...

In trying to discern libertarians of the left from those of the right (I consider myself neither, although ideologically much nearer to the prior), I find there to be an enormous leap of faith from the principle of self-owenership, that stresses accountability and maturity of the individual, to the claim that all material property rights are equally sacrosanct. The first, although somewhat dreamy for my taste, is logically consistent. The second is a feeble attempt at ex-post legitimation for any type of appropriation, whether socially, economically or morally acceptable or not. It provides an ideological anchor for those best served by it, but I see no proof that it ever has or ever could deliver a basis for acceptable economic outcomes. Acceptable to all, that is.

Anonymous said...

Now MMTers sound as if taxes are actually needed by the government for spending. Wow is this convenient. When we want to use the government to create jobs or fund infrastructure, taxes aren't needed. When we want funds for defense, taxes are key? Wow!

Anonymous said...

How embarrassing. Left-wing MMTers caught pretending that taxes fund government spending when they want to attack libertarians. Can we get our talking points straight?

Tom Hickey said...

According to the Chartalist theory of money, to which MMT subscribes, taxes are necessary to give state currency value by necessitating that the private sector obtain it to satisfy their public obligations. This involves the legal power of the state to force compliance.

The existence of state money allows the state to transfer resources from the private sector to the public sector for public purpose, i.e., administration, security, and such other responsibilities as may be invested in the state by the constitution. The US Constitution invested the state with promoting the general welfare (preamble) and the fiscal power to do so (welfare clause).

The principle point is that in a nonconvertible floating rate monetary system, neither taxes nor borrow fund government; the power to issue currency does this instead.

This means that there is no direct connect between taxation and expenditure, although taxation is required to give state money value, allowing the state to transfer real resources for public use.

If there is a modern state, there is a government and government must be funded. It is not reasonable to expect that it will be funded voluntarily. Therefore, some coercive construct is required. Taxation with representation is the choice of modern liberal democracy, although in extremis the state can and does commander private property.

Red Rock said...


All true, but this glosses over the faulty critique of libertarians made in this article. Most libertarians that I've been exposed to do not feel there should be zero taxes, nor do they feel there should be no military or police power.

The article implies that by believing taxes should be kept low, libertarians are in favor of defunding or not financing our defense. MMT allows for taxes to be low enough to legitimize the currency (chartalism) and the size of the military has nothing to do with the amount of taxation over and above the chartalist minimum. As such, there is no contradiction in favoring low taxes and a strong military.

Tom Hickey said...

"And they are right. I think only Warren Mosler stressed that this is not a bug, but a feature of government spending in order to achieve public purpose, a concept that Austrians oppose."

Randy Wray, too. Randy has said that public desires (voter preferences) often or even generally exceed public provision. While "affordability" is often given as an excuse for not providing these, the only constraint is the availability of real resources. The arbiter of fiscal policy in a liberal democracy is the wishes of the majority, through their elected representatives in a republic.

Many people profess to want "small government," but sing then a different tune when it cuts into their services.

Tom Hickey said...

"All true, but this glosses over the faulty critique of libertarians made in this article. Most libertarians that I've been exposed to do not feel there should be zero taxes, nor do they feel there should be no military or police power."

I don't see any difficult reconciling all but the most extreme libertarianism with MMT. Fiscal policy is a political choice, but it operates within the confines that MMT describes, such as sectoral balances.

If we recognized that, then we could have a debate based on both the same facts and different norms, depending on preferences for different policies and their likely outcomes.

But if the debate is going to be conducted when one side doesn't admit



Y = C + I + G + (X-M)

because G has no place in the equation, then we have a problem, because G is not going to zero anytime soon in a modern society.