11 November 2011

Agree to disagree.

A quiz. Agree or disagree with the following:
1) Restrictions on housing development make housing less affordable?

2) Mandatory licensing of professionals increases the prices of those services?

3) Overall, the standard of living is higher today than it was 30 years ago?

4) Rent control leads to housing shortages?

5) A company with the largest market share is a monopoly? (I used to have a hard time wondering why this one in particular kept coming up... and there did not appear to be some ideological basis for it. Pretty much everybody is stuck on stupid with it and a monopoly isn't that technical an economic principle). 

6) Third World workers working for American companies overseas are being exploited?

7) Free trade leads to unemployment?

8) Minimum-wage laws raise unemployment?

(Pretty much all of those are no-brainers for me).

9) A dollar means more to a poor person than it does to a rich person?

10) Making abortion illegal would increase the number of black-market abortions?

11) Legalizing drugs would give more wealth and power to street gangs and organized crime?

12) Drug prohibition fails to reduce people’s access to drugs?

13) Gun-control laws fail to reduce people’s access to guns?

14) By participating in the marketplace in the United States, immigrants reduce the economic well-being of American citizens?

15) When a country goes to war, its citizens experience an improvement in economic well-being?

16) When two people complete a voluntary transaction, they both necessarily come away better off?

17) When two people complete a voluntary transaction, it is necessarily the case that everyone else is unaffected by their transaction?

The last two without the qualifiers "necessarily" are the only tricky questions in this second portion. The "necessarily" is being used to justify a lot more than interference in necessarily public concerns.

The moral of the story appears to be that no political group ideology is free from bias and no group assesses all political realities based on the actual real world impacts of their preferred policies, but rather based upon the signal that their preferred policy sends. Rent controls therefore "help" poor people and immigrants and/or the Chinese are "stealing our jobs". To my own tribe, libertarians, I'm disappointed that it's not understood that making something illegal constrains its availability (though in the case of drugs, it appears that it does so in a fairly small way). It is of course equally poorly understood on our opposite that making something illegal that people actually want will spawn black markets for it (as in the case of narcotics, alcohol, abortion, prostitution, etc) and won't just abolish the intended "vice", therefore creating costs for enforcement of laws, opportunities for corruption, and so on, all costs that must be associated with any perceived or actual benefits resulting from such constraints.

As a similar problem, because of the importance libertarians place on individual freedoms, we run into difficulties with those last two statements and the availability of voluntary transactions vis a vis the state's laws where the transaction occurs. It is true there are often externalities when a transaction occurs. Visiting a prostitute might carry venereal diseases back to a spouse or sexual partner. An addict purchasing narcotics (or alcohol) might be committing other crimes, or more commonly being abusive and damaging to their family (stealing items to pay for it, physically abusive, etc). Pollution from a factory or power plant can spoil the air and water around it, as a classic public goods problem with many "voluntary" parties involved. Traffic congestion is a similar problem. Gambling is pretty obviously a case where a voluntary transaction can leave one person worse off (assuming that the gamble was not merely recreational amusement for instance). There are plenty of opportunities for fraud even in voluntary transactions, or for informational asymmetries that cause further distortions and problems. The question for libertarians is something like "at what price freedom?". The most pragmatic response I can think of is to not restrict the action merely because the action is sometimes harmful but to come up with clearer and better incentives to avoid the negative consequences that we don't want (ie, by penalizing bad consequences or irresponsible actions, like fraud, theft, pollution, traffic, lack of condom use, domestic violence, etc). Here we have the satisfaction of leaving individuals enough freedom to do things, but still legally preventing them from actively harming others.

A strong corollary to this problem can be made with the global warming debate. In order to avoid what appears to be a very poor state level response (say, cap and trade on carbon), it becomes "necessary" to deny there is even a problem that the state/public must respond to with collective or even individual action. Libertarians on both fronts are essentially claiming that there is no problem with two people doing anything they want to each other in order to avoid the ham-fisted state level response of preventing everyone from doing similar but non-egregious things to each other. That's a serious overreach of ideology. There are obviously problems. The questions for us is something like the following a) are these problems solvable only through the architecture of the state? (often the answer is no, but sometimes it has a use) b) are the state's interventions likely to cause more problems than it solves? (very often this the reason the state is a poor choice for intervention) c) if this is the problem with the current state interventions, can a more sensible programme be designed and implemented to more strongly target the actual problem? (sometimes a more efficient government is possible, and sometimes not). I would argue that a carbon tax or gasoline tax is much more efficient than cap and trade. On carbon emissions at least. And I would argue that (effective) prevention/education programmes (which we do not have) and emphasis on treatment for addiction are much less costly (and effective) means of resolving the large scale social problems caused by addiction to substances than our current insistence on enforcement regimes and incarceration. But I would not argue that neither of these problems does not exist or does not matter in the first place. There are cases where some people will claim a harm, let's say gay marriage rights, and it really does not matter because we're talking about private contracts and the desired manner of family construction by private individuals that really do not have much public consequence and effect (empirically speaking). But quite obviously drug or alcohol addiction has public costs associated with it in the same way that smokestacks or a traffic jam does.

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