Why libertarians are not dogmatic in the quest to minimize or end the state

One of the most frequent objections libertarians face is that we are just too dogmatic. Surely, states often fail, sometimes at a grandioze scale; sometimes states go out of control and turn into brutal tyrannies that kill tens of millions and devastate the societies from which they spring. However, the logic goes, the state is merely tool and any tool may be abused, but it is deeply implausible that the state is a universally harmful tool. Even weapons of mass destruction may have played a positive role on net through preventing a third world war between the West and the USSR and its satellites.

This objection is superficially highly plausible, especially if we take into account that at least in the developed countries states have lately coexisted with enormous socioeconomic progress. Nonetheless, the problem with this idea is that the state is not exactly a tool. The state is, rather, an order of interaction among social actors based on certain principles. I will get back to the question which principle in the final part of this essay but what matters here is that there are orders that are inherently harmful for the systems in which they establish themselves.

One of the most obvious of such pathological orders is the biological phenomenon of cancer. Cancer is an order/pattern in which certain cells start multiplying without normal limits, spreading around the organism, crowding out healthy cells and eventually seriously compromising the the function of various organs.

It may be immediately objected at this point that the implicit analogy with the state fails because only a minority of states have historically essentially killed their societies as cancer does if not treated. However, there is a type of cancer that does not necessarily kill but that still can be considered as inherently harmful for the organism. The cancer in question is leukemia. In leukemia, pathological white cells displace normal white cells, undermining the body’s immune system. Acute leukemia is often fatal but there are cases of chronic leukemia which merely worsens the quality of life. In spite of its non-lethality, no oncologist will say that chronic leukemia should not be treated.

It is interesting how much leukemia resembles the state from the libertarian perspective. Like in leukemia, the state crowds out the private sector in many important domains. It also distorts the functioning of vital social coordination mechanism like market pricing.

However, merely pointing at apparent similarity between the state and leukemia is not remotely a proof that the state is inherently pathological. And even if the goal of this essay — to show that libertarians are not dogmatic in believing this — is much less ambitious, it still will not work.

However, what must suffice is a powerful prima facie evidence that the state has demonstratably failed in various domains. In what follows I will use data from several different areas of government intervention in the United States to deliver exactly such evidence.

My research for this illustration was guided by a simple question. Which things even non-experts would widely claim that the state should do without much hesitation?

a) Promote safety/reduce accidents

One of the little-disputed prerogative of modern states is to promote public safety, or minimize the number and gravity of various kinds of accidents. The graph below [1] illustrates what the US government has achieved in this area.

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To quote the CATO Institute’s Handbook for Congress from which the graph is taken:

Before the 1970s, the health and safety regulations that we now take for granted were completely absent from the American economy, with the exception of selected regulations for food safety and prescription drugs. The rise of the consumer movement and environmental concerns led to the establishment of the National Highway Traffic Safety Administration in 1966, the Occupational Safety and Health Administration in 1970, the Environmental Protection Agency in 1970, the Consumer Product Safety Commission in 1972, and the Nuclear Regulatory Commission in 1974.

It is clear from the graph, that no discernable change in terms of the trend towards improving safety has taken place since then. Yet, safety regulations have considerable compliance costs that arise from reporting and checks. In fact, at least one consideration would suggest that without the intervention, the fall in fatalities would have been even greater.

If motor vehicle-related fatalities are excluded from the aggregate, it becomes clear that the rate of decline actually slowed after mid-1960s. Moreover, concerning traffic fatalities, merely measuring them without taking into account the intensity of driving misses the point. When this factor is taken into account, as the CATO analysis did, a very different picture emerges.

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Prior to the mid-1960s, the distance-adjusted traffic fatality rate had fallen dramatically, while afterwards its rate of decline slowed — just like the rate of decline of accident fatality rates excluding non-adjusted traffic fatalities.

b) Promoting better access to healthcare

Based on the conventional wisdom, you may think that the US healthcare is completely free from government intervention but this is not remotely the case, the worst part of the imaginary free-market jungle. It is true that there is no single-payer. But, first, a large part of healthcare expenses (40%) are made by government through Medicare and Medicaid. Second, most individuals pay for most medical services not out of pocket but through their insurers, and this is highly encouraged by government regulation and tax incentives.

All this creates a very high administrative burden because the intermediaries, be they government bureaucracies or private insurers, must determine whether persons in question are eligible for coverage, for which coverage, whether the right kind of services have been provided and so on. Hence, the graph shows a staggering proliferation of healthcare administrators in contrast to a much more modest increase in the number of doctors.

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And this is not even the whole picture because the ‘red tape’ also affects how doctors work in that they should spend a lot of time and effort on compliance and reporting. The US healthcare is still very good in terms of its quality because it still has profit incentives and competition in it. But it has a problem arising from what I just described. It is too expensive because it is paid for through third parties. And it is government intervention that is behind this.

c) Combating the production, distribution and use of addictive drugs:

Most people still agree that government should inhibit the turnover of addictive drugs. Perhaps, no government has made a greater effort on this front than the US one. Yet, the data suggest that this effort has been a colossal failure. Spending on the drug war soared since the War on Drugs was proclaimed by President Nixon, with no decline in the drug addiction rate.

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At the same time, the US has the largest prison population in the world largely because of the war on drugs, which means that the actual cost of this endeavor is far higher than $1.5 trillion. This is not even to mention how many people actually died because of poor-quality drugs and fear to ask for medical assistance caused by the prohibition.

c) Fight poverty

The need to find poverty is one of the key pillars of modern welfare states. People widely believe that without governments redistributing money from the wealthy, a lot of people will be dirt poor. Despite the popular myth that the US is a country without a public safety net, it is presently spending almost $1 trillion per year on fighting poverty. Which is more than 10 times what it spent in 1965.

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Before 1965, the poverty rate had already been falling even without substantial government involvement. It continued to fall until around 1970, after which it remained roughly stagnant, despite skyrocketing spending.

d) Manage the money supply to prevent crises and minimize unemployment

The chart below depicts the US unemployment rate between 1870 and 2009. The US central bank, the Federal Reserve was created in 1913 with an explicit mission to ensure macroeconomic stability. Instead, within less than 20 years of its existence, it presided over the gravest crisis in the history of modern economies. And even if we dismiss the Great Depression is a very unusual episode or say that the Fed needed to learn to do its job (at such cost?!), the unemployment rate exceeded the pre-1913 peaks two times after 1950 — in the early 1980s and in 2009 (not shown on the graph), and the average unemployment rate in 1970–2008 was higher than in 1870–1913.

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It should also be kept in mind that in the modern environment with much better communications, faster and cheaper transportation, one would expect unemployment levels to be lower because of simplified job/candidate search and relocation. But even after 1970, it has been worse.

e) Provide schooling

Between 1970 and 2008, inflation-adjusted US federal spending on public schooling has risen by almost 3 times. Yet, it is hard to discern any substantial changes in results.

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Why the state may be an inherently pathological order

Opponents may still argue that, despite the spectacular evidence of widespread grand-scale failure of one of the most developed states in the world, a mere bunch of damning graphs is not sufficient. After all, it is possible that without the state, the results in the relevant domains would have been even worse. A plausible explanation is necessary.

Libertarians have provided powerful explanations for various particular types of state failure. Pure socialism does not work since without market princing of inputs rational economic planning is impossible. Price controls fail because of the laws of supply and demand. Many other interventions (like higher education subsidies) primarily misfire because they create preverse incentives. Others (like the ban on incandescent light bulbs) make things worse mainly because of imposing one-size-fit-all solutions without knowledge of the inherently uncertain future.

But is there an overarching, higher-level explanation uniting all of those, in a sense? It appears that there indeed is one. In a sense, it was already provided by Aristotle, although he himself did not recognize it. When he said that human beings are political animals, he did not mean by that what the modern use of the word ‘political’ suggests. Rather, Aristotle claimed that what differentiates humans from other animals is our ability to reason with other people to achieve the ends that require cooperation.

Even a democratic state is an order fundamentally based on physically forcing people who do not use, or pose an imminent threat of using, violence against other people. It is thus contrary to the fundamentals of fruitful human coexistence and cooperation. When you do not need to convince people to use resources, no one can demand a price for using them. If the expressed preferences of suppliers or consumers of goods are ignored, the laws of supply and demand cannot work, except by accident. When you can use other people’s money or resources without reasoning with them to secure their genuine consent, there is little incentive for you or the beneficiaries you choose to use the money or resources prudently. Finally, when you force people to do what they likely would not do without your excercise of power, you curb decentralize trial-and-error processes like science and entrepreneurship that are crucial for progress.

Footnotes:

  1. All graphs included in this essay feature monetary ammounts adjusted by the inflation.

Written by

PhD, economics (2018) from Aix-Marseille University, independent blockchain adoption consultant based in Aix-en-Provence, France, Email: daniilgor2004@gmail.com

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