Libertarianism Is More Than Just Market Fundamentalism

by | Sep 20, 2017

Libertarianism Is More Than Just Market Fundamentalism

by | Sep 20, 2017

Libertarian critics and supporters alike often characterize our approach to social problems as “let the market take care of it.”

If the government would just stop taxing and regulating us, so the narrative goes, all our troubles would be left behind. This oversimplification of libertarian policy proposals understandably turns off potential allies while lending opponents a powerful club with which to bash us.

A better characterization of libertarian policy is that we believe individuals can generally achieve better results by cooperating voluntarily within a just system of property rights than by allowing an elected or unelected elite to apportion resources.

Thinking about it this way highlights three points missing from the “let the market handle it” construction. First, libertarians welcome all forms of voluntary cooperation, not just commercial transactions. Second, it recognizes that any human society is necessarily imperfect, and that it is beyond our capability to solve many social problems:  all we can do is minimize the harm that they cause.  Finally, this positioning highlights the fact that the current property rights system is not necessarily just and may need to change to be compatible with a just society.

Voluntary interaction outside the market

Our society consists of much more than businesses and governments. Individuals also interact through a broad range of informal and formal institutions operating beyond both the profit motive and government coercion. We also have non-profit organizations, religious groups, unions, social clubs and families.

While these institutions remain pervasive, most have lost power over the last hundred years or so.  In the early 20th century, fraternal organizations provided a wide array of services to their members and the larger community. In the current century, these entities have been sidelined as we look to government to take the lead in solving social ills.

Because nonprofits have been marginalized by government and obliged to operate under IRS and state rules, they are not as efficient or effective as they could be. Indeed, the distinction between for-profit companies operating in the interests of shareholders and non-profits tasked with providing social benefit is an artificial one, encouraged by state and federal laws. Worker-owned cooperatives like Spain’s Mondragon Corporation operate primarily for the benefit of their employees, plowing profits back into worker training and other benefits. In the US, some states have chartered “B Corporations” that make limited profits while serving a social purpose.

It is fair for critics to ask: “If voluntary organizations were so wonderful, why did the government need to become involved in the problems they were addressing?” I believe that when we look back into history, we’ll find that contemporary proponents of government action had an overly optimistic view of what the state could accomplish. Had they been more patient, an increasingly affluent society would likely have developed non-coercive mechanisms for ameliorating these problems. Such is the case with the Johnson-era War on Poverty, which appears to have attenuated gains that African Americans and other disadvantaged groups were making in the years after World War II. Had public policy stopped with civil-rights legislation that struck down Jim Crow laws and barriers to voting rather than moving on to cash welfare and food stamps, civil society may have stepped up with better solutions such as alternatives to traditional K-12 public schools sooner. Existing solutions such as historically black colleges may have seen more community support rather than having been allowed to wither.

Not perfect; just better

Some social problems appear to be intractable and may have no solution in the near-to-intermediate term. Their effects can be exacerbated when government employs brute force to cure them.

The classic case is substance abuse and addiction. While some libertarians might deny that this is a problem at all, I think most of us would agree that substance abuse is often harmful to individuals, their families and the overall community.

But the obvious way to address addiction – using government’s coercive power to ban it – hasn’t worked and has created additional problems. Alcohol prohibition in the 1920s was widely flouted and it fueled the growth of organized crime. Today’s war on drugs continues after President Nixon declared it almost half a century ago. Unintended negative consequences have included gang violence and mass incarceration.

A better alternative would be to decriminalize drugs relying instead on the medical profession and social workers to develop and refine methods of treating addictions and helping addicts. Twelve-step programs, conceived at a time when our knowledge was much less than it is now, provide some indication of what could be done to fight addiction without the use of force.

But whatever we do, some addiction will remain. It is also the case that no system currently available to us will eliminate unequal health and educational outcomes (because doctors and teachers necessarily vary in quality), let alone disease, death and ignorance. The government can declare a right to healthcare and education, but it has proven unable to assure consistent provision and quality of these services, nor can it guarantee that students will learn nor that we can all achieve a long lifespan.

Rethinking property rights

To the extent that government has unjustly redistributed property over the years, simply ending government privileges and leaving the existing property allocation in place, is unjust. Perhaps those who have become rich through government subsidies, takings and monopoly privileges should be expected to relinquish at least some of their ill-gotten gains during the transition to a free society.

That approach may narrow our difference with the Progressive Left which is now so focused on income inequality, but it would also be hard to implement. We may have difficulty achieving widespread agreement about what constitutes justly acquired property. While it is true that some Europeans and European-descended people appropriated property from Native Americans in previous centuries, it would be difficult or impossible for any given Native American to establish a claim to any particular parcel. Aside from the lack of deeds, today’s “White” and “Native Americans” are usually hybrids, carrying the genes of both the perpetrators and the victims of long-ago thefts.

Even once an initial property distribution is achieved, there are many questions about how new property rights would be established and existing rights maintained. Contemporary concepts of property rights often have little relationship to the Lockean idea of mixing one’s labor with the land. Many believe that once an employee is hired, he has certain claims on an employer such as a right to paid paternity leave and freedom from arbitrary dismissal.

Libertarians typically reject employment-related rights but are often sympathetic to patents, which confer a monopoly on anyone who successfully submits an idea or invention, even barring anyone who independently develops the invention from using it. Patents can be overbroad, and they may also be granted for trivial innovations. The resulting abuse by patent trolls (as well as by otherwise reputable companies) gives rise to endless litigation and may easily squelch more innovation than the patent system generates. Circumscribing or even eliminating intellectual property may thus be consistent with libertarian ideals and greater prosperity.

Patents, copyrights and trademarks are among a wider universe of government grants that may not exist in their current form in a truly free society and that concentrate resources in the hands of the powerful and well connected. Taxi medallions (whose value is thankfully being destroyed by Lyft and Uber), broadcasting licenses, banking licenses and corporate charters are all government interventions that confer rights within the existing property system. Corporations may have developed under common law, but would likely not have acquired as much power as they now have. In a purely free market, a group of individuals might be able to negotiate contracts which limited their collective liability, but they could not shield themselves from plaintiffs when they commit torts.

Once property is obtained, there are differing views about whether and under what circumstances it may be forfeited. For example, if one does not cultivate his land or occupy his house for an extended period of time, might it be deemed abandoned and thus available for homesteading by “squatters”? Also, once we die, do we really retain the right to will our property or may it also be considered abandoned and thus available to the first claimant?

By refusing to defend the existing allocation of property rights, rejecting intellectual property and taking an aggressive approach to abandonment, one could remain within the big tent of libertarianism while advocating a more egalitarian society.  Going even further, a kibbutz or other type of commune in which everyone agrees to the collective ownership of land, animals and inanimate objects is both fully egalitarian and fully libertarian at the same time.

But like most libertarians, I would not want to live on a kibbutz, and I certainly would not want to be compelled to live in a communal system. The fact that some people prefer communal living suggests that a libertarian world would be self-sorting. Different communities would have different definitions of property rights. As long as each community allows freedom of entry (to those willing to abide by its rules) and of exit, it should be possible for individuals to vote with their feet for the property rights system that most closely approximate their values. My point in discussing these alternatives is that libertarians need not defend the current system of property rights.  We don’t have to advocate the status quo minus all taxes and regulations. We can instead advance alternatives that may be more consistent with our own ideals and that may be attractive to a broader swath of the political spectrum.

A belief system that is neither liberal nor conservative

The formulation of “let the market handle everything” typecasts libertarians as radical conservatives, rendering us unable to communicate with large swaths of America. But while we libertarians agree with conservatives on many things – including the importance of voluntary social institutions – we should be willing to part with them when necessary.

Although it is true that we libertarians often distinguish ourselves by rejecting coercive social conservatism, we should go further by questioning the existing system of property rights. Rather than joining conservatives as apologists for the privileged and powerful, we should be more willing to investigate and oppose government interventions that prop up the ruling class. I also think we should part with conservatives on issues of military interventionism, but that is a topic for another piece.

At the same time, libertarians are very different from contemporary liberals and socialists. By recognizing that human society is necessarily imperfect, we reinforce our opposition to the top-down solutions that progressives prefer. Advocates of government regulation and central planning offer a false choice between living with imperfection and eliminating problems through command and control. But problems like addiction and poverty cannot be fully resolved at our current level of social and economic development. Individuals cooperating through voluntary institutions – both commercial and noncommercial – are best equipped to minimize these problems in a bottom-up way.

Libertarians also recognize that government command and control cannot be legitimized by placing it in a democratic context. Even if liberals are not persuaded by libertarian scholarship on voter irrationality, the results of the 2016 election should have shaken their faith in the wisdom of crowds in the polling booth. It is far better to let individuals vote with their time, their wallets and their feet – making decisions in which they have a personal stake and thus an incentive to consider carefully.

Properly understood, libertarianism is neither part of the contemporary left or right. That proper understanding begins once we jettison our “let the market take care of it” rhetoric.

About Marc Joffe

Marc Joffe is a senior policy analyst at the Reason Foundation. He has also written studies for the Mercatus Center at George Mason University, the Reason Foundation and the Haas Institute for a Fair and Inclusive Society at UC Berkeley. Previously, he was the director of policy research for the California Policy Center and a senior director at Moody’s Analytics.

Our Books


Related Articles


Record Bank Failures, And What They Mean

Record Bank Failures, And What They Mean

The failure of Silicon Valley Bank (SVB) on March 10 was the second largest bank failure in U.S. history. Just two days following SVB’s collapse, Signature Bank joined the record books as the third largest bank failure in U.S. history. First Republic Bank also seemed...

read more
Iraq War II, 20 Years Later

Iraq War II, 20 Years Later

Well it seems like only yesterday, though it was half a lifetime ago. George W. Bush, Dick Cheney and their men and women, especially the neoconservatives, knowingly and deliberately lied this country into starting an aggressive war against Iraq—a war they pretended...

read more

Pin It on Pinterest

Share This