So what's a good glibertarian to do when it turns out that the free market has been flooding the environment with de-masculinizing chemicals? Support regulation? Support tort lawsuits?As Tom Lehrer said in a different context, they have a hard problem, like a Christian Scientist with appendicitis.
Never fear: There's no problem so large that a real, manly glibertarian can't pretend it has a "free-market" solution. Didn't Ronald Coase prove there's no such thing as an externality?* Self-organizing complexity uber alles!
I don't think I've seen Instapundit argue that there was a free market solution to feminizing chemicals. Indeed, the post didn't say anything at all about what we should do; it just pointed out that it might be happening.
There is often an operating assumption that failing to vigorously suggest regulation, or to preface/postface any post about a problem in the world with a sarcastic remark about how if it weren't for all the jerks who don't vote for Democrats, this never would have happened, is actually equivalent to stating that anarchocapitalism works.
The failure to have a knee-jerk reaction is not, in fact, evidence of a knee-jerk reaction in the other direction. Personally, I haven't posted on this, but if I did, I probably would have posted about what Glenn did. I would have done so not because I think the government won't ultimately be involved in solving the problem, if it gets solved, but because I assume it will be solved in the standard boring way already in place, which is that the EPA will regulate the emission of these chemicals. There are some potentially interesting issues in how you do a cost-benefit analysis on loss of masculinity, but I don't have any ideas on that front.
I also really, really wish that liberals would drop the "Glibertarian" label. First of all, I don't like any variation on political labels designed to insult, and I doubt that Mark thinks the use of "Dimmocrat" reflects well on the person who employs it. And second of all, on the internet the label is usually deployed by liberals who have taken it upon themselves to define what a "real" libertarian is, i.e. a libertarian who has never publicly much disagreed with said liberals. We don't go around writing people out of the progressive movement, or putting block quotes around "progressive", no matter how foolish we think the people are, or how badly we think their stated positions betray the true goals of the movement. Why not put aside the juvenile name-calling and engage the arguments?
In this context it particularly makes no sense, because trust me, if anything "Glibertarians" like Glenn and me are closer to you on this issue than most of the "real" libertarians, who are a lot closer to anarchocapitalists or minarchists. The question is not "what's a Glibertarian to do", but "What's a libertarian to do". In my case, the answer seems easy: regulate it with as close to a market-type mechanism as you can. But you see, that's why I'm not a 'real' libertarian.
Megan, out there in the world, how often has the word "wacko" been paired with the word "environmentalist"?
Ok, maybe it has been more the "right" than the libertarians, but I've certainly had it put in my face a lot in the last 10 years. Raise really any externality, and the push-back has been that only wacko environmentalists worry about such things.
Maybe this one hits close enough to home that those folks will start to filter the environmental questions a little more carefully.
To continue ... I have tried to explain more than once that I start as a libertarian myself, but that I recognize externalities ... and so end up on center of a lot of issues.
So yeah, I can see some digs at the "I see nothing" folk, who really stick on their pure libertarianism by never meeting an externality they could believe.
An unregulated market caused the widespread use of emasculating substances? And this would nave been prevented by a more heavily regulated economy? Where does this guy vacation - the Caspian Sea?
.
Why not put aside the juvenile name-calling and engage the arguments?
This question is rhetorical, right?
If people like Kleiman thought they had a persuasive argument, they'd state it. They know they don't.
"Glibertarian" is probably overused, but I think it is not inappropriate to describe someone who automatically assumes a free-market economic solution to every problem. But in general, these names that bloggers and their commenters call the people they oppose get really tiresome really quick.
That said, as a liberal, I have no objection to being called a "moonbat." I know it is supposed to imply that liberals are crazy and unreaslistic, but I like the moon and I like bats, and I think if there were bats that lived on the moon, they'd be really cool.
Good post, Thanks
So, what is this post about? Name calling or feminism chemicals? And which is, in your opinion, the bigger problem?
Just wondering.
I'm not too concerned with the labels, but the environmental damage is a bit bothersome, just for perspective.
So, what is this post about? Name calling or feminism chemicals? And which is, in your opinion, the bigger problem?
Just wondering.
I'm not too concerned with the labels, but the environmental damage is a bit bothersome, just for perspective.
As a transgendered libertarian, I fail to see the problem here.
The market solution for this is the same for all pollution issues: Pollution is part of the cost of industry, and those doing the polluting (and, by extension, their customers) ought to bear the brunt of that cost. Whatever it takes to restore the ecology needs to be the responsibility of the polluter.
To put it so simply that non-libertarians can grasp it: "Clean up after yourself."
Well... fine, but as someone who has been trying to find smart libertarian commentary that isn't fundamentally convinced that everyone else in the world is trivially innumerate and thus unworthy of holding opinions and participating in conversations, all I can say is, glibertarian is cute. And of course lots of overly earnest liberals are reasonably innumerate, but still. The label speaks to a irritable hole in my heart.
"as someone who has been trying to find smart libertarian commentary that isn't fundamentally convinced that everyone else in the world is trivially innumerate"
Well, make up your mind. Are you looking for a smart libertarian, or one who fails to see that big-government advocates are badly misguided and/or willfully ignorant?
Glib enough for ya? ;)
Why not put aside the juvenile name-calling and engage the arguments?
That question pretty much answers itself.
Megan, out there in the world, how often has the word "wacko" been paired with the word "environmentalist"?
And your point would be? Does Megan need to commit to print every single example of silly name calling in order to complain about silly name calling? Have you ever seen Megan say "environmentalist wackos"?
I don't care what names anyone calls me.
As for the study that started this whole argument? I smell a healthy dose of "correlation without causation" in the air - especially when the source of the study is considered.
"CHEM Trust believes that certain classes of chemical can undermine humans and wildlife by effecting their health, behaviour, intelligence and ability to reproduce."
With a statement like that on the front page of their website, would you expect them to publish papers that didn't tell us we were all going to die? They have a vested interest in the opposite point of view.
I will freely admit that I haven't read this study, and I likely won't. It just doesn't mean that much to me when I read the summaries posted on their website - void of real data - and see the plethora of logical fallacies used in their arguments - The most common of which is, of course, an appeal to emotion.
You don't know why Instaputz or yourself are called Glibertarian? You are right that it is a put down. I can't speak for everyone but part of the reason you are stuck with that tag is because some Libertarians don't seem to realize that a lot of decisions you make effect other people. Take the auto "bailout". In a perfect world, they shouldn't get bailed out. Do you want to make this recession into a depression? That is what most economists with a brain say would happen if The Big Three went tits up right now. Also, is Wall Street really that special? We can bail out Wall Street but not Main Street? The best example I can give you is your own hero, Alan Greenspan. Do you need me to remind you what he told Waxman last month? That basically his whole belief system was turned upside down by this crisis. It is a pretty stunning admission coming from the Ayn Rand wannabe.
Ah, but the game in poltics, and the blogosphere, is to be selective in your hearing.
It "works" for libertarians to hear criticisms of themselves, but not the criticisms of the enviros from their allies, right?
In a perfect world, they shouldn't get bailed out. Do you want to make this recession into a depression? That is what most economists with a brain say would happen if The Big Three went tits up right now.
Even accepting that the Big 3 failing will cause a depression (and I'm not sure it's nearly the consensus opinion you suggest), there's still a gaping whole in your argument: Does the bailout under consideration prevent the Big Three from going tit's up?
Another unconsidered point: Since the ultimate goal is to avoid a depression, is bailing out the Big 3 the best way to prevent it? Even assuming the bailout works, that is.
So to be clear, you agree that the bailout is undesirable ("In a perfect world, they shouldn't get bailed out."), you don't have any evidence that the bailout will avoid the problem, and you haven't considered other options, yet libertarians are the ones who are being glib on the issue?
Pot, I'd like to introduce you to kettle.
Ditto Tara and, to some extent, odograph.
I've been involved in sort of a war against fellow libertarians who do, in fact, trivialize the impact of externalities. Check out one of my What's with libertarians? posts.
Sad to say, the "glibertarian" label -- for certain libertarians -- is entirely justified. I ran into *exactly* that problem, of "externalities don't exist, go read Coase", with a prominent libertarian, Bob_Murphy. When I suggested that causing Bengali land to permanetly flood *is* a violation of their rights, his response was literally that I need to go read that seminal Coase paper.
No exaggeration. He said to me in an email, as his only response to that and related points, that I *totally* need to read it, it's so awesome.
I didn't play that game, of course, since I'm quite familiar with that argument, and so I demanded that he tell me specifically *which* insight I would get from it, which I don't actually appreciate in my arguments. After a bunch of kicking and screaming, he finally told me what that insight was, and it turned out to only be applicable to a position I wasn't taking, and which I had made clear I wasn't taking.
That's not all. In this attempt to see deny the relevance of the whole concept of externalities, you won't believe what else happened. Bob_Murphy actually objected to my characterization of someone displaced by AGW-induced flooding, as a "victim". His response -- I'm not making this up -- was basically, "You could just as well say that Exxon is a 'victim' of Al Gore."
Yep, that's right: the issue of AGW has so distorted the perceptions of libertarians that some really started equating "permanent displacement from one's home via someone else's actions" with "slight loss of profits".
***
The root problem is that when people complain about externalities, they're really complaining about externalities that are also widely morally objectionable. For me to displace you from your land through my CO2 use is *quite* a different thing than wearing cologne you don't like, and yet the glibertarians fail to the see the distinction that everyone else sees so naturally. Yes, it may be "economically efficient" for Bengalis to pay for their own relocation, but why the hell should they have to? They're not the ones that caused it!
And yet I see glibertarians advocate "market solutions" to climate change that amount to exactly that -- making victims pay for it their own selves.
It's a sad day when liberals have a better grasp of the pollution issue than libertarians.
'Glibertarian' automatically reads for me as 'Gilbertarian' - as in W.S. Gilbert of Gilbert and Sullivan comic opera. It carries all the right connotations of meaningless and often ridiculous rapid recitative in the mouth of the utterer. It is always a disappointment to find that the actual words around the term are boring.
But thanks for introducing me to the term 'minarchist'. I picture them as dancing freely with the elves, etc.; subject only to the occasional caprice of Oberon or Titania.
"you don't have any evidence that the bailout will avoid the problem". Well you're asking someone to prove the unprovable. Will it work? I don't know. Will it prevent a spike in unemployment? I'd say yes. Will that prevent further foreclosures, which would in turn prevent further bank struggles (which we'd ultimately have to pay for)? These are the questions we should be asking.
Megan,
If I may, often I believe libertarians, at least myself included, place quotes around the word PROGRESSIVE (see, I refrained) because the political usage betrays its actual literal definition, and in a quite ironic way which many liberals and self-proclaimed members of the progressive movement either refuse to acknowledge, or are blind to in their ideological fog. The idea that the notion of progress in modern America should mean the thwarting of technological advancement, industrialization, globalization, mass economic prosperity, and the democratization of culture is absurd. And if a lantern can be shone on that absurdity by simply placing quotes around the word PROGRESSIVE in discussing, for instance the left's perception of iniquity in genetically modified food, then I say bully!
Right. This thread has been useful in helping me reformulate my (possibly ill-tempered) gut instincts better. So here's stab two.
I live in Madison, Wisconsin, in a neighborhood knee deep in innumerate over-educated hippies who are deeply enamored of word-based, principles-based outcomes like "equality" and "diversity" and "tolerance" and... well, you know the drill. It's the sort of stuff Cool Cal is lambasting. It's home to people who think in terms of outcomes they'd like to see, but not in terms of systems, rules, and constraints that get you there. Some of them are noisy. Some of them control certain conversations. (And, in point of fact, I have a housemate studying public health policy with a PhD from the University of Chicago in economics who, in her role in a cross disciplinary group here at UW-Madison, is driven crazy by this kind of thinking and rhetoric) So that sort of person exists. I know many of them. They are often well-meaning and ardent.
However.
I often feel, when reading things from self-identified libertarians, a kind of projection going on, where anyone and everyone who would critique markets becomes one of those noisy, ardent, earnest, innumerate hippies who are my neighbors. Maybe I'm reading into things. But that is my personal reaction as someone who wants to find libertarian thought compelling, and almost does, but whose contrary, skeptical buttons are madly pushed by the sheer dismissiveness he feels he sees in, again, self-identified libertarian writing.
Well you're asking someone to prove the unprovable. Will it work? I don't know. Will it prevent a spike in unemployment? I'd say yes. Will that prevent further foreclosures, which would in turn prevent further bank struggles (which we'd ultimately have to pay for)? These are the questions we should be asking.
Not really. I'm just asking bailout proponents to look at the magnitude of the liabilities, the magnitude of funding, and the proposed restructuring plan and explain how it even has a prayer of working. It doesn't, not the current plan.
All the current plan does is allow the GM and Chrysler to limp through until the new Congress and Obama's Cabinet is sworn in and then they can start negotiating the real bailout. It also establishes a sunk cost to enable the real bailout to start with "we've already spent 25 (or 14, or 34) billion - if we don't give them more, that money will be wasted" (Note: this same argument was used in Iraq).
So, if you want to talk bailout, let's talk about what it's really going to take to buy out the Big 3's liabilities and allow them to restructure into a car companies appropriately sized for the modern market, all in the midst of a major economic downturn that's hit all the automakers.
And then we should discuss the opportunity costs of those many 10's of billions of dollars it's going to require and whether that's really the best allocation of all that capital. In particular, we should compare it allowing the automakers to reorganize under Chapter 11 (with DIP financing guarantees if necessary) into the smaller companies they need to become, and cut the displaced autoworkers a big check and wish 'em good luck in their future endeavors. Because, (agreeing with JKC), the goal is not so much to save the Big 3, but it's to avoid a depression. I don't see how throwing good money after bad avoids the same end state.
I admit to being prejudicially opposed to the bailout, but I could be convinced that it's the least bad option. Arguments like JKC's (we don't want a depression; the Big 3 failing would cause a depression; therefore, we must bail them out) aren't convincing because they're elide a) how the bailout plan under consideration actually prevents the failure and b) the opportunity costs of the bailout.
The plan is clearly flawed and insufficient, how could any bailout fix the problems that have built up over decades? However, if it can save jobs temporarily, I'd see that as helping consumer spending, preventing foreclosure, default on other debts., etc. However, I tend to favor a bailout that is more of an organized bankruptcy. Debt, wages and benefits renegotiated, DIP financing from the gov (don't see where else it would come from), capacity cut. If they go bankrupt on thier own, would their pensions be covered by the PBGC? And can they cover those liabilities?
Why not put aside the juvenile name-calling and engage the arguments?
Because the "arguments" are invariably stupid and disingenuous? Sure, libertarians might have a case against being called "glibertarians" or "libertards" if they were actually a legitimate political or philosophical movement, instead of just a hidey-hole for anti-intellectual misanthropes.
RG, I think we largely agree. The only thing I dispute is that allowing the auto companies to continue producing cars that aren't wanted (what "save jobs temporarily" really means) actually makes the problem worse. There's just to much capacity for building automobiles. Until that excess capacity is wrung out, it's going to harm all the automakers.
Which doesn't mean we shouldn't do something for displaced autoworkers - not just because we like them - but to ameliorate the broader effects of throwing a bunch of people out of work all at once. I suspect that it will cheaper and more effective to deal with that smaller problem (a lot of unemployed workers) than the larger problem (an industry sized to make more cars than can be profitably sold). We should split the two problems. Chapter 11 for the company, some sort of displaced worker program for labor.
Nationalizing the domestic auto industry (which is where the bailout leads..."car czar"?) is not going to solve the problem - it's going to prolong it. And increase it.
I'd mostly agree. Megan's most recent post deals with the UAW's refusal to concede on wages. That is flat out insanity.
"displaced worker program for labor."
My question is, what other employment is there in Detroit? They are probably locked in geographically, since I doubt they can afford to sell their houses and move.
If you're brand of libertarianism means fetishizing selfishness, glibertarian is the word for it. The word captures the problems of libertarianism pretty well. Isn't the whole point of libertarianism its shallowness? Shallow because the answers are always easy: "Government bad." "Don't try to address problems. You'll only make it worse." "Look out for yourself and everything will be fine."
I mean, what else do you call someone who doesn't care about (or is against) the environment, education, equality, public health, urban design, mass transit, quality of life, etc? It's not that libertarians have no insight. If you're a liberal it's useful to put on your libertarian hat once in a while. As in, "Why do interior decorators need licenses again?" But as a universal problem-solving tool reflexive libertarianism is about as useful as a broken magic 8-ball.
Why do interior decorators need licenses again?
Yeah, everyone knows the real threat is from unlicensed pet massage therapists.
Megan's most recent post deals with the UAW's refusal to concede on wages. That is flat out insanity.
Is it? As long as the Feds are willing to throw a lifeline, why should the UAW concede anything?
My question is, what other employment is there in Detroit? They are probably locked in geographically, since I doubt they can afford to sell their houses and move.
I doubt there are viable employment options in Detroit. People are going to have to move. And house or not, if you don't have a job, you can't afford to stay there. I'm not disputing that there are going to be hard choices and real pain.
It's not like anybody is talking Chapter 7 for the Big Three, just Chapter 11 reorganization. The only substantial argument that's been made against Chapter 11 is that buyers will avoid buying from a company when warranties are in question (causing such a collapse in sales that it would force conversion to Chapter 7). That could be solved much more simply by establishing a Federal guarantee of the warranties.
The specter of American automakers ceasing to exist is a scare tactic designed sell the idea of opening the Federal coffers. Because, outside of the existing minority of UAW-owned politicians, transferring federal money to UAW retirees isn't a popular idea.
You don't know why Instaputz or yourself are called Glibertarian? You are right that it is a put down. I can't speak for everyone but part of the reason you are stuck with that tag is because some Libertarians don't seem to realize that a lot of decisions you make effect other people. Take the auto "bailout". In a perfect world, they shouldn't get bailed out
Yeah, I agree with Megan that the term is overused. But it isn't a useless term either. It doesn't describe all libertarianism, which is a respectable ideology that has a lot of interesting and useful things to say.
Rather, it describes a TYPE of libertarian mindset that assumes that all problems are easily solved by the magic free market and that there are never any difficult public policy questions that require complex trade-offs by governmental policymakers.
It's the difference between the person who says that we need to use caution in bailing out the financial sector because of risks of moral hazard and dangers inherent in public ownership of large enterprises and the person who says that recessions would never happen if we had a gold standard and a government which never intervened in the economy.
So I say, let's keep the term alive but use it much more selectively. I certainly don't think intelligent libertarians who are raising intellectually serious public policy arguments should be called "glibertarians".
recessions would never happen if we had a gold standard and a government which never intervened in the economy.
Real glibertarians realize that the gold standard is a tyrannical restriction on freedom of currency which is basically worse than Hitler. Damn Lincoln and his greenbacks!
I don't criticize Reynolds for not proposing a solution; my point was that all the possible solutions -- taxes, regulations, and class-action tort lawsuits -- are ones he regularly denounces, and which the politicians he supports automatically oppose.
That is, the existence of this sort of problem demonstrates the limits of the libertarian project. (In this case, any serious attempt to address the issue would have to be international, which shows the limits of Glenn's facile opposition to anything involving the UN.)
Those who acknowledge the existence of such problems, as you do, I consider libertarians. Those who spend most of their time denying that such problems exist I consider glibertarians. And yes, I've met some dimmocrats, too.
[As to name-calling, Reynolds is once again suggesting that I'm insane, in this case because he made a silly mistake in following a link.]
"Didn't Ronald Coase prove there's no such thing as an externality?"
Um no.
He demonstrated that given no transaction costs externalities are best handled by negotiation between the parties, with the social optimum being obtained via a voluntary payment from one party to the other.
That's a long way from saying there is no such thing as an externality. Just as saying we have learned the socially optimal way to manage typhoid is a long way from saying there is "no such thing as typhoid".
Coase's prize and fame largely derive from his being the guy who brought the importance of **transaction costs** into economics. He's long derided and pounded on "blackboard economists" who love to draw many pretty lines on charts to illustrate their economic ideas in Platonic purity, while ignoring all the many messy transaction costs that make the real world a very different place.
Coase clearly and explicity used this externality business as a counterfactual to demonstrate the importance of transaction costs.
That is: *if* transaction costs were zero *then* "externality problems" like pollution would be bargained away in the market, but these problems aren't bargained away in the market, *thus* transaction costs are large -- and should get a lot more attention from economists and other social planners than they do.
Stigler and a lot of other economists were mightily struck by the first part of the counterfactual ("*if* transaction costs were zero *then* externality problems would be bargained away in the market"...) and ignored the rest, Stigler naming it the now famous "Coase Theorem".
Coase himself didn't consider it a theorem, he thought it was just common sense. And he's complained a good bit about how his "Theorem" has been thrown around so much in ways differing from his original intent.
Now things have so far degraded on the left among many environmentalists and commentators who know little economics and zero Coase (and among some right ideologues of similar ignorance) that the "*if*" has been dropped out of the first half of his statement, and they represent it as "Coase says externality costs are bargained away in the market", from which it is just one more short ignorant step to ...
"Didn't Ronald Coase prove there's no such thing as an externality?"
Um, no.
Jim_Glass: actually, as I said above, I think the problem people intuitively have with this Coasean reasoning is that it's not true, even in the pure case of no transaction costs.
Think about it this way: what if while you were sleeping I came close to your window -- though still outside your property, and revved my motorcycle loud enough to keep you from sleeping. And let's say that, because of some technicality, there's no law or property right you can invoke to make me stop.
Would you seriously try to pay me to go away, thinking, "hey, problem solved!" Hopefully, you're not that stupid. Because then you just created the incentive for people to extort more money out of you. Yet economists would pat themselves on the back and say, "See? Because of property rights, this so-called 'problem' has an efficient solution."
But it's a load of crap.
Now, as an economist, you might admit that, okay, sure, you suffered a bit -- you lost some of your consumer surplus. But that "doesn't matter" because it's "just" a transfer payment. You lost, and I gained. Only when there are are *no* gainers do we see an "inefficiency" and therefore a problem. Here, there is no problem.
Hell yes there is! A system in which people can extort money this way is a system in which people just don't make as big investments in property, knowing that will just make them a better target for extortion. It's a systematic weakening of property rights.
So no, Jim_Glass, the appropriate solution is not to "get transaction costs to approach zero, and let bargaining take over." The appropriate solution is to require those who try this extortion to pay up for it!
Deliberately annoying people should *not* be a path to wealth. People see this intuitively. And for the exact same reason, the victims of global warming should *not* be the ones that have to buy out the polluters, even if the transaction costs would be zero.
***
For some reason, I seem to be the only one who makes this point. Could someone please assure me I'm not out in left field here?
Jim:
Please re-read the post. I made it clear that the "Coases's Theorem" of glibertarian fantasy isn't at all what Coase said. Your account is exactly right: externality, according to Coase, is a problem only in the presence of transactions costs, where "transactions costs" includes the free-rider problem.
My only critique of Coase is that he doesn't consider the problem of extortion: I buy the property next to yours and commit to starting a hog farm unless you pay me to go away, collect my payoff, then move on to the next victim.
Mark
Mark_A.R._Kleiman: My only critique of Coase is that he doesn't consider the problem of extortion: I buy the property next to yours and commit to starting a hog farm unless you pay me to go away, collect my payoff, then move on to the next victim.
That's hardly the minor point you seem to imply it is! It's exactly why "buying off" CO2 emitters is an unacceptable solution: we don't want a world in which so severely offloading your costs onto random, innocent third parties is "just another way of doing business"! And remember, you're not just going on to the next victim; you're giving other people a chance to extort your original victim again. Oops!
Btw, I blogged this.
Silas:
"Transaction costs" are a fancy piece of economic jargon for the things that keep you from being able to pay me to stop revving my motorcycle outside your house. They don't have to be real costs in terms of money; they can be costs in terms of time, physical feasibility, cultural attitudes - whatever. The Coase theorem is simplistic in that, as Jim observes, it explains why the market doesn't solve externalities - because of high transaction costs.
To address the larger point, I think there are two kinds of libertarians: the ones who come to libertarianism because it follows from basic policy analysis that libertarian policies are usually more effective, and those who come to libertarianism because it fits in with their philosophy that more liberty is good. In other words, one group adopts the ideology because it follows from their reasoning; another group adopts it because their reasoning follows from it. One group is free to reject libertarianism when it is not in accord with their reason, but the other is not, because it *is* their reason.
While I don't mean to knock the anarchists/minarchists who are all for "liberty," in the real world it's fairly clear that the utopia imagined by people like Rothbard, Von Mises and Nozick isn't feasible nor necessarily desirable. Maybe with a better kind of human it would be, but the present breed we're dealing with is a little too fallible and shortsighted to make things work if we follow libertarianism to its ultimate conclusion.
I am more inclined to agree with the original liberal thinkers like John Stuart Mill and Frederic Bastiat, and some more modern thinkers like Hayek who seem rather moderate compared to the ravings of most "libertarians" today. All three men took the state for granted, because the institutions of the state are necessary for human society to function. And when you have to account for the state, it is hard to make simplistic conclusions like Rothbard was wont to do. For example, as Mill observed, since the state must by necessity provide board and lodging for imprisoned criminals, not doing the same for the innocent would be equivalent to a subsidy on crime. Bastiat and Hayek likewise supported a limited welfare system.
Because of this it may make more sense to let the Rothbardians, Paultards, et al. call themselves libertarian, and appropriate some other label for people who are "libertarians except when economic/policy analysis suggests a less libertarian option is more desirable." Until we can make this kind of distinction, it will be hard to debate issues involving liberty, because one group of libertarians will be approaching the situation from an utilitarian (i.e. utility-maximizing) point of view, and the other will be looking at things from a purely liberty-maximizing point of view. I personally think of myself as a classical liberal for this reason, although that may not be the best label; another possibility is Will Wilkinson's "liberaltarian."
For an interesting exploration of one of the distinctions between different strands of libertarian thought, I recommend Daniel Klein's "Mere Libertarianism": http://www.mises.org/reasonpapers/pdf/27/rp_27_1.pdf
johnleemk:"Transaction costs" are a fancy piece of economic jargon for the things that keep you from being able to pay me to stop revving my motorcycle outside your house. They don't have to be real costs in terms of money; they can be costs in terms of time, physical feasibility, cultural attitudes - whatever.
Whoa whoa whoa, so my reluctance to commit to perpetually making extortion payments is some pesky "cultural attitude" that I need to rationally discard in order to make efficiency gains?
Do you not see the contradiction there? The reason I don't pay such extortion is because it signals that I'm an easy target, thus signaling people that they can extract the rest of my consumer surplus. I *can't* be indifferent to losing my consumer surplus, because if I were, it wouldn't be a consumer surplus! Ergo, that "cultural attitude" can't go away.
If you've stretched the concept of "transaction cost" to the point where it includes "the cost of my reluctance to be extorted", you've stretched it beyond the point of usefulness. And if Coase's Theorem relies on such a stretch (which as far as I can tell, it does), the Theorem is useless -- even in the Platonic realm!
Glenn Reynolds wouldn't recognize masculinity if Dr. Helen slapped him with her cock.
And to me, glibertarians are those who will never, ever admit that any of their policy prescriptions have turned out badly because of the prescription itself. They will always have some facile explanation about why 'that wasn't really a libertarian implementation.' Which goes to the second part - actually an and/or proposition - which is simply to be glib about inconsistencies, errors of fact, etc.
I'd love to meet a libertarian who would say something like: "Well, we didn't regulate the financial industry the way we should have, and libertarians believed that this was for the best, but we turned out to be wrong on this one." Or, "You're right, I can't say that just because someone works hard they deserve anything, and then turn around and claim that I deserve to be heard because I've worked hard."
The problem, as somebody else has already noted, is the selectivity. If Megan bemoans the ready use of the appellation to describe libertarians, then perhaps she had better also devote a few posts to how so many libertarians seem so quick to insult other people with so little provocation. And perhaps libertarians should be a little bit more aggressive in policing their own ranks.
Not doing so while whining about the lack of civility strikes me, and probably most people as well, as a bit of self-serving hypocrisy.
Silas:
I didn't explicitly address your case in full because it is the motorcyclist imposing an externality on you, so it's probably not the best example of the argument you're trying to make. The onus should be on the motorcyclist to compensate you for emitting toxic fumes and making noise which affect your property and life. And for all sorts of reasons, that's not practical. Hence, the need for a state to enforce speeding/noise/whatever regulations.
johnleemk:
"The onus should be on the motorcyclist to compensate you for emitting toxic fumes and making noise which affect your property and life."
But Coase's point was that the initial grant of property rights does not matter to the ultimate distribution of goods after bargaining (if there are no transaction costs). If in this case the initial distribution of property rights effects the outcome then the theorem is disproven.
Coase's theorem has to be refined to eliminate the extortion problem to be viable.
Oh, that's right. I'm sorry, I was making an implicit assumption that the benefits to the motorcyclist would be outweighed by the costs to Silas. Silas was making the same assumption, but he seemed to believe that it would result in him having to make a payment to the motorcyclist, which as I explained, would not be the case. Here is how I see it:
1. The motorcyclist revving his bike imposes a cost of X on the residents in terms of annoyance, etc.
2. The motorcyclist derives a benefit of Y from being able to rev his bike.
3. If X is greater than Y, the motorcyclist should pay the residents for the right to rev his bike; if X is less than Y, the residents should pay the motorcyclist to go away.
And so my argument for the state's existence is also not quite right. It should run something like this: X is almost certainly greater than Y in most cases. However, the residents cannot negotiate with the motorcyclist because X is spread out across each of them individually, and the cost to each individual may be less than Y. In such a case, we would need individuals to band together to negotiate with the motorcyclist, and we could very well run into the tragedy of the commons. A quiet neighborhood is thus a public good, and we need a state to protect it.
johnleemk,
Coase's theorem is that it doesn't matter whether x > y or y > x the outcome of the negotiation will be the same. Whenever x > y the motorcyclist will not rev his motorcycle. Whenever y > x he will. If property rights are granted to the residents, the payments will go to them if payments are needed. If the property rights are granted to the motorcyclist, payments will go to him if payments are needed.
If payments are needed to stop motorcyclists from revving engines outside residences at 3AM then ultimately all the value residents get from having homes will go to people who own motorcycles and can credibly threaten residents with late night revving. This is a sub-optimal outcome.
Introducing the state does not solve this problem as the state is just another actor that will act to increase it's own profit. In the case of a state structured in such a way that ownership and control are unified in one actor, the result is more likely to be rational (as long as there is some way to recapture the value (like through increased property taxes paid in peaceful neighborhoods compared to the smaller land values in noisy, disordered neighborhoods in this case)).
A state like the one we have in the United States is not likely to act in a rational manner since ownership and control are divorced. The actual actions of the state are decided by people who have no way of capturing the benefits from an improved situation but do have the ability to capture benefits from increasing government employment (you can sell jobs or give them to groups in exchange for loyalty which can be used to build up power) and power (power feels good for humans). As a result, although there may be a better outcome than what no government action produces actually getting to such a result is likely to be impossible. Confounding this problem is that there is a massive propaganda system that the state runs (schools, from elementary schools to universities) that indoctrinates people to believe that the government solves problems (rather than extending the duration of those problems while slightly ameliorating the impact of those problems).
You're right, Steve, although after rethinking my original statement, I think you and I seem to be stating the same thing re Coase's theorem, albeit you doing so in a much clearer way. Ultimately the outcome ought to be the same regardless of how property rights are allocated; the outcome only depends on who values the good in question more.
Re your response, it seems to me that you are criticizing not the state as an abstract entity, but rather a specific incarnation of it. I am personally all for greater federalism, and I think local governments do not get their proper due in modern political science. You and I seem to agree that a limited state of some sort is ideal; many libertarians seem to believe no state of any sort can ever be ideal (e.g. Rothbard's insistence that any coercive action by a state must by definition reduce social utility).
You guys both seem to be tangenting away from the issue.
Here, we quite clearly have a case where the initial distribution of property rights affects the outcome. The biker has the right to irritate the people, so he revs. If he didn't, he wouldn't. The reason they don't buy him out (when he has the right) has nothing to do with transaction costs; even if you could broker a zero-cost deal with all the homeowners and bikers, they would be capable of extracting the homeowners' entire consumer surplus, even though they don't actually enjoy revving much.
Paying such extortion is clearly an inefficient outcome, even by a strict definition. And that's before we take into account the long-term wealth-destroying effects of such extortion.
Please stop connecting this to the issue about the government intervention; as you note, the problem is independent of the level of government.
The point is, it's not enough to have clear property rights and zero transaction costs. The property rights have to actually be reasonable. And that is exactly why most responses to externality-based environmental arguments are non-responsive.
It's almost like the economists who trivialize externalities have never lived in an apartment that suddenly became noisy as a result of some jerk.
The reason they don't buy him out (when he has the right) has nothing to do with transaction costs; even if you could broker a zero-cost deal with all the homeowners and bikers, they would be capable of extracting the homeowners' entire consumer surplus, even though they don't actually enjoy revving much.
The point is in fact to extract the whole surplus. In the examples I've seen of Coase's theorem, the equilibrium position without transaction costs is one where the marginal benefit is equal to marginal cost. (I could be misstating this - I wish I had a graph to illustrate this better.) If you buy a home but not the necessary property rights to ensure peace and quiet, you will have to pay up for those additional rights, and in a fair market, the price you will pay will be up to the value you place on those rights.
Sorry, but my definition of "fair market" is not one in which everyone's surplus is sucked away to the point where they're just short of suicide.
If a market allows people, for any activity, to force you to pay "the full value you place" on that activity, so long as they can find some aspect of it that you desire but didn't explicitly purchase (and these exist in droves), then you will be moved down your preference ranking to the point where you just barely prefer living.
It's the same situation as when you're being charged for your life being saved -- you'd pay enough to just barely prefer still being alive.
And you're confusing different concepts: "marginal benefit = marginal cost" is not the same thing as "zero consumer surplus". It's possible for a buyer to buy until MB=MC and yet both consumer and producer have a surplus.
See, that's what I'm not quite sure about, mainly because I'm accustomed to thinking about Coase's theorem in terms of MB and MC. If the consumer surplus is erased, that implies some sort of price discrimination. And I don't see how price discrimination could be possible here, since revving the bike to intimidate one resident when the rest have paid you off will by necessity affect the other residents who have already purchased the necessary rights. So when I used the term "surplus," I had in mind the difference between MB and MC - sloppy of me, but I took it for granted that exacting all of the consumer surplus would be pretty impossible. In the model, the owners of the property rights will take up to what the residents are willing to pay (i.e. how much they value) for said rights, where there is no gap between MB and MC.
My guess is that there is some difference in our reasoning because we are differing in whether we talk about the impact on one individual or many individuals. I am speaking of the whole community - many residents. You seem to speak of one resident.
If there is only one resident, then we have a monopsony versus a monopoly, and we're going to see either no consumer surplus or no producer surplus - or at least very significantly reduced surpluses. My sense of it in this case is that we would determine who values the rights more by who is most willing to do nasty stuff for it - the resident can get an assault rifle and start shooting dead the bikers. If the bikers really value the ability to rev their bikes more than the homeowner values peace and quiet, they'll retaliate; if not, they'll terrorize another homeowner or take up a more worthwhile occupation.
But I am speaking of a community of residents, each of whom places a different value on peace and quiet. In such a case, the only way to exact the full consumer surplus would be through price discrimination, and as I said, it's kind of hard to do that with a public good like the one we're discussing here. Some consumers would have their entire consumer surplus exacted, but many would still have a surplus leftover.
See, that's what I'm not quite sure about, mainly because I'm accustomed to thinking about Coase's theorem in terms of MB and MC. ... So when I used the term "surplus," I had in mind the difference between MB and MC - sloppy of me, but I took it for granted that exacting all of the consumer surplus would be pretty impossible.
Well, there is where your confusion lies. When economists talk of "purchasing until MB=MC", they're talking of purchasing until the *change* in consumer surplus per *additional* unit purchased is zero, not until the *total* consumer surplus is zero.
And no, I certainly am thinking in terms of the entire community. And my point was that even if you *could* somehow buyout all bikers *and* get all residents to contribute, that a) wouldn't be regarded by most people as a desirable outcome, and b) would simply open the floodgates to *other* extortions once it becomes clear that you can make a bundle by jumping on any property rights that aren't fully specified, thus destroying wealth all around, which is very inefficient.
A) That's what I don't get. We can agree to disagree on this, but if you buy a house without buying the associated property rights ensuring nobody can drive past your house making loud noises, you ought to pay up if you want those rights. And since the costs and benefits of those rights are spread out across the whole community, negotiations will have to be communitywide. And assuming that communitywide negotiations are practical (i.e. no transaction costs), then the community can and should buy up the rights if it values them more than their current owner does. People may not like this, but last I checked, people don't really like free trade either.
B) I don't see how it is extortion if the owners of the property rights get the best deal they can out of owning those rights. And realistically, those owners would probably invest in building a noisy factory instead of buying noisy bikes and revving them, since there's probably more profit involved in the former than latter. Either way, the community is going to have to decide if it wants those rights it failed to procure before settling there.
Libertarians respect property rights and the idea of emergent order as opposed to appointing yet another Czar.
Given that we do live in a highly regulated marketplace and given the incredible efficiency and effectiveness of the history of government regulation and intervention, let's not be so glib about glibertarian ideas.
Let's just be clear about where libertarian critics are coming from: These people who brush off libertarian ideas so easily are most often those who still blame events such as our current financial meltdown on too much free enterprise and not enough regulation. In their world view we're always just one more government agency or one set of regulations away from perfection.
johnleemk: Maybe I didn't make clear what is wrong with such a position, so let me try again:
There will always be "holes" in the initial property rights specifications. That's an inherent feature of natural languages (and dealing with the real world): that it's impossible to specify with infinite precision. For the same reason, legal disputes can't be resolved without a human to apply the various standards and resolve the inherent ambiguity in the official specifications (law, contracts, and property rights), and this will remain the case until we have provably optimal artificial general intelligence.
So, it's impossible for people to specify all of the rights that the want (and therefore believe that they are buying), so there will always remain holes people can use to extort you. (And before you call languages' imprecision a "transaction cost", think about how meaningless it is for Coase to speak of "property rights with no transaction costs" when property rights inherently have such a cost.)
Moreover, even if you could specify them, how is it even possible to convert a given neighborhood to "not acceptable to piss people off"? (Btw, the right the homeowners are claiming is against *continuous, deliberate* revving, not merely passing by.) Remember, the violation comes from *other* properties, so you'd have to buy out everyone in the world individually, and there children. Again, bye-bye consumer and producer surplus for all but a few extortionists.
That's not a particularly significant point, since in the kind of thought experiment we're pursuing, the rights people obtain are exactly what they have in contemplation when they make the contract. Of course in the real world there are a lot of wrinkles. It's not particularly meaningful to say "there are always going to be transaction costs in the real world" because that's a truism, and can be said about almost anything in economics. The important point being made is in the overarching concept. To disprove Coase's theorem, you need to do more than identify hypothetical lacunae of language which could be abused in the real world.
Let's restate our thought experiment. A community settles on a plot of land, but there is no buffer zone on their land separating them from the outside world. The owner of the surrounding land pursues an alternative use which has detrimental effects on the community. How does Coase's theorem not apply?
You are trying to say the theorem does not work because the owner will buy a bunch of bikes to rev just to keep residents awake at night so he can force them to buy his land. But why would the owner do that when he could build a noisy factory or pursue some other profitable use of the land, which would directly benefit him? Your example doesn't make sense unless the owner of the land is for some reason devoted to wasting his money on motorbikes which make loud noises, and the residents ought to compensate him if they want him to get his kicks from this elsewhere.
The more I think about the example you're providing, the less sense it seems to make. I don't even see the alleged extortion in it. To recap, the landowner can't price discriminate because although he is a monopolist, the nature of a public good prevents price discrimination - so he can't extract the entire consumer surplus of the residents. He could be stupid and waste his money on an inefficient use of the land (like trying to extort money from residents in a rather ineffective manner), but in such a case someone with a better idea of how to use it for commercial, residential or industrial property would just pay him off and develop the land, and reap a profit from that.
It's not particularly meaningful to say "there are always going to be transaction costs in the real world" because that's a truism, and can be said about almost anything in economics.
And it's not meaningful to talk about "property rights without transaction costs" when the very nature of property rights requires (something that defending Coase's Theorem forces you to classify as) transaction costs. It's not just that there are always going to be transaction costs in the *real* world. It's that there are always going to be transaction costs (as you've defined them) in the *ideal* world.
. A community settles on a plot of land, but there is no buffer zone on their land separating them from the outside world. The owner of the surrounding land pursues an alternative use which has detrimental effects on the community. How does Coase's theorem not apply?
Because the moment you pay him off, people divert all available resources into coming up with other ways to hurt others and warrant a payoff. This diversion of resources is ultimately welfare-destorying and *not* efficient.
To help you see the point, imagine that we start from a state of nature with clear but limited property rights. Would it be an "efficient" solution to try to buy off everyone who wants to kill you? Or do you just form a group of friends that can protect you, and "aggressively dispute" property debates about whether you have the right to live? The former is the Coasean solution, the latter is the formation of a state or protection agency.
You are trying to say the theorem does not work because the owner will buy a bunch of bikes to rev just to keep residents awake at night so he can force them to buy his land. But why would the owner do that when he could build a noisy factory or pursue some other profitable use of the land, which would directly benefit him?
Because the goal isn't to produce a saleable asset that requires noise. The goal is to extort money from others, genius. And that's hardly a waste of money for the extortionist!
The more I think about the example you're providing, the less sense it seems to make.
Ironically, that's because you *lack* the distraction of a motorcyclist revving his bike as you try to make your post, forcing you to spend hard-earned money making him go away ... and hoping no one else tries the same thing.
To recap, the landowner can't price discriminate because although he is a monopolist, the nature of a public good prevents price discrimination - so he can't extract the entire consumer surplus of the residents.
??? All you did was throw around economic jargon there. In English, the bike-revver -- assuming zero transaction costs -- can get them to pay enough so that they just barely prefer "loss of money + quiet" to "keep money and not have quiet". That *is* the full consumer surplus. If you're using the term another way, you're not using it correctly.
. He could be stupid and waste his money on an inefficient use of the land (like trying to extort money from residents in a rather ineffective manner), but in such a case someone with a better idea of how to use it for commercial, residential or industrial property would just pay him off and develop the land, and reap a profit from that.
So, don't worry about protection rackets because a wealthy developer will be able to buy out the mafia?
In closing, I don't mean to pick on you; you're just reciting the standard economic arguments, which certainly sound plausible to a lot of people ... until you try to compose a post while a biker is revving his engine to piss you off.