Russ Roberts

Michael Lind on Libertarianism

EconTalk Episode with Michael Lind
Hosted by Russ Roberts
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Michael Lind of the New American Foundation talks with EconTalk host Russ Roberts about two recent articles by Lind at Salon.com. In the first article, Lind argues that libertarians are wrong about how to organize a society because they embrace a philosophy that has never been tried. In the second article, Lind argues that the ideas taught in economics principles classes lead to bad public policy. Roberts challenges Lind and along the way they manage to find some areas of agreement.

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0:33Intro. [Recording date: July 12, 2013.] Russ: We're going to talk today about two articles you've written recently, and we may get into other things as well. But the two articles, one was on libertarianism; the other was on economics; and they've created a bit of a firestorm on the web. Let's start with libertarianism. You asked the rhetorical question: If libertarianism is so great, why hasn't it been tried before? Is that a fair assessment of your argument? And if so, can you elaborate? Guest: Well, it is a fair assessment, and it was inspired by a conversation I had at a party where most of the crowd was libertarian. Where I asked a libertarian economist who shall remain unnamed: Why are there are no countries of which you guys approve? Because all he or other libertarian thinkers can provide are examples of countries with particular policies they like. So they like Chile's Pinochet era Social Security privatization; and they like Swiss banking laws; but they can't point to an actual country which is largely libertarian in most but not all of its policies. It doesn't have to be exclusively libertarian. But there aren't even any predominantly libertarian countries. And so that was my rhetorical challenge to them. If you can't point to a single country out of nearly 200 sovereign states on this planet in 2013, that you approve of, then isn't your ideology fundamentally unworldly and utopian? And the responses were--the most plausible response, I think, was that we're pioneers of the future and perhaps in the year 3013 countries will be libertarian, but it's unfair to ask that question now. It would be like saying why are there no democracies during the dark ages? So I thought, well, at least you can make that case. But the least plausible response to my question why are there no countries, were those that said: Well, there was a libertarian country. Once upon a time in a golden age, it was the United States--between the Civil War and the Progressive era, when you had large industrial corporations, child labor, no unions, and so on. And I thought: that answer, even from a libertarian perspective, was not very smart, because the United States between the 1870s and let's say the 1900s was by no means a laissez faire society. We had high tariffs, the government was intervening was to help businesses crush strikers in the railroad and other industries. So the argument that the libertarian paradise lies in the distant future, at least you could make that argument. But you can't plausibly say that the libertarian paradise existed in the past, either in the United States or in another country. Russ: I want to come back to both of those points--the utopian point and the United States in that alleged golden era. But I first want to ask you about the example you got back from your cocktail party. I'm surprised that anyone would suggest that the Pinochet era, Chilean Social Security, has anything to do with libertarianism. It was a military dictatorship and the Social Security program was a public--it was forced savings. It's true you were free to invest the money in private activity, private investment. But it's not much of a libertarian social security system. Guest: Well you've put your finger on one of the contradictions of modern libertarian thought. Because they argue that what are in fact public programs that have some elements of choice are really market programs or libertarian programs. And you are quite right. It's completely incoherent, the contrast with their principles. So, for example, most libertarians--at least the politically influential ones in Washington--favor vouchers for schools. But a school voucher, if it's funded by the government, is just as much a government program as government money going directly to a single district school. Right? Russ: Totally agree with you. Guest: You're merely introducing the choice; merely introducing an element of choice does not make it a free market program. You are still taxing people. You are simply allowing the taxes are going to the consumer rather than to the producer. Russ: Yeah, I totally agree with that, in fact. That idea is associated with Milton Friedman. I think there are other people who claim authorship of the idea. Milton Friedman advocated that in Capitalism and Freedom-- Guest: If you go back to the 1920s there was something called 'Voucher Socialism.' So you can argue that a lot of these Friedmanite proposals--you are quite right, it comes from Milton Friedman. But it really has more to do with Voucher Socialism than it does with free markets. Russ: So, I agree with you in the sense that it's certainly still a government program. And I would argue that the political side of that program would be more worrisome than the economic side. I worry that if we had vouchers then there would be political pressure to increase the amount. And for government to get involved with the schools. So, yes, I am against government schooling generally, not replacing the current system with a voucher system. However, Milton Friedman, when he advocated that idea, I think saw it as an improvement. Now, Milton was not a utopian. In any sense. He advocated negative income tax, of which some would say, I think correctly, that the earned income tax credit is the descendent of that proposal; and whether he would like it now, how it's turned out, is a different question. But he certainly advocated a negative income tax as an improvement on the in-kind nature of food stamps and housing programs, health care, etc. But he was not a utopian. Guest: Well, I have a lot of time for Milton Friedman. I would see Milton Friedman actually as a neo-liberal of the right, rather than a truly market-fundamentalist libertarian. And, you know, progressives and centrists can support a lot of the same programs. For example, there are school vouchers in Sweden, which is an extremely social democratic country with about 50% of its Gross Domestic Product (GDP) going to government. But they have local school vouchers, and vouchers for other programs. In the United States the progressives are defending food stamps, which is a voucher program for particular restricted kinds of commodities. Now, my own thinking about vouchers is more practical. It's not a matter of libertarian ideology or progressive ideology. I think that vouchers tend to work where you have truly competitive markets, and also where the number of recipients of the vouchers is sufficiently small that it doesn't really warp the market very much. So, for example, if you give food stamps to people and let them buy, let's say something like cereal or preferably something more healthy like fruit, that's not going to drive up the price of fruit because you don't have vast sums of subsidy going from the government into the market. And at the same time, you do have a relatively competitive market in produce or in cereal, even if it's not perfectly competitive. Where I think vouchers and government subsidies in general are dangerous is when you are pouring government money--and whether it goes through the consumer or the producer--into what economists call 'imperfect markets' where you don't have lots of small firms competing. You have oligopolies or monopolies, which are able to set their own price. They have what's called 'market power.' And I think we've seen this since the 1960s in both health care, thanks to Medicare and Medicaid money, and higher education. Because beginning with the 1960s, for perfectly valid reasons--and I generally approve of federal aid to higher education and also of health care for the elderly and the poor--but when you put government subsidies into an oligopolistic or monopolistic market and you don't have some kind of price control system, that you cannot rely on competition to keep prices down.
9:34Russ: Well, actually competition is going to push prices up when you subsidize large groups of people that way. So that's what we're seeing. Guest: Well that's right. And then you get this political feedback effect where the doctors or the universities with their tuition raise their prices. Producers raise their prices by the amount of the subsidy. They then tell their clients, you know, the doctors, patients, or the parents of the university students: Oh, isn't it terrible--prices are going up; write your Congressman and tell him or her that you have to increase the subsidy. Right? So you get this vicious feedback effect in which the producers can keep driving up their own prices. Russ: You don't need much market power to really make that argument. It's that if there were limited numbers of people on the earth, if the skills that were necessary to provide the services are limited--as they are with medical care or education--even though new people can enter the field, even though there's competition among the providers, a subsidy in a competitive market like that will push up the price and it will do exactly as you said: it will encourage the political lobbying to make the subsidy larger and continue the problem. I'd say we've done something quite similar in housing as well. Guest: Well, I think we're going to see this as a result of Obamacare. That the initial tendency will be to drive up prices because you have all of this new money flowing into the system. Now, if you accompany it with some kind of price regulation then you can deal with that problem. But if you don't, then the producers may simply jack up their prices. Russ: Absolutely.
11:15Russ: Let's go back to your conversation about whether libertarianism has been tried or not in the United States and whether that's a realistic observation, and then the question of whether it's a utopian ideal. I think to some extent you've created something of a straw man. There are people like Milton Friedman--I think Milton, although he sometimes called himself a libertarian, would find himself more explicitly as a classical liberal--someone who wants smaller government--limited government, smaller government. He's not an anarchist. And certainly anarchists, anarcho-capitalists, people who are at the extreme of the libertarian position who make the case for zero government--it's an interesting position; I'd like to talk to you about why that might not be sustainable if it ever were tried. But it certainly has never been tried. But it seems to me that the more realistic--and certainly the view I hold--that I'd like to see some government but a dramatically smaller one, the fact that that hasn't been tried doesn't seem to be much of an argument against it, mainly because nations don't make decisions. Individuals do. Politicians vote in certain ways. If I said to you: No one tries chocolate ice cream; no one buys chocolate ice cream and therefore it must not be very good--that's a pretty reasonable claim. But the fact that no nation has adopted a classical liberal state, ever--and we could debate about England or the United States at certain time periods--why would that tell you anything about whether that's a good idea or not? Guest: Well, because what is the first principle of the state? Even in a classical liberal tradition. I mean, I consider myself in the Lockean liberal tradition--I consider myself a Lockean of the center left. And that's not a contradiction in terms. If you go back to John Locke and the Founders and classical natural rights theory of the 17th and 18th century, it's all about war and violence. That's what it is all about. A subject that the so-called modern libertarians tend not even to talk about or at least it's kind of an afterthought. But if you go back to the social contract libertarians, the whole idea is that a state of nature is a state of war. It's a state of anarchy. And you cannot protect your rights by yourself against the neighbors who want to kill you or enslave you. And so therefore humans--first tribes and then city-states--and it doesn't have to be a modern democratic nation-state, but the whole point of political entities is for people to pool their coercive powers against these external parasites, these human predators who try to kill or enslave you. And also the people within your own community, the potential tyrants who try to kill or enslave you. And ultimately it's pooled coercive power that is at the heart of true classical liberal theory. What I think--the people who call themselves classical liberals now are not actually in that Hobbesian-Lockean, 17th century natural rights tradition, which is obsessed with created bounded territorial units with military power and police power to prevent anarchic violence. Russ: Well I don't know-- Guest: [?] Really come more out of a 19th century kind of Proudhonian anarchist tradition, which assumes that the natural state of human beings is sociability and cooperation. And one can have an interesting anthropological argument as to which of either of these corresponds to the world as it is. But I think this is--and it's an answer to your question by the way. The answer to your question is, at least according to the Lockean tradition: if you are surrounded by militaristic, socialistic welfare states, and then you create a libertarian paradise--particularly if it's on a desirable piece of territory--your country is not going to be sovereign for very long, if it cannot mobilize the military resources and the population support to defend it from the aggressive non-libertarian neighbors. And I think that's a real flaw. Russ: Well, I agree with that. I think that's the flaw of anarchy. But I don't see it as a flaw of classical liberalism. Certainly classical liberals, up through the modern era, which would include Robert Nozick in his Anarchy, State, and Utopia, certainly made a case for the police state, or a role for the state in provision of police. Certainly I think most classical liberals see a role for national defense--very modest of course but certainly the ability to defend the nation from attack. I think it's the rest of it where the interesting stuff lies. Guest: Well, okay, but just bear in mind that the people who are thought of as big government liberals including Theodore Roosevelt and Franklin Roosevelt, they simply think that survival in the modern world requires a more extensive government, even for the basic liberal state. So, being liberal, a classical liberal like John Stuart Mill in the late 19th century, and think that well, without violating your classical liberal principles, you'd want as much private property, as many individual rights as possible, in industrial conditions where giant industrial organizations can poison whole landscapes. You may simply have to have bigger, more state regulation. It's not that you love the state--it's something you reluctantly conclude. And likewise, all of the industrial societies by 1950 had adopted some kind of social insurance schemes or welfare state that was more or less compulsory. And it wasn't because they loved the state for the sake of the state. They weren't fascist or totalitarians. It was because the alternatives--you know, foreign-based family support systems and local charity, simply had ceased to function, when you had a wage-earning majority living in giant industrial cities. So I think that to dismiss the dominant tradition of the 20th century as not being in the classical liberal tradition as though it's, you know, some sort of alternate or statist tradition--I think you can justify a lot of the modern welfare state as well as a lot of the modern warfare state on classical liberal grounds; that is in today's industrial conditions this is the minimum that you need. The minimum government that you need is vastly bigger than it would have been in the 17th or 18th century. Now that holds out the possibility that maybe in 200 years, if conditions change, you could have a smaller welfare state and a smaller military. Right? Russ: Well, but you are suggesting that the reason that we have a large welfare state, a large corporate welfare state, a large public social welfare state, a large regulatory state-- Guest: Well, I'm not defending crony capitalism. But let's look at the social welfare state. Russ: It sounds like you are. But go ahead. Guest: Well, no no. The modern British welfare state really was a product of World War II, of the Beveridge Report. And the basic idea was: We have to guarantee all of these soldiers fighting Hitler that when they come back we are not simply going to abandon them to destitution and unemployment. And so therefore you had the right to national health insurance, the right to a job, public housing, all of this. It was the reward for fighting in a World War. And the link in the United States is not as direct but it's still there. If you think about the GI Bill. So I do think there's a link between provisions of some kind of economic security to your citizens and the need to have those citizens mobilized in these colossal wars like the World Wars. Now, as I say--now most liberals and most conservatives ignore that link. Let me say that right out. Most progressives think that the social welfare state of the kind we have might have existed just for its own merits, in their view, without these World Wars, without the link between the citizen-soldier and the domestic economic benefits. And a lot of conservatives think: Well, we can draft everybody to go fight in foreign lands. But on the other hand, when they come back, they are on their own, right? But I'm just saying as a political historian that the link between military service and minimal economic security--this has been crucial. And you also find this same link historically between voting rights and military service. That is, every expansion of voting rights in the United States has tended to be justified, in practice, successfully, by the rights of soldiers, whether it was the expansion of voting rights for all white males during the War of 1812, and then of course the abolition of slavery, and initial voting rights, with the Civil War, and so on. Russ: Well, it's an interesting point. I think it's a bit of a stretch, as you somewhat might agree, in the United States. The GI Bill, yes, that was done as a way to cushion soldiers' return to civilian life. Many of them did not take advantage of it. Many of them found jobs. It wasn't horrible. They got health care, they didn't starve to death. They found a job and a roof to put over their head. And in fact the post-WWII economy was rather successful despite a very small increase in government activity. Very, very different, yes, from the British case.
21:12Russ: Let's take an example, say, such as education, where, as you point out, say it's part of the safety net that we've decided--someone has decided--that education is provided publicly and funded publicly, K-12, and subsidized dramatically in the post-high school years. That has not been a very effective system, it seems to me. And so while you can argue that it is there because it just seems natural, it's partly there as every one of these programs is, for political reasons that are not about some ideal taking care of people, but there are specific special interests that benefit. In my case--I'm one of them--I'm an academic, most of my career, and I've been a tremendous beneficiary, not my not-so-happy result, from these subsidies. And I don't think they've served people very well. They've served me well. Guest: I think there are two questions. Let me push back, first of all, as to they haven't been successful. Look at the United States. A lot of the stuff about the failure of America's K-12 system is pure propaganda. The data came out recently showing that whites, blacks, and Latinos have steadily improved their academic performance over the last couple of generations. Now you can say they might have been better under a different system. But what would that system be? Let's look at international comparisons. The United States--sometimes there's these alarms in the press about the United States instead of being number 1 or 2 is like number 15 or number 12--it's still near the top--on math and science or things like that. Well, there are sociological reasons for this which it's very unpopular to discuss in public, because you don't want to reinforce stereotypes; and I certainly don't intend to do this. But if you look at non-Hispanic whites in international comparisons--there is something called the PISA scores. Non-Hispanic whites in the United States are at the top. They are up there with the kids of Shanghai, China. And by the way, the Chinese scores are only for Shanghai; it's not the whole country, which would drag it down. So, what are the two groups that drag down the scores in the United States? It's two groups which for obvious historical reasons would do so. One is African Americans, who were victimized and disenfranchised until only a generation or so ago--two generations ago--and have yet to catch up, despite great progress. And the other group is fairly recent immigrants from rural portions of Latin America. And again, there's no big surprise there. If you look at Germany, the working class and working poor are Turkish immigrants and their children, who are at the bottom of the economic spectrum there, do less [more?--Econlib Ed.] poorly than the native Germans and drag down the overall German scores. So I want to push back on the idea that the United States does not have a successful educational system. It does. Russ: High literacy rate. There are things it does fairly well. Guest: I think it costs too much. You can make that case, certainly. And you can also make the case that even if it has worked in the past, maybe you need to rethink the model using new technology and the Internet and so on. And I think that's certainly the case. Russ: It's happening. Guest: Yeah. So, if in 1840 the county commissioners had distance learning and computers and the Internet and all of these other technologies, would they have voted to have a one-room schoolhouse with one 19-year old woman teaching all classes, you know, from 1st grade through 12th grade? I don't think so. So certainly you can reinvent. And I think we are going to see this in the next generation. But again getting back to the libertarians, I think a lot of the actual policy proposals which are put forth in the name of libertarianism, some of them are quite sensible. Right? Russ: You can list them if you want. You can pick a couple. If they come to mind. Guest: Well, for example, for-profit universities. I don't see why people should be against that on principle. Progressives tend to be, because their electoral, in some degree financial, constituencies tend to be teachers' unions. Right? I consider myself a progressive, but, you know, I don't represent the teachers' unions, so I don't see why people shouldn't think about alternate models. And the same is true of K-12. You don't necessarily have to have 30 students to a room with one teacher who has an Ed (Education) Degree instead of some particular subject. You could experiment with part of the day at a physical location and part of the day online. And so on. So I think there's enormous room for experimentation there. But the thing is, as we discussed earlier, libertarians say they are against the government. But then they line up behind proposals which are actually government policies that are simply more flexible. This simply has some kind of partial market element to them. So, actually I think the libertarian proposals tend to deserve more respect than the libertarian theory. Russ: Well, I guess again it depends on the flavor that you are talking about. I certainly agree with you that so-called market solutions that have government running the market whether it's for schools or health care or other things are not particularly libertarian or classically liberal.
27:04Russ: I want to go back to one last thing on this issue of this transition to a larger government. You mentioned that after the Great Depression, somewhere in the New Deal perhaps, we had to go to government provision of social welfare services because charities weren't doing the job. Actually, charities were quite active during the Depression of 1895. They were quite active in the Great Depression. They disappeared when government got much larger. You are correct, as you point out in your article, or in one of your articles, that there's always been public provision of welfare at the state and local level, though. So it's never been a so-called libertarian provision of aid to the poor. There's been a lot more private aid to the poor pre-Great Depression. I think it's important to point out that the death of serious private charities fighting hunger and poverty for large groups of people ended with the New Deal and the rise of Federal spending. Guest: You are absolutely right. There is no doubt that government social insurance crowded out a lot of charitable activity. And also that Federal social insurance crowded out a lot of state and county and local. Russ: That's correct. Guest: Now, the question is: Is this a bad thing or not? Russ: That is the question. Guest: I asked this once of an 84 year old friend of the family, unfortunately no longer with us, who had grown up on a farm in Missouri. And I was discussing Robert Putnam's study about the decline of civic activity and so on. So I asked him, because he lived all the way back until--was born around WWI--you know: Did he miss all of these organizations like the Elks and the Moose Lodge and all these fraternal civic organizations? And he said exactly what you said. He said, well they all disappeared because of Social Security. Russ: That's right. Guest: He said, because the only reason 90% of us joined them was because they had health insurance. You know, sometimes the Moose Lodge would have a deal with a doctor, who would see all the members of the Immortal Order of Moose. Or the Elks or whatever. So, they provided health insurance, they provided burial insurance, which was very important for people who did not have the cash to provide for funerals. And also they had old age homes. Old folks' homes. If you were poor then the fraternal order of Elks would have an old folks' home. So I said, do you miss that world of diverse civic society? And he said, Hell no. So. You know there may be people who have some nostalgia for that, but I think this actually liberates civil society. You may disagree with me, but it seems to me--I'll give you an example. During the Communist rule in Poland and in Eastern Europe, jazz clubs were often used as covers for democratic political activism. Okay? So the membership of these jazz clubs collapsed once you had democracy in these countries. Is that a good thing or a bad thing? Well, I think if you love jazz, then really, if the jazz club, even if it's smaller, now it's simply jazz lovers. And likewise, the Masons and the Shriners are much smaller than they were in the past. But if most of the people who join the local Shriner Lodge are really interested in Freemasonry, in other words they are not simply interested in economic benefits, which are now provided by the state, it seems to me that's an improvement for the Shriners. They don't have all of these people who were there just to get burial insurance. Russ: Well, I think the question is if you want to assess what a more libertarian charity system, a more private, voluntary charity system, would look like, I'm not sure you want to look at 1927. It probably would be worse in 1927 than it would be today. We're a much wealthier nation; we have much better ways of communicating and interacting and sharing ideas. And raising money, for that matter. So, when I think about what private provision of some government services would look like, I think about the Harlem Children's Zone, which Paul Tough talked about on a podcast here a few months ago, where basically an entrepreneur, Jeffrey Canada, thought the government safety net had done such a miserable job with inner city African-Americans and other poor people that he decided to provide it privately in a different way. And does it better. It's a lot of work. He doesn't raise as much money or as easily as Head Start or other government programs, government schools, which use tax revenue. But it's more effective. It's more humane. It's more transformative both for the people who live through it and the people who fund it. So, I think the crucial question is--it's unanswerable, so we can argue about it until the cows come home--the crucial question is: Is it imaginable that privately collectively provided social services might do better? I think they might. I agree you can't prove it. Guest: Well, yeah. I guess the question is: Are there enough benevolent billionaires? Because it is mostly the rich who provide the money for charity. Individuals do some. Ordinary middle class. But it's mostly the rich. The only time we had any experience of this really was in the United States and maybe in some European countries after the decline of feudalism when you had state religious welfare, tax-funded things and the rise of the modern welfare state. You know, from the late 19th, early 20th centuries. And at least at that time, the great industrialists and bankers did not see fit to provide charity in anything matching even a minimal welfare state for people now. Which is one of the reasons why these countries created a welfare state. If, you know, the British and the German and the American industrialists had had this whole alternate funded model, then I don't think there would have been much pressure for a modern welfare state. And you can say, well now you have Bill Gates and Warren Buffett, and they are different. My experience in my job--you know, obviously the non-profit community brings me to dealing with very wealthy people. Russ: You're going after them. Guest: Yeah. It's a kind of quasi-academic sector. Is that the majority of very wealthy donors are not very interested in poor people. Or even in the middle class. In helping them out in their own country. The big 'gets' if you are asking for charitable donations involve either the poorest and most destitute people in the world--say, the poor in Africa, a traditional objective of charity from the West; the environment; and also, artistic and cultural and educational institutions, like universities and symphony orchestras, which largely benefit the rich and the upper middle class. And their own children. I don't know. I'm open to the suggestion. But my fear would be that if you got rid of the welfare state it wouldn't be replaced by money from the rich, because they would be spending all the money on zoos and on, you know, symphony orchestras. Russ: I think the counter-argument there is that even in a world where government provision of funding of public schools exists, there are still a lot of wealthy folk and not so wealthy folk who donate to a private scholarship system to get people out of those schools--even when there is a zero-price alternative. So, that to me suggests there is some potential. Guest: But this brings us to a different question. Which is: They do so because it's very easy to say the problem with the working poor and low-wage workers in the United States is because they lack education, and therefore we'll help them go to college and they'll make more money. But the vast majority of jobs in the United States today, and the majority that are being created, require no higher education beyond high school. And maybe a couple of weeks of on-the-job training. That's according to the Bureau of Labor Statistics, which every couple of years publishes an updated list of the jobs with the greatest overall, and it's jobs like nursing aides, janitors, security guards. These all greatly outnumber all of the scientists, engineers, lawyers, professors put together. I do think there's kind of a taboo in the United States--I can't speak for other countries--where the rich are told, well, you can help the poor and low-wage workers by helping them go to college, even though most of the jobs don't require college degrees. But we are not going to ask you to pay your workers more. Right? Whenever there is a suggestion for a higher minimum wage or just higher pay or that more of the profits be shared with workers, Democrats for the most part as well as Republicans, this is not on the table for discussion. The problem is a janitor with a Ph.D. is not going to be paid any more than other janitors. Because most actual occupations, the labor market structure is what determines compensation. It's not credentials. Russ: No, that's true. Which is a good thing, I think.
37:01Russ: I think the question is whether the world would be a better place if K-12 education, say, was provided in a more thoughtful and more effective way. Guest: But follow that to your conclusion. Since a lot of people, particularly academics, complain that they are doing remedial instruction for undergraduates who really have not mastered what they needed in high school, so if we had better K-12 maybe fewer people would need to go to college. Russ: That would be a good thing. I like that. That would be great. I think too many people probably do go to college. It's subsidized dramatically. The consequence is that subsidization has not been fully paid yet; we have an impending student debt problem, because exactly along the lines you talked about before, we have subsidized it, pushed up the tuition as a result-- Guest: Right. Russ: It's a labor-intensive activity. Whether it should be or not remains to be seen. There are some technological things coming that will maybe reduce the labor involvement. But right now it's generally done in a labor-intensive way, and as a result it's enriched, again, people like me, and you, because you are a substitute for me. Guest: Well, a think tank is a university without students. Russ: Correct. Guest: And we benefit from the fact that our productivity growth is extremely slow in the non-profit intellectual sector, so we can't yet be replaced by software programs. It may happen at some point. Russ: That's right. It very well might.
38:95Russ: Let's move on to your discussion of economics. A 10-point manifesto against what you call Econ 101. I agreed with one of the 10, maybe one and a half, which is pretty good. I agreed with your first point, which is that economics is not a science and that there's way too much advocacy without certainty on the part of economists. So we agree there. But what else do you think is dangerous or unhelpful about economics? Guest: Well, let me make clear: A lot of people didn't read our piece. We had a disclaimer in there. We were not criticizing Econ 101 textbooks, whether by Paul Krugman or Greg Mankiw or anybody else. We just used Econ 101 for what politicians [?] about the economy. Russ: Say that again? You faded out there. Guest: We were using 'Econ 101' as shorthand, for what people with a fairly limited economic education think that economics says. Right? It was sort of common knowledge. Maybe the phrase 'Econ 101' is misleading. But we were just both frustrated, Robert Atkinson and I, because again and again someone will stand up in Congress, or maybe write an op-ed saying, like: Economics shows, all economists agree, x, y, and z. And usually it's an extremely simplified vision of all activities can be done by for-profit firms in competitive markets. I mean, there is a kind of right-of-center bias to this. And so we just went through a number of things from imperfect competition and oligopolistic industries where the efficient organizations, efficiency may actually favor monopolies and oligopolies for engineering purposes, and in some cases to trade, which is the best example of this. Because in fact the theory of international trade, all the way back to David Ricardo, who has all kinds of qualifications for his theory of comparative advantage is never reducible to the simple thesis that in free trade all sides win. No sophisticated economist, including defenders of free trade in general like Jagdish Bhagwati-- Russ: Including me. Guest: Yah. Well, you always say there's some circumstances. For example Ricardo said-- Russ: Well, not 'some circumstances.' There are, at any point in time, trade has people who benefit and people who struggle. Whether there's losers or not--my former colleague, Don Boudreaux likes to point out that some people who are harmed by trade of a particular kind might still be better off than they would be if there were total protectionism. But you could argue that's a fine point. Guest: Fair point. But these qualifications tend to get lost in public debate. So we were arguing for a more nuanced public debate. That was the point of our piece. Russ: Well, it's certainly true that when things like NAFTA (North Atlantic Free Trade Act) came up, or whatever recent trade issues come up, the defenders of the bill, the legislation, NAFTA, say: Trade will create x number of jobs and we'll all be better off. That's stupid. You can't count how many jobs; it probably won't create jobs; it might change the number of jobs; and certainly some people will be worse off because of NAFTA than otherwise. The critics of NAFTA said, count the number of jobs that would be lost, using a goofy model of relationship between trade and employment that required a certain set of heroic assumptions about data and complexity. And they'd tell how many jobs would be lost, as if that were a reasonable scientific attempt. Guest: Yeah, we're not defending the other side, either. You see the same thing in the debate about this immigration reform bill. So, the Congressional Budget Office (CBO) does a study where it says that there is a very small gain to the economy as a whole over 10 years--and it is small, it's in the billions in a multi-trillion economy--small but real. On the other hand, there are real losses, in terms of lowered wages, at the very bottom of the labor market for native and naturalized workers without high school diplomas who would compete with low-wage immigrants in some areas. Okay, that's a nuanced report. There are positives, there are negatives; you can decide whether the positives outweigh the negatives. And the CBO thinks that it does. This gets translated into public debate and suddenly we're being told that the CBO says the United States will grow rich through immigration. And nobody will suffer. Russ: Yeah. Well, part of this is an aggregation problem, right? It's the idea that the United States will benefit from--and my side, the free market side, makes this kind of claim all the time. What they really mean, if you press them, is that most people will be better off. Ultimately it's a certain form of utilitarianism that I find--my Austrian side, my Hayekian side, finds very unattractive. I don't care, when you ask me, and I think you are agreeing here, I don't care if you tell me that the net gain to all Americans is positive that that means that therefore it's a good idea. That doesn't follow, to me, at all. You have to look at, you'd have to make an assessment. Because it's not going to make everybody better off. It's a lie. Guest: Right. So, the left has its own mess. But I think this particular version of Econ 101, it tends to take arguments which are actually complex and nuanced and then it turns them into this kind of bumper sticker slogan, which is that the more free market solution or the more deregulatory solution is just a win-win for everybody; there are no costs, there are no benefits. Now I guarantee you that if we are dominated by a generation of real collectivists--I don't think the Progressives are very collectivist nowadays--the Wall Street Democrats certainly are not--that I would be arguing against their myths. Right? If they began arguing that you can have infinite levels of taxation and it has no effect on crowding out of private capital and so on. It's just at the moment, your side, or at least the center right, more pro-market side, has pretty much dominated the elite public discourse. Really since the 1980s. Not public policy necessarily. Russ: No. Certainly not. Guest: But the way we talk about markets and about business and so on.
45:28Russ: Can I just stop you? When you mention, invoked 'Wall Street Democrats,' what was your point? You said that they weren't what? Guest: I don't think you can call them collectivist or leftist or social democratic in any way. Russ: Well, only for their industry. Which is the nature of cronies. Guest: Yeah, the other thing--right, right. Russ: The nature of cronies is to say: We need free markets except for my industry, which is special. So the financial sector has managed to convince the ruling class and to some extent the economics profession that they deserve to be special. Which I find to be repugnant. And every industry makes this claim. Guest: Well, explain this to me: Why is it that--see, I consider myself pro-business. I'm pro-market, where you can really have competitive markets. Why is it that the attempts of what I view as natural monopolies and natural public utilities--and I would include not just water and sewage but a lot of basic transactional banking for example--this is a tax. When these are in private hands, these are predatory monopolies, these are oligopolies; they are exacting a tax from every entrepreneur, every business, and their customers. It's actually bad for markets. And the best thing for a market would either be they would be regulated like public utilities or nationalized in some cases. But what I consider to be the real productive businesses in the United States have been persuaded that banks--and remember that Alexander Hamilton, first Treasury Secretary, called banking a public utility. They've been persuaded that bankers are somehow risk-taking entrepreneurs just like they are. Just like Bill Gates and Steve Jobs and so on. And therefore if the government wants to regulate what arguably is a utility like banking, then this is an attack on free enterprise. Do you see the point I'm making? Russ: Well, not exactly. I see part of it. Guest: Let me give you another example. Russ: Yeah, go ahead. Guest: Suppose that ConEd and some of these natural monopolies that are public utilities--let's say the local sewage commission--were privatized. And then the local sewage company now that it's under private ownership uses its monopoly power to jack up its prices and then, if it goes bankrupt it demands to be bailed out by the government. Okay? I mean, that would be a parallel. Particularly because a lot of the banking stuff is sewage. Russ: Cute. Toxic. Guest: Why would the so-called free market people rush to the defense of this predatory private monopoly when the government tries to regulate them? It seems to me the logical thing to do would be to say, we'd rather have a private regulated utility than these parasites who were hurting the actual productive businesses. Russ: I guess it depends on whether you think banking is a natural monopoly. I don't see that it is. I see lots of competition potentially among bankers, among provision of services of the various kinds we could imagine. We could imagine the security of your money, we could imagine the ability to make transactions at a distance, providing liquidity through credit, etc. So, I don't see why that has to be the case. Where I agree with you, and I said this--I have to hold my nose when I say it but I certainly agree--I would much rather have government regulate and run the banking system than pretending it's a free market system and just bailing it out so that all the up-side belongs to the financial sector and the taxpayer pays for the down-side. That's the worst of all possible worlds. Guest: Where we agree--I think where we could have real agreement across partisan, philosophical lines, is against crony capitalism, where it's the worst of both government and for-profit. And that if you could go to a lot of these crony capitalist sectors--and I think banking is one-- Russ: Housing is another. Guest: Higher education. Russ: Health care. We've only described about 50% of the economy. Guest: Exactly. And then you say, okay, look, either we are going to move this in a more market direction where appropriate, or we are just going to make it more government. But we are going to get rid of these socialize-the-losses and keep-the-profits model, of crony capitalism. I think that could be a program for one or both parties. Russ: Yeah. I'm surprised it hasn't been. Guest: But if you are right and it's 50% of the economy and it's 80% of the campaign finance contributions, then why are you surprised? Russ: Yeah, no, that's right. Guest: You have to have some source of funding. Russ: Yeah, that's why I say that Republicans and Democrats are similar: they like to give money to their friends; they just have different friends. But they have one friend in common, which is the financial sector, and the reason is that that's the Willie Sutton theory of why you rob banks--because that's where the money is. So it's very hard to be tough on your friends when they finance your campaign. You go back to the last Presidential election, it's shocking to me that neither candidate was willing to address this crony issue in the financial sector. You had a Progressive, on-paper Democrat; you had a Republican desperate to show that he wasn't a plutocrat. And neither of them touched it. It wasn't that they didn't make it the centerpiece. They didn't touch it. And I suspect the reason is that they are beholden. Guest: I think that's right. Now, they were always beholden on banking and business interests, but before banking deregulation in the 1970s and 1980s, we had this very vulcanized and very inefficient banking system-- Russ: It was smaller. Guest: where laws against branch banking protected state and local banks against the New York banks. And once you eliminated those laws it made life much easier for us citizens and consumers--because you had to have Traveler's Checks to go from one city to another. But what it meant was that suddenly all of these politicians who could take on Wall Street because they were banked by the little small-town bank in Missouri or Mississippi, they are raising money from the same megabanks. And it's a real political problem. I'm optimistic in the long run simply because I think as deleveraging goes on as the process of inflating away or defaulting on a lot of these overhanging debts that are never going to be repaid goes on, that the overgrown financial sector in the United States may continue to shrink over time. And we could get back to a healthier situation in which we don't have an overly financialized economy, simply because they've had to shrink and swallow a lot of losses. Russ: It's imaginable. Guest: Instead of the counsel of despair.
52:18Russ: I want to go back to something you said a minute ago which shocked me. You said that you were pro-business. It didn't shock me because you are a Progressive. It just shocks me generally. I think one of the worst things for my side of the debate is the conflating of pro-business with pro-market. They have nothing to do with each other. Guest: Oh, I understand that. Russ: But people do that. People try. Guest: No, I'm not--I said I was pro-business not pro-market for a reason. I understand the libertarian objection--that we're for markets not for businesses. I'm not a libertarian. I think there are some industries which are not naturally competitive industries, where it's in the public interest to have--companies. Including, like defense contractors. And in that case it makes sense to be pro-business even though there's no particular market there. That is, you would rather have-- Russ: Don't you think the defense sector is a little large for what we get from it? Guest: I think it's large compared to what we need. Russ: For what we get from it. Yeah. Guest: Yeah, no, that's right. I would downsize it considerable. But I would guess that my view of the minimal appropriate defense sector would probably be higher than yours or most people along the more libertarian side. I think that again--and again, I'm not a libertarian. I believe there are certain traded-sector industries that are essential for national defense which you want to have domestic producers in. Because at the end of the day you don't know who is going to be your ally and who will embargo imports or not. And that's simply--you know, you may disagree with the judgment but that's based on our historical experience. And what that means is that the Europeans will never allow their aircraft industry to be totally dependent on the United States. The Chinese are trying to build up their own automotive and aircraft industries, ultimately for strategic reasons. This doesn't mean that you are in favor of statism or collectivism or economic nationalism in general. It just means there are certain militarily relevant industries in which all of the potential great military powers are going to somehow sponsor or subsidize their domestic producers rather than buy the stuff abroad. Russ: I understand. It's an interesting argument. And I think it's just a question of scope, how broadly you think that should be expanded. Russ: Before we leave this area I just want to ask you about one other point you made which ties into this issue of pro-business versus pro-market. You wrote that without the support of the Koch brothers and various self-interested corporations, that there would be no significant libertarian intellectual or political movement. You want to try to justify that? And it suggests that the reason that people support libertarian causes is to encourage pro-business legislation. I find that untenable. But you can defend it. Guest: Well, this is my Washington perspective. If you look at what happened to the libertarian movement, it began as a very vibrant group of intellectuals, sort of like the Paleo-Conservatives, where they have their own principles and their own philosophies and have debates and it's largely academic but it's obviously got political implications. As I understand the history of the movement--and this was explained to me by an angry dissident West Coast libertarian, the Cato Institute and the East Coast libertarians, when they decided to get corporate contributions, suddenly they became silent, a lot of these corporate-funded libertarians, about crony capitalism, about defense contracts they object to, and so on, in order to become players in the conservative wing of the Republican Party. And, you know, Progressives make the same complaint about progressive intellectuals selling out in order to be players in the Democratic Party. So, this is true of partisanship in general. But you may disagree with that. Russ: Well, I have no affiliation with Cato. But I think Cato is a pretty ardent advocate for free trade. They are not protectionist. I think they are a pretty ardent advocate against the defense sector being larger. It seems to me they take lots of--they are against agricultural price supports. They take lots of positions that are "anti-business." And I think they are pretty good on the financial sector. I think. Maybe I'm wrong. They are pretty good about speaking out about crony capitalism. That would be true with the Mercatus Center, where I spent many years at, and I don't see any signs that they've been bought out. Guest: Well, you know, you influence the climate and the weather and, I don't know, maybe I've insulted them erroneously. But my impression is that the corporations who fund these--and it is corporations. I do know a case at a conservative think tank, not a libertarian think tank, where one of the policy wonks who criticized defense spending was let go the same day that one of the defense contractors complained to the president of the think tank. So--and the fact is, there is vastly, vastly more money available for libertarian free market think tanks in Washington than there is for, let's say, pro-labor think tanks. Or pro-consumer think tanks. So I assume they are getting something for their money. It may simply be changing the debate, moving it more toward the free market direction. But it certainly does not seem to represent the distribution of opinion in the public, where libertarians are so small as a percentage of the electorate that Patri Friedman, as you may know--Milton Friedman's grandson-- Russ: Previous EconTalk guest-- Guest: Yeah--has proposed that libertarians are such a minority they could never win elections in the United States and should move to seasteads, offshore, and create their own sovereign states. Russ: Well, where we agree is that we certainly have a tough time making the case for a radical change. As every radical group does, in the relationship between the state and the rest of us. Guest: But most radical groups do not have such nice offices and such deep coffers. That's my point. Russ: That's interesting. Guest: I actually think the libertarians, they might actually be more popular in the public, if instead of just taking grants from the Koch brothers and writing policy papers they actually tried to convert people. Ordinary people. Russ: You don't think we are trying to do that? You don't think those of us--the implication--the reason I found your quote so surprising was the implication that there aren't people who actually believe deeply in liberty. And there always have been. There always will be. Guest: No, my point is that if all of these corporate and donor subsidies vanished, there would still be a significant minority of libertarians. They would mostly be academics, probably. Or the occasional journalist. And they would be like other, you know, heterodox political groups, including Marxists, left-wing social democrats, communitarians. But none of those groups has access to the resources. Russ: Well, we're doing better than those groups, because our utopia has never been tried! Theirs has. It's the empirical evidence. Those Communists, they used to get a lot of money, but now it's harder for them. Guest: Well, there is a complete contrast I think between libertarians and at least the Marxist socialists, because the Marxists, back when you could still find some, I would ask them: Well, what kind of insurance system do you have after the Revolution? Like, how do you structure the public utilities? And they would say, that's a bourgeois question; we'll work all that out after the Revolution. Libertarians have these incredibly detailed plans in advance. Russ: That's right. Guest: Which makes it more plausible, frankly. Russ: It's good marketing. Guest: Something they've thought about.
1:00:37Russ: Let's just close with a conversation about the current state of the American situation--our economy and where we are heading. Where do you see, where do you think we should be going? This is a transition point--perhaps; it may not be. I've been shocked at how little we seem to have learned from the crisis. Whether you are on the Left or the Right. If you blame government for what went wrong through moral hazard or housing policy, we haven't changed any of it, other than to put Fannie and Freddie on life support. But they are still alive. And moral hazard seems alive and well, despite attempts to get rid of Too Big to Fail. If you blame it on Wall Street and greed or failure of deregulation, we haven't really, I think reregulated in any important way. We haven't done anything dramatic in the face of the worst recession of all of our lifetimes. So, where do you think we ought to be heading, what lessons should we have learned and what would you suggest? Guest: Well, I think there are two questions. One is the post-break recession aftermath, where I tend to follow the conventional Progressive view that we needed more fiscal stimulus, if you want to call it that, along with accommodative monetary policy, in order to get out sooner from this long deleveraging process. Which where we could never quite escape. We could keep seeking back down again and again. The longer, more difficult issue is that, because of technology mainly, the entire world economy is moving from the manufacturing based economies of the 20th century, on which all of our institutions are based, whether it's unions or old-fashioned welfare states, contributory social insurance, to a new economy in which much of the productive sector will be robotic. And the vast majority of people will work in the non-traded domestic service sector doing jobs that neither robots nor people in other countries can do. It's already about 86% of the population; it may end up being 96%. And neither the Left nor the Right has much of a vision about what are you going to do with all of these people, where most of the jobs that are being created are in jobs which, at least at the moment, in the United States and similar Western societies, pay very little. And these are the jobs of the future, for the most part. Retail, hospitality, health care is going to grow enormously. And then of course brain surgeons are going to be paid well. But nursing aides are not. So there are a limited number of options that you can discuss. You can accept a low-wage society of nursing aides and simply provide more subsidies to them, either in the form of vouchers or in the form of public goods. You can try to raise their market wages by minimum wages or other market interventions like a shorter work week. But I think that's the big question. The big question of the 20th century was: You had these emerging majorities in developing countries like the United States and those of Western Europe of post-agricultural industrial wage earners; and their needs created crises and governments responded to them in various ways. In both the private sector and the public sector. The equivalent of the urban factory worker of 1950 will be the suburban medical complex nursing aide of 2020 or 2030 or 2040. Russ: I don't know-- Guest: Because that's my take. Russ: I'm not as pessimistic as you are, maybe. Well, I'm not. And just to give a little recent history, this vision that we are all going to be nurse's aides for each other and it's a low-paying job: Twenty years ago, which I'm sure you remember vividly, people said: The Japanese are eating our lunch; all we are going to be left with is the service sector; we are going to be selling each other cosmetics and doing each other's laundry, and that's a very low standard of living. That vision was wrong. That vision of the transformation of the service sector was wrong. Now you could argue it was wrong because the Internet and technology came along and made that world very different. Guest: Why was it wrong? Russ: Because we are not all selling each other Guest: [?] service sector now? Russ: Well there is one. Guest: But that's where the jobs are being created. Russ: Well, I don't-- Guest: It's not because the Japanese-- Russ: No, I understand. It's technology. I understand. I'm just saying that the pessimistic view of 1984 or 1986 or 1990, which said that industrial jobs were leaving the United States to be replaced by service jobs, and service jobs paid poorly, I think was an incorrect assessment of where the U.S. economy was headed and where it headed up. And I'm not confident that we're headed toward a world of nurse's aides, for the same reason. I don't know what's going to happen. I don't know what's coming along. And I really don't know how technology is going to change, how we will interact. It changed dramatically over the last 15 years. Mostly for the good. Now, as we talked about before, there are people who suffered, who have had a tough time in the last 10 or 15 years. And I want to try to keep the Great Recession out of it, because I think it's masking part of the-- Guest: Well, that's why I said--this is the long term. Russ: Correct. So, we'll see. It's hard to say. But close with the policy implications of that. If you are right. Guest: Well, I think the policy implications are, on one thing after another, we have to review all of the regulatory, labor market, social insurance schemes which were premised on essentially the typical worker, the typical wage earner. And this would still be a wage-earner society where most people get very little from capital in our lifetime. And the typical wage earner is a unionized member of an industry like automobile manufacturing where the workers and the bosses can extract rents because of their market power. And share that with the industrialized sector workers in the form of generous private pensions or allowing them to pay for generous public welfare states and so on. I just think that whole 1950s model which existed in various respects to this day, in different national versions in the United States, Japan, and Germany, and so on was essentially designed for a society in which 30% or more of the workforce--then the male workforce--was in the factory sector. And it seems to me the society we are moving towards, where it's largely non-automatable, non-offshoreable, personal services--some of which are very high end, some of which are very low end--the factory-type model and the industrial workforce model just does not fit. And the Progressives, because of their base in the labor unions, you know, tend to be stuck in this 1950s model, I think. I think what the Right, at least the Political Right, has been saying to Americans for the last 20 or 30 years is essentially: You, too, can be a millionaire. Right? We'll have an ownership society and you can invest in the stock market and somehow this all be capital, and you'll be receiving capital gains. And that's not going to work. So I really do--you made this briefly, but I do think that labor market conditions and the social wage for high school--well, even the majority of people, the rest of our lives in this country, assuming you are older than I am, and I'm 51-- Russ: I'm 58-- Guest: Most Americans in their lifetimes will be educated working class people. And that--whether they have a decent middle class lifestyle I think, that's the ultimate test, I think, of these different political philosophies.

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COMMENTS (67 to date)
James writes:

Wow, best guest in months. Lind is right on the money on nearly every issue. Libertarians underestimate the necessary size of government. The modern world is full of dangers that can destabilize a weak state. Large military, institutions like the NSA and the FBI, huge police forces, huge firefighting forces, FEMA, etc. are all simply necessary in the post WW-II era.

It may be true that we could survive and thrive with much less of what is essentially expensive government insurance, but who wants to run that experiment?

Lind also hits the nail on the head about education. Our schools are no worse than those in Norway, Sweden, China, Korea, Japan, etc. It is 90% propaganda and public misunderstanding of statistics. Even when it comes to NCLB the public is misinformed about its "failure". In fact NAEP scores show the Black-White gap in 8th grade math has closed by 30% since 2000.

David writes:

Russ,
As frustrating as it is sometimes I still respect the structure of Econtalk and your ability to allow the guest to speak their opinion without interruption even if you disagree with them.

I don't think Lind takes into account cost. Yes, government provides things but is it sustainable? Social welfare looks great but what happens when it becomes to large and costly. Perhaps the incentives for defense contractors to get contracts over emphasizes the need for defense spending.

Justin P writes:

This was a great podcast.

I agreed with Lind more than I thought I would have. He did make some rather bizarre claims at times as well as taking for granted that all libertarians are not the same.

I think his arguments are very good against Anarcho-Captialist type libertarians (his Proudhonians) but not for minarchists like me or anyone that is a classical liberal. It would be interesting to see what type of Libertarian his cocktail party friend was?

His classical liberal defense of the welfare state is a huge stretch. "And it wasn't because they loved the state for the sake of the state. They weren't fascist or totalitarians." Actually a lot of them were, though. I think a lot of them are now as well. If you look empirically, that can be no doubt those societies that are more free market, produce more wealth and raise people out of poverty faster than countries with less free markets. The answer to why there aren't more "Libertarian countries" is the same answer to why people still to this day think free markets are bad or evil or whatever they try to say to justify more regulation. That's really the heart of the matter. Why do people advocate for more State involvement when the States continued involvement leads to impoverishment?

I think Lind poses something like a strawman when asking why Libertarians aren't proposing "libertarian policies?" Well, that would be the case IF all libertarians were An-Caps, but they aren't. Minarchists like myself, know that Government is a necessary condition for society, the question is how much creates the optimum. This is the question Lind should be asking. Obviously, Progressives and Minarchist/Classical Liberals are going to disagree but looking at the Data, I think there is a strong case for the Classical Liberal tradition. So what you see are Libertarians (not of the An-Cap variety) proposing policies that are for less government decision making rather than for more bureaucratic decision making. More local decision making rather than centralized. This leads to policies for fewer taxes, less spending, less regulation etc.

Andrew' writes:

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triclops41 writes:

I had 3 main problems with Lind.
The first is that he thinks incremental improvements advocated by libertarians prove they aren't libertarians. That's ridiculous! His example, vouchers, are offered by free market proponents as a less bad alternative to the current system. It is strange that he applies a purity test to libertarians that he applies nowhere else.
The second is that he knows literally nothing about libertarian think tanks like Cato. Cato spent a ton of time arguing against "too big to fail", and arguing that letting those banks fail would not lead to the apocalypse. In that respect, Lind is a slightly more sophisticated proponent of "Kocktopus" than most, but still sees them as omnipotent bogeymen. He even had to admit his evidence for such capture was just a conservative think tank!
The last is that he fails to see how the centralization of power that is a consequence of his high regulation and/or nationalization solutions are the very cause of the crony capitalism he wishes to eliminate.
I think Lind has some interesting things to say, but his understanding of libertarianism is perfect for an article "Linds myths about libertarianism 101".

David writes:

Thank you, Russ and Michael, for a thoroughly enjoyable and thought-provoking episode.

AmosDW writes:

Allow me to restate Lind's original question: "Why, if libertarianism is such a good idea, have no governments, made up of people who themselves profit from the opposite of libertarianism, moved toward libertarianism?"

That ought to clear up the question.

A lot of people covered other objections quite well. The point that triclops makes is common among Progressive thinking, however. No amount of error condemns Progressivism and collectivism. Any amount of error condemns libertarianism and free markets.

Then there's the part about how connecting state-sponsored reward to military service begins with Progressives during WWII.

No. The Ancient Romans and Classical Greeks did it.

Patrick R. Sullivan writes:

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Ryan O writes:

This seemed like more of a press conference than the typical EconTalk. It's very rare that Russ lets vapid logic and broad strokes color the conversation to the point of academic suffocation, but this seemed more to me like a platitude based undergraduate discussion section on political economy, and less of a serious inquiry into the realistic issues raised on the topic of libertarianism.

This episode made me a bit angry, as Russ (one of my intellectual heros and a very capable advocate) let talking points and necessary questions get sidetracked in bazaar ways. It was like listening to a bad debate round.

For example--when they're discussing why there hasn't been a libertarian based government... This question is quite absurd given that libertarians aren't like marxists-we don't have a teleological doctrine that serves as the focal point of our future endeavors. In fact, we patently admit that we DON'T understand what the future will bring, and don't have answers to questions yet asked. What we DO have is a way of looking at questions, and a way of providing answers. Libertarianism is a lot like economics, as a philosophy and a practical tool, it's a way of looking at the world, and Russ didn't get that across (he actually failed to make very many constructive points in defense of libertarianism at all).
There surely has been libertarian based societies with classical influence throughout policy, but like I said- the question itself is a bit ridiculous. The distraction that Lind offers was utterly vacuous. The idea that the people choose what they like best? Any reasonably informed person will tell you that the product of group choice is rarely (if ever) the optimal solution, and that same person will tell you that large interests, media influence, and the notions of policy moral hazard combine to yield the realities in which we live. There's also a reasonable argument to be made that libertarianism doesn't mesh well (in some ways) with democracy and a "what have you done for me lately?" voter paradigm. Russ does a reasonable job defending this point of of group choice yielding the "good" answer (The chocolate ice cream example), and I do respect his prudence when guests have shallow views of history, politics and economics, but a little lawyer-ing here would have been nice.

I think Russ can strike a balance in such instances. His respect and candor is admirable in every single instance (one of the reasons EconTalk is so popular and well regarded), but I do think he should bring some constructive material to the chalkboard on such occasions, instead of purely functioning as a backboard and assumption irker. Libertarianism has a multitude of defenses, along many spectra, and just because it can be assumed that many of the people listening agree doesn't mean those arguments aren't worth making.


Utiz4321 writes:

I think the guest makes to much out of the pragmatic libertarian policy proposals and libetarian theory. I think a libertarian could give a perfectly coherent response to why are you lining up behind programs that don't line up 100 percent with you philosophy by saying it is our second best solution ( or third best ect.). The move to an active government. Was an evolutionary process and so would a move away.

triclops41 writes:

I'd also say this is the only Econtalk where Russ disappointed me, and I've been listening for about 5 years. All that shows is that Russ may be human after all, and that no one bats 1000!
I look forward to next week, Econtalk is the best part of Monday!

R. Jones writes:

James wrote:

In fact NAEP scores show the Black-White gap in 8th grade math has closed by 30% since 2000.

I'm not sure where exactly you got that statistic or what you were trying to show with it but here's the reality:

"No significant change in White – Black score gaps since 2004"

http://nces.ed.gov/nationsreportcard/pdf/main2008/2009479.pdf

Their graphs show a consistent math gap that hasn't closed at all since the mid-80's.

SaveyourSelf writes:

I like it when Russ interviews smart people who are also Socialists because I can follow the train of their thoughts...even when they derail. That said, my hat goes off to Mr. Lind for stepping up to the plate and taking a swing. I admire his courage.

Michael Lind has a speech style and language that reminds me of President Clinton. Both use modern economic terms that reveal broad reading and intelligence. And both dismiss the mathematical, statistical, and logical consequences of those economic terms whenever they conflict with political preferences.

Early in the podcast Mr. Lind said, "I'm pro-market, where you can really have competitive markets." Which sounds like a pro-market, pro-competition position, but, for Mr. Lind, there are a very large number of markets which produce "natural monopolies," where that position does not apply--like banking! Against such “natural monopolies”, he says, "the best thing for a market would either be they would be regulated like public utilities or nationalized in some cases." (Section 45:28)

[Never mind that there is zero competition—by law—in a nationalized industry.]

Russ's shining moment--for me--in this podcast was his rather understated observation that there is, in fact, a great deal of competition in banking.

Mr. Lind’s response shortly thereafter is telling: "Why would the so-called free market people rush to the defense of this predatory private monopoly when the government tries to regulate them? It seems to me the logical thing to do would be to say, we'd rather have a private regulated utility than these parasites who were hurting the actual productive businesses."

That is a rich statement with many assumptions. Here are but a few: 1) "Predatory private monopolies" are only predatory because they are private, whereas government monopolies are never predatory. 2) It is preferable to have the government actively take over a monopoly than to have the government actively encourage greater competition. 3) Central planning is an equal substitute for diffuse individual decision-making. So that a government office could run a business at least as well as private citizens while simultaneously guaranteeing better moral outcomes. We are talking about “public servants” displacing “parasites” after all. 4) Individuals--like himself and the people in his political party--are smarter than the market. 5) Free market advocates only advocate for free markets when times are good. When bad things happen, by his logic, they are supposed to advocate for centralized decision making.

mtipton writes:

Great podcast, wish they were longer! This conversation illustrates why the “right” and “left” desperately need to talk to each other. As in the case of George Soros’s talk at CATO, the straw man of the “market-fundamentalist impervious to evidence or nuances” seems to be a popular perception among the left. It probably goes both ways, and we tend to create caricatures of each other, however simplistic, they certainly are easier to argue against. I’ve always found amazing how the “filter of our mind” affects our perception of reality. Here you have two people in George Soros and the Guest that feel the need to oppose “market fundamentalism”, at the same time you have libertarians concerned that the population at large tends to have an anti-market bias, and demand and expect outcomes from “government action” that are unrealistic and lead to more cronyism and inefficiencies than anything else, both looking at the “same reality”. Is the problem too much or too little government? Or is that the wrong question, and we should follow Obama’s framing of the problem, the question is one of good government vs bad government? Well I am sure EVERYONE IS FOR GOOD GOVERNMENT. The heart of the matter is how do we judge, how and CAN we know? Can we know the actions and outcome that will transpire if we advocate for this or that “government action”? If we are going to be honest with ourselves, we’ll acknowledge that on the face of such a complex system as the global political economic social ‘system’ of human interaction we can’t really KNOW what arrangements are possible, HOW to achieve particular arrangements and which will be “successful” in the short, medium and long-run. In looking through my libertarian tainted lens, this leads me to advocate for as much individual freedom of action as possible.

“It is because every individual knows so little and… because we rarely know which of us knows best that we trust the independent and competitive efforts of many to induce the emergence of what we shall want when we see it.” F A Hayek

Stuart Maclean writes:

Why are there no libertarian countries? Where is there a viable country in the world? They're ALL broke! They're all centrally-banked socialist failures. http://www.cato.org/policy-report/marchapril-2013/saving-soul-classical-liberalism

Eric Gartner writes:

For the life of me, I don't understand why "Why are there no libertarian countries?" is of much relevance at all to whether libertarianism is a viable or correct political and economic system. The question seems to come from a mental space in which we've reached the end of history, and all that remains is to optimize the liberal democratic-republican mixed-economy system until the Sun burns out. Given the vast change our species has undergone in just the past few thousand years, that seems like an unlikely future to me. Surely there are many ideas -- and not just political, but social, scientific, moral, etc. -- whose time has not come. I suspect the future will include the rise and fall of many great powers, widespread technological disruption of the way life is lived, waves of cultural conflict unimaginable to us today, and the rise to dominance of ideas that would confuse, shock, or downright disgust us comparatively-primitive early-21st century folk. Maybe it's loony to think about that now, but in our history it doesn't seem to take long for the loony ideas to become the near-universally-accepted ones.

Now, I'm not saying liberal democracy is an incorrect dead end, either. Just that it seems "loonier" to me to think that nations have necessarily already tried all the good ideas. If the whole world switched to minarchism or anarcho-capitalism, I'd be hesitant to declare that the end of the story, too. It seems to be the same lack of imagination that led so many throughout history (including the very bright) to be unable to dream of a world without kings, or slavery, or theocracy. Why the heck should we limited to the small box of already-tried ideas? If you want to argue against any political philosophy, you need to bring much, much heavier ammo than "If it's so great, where is it?" [Even when your political philosophy places a lot of value in emergent orders.] And to their credit, most political philosophers do bring much heavier ammo to the fight.

As far as empirical evidence goes, it seems that libertarianism is actually very much like the system being used whenever there are voluntary transactions. Trade, charity, most social groupings, family relationships (with the exception of young children), playing, talking with a friend, most of what happens on the Internet, and so on... people spend most of their lives engaged voluntarily with others, mostly with mutually agreed-upon rules and customs guiding the action. Libertarians seek to increase this sphere of "voluntary" acts and decrease the sphere of the "coerced", however they choose to define those terms. It feels radical to push this sphere larger than what we are accustomed to, but libertarianism isn't arguing for anything we don't already apply to many areas of life. When you think of it as a system imposed top-down by a nation-state instead of what happens when the nation-state slides further to the background and lets more things play out in the realm of voluntarily traded private property rights, of course you won't be able to find it anywhere in the world. The world libertarians argue for, however, is already substantially present in our lives, and in evidence all around us. [And the same can be said of other systems as well, both those tried and those untried on larger scales. We each act out many -isms in microcosm. We don't need a standard-bearer state to get a little taste of an idea.]

Maybe that's all a bit "utopian", and I very much enjoy discussions of natural monopoly and fraternal orders and school vouchers, but those things feel disconnected from the initial "question libertarians can't answer". Those are just policy arguments, which are vitally important, but ultimately don't have much to do with the "gotcha" that launched the conversation, unless you accept the premise that the question really is a death blow to libertarianism unless you can successfully defend the Gilded Age or medieval Iceland or colonial Pennsylvania as being a functionally libertarian state. We can learn a tremendous amount from history, and from comparing modern nations, but why would anyone confuse an atlas with a menu of allowed policy options? And if you want to carve the world into a variety of competing systems (an act which will necessarily leave out critical details about each unique polity), each system was tried someplace and sometime first, was it not?

bogwood writes:

Appreciate the podcast as usual, brightens my Monday bike ride. Just two notes from the biophysical side.
The sewer system is not a "natural" monopoly. Or maybe peeing and pooping in your drinking water is natural. There are options which lead to closing the nitrogen,phosphorus and carbon cycles. The government tends to resist this necessary environmental goal. Guest needs to think outside the toilet.
We probably,as a society, are not richer than fifty years ago since we have burned through 200 trillion dollars worth of natural bank account/resources. The accounting is complicated but certainly per capita we are poorer.

Thomas Shaw writes:

I only listened to Bryan Caplan's econtalk podcast on the myth of the rational voter, but it seems to me like his book lays out the foundation for why we haven't tried a libertarain goverment. People choose bad policies, due in part, because they are not well informed and they have little incentive to become well informed.

Am I on the right track here?

John Peer writes:

I love that Russ tries to be open minded and fair to his guests that hold different opinions but IMO he should've been way tougher on Lind, what with all his uninformed assumptions, fallacies and strawmen. I thought Sachs and even Stiglitz were good guests and brought up some good points, even finding some common grounds with "our side" but Lind came off really hack-ish.

Martin Brock writes:

I agree that Anarcho-Capitalists are more like 19th century Mutualists (Proudhonists) than they are like 18th century Classical Liberals. I sometimes accept the Mutualist (though not the Anarcho-Capitalist) label myself, with my own provisos of course, but I don't accept any "anarchist" label, because anarchism generally is subject to Lind's critique, a critique that is nonetheless facile when applied to the great variety of libertarian thought.

Despite the label, anarcho-capitalists are not properly "anarchists" at all. They are what I call nanarchists (nano-archists or extreme minarchists). They advocate an extremely minimal state in the sense that its most central authority enforces very few rules, but they nonetheless advocate a state, at least implicitly.

Nowadays, I identify most with Chandran Kukathas' Liberal Archipelago, as far as I understand it. Kukathas' Archipelago is also nanarchist and also departs from 18th century classical liberalism and 19th century mutualism and from other broadly libertarian schools of thought. Kukathas also uses the "anarchist" label, but he essentially advocates an extremely limited state enforcing only two, individual human rights universally, a right not to be killed by a community and a right not to be held involuntarily by a community (essentially a right of habeas corpus and a right to be judged by the standards of other communities in a criminal procedure).

Kukathas' ideal is practically the "intentional community" ideal that I adopted when I was younger and then associated with "communism", though I was always an extreme libertarian and never anything like a Marxist.

In this liberal archipelago, conventional "property" rights, which anarcho-capitalists presume to be enforced universally, are determined within communities, as terms of membership, and may take forms more varied than anarcho-capitalists typically assume. Essentially, communities have land (natural resources broadly) and delegate governance of this land to individual members freely accepting membership in a community with the sort of property rights that they prefer.

The most central authority in the Archipelago enforces only an obligation of these communities not to kill members systematically (ruling out capital punishment) and not to hold any member in a community against his will (ruling out involuntary imprisonment in the sense that any prisoner may leave his prison for another community willing to accept him, possibly into a different sort of prison for a time).

The "democracy" realized in a liberal archipelago is hardly limited at all, in terms of the variety of law that it may enact, but people governing themselves this way may not impose rules on millions through some majoritarian process. They may only vote with their feet for the particular system of law that they prefer without necessarily preventing others from organizing themselves subject to a different, even a radically different, system of law.

Of course, the Liberal Archipelago is utopian and has never been realized anywhere (and presumably never could be realized precisely as described here), but that's no criticism of it. Nothing is ever tried until it is tried.

Edward Dentzel writes:

I'm sure there's somewhere on this Earth where Mr. Lind is known as a very smart, articulate, thoughtful, and thorough guy, but he surely didn't prove it on this podcast. I'm no libertarian so I'm not going to get into defending them. But Mr. Lind's allegedly challenging question of why there aren't any libertarian countries in the world seems more like an inquiry that would arise at some late-night "deep" discussion between poli-sci majors at one of our un-esteemed Ivy League schools. I mean, while we're at it why don't we ask the question that could solve all of these problems: Why don't people all love one another? Fire up the VW bus, man.

That he believed his question was thought-provoking and profound seems naive and ignorant to me. Mr. Lind, all over the world in all sorts of different sectors--entertainment, relationships, science, parenting, etc.--good ideas are losing to bad ideas for all sorts of reasons. And I say this and I'm not a libertarian at all.

I think his question is actually (and maybe the respondents figured as much): If libertarianism is so clearly better than all other forms of governance, why do people reject it? Of course, the undertone of such a question is: Libertarianism isn't better at all and people all over the world are correct in rejecting it. To Mr. Lind I would've answered: Ya know, some people hate chocolate, too . . . what can ya do?

Overall, after this hour-long podcast, my impression is despite his impressive credentials Mr. Lind is just like any other voter out here: He dislikes anything but the way he thinks. The difference is he got some attention by writing an article about it. Congrats on that, Mr. Lind.

Greg G writes:

The failure of real world libertarian nations to evolve is indeed a legitimate challenge to a libertarian philosophy. The failure of many libertarians to recognize that has a lot to do with why libertarianism is not gaining more interest outside of the libertarian community.

Yes, it is true as Eric points out, that not all the good ideas have been tried. And yes, it is true as Edward points out, that good ideas can lose to bad ideas for many reasons. Those are fair points.

The problem is that most libertarians claim that a relatively more libertarian system would provide very substantial competitive benefits to the individuals and nations that adopted that system. It is claimed that a relatively more libertarian system would provide substantially more economic efficiency and more opportunities for human flourishing in general.

In a world where natural selection still operates, that should cause a tendency for the success of at least some increasingly more libertarian nations. There is, after all, a wide range of variation in how far different nations stray from the libertarian ideal.

And yet as long as there have been self identified libertarians they have constantly been warning us that the growth of the modern nation state has been taking us FARTHER FROM the libertarian ideal.

And despite all this libertarian hand wringing, the world has seen a huge increase in the number of people living in relatively more freedom and prosperity.

It is one thing to believe in libertarianism despite this challenge. It is quite another to fail to even recognize it as a legitimate challenge.

Halvard writes:

Interesting podcast.
One question free market and libertarians always have a problem with explaining why Finland has the best school system.

Finland is the opposite of free market but has no problem creating the best K12 school system. Finland is social democratic, has unions, hardly any testing, no incentive pay. Actually Finland does everything wrong, but when it comes to output the country beat everybody else.

So the question is how can a country do everything wrong but be at the top of the class.

Seth writes:

It seems like Lind was open for change in several areas. For example, he agreed that we spend too much on defense and K-12 education. He advocated experimenting with other K-12 models, even suggesting that ‘a better’ K-12 system would keep people from having to go to college and get remedial help on things they should have learned in high school.

But, he never touched on how he thought that change could take place when government is heavily involved. A key reason I favor more liberty-minded solutions (not necessarily all-or-nothing ideology) is that the feedbacks that drive change seem to work better than in areas with more government involvement and less choice.

For example, Lind is open for experimenting in K-12 education delivery. How does that work when we have several entrenched establishments who are backed by weak-feedback-taxpayer funding (teachers, administrators, etc.) that resist such experimentation. Not only that, they advocate for a single standard “that works” rather than entertain and allow for the idea that discovery through experimentation may lead to trials that produce unexpectedly better results, but at a cost of producing some errors along the way. Do you think you will convince them that a few errors and failures are worth it risking their livelihood?

At 27:04, Lind says: “…There is no doubt that government social insurance crowded out a lot of charitable activity. And also that Federal social insurance crowded out a lot of state and county and local… Now, the question is: Is this a bad thing or not?...[Story about one conversation with man who had experienced private charitable efforts before the gov’t crowd-out]…So I said, do you miss that world of diverse civic society? And he said, Hell no. So. You know there may be people who have some nostalgia for that, but I think this actually liberates civil society.”

At what cost? Again, we get into a feedback problem. What incentive do people have to economize once civil society has been liberated. Here, I believe, is the very reason that we spend too much on some of the things Lind highlights, but he doesn’t seem to connect those dots. Perhaps the more diverse civic society that included the fraternal order of elk wasn’t preferable (at least to one person) to one that is a seemingly unconstrained connection to taxpayer wallets, but maybe that less preferable scenario was a good thing because it encouraged a bit more self-reliance prudence and a bit less recklessness and dependency.

John Berg writes:

Dr. Roberts:

When one uses the word root "emerge," do one always mean "emergence"? Is "Emergence" always the haphazard resulting of a stable system from unrelated but apparently voluntary actions of apparently independent entities? How does "evolve" differ?

How can I justify the belief that man will never discover/invent a utopia?

Did former Speaker Nancy Pelosi reveal a truth when she stated that "We have to pass the bill to find out what's in it" because "passing the bill" means Congress merely authorizes a group of unaccountable "experts" to make our laws? Has our Constitution been successfully out-flanked?

John Berg

Ralph writes:

In defense of Milton Friedman, he proposed government programs like vouchers and Negative Income Tax with the qualification that specific governemnt bureaucracies and services be reduced or ended in return. The point was that government bureaucracy/services are inherently inefficient and the same services can be offered more efficiently by a direct transfer of money and then let individuals make their own decisions in a market. Thomas Sowell makes a similar point when he says that we can end poverty tomorrow with a direct transfer of funds that raises all above the politically determined poverty level, and all without any new government programs. It's more efficient than the proliferation of government bureaucracies.

There would not just be a new voucher/market choice system, there would also a reciprocal reduction in government.

American Big Government Liberals love Milton Friedman's proposals, but they enact them without the government reductions. They embrace Republican spending ideas without the reciprocal cuts, increasing government bureaucracy and spending.

Friedman also proposed the all-volunteer army; self-selecting the most committed and best qualified and creating the greatest fighting force in history here in the states.

Ralph writes:

Expansion of government services to everyone in society without requisite obligation is not the same as contractual obligations made to soldiers. The Big Government expansion made on that FALSE comparison is what sets Liberals on their eternal quest for Williams James’ “Moral Equivalent of War” and the requisite suppression of individual preferences for state preferences: they seek an excuse for continuous government expansion and concentration of power in the hands of so-called progressives.

Classical liberalism (American Conservatives/Libertarians) created the Second Amendment, which is the interest in defense of rights by force. Lind misses that fact. Big Government progressives are doing everything they can to undermine that individual control of force and concentrate it in the hands of the state.

Private charitable donors have a different understanding of HOW to improve the lives of disadvantaged people. Providing opportunity rather than outcomes is the preferred privately funded mechanism. Lind is right that you won’t see a privately funded duplication of Big Government programs, but that’s because charitable individuals don’t see the so-called progressive solution as effective in solving problems. They want to see results for their donations. Give a man a fish vs. teach a man to fish…

Jay writes:

What a great interview.

I wish there was more time spent on the issues regarding trade deficit and the emergence of service economy.

Andrew writes:

Great Interview Russ. Really enjoyed hearing you guys face off.

Andre Kenji writes:

The best Econtalks are the ones where the guest openly disagrees with Russ.

Alex writes:

IMHO the reason why there aren't Libertarian countries is the Representative Democracy system. It creates a permanent political class of people who want power; politicians will never voluntarily give away control.
In addition, the channelling of power through a limited number of people creates an easy target for lobbyists and rent-seekers.
The answer is more Direct Democracy, which can probably only feasibly work with technology such as the internet.
We need the national version of the Town Hall Meeting.

Mateo writes:

Interesting topic, but I am only so fond of the guest. He brought up many interesting ideas which I appreciated, but too often the bias was choking. Using Pinochet as an example of Libertarian government shows me that his definition of a Libertarian is "someone who is bad and does bad things."

The other annoying aspect was the "if it is not a rock, it must be whatever I want to believe it is" theory of arguing. It reminded me of creationists' issues with evolution. Without a time lapse from the big bang to today, the case is un-provable to them. Yet, they do not use the same logic on their beliefs.

Truth is singular, its versions are mistruths (thank you Cloud Atlas).

Shawn B writes:

I have to agree with the guest's concept of natural monopolies surrounding transactional banking and was somewhat amused to see Russ struggle to understand his argument.

Surprisingly, the guest did not mention the Federal Reserve's check clearing service as an example of both a natural monopoly and a highly regulated implementation of it as a defacto government-run monopoly.

The "free market" version of this same service is Visa/Mastercard. And unless you have been sleeping under a rock, it's clear that private operation of a natural monopoly in transactional banking results in rent-seeking behavior, as is evidenced by both the class-action settlement reached with Visa/MC and the numerous entities opting out of the settlement as inadequate.

Russ' arguments against this seem a little thin, as even the guest limited himself to "transactional" banking and not broader banking services for more complex financing needs (eg, investment banking, mortgage lending, etc).

I think that cellular phone service is another example of a natural monopoly masking as a competitive business. While device sales and specific services like voicemail vary, the task of sending data or completing voice calls is very transactional and the capital intensive nature of cellular networks is really no different than wired voice or data networks which are still treated as highly regulated public utilities.

Very enjoyable guest who made some very good critiques.

Robert Kennedy writes:

I agree with the various responses to Lind's original question. It seems obvious to me that most governments are going to end up with a lot of rent seekers that will resist libertarian philosophies. Those of us with libertarian instincts need to continue to provide a voice that will hopefully have an impact on whatever emerges.

I'll agree with Lind that donations from Koch and others has benefited the libertarian cause. But so what? I assume that Charles & David Koch are just as sincere in their views as I am. Are they bad because they have money and choose to donate it? Lots of people donate money to causes they believe in. Donated money is not inherently self serving, imo.

Michael writes:

As someone who is left-leaning politically, I think Lind does have a point with his critique of libertarian support of school vouchers and similar programs.

I will use school vouchers as an example, since it was discussed on the podcast. Here are some realistic potential consequences of a school voucher program:

1. Improvement in the quality of K-12 education for all students, regardless of background, socioeconomic status, etc.
2. A massive increase in the cost of K-12 education, analagous to the increase in the cost of higher education that has occurred coincidently with increased federal funding of higher education.
3. A massive, taxpayer-funded giveaway to K-12 "educators" who are politically connected.
4. Relative to the status quo, a program that improves the quality of education for the well-off, while reducing the quality of education for the poor.

Which of these do you get? Probably some of each, depending to a great extent on how exactly the program is designed, legislated, and administrated - and many of these tasks would be left to a non-libertarian government!

Jim Feehely writes:

Dear Russ,

It seems you are confusing anarchy with chaos. I think Noam Chomsky provides the best definition of anarchy: Anarchy requires any individual or institution that exercises power and authority over others to justify that authority. If that authority cannot be justified, then anarchy requires that power and authority to be dismantled.

In relation to the demands for small government, that can only be achieved by dis-aggregation of all powerful nation states and of large corporations. If smaller is better than large in relation to government, then that principle must be generally applied to all institutions. Whilst corporations continue to enlarge and aggregate across borders, small government is not possible, and if possible, can only result in laissez faire capitalism and I guarantee that will will be very bad for individuals.

Welfare in 'liberal' societies is simply the necessary, but often misdirected, response to the inequities of liberal capitalism.

What all political economy ideologies completely miss is the relationship between human society and environment and that is now, and has been for many decades, the crucial issue.

Neo-Liberal Capitalism has clearly failed on the key issue of wealth equity and is, in my view, fatally discredited on that basis alone. It is also accelerating the destruction of the environment.

Socialism and Communism cannot solve the 'incentives for contribution' problems.

I support Michael Lind's argument for a vastly modified form of capitalism; ie dis-aggregation of all big institutions (including nation states and corporations), authentic markets (not markets controlled and contorted by the powerful) and equitable distribution of wealth based on contribution to society, not based on luck and power. That is not Socialism, Marxism or Communism. Michael Lind is to be congratulated for exposing the failure of all ideologies.

What the world needs is new thinking, not the tired ideological debates of centuries. It is either that, or the inevitable destruction of nature and the environment. We know the environment is being destroyed, yet we debate political economy without any mention of the impact on nature.

Even this discussion, despite the important points covered, like all discussions not specifically about nature and the environment, proceeded without any mention of nature or the environment.

If Liberalism or Neoliberalism had any credibility it would emphasise the right to a healthy and supportive environment. But it does not. It simply theorises about wealth.

Regards,
Jim Feehely.

Adam writes:

Very interesting and challenging guest. Michael's clearly studied his opposition very carefully and crafted jolly good arguments for progressive statism. Seemed like you were a little back on your heels, Russ. Boxing can be tough.

Michael's challenge does play a little fast and loose with the facts, however, as other comments point out. His strategy only works once he pushes libertarians into an extreme corner of the ring--that of anarchy-libertarism (AL). As Locke and Hobbes point out, AL is a violent unpleasant world of gangs and brutality. How can Michaels argument not prevail against the AL fantasy?

Libertarians and progressives all require a State. Libertarians require a State for national defense, orderly and honest commerce and a stable rule of law. We don't need a State for crony capitalism, partial justice and massive redistribution. We may need some degree of coerced redistribution to sustain ethically acceptable--e.g., "equal" in the old fashioned sense--opportunities and socioeconomic mobility.

Progressives obviously require a State to impose their utopian dreams. The dreams are endless and only lead to the massive inefficient and social destruction that's replaced prosperity in too many cities and states across the country. A few examples: Detroit, Cleveland, south Chicago, St Louis/East St Louis, Newark...

Oh, I can't leave out my native State of California. Look what they did to my State! I love to visit the few sunny spots left, but so much is sadly wasting away. Stockton, Modesto, LA. The beaches are beautiful, but careful--watch out for those syringes forgotten from the night before. Beautiful forests, but careful--watch out for the 'juana farms and their gangs.

CA is such a sad example of progressive Statism--so much beauty and potential destroyed by a greedy electorate dumbed down by years of Statism and rising property values. My family members who remain there think that prosperity comes from buying a house and borrowing successive more and more to live off the appreciation. if you insist on working, they say, then you should work for a school system or a non-profit. Yes, Silicon Valley has too may profit-making companies, they say, but their useful--that's our source of tax money. With SV, it'll all work out!

Michael is wrong. The progressive State is a failure wherever it's tried. As he point out, the progressive State grows and grows to its own advantage. Need more soldiers? Then give them social security, health care and voting rights--that's what Michael sees in the history of Bismarch's Germany and post-WW2 Britain. There's no humanity in the welfare State, it's all about the power to impose one's own version of utopia. I'd prefer that Progressives like Michael would take up writing utopian novels, rather than having them burden our political economy with their fantasies and deceptive rhetoric.

What are we left with? Progressive failure or a thin hope of incremental libertarianism. Progressive beckon us onward toward a Detroit-like future. A little more liberty and impartial law would go a long way in opening up a golden age where freedom and individual expression might flourish in commerce, arts and all the wonderful endeavors of a civil society. Alas, the US polity seems to favor the former rather than the latter.

Mr. Econotarian writes:

Another great episode!

Regarding banking "being a natural monopoly", I think that is pretty silly as there are plenty of banks and a very competitive market (and of course "banking" itself means about 100 things). To the extent there are a limited number of banks, it is because of the ever increasing levels of regulation. For example, there has recently been a tremendous decrease in free checking accounts because of Dodd-Frank.

Moreover, it is clear than government-run banks tend to be politically controlled for the benefit of insiders (see China's state-owned banks). Having to measure the risk/return of various potential loans is very difficult, even for those who are mainly motivated by risk/return rather than political patronage.

State and City governments can't even responsibly run their own employee pension systems in the long term (see Detroit and San Jose).

Social Security is a relative "success" of government banking, in that it doesn't truly promise a defined benefit (it lies and says it does, but it gets changed when tough times come along), and also it is a pretty simple model. And like Freddie and Fannie, Social Security probably can depend on "general fund" money if it really goes bankrupt.

Regarding Libertarianism, it is clear that CATO is a think-tank that tries to do quality fact-based work. It is not a political movement. The Libertarian Party and the Republican Liberty Caucus are political movements. And the Ayn Rand Institute is an objectivist philosophical movement.

Political movements, to be successful, require spirituality of charisma of ideas and leaders. Facts and reason are nice, but they don't win the day.

Moreover, the Libertarian Party faces a ballot-access nightmare. Our existing political system in the US does not support third parties.

I believe that libertarianism has an achilles heel - personal fear of loss. We know that homo economicus fears loss more than equivalent gain. A political movement that promises safety from loss will often win over a political movement that promises a potential gain. This is despite the fact that government can't always protect you from loss, or that perhaps your loss will be insured against at a lower premium by a private free market enterprise rather than government.

Those who support economic freedom should recognize the few wins we have had - massive deregulation of transport and energy in the 1970's-1980's. The Internet has not been highly regulated. You can now carry a legal concealed weapon 50 states.

Urstoff writes:

I thought public choice answered Mr. Lind's question long ago. There aren't many libertarian states because few (if any) political systems are incentivized to maintain minimal states. Ironically, Mr. Lind seems to be the utopian here, as his question implies that governments naturally do what is best, and since no governments are libertarian, it must not be best. The first premise, as we can all see, is laughable.

BrianC writes:

Excellent, thought provoking podcast. Russ, can you bring someone on that could describe, in detail, the ideal libertarian state? At least people couldn't say Lind is making a strawman. It seems a common criticism of Lind, but i find it hard to understand what libertarians really believe and want from a society.

Richard writes:

I agree with several other commenters, for instance, triclops41, that Prof. Lind's critique of libertarianism is unconvincing. "Normal" (non-revolutionary) politics is always incremental, not utopian. My beef with some libertarians is that they permit their fixation on utopian counterfactuals to interfere with their pursuit of normal political objectives -- policy improvement (a vector -- a direction and a step size, not a leap to the unreachable "ideal"), election, etc. But contrary to Lind, the absence of utopian libertarian states historically says nothing about the wisdom/desirability of feasible libertarian-inspired policy changes. So much for straw men.

What about Lind's dystopian vision of technological progress driving immiseration and inequality in a market-based near future? Well, this projection is nothing new. The Luddites, in the 19th century, professed the same fears, and more recently, the Unabomber's manifesto laid out the case. As with most such futurism, there are grains of truth and vast expanses of probable error in the narrative. Are these low-cost labor-displacing robots that relegate the massses to low-skilled non-tradeable services going to churn out vast quantities of products consumed principally by the top 2 percent of wealth holders? There's ample reason to doubt that would constitute a market equilibrium.

Of course, we'll have to wait and see, but in general, progress that has increased total wealth has historically pulled all segments of the income distribution along over time, even if at uneven rates. So we have greater inequality today than 60 years ago. Would those in the 10-20% slice of today's distribution voluntarily trade places with those in the 30-40% slice in the 1950s if their life could be replicated today? When one considers what that would entail, substantial doubt that they would is certainly justified.

John Arkwright writes:

I was not impressed by Mr. Lind and agree with many commenters' opinions. I offer only two additions.

1. Mr Lind sees natural monopolies everywhere and advocates government setting prices, concentrating on fairness and not efficiency. Russ did not engage him on Hayek's view of the calculation debate, which, it seems to, me was the main counter to Lind's justification of the government role in decision making.

2. Portraying Cato as a shill for cronyism goes against all evidence, to the point that Lind's claim is nonsensical. The Koch brothers' business is agriculture. In particular they make lots of money from ethanol. Cato devotes a great deal of energy, reflected in papers, presentations, and podcasts to arguing against any government interference in agriculture and especially against all subsidies and mandatory uses of ethanol. A simple search on Cato's web site turns up dozens of research and advocacy articles. Since Mr. Lind apparently has not done this, he has shown himself to be wholly uninformed.

Kryx writes:

I don't think Russ did a bad job. He let the guest discuss his ideas and found common ground. Also, he is an educator and assumes that we can analyze the ideas and interpret them ourselves.

There are times to pick your battles - I enjoyed Russ's battle over infrastructure spending on NPR. He was called out him opponent rightly on many things forcefully (ie European austerity).

I think the guest had some good points about libertarians to consider. I feel that some of us are willing to tear down everything so we can have a perfect world which will never happen. I wish that the guest would consider that although there are no angels on earth in regards to the market process - he is fine with using the political process and the government to make sure we save enough, have social insurance, etc - even though it is bankrupting us.

It is a complete fiction you cannot be a Millionaire in today's society. If you save only $100 dollars a week and invest it over forty years you will have a million dollars (is it easy, no, but it is the same with all endeavors in life). Compare this to the social security pension which is a pittance.

Dr. Duru writes:

This was a great podcast. I came out of it with a better appreciation of Libertarianism. I liked the civility of the debate. Not easy to do on topics that deal with one's fundamental political/ideological beliefs. Part of what makes EconTalk special and stand out from other forums more focused on unadulterated punditry.

Kudos!

Emerich writes:

Lind’s original question, “Why aren’t there any libertarian states,” is indeed a straw man. Public choice theory explains beautifully why it’s so hard to get even close. But survey countries in the world today and through history, and what do you find? The more closely the approach the “liberal” (in the classical sense) model—limited scope for government, maximum freedom—human flourishing is greatest. Compare: Maoist China; post-Mao China; Taiwan; Hong Kong. North Korea; South Korea; East Germany before the unification… etc. How can we even be arguing about it today?

Second, his claims that the Koch brothers and other libertarians dominate Washington is beyond absurd. What’s the budget of the Cato Institute? $23.6 Million, according to Wikipedia. What’s the biggest think tank of them all? Brookings Institution, which is left-of-center, budget: $90 million. What’s the endowment of the liberal Ford Foundation? $10.9 Billion. Find me a "libertarian" foundation with an endowment a fraction of that, if there even is a "libertarian" foundation.

Who dominates the economic debate in Washington? To the liberal foundations and think tanks you can add the mainstream media, which surveys have shown over and over are overwhelmingly liberal, Fox news notwithstanding.

Michael writes:

Emerich writes:

"Lind’s original question, “Why aren’t there any libertarian states,” is indeed a straw man. Public choice theory explains beautifully why it’s so hard to get even close. But survey countries in the world today and through history, and what do you find? The more closely the approach the “liberal” (in the classical sense) model—limited scope for government, maximum freedom—human flourishing is greatest. Compare: Maoist China; post-Mao China; Taiwan; Hong Kong. North Korea; South Korea; East Germany before the unification… etc. How can we even be arguing about it today?"

We can argue about it today because of the following:

The government is not involved in simple, straightforward, "rich-to-poor" redistribution. They do some rich-to-poor redistributation (welfare state), some poor-to-rich redistribution (zoning regulations, onerous occupational licensing requirements), some taxpayer-to-homebuyer redistribution (mortgage interest deduction), some taxpayer-to-financial sector redistribution (bailouts, etc.), it goes on and on.

The long list of government subsidies benefiting some groups at the expense of others is, in and of itself, a pretty strong argument for a more libertarian approach. But incremental elimination of such subsidies - if done in a biased way - is not really libertarian at all.

For example, it doesn't seem "libertarian" (to me, a non-libertarian), to eliminate, say, rent control/low income housing without also eliminating the regulations that stand in the way of a free market solution to the problem, of which there are many (e.g. zoning regulations that create an artificial scarcity of housing).


Dmitry writes:

Russ, great podcast!
I more and more admire your ability to handle the dialogue with guests who are far from you on ideological spectrum! One learns a great deal from such podcasts.

I just wanted to comment on the Mr. Lind's point that libertarianism has never been tried and therefore isn't so great as its proponents claim. I think that Michael's idea parallels the argument made about socialist/communist views - communists when confronted with the fact that the Soviet experiment had failed and therefore socialism is worse than capitalism often like to say that the Soviet regime was very far from "ideal" communism which has never been tried.
Pro-market economists counter that by saying the "ideal" communism is a utopia and can never be implemented due to inconsistent incentives facing individuals.

I think same thing here - the fact that libertarianism has never been fully implemented suggests that it is too hard to align different incentives simultaneously giving individuals more freedom than ever before.

Lauren Taylor writes:

Thank you for sharing your insights into libertarianism. The ideology of adults and advanced intelligences that can assume responsibility and be compassionate. I hope more people come to your point of view as it would make society more prosperous and increase the wealth of society as a whole.

Roy Haddad writes:

My opinion of Michael Lind went up while listening to this podcast. I suppose I was expecting some sort of maniac after reading about his articles. I was impressed by the quality of debate from both Russ and Michael.

However, I don't think he managed to demonstrate sufficient understanding of libertarians or libertarianism, and so while the podcast was much better than I expected, I feel like it was still interesting not so much for the ideas within, but as an example of how to give a thoughtful interview to someone whose ideas you find completely askew, and as an accessible window into such ideas (I hope reading/listening to non-libertarians will help keep my mind open, so I appreciate these opportunities.)

Greg Pandatshang writes:

You know, when setting up the basic question of this conversation, I can't know what Michael Lind meant to say, but what he did say was, "isn't your [libertarian] ideology fundamentally unworldly and utopian?" Is Russ's rejoinder, he says asks, "why would that tell you anything about whether that's a good idea or not?"

I just wanted to point out that "good idea" is a different category than "unworldly and utopian" is. To take an extreme example: "everyone being kind to each other all the time" is definitely unworldly and utopian, and it's also definitely a good idea. Perhaps libertarianism falls into the same category.

There's a limit to how interested I am in hearing people talk about the consequences of measures that haven't been tried yet. Especially so if they blur the line between the speculative and the so. Russ is admirably cogent on this point, but many libertarians are not so careful.

Kenneth writes:

I read Lind's posts on Salon (Mike Munger linked to them), listened to this podcast, and today listed to a debate beween Peter Schiff (for a night-watchman state) and Stephan Molyneaux (for an anarcho-capitalist voluntary society), and I find myself agreeing with with Lind that the absence of a libertarian state tells us something. It doesn't tell us, as Lind supposes, whether it would work or not, but it does tell us that debating whether a minarchist or anarchist society is preferable is like debating how many angels can dance on the head of a pin. So many people accept the idea of debt ridden surveillance states legislating the policy preferences of a plurality or in come cases, of the well connected minority, and even approve of it, that notions of a libertarian society are absurd. What I think the practical libertarian (or anarchist) has to do is embrace one or both of the following: 1) persuade 40% (or more) of the values of real limited government so that the 22nd century might be in a position to try it out, or 2) figure out how to live a life of liberty in a statist society. That might mean sea-steading, going Galt, or as Bill Whittle discussed in his podcast right after the 2012 election, simply accepting that 40%-50% of your nominal income will be appropriated, and spending time and energy on living a life of liberty with your half, rather than wrangling so hard to get reductions in the size of government as we know it now. I imagine that people embrace the status quo because they have mis-judged the costs and benefits, because the benefits are more immediate than the costs, or because their preferences for social justice are greater than liberty. So for whatever combination of these or other causes, libertarian societies don't exist, and won't exist without a profound revolution in how people think about society. In the mean time pinning for a libertarian society is an almost totally imaginary exercise, whose only value is the internal examination of principles and the preparation that if it became possible liberty minded people wouldn't be without a vision or a set of proposals.

Mike writes:

Wonderful episode. There have been a few excellent episodes recently. I think Prof. Roberts is getting better and better at this. It was refreshing to listen to two people viewing the problems and solutions from such different viewpoints keeping it respectful. I wish there were more venues like Econtalk for hearing different perspectives without the histrionics.

Leigh writes:

Could the factory worker of the future be the artisan? As the cost of basic goods go down because of the increased use of robotics, we have more disposable income. We buy more specialized products (craft beer, bacon, hand made pottery, etc). Markets on Internet make these available at accessible prices to a large number of consumers. As a result, artisans can make a living; they won't be wealthy, but they'll have a better quality of life than a factory worker.

Honza writes:

I think he made some very good points.

There is a good reason why many libertarian organizations get a lot of corporate funding while other organizations get no corporate funding whatsoever. No matter how libertarians may perceive themselves their ideology, like many other ideologies, serves a certain group of people and would be devastating to other people if implemented. The way to get around this very practical problem is the usual way of branding the "other people" lazy, stupid, immoral, irresponsible or otherwise inferior (this isn't unique to libertarianism, of course).

Too bad he didn't elaborate on that more. The point about libertarian countries was irrelevant in my opinion. There never has a been a socialist country either (if you ask the right people).

Brian writes:

A few points:

-the perfectly libertarian society is next to the perfectly progressive society, look at the Fraser report if you have any doubt about the effects of liberty on human societies

-his claim that US public education is good is absurd as he himself says " ... spend their time on remedial education ..."

-why I am not a progressive: Lind suggests that since he and presumably some of his ilk can only think of low wage personal service jobs for most that is all there will be, of course he will support his allies using guns just to be sure

-I agree completely that we need soldiers to defend or society, as to using that to attempt to justify bureaucrats taking and dictating I will rest on the actual experience of a draft vs all volunteer armed forces

-the old man preferred free riding on others but he is not the only participant, ask the young member of our society how he feels

be well,
Brian

[comment edited with permission of commenter--Econlib Ed.]

J Kadvekar writes:

One is a great admirer of Russ Roberts. Through this radio program, he has been a great advocate and teacher of classical liberalism and of Austrian political economic theory.

But one does wish that he had been a more vigilant and sterner interlocuter for someone of the notoreity of Michael Lind. One wishes, more precisely, that Russ had stepped in the ring as an economist (with a knowledge of the history of economics) against the many fallacies and falsehoods of Lind. Russ was a today more of an interviewer.

How a Bastiat or a Boudreaux would have loved to show the fallacy of the Jazz club example of Lind's. They would have also showed that a billionaire who has made his money honestly IS already benevolent.

J Kadvekar writes:

Ofcourse, what Bastiat ou Boudreaux would have said, could have equally been said by Russ himself.

One just feels that given the scope of Michael Lind's half-truths, Russ could have demonstrated, in a conversation, how fallacies are taken by many as truths.

Russ Wood writes:

Great EconTalk. While he did not convert me to large-government classical liberalism, Mr. Lind did make me think, and want to read more.

A glaring hole in Mr. Lind's approach is the issue of costs: reductions in personal autonomy and freedom when the government takes over; reductions in private charity (which he acknowledged briefly); inefficiencies of government provision of services; massively increased areas for politics and rent-seeking; and the simple inefficiency of much government bureaucracy. I hope to learn to what extent he addresses those concerns in his writings. Perhaps he could return to EconTalk to discuss them.

Becky Yamarik writes:

Really enjoyed this podcast. Very thought provoking. It illustrates why my husband and I love listening to econtalk; as my husband says, "When I read the NY Times or listen to Fox News, I feel like I'm being lectured to. I'm not really learning anything new". Whereas with Econtalk we're always learning and having our assumptions challenged. . .

and I would disagree with Lind that you libertarians aren't trying to convert people. . . While I'm not turning from a socialist into a libertarian, I'm probably more skeptical of government interventions to solve problems after 2+ years of econtalk under my belt. . .

Richard Crist writes:

Libertarian government has not been tried because those who have power see no need to give up any of it. This is true for American politicians as well as Chinese, Brazilian, South Korean, Syrian, or German.

Being fair minded I would guess most politicians believe they are working for the good of their citizens and more power would help them do more good. I'm skeptical it would.

I would acknowledge there are also politicians who work for their own good too. Some may try to work for the good of both themselves and the people, so it can be difficult to identify the difference.

And the difference is unlikely to change the outcomes.

Shawn Eng writes:

Oh my dear friends. You haven't had strong libertarian spirits until you've had a taste of Hans Hermann Hoppe:

Journey into a Libertarian Future
http://www.redmoonrising.com/libjourney.htm

Adam S writes:

This was a great podcast. Contrary to many comments above, I was very impressed by Russ treating Mr Lind's views with great respect, even if they were sometimes illogical and very at odds with Russ's views (and my own).

I don't know why so many libertarians seem to always be fixing for a fight or a decisive debate that humiliates the other side. I think the angry libertarian mentality is one reason the ideology hasn't caught on yet. Anyway, well done Russ.

Joe Brooks writes:

...in direct response to:

"Let's move on to your discussion of economics. A 10-point manifesto against what you call Econ 101."

I was taught in high school in the 1960s The American School of Economics, import tariffs, a national manufacturing plan, a public school system that promoted education and industry, building infrastructure and reciprocity where mutual benefit took place. Any mutual benefit was meant largely for the entire nation, not just the higher profits for multi national corporations, that took place.

Under this system, largely practiced from 1792 until 1971, the US had the highest standard of living in the world, by the 1880s. We are now #13.

Jefferson tried free trade during his Presidency, he and many others believe it contributed to the War of 1812. As he gained this experience, he came to believe that international trade must be managed, to ensure USA independence and self reliance.

We now have an approximately 10 trillion dollar trade deficit over the last 20 years. This is not economics, this is just bookkeeping and is a massive loss of prosperity, jobs and opportunity for US citizens.

Jefferson's thoughts on trade as he gained real world experience may be of interest, again:

http://www.monticello.org/site/jefferson/quotations-manufacturing

[Comment re-written by commenter to comply with our comment policies.--Econlib Ed.]

Luke writes:

His unification of Locke and Hobbes is disgusting. A cursory review of their writings reveals their inverse paradigms. One is not philosophically interchangeable for the other. That should be acknowledged.

James Oswald writes:

There are in fact many libertarian countries, and furthermore, many of them are very pleasent places to live: Singapore, Australia, New Zealand, Denmark, Canada, Chile, Switzerland, and many more. I would even go so far as to say the United States is rich and successful in large part to how relatively libertarian it is compared to other large countries, such as China and India. It's not a streach to say that on the margin, libertarianism is a path to prosperity, and I think that comes out very clearly in cross country comparisons.

Adam S writes:

@James Oswald

Perhaps Australia is libertarian compared to India, but compulsory voting? Single payer mandatory health system? One of the highest minimum wages in the world?

Or Singapore, where all of the land is government owned and the vast majority of people live in public housing? Not to mention draconian censorship and libel laws. Not very free.

Hong Kong consistently ranks as another top business spot, and after living there for several years, i can certainly say that the government services and reach are far more invasive than that of the US.

I can never understand why these countries are consistently thought of as the freest to do business in, when US employers can hire and fire as they please, pay a relatively low wage, and are barely responsible for heath care benefits common in most of the developed world.

Can we please leave nurse's aides alone and let them figure out on their own how to make more money? I, for one, plan to use the internet to provide online education to them to help them in the process, of course for a modest fee, and I definitely intend to deliver the highest quality education that will raise their standard of living.

As for Koch Brothers financing think tanks -- what bank that received multibillion dollar bailout did Koch brothers exactly run? What car company? What state government that received the stimulus? Or a defense contractor? The audacity of those Koch Brothers: Saying those dreaded words "Laissez faire et laissez passer, le monde va de lui même!"

The mere desire to participate in the political process, and not to fund useless or destructive causes the idle rich fund, as this guest himself posited the idle rich do, makes the Koch Brothers into the devil, whose sins the guest is unable to state, but who must be named personally and hated anyway.

I have my disagreements with the Koch Brothers, for example, on their immigration ideas. But the widespread efforts of the left to demonize them are reminiscent of the worst type of political propaganda.

The Koch Brothers: Emmanuel Goldstein of the New America?

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