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I have never quite understood why libertarians think that is the precise optimum for the amount of government activities and their "theft" of my money via taxat

I have never quite understood why libertarians think that is the precise optimum for the amount of government activities and their "theft" of my money via taxation. Don't libertarians understand or accept that there are market failures that government is needed to solve? Or do they think that in every case government makes more bad than good when trying to solve market failures? Or is it just that freedom of individuals is more important than fixing market failures (In which case I must wonder by what logic it is important for a government to stop me being killed by another person but not at all important to stop me being killed by a market failure? I end dead in both cases...)?

wyager 9y ago
Libertarians don't posit a precise optimum. They are generally of the opinion that the optimum is quite a bit lower than what we have right now. > Don't libertarians understand or accept that there are market failures that government is needed to solve? The only credible "failure" I'm aware of is the need to internalize of public externalities, which can be achieved in a number of liberty-friendly ways. See, for example, the Coase theorem. Libertarians recognize that these models are not exact, but they do suggest that we can do better. Perhaps you could list some of the market failures you are thinking of?
- semi-extrinsic 9y ago
  > See, for example, the Coase theorem Which only holds when transaction costs are negligible, i.e., never. Which was precisely Coase's point in that work - he showed that mathematically, it doesn't matter what initial distribution you put on something (his example was radio broadcast frequency allocations), since the final Pareto-optimal distribution is independent of initial conditions. This is the Coase theorem. But as soon as you include transaction costs, the theorem fails to hold, and initial distribution is important. A few obvious market failures: * Microsoft monopoly in the late 90s * Too little being done to reduce CO2 emissions, since emission costs are externalized and delayed * Broadband providers in the US * EpiPen pricing * Essentially every Health and Safety regulation ever exists to fix a market failure. In the small government world, employers see no cost of workers dying of lung cancer in their 60s from breathing asbestos, etc. I could go on.
  - tom_mellior 9y ago
    I'm not a libertarian and agree with you on all points except... > * EpiPen pricing My understanding was that part of the problem with the EpiPen was a monopoly due to patent issues. Patents are monopolies created by the government, so the market failures they cause are in fact government failures.
    - semi-extrinsic 9y ago
      I agree. But the flipside is that without patents, no-one would be spending money on drug development, since there would be 100% probability that someone straight-up copies your drug that you spent 5 years and $50 million to develop, and can then sell profitably at a lower price and capture the market. I think we can all agree that drug patents in particular are a necessary evil. On other patents (in particular software) I'm a lot more skeptical. And that's not to say "Big Pharma" isn't trying to abuse the system to maximise their profits.
      - tom_mellior 9y ago
        Necessary evil: yes, to some extent. I didn't say "get rid of all patents", just that they can cause market failures. I could imagine some models to make them less evil, for example by having a scheme that forces companies to grant fairly priced licenses to their competitors. Or, for drugs whose availability is in society's general interest, a government reimbursing the development costs. For both of these one would need a fair way of determining development costs, but as far as I understand pharma research already has a detailed paper trail to make sure their patent applications are bullet-proof.
    - dredmorbius 9y ago
      There's a bit of a drugs problem anyhow: http://blogs.sciencemag.org/pipeline/archives/2012/03/08/erooms_law http://blogs.sciencemag.org/pipeline/archives/2012/03/08/ero... And, well, medicine ain't all it's cracked up to be: https://ello.co/dredmorbius/post/msqfdpan_0xudzuorebfbg https://ello.co/dredmorbius/post/msqfdpan_0xudzuorebfbg Which is to say, you're vastly better off investing in public health measures than in intensive medical interventions. (See Laurie Garrett, The Coming Plague, for more on that theme.)
- beefield 9y ago
  To me, probably the most important market failures rise from information asymmetries. Not only the textbook cases where you know something I don't, but would understand if you told that to me (lemon markets for cars), but the ones where I am so dumb compared to you that even if you tried to explain me, I would not understand (monty hall problem as an extremely simple example). Even further, the issues where you manipulate me to want things that are bad for me, are a kind of information asymmetry. The problem is that the latter concepts do not seem to enter mainstream economics or libertarian mindset. People (including me) are manipulable and stupid. And having no control how much stupid people are going to be manipulated for benefit of others, would end up very bad very fast. What comes to Coase, here is an interesting example of Coase failures: http://evonomics.com/resolve-fights-reclining-airplane-seats-use-behavioral-economics/ http://evonomics.com/resolve-fights-reclining-airplane-seats...
- postozoan 9y ago
  Besides externalized costs, which is gigantic issue that is not easy to solve. These problems are also clear market failures: Large scale goals with large public benefits but which come at high costs will not be achieved without high level cooperation. For every individual market participant, the public education system, the public highway system, the public energy system, etc. have costs far exceeding their means. Yet every market participant benefits enough that they are happy they exist. The level of cooperation needed requires organization at the scale of at least local government. Dealing with external factors, such as other nations -especially if they're hostile- or natural threats. Individual market participants can not muster armies (unless they are at the scale of governments), cant bargain with foreign governments on equal terms and will not provide (preventive) care for disasters/diseasese/etc. Would microsoft or walmart vaccinate everyone?
  - wyager 9y ago
    I had a longer response written out, but my phone browser crashed and I have to go soon. This will be brief. > externalized costs Coase theorem and strong trespass law. > Large scale goals with large public benefits but which come at high costs Assurance contracts. > public education system, Private schools perform better across the board. If public schools didn't exist, I would expect to see more parochial and charity schools. > public highway system Replacing the IH system with privately operated toll roads is well within the reach of US investment banks, and it would be a safe bet. Plus they would be incentivized to actually do repairs quickly, unlike on public roads. Wins all around! > public energy system, Sure, this is a hard good to privatize due to line easement requirements. There are ways around this, but I think practically libertarians would agree with the government managing things like water pipes or electrical lines. This will become less of an issue in the near future as being off-grid on solar becomes practical for more people. (Or if we end up with small-scale community nuclear, like some are working towards.) > Yet every market participant benefits enough that they are happy they exist. If you think they'll still be happy after being made aware of how much they're paying (instead of it being obfuscated via taxes and respending) then there's no problem. > armies PMCs and military insurance. This would almost certainly be more efficient than the current bloated military we have in the US. > disasters/disease Insurance again. > Would microsoft or walmart vaccinate everyone? Does the government vaccinate everyone now? (No, they do not.)
- deleted 9y ago
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- deleted 9y ago
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- dredmorbius 9y ago
  Pricing of information goods. See Robert Nozick. Gresham's Law -- race-to-the-bottom markets. The price of extractive resources. Rents, generally. The fact that wealth is power. Totally drug-resistant tuberculosis.
afsina 9y ago
There are a lot of literature about this. But to answer to your question, whole concept of "Market failure" is considered a myth. Just two articles among many: https://mises.org/library/market-failure-myth https://mises.org/library/market-failure-myth https://mises.org/library/response-market-failure-drones https://mises.org/library/response-market-failure-drones Thomas J. DiLorenzo's light book "Organized Crime" has some chapters about it as well. It is available there. https://mises.org/library/organized-crime-unvarnished-truth-about-government https://mises.org/library/organized-crime-unvarnished-truth-...
- anentropic 9y ago
  In other words a faith-based ideology, where markets cannot fail by definition
  - afsina 9y ago
    No, what they say is, failures will occur but markets can heal themselves better than government intervention.
    - beefield 9y ago
      But that is pretty much an unfalsifiable claim, which puts it quite strongly into the "faith-based ideology" category.
  - baddox 9y ago
    I'd suggest this article as a better libertarian treatment of market failure: "Market Failure: An Argument for and Against Government" http://www.daviddfriedman.com/Machinery_3d_Edition/Market%20Failure.htm http://www.daviddfriedman.com/Machinery_3d_Edition/Market%20... David Friedman doesn't deny that market failures exist, but he points out that the exact same economic phenomenon happens with government, and there's no inherent reason why government is more or less susceptible to it than markets.
logicchains 9y ago
>In which case I must wonder by what logic it is important for a government to stop me being killed by another person but not at all important to stop me being killed by a market failure? Many forms of libertianism are deontological (based on principles, e.g. "natural rights"[1]) rather than utilitarian (based on ends). A libertarian might believe that if they obtain something either by finding/making it or accepting it from someone else, potentially in exchange for providing some good/service to that other person, then they have a natural right to that property. This means they'd view it immoral for anyone else to take it off them without their consent, and hence oppose taxation. Some Christians are also libertarian for this reason: they take "Thou Shalt Not Steal" as an absolute, not making exception for people acting on behalf of others. Such Libertarians generally support only "negative rights", not "positive rights". A negative right means the right to have other people not interfere with you (e.g. hurt you or take your property), while a positive right is a right to have other people do something for you (e.g. feed you when you're hungry or pull you out of a river when you're drowning). Many concepts of "market failure" only make sense when assuming the existence of positive rights: that the other people/the market owes you something or should work towards some specific end. Libertarians would hence not necessarily consider these a failure: from that perspective, the immoral thing is someone killing you, not necessarily you dying per se, if no-one is actively trying to harm you. There are also some forms of market failure, however, "negative externalities", that many libertarians do believe in, and the proposed solution is to strengthen property rights (so e.g. class action lawsuits are allowed against any kind of polluters, and unlike the BP lawsuit the government cannot cap the payout). 1. https://en.wikipedia.org/wiki/Natural_and_legal_rights https://en.wikipedia.org/wiki/Natural_and_legal_rights
BurningFrog 9y ago
> Don't libertarians understand or accept that there are market failures that government is needed to solve? There are levels of insight here. 1. Free markets create wealth and make everyone better off. Go libertarianism! 2. Economics shows the are market failures in the real world. Go socialism! 3. Public Choice theory shows there are major government failures in the real world. Go...? Once at level 3, reasonable people can disagree in what cases imperfect real markets are superior to imperfect real government. But if you you're only at level 2, which is how I read your post, you're comparing imperfect real markets with idealized perfect government.
- beefield 9y ago
  Well, in my second sentence I admit that government can do bad: > Or do they think that in every case government makes more bad...

wyager 9y ago

Libertarians don't posit a precise optimum. They are generally of the opinion that the optimum is quite a bit lower than what we have right now. > Don't libertarians understand or accept that there are market failures that government is needed to solve? The only credible "failure" I'm aware of is the need to internalize of public externalities, which can be achieved in a number of liberty-friendly ways. See, for example, the Coase theorem. Libertarians recognize that these models are not exact, but they do suggest that we can do better. Perhaps you could list some of the market failures you are thinking of?

semi-extrinsic 9y ago
> See, for example, the Coase theorem Which only holds when transaction costs are negligible, i.e., never. Which was precisely Coase's point in that work - he showed that mathematically, it doesn't matter what initial distribution you put on something (his example was radio broadcast frequency allocations), since the final Pareto-optimal distribution is independent of initial conditions. This is the Coase theorem. But as soon as you include transaction costs, the theorem fails to hold, and initial distribution is important. A few obvious market failures: * Microsoft monopoly in the late 90s * Too little being done to reduce CO2 emissions, since emission costs are externalized and delayed * Broadband providers in the US * EpiPen pricing * Essentially every Health and Safety regulation ever exists to fix a market failure. In the small government world, employers see no cost of workers dying of lung cancer in their 60s from breathing asbestos, etc. I could go on.
- tom_mellior 9y ago
  I'm not a libertarian and agree with you on all points except... > * EpiPen pricing My understanding was that part of the problem with the EpiPen was a monopoly due to patent issues. Patents are monopolies created by the government, so the market failures they cause are in fact government failures.
  - semi-extrinsic 9y ago
    I agree. But the flipside is that without patents, no-one would be spending money on drug development, since there would be 100% probability that someone straight-up copies your drug that you spent 5 years and $50 million to develop, and can then sell profitably at a lower price and capture the market. I think we can all agree that drug patents in particular are a necessary evil. On other patents (in particular software) I'm a lot more skeptical. And that's not to say "Big Pharma" isn't trying to abuse the system to maximise their profits.
    - tom_mellior 9y ago
      Necessary evil: yes, to some extent. I didn't say "get rid of all patents", just that they can cause market failures. I could imagine some models to make them less evil, for example by having a scheme that forces companies to grant fairly priced licenses to their competitors. Or, for drugs whose availability is in society's general interest, a government reimbursing the development costs. For both of these one would need a fair way of determining development costs, but as far as I understand pharma research already has a detailed paper trail to make sure their patent applications are bullet-proof.
  - dredmorbius 9y ago
    There's a bit of a drugs problem anyhow: http://blogs.sciencemag.org/pipeline/archives/2012/03/08/erooms_law http://blogs.sciencemag.org/pipeline/archives/2012/03/08/ero... And, well, medicine ain't all it's cracked up to be: https://ello.co/dredmorbius/post/msqfdpan_0xudzuorebfbg https://ello.co/dredmorbius/post/msqfdpan_0xudzuorebfbg Which is to say, you're vastly better off investing in public health measures than in intensive medical interventions. (See Laurie Garrett, The Coming Plague, for more on that theme.)
beefield 9y ago
To me, probably the most important market failures rise from information asymmetries. Not only the textbook cases where you know something I don't, but would understand if you told that to me (lemon markets for cars), but the ones where I am so dumb compared to you that even if you tried to explain me, I would not understand (monty hall problem as an extremely simple example). Even further, the issues where you manipulate me to want things that are bad for me, are a kind of information asymmetry. The problem is that the latter concepts do not seem to enter mainstream economics or libertarian mindset. People (including me) are manipulable and stupid. And having no control how much stupid people are going to be manipulated for benefit of others, would end up very bad very fast. What comes to Coase, here is an interesting example of Coase failures: http://evonomics.com/resolve-fights-reclining-airplane-seats-use-behavioral-economics/ http://evonomics.com/resolve-fights-reclining-airplane-seats...
postozoan 9y ago
Besides externalized costs, which is gigantic issue that is not easy to solve. These problems are also clear market failures: Large scale goals with large public benefits but which come at high costs will not be achieved without high level cooperation. For every individual market participant, the public education system, the public highway system, the public energy system, etc. have costs far exceeding their means. Yet every market participant benefits enough that they are happy they exist. The level of cooperation needed requires organization at the scale of at least local government. Dealing with external factors, such as other nations -especially if they're hostile- or natural threats. Individual market participants can not muster armies (unless they are at the scale of governments), cant bargain with foreign governments on equal terms and will not provide (preventive) care for disasters/diseasese/etc. Would microsoft or walmart vaccinate everyone?
- wyager 9y ago
  I had a longer response written out, but my phone browser crashed and I have to go soon. This will be brief. > externalized costs Coase theorem and strong trespass law. > Large scale goals with large public benefits but which come at high costs Assurance contracts. > public education system, Private schools perform better across the board. If public schools didn't exist, I would expect to see more parochial and charity schools. > public highway system Replacing the IH system with privately operated toll roads is well within the reach of US investment banks, and it would be a safe bet. Plus they would be incentivized to actually do repairs quickly, unlike on public roads. Wins all around! > public energy system, Sure, this is a hard good to privatize due to line easement requirements. There are ways around this, but I think practically libertarians would agree with the government managing things like water pipes or electrical lines. This will become less of an issue in the near future as being off-grid on solar becomes practical for more people. (Or if we end up with small-scale community nuclear, like some are working towards.) > Yet every market participant benefits enough that they are happy they exist. If you think they'll still be happy after being made aware of how much they're paying (instead of it being obfuscated via taxes and respending) then there's no problem. > armies PMCs and military insurance. This would almost certainly be more efficient than the current bloated military we have in the US. > disasters/disease Insurance again. > Would microsoft or walmart vaccinate everyone? Does the government vaccinate everyone now? (No, they do not.)
deleted 9y ago
[deleted]
deleted 9y ago
[deleted]
dredmorbius 9y ago
Pricing of information goods. See Robert Nozick. Gresham's Law -- race-to-the-bottom markets. The price of extractive resources. Rents, generally. The fact that wealth is power. Totally drug-resistant tuberculosis.

afsina 9y ago

There are a lot of literature about this. But to answer to your question, whole concept of "Market failure" is considered a myth. Just two articles among many: https://mises.org/library/market-failure-myth https://mises.org/library/market-failure-myth https://mises.org/library/response-market-failure-drones https://mises.org/library/response-market-failure-drones Thomas J. DiLorenzo's light book "Organized Crime" has some chapters about it as well. It is available there. https://mises.org/library/organized-crime-unvarnished-truth-about-government https://mises.org/library/organized-crime-unvarnished-truth-...

anentropic 9y ago
In other words a faith-based ideology, where markets cannot fail by definition
- afsina 9y ago
  No, what they say is, failures will occur but markets can heal themselves better than government intervention.
  - beefield 9y ago
    But that is pretty much an unfalsifiable claim, which puts it quite strongly into the "faith-based ideology" category.
- baddox 9y ago
  I'd suggest this article as a better libertarian treatment of market failure: "Market Failure: An Argument for and Against Government" http://www.daviddfriedman.com/Machinery_3d_Edition/Market%20Failure.htm http://www.daviddfriedman.com/Machinery_3d_Edition/Market%20... David Friedman doesn't deny that market failures exist, but he points out that the exact same economic phenomenon happens with government, and there's no inherent reason why government is more or less susceptible to it than markets.

logicchains 9y ago

>In which case I must wonder by what logic it is important for a government to stop me being killed by another person but not at all important to stop me being killed by a market failure? Many forms of libertianism are deontological (based on principles, e.g. "natural rights"[1]) rather than utilitarian (based on ends). A libertarian might believe that if they obtain something either by finding/making it or accepting it from someone else, potentially in exchange for providing some good/service to that other person, then they have a natural right to that property. This means they'd view it immoral for anyone else to take it off them without their consent, and hence oppose taxation. Some Christians are also libertarian for this reason: they take "Thou Shalt Not Steal" as an absolute, not making exception for people acting on behalf of others. Such Libertarians generally support only "negative rights", not "positive rights". A negative right means the right to have other people not interfere with you (e.g. hurt you or take your property), while a positive right is a right to have other people do something for you (e.g. feed you when you're hungry or pull you out of a river when you're drowning). Many concepts of "market failure" only make sense when assuming the existence of positive rights: that the other people/the market owes you something or should work towards some specific end. Libertarians would hence not necessarily consider these a failure: from that perspective, the immoral thing is someone killing you, not necessarily you dying per se, if no-one is actively trying to harm you. There are also some forms of market failure, however, "negative externalities", that many libertarians do believe in, and the proposed solution is to strengthen property rights (so e.g. class action lawsuits are allowed against any kind of polluters, and unlike the BP lawsuit the government cannot cap the payout). 1. https://en.wikipedia.org/wiki/Natural_and_legal_rights https://en.wikipedia.org/wiki/Natural_and_legal_rights

BurningFrog 9y ago

> Don't libertarians understand or accept that there are market failures that government is needed to solve? There are levels of insight here. 1. Free markets create wealth and make everyone better off. Go libertarianism! 2. Economics shows the are market failures in the real world. Go socialism! 3. Public Choice theory shows there are major government failures in the real world. Go...? Once at level 3, reasonable people can disagree in what cases imperfect real markets are superior to imperfect real government. But if you you're only at level 2, which is how I read your post, you're comparing imperfect real markets with idealized perfect government.

beefield 9y ago
Well, in my second sentence I admit that government can do bad: > Or do they think that in every case government makes more bad...