Convoluted and Confused: Yet More Leonhardt-Bashing

Are we libertarians so cranky about David Leonhardt’s review of Brian Doherty’s Radicals for Capitalism because he really hit us where it hurts? No. We’re cranky because the review truly is astonishingly clueless. As big government conservative Ross Douthat puts it:

As I said, I hold no particular brief for libertarians, but as evidence that they have a particularly noteworthy “soft spot” for tyranny (compared to whom? the New York Times?), this [i.e., Friedman’s hour with Pinochet; Rothbard’s electoral flightiness; Rand’s HUAC testimony] is thin stuff indeed, and it feels like a lazy book reviewer’s attempt to find some bones to pick with a movement he doesn’t know all that much about.

Lazy and ignorant, yes. But also convoluted and confused! In his embarrassingly incoherent penultimate paragraph, Leonhardt fires away completely indiscriminately in an attempt to score some kind of hit (why the effort, anyway?) by mentioning obscure anti-Semites actual libertarians have never heard of, airing completely baffling claims about Bush’s “free-market approach to rebuilding Iraq,” and making representations about Cato’s stance on global warming that should get the fact-checker fired (if the Times used one). But David Boaz and Gene Healy have touched on all this below. So let me address this choice bit from Leonhardt:

In fact, across a range of major issues — energy policy, health care, retirement savings — a hybrid form of laissez-faire capitalism and collectivism seems to be ascendant. The market will be allowed to work its efficient magic, but government will step in to correct the market’s failures. “Libertarian paternalism” is the name two University of Chicago professors, Cass Sunstein and Richard Thaler, have devised for one version of this philosophy.

Many of the purists who populate “Radicals for Capitalism” would surely hate an idea like libertarian paternalism. But they also might understand that they helped to make it possible.

Now, Leonhardt is right that libertarians have helped make the popularity of “a hybrid form of laissez-faire capitalism and collectivism … ascendant” by making it completely intellectually discreditable to argue for collectivism unleavened by markets. He seems to think he’s making an interesting or relevant point by observing that Sunstein and Thaler have used a pattern of shapes that happen to spell the word “libertarian.” As I’ve pointed out before, this has nothing to do with libertarianism, the idea, and is little more than a spoonful of orthographic sugar to make their old fashioned paternalist medicine go down. Leonhardt also makes it sound as if “market failure” arguments are some kind of sexy new intellectual discovery that give the lie to full-on free marketeers and have breathed fresh life into the fusty old political philosophy of regulatory control by political elites. But, no.

Market efficiency does count as “magic,” as Leonhardt puts it – if the solidity of mostly empty-space matrices of molecules count as magic, that is. It’s just the way the world works, and minimally well-educated people know it. Magic surrounds us! That freely-set prices in well-ordered markets efficiently coordinate human cooperation and enable large surpluses from trade – that markets facilitate human prosperity – is an empirical fact now well-understood by anyone worth listening to about economics, politics or policy. That so many intellectuals (so many economics reporters?) still don’t understand how or why market coordination works, and don’t feel ashamed by their ignorance, shows just how far we have still to go.

A key to understanding market coordination is understanding that dynamically self-correcting systems need a steady stream of reliable feedback, which is what shifting market prices provide. If more people understood this, more people would be prepared to ask: Do policymakers in democratic governments generally receive the kind, quality, or volume of informational feedback they would need to spot and fix market failures – that is, to reliably spot genuine “market failures,” to devise the policies that would in fact correct them, to implement those policies in time, to assess accurately whether the policies are working, and to revise or remove them as circumstances change? Do democratically elected politicians generally receive the kind of feedback they would need to be motivated to do all that, even if such feedback mechanisms did exist? Do they get the feedback they would need to be motivated to appoint bureaucrats who would be motivated to make use all that information? Etc., etc. If the answer to each those questions is “Yes,” then why are we in Iraq, for example? If the answer to those question is “Yes,” then our world contains magic indeed.

Government initiatives often need a lot of magic to work, which is why they so often don’t – which is why there is so much government failure. However, part free-market, part statist chimeras don’t always need magic to fly, since markets can haul a lot of dead weight, if they are free enough. But what should we call the belief that we would all fly higher if only government could work more of its sandbagging magic? The audacity of hope. The extent to which “hybrid” energy, health, and retirement policies are going to be improved is the extent to which the government takes steps to stop banning certain kinds of markets – like dynamic spot-price markets in electricity, or real risk-sensitive insurance markets for health care.

As Brian Doherty’s book makes abundantly clear, libertarians have done more than anyone else over the past century to explain to the world how and why people flourish when we limit the institutions of coercion and legalize the institutions of free association and free exchange. No other major American political movement has such a clean conscience, such un-dirty hands. Leonhardt’s confused and aimlessly belligerent review should remind us that Doherty’s inspiring short history is only a beginning.