Eight Seconds on Health Care

At Cato’s Health policy summit this weekend, Susan Chamberlin kept challenging us to come up with an 8-second sound bite on health care. I had nothing better to do on the plane ride home than to work on the puzzle. Here is what I would propose:

The prescription for better health care is more freedom to innovate, not remote-control surgery from Washington.

I was struck by the fact that some states have sensible policies in some areas. In fact, I can imagine other soundbites along the following lines:

Health insurance costs less in [pick a state, say Kansas or Oklahoma] than in Massachusetts, thanks to fewer dysfunctional regulations.

People who have diabetes or other expensive chronic conditions do not have to worry about health insurance if they live in [pick a state], thanks to the state’s high-risk pool.

Consumers today can find information to help them select the best health insurance plan, the best doctor, and the best treatment alternative, thanks to services available on the Internet.

If you want to see even faster progress on solving problems with our health care system, try more deregulation to encourage more innovation. Try encouraging more competition, not a government monopoly. We need responsible consumers making informed choices, not bureaucratic diktats.

NYT Clueless on Libertarianism

In Sunday’s New York Times, Times economics columnist David Leonhardt reviews Radicals for Capitalism: A Freewheeling History of the Modern American Libertarian Movement by Brian Doherty.

It might have made sense to get a libertarian, or someone familiar with the libertarian movement, or a political historian to write the review. Instead, the Times turned to someone who knows something about economics. Since the Times is the most important book review venue in the country, it’s worth taking a close look at Leonhardt’s complaints.

The first half of the review retells the story of Ayn Rand and the Objectivists, which is fine. It’s an interesting story, though it’s probably the part of the book most likely to be already familiar to Times readers. After the Randian opening, Leonhardt writes:

The story of the American libertarian movement, like the story of its most famous salon, has been a combination of small numbers and big influence. It has never really emerged from the fringe, for the simple reason that most Americans want their government to educate the young and care for the old. But over the last few decades, they have also grown increasingly skeptical of collectivist policies that go beyond the basics. Libertarian thinkers — Rand, Milton Friedman, Murray Rothbard and others — have helped foment this skepticism and then enthusiastically pointed to the alternative.

Fair enough. Most movements are small, even those that have big effects. “Fringe” is a subjective issue; if a movement produces several Nobel laureates and a chairman of the Federal Reserve Board, and plays a role in such policy reforms as the end of the draft, deregulation, sharply reduced taxes, and freer trade, is it still on the fringe?

Moving on:

Libertarianism has its roots in the writings of a pair of major 20th-century Austrian economists, Ludwig von Mises and F. A. Hayek.

That’s not exactly wrong, but it’s a little ahistorical. I’ll stand by what I wrote in Libertarianism: A Primer: “Libertarianism is often seen as primarily a philosophy of economic freedom, but its real historical roots lie more in the struggle for religious toleration.” Key libertarian ideas emerged out of the struggles for religious freedom in the late Roman Empire, the Middle Ages, and the early modern period.

American libertarianism certainly finds its roots in an earlier period than Mises and Hayek: the American Revolution, abolitionism, the fight against imperialism, war, and prohibition. But Mises and Hayek are definitely important, especially as some earlier fights — against monarchy, established religion, mercantilism, and the pre-modern blind reliance on faith and tradition — were largely won.

In 1980, Ronald Reagan would win the presidency by campaigning on laissez-faire rhetoric. The day after his election, he was photographed on an airplane reading The Freeman, the flagship libertarian magazine, while Nancy Reagan rested her head on his shoulder.

I suspect most people familiar with the libertarian movement would identify Reason as its “flagship magazine,” but the Freeman was and is a fine publication, and probably better suited to Reagan’s interests.

Unfortunately, the movement’s steadily increased influence makes up only a small part of the story he tells. Most of the rest deals with minor figures and faction fights.

Some libertarians have also made this complaint: too much reliance on minor figures. In fact, Brian Doherty organizes his book around five major figures: two Nobel laureates, the best-selling novelist of ideas of the 20th century, and two prolific scholars who never got the mainstream recognition they deserved but did influence thousands of libertarians. But look: this is a (freewheeling) history of the American libertarian movement. It’s not a strictly intellectual book, like George Nash’s Conservative Intellectual Movement in America. It’s not a book about trends in American politics. It’s a history of a movement, and so of course it discusses major figures and minor figures and even factional fights — that’s what makes up a movement. But “most”? I count more than 50 pages on Ayn Rand and more than 40 on Murray Rothbard; that seems like sufficient attention to major figures.

Doherty, a senior editor at Reason magazine, acknowledges he has written “an insider’s history,” but it is also a sloppily written history. In a single chapter, Milton Friedman is described both as an active writer at Stanford University and, accurately, as deceased.

Well, sloppy is a subjective term. But if this is Leonhardt’s only example, it’s not very convincing. On page 469, at the end of several pages on Friedman, Doherty writes, “Friedman died at age ninety-four in November 2006, just as this book went to press.” Get it? The book was written, edited, typeset, and on its way to the printer when the sad news of Friedman’s death was announced. The publisher managed to squeeze that fact into the book, and Leonhardt pounces. If that sentence had not been included, would Leonhardt have called the book sloppy for not being up-to-the-minute?

And almost everything about “Radicals for Capitalism” is too long: the terms (“Popperian falsificationist”), the sentences that sometimes run more than 100 words, and the book itself, at more than 700 pages.

There are 127 Google hits for “Popperian falsificationist” and 1,300 for “Popperian falsification” (and at least 10 times that many if you take off the quotation marks), so it seems a reasonable term for a book about ideas. Some of the sentences may be too long, but I don’t think readers are going to be intimidated by them. As for the length of the book — gee, 619 pages (plus endnotes) for a comprehensive history of a political movement? For a short history of the libertarian movement, I heartily recommend chapter 2 of Libertarianism: A Primer — 32 pages on liberalism and libertarianism, only seven of which cover Brian’s topic. But if you want the comprehensive history, one that can serve as a reference on many different topics, from its five key figures to the history of various libertarian institutions, then this is the book. If Andrew Mellon is worth 800 pages in a new biography, I think the entire libertarian movement can warrant 700.

Leonhardt then devotes a long paragraph to criticizing Doherty for not adequately grappling with the mistakes and failings of various libertarian characters. Doherty does mention them — that’s how Leonhardt knows about them — but it’s true he doesn’t make them the central theme of his book.

He relates that Rand “notoriously testified” before the big-brotherly House Un-American Activities Committee in October 1947, when the committee was investigating Hollywood, where Rand had worked as a screenwriter, but the episode receives only two paragraphs.

This is rich, coming in a review in a newspaper that still to this day proudly touts the Pulitzer Prize it received in 1932 for Walter Duranty’s dispatches from Russia, reports that are now widely acknowledged to have minimized or covered up the horrors of Stalin’s government-created famine in Ukraine. I’m not sure Rand should have agreed to testify for HUAC. But she told them about the ideas that Communist screenwriters were putting into Hollywood movies, and she strongly opposed any effort at government censorship. So it’s hardly a terrible blot on her character, much less on an entire movement.

He skates over other questionable matters, too: for instance, that Friedman advised the murderous Pinochet regime in Chile;

Brian Doherty addressed Friedman’s Chilean connection at length here. Friedman had one meeting, of less than an hour, with Pinochet. He and other Chicago-school economists recommended sound economic policies for Chile, many of which were implemented, and ever since then Chile has had the strongest economy in Latin America. Is that a bad thing? Should Friedman have refused to give sound economic advice to the government of a poor country? Leonhardt doesn’t mention that Friedman spent far more time advising the murderous Communist regime in China. Friedman has noted that “I gave exactly the same lectures in China that I gave in Chile,” but nobody ever demonstrated against him for that. In fact, Friedman made three trips to China and talked to government officials each time. And perhaps he could take some credit for the rapid economic growth there as well.

…that Merwin Hart “infected his free-market thought with anti-Semitism”;

Despite 30 years in the libertarian movement, and despite having read this book, I had never heard of Merwin Hart. But I found him in the index (not always an easy thing; the best criticism of this book, which Leonhardt missed, is that the index is seriously inadequate; the Rand paragraphs on HUAC, for instance, are on page 188, not 150 as the index indicates). Turns out he ran something called the National Economic Council in the 1950s. And why is he in this book? Because he’s a major libertarian figure? Because he’s a minor libertarian figure? No. He gets one line in this book because movement founding father Leonard Read told people to stay away from Hart because, yes, he “infected his free-market thought with anti-Semitism” — in other words, he wasn’t one of us.

…and that Rothbard supported Strom Thurmond’s segregationist campaign for president in 1948 (because, Doherty casually observes, “he admired Thurmond’s states’ rights position”).

Okay, that’s embarrassing. And all those whose friends and forebears did not support the pro-Soviet Henry Wallace that year are entitled to criticize. But look: Rothbard was 22 at the time, raised in a family of actual sho-nuff Communists (except for his father), and still searching for a political home. Over the course of his life he managed to support Robert Taft, Adlai Stevenson, Norman Mailer, Nixon, various Libertarian Party candidates, Pat Buchanan, Ross Perot, and George H. W. Bush. It’s hard out here for a libertarian trying to find a politician to support, and Rothbard grasped at more straws than other libertarians did.

The book fails to ask why people who claim to love freedom have so often had a soft spot for those who would deny it to others.

If that’s the sum total of embarrassing libertarian moments, it’s a pretty darn good record over 70 years or so. Modern liberals have to deal with the fact — not an embarrassing fact but a shameful one — that many of their forebears supported Stalin and the Communist party, or were at least fellow-travelers. As for conservatives, I could mention their long resistance to liberty and legal equality for blacks, women, and gays, but instead I’ll just say: George W. Bush and the Iraq war. In 70 years, libertarians have done nothing to compare to expressing support for limited constitutional government while also supporting Bush, his disastrous war, and his accumulation of unprecedented presidential power. (Leonhardt, by the way, says that one sign of libertarianism’s waning influence is that Bush’s “free-market approach to rebuilding Iraq has proven disastrous.” Talk about cluelessness.)

The libertarians at the Cato Institute, meanwhile, are struggling to persuade people that global warming — the archetypal free-market failure — is a hoax.

Nope. Climatologist Pat Michaels, a scholar at Cato and at the University of Virginia, says that the earth is warming, that human activity is partly responsible, but that the warming is almost certainly not going to be large or disastrous.

Leonhardt concludes that the “purists” who people Radicals for Capitalism might not be happy with “cap-and-trade” energy policies, “libertarian paternalism” in health care and retirement, and other hybrids of capitalism and collectivism, but “they helped to make it possible.” No, Mises and Rand and Read wouldn’t be happy with such outcomes, and neither would I. But those policies are a lot better than fascism or state socialism, which seemed to be the dominant ideas when Mises and Rand started writing. And they’re even better than ever-increasing FDR-style government intervention, which is what Read set out to fight.

Doherty makes the point that most of those people didn’t even dream of actually changing the world. They just thought it was important to speak truth to power, to stand up for freedom even in its darkest days, and to preserve the ancient ideas of liberty and individualism until the world was ready for them. They would never have anticipated the progress that Doherty describes. Even Leonhardt acknowledges that

libertarian arguments have enjoyed a nice run. Tax rates have been reduced; once-regulated industries have been opened to competition; any two consenting adults, including those of the same sex, can now marry in some places. One of today’s most fashionable political labels, “socially liberal and fiscally conservative,” Doherty shrewdly notes, is “the basic libertarian mix.”

Doherty notes that despite the growth of some kinds of taxation, regulation, and government monitoring, “it’s not hard to see a world that is well worth celebrating — perhaps even reveling in — to the extent that it runs on approximately libertarian principles, with a general belief in property rights and the benefits of liberty. This is the ‘neoliberal’ world that has been seen by pundits and politicians all over the West as dominant since the death of communism. For most people living under it, it’s doing a pretty good job of delivering the ‘pursuit of happiness’ part of the Declaration of Independence, at least.”

No book is perfect, nor is any movement. But contra Leonhardt, Radicals for Capitalism is going to be the standard history of the libertarian movement for years to come. And it tells a story libertarians can be proud of.

Heartland Insurgency

On Tuesday, it was Nebraska senators Chuck Hagel (R) and Ben Nelson (D) who provided the winning margin for a Senate bill to begin a phased withdrawal of troops from Iraq.

Today it’s five-term congressman Lee Terry (R-Neb.) deciding that Attorney General Alberto Gonzales should resign.

Pretty soon, the neocons are going to be calling for an invasion of Nebraska.

Government Should Not Interfere with Company Pricing Decisions

It is currently illegal for a company to insist that a retailer sell a product at a certain price. Politicians claim that this policy, known as resale price maintenance, results in higher prices. This surely is true, but the key question is why a firm would want to insist on higher prices, especially since the retailer reaps the benefit?

The answer, as Steve Chapman explains in his column, is that some products are more likely to do well if the retalier has an incentive to give potential consumers more time, advice, and service. But this won’t happen if consumers can benefit from this attentiveness at one store and then buy the product at another store:

For a manufacturer to make an agreement with retailers to sell only at a specified minimum price is illegal — even when it promotes competition and offers benefits to consumers. …[E]stablished federal law … treats resale price maintenance agreements as invariably malignant. …The assumption is that if you let manufacturers control retail prices, they’ll hose consumers for their own profit.

But if they wanted to hose consumers, they could just raise the wholesale price they charge to retailers. That way, they would get the full proceeds of the rip-off, instead of sharing them with stores. So it’s reasonable to assume there is some motive besides price-gouging at work.

…Why would a company making purses or televisions or running shoes want to keep prices at a certain minimum? Maybe to induce stores to offer exceptional service or technical assistance. A store can afford to do that only if it can charge a commensurate price. But a service-oriented store can’t charge a commensurate price if a consumer can come in, get lots of help and then go across the street to Discounts Galore and buy the item at 30 percent off. By setting a floor, the manufacturer can prevent “free-riding” by bargain outlets.

In our hypercompetitive retail environment, if the strategy doesn’t serve customers, manufacturers who use it won’t survive. Consumers who can’t get one brand at a discount price will defect to other brands.

Sweden Repeals Wealth Tax

Globalization has been an ally of taxpayers. Because it is increasingly easy for jobs and capital to cross borders, politicians are being forced to eliminate or reduce taxes that penalize productive behavior.

The latest example comes from Sweden, which is now eliminating its tax on wealth:

Maybe the next Bjorn Borg won’t feel compelled to move to Monaco now that Sweden plans to scrap a decades-old “wealth” tax that imposes levies on assets — not just on income. …The move, expected to be approved by parliament later this year, underscores the country’s efforts to keep successful Swedes and their capital at home by changing its fabled but costly welfare state.

“It’s not sustainable to keep taxes that radically diverge from other countries,” Finance Minister Anders Borg, who is not related to the tennis great, told The Associated Press on Thursday. “Not if you want the money to stay in the country.”

Sweden is not alone. The article notes that other nations have been forced to eliminate this punitive levy on capital:

Several European countries have dropped taxes on wealth in the last decade, including Denmark, the Netherlands and Finland.

Switzerland and Monaco seem to be the favored destinations of Sweden’s tax exiles. At least the new government recognizes the damage caused by punitive tax rates. The wealth tax is being abolished in an effort to lure talented entrepreneur and capital back to Sweden:

[T]he wealthiest Swedes have fled the country, including IKEA founder Ingvar Kamprad, No. 4 on Forbes magazine’s list of the world’s richest people. He lives in Switzerland. Five-time Wimbledon winner Bjorn Borg moved to tax-haven Monaco in the late 1970s. The principality is also home to many Swedish sports stars such as Alpine skier Anja Paerson, high-jumper Kajsa Bergqvist and triple jumper Christian Olsson.

The government says more than 500 billion kronor, the equivalent of almost C$83 billion of Swedish capital, is outside of the country’s borders. “This is money that, if it was brought home, could be invested to create jobs and welfare in Sweden,” the country’s coalition leaders said in a joint statement this week.

Stefan Persson, the main owner of fashion retailer H&M, threatened to leave the country in the 1990s because of the wealth tax. The Social Democratic government at the time changed the law, giving him an exemption.

…Borg, the finance minister…added it was necessary for Sweden to remain competitive in an increasingly globalized economy. “It’s a step on the way back toward making Sweden an entrepreneurial society,” he said.

Is Giuliani a Supply-Sider?

Writing in the Wall Street Journal, Steve Forbes endorses Rudy Giuliani and makes a reasonably compelling argument that he believes in smaller government:

Rudy Giuliani…cut taxes and the size of government…. Mr. Giuliani delivered, overcoming the initial resistance of the overwhelmingly Democratic City Council. He ultimately prevailed 23 times, including cuts in sales, personal income, commercial rent and hotel occupancy taxes.

…Mr. Giuliani always made fiscal discipline a priority: instructing city commissioners to cut agency budgets even when the deficits had turned to surpluses. Mr. Giuliani set out to cut the size of city government, insisting that New York should live within its means. New Yorkers saw their quality of life improve with more effective delivery of services while the bureaucratic ranks were being thinned by nearly 20,000 — a near 20% decrease in city headcount, excluding police officers and teachers.

But there are reasons to question Giuliani’s pedigree. In a post on the New York Sun’s political blog, Ryan Sager quotes Giuliani trashing the flat tax:

“It [the flat tax] would really be a disaster and it’s totally inconsistent with the movement of the Republican Congress toward giving more responsibility to state and local government,” Mr. Giuliani said on CNN’s “Capital Gang,” on March 9, 1996.

To be sure, even good policymakers sometimes say silly things because of competing political interests. Nonetheless, it is difficult to reconcile Giuliani’s recent supply-side rhetoric with his harsh 1996 statement. If he had merely expressed concern, that would be understandable, but claiming that a flat tax would be a “disaster” suggests a genuine hostility to the flagship policy goal of supply-side economics.

‘Security Is the New Freedom’

That’s what David Brooks declares in yesterday’s New York Times. In the column, he argues (yet again) that limited-government conservatism is dead, and that what should take its place is an orientation that focuses less on “negative liberty (How can I get the government off my back) and more [on] positive liberty (Can I choose how to live my life).” We also learn from Brooks that since “The ‘security leads to freedom’ paradigm is a fundamental principle of child psychology,” it must be the right way to look at man’s relationship to the state.

Since Brooks cites Tyler Cowen’s contribution to Cato Unbound, now’s as good a time as any to carp about that essay. I can’t agree with Professor Cowen that the libertarianism of the future ought to share the Left’s focus on ‘positive’ liberties and make its peace with big government. The 21st century libertarianism he’d like to see, a doctrine that seems to view principled distrust of government as an anachronism, isn’t libertarianism at all. It’s modern liberalism with a greater appreciation for markets — Thomas Friedman without the mixed metaphors. If modern liberalism moves in that direction, the world will be better off, and if libertarians can help encourage that transition, we should.

Yet I don’t understand why the continuing resilience of the welfare state constitutes an “intellectual crisis” for libertarianism. An ideology is in intellectual crisis, it seems to me, when certain of its core tenets turn out to be wrong. That people still like the idea of free stuff from government doesn’t count unless libertarianism has been in crisis from its inception.

In any event, my guess is that any political prediction that Cowen, I, or any other aspiring Hari Seldon might choose to make will, in a matter of decades, look as quaint as one of those 1950s magazine pieces on our Jetsons-style future. Given the difficulty of predicting the future, we might do better to focus on what’s true instead of what we believe to be politically possible.

If the welfare state impedes human flourishing, if the drug war is an abomination, if the New Deal constitutional revolution was an intellectual fraud from top to bottom, then libertarians ought to say those things. Because they’re true. Because they’re not said often enough. And because describing the world accurately is the first step towards changing it.

What sort of changes are possible? Who knows? But even if you think the best we can hope for is a less-awful welfare state, don’t underestimate the clarifying effect of bold, uncompromising ideas. Such ideas can help make positive, incremental reforms possible. The welfare reform we got in 1996 — generally a good thing — looks more like Robert Rector’s program than Charles Murray’s “end welfare” thought experiment in Losing Ground. But would we have gotten that sort of reform if Murray had decided that imagining a world without welfare wasn’t worth the effort?

One of the most wonderful things about Brian Doherty’s history of libertarianism is how little the ideology’s founding mothers and fathers cared about what sort of bills might plausibly get out of committee. There’s no denying that 20th century libertarianism had elements of apocalyptic pessimism. But it’s hard to miss the equally broad streak of insane optimism. To stand in the middle of the Century of the State and proclaim a vision of a world unshackled, a world governed by the rule of “anything that’s peaceful,” that is, a world hardly governed at all — what could be bolder or more hopeful? The Audacity of Hope!

Sure, Hayek and Friedman were willing to accept aspects of the modern welfare state. But it’s only when divorced from historical context that they look like Moderates for Capitalism. In the (sparkly) teeth of New Frontier liberalism, Capitalism and Freedom proclaims that Kennedy’s inaugural address — “ask not what your country…” — was founded on a worldview unworthy of free men in a free society. It was, for its time, a radical book.

Writing in 1949, Hayek had an effective rejoinder to the idea that classical liberals ought to limit their aspirations to what’s currently politically possible:

We need intellectual leaders who are willing to work for an ideal, however small may be the prospects of its early realization. They must be men who are willing to stick to principles and to fight for their full realization, however remote. The practical compromises they must leave to the politicians. Free trade and freedom of opportunity are ideals which still may arouse the imaginations of large numbers, but a mere “reasonable freedom of trade” or a mere “relaxation of controls” is neither intellectually respectable nor likely to inspire any enthusiasm.

The main lesson which the true liberal must learn from the success of the socialists is that it was their courage to be Utopian which gained them the support of the intellectuals and therefore an influence on public opinion which is daily making possible what only recently seemed utterly remote. Those who have concerned themselves exclusively with what seemed practicable in the existing state of opinion have constantly found that even this had rapidly become politically impossible as the result of changes in a public opinion which they have done nothing to guide.

I’ll stop the Braveheart speech there. But just one more observation: Brooks’ (and Cowen’s?) notion that the modern world has outgrown the Liberty vs. Power paradigm is bizarre. Barring some miraculous change in human nature and the nature of government, that paradigm’s as enduringly relevant as anything gets in politics. There’s a reason “Skepticism about Power” is the section that opens David Boaz’s Libertarian Reader. That heuristic flows from observable truths about man’s nature and the state’s. Distrust of government lies at the heart of libertarianism and at the heart of the American experiment. Liberty’s future depends on rekindling it.