As libertarianism has acquired a higher profile in American life over the past several years, the attacks on and caricatures of libertarians have grown almost as rapidly. Libertarians, we read, are antisocial, and prefer isolation over interaction with others. They are greedy, and are unmoved if the poor should starve. They are naive about our dangerous enemies, and refuse their patriotic duty to support the government's wars.
These caricatures and misconceptions can be put to rest by simply defining what libertarianism is. The libertarian idea is based on a fundamental moral principle: nonaggression. No one may initiate physical force against anyone else.
There is nothing antisocial about that. To the contrary, it is the denial of this principle that is antisocial, for it is peaceful interaction that lies at the heart of civilized society.
At first glance, hardly anyone can object to the nonaggression principle. Few people openly support acts of aggression against peaceful parties. But libertarians apply this principle across the board, to all actors, public and private. Our view goes well beyond merely suggesting that the State may not engage in gross violations of the moral law. We contend that the State may not perform any action that would be forbidden to an individual. Moral norms either exist or they do not.
Thus we cannot abide State kidnapping, just because they call it the draft. We cannot abide the incarceration of people who ingest the wrong substances, just because they call it the war on drugs. We cannot abide theft just because they call it taxation. And we cannot abide mass murder just because they call it foreign policy.
Murray Rothbard, who earned his Ph.D. from this very institution in 1956 and went on to become known as Mr. Libertarian, said that you could discover the libertarian position on any issue by imagining a criminal gang carrying out the action in question.
In other words, libertarianism takes certain moral and political insights shared by a great many people, and simply applies them consistently.
For example, people oppose monopoly because they fear the increase in prices, the decrease in product quality, and the centralization of power that accompany it.
The libertarian applies this concern for monopoly to the State itself. After all, private firms, which we are supposed to fear, can't simply charge whatever they want for their goods or services. Consumers can simply switch from one supplier to another, or from a particular product to a close substitute. Firms cannot engage in quality deterioration without likewise losing customers, who can find competitors offering better products.
But the State may, by definition, charge the public whatever it likes for the so-called services it supplies. Its subjects must accept whatever level of quality the State should deign to provide. And there can never, by definition, be any competitor to the State, since the State is defined as the territorial monopolist of compulsion and coercion.
With its wars, its genocides, and its totalitarian atrocities, the State has proven itself by far the most lethal institution in history. Its lesser crimes include the debt crises it has caused, the self-perpetuating bureaucracies that feed off the productive population, and the squandering of resources – which might otherwise have improved the general standard of living through capital formation – on arbitrary and politically motivated projects.
Yet the State, despite its failures, is consistently given a benefit of the doubt that no one would extend to actors and firms in the private sector. For instance, educational outcomes remain dismal despite vastly increased expenditures and far lower class sizes than in the past. Had the private sector presided over such a disaster, we would never hear the end of all the denunciations of the malefactors of great wealth who are keeping our children ignorant. When the government sector performs so poorly, there is silence. Silence, that is, interrupted by demands that the State be given still more resources.
Years ago, when John Chubb of the Brookings Institution tried to uncover how many bureaucrats were employed in New York City's public school system, it took six telephone calls to reach someone who knew the answer – and that person was not allowed to disclose the information. It took another half dozen calls to find someone who both knew the answer and could reveal it. The answer? Six thousand.
Chubb then called the Archdiocese of New York to find out how many bureaucrats were employed in the administration of the city's Catholic schools, which educated one-sixth as many students. When the first person he called didn't know the answer, he figured he was in for it again. But that person went on to say, "Wait, let me count." It was twenty-six.
Imagine if the situation were reversed, and the top-heavy school system had been the private one. There would be no end to the investigations, the media reports, the public outrage. But when the State is the guilty party, there is no interest in the story at all, and no one even hears about it.
Likewise, when the government courts force innocent parties to endure interminable delays and endless expense, there are no investigations or cries for justice. When the rich and famous are obviously favored by the system, people glumly accept it as a fact of life. Meanwhile, private arbitration companies are flourishing, quietly filling the gap left by the government's awful system – and hardly anyone notices or cares, much less appreciates these improvements in our welfare.
The US government has carried out atrocities of an unspeakable kind, just in the past ten years, and justified them with propaganda claims that nobody around the world, apart from a gullible sector of the American population, took seriously. If K-Mart had somehow managed to do such a thing, everyone involved would have been roundly condemned, and the perpetrators would have been imprisoned, if not executed.
The government, on the other hand, persuades the people that they and the government are the same thing, that the government's wars are their wars, that these conflicts involve us against them. People's moral compasses become blurred as they begin to identify themselves and their own personal goodness, as they see it, with the wars in which "their" government is engaged.
In fact, for the libertarian, the government's wars are not us versus them. The wars are a case of them versus them.
The other side of the Austro-libertarian coin is, of course, the Austrian School of economics.
The Austrian School has enjoyed a renaissance of sorts since the Panic of 2008, since so many economists who belong to this venerable tradition of thought predicted the crisis – in the face of official assurances to the contrary, in the media, among the political class, and from the Federal Reserve itself. Thanks to the Internet, it was impossible for official opinion to black out these dissident voices.
The Austrian School, which was born officially with Carl Menger's 1871 book Principles of Economics, is sometimes conflated with other schools of thought loosely associated with the free market. But in its method, its price theory, its monopoly theory, its capital theory, its business-cycle theory, and in so much else, it is distinct from those other schools of thought, and often in direct opposition to them.
It is solidly realistic, and grounded in the individual actor and his decisions and preferences. It seeks to understand real-world prices, not the prices of a long-run equilibrium that can never exist except in the minds of economists.
It was the Austrians who solved problems that had vexed the classical economists, whose price theory could not account for why water, so necessary to life, commanded virtually a zero price on the market, while diamonds, a mere luxury, were so dear.
And it is the Austrians who predicted the Great Depression at a time when fashionable opinion claimed the business cycle had been tamed forever, who predicted the dot-com crash when Fed chairman Alan Greenspan was saying that perhaps booms didn't necessarily have to be followed by busts any longer, and who, as I mentioned, predicted the most recent crisis when the regulators whom we are supposed to trust to keep the economy stable said there was no housing bubble and the fundamentals of that market were sound.
A common caricature holds that supporters of the free market believe the market yields a perfect social outcome, whatever that is supposed to mean. In a world of uncertainty and constant change, no system can yield a perfect result. No system can ensure that the whole structure of production instantaneously adjusts to precisely that allocation of capital goods that will yield the exact array of types and quantities of consumer goods that the public desires, while imposing the least cost in terms of opportunities foregone.
Our point is that no competing system can do a better job than the market. Only actors on the market can allocate resources in a non-arbitrary way, because only on the market can someone evaluate a course of action according to the economizing principle of profit and loss. This is what the Austrians call economic calculation.
This was the reason, economist Ludwig von Mises explained in 1920, that socialism could not work. Under socialism as traditionally understood, the State owned the means of production. Now if the State already owns all those things, then no buying and selling of them takes place. Without buying and selling, in turn, there is no process by which prices can arise. And without prices for capital goods, central planners cannot allocate resources rationally. They cannot know whether a particular production process should use ten units of plastic and nine units of lumber, or ten units of lumber and nine units of plastic (if we are indifferent between the two combinations from a technological point of view). Without market prices by which to compare incommensurable goods like lumber and plastic, they cannot know how urgently demanded each input is in alternative lines of production. Multiply this problem by the nearly infinite set of possible combinations of productive factors, and you see the impossible situation the central planning board faces.
Even the non-socialist State has a calculation problem. Since it operates without a profit-and-loss feedback mechanism, it has no way of knowing whether it has allocated resources in accordance with consumer preferences and in a least-cost manner. To the contrary, its decisions regarding what to produce and where, in what quantities and using which methods are completely blind from the point of view of social economizing. (By "social economizing" I mean the process by which we attain higher-valued ends with lower-valued means.)
Hence if we want to ensure that resources are not squandered or spent arbitrarily, we must keep them out of the hands of the State.
Strictly speaking, the Austrian School of economics has nothing to do with libertarianism. Economics, insisted economist Ludwig von Mises, is value-free. It describes rather than prescribes. It does not tell us what we ought to do. It merely explains the various phenomena we observe, from prices to interest rates, and supplies the cause-and-effect analysis that permits us to understand the consequences of coercive interference in the voluntary buying and selling decisions of individuals.
All the same, the knowledge the Austrian School imparts to us strongly implies that certain courses of action are more desirable from the standpoint of human welfare than others. Among other things, we learn from Austrian economics that the State's allocation decisions cannot be socially economizing. We learn that the desires of consumers are best served by the free price system, which directs production decisions up and down the capital structure in accordance with society's demands. And we learn that the State's interference with money, the commodity that forms one-half of every non-barter exchange, gives rise to the devastation of the boom-bust business cycle.
Austro-libertarianism, then, in the spirit of Rothbard, takes the libertarian nonaggression principle and supplements it with the Austrian School's descriptions of the free and unhampered market economy. The result is an elegant and compelling way of understanding the world, which in turn conveys the moral and material urgency of establishing a free society.
Now the seminar today asks us to consider questions of power and the State from an Austro-libertarian perspective, but also in light of Nicolo Machiavelli, the late fifteenth- and early sixteenth-century historian, political theorist, and counselor to princes. Most people know of Machiavelli for the views expressed in his short manual The Prince, and not for his longer and perhaps more substantial works, including his Discourses on Livy and his history of Florence. I have drawn largely but not exclusively from The Prince for my brief remarks today.
The Roman moralists of antiquity, and the Renaissance humanists who followed them, had urged that rulers had to possess a particular set of moral virtues. These were, first, the four cardinal virtues – cardinal from the Latin meaning "hinge"; hence all other virtues hinge on these – of courage, justice, temperance, and wisdom. Now all men were called to cultivate these virtues, but princes in particular were called to still others beyond these, such as princely magnanimity and liberality. These themes are developed in Cicero's De Officiis, or On Duties, and in Seneca's On Clemency and On Benefits.
The humanists anticipated the thesis Machiavelli would one day bring forth, namely that there ought to be a division between morality on the one hand and whatever happens to be expedient for the prince on the other. They answered it by cautioning that even if princely wickedness is not punished in this life, divine retribution in the next life would be fearsome and certain.
What made Machiavelli stand out so starkly was his radical departure from this traditional view of the prince's moral obligations. As the great Machiavelli scholar Quentin Skinner points out, "When we turn to The Prince we find this aspect of humanist morality suddenly and violently overturned."
The prince, says Machiavelli, must always "be prepared to act immorally when this becomes necessary." And "in order to maintain his power," he will – not just sometimes but often – be forced "to act treacherously, ruthlessly, and inhumanely."
Most people will never interact with the prince themselves, hence Machiavelli's note to the prince that "everyone can see what you appear to be" but "few have direct experience of what you really are." "A skillful deceiver," he continued, "always finds plenty of people who will let themselves be deceived." We can surmise from this what kind of person the prince would have to be.
It is customary to object at this point that Machiavelli counseled that the prince pursue virtue when possible, and that he should not pursue evil for its own sake. Machiavelli does indeed make such an argument in chapter 15 of The Prince. But on the other hand, Machiavelli says that conduct considered virtuous by traditional morality and the general run of mankind merely "seems virtuous," and that apparently wicked behavior that maintains one's power only seems vicious.
Skinner poses, and answers, the historian's natural question when faced with these moral claims:
But what of the Christian objection that this is a foolish as well as a wicked position to adopt, since it forgets the day of judgment on which all injustices will finally be punished? About this Machiavelli says nothing at all. His silence is eloquent, indeed epoch-making; it echoed around Christian Europe, at first eliciting a stunned silence in return, and then a howl of execration that has never finally died away.
Machiavelli's view has sometimes been summarized as "the ends justify the means." Such a distillation does not capture all aspects of Machiavelli's thought, and no doubt this pithy summary irritates professors of political theory. But if the end in mind is the preservation of the prince's power, then "the ends justify the means" is not an unfair description of Machiavelli's counsel.
This principle, in turn, is what the collectivist State now appeals to in order to justify its own deviations from what people would otherwise consider moral and good. F.A. Hayek wrote, "The principle that the end justifies the means is in individualist ethics regarded as the denial of all morals. In collectivist ethics it becomes necessarily the supreme rule; there is literally nothing which the consistent collectivist must not be prepared to do if it serves 'the good of the whole,' because the 'good of the whole' is to him the only criterion of what ought to be done." Collectivist ethics, he added, "knows no other limit than that set by expediency – the suitability of the particular act for the end in view."
Almost everyone now accepts, at least implicitly, the claim that a different set of moral rules applies to the State, or that to one degree or another the State is above morality as traditionally understood. Even if they would not use some of the verbal formulations of Machiavelli, at some level they believe it is unreasonable to expect the State or its functionaries to behave the way the rest of us do. The State may preserve itself by methods that no private business, or household, or organization, or individual would be allowed to employ for their own preservation. We accept this as normal.
This is merely a more general statement of the phenomenon I described earlier, whereby few people even bat an eye when the State engages in behavior that would be considered a moral enormity if carried out by any other person or entity.
Now it will be objected that the coercive apparatus of the State is so important to the right ordering of society that we cannot insist too strongly on libertarian purity when evaluating its behavior. Sometimes the State just has to do what it has to do.
Every so-called service the State provides has in the past been provided non-coercively. We are simply not encouraged to learn this history, and the framework we unknowingly adopt from our earliest days in school makes our imaginations too narrow to conceive of it.
Machiavelli launched one revolution, on behalf of the State. Ours is the revolution against it, and in favor of peace, freedom, and prosperity.
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