Arnold Kling  

Foundations of Libertarianism

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Retirement Age in Play?... Globalized Education?...

James Piereson offers an interesting history of the role of foundations in stimulating political ideas and debates.


In the period running from the end of World War II down to the present, conservative philanthropy has gone through at least two distinct phases, and is now entering a third. Surprising as it may seem, both earlier phases were defined by ideas rather than by narrow business or corporate interests.

The first phase, which began in the mid-1940s and ran well into the '70s, was guided more by an interest in classical liberalism and libertarianism than in conservatism as it has been understood more recently.


His description of the influence of Hayek is interesting, as is his discussion of neoconservatism. It made me think of a short description of the difference between a neoconservative and a libertarian:

A neoconservative believes that an "ownership society" is one where you are taxed in order to fund personal savings accounts. A libertarian believes that an ownership society is where you get to keep your money in the first place.

In my view, the biggest problem that libertarian philanthropy faces today is the wealthy churches of academia, which have far more assets than any foundation and which are overwhelmingly in the hands of spoiled, intellectually cocooned leftists.


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TrackBack URL: http://econlog.econlib.org/mt/mt-tb.cgi/268
The author at Acton Institute PowerBlog in a related article titled The Battle of Ideas writes:
    The Road to Serfdom, by F. A. HayekThis OpinionJournal article, “Investing in the Right Ideas,” by James Piereson, surveys a brief history of philanthropy in the 20th century. Piereson describes three phases of conservative philanthropy, initi [Tracked on May 27, 2005 9:43 AM]
COMMENTS (21 to date)
spencer writes:

There is much I find appealing about the libertarian philosophy. But I'm a numbers guy and I have to go with the evidence.

You act as if the libertarian economic theory is an untested theory. But we have experience with a liberaterian environment in the US-- somewhere from around 1850 or the Civil War to WW I or the depression. Essentially all the major factors of the modern capitalist system were in place in that period as the limited liability corporations could mobilize large ammounts of capital and implementing large scale capital spending projects. But if you compare the record of that era to the post WW II economic record you find that the ability of the system to improve the well being of the population was clearly superior in the post WW II era in term of real per capita income growth and a host of similiar measures of economic well being.

My question that I would love to see an essay by you on is if large scale government so bad, why has the economic record over the last 50 years or so of large government been so clearly superior to the record in the era of small government from 1850 to 1950. Even if you only examine the period of peak prosperity growth up to 1925 and exclude the 1930s depression you get similar results.

Moreover, I do not believe the better record in the modern era is due to greater advances in technology. From roughly around 1840- when the steam engine begin to be widely used to around the 1920s-- was the era when for the first time the means of production was able to move from almost exclusively muscle power-- men and draft animals -- to machine power of the gas and electric engine. Even the telegraph gave instant communications by 1840, and we are still just improving that technological breakthrough with radio, TV and the internet.

El Presidente writes:

When I hear discussions of the superiority or inferiority of political philosophies I am reminded of a song.

"You may be right. I may be crazy. But it just may be a lunatic you're looking for. Turn out the light. Don't try to save me. You may be wrong but, for all I know, you may be right."

Let's just try to be reasonable. What do you say? Libertarianism is uniquely gifted in the American political arena precisely because it is not bound by religious loyalty or war chests. It's FREE. That's a bargain. Watch it be co-opted by abundant wealth and then try to figure out who it serves.

Spencer is absolutely right about the history of libertarianism. Modern libertarianism might be defined similarly to classical liberalism aka American conservatism (but definitely not the current "conservative" ideology sometimes referred to as neoconservatism). The permutations of this idea set lead me, the son of a Christian minister, to believe wholeheartedly in evolution; at least of ideas. The conflict is really very simple though regrettably irresolvable. We are constantly trying to revise who will be in control and how many whos there will be. If you recall the Articles of Confederation we decided to be an assembly of autonomous states. That didn't work. Now we are primarily national and secondarily federal (even though the constitution reverses the arrangement). That doesn't seem to work too well either according to a lot of folks. The short answer to this conflict is that there is no answer or rather there is a multiplicity of answers but we agree on none of them. Unanimity is the precondition for an answer but it's a pipe dream because we are always trying to best each other. Churchill was right about democracy.

Spencer: One of my profs, Max Neiman, wrote a book called "Defending Government, Why Big Government Works". You might find it useful.

Randy writes:

Spencer,

Re; "Why has the economic record over the last 50 years or so of large government been so clearly superior to the record in the era of small government from 1850 to 1950?"

That's comparing apples and oranges. The world was a completely different place in the latter half of the 20th century. The real question is, how much progress would have been made had it not been for the massive government programs of the late 20th century? You are assuming that the government was the cause of the progress just because it coincided with the progress. It seems more likely to me that the government programs were made possible by the progress. And if that is the case, then isn't it quite likely that more progress would have been made without deadweight losses from government redistribution?

spencer writes:

No -- my argument is that from an economic and technical perspective the 1850-1950 era was not very different from the post WW II era. The only big difference was the role of government expanded substantially.

Zubon writes:

I'm sorry, spencer, can you clarify that belief? 2000 "was not very different from" 1850 technologically or economically? The internet is fundamentally the same thing as a telegraph, and our current motive power is not very different from the steam engine? How many orders of magnitude in difference does it take to gest to "very different"? I would think that modern computers are vastly different from Babbage's difference engine. I am not sure how we are meant to interpret things' being not very different economically over that time period, unless your point was just that we had corporations at the time.

Nicholas Weininger writes:

1850-1950 is a very bad comparison period indeed. Since the Depression was (arguably) caused and sustained by big government interventions, citing it as part of your empirical anti-libertarian argument is pretty problematic. Including WWI and/or the Civil War in your time period is also very fishy.

A somewhat stronger comparison would be between the post-WWII period and the 50 years after the Civil War-- both periods of more-or-less worldwide peace, amazing technological progress, and sustained economic growth. Was the average annual rate of growth in per capita GDP really significantly slower in 1865-1915 than in 1950-2000? If so, do you have a citation?

Even if so, there are still problems with holding up 1865-1915 as a test period for libertarianism. Though government took a smaller total share of GDP in that period, it was less libertarian in several important respects. For example, high protective tariffs were used to frustrate foreign competition, and over half the population was systematically, legally excluded from full participation in the labor force.

Mike Linksvayer writes:

I suppose most growth comparisons are apples and oranges, but across countries in the latter half of the twentieth century less government seems to mean more growth.

On comparisons across eras, I'm no romantic for the past, but it isn't obvious to me that people's lives improved less from the mid-1800s to the early 1900s than since. Both eras have been absolutely amazing. Can someone point to some data?

spencer writes:

For the data go to www.eh.net/hmit/gdp/.

I had already done 1850 to 1925 and the trend was 1.5%. 1915 was below trend, and 1865 was above trend so 1850 to 1925 should give you a higher growth rate then 1865 to 1915.

Since WW II real per capita GDP growth was 2.2% as compared to 1.5% in the earlier era. These are compound growth rates, if you do averages the 1850 to 1950 era averages 1.4, and post 1950 is 2.1%.

So the data shows that real per capita growth since 1950 has been about 50% higher then in the 1850- 1950 era and that the 1.5% trend was fairly constant throughout the era -- you get similiar rates whatever multi-decade period you use.

Yes, communications, etc, are much better today then in 1850. But we are not talking about levels, we are talking about growth rates, or improvements in the standard of living.
By the civil war the telegraph gave instant communications around the country. Improvements from that have been faily constant. When I was a kid our phone was on a party line. 20 years ago cell phones were science fiction.

The point is the growth started a century and a half ago and has been on an upward slope since with a sharp break in the trend in the middle of the 20th century when per capita growth rates rose about 50%. This coincided with the emergence of large scale federal government in the US. Correlation does not mean causation.
But, at a minimum it implies that the liberaterian case for small government is unproven and has a mountain of counter evidence to overcome.

My own belief is that there is an optimal level of government. Recently Europeans have exceeded it, although much of the recent slowdown in European growth is due to the shifting of what would otherwise be Western European investments to Eastern Europe, not the size of European governments. I do not know what the optimal size of government is, but the data seems to argue that we have accidently hit on a level that seems to work very well.

Nicholas Weininger writes:

Spencer, thanks for the data source-- that's a great site.

My last point still stands, though. Late 19th C America differed from the libertarian ideal in significant ways that may even have a greater influence on economic growth than the overall size of government. Moreover, there are other factors that could introduce "noise" into the real-GDP-per-capita number, e.g.

1. immigration patterns-- huge numbers of poor immigrants entered the country in the late 19th C and this may have pulled down the per capita GDP number;

2. errors in calculating inflation-- these are presumably more likely in the older data set, since econometric precision has improved over time and in the 19th C probably a larger portion of the economy was "off the books," and in a 50-year span a small per-year error can produce a huge change in the overall figure.

For these and similar reasons, I tend to think that two-variable analyses like real per capita GDP vs. size of gov't are very, very poor ways of evaluating the effectiveness of economic philosophies. Aprioristic reasoning is of course much better. :-)

Nicholas Weininger writes:

Indeed, if you read the source note on the EH site it points out that the pre-1929 data are calculated completely differently, and in much more error-prone ways, from the post-1929 data, as there were no national GDP calculations before 1929. So it's really not clear that the precision of the pre-1929 data is high enough to compare usefully with the post-1929 data.

spencer writes:

I'm as as aware as anyone of data problems, but it does not disprove the point that GDP per capita growth has been significantly higher since 1950 then in the prior century. No serious sudent of economic growth that I know of disputes this comparison. So I still strongly believe my original point that the emergence of big government has been accompanied by a sharp improvement in the rate of growth of the population's well being. I am not saying there is any causal relaionship. But it is a major argument that the liberaterian theory is incorrect and I would like to see out host answer that question.

In short, they advance a theory that is not supported by the data. Why should I accept their theory in the face of such strong contrary evidence?

monkyboy writes:

I think you are missing the appeal of being a libertarian, Spencer.

Being a libertarian is like being a religious fundamentalist, no deep thought is required. Government bad, private enterprise good is all you need to know.

The U.S. turning into a libertarian paradise has about as much chance of happening as the Rapture, so the odds of being proven wrong are next to zero.

Shame on you for pointing out a prehistoric libertarian America...it's like showing facts to back up evolution! If there is a libertarian hell, you are going, my friend :)

spencer writes:

I grew up in the rural south and have spent most of my adult life in Boston. A couple of weeks ago I went to a wedding in Florida of two people near 60. One lost his wife a little over a year ago after a several year terrible battle with cancer. the woman was deserted by her husband about 15 years ago and had to raise 3 kids on her own.

They both were very active in their church and their faith helped them get through the hard times. They had 2 ministers doing the ceremony and 3 other ministers attending.
All through the wedding and reception I kept hearing the ministers talk about how great God was to bring these two together. I did not have the guts to ask them if they knew anything about probability or had every had a stat course.

But I came out of that weekend with a greater understanding of how the right thinks and how they convince themselves and others to believe. Monkeyboy, you are right -- it is faith, and I live and work in a world of facts.

Mike Linksvayer writes:

spencer, thanks for the link. Wow, real per capita income grew not at all 1801-1821 nor 1915-1933. ~1934-84. The ~20 years following 1934 were quite a spurt of growth. Growth seems to have slowed in the last few decades.

There is a problem attributing growth in any particular short timespan to policies of the day: many policies may take a long time for their effects to fully unfold.

In any case, the combination of slower growth before "big government" in the US and slower growth now in countries with even bigger government seems to support spencer's idea that the US has stumbled upon a roughly optimal level of government.

However, both cross-era and cross-country comparisons seem unfortunately apples and oranges comparisons. What we need are growth and relative size of government data for many other countries over comparable time periods.

For the time being assume that the US govt is smaller than comparable governments in all time periods. Assume also that the US grows faster than comparable countries in all time periods. Both seem like fairly reasonable assumptions, though I'd love to have proof either way.

Anyway, if my assumptions are correct, it would be pretty hard to argue that the US could've increased growth at any point in time by increasing the size of government or that we've now stumbled upon a roughly optimal size.

So, do comparable growth and size of government data exist for other countries?

Mike Linksvayer writes:

Nevermind the spurious "~1934-1984" above. I think that was the best 50 year period in the time series, but forgot what I wanted to say about it and to remove the text.

Nicholas Weininger writes:

Spencer, I'm not claiming that the data on GDP per capita positively support the libertarian thesis. They don't. I'm claiming that there are so many problems with the data, and so many alternative explanations for the pattern other than "big government is good for the economy," that they constitute at best very weak support for the anti-libertarian thesis. An appeal to unspecified authority doesn't really do much to dissuade me from this position.

spencer writes:

I'm not claiming anything either. I'm just asking our host to write an essay addressing the question.

Ann writes:

I think it's counter-productive to think of government in terms of quantity, rather than quality. The role of government should be to improve incentives, where necessary, and/or to fix externality problems. The justification for government forcing people to save for retirement is that we're not willing to let people starve if they reach old age and haven't saved.

What government should NOT do is to pick winners and losers, or to create its own monopolies which, after all, tend to have bad incentives. I thought a lot about this when living in Asia, teaching a class on financial markets. Many Asians argued that their markets were more heavily regulated, and hence better and "cleaner", than US financial markets.

But the key difference was in the regulatory philosophy - the heavily regulated countries let government bureacrats decide which companies should and shouldn't be listed, based on largely irrelevant but straightforward criteria such as company age and whether the company had a 3 year track record of reported profits. Their accounting requirements, however, meant that investors had little ability to judge for themselves, since companies revealed so little information.

The US, on the other hand, lets any company go public as long as they reveal sufficient information, letting investors decide how to invest their own money. Investors aren't infallible, but investors managing their own money at least have an incentive to try to get it right.

The point - good versus bad government isn't simply a question of more versus less.

Bob Dobalina writes:

The ~20 years following 1934 were quite a spurt of growth.

Following the post hoc ergo propter hoc approach championed by spencer, it's clear to me that what we need to do is have a big depression, and then just wait for the results to roll in!

spencer writes:

Actually, I started my comparison in 1950 on purpose to avoid the post-depression rebound.

Again, I did not say government was the cause. All I did was ask our host to do an essay on why the data conflicts with the libertarian case that big government is a negative. My own view is that it is both a negative and a positive.

James writes:

Spencer,

A few comments...

If by "living in a world of facts," you mean that you only pay attention to observed and recorded events, your analysis will necessarily be incomplete because it will not (can not) take into account any foregone alternatives or opportunity costs which, by their nature, can't be observed and recorded but which are central to economic analysis.

With "All I did was ask our host to do an essay on why the data conflicts with the libertarian case that big government is a negative," you commit the fallacy known as a complex question, i.e., will you write an essay explaining why the data conflicts with the case that you don't beat your wife? To say that the data conflicts with the libertarian case implies that the elasticity of the growth rate with respect to size of government is positive and statistically significant. What are your actual findings?

Finally, regarding your view that there is an optimal size of government, is this based on a curvilinear regression of empirical data, or just faith?

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