Bryan Caplan  

The Homage Statism Pays to Liberty

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Here's an odd thought for a libertarian: The government very rarely tells me to do anything.  Once per year, the IRS orders me to pay federal income taxes.  Once per year, the state of Virginia forces me to pay state income taxes and get my car inspected.  Once per year, Fairfax County makes me pay property taxes.  Traffic laws aside, the government leaves me alone more than 350 days per year.

How is this possible when the government regulates almost every aspect of American life, and takes 40% of GDP?  The government controls the labor market (especially for foreign workers).  The government decides what products I can and can't buy.  The government runs a massive retirement system that I can't escape without leaving the country.  How can the government control me so thoroughly yet so rarely boss me around?

The answer is simple yet shocking: Government controls me by controlling my trading partners.  Government doesn't tell me to pay sales taxes; it just forces every business in Virginia to collect sales taxes as a condition of sale.  Government doesn't tell me who I can and can't hire; it just tells every business I deal with who they can and can't hire.  Government doesn't even tell me I have to contribute to Social Security; it just requires my employer to make contributions on my behalf as a condition of employing me.

Why is government coercion so predominantly indirect?  Most economists would cite transactions costs.  Bossing CostCo around is far easier than bossing all of CostCo's customers around.  But this explanation is unsatisfying.  Government eschews many cheap ways to directly bully private individuals into submission.  For example, if government really wanted to crack down on scofflaws, it could pay cash bounties to whistleblowers of every description.  Anyone who hired an illegal nanny or failed to pay use tax on out-of-state Internet purchases would have to look over their shoulders day and night.  (Think about how many bounties a garbageman could collect!)  As long as the scofflaws were liable for the fines, an army of whistleblowers wouldn't cost the government a dime.

If this sounds draconian to you, you're in sight of my preferred story.  Governments rely on indirect coercion because direct coercion seems brutal, unfair, and wrong.  If the typical American saw the police bust down a stranger's door to arrest an undocumented nanny and the parents who hired her, the typical American would morally side with the strangers.  If the typical American saw regulators confiscate a stranger's expired milk, he'd side with the strangers.  If the typical American found out his neighbor narced on a stranger for failing to pay use tax on an out-of-state Internet purchase, he'd damn his neighbor, not the stranger.  Why?  Because each of these cases activates the common-sense moral intuition that people have a duty to leave nonviolent people alone.

Switching to indirect coercion is a shrewd way for government to sedate our moral intuition.  When government forces CostCo to collect Social Security taxes, the typical American doesn't see some people violating their duty to leave other people alone.  Why?  Because they picture CostCo as an inhuman "organization," not a very human "bunch of people working together."  Government's trick, in short, is to redirect its coercion toward crucial dehumanized actors like business (and foreigners, but don't get me started).  Then government can coerce business into denying individuals a vast array of peaceful options, without looking like a bully or a busy-body.

Of course, if the public fully absorbed the implications of common-sense morality, the government's ruse would fall flat.  The public would look at the vast majority of business regulation and say, "So a bunch of people are using their own skills and their own resources to make money.  How on earth does that vitiate your duty to leave nonviolent people alone?"

Yes, governments have been known to boldly contradict common-sense morality.  Conscription is an obvious example.  Common-sense morality says "Your body, your choice."  Conscription says, "'Your body?'  Where do you get these treasonous notions, private?"  For the most part, though, governments prefer to take the path of least resistance.  Instead of denying the duty to leave nonviolent people alone, government exploits a massive loophole:  We're perfectly free to make any deal that government allows businesses to make with us.  

Many libertarians will find this depressing, but they shouldn't.  Hypocrisy is famously the homage that vice pays to virtue.  Government's preference for indirect coercion is the homage that statism pays to liberty.  Libertarians don't need to convince people that coercion is wrong.  We just need to convince people that indirect coercion of business is coercion of people.



COMMENTS (22 to date)
BZ writes:

Leave it to an economist to tell me something that is obviously true, but I never thought of.

Oh -- addendum -- don't our employers collect our taxes for us? The only direct interaction I have with the IRS is filling out a form to decide how big of a check they will cut me.

MikeP writes:

Once per year, the IRS orders me to pay federal income taxes.

Following BZ, once per year the IRS orders you to spend hours proving how much you should get back.

If you pay quarterly, however, the IRS orders you to pay federal income taxes four times per year.

Surprisingly, this is still way better than California, which orders you to pay quarterly taxes only three times per year. You see, California orders you pay 30% of your year's income in the first quarter, 40% in the second quarter, and 30% in the fourth quarter -- even if you have no idea in the first and second quarters how much you will make in the third and fourth quarters.

John Thacker writes:

There's a lot of truth to this-- but I think that quite a few Americans tolerate such direct action when it happens against low status people (which overlaps with but is not exclusive to the poor.) You're better off because you're privileged and high status.

Consider Bloomberg's NYC, where most of his coercive actions are indeed indirect, but stop and frisk is anything but. Or the cases that Radley Balko documents.

I think you're certainly right that the government uses indirect action, especially against corporations, to achieve the same goals, but the reason why you in particular see little involvement is only partially that, and partially your high status. The poor and low status experience government very differently.

Sam Wilson writes:

I've got a response here. I'm slightly skeptical that neighbor-snitchery is all that far outside the ken of the typical American that we couldn't see it here. We've already seen ordinary people quickly acquiescing to the erosion of the 4th amendment. Who's to say that with a little more pushing, we could end up looking a lot more like East Germany than West?

Brian writes:

"Government's trick, in short, is to redirect its coercion toward crucial dehumanized actors like business (and foreigners, but don't get me started)."

No, the government's trick is to keep coercion at the level of what's unseen, which as we know from Bastiat is easily ignored by humans. You hardly know you're being deprived if you never see what all the options are.

John Thacker writes:
No, the government's trick is to keep coercion at the level of what's unseen

Right, and what happens to low status people is often unseen, even when the low status people are not corporations or foreigners.

Aaron Zierman writes:

Brilliant. Breaking down coercion between direct and indirect types illustrates clearly how our government operates. This truly is where the difficulty lies. Thank you.

Eric Hanneken writes:

I think Ayn Rand made a similar point in "America's Persecuted Minority: Big Business," although she was writing more specifically about antitrust laws.

As Bryan mentioned but didn't explicate, the U.S. government saves its worst for foreigners, especially those from poorer countries, who are bombed, shot, dispossessed, and prevented from entering the United States. But as John Thacker pointed out, governments in this country also mistreat low status citizens. Think of all the people arrested for drug possession and coerced into "treatment," for example. Or think of prostitutes. There's no way to portray these victims as big businesses, but many Americans approve of what the government does to them.

MG writes:

Ironically, in almost all areas of societal interactions, the mere possibility of a party having a huge incentive/ability to conceal, and its counterparty a diluted willingness and ineffective ability to investigate, triggers suspicion and results in journalistic investigation, mndates for disclosure and labelling, etc.

Why can't we at least start by ensuring that government highlight, not obscure, the extent of its coercion/nudging by quantifying its costs. We should demand a much more comprehensive tallying of each citizen's tax burden (even if some components must resort to estimation). We could also do the same for benefits received (valued at all-in cost). We could then move to the costs of regulations. The list goes on.

Greg writes:

Great post.

Unfortunately, this is ingrained in our legal system. The central holding of the Obamacare case is that the government cannot "mandate" or require the purchase of insurance under the US Constitution (specifically, the commerce clause). So no one can show up and arrest you for not buying insurance

The Government CAN impose tax penalties on the product of your labor (and collect them in advance through your employer) for failing to purchase insurance.

We might be better off as a society forcing our government into the direct coercion... as it is place the moral repugnance of government intervention in public for all to see (and, perhaps, abhor).

Graham Peterson writes:

"Because each of these cases activates the common-sense moral intuition that people have a duty to leave nonviolent people alone."

That's right. And the intuition that business is inherently or fundamentally violent is the reason people vary only on the interval [complacency, cheering] on regulation of business. Look at the intuitive way people talk about business-doing:

"kill the competition"
"corner the market"
"got a steal"
"target market"

As long as people think and talk about markets intuitively with a War metaphor, government coercion will be welcomed.

Graham Peterson writes:

Also, this is a stupendous insight Brian closes with:

"We're perfectly free to make any deal that government allows businesses to make with us . . . . we just need to convince people that indirect coercion of business is coercion of people."

libertarian jerry writes:

Good article and right to the point. As an addendum I would also say that there are a lot of vested interests in keeping the system as it is. These would be accountants,tax preparers,lawyers,lobbyists,bankers who collect interest payments on government debt plus a myriad of net tax consumers. In essence,the productive American people in the Economic Class have become the serfs of the Political Class.

Hazel Meade writes:

I made this same point recently in a debate regarding the two christian conservative cake-makers in Oregon, which refused to make a wedding cake for a gay couple.

Anti-discrimination laws effectively discriminate against people on the basis of religious belief. Many supports of those laws would argue strongly that noone should be forbidden from entering a profession on the basis of their religious faith, but then simultaneously turn around and say that a business should not be allowed to sell cakes unless it does not disctriminate.

By shifting from "two human beings who want to sell cakes" to "a cake-salling business", they dehumanize the issue. You're not compelling PEOPLE to do things that violate their faith, your compelling an impersonal business.

ThomasH writes:

Rather they'd need to convince folks that the tax or regulation being objected to does more harm than good.

After the citizen "realizes" that taxation is coercion (not a surprise to most people), she needs to decide that x% of the value of her purchase will do more good spent on her private consumption than on public consumption or that he'd rather make exclusively non-governmental arrangements for inspecting foods and drugs, policing his streets, and funding his universities. An earlier article about the difficulty of reducing spending on unnecessary fire fighters is more to the point.

Tom West writes:

For better or worse, I think most people *support* the idea of businesses being coerced.

After all, the laws are there in the first place (in general) because of perceived harm a business' action was causing to others, while the expired milk only causes harm to oneself.

Thus people may well perceive most business regulation like they perceive noise laws - generally in their own interest.

Still, I think Bryan has some quite real insights here.

MingoV writes:
We just need to convince people that indirect coercion of business is coercion of people.
Far too many people have succumbed to generations of propaganda "proving" that government regulations protect people. OSHA regs protect workers. Loan regs protect borrowers. Building codes protect home or building buyers. Financial regs protect investors from fraud. FDA and USDA regs protect us from tainted food and toxic drugs. EPA regs protect us from air and water pollution. Etc.

To get past this, one has to separate the completely worthless regs from those of questionable worth. Then one has to convince people that regs in the latter category are not as efficient as the free market for protecting people. This task is enormous, and the non-libertarian target audience is unlikely to have the patience and the motivation to hear and accept the arguments.

Tom West writes:

Then one has to convince people that regs in the latter category are not as efficient as the free market for protecting people.

Of course it's difficult. The majority are willing to trade freedom for the luxury of not having to use scarce cognitive resources to avoid (for example) food and product safety issues.

The next generation often makes assumptions about safety that amaze me ("they wouldn't be allowed to sell it if it could harm me") and I am constantly making food safety choices that horrify my in-laws ("in my day, you'd have poisoned yourself a dozen times over").

Each generation seems to be making themselves safer by eliminating more choice.

"Caveat emptor" has become a dirty word (phrase?).

eli writes:

Everyone believes in minimum wage law, but nobody supports a law against poor people selling their labor for less than $X. It doesn't matter to them that to the extent that the laws are obeyed they have the same effect.

JKB writes:

There is a reason that the solutions to the "internet tax" only involve the vendors, no matter how small, collecting and remitting the sales tax. It would be simple after an online transaction to simply link over to the state taxing agency for a separate charge to the card for the tax. But it would also make people very aware of the tax. Same with withholding.

A description from 1950:

Is the big and successful corporation its own master, then? Not quite.

To begin with, it is severely circumscribed by the government. as Professor Sumner H. Slichter has said, one of the basic changes which have taken place in America during the last fifty years [1900-1950] is "the transformation of the economy form one of free enterprise to one of government guided enterprise....The new economy," says Dr. Slichter, "operates on the principle that fundamental decisions on who has what incomes, what is produced, and at what prices it s sold are determined by public policies." The government interferes with the course of prices by putting a floor under some, a ceiling over others; it regulates in numerous ways how goods may be advertised and sold, what businesses a corporation may be allowed to buy into, and how employees may be paid; in some states with Fair Employment laws it even has a say about who may be hired. "When a piece of business comes up,' writes Ed Tyng, "the first question is not likely to be 'Should we do it?' but 'Can we do it, under existing rules and regulations?' "He is writing about banking, but what he says hold good for many another business. Furthermore, in the collection of corporate income taxes, withholding taxes, social security taxes, and other levies the government imposes upon the corporation an intricate series of bookkeeping tasks which in some cases may be as onerous as those it must undertake on its own behalf. Thus the choices of enterprise are both hedged in and complicated by government.
--'The Big Change: America Transforms Itself 1900-1950)' (1952), Frederick Allen Lewis

Bill Drissel writes:

Homage: Every tinhorn dictator calls himself President.

Regards,
Bill Drissel
Grand Prairie, TX

Musca writes:

Tom West hit on a crucial point, which may undercut the whole idea of "common sense morality" (moral intuitionism).

It's been dealt with often in Bryan's posts, particularly involving Dr. Huemer, but moral intuitionism assumes that our gut level reactions of revulsion to certain images and ideas are morally correct. Yet, Bryan has mentioned biases on EconTalk and elsewhere, including anti-foreigner bias, that are widely held and require real cognitive effort to overcome ("overpopulation is bad because more people are consuming scarce resources", "immigrants are coming to steal our jobs", etc.).

To use Kahneman and Tversky's phrasing, ratiocination about morality requires energy-intensive System II thinking. Moral intuitionism is essentially making your easy, flowing System I reactions the standard of morality.

But isn't System I the source of all our biases and, ultimately, often wrong? In other words, asking people to critique policy in light of "common sense" morality may end up appealing to the same biased source of their original errors.

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