In this marvelous second chapter, Nikolai Wenzel distinguishes between 3 flavors or strains of libertarianism: classical liberalism, minarchism, and anarcho-capitalism.

1. In economic terms, classical liberals espouse the concept of the “productive” state beyond the “protective” state — but not the “redistributive” state. (63)

The state has a duty of “erecting and maintaining certain public works and certain public institutions.” (64)

… the state should solve collective action problems, decreasing overproduction of bads (such as environmental harm) and increasing underproduction of goods (such as education, roads, or mosquito control) when the market has failed — without, however, lapsing into the “redistributive” state of progressivism. (48)

Redistribution both from the minority of high-income people to the majority of low-income people and from the majority of the consumers to the minority of crony capitalists is proscribed. To paraphrase Will Durant, the poor cannot despoil the rich through violence or votes, and the rich cannot despoil the poor through ability or subtlety. In short, no one is privileged or protected from competition.

2. “Under minarchy, the purpose of the state is the protection of individual rights from the aggression of others; the state itself may not engage in any coercion, except to prevent coercion.” (69)

For example, “robust political economy casts fatal doubt on the very existence of socially optimal equilibria, the ability of specialists in political economy to identify them, and the state’s ability to correct market failures without unintended consequences or political capture.” (71)

The market flows, as a process of everlasting improvement driven by entrepreneurs and consumer sovereignty.

What is efficient or “socially optimal” today will not be so tomorrow. Economists are usually bad entrepreneurs (and vice versa!) and cannot “identify” inefficiencies. (If they are so smart, why aren’t they rich?)

State regulations assume a frozen economy and themselves tend to freeze it, including in unexpected, subtle, but destructive ways.

3. Anarcho-capitalism is “appealing and in many cases obvious… Just as government will abuse its power if it provides traditional goods and services, the same will happen with the provision of security and the protection of individual rights. The market and civil society can protect individual rights more effectively than the state. Limited government is a fool’s errand, and the only defense of rights can be found in markets and civil society.” (68-71)

In my view, however, pure anarcho-capitalism is defective because enforcement of laws for the sake of general deterrence through fear of punishment presupposes an organization in society that has enough coercive power to crush any individual or group within that society. We may identify 3 reasons for rational violence: vengeance, just punishment, and self-defense. Vengeance is generally a corruption of justice and is altogether outlawed both for the citizens and for the police. The state has nothing to do with self-defense at all: cops are not anyone’s bodyguards. However, the state’s monopoly on punishment is not a bug but an essential and unavoidable feature.

Here is how I would describe myself in the context of the design of the US system of government:

I am an anarchist for the federal government: it should disappear.

I am a minarchist for state governments: they should concern themselves solely with execution of justice. As I have written before, the 3 branches of government are differently privatizable: judges fully, the legislature in part, and the executive branch not at all. Let’s make what we can private and keep what we must public.

I am a classical liberal for local governments: it is on this level that control of externalities and production of a few definite public goods are reasonably effective.

My favorite example of a useful positive local externality-fixing ordinance is one mentioned by Steven Landsburg: “Exterminators shall not drive the vermin next door.” Mosquito control is probably best supplied by cities, etc.

Stiff competition between tens of thousands of cities will keep local governments in check.

I am a “statist” for private firms and organizations in the sense that they should have full powers to bind themselves by contracts however they please.


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