Libertarianism and Liberty
Libertarianism presents itself as a simple, clear, and principled view. It appears to provide a moral basis, in the value of individual liberty, for a specific political program of limited government and low taxes. The moral significance of liberty seems obvious even to those who believe it is not the only thing that matters. But the claim of the libertarian political program to be founded on this value is illusory. Three lines of thought lead to conclusions that might be seen as libertarian. But none of these shows that respect for the value of individual liberty should lead one to support the political program of low taxes and limited government that libertarians are supposed to favor.
One route to libertarian conclusions appeals to an idea of productive efficiency. As Hayek argued, the market is, in an important range of cases, a more efficient mechanism for deciding what to produce than decisions by any central planner. This is so for two reasons. The first is the flow of information: no planner could acquire information about what consumers want to buy as efficiently as the market does. The second is capture by interests: decisions by state-owned industries are likely to be guided by the interests of those who run or work in those industries rather than by the goal of efficient overall production. Where they apply, these arguments are powerful. As recent financial crises show, however, these considerations do not lead to the conclusion that government regulation is always a bad thing. And even Hayek would not deny that government intervention is needed in the case of externalities such as pollution and climate change. The considerations just mentioned provide some guidance about how to deal with these problems, but they provide no reason for thinking that they should be dealt with by simply leaving it to the market.
Whatever policies they support, however, these considerations are not based on the value of liberty for an individual. This argument assigns individual liberty only an instrumental value: it is important only as a means to economic efficiency. “Efficiency” sounds important. But efficiency is only as important as the goal that is efficiently promoted. The value that Hayek’s argument takes as fundamental is the satisfaction of individual preferences. More specifically, it is the satisfaction of preferences that can be expressed through the market, the weights given to these preferences being determined by individuals’ willingness and ability to pay for their satisfaction. Since individuals with more money are willing to pay more for the satisfaction of a given preference, this means in practice that what is maximized is the satisfaction of preferences weighted by the wealth and income of those whose preferences they are.
Many of the factors affecting the degree of control individuals have over their lives—such as the legal system and the organization of the economy—are not the subject of preferences expressed through the market. To the degree that they are not, market outcomes will not be sensitive to the value individuals place on their own liberty. For example: The productive efficiency of a market economy depends importantly on its ability to shift resources from industries that are no longer needed or efficient—such as typewriters manufacturers in an era of the computer—to those making products for which there is greater demand—such as computers and software to use on them. This efficiency is attained at a cost to workers, who must find new employment when such changes occur. Workers who are constantly subject to such disruption have less control over their lives than they would in a more stable society. To determine what system is to be preferred, some decision must be made about how to balance the conflicting values of productive efficiency and individuals’ control over their lives. The market itself does not answer this question, since the choice between different systems is not something that individuals express a preference about through their market behavior…