Saturday, 7 February 2009

Libertarian ideas to stimulate the economy

At, Jeffrey A. Miron has some Libertarian ideas to stimulate economy. Is that an oxymoron?

Jeffrey A. Miron, senior lecturer in economics at Harvard University, seems to want to do what in some ways seems the impossible, and come up with a libertarian stimulus package. Miron starts by saying
[...], libertarians do not argue for doing nothing; rather, they advocate eliminating or adjusting policies that are bad for the economy independent of the recession.
But if these policies are to be advocated for independently of the recession, are they a "stimulus package"? Aren't the measures put forward by other groups in terms of a stimulus package special because they are not measures they would, in normal times, be suggesting? Don't libertarians advocate eliminating or adjusting policies that are bad for the economy at all times and thus they would add nothing in terms of extra policy measures to deal with the current situation? Wouldn't many libertarians in fact argue that governments doing nothing is the correct policy response to the current crisis?

Miron puts forward the following as a stimulus package that he thinks libertarians can endorse.
Repeal the Corporate Income Tax: Repeal would spur investment, improve the transparency of corporate accounting, slash compliance costs, and avoid the distortions caused by the special-interest provisions in the tax code. Repeal can work fast, by raising companies' share prices, increasing cash flow, and allowing corporations to lessen their need for bank lending.
Yes, but most libertarians (and some non-libertarians) would argue for this independently of the crisis, so its not really a stimulus, or entirely a libertarian, measure.
Increase Carbon Taxes While Lowering Marginal Tax Rates: Reasonable people disagree about how much the U.S. should reduce its use of fossil fuels, but crowded highways, air pollution, and global warming all suggest that some reduction is desirable.
This is a very mainstream, non-libertarian, measure. Greg Mankiw, for example, has been pushing this for a long while. Also such advocacy is independent of any stimulus package.
Moderate the Growth of Entitlements: The elephant in the room amidst the stimulus debate is the impending imbalance in Social Security and Medicare as the baby boom generation moves into retirement. Without reductions in benefits, taxes will have to increase substantially, generating a major drag on the U.S. economy.
But wouldn't the libertarian position be that programs like Social Security should be removed completely and private systems be used instead? But again, wouldn't libertarians argue for this independently of the crisis, so its not really a stimulus measure?
Eliminate Wasteful Spending: Most discussion of the stimulus focuses on areas where, according to proponents, government spending should be higher. Much current expenditure, however, is wasteful.
A mainstream looking move. Many non-libertarians would also argue for this, and they would do so independently of the crisis.
Withdraw from Iraq and Afghanistan
Again many non-libertarians would support and advocate this, and do so independently of the current situation.
Limit Union Power: [...] Laws that protect unions are problematic. Unions raise wages above market levels, increasing unemployment. Thus the Obama administration can signal American business that it cares about efficiency, not just redistribution of wealth, by opposing the card check bill. Better yet, it can repeal the Davis-Bacon Act, which inflates labor costs in federal contracts.
Nothing libertarian, per sec, about this move. A number of different groups of non-libertarians would argue for it, independently of any stimulus package.
Renew the U.S. Commitment to Free Trade: One crucial danger in the current environment is that the U.S. and other countries will embrace protectionist policies. The U.S. enacted prohibitive tariffs during the Great Depression, and many trading partners retaliated. World trade plummeted, contributing to the economic misery.
I have pointed out a number of non-libertarians who argue against protectionism recently, so not really a libertarian policy as such. Also protectionism being bad is independent of the current situation.
Expand Legal Immigration
This would get a lot of non-libertarian support and again independently of a stimulus package.
Stop Bailing out Businesses that Took on Too Much Risk
This measure would also get a lot of non-libertarian support and this support would be independent of a stimulus package.

Miron ends by saying
The libertarian view, then, is that many desirable policy changes involve less government, not more. Even changes that are inconsistent with the Keynesian stimulus framework, such as reductions in military spending, make sense when the spending is wasteful.

It is tempting to believe that every problem has a solution, but the reality is not so nice. It is possible, even likely, that the best we can do is fix things we know how to fix, and then get out of the way. This may not ameliorate the current situation, but it avoids making things worse. In economics as in medicine -- first, do no harm.
While I think that Miron's ideas are good ones, what I don't see is how they are definitively libertarian, as opposed to, say, just good economics. The measures Miron suggests would get, I think, a lot of support from non-libertarians and thus I don't see anything libertarian, as such, about these ideas. Also, even if we accept Miron's list as libertarian, these ideas would be argued for even without the current crisis and thus I'm not sure they really are, therefore, a stimulus package, rather than a general libertarian wish list. I also wonder if other libertarians would think them too mainstream and not radical enough and so not truly libertarian at all.


Anonymous said...

The idea of a Libertarian 'stimulus' is preposterous, and the Libertarian response to the crisis would be to do nothing. Furthermore, Miron's list of Libertarian policies is insipid.

However, you make an error in implying that a policy can't be Libertarian if it isn't exclusive to Libertarians. Legalising drugs is a Libertarian policy which is shared with persons of distinctly different political persuasion. Libertarian ideas are little more than good economics allied with wise social policy, in a context of recognising the extraordinary resourcefullness, creativity and productivity of free individuals. All sensible ideas which are shared with other people to varying degrees.

Dave Christian

Paul Walker said...

Dave: Your point is well taken. But I have to ask if libertarian policies aren't, at least to a degree, exclusive to libertarians, then what make libertarians different from everybody else?

Sean said...

Good table manners...

But seriosly, obviouslt the consistent aplication of the non-initiation-of-force principle.