Tuesday, October 19, 2010

Flaws of Pure Libertarianism. II.

A crucial test of any theory is whether it is stable under small perturbations - changes. A stable theory will have forces that cause the system to return to equilibrium after being perturbed. An unstable theory will blow up.

Is pure libertarianism stable as a theory of the economy of a closed system? Let's analyze it.

What would cause a perturbation? This is easy - there are two sources. First, the world contains a population with a broad distribution over many, many dimensions: skills, strength, knowledge, geography, etc. second, there is luck. The luck of unknowingly happening to grow up onto top of a huge oil reserve, the luck of being a few days earlier in an invention and thus obtain the patent, the luck of being borne to royalty or wealth, the luck of being picked from a pool of dozens of seemingly and objectively equal applicants for a good job or school, on and on ...

Assume a person - or small group - has a economic advantage over others and implements that advantage to gain wealth: more resources, etc. That person can then use that, invest it and get more. And more. And more. And on and one infinitely. Barring bad "luck" or stupidity in investing, that person or group can accumulate such wealth as to become a force in the political sector. Then that person/group can use the governmental sector to lock in its wealth and power, eliminate competitors and protect its wealth from outsiders.

Don't say this does not or cannot happen. The examples of persons of great wealth buying seats in the US Senate are legion. [John Heinz, Rockefeller from WV, Maria Cantwell, etc.). The US Robber Barons bought entire state legislatures.

What forces exist in pure libertarianism to help prevent this - the creation of a new aristocracy and Ruling Class? The libertarian might say, "competition". Hmmm ...

Does that work?

It could ... BUT the government prevents hardball competition.

For example, an inventor creates a new product and gets a patent. A competitor could copy that idea-invention and sell it for less, but the GOVERNMENT protects the inventor-patentholder by punishing the copycat. Same for copyright protection (which protects computer software), same for natural resources. Who do you think protects that gold mine from others coming in to mine the gold? The government's police force. Government creates "property" and protects PROPERTY RIGHTS from squatters, from nonviolent thieves, from copycats, etc. Notice that none of this "competition" involves violence.

And theories of Pure Libertarianism seem to justify government only to prevent violence. [Cf. Nozick, in Anarchy, State and Utopia] But property rights and contract rights are a creation of GOVERNMENT and are protected by GOVERNMENT.

A truly Pure Libertarianism would have no governmentally protected property rights; such a system would have forces to prevent a new aristocracy - true, pure competition by substitution, copying or simple squatting & nonviolence takings. After all, unless you yourself protect something, it's not yours in a Pure Libertarian world, is it?

Thus we see that while truly pure - ultra, capital "P" - Pure Libertarianism does have forces to make that system stable, the type of small "p", "pure libertarianism" contemplated by almost all economic theorists (including the vaunted Chicago School) requires a powerful government to create and protect property. And enforce contracts. This government nullifies the forces of competition that would make such a system stable. The common system of pure libertarianism is unstable and in a self-contradictory manner uses governmental power to create fertile grounds for powerful, wealthy Ruling Classes and new aristocracies.


19th century America is an obvious example. Russia in the 1990s is another. And the creation of feudalism in Europe around the 9th century is another.

Notice the examples are the same as I used in yesterday's analysis of pure libertarianism under the Hayek criticism. This is no accident. Today provided a microscopic, small scale analysis; the Hayek criticism is a broad, macroscopic formulation of the same forces.

Also note that Fraternal Libertarianism does NOT fail under perturbation: the regulations of the wealthy and powerful prevent them from becoming a new Ruling Class and aristocracy with hard wall limits on their wealth and power.

Fraternal Libertarianism is stable and a viable political-economic system. Libertarianism is not.


Krypto wants me to sell some US stocks. This is a weak signal, but since the S&P 500 is nearing my target for the year end (1200), I will comply.

Word of the Day

"Soporific" - adjective & noun [$10]
Soporific means (adjective) tending to produce sleep; (noun) a soporific drug or influence.
Sentence: A Philistine or member of the Booboise might think today's post is soporific, but the rise of the Tea Parties in US political battles makes understanding the ideology of libertarianism crucially important to see how they might evolve ... or devolve.


Bunkerman said...

sheesh, glad I put that order in at the open.

I'm geting tired of these beefers following my leads.

what scum!

They should send Krypto part of their fees.

Spin-em said...

Does Krypto watch CNBC??

Bunkerman said...

no, she does not. I watch Bloomberg some, but usually its on mute.

Bunkerman said...

I stopped watching CNBC a couple years ago - I got sick of the greenie propaganda.

Also they were a mouthpiece-megaphone for beefer shorts.

Spin-em said...

Bunk.. can you write about your buy/sell indicators after the series...spot on indeed...

Frosty said...
This comment has been removed by the author.
Bunkerman said...

"Lately" I seem to be a day late ... I guess I should run the update at 3PM.

Frosty said...

indeed Bunky...at your age one never knows if the sun will come up...toss Krypto an extra milk boner from frost.

Bunkerman said...

lol, sheesh frosty ...

I Strive for Perfection for my milions of readers.