Matt Zwolinski and some of the commentators on the new Bleeding Heart Libertarians blog take issue with the way I presented a libertarian approach to compassionate economic policy in this article. This is the kind of life that the blogosphere brings to the Great Conversation, and I’m glad Matt and his commenters picked up (and responded to) my article. I’ll have more to say about it in my next Forbes column this coming Friday, but here are a few quick points.
First, short op-eds don’t lend themselves to subtlety, nuance, and a careful weighing of all possible arguments the way journal articles and longer essays do. The internet changes this a bit by allowing for hyperlinks, like this post that was basically a bibliography for one of my articles proposing that we eliminate the minimum wage. In my Forbes articles, I try to link to supporting arguments and evidence, but without overdoing it. I would be grateful for feedback.
Second, some of the cases I’m pointing out (minimum wages, price controls, interference with trade) are the cases where the theory and evidence are least ambiguous. Before we have a deep discussion of the moral and theological points about intervention, we should focus on clearing up disagreements that can be resolved with the law of comparative advantage and basic supply and demand.
Third, I wasn’t clear in my discussion of waiting. People can pay for goods using money or some other means. When they are prevented from paying with money, they will pay with time. Their time is also valuable. Price controls create shortages, and they also drive a wedge between what people are willing to pay and what they are legally allowed to pay with money. They will pay the difference between what they are willing to pay and what they are allowed to pay (in money) with their valuable time. Here is the relevant chapter from David Friedman’s Price Theory textbook, available for $0 online. I don’t remember the page numbers on which the example is explained, but it is discussed in detail in Steven Landsburg’s Price Theory and Deirdre McCloskey’s Applied Theory of Price.
Along the continuum of ways to administer welfare programs, there are more wasteful and less wasteful ways to go about it. The broad point is that such programs usually change people’s incentives so that they are encouraged to expend effort not in the production of wealth but in attempts to obtain transfers. I was thinking in particular of church-based “free food” programs that crop up around the holidays. The opportunity cost of standing in line is not zero, and we aren’t telling the full story if we assume that it is. Furthermore, we have to address the likelihood that our interventions will encourage rent-seeking and ultimately create more problems than they solve.
Fourth, critics of the libertarian perspective point to the “successes” of the New Deal and other government programs that rescued us from the industrial cauldron of the late nineteenth and early twentieth centuries. Here, the economic history leaves a lot to be desired. A lot of the interventions came after long declines in the problems (child labor, for example) they are credited with fixing. If you have access to a university library, you can browse the Millennial Edition of the Historical Statistics of the United States. The best discussion of this era, in my opinion, is Robert Higgs’s Depression, War, and Cold War.
Finally, I’m taking for granted that the policies I’m criticizing are “designed to help the poor.” I’ve assumed that proponents of the minimum wage have acted out of concern for the poor and have rejected the competitive model of the labor market for reasons of varying intellectual merit. As Thomas C. Leonard argues in this fascinating 2005 paper, however, this wasn’t necessarily the case. Some of the proponents of minimum wages knew that they would create unemployment among the very poor, but they saw this as a benefit rather than a cost: as eugenicists, they saw it as a way to isolate and separate the undesirable from the desirable population.
In an earlier post, Matt asked for reading suggestions. I have many, but I really enjoy Steve Landsburg’s books and the blog that accompanies his book The Big Questions. I’m excited about the discussion going on at BHL because I think there’s a lot of room for a very fertile conversation between libertarians and the left. It’s true that libertarians need to take the left’s concerns more seriously, but we would be doing everyone a disservice if we weren’t just as serious about what economics brings to the table.