More Libertarian Economic Hokum

Libertarian Party: Just Kidding, We're Republicans!While doing research about the decreasing dangers of police work, I came upon some good work by libertarians. Unfortunately, this also brought too much of the typical brain dead libertarian economic analysis. In particular, at The Freeman, I found an article by Corey Iacono, 5 Economic Myths That Just Won’t Die. It was apparently the cover story of the December issue. It’s an excellent example of conservative affirmative action. If only I could spout this kind of nonsense, I too could be published in a seemingly popular magazine.

A big part of the problem is that the myths are no such thing. No one, for example, goes around saying, “Capitalism isn’t economically superior to socialism.” There literally is no such thing as a pure capitalism or a pure socialism. The libertarians are the only ones who claim that there can exist some kind of perfect capitalism. And even they fall to pieces when you bring up tort law or almost any other practical matter. But even if we grant Mr Iacono his myth, he doesn’t counter it. He only argues that liberalizing socialist countries increases economic growth. That is not the same as showing that capitalism is economically superior to socialism. There is a balance and going too far either way makes things worse.

Typical of the article is its argument against, “Countries like Sweden and Denmark prove that high taxes don’t harm economic growth.” He avoids the subject altogether. He does mention one paper regarding the Danish economy that is not based upon data but on a non-standard economic model. Otherwise, his argument is that in a general sense lower taxation leads to higher economic growth. Again, no one really argues with this. The argument has been that taxes of the rich do not hurt the economy — in a recession at least — because they don’t spend most of their money and so it is just added to the piles of cash rushing around the economy hopelessly looking for places where it can be used. But such economic complexity is anathema in libertarian thought.

The article isn’t without some actual claims that are made, “The government ended child labor. In a free market, child labor would still exist.” But I hardly think it is a myth. He quoted an article by the Economic History Association that stated that child labor ended primarily due to improved incomes of working people from 1880 to 1940. The problem here is that incomes improved due to the rise of labor unions and various government activities. Given that the United States has been seeing little to no increase in real wages for the working classes over the last four decades, we ought to see a rise in child labor if it weren’t for laws. The same argument that Iacono made has been made for a century and a half for how the Civil War was unnecessary because the free market was just about to destroy slavery. In this case, Iacono is apparently fine with generations of children working in coal mines because the bright light of the libertarian utopia is only a few generations away!

His next myth was, “Free trade doesn’t lead to better economic outcomes in the real world.” Free trade is mostly a scam to keep rich countries rich and poor countries poor. There is no way that a banana republic becomes anything else if it can’t protect its infant industries from destruction by powerful foreign corporations. Let me outsource the rebuttal to Ha-Joon Chang’s excellent Bad Samaritans:

The poor growth record of neo-liberal globalization since the 1980s is particularly embarrassing. Accelerating growth — if necessary at the cost of increasing inequality and possibly some increase in poverty — was the proclaimed goal of neo-liberal reform. We have been repeatedly told that we first have to “create more wealth” before we can distribute it more widely and that neo-liberalism was the way to do that. As a result of neo-liberal policies, income inequality has increased in most countries as predicted, but growth has actually slowed down significantly.

But by far the worst of the “myths” was, “The idea that economic growth helps the poor is trickle-down economics — it doesn’t actually help them.” No one says that economic growth doesn’t help the poor. No one. But he doesn’t address this anyway. He actually goes on to argue in favor of trickle-down economics. He wants growth, which he claims that we get “through methods such as limiting the size of government and lowering barriers to international trade.” The size of the government is generally irrelevant, but it is unquestionably actively harmful in the middle of the worst economic period since the Great Depression. There is no “crowding out.” Corporations are already sitting on hundreds of billions of dollars because they don’t see any point in investing. And what possible barriers to international trade is he talking about? As I’ve discussed, our big new “free” trade agreements are more about making countries less democratic and making it easier for owners to collect their rents.

All of this is just the same old libertarian hokum. This isn’t economics; it is theology. It is worship of the free market and the idea that any interference with it will make it angry and turn against us. Economics started as a part of moral philosophy. But amongst libertarians, it has lost all its moral context. It is no longer about the best way to facilitate the sharing of resources. It is about feeding an ideology that can never fail and only be failed. Unfortunately, Corey Iacono isn’t even a priest in the cult of the free market; he’s just one of the true believers sitting in the pews.


Iacono wrote a followup article, 5 More Economic Myths That Just Won’t Die. It is an improvement in that it actually contains a widely believed claim that is, in fact, false, “Immigrants take American jobs and reduce American wages.” But three of the remain four myths are all the same: government can’t create jobs. It’s pathetic. But it has 464 shares, because there are scads of people out there who just can’t get enough hokum when it tells them what they want to hear.

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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

10 thoughts on “More Libertarian Economic Hokum

  1. I don’t think I would have a problem with libertarians (as much), if they had to take several courses that included social justice and environmental science. Also, they would need to go to superfund sites to see how rampant capitalism destroys entire communities and the surrounding area.

    Most people I know, who are libertarians, unfortunately, are ignorant. They don’t understand how their (immature) desire to have whatever they want (they seem to think this is what freedom means) can have a negative impact, which might even include damaging a fragile ecosystem or polluting the local water supply. But they don’t care, if they even know, which they probably don’t, because they are ignorant.

    If we are entitled to anything, shouldn’t it be water and air not sullied by libertarians?

    • That’s exactly right. There are so many problems with libertarian thought. If you haven’t read it, read Agrarian Justice. Over 200 years ago, Thomas Paine laid out the unfairness of property rights along with a plan to deal with it. The biggest problem with libertarians is that they are focused on maximizing the freedom of the people who already have the most freedom. And that increased freedom will come at the cost of freedom of those who have the least freedom. I’ve got to put together a page that compiles all my libertarian writing. Your comment brings up a lot of issues!

      There are some serious people who think about environmental issues from a libertarian standpoint, like the people at the Pacific Research Institute. But it all depends upon property rights. So, for example, it is fine if I want to pollute on my own land, but if it affects you, I must pay damages. This would work rather well. The problem is that it depends upon having a good legal system. As it stands, we have a terrible legal system that is highly tilted toward the rich. In the libertarian utopia, the legal system would be private. So basically, the rich could do whatever they want. If the guy polluting is no more powerful than you are, fine. But if it is ExxonMobile, forget about it.

      Of course, for we transhumanists, this doesn’t fully deal with the issue. But even on their own terms, libertarians can’t make the pieces fit. As I said, it is theology. Libertarians stay libertarians by not thinking carefully about their ideology and by doing what the guy did in the article: looking for evidence to justify his position rather than finding a position based on evidence.

      • Many great points. I’m afraid I will have to put Agrarian Justice on my big list, since much of my time is spent planning lessons and reading books about health, for now.

        And, yes, I am not nearly as powerful as ExxonMobil, especially with the Citizens United hanging over our heads. I would also argue that, if it pollutes your own land, it will pollute the land around your own land, but I think you would probably agree with that.

  2. Hey there, I’m the author of that article you just “rebutted”. I see you many nice things about me, including the claim that my article was simply spouting nonsense and the claim that I personally am a true believer in “the cult of the free market”.

    I’d just like to let you know that your “rebuttal” isn’t actually very good. You don’t cite a single academic paper to refute any of my claims, which are backed up by an extensive amount of research which is cited in my article. Your theoretical arguments aren’t very impressive either, in response to my argument that capitalism is economically superior to socialism, you state:

    “He only argues that liberalizing socialist countries increases economic growth. That is not the same as showing that capitalism is economically superior to socialism. ”

    Actually, yes it is. The best evidence, in my opinion at least, which can demonstrate that capitalism is superior is to examine the economic performance of socialist countries after they have undergone the transformation to a market economy. As noted in the article, plenty of research shows that economic performance improves following the transition to a market economy. A 2013 meta-analysis of 60 studies which examined the economic performance of formerly centrally planned socialist economies after undergoing economic liberalization (pro-market reforms) found that the empirical literature indicates that liberalization reduced economic growth in the short run, but had strong positive effects on economic growth in the long-run. In particular, “the positive effects of reforms outweigh the costs after about a year and then continue to contribute to economic growth.” [1]

    Your “rebuttal” to my claim that free trade leads to greater economic growth is merely a quote from Ha-Joon Chang who claims that “The poor growth record of neo-liberal globalization since the 1980s is particularly embarrassing.” Perhaps Chang is ignorant of the research that has been done on this matter. A 2014 review of over 100 empirical studies on globalization found that, “The evidence shows that globalisation has spurred economic growth, promoted gender equality and improved human rights.” [2]

    A 2004 review of the evidence on trade liberalization by economist Alan Winters found that, “In the long run and on average, trade liberalization is likely to be strongly poverty alleviating, and there is no convincing evidence that it will generally increase overall poverty or vulnerability.” [3] In 2014, a decade later, Winters published another review to see if new evidence had changed that finding. According to that review, “The conclusion that liberalization generally boosts income and thus reduces poverty has not changed.” [4]

    Your rebuttals to the rest of my arguments are also unimpressive for reasons I can go into greater depth at your request. You also ignore a great number of the research and arguments advanced in my article, which is unfortunate.

    [1] Structural Reforms and Economic Growth: A Meta-Analysis by Jan Babecký
    [2] The evidence on globalization by Niklas Potrafke
    [3] Trade Liberalization and Poverty: The Evidence So Far by Alan Winters
    [4] Trade Liberalization and Poverty: What Have We Learned in a Decade? by Alan Winters

    • Thanks for stopping by!

      My article was clearly not intended to be a thorough rebuttal to your article. I suppose I could take a week and go through it point by point. But I think you would agree that that would be giving your article rather more attention than it deserves. It is not a review article. It does not grapple with differences of opinion and the subtleties of the issues involved. It is a polemic intended to be read by people who already accept your ideological framing.

      You don’t seem to understand the main point that you are arguing against in this comment. Small changes in a particular direction can be good while large changes can be bad. For example: Social Security improved lives, Stalinism destroyed them. What’s more, it hardly matters how great economic growth is when it is not shared.

      Feel free to comment further. But remember, this is a blog, not Economics Letters. No one is interested in slogging through working papers of the Czech National Bank. In discussing your article, I attacked in two ways. First, I attacked your claim that these were myths that people actually believe rather than “myths” that libertarians think other people believe. Second, I countered your points in a general way. Quote mining doesn’t help further the discussion, although I suppose I asked for it by quoting Ha-Joon Chang — who you should read, given that much of his work is countering people like Winters.

      I appreciate that you took the time to comment.

      PS: The problem I see with your work, and that of pretty much every libertarian, is that you already believe that the free market is the answer. Thus you go out looking for ways to justify that. We all do this sort of thing. But the effort to find practical solutions expands our view. Ideology can be very good, but it does tend to limit options.

      • Well I appreciate that your response was much more polite than your article. You say:

        “You don’t seem to understand the main point that you are arguing against in this comment. Small changes in a particular direction can be good while large changes can be bad. For example: Social Security improved lives, Stalinism destroyed them. What’s more, it hardly matters how great economic growth is when it is not shared.”

        Thank you for the clarification, but social security is a transfer program, I’m not against transfers programs, I’m opposed to socialist central planning, and that’s what I’ve been trying to prove is inferior to the market economy. As I’m sure you are well aware, most market economies have welfare states (welfare states are not socialism). The desirability of the welfare state is not something I covered in the article, rather, the evidence I presented was meant to show that markets are superior to socialist central planning.

        I believe the things I believe because there is a large amount of evidence supporting them. I’m not purely pro-free market either, I believe in environmental regulation (or carbon taxes) to mitigate global warming for one, I’m not vigorously opposed to Obamacare as many libertarians are (though it could use some reform), etc.

        I’ll read Chang’s book for the sake of getting a differing opinion. Thanks for your time

        • This is a constant problem — especially since the blog started getting real traffic. I manage to directly insult Avik Roy (which I don’t mind) and Josh Barro (which I feel kind of bad about). In your case, I didn’t think that you would see the article. If I had, I might have pulled back on the rhetorical flourishes. But all I meant by my comment about being a true believer in the pews is that you aren’t a professional economist. But you are clearly smart and have done a lot of research. Maybe in a decade I will be able to say, “I insulted him when he was just freelancing at the Freeman!”

          If all you are arguing against is central planning, then I don’t see how we disagree. I believe in a mixed economy and I think the vast majority of stuff is best left to the market. Dean Baker is the economist that I’m most influenced by. If you haven’t read it, I highly recommend, The End of Loser Liberalism: Making Markets Progressive — the e-book is available for free at the CEPR website.

          I used to be a very active libertarian. There is still much about it that I like. But nationally, it has come to be far too associated with neo-confederacy. At this point, it is very clear that voting for libertarian rhetoric gets you conservative policy. I find Rand Paul especially distasteful. There is a man who can’t even take a libertarian stand on drugs. He’ll allow me to do any drug I want, as long as he’s okay with it?! How is that different from any liberal or conservative? At least his father was better on that issue.

          Anyway, you sound like a very reasonable young man and not a “true believer.” So I am sorry for writing that about you. But do understand: that was not written about you as a person but you as a public intellectual. Do bear in mind, however, that if you are going to continue to do this kind of thing, people are going to say much worse things about you! I get savaged. I used to be called Satan or “in league with Satin” all the time. (Not for this writing, however.) It used to upset me but now I get a kick out of it.

          • Thank you for the kind words. I will keep in mind that people will say bad things about me, and I’ll try not to take it too personally.

            I wish you the best!

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