Fanciful Libertarian Ideas on Information

Tyler CowenA week and a half ago, David Auerbach wrote a very good and detailed article, Buyer Still Beware. It is in response to an article by libertarian economists Alex Tabarrok and Tyler Cowen, The End of Asymmetric Information. In that, they argue that the internet and other information delivery systems have greatly reduced the asymmetry of information, which has long been known to distort markets. So basically, we don’t need regulation, because people can just check Angie’s List. Auerbach makes a compelling case that having more information doesn’t help much given that it increases both good and bad information. The question is still how to find good information.

I would take it a step further — although Auerbach does imply this. All increased information does is create a kind of information arms race. People want more and better information about the products they buy. Sellers do not want this. It is much better for businesses to be able to control what people think and feel about products. And here is the main thing. Control of information is a major part of what businesses do. Consumers do not have the time or inclination to become fully informed about every product they buy. And I think this the critical issue.

On a practical level, libertarian ideas always lead to neoliberal policy. And this results in our getting worse systems. I understand that Obamacare might be better for a small number of healthcare consumers who have the time and inclination to really research all the insurance options. But for the vast majority of people, having a single-payer system is better. Overall, they would get a superior form of health insurance. But apart from that, their lives are easier because they don’t have to worry about something that really doesn’t improve their lives. Most people have the experience of just shifting through two or three insurance options at their employers — it’s a pain. The situation is just madness when it is 20 or 30.

Alex TabarrokWhat Tabarrok and Cowen are up to here is just libertarian fantasy. They want there to be no need for regulation, so they have gone out looking for something to justify it. It isn’t a coincidence that their paper just happened to find what they were looking for. If they had come to some other conclusion, I question whether they would have written the paper. And I know that if they had, the Cato Institute wouldn’t have published it, because it has been very upfront about its lack of scientific ethics. (They are not in the business of publishing information that pushes against libertarian solutions.)

Auerbach also documents how libertarian information systems become, in real life, little fiefdoms. He mentioned the whole Silk Road debacle. I wrote about it earlier this year, How the Libertarian Dream Dies. But he also goes into some depth about Reddit, and how moderators on subreddits actually ban articles. For example, Simon Owens wrote an article, Should Reddit’s Powerful Mods Be Reined In? It was banned from the technology subreddit.

This, I think, is the fundamental problem with libertarianism. It would have us get rid of government because of its fairly minor oppression of us, and replace it with totally unaccountable private parties that could and would oppress us far more. It is just a matter of incentives. There may be a great macro-level incentive for all of us to follow the law, but we don’t all follow the law. The same is true in markets. There will be some who will not do well — or at least not as well as they think they should — and they will use whatever advantage they have. And the fact that this makes everyone else worse off doesn’t matter in the least.

I know what libertarians say in response to this. But it is no less fanciful than the notion that everyone will get along just fine and no one will try to game the system. It all depends upon perfect judicial systems. Or even worse: it is dependent upon voluntary judicial systems. There could not be a more perfect political philosophy for those that already have economic power. It’s the ultimate con, “Just get rid of the one thing that is stopping you from enslaving yourself and then you will be able to do whatever it is you want, without anyone to tell you what to do!”

Does the fact that I don’t believe everyone can get along perfectly in a libertarian utopia mean that I am cynical? I don’t think so. Basically what the libertarians are saying is that we don’t need government in a world where everyone gets along. And I agree: in that kind of world, we wouldn’t need a government. But that is not the kind of world that we live it. It is because of human imperfections that we have governments. And yes, governments are a mixed blessing. But “no government” isn’t mixed at all: it is just bad.

It’s sad that two respected economists like Alex Tabarrok and Tyler Cowen write such rubbish. Or not. Maybe it is sad that people who put forth such rubbish are respected. But they both write smart things a lot of the time. It is like libertarianism is a kind of disease. More than most ideologies, it fries the brain, making proponents think they are being smart and deductive when they are just being fanciful. They so want to believe. And there are rich people around with so much money to pay them to believe…

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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.

13 thoughts on “Fanciful Libertarian Ideas on Information

  1. OK — here’s a hopeful (buried in horrible) note.

    One of my brothers, who worked for governor Ah-nold, sent me this link:

    http://finance.yahoo.com/news/las-vegas-sands-misses-1q-222314192.html

    The link is unimportant, ignore it. What’s important is this quote about a casino magnate talking to stockholders:

    ‘”I hope we don’t sink like that boat off the Mediterranean,”‘ he said, to laughs including his own.”

    My brother, who regards Big Gummint as a curse, sent me this link to something he read in his daily skimming of financial news, to point out what an utter savage monster this rich asshole is.

    My brother will never become a liberal. That would take 1,000 millenniums of Purgatory. But the more rich assholes gleefully behave in pure Mare Antionette, “ain’t no stopping’ us now” fashion, the more even self-styled libertarians will come to agree that, um, maybe taxing rich assholes just a little bit isn’t the worst idea in the world.

    • There is some hope. The more the rich isolate themselves from the rest of society, the more they are likely to say this kind of thing. But after the 47% video, I thought, “That’s the last time they’re going to allow bartenders to keep their phones at these events!” They will just get better are information control. And if that doesn’t work, they will just dismantle the democracy. And actually, they have already done this to a large extent. Democracy: $900 million, am I right?!

  2. It’s obvious that there is more information available to consumers than 20 years ago. But the ratio of good to bad has declined massively. It is harder to get good information than before. Also it is obvious that people are getting deep into the field of hiding and obfuscating information, much more than before. In fact, we’re rapidly turning into a society of hucksters.

    Not obvious enough for these professors, though. It’s the same as cherry-picking data, but worse. The huge increase in difficulty in getting useful, actionable information is a defining feature of contemporary science. So any ‘social scientist’ that can’t see this clearly is an idiot, a zealot, or both.

    • That’s exactly right. I’m also interested in the trade-off involved. How much of our lives should be spent making the best possible choice? Economists especially have this tendency to be deeply unserious when it comes to thinking about people.

      • Yes, and these dinks seem to be a-OK with the idea of everyone having to be amateur actuaries just to get by. Yes, ‘deeply unserious’.

    • I changed your comment above to the markup that I think you meant. You just forgot your closing em-tag. But that is a good example!

      • Thanks for fixing the comment. Of course, there was a larger error, where I meant to write about ‘contemporary society’, not ‘contemporary science’. As far as I can tell science itself has been less affected by our current ‘wall of bullshit’ sort of discourse than most other communicative institutions.

        • Yes, but still affected. In the past, scientists (eg, Sagan) have felt good about the ethics of science. But it seems to me that it has mostly been due to the fact that science doesn’t pay that well. This is why we see a lot more nonsense coming from economics than physics. Glenn Hubbard makes a lot of money telling rich people what they want to hear using “Science!”

          • I certainly don’t think there is anything in the souls of people that makes science a more honest and less gamable pursuit than most. It’s in the structure of incentives; generally and to first order only there is less to be gained by lying and gaming the system. Science is one of those things in which the ingenuity needed to game the system is as great or greater, usually, than acting honestly.

            Notwithstanding famous exceptions!! Did you hear about the student who faked her proton NMR’s with a computer simulation? She almost got away with it. Her Ph.D. was revoked.

            Obviously, if she was an urban art critic or conservative pendant, she’d get a Freedom Medal.

            Never, never apologize for pushing science and reason. It’s the worst way to go – except for all those other ways.

  3. @RJ – As I recall, Carlos Castaneda got his antropology PhD revoked after he admitted that he had made up Don Juan. I always thought it was kind of obvious. But I thought they should have given him a PhD in creative writing.

    The reason I point out problems with science is that a lot of people romanticize it. By far, the best thing about science is that ultimately, it incentivizes people to try to break existing theories. Just the same, in most cases, it is a better career strategy to go along — especially given that revolutions are rare. But that’s something that has bothered me about global warming denialists. They often claim that scientists have an incentive to cover up for bad work. That’s just not true. It is the opposite of the truth.

    On the other side, we need to respect that scientists are human beings. One of my big complaints is about peer review. It is an important thing, but it is highly political. And it is the most conservative aspect of science. It can act as a gatekeeper for new ideas. Indeed, a lot of journals were created in response to this aspect of the process, only to become their own gatekeepers later. The main thing is that just because a paper has been peer reviewed doesn’t mean that it’s right. And that kind of argument is an appeal to authority — albeit a better authority than most lay people can rely on.

  4. All increased information does is create a kind of information arms race. People want more and better information about the products they buy. Sellers do not want this. It is much better for businesses to be able to control what people think and feel about products. And here is the main thing. Control of information is a major part of what businesses do. Consumers do not have the time or inclination to become fully informed about every product they buy. And I think this the critical issue.

    I also think this is the critical issue. The informational facilities that assist consumers with comparison shopping or what have you dispense information one data point at a time, or at most a half dozen or so, and are usually not even queries based on parameters known to the consumer. The data flow in the other direction (from mobile operating systems, from the point of sale, etc.) is a fire hose of raw, bulk data, often empirical in nature, being generated by actual spontaneous behaviors or actual market transactions. The level of information asymmetry has increased, not decreased.

    • Excellent point. I was thinking about Safeway the other day. In order to get any kind of reasonable prices, you have to use a special card, which means that they know every purchase you make. Of course, I know the time is coming when they will use facial recognition and do it without asking. Brave new world? For some I suppose.

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