A 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.
What 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…