My apologies for the long delay since Part IV. I’m finishing a book for Cambridge U Press, and an enormous screw-up in what should have been the final (as I thought) version set me back a long way. My fault, not theirs, and now it’s fixed. The book is called “Choosing in Groups,” and it should be out in time for the holidays! Given how long it’s been, it’s worth giving an outline of what I have tried to argue to date:

Part I: Directionalists and Destinationists have fundamentally different views of policy and libertarianism. (LINK http://bleedingheartlibertarians.com/2013/12/a-libertarian-mungerfesto-in-five-parts/ )

Part II: Voluntary exchange, euvoluntary exchange, and the argument for “voluntary coercion” (LINK http://bleedingheartlibertarians.com/2013/12/n/ )

Part III: What if the exchange setting is not euvoluntary? (LINK http://bleedingheartlibertarians.com/2013/12/a-libertarian-mungerfesto-part-iii-if-the-exchange-setting-is-not-euvoluntary-what-then/ )

Part VI: The argument for markets: Even if exchange is not euvoluntary, promoting exchange improves the lot of those who are least well off (LINK http://bleedingheartlibertarians.com/2014/01/a-libertarian-mungerfesto-part-iv-consumer-sovereignty-and-getting-the-things-there/ )

So…to confront the problem of finishing. One of the reasons that Das Kapital spilled over into three volumes is that Marx kept using “proof by forward reference,” making an assertion early on that he promised later to prove decisively. Only it turned out that when he took up the subject again the “proof” was not yet available. So Marx made an even more airy claim about how obvious his argument was, and promised to take it up again later. As the chapters and volumes progressed, things got more mystical and less practical. I hope to avoid that fate. But that means that much of what will be “finished” is simple assertion. I have tried to lay the foundations for the arguments in Parts I-IV, but the fact is that all that is left now is to list the conclusions I have reached, not the conclusions that necessarily follow as a logical matter.

More after the jump…

The argument for libertarianism I see the argument for libertarianism as an argument from autonomy, or self-ownership, and a presumption against the initiation of force. Neither of these arguments is airtight, and many people have pointed out problems with each, which I acknowledge. Nonetheless. By autonomy I mean both that the individual owns his or her own body, time, and conscience, and that subjective judgments about what is good or bad for oneself deserve a strong presumption of deference. What I mean is that there is a burden on the state, or any group, or any other person, to satisfy before the presumption in favor of self-ownership and judgments about individual goals can be overturned. In particular, the presumption in favor of self-ownership requires that the state or groups be prevented from using the individual or harming a person for the benefit others, even if the harm is “objectively” slight and the benefit is “objectively” enormous.

Of course, if the person gives his consent to be harmed, that is not only acceptable but morally admirable. If I give up my seat on a bus to a woman who appears to be 11 months pregnant, no harm is done to my autonomy, provided I do it voluntarily. This presumption in favor of autonomy is simply a feature of liberalism more generally. As Jerry Gaus puts it, the “fundamental liberal principle” is that “we have liberty to act as we see fit unless reason can be provided for restriction.” Gaus makes the claim this way:

“1. A person is under no standing obligation to justify his actions; 2 Interference with, or restriction of, an other’s action requires justification; unjustified interference or restriction is unjust, and so morally wrong.” (p. 274 from “The Place of Autonomy within Liberalism,” LINK http://www.gaus.biz/autonomy.pdf )

Why is autonomy important? As I have argued it (especially in Part III), if the exchange setting is euvoluntary, then the autonomy of the participants must be respected. Full stop: MUST be respected. Of course, that is an ideal setting, much like the economics profession’s question-begging assumption of “perfect competition,” where commodities are homogenous and there are many identical buyers and sellers. That is the world of euvoluntarity. By noninitiation of force I mean that there are no revealed truths, no outside authority, and no immutable natural laws except those of physics. Values come from us, the group of people who consent to be coerced if we violate the agreement.

Note that such an “agreement” cannot be a consent theory of state authority, unless the state is very small and new. In an ideal setting, no one can be coerced without their prior consent. What if the exchange setting is not euvoluntary? What is the role of the state then? One possibility is that the state could take over the functions of voluntary arrangements to secure mutual benefits. But historically that has not worked very well. Instead, I think that the state should try to approximate more closely the conditions of euvoluntarity, so that private arrangements can proceed in a more effective way. The state is thus not a replacement, or alternative, but rather a means of assuring that euvoluntarity is achieved.

That’s important because the core precept of autonomy is that people be held responsible for their own choices. If the consequences of those choices are good, and create value, then people profit. If the consequences are harmful, then people suffer losses. The problem is that if exchange settings are not euvoluntary, people cannot be held responsible for their choices, either for good or bad. That’s why societies fail: people are prevented from enjoying the benefits, or suffering from the harms, that they participate through their choices in creating.

The Argument for Markets The argument for market organization of human activity has several parts. They are mutually reinforcing, but each is an important part of claim that decentralized human action can produce an orderly and prosperous society.

1. Benefits of exchange: if an exchange is voluntary, then both parties to the exchange are better off. Resources may be exchanged several times, and “move” quite substantially, either in terms of distance or adaptation to new uses.

2. Benefits of price signals: the price system is an emergent order, signaling the relative scarcity and opportunity cost of resources and time. It is immoral to knowingly use a resource that someone else values more, and in a price system I have both the knowledge and the incentive not to use resources someone else uses more. (Matt Z makes this argument beautifully in this video, https://www.youtube.com/watch?v=h9QEkw6_O6w , where people standing in line for a generator have a ranking of use values, but without a price system have neither the knowledge nor incentive to act morally).

3. Benefits of rewarding innovation while imposing almost all risks on innovators themselves. Not clear which (if any) innovation will pass the profit test, but new products or production processes that earn profits must produce more value than they use up. The alternative to profit-seeking, which is rent-seeking led to the huge waste of money on Solyndra. The state may be good at producing basic research, and materials science. But it’s bad at making bets on major innovations. Of course, private markets are really bad at predicting which major innovation will work, also. The difference is that market innovators have to sell to the citizens. Rent-seekers just have to sell to the legislature, and the “experts.” Legislators are spending other peoples’ money, and experts suck ( Tetlock, 2006 http://press.princeton.edu/titles/7959.html ).

Now, none of these three arguments, not even all of them together, mean that all problems of basic research, public goods, and externalities can be solved by decentralized market action. But a lot of problems of organization, even complex problems, can be solved by markets. And if you buy the autonomy argument, then people have to be allowed to make their own judgments about whether they are “better off” if they engage in a particular transaction, or if they want to try to invest in a new product. That’s true even if the transaction or the investment makes no sense to you, or to the experts; if the exchange setting is euvoluntary, autonomy must be respected. If the exchange setting is not euvoluntary… then we should try to make it euvoluntary, and then respect autonomy.

It’s a mistake to say, “The exchange setting is not euvoluntary, and therefore the state can do better.” Bill Keech and I just presented a paper at the Public Choice Society meetings that argued that the state will fail, too, and for the same reason, if there are profound collective action or information asymmetry problems (Link: https://www.dropbox.com/s/e0nupf6ctx2vo2b/Unified%20Framework%20PCS%20%201.0.pdf )

For an exchange setting to be euvoluntary, or more broadly for exchange to make sense as a morally justified system, people have to have enough resources to participate in the system, and enough bargaining power to participate in the system as full partners. Because exchange is, in the ideal setting, a partnership rather than an adversarial relation. It’s true that two people negotiating an exchange are each trying to get more of the surplus (the difference between the minimum willingness to accept and the maximum willingness to pay). But the exchange–if it is voluntary–makes both parties to the exchange better off, compared to not making the exchange. Failing to make the exchange hurts BOTH of partners who failed to consummate the exchange. The problem is that in a market exchange setting, “willingness to pay” is not an abstract concept. It’s an actual measure of the number of dollars that someone is willing to pay to acquire somethings.

Here’s the problem: What is the willingness to pay, for a starving man with no money, for a Subway sub with potato chips and a big frosty Coke? Zero. Nada. Nothing. This strikes many people as paradoxical, even immoral, and they are right. The starving man would benefit enormously from acquiring the sandwich. But the convention of a market system is that abstract subjective demands are made objective and given force as movers of resources if the “demand” is made effective by having money. If the man has no money, he doesn’t “want” the sandwich.

Hayekian Socialism The problem is not the inequality of outcomes. There are other arguments you could make, where severe inequality of outcome is a problem, of course. One common one is the Walzer-type claim that enormous economic wealth creates concentrations of power, and it is difficult to prevent such concentrations of economic power from metastasizing beyond the market setting (where wealth is arguably legitimate as a source of disproportionate command) into the political “sphere,” where democracy requires more or less equal ability to command.

But I see that possibility as a product of the state having too much power over economic decisions in the first place. The problem is not money in politics, but rather the expansion of politics into controlling money. The problem, as I see it, is that the starving man with no money actually does want that Subway combo meal. In fact, he wants it a lot. A system that doesn’t register that desire or react to it in any way strikes many of our opponents as strange. In fact, they see it as an RAA, and the argument is over.

I don’t think that has to be true. Still, it makes no sense to require that Subway give him the sandwich, however, because the only reason that Subway exists is to serve the effective demand of consumers. It passes the “profit test” I talked about in Part IV, because Subway can produce food at a cost below what (many) people are willing and able to pay for it. By selling those combos at a price above the cost of production, Subway makes its customers better off and is therefore entitled to the profits that are promised to economic firms that create value.

The answer to the problem is what some people have called “Hayekian Socialism.” Of course, it’s not socialism at all, since there is no state ownership of the means of production. Instead, Hayek argued that society “should” (for both consequential and moral reasons) have a guaranteed minimum standard of living for its citizens.

There is no reason why in a society which has reached the general level of wealth which ours has attained the first kind of security should not be guaranteed to all without endangering general freedom. …. [T]here can be no doubt that some minimum of food, shelter, and clothing, sufficient to preserve health and the capacity to work, can be assured to everybody. … Nor is there any reason why the state should not assist the individual in providing for those common hazards of life against which, because of their uncertainty, few individuals can make adequate provision. Where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance – where, in short, we deal with genuinely insurable risks – the case for the state’s helping to organize a comprehensive system of social insurance is very strong. There are many points of detail where those wishing to preserve the competitive system and those wishing to supercede it by something different will disagree on the details of such schemes; and it is possible under the name of social insurance to introduce measures which tend to make competition more or less ineffective. But there is no incompatability in principle between the state’s providing greater security in this way and the preservation of individual freedom. To the same category belongs also the increase of security through the state’s rendering assistance to the victims of such ‘acts of God’ as earthquakes and floods. Wherever communal action can mitigate disasters against which the individual can neither attempt to guard himself nor make provision for the consequences, such communal action should undoubtedly be taken. There is, finally, the supremely important problem of combating general fluctuations of economic activity and the recurrent waves of large-scale unemployment which accompany them. This is, of course, one of the gravest and most pressing problems of our time. (F. A. Hayek, Road to Serfdom, 1944, Pages 148-149)

Of course, people could buy private insurance for the kind of problems Hayek seems to want the state to help guard against. Nonetheless. And the guarantee of a certain level of income, and subsidized unemployment compensation, will reduce the incentives to work and to find jobs. Still. In spite of those problems, I want the state to ensure that people have choices. There are three programs that I think form the core functions of the state in ensuring a realistic level of euvoluntarity: (1) Basic income, (2) Public education funding, and (3) Single-payer health insurance.

(1) Basic income. We already get a “standard deduction” on our income tax returns. Bill Gates gets it, and the poorest worker gets it (if that worker makes enough money to owe taxes). “Basic income” is simply a larger standard deduction, with the added provision that it is a tax credit rather than a deduction. Everyone gets it, everyone. Even the starving man with no money. Except that now the starving man has money. Not a lot of money, perhaps, but a payment equal to the amount required to get him up to the “poverty line.” For the U.S., that’s about $12,000 per year for an individual, or $1,000 per month. (LINK: http://aspe.hhs.gov/poverty/14poverty.cfm ) Everyone would receive $1,000 a month, from Bill Gates down to the starving man at Subway. For most people, this would simply mean an increase in gross income, and an offsetting increase in taxes, for no net change in disposable income. But for the very poor, there would be a change. Or would there? At present, the U.S. spends more than $20,000 per poor person on poverty programs, as I argued in Munger (2011).

Basic Income would replace all of these wasteful, scattershot programs with a cash payment, managed by the IRS using existing databases and infrastructure. By cutting the payment per person from $20,000 to $11,000, the total tax burden would actually be reduced. Of course, there is a problem. That $1,000 per month payment is it. That’s all. That’s all you get from the state. Of course, if you get a job, you don’t lose any of the $1,000 per month, so with a little work most people could earn an income that would be well above the poverty line. A couple would receive $24,000 per year, putting them well above the poverty level of $15,730 for a two-person household.

What if the couple spends their money badly, though? What if they spend it on stupid things? The problem with autonomy is that people may make bad choices. My answer is that there are going to have to be some exceptions. Heroin addicts don’t satisfy condition #3 of the definition of euvoluntarity (non-regret). We would need medical treatment options that would extend beyond, and possibly replace, Basic Income. But for most people, most of the time, if the exchange setting is euvoluntary then autonomy must be respected. Basic Income makes the exchange setting euvoluntary, or at least takes a giant step in that direction. And now the starving guy actually wants that Subway combo meal. Because he has enough money to make the subjective demand effective through his monthly check. He may well run out of money, in the sense that he has less than he wants. But he has some. Is it “enough”? That’s a nonsense question. It could never be enough. The point is that he now has alternatives, and the fact that he has alternatives means that he makes choices, and he can be held responsible for those choices.

2. Public Education Funding. The U.S. system of monopoly public education provision is bizarre. In many other countries, there are both municipal and “independent” public schools, and also what in effect are voucher programs. If you believe that equality of opportunity requires that everyone have access to education (and surely it’s hard to disagree), there is still no reason to believe that the state should be only provider of education. So, again, the solution is to give parents alternatives, choices, with voucher programs and charter schools. The state may play a crucial role in financing education. Rich people will always have choices. Euvoluntarity requires that everyone have choices. Public funding through charters and vouchers is not a perfect solution, but it goes a long way toward assuring that parents who want something better for their children have a chance of achieving it.

3. Single-payer health care. I have argued elsewhere (LINK: http://mungowitzend.blogspot.com/2012/06/single-payer.html ) that the real reason the U.S. is slumping and can’t get up is health care. There is no reason to tax employers to pay for health care, other than the peculiarities of our tax system. And the loss of productivity, and the sense of unfairness that people without health insurance feel, is inconsistent with the goal of a free and responsible society. Nearly all of our competitor/trading partner nations (Germany, France, Japan, Chile, Sweden) have some form of single-payer, except for the countries (England, Canada) that make the mistake of going all the way to public provision. Again, public financing and private provision of essential social services is the sweet spot. Public provision is disastrous.

In Summary So, the reason I’m a “Bleeding Heart” libertarian is that I think that the argument for freeing up market exchange is very powerful, but rests on some assumptions. We can respect individual autonomy, and grant individuals the power to make their own choices, and we’ll all be better off. But the assumption of euvoluntarity requires that people actually do have choices. For people to be rewarded for good choices or held responsible for bad choices, it is necessary that the good choices actually reflect virtue, and character, and hard work, not just luck and privilege. And the bad choices have to have been made in a context where a good choice was possible, and financially feasible, but the person chose to act viciously and irresponsibly.

I’m not sure that this is what is meant by “social justice.” What is important is that people have the sense that they are playing what James Buchanan called a “fair game.” If I work hard, and get an education, I can succeed. If I fail, I can get another chance. And if I get sick, I don’t bankrupt my family and mortgage all their future chances at success. As I argued back in Part I, this clearly makes me a directionalist rather than a destinationist. In terms of ideal theory, I could be an anarchist, but I could also be a socialist. If we grant certain extreme assumptions about human capacity, behavior, and society, many different systems might work.

But in terms of policies that would actually be immediately feasible, and would be incrementally better than our current dog’s breakfast of incoherent “welfare” programs, Basic Income is an improvement.

Compared to monopoly public education with an op-out for the wealthy, reducing support for public education, charters and vouchers are an improvement.

Compared to the nightmare of Obamacare, single-payer is an improvement, and removes the “insurance tax” that currently shackles the US economy to slow growth rate.

When libertarians try to argue with people on the left, we usually get a “yes, but….” Answer. The argument for the benefits of euvoluntarity, combined with the three broad programs listed here as a means of approximating euvoluntarity, take us a long way toward a synthesis.

Reference: Munger, Michael. 2011. “’Basic Income’ is Not an Obligation, But It Might Be a Legitimate Choice,” Basic Income Studies, 6, 2 (December): 1-13. (LINK: http://www.degruyter.com/view/j/bis.2011.6.issue-2/1932-0183.1222/1932-0183.1222.xml )

UPDATE: In response to comments, let me note some things.

1. I had thought it obvious that I was not making a Kantian “deserve” point, but rather a Misesian/Nozickian “entitled” point when it comes to profits. So I am not trying to reverse my previous rejection of the “whimsical” nature of desert. Far from it. What I am proposing is that we use profits and losses as a “Discovery process,” with all that entails in terms of protecting profits, and assessing losses. Smoothing by taxing profits or covering losses means that the incentives to discover value, avoid harm, and behave responsibly are all obliterated. This argument is simply a warmed-over claim by Mises, who (unsurprisingly) said it better.

2. It may be unclear that the nature of the BIG is quite encompassing, in terms of the programs it would have to replace. No more minimum wage. No more WIC/unemployment insurance/old age pensions. All of it. Gone. Just the BIG. Now, one could object that this is implausible, and that “we” would never consent to doing all this whittling down. Fair enough. But the proposal for BIG is based on the twin claims that it would be cheaper and ALSO much better for liberty. Here is an example of that kind of argument, from REASON’s Matt Feeney.

3. Not least important, BIG would actually help the people “we” are trying to help. Sorry for the scare quotes, but it’s not clear what “we” thinks these sucky programs are helpful.