Monday, January 2, 2012

Libertarianism, a good idea that fails the reality check

Libertarianism, a nice idea, doomed.

There is a lot of discussion regarding libertarianism, but it is being confused by Ron Paul saying stuff. So your old pal, Uncle Paul Keating is here to set things straight.

Libertarianism is like Pure Communism and Pure Capitalism. A nice thought experiment for ivory tower types. It is based on the assumption that every person is sane and sensible.

A libertarian is someone who knows that his or her decisions are the best, and any regulation is a personal affront to their liberty.

So, using a scenario, lets explore one aspect of Liberty. The right to use fireworks.

In a libertarian world, every person has the right to own and use fireworks in any way they see is appropriate. If anyone gets injured using fireworks will be able to fund their own recovery because they have saved money or have personal healthcare.

In the real world, this has some major issues. Firstly, people find new and novel ways, generally with the assistance of alcohol or drugs, to injure themselves or others with fireworks, which are in reality controlled explosives. Secondly, people are often unable to fund their recovery due to the fact they chose not (or are unable) to pay for health insurance.

And more importantly, many of the injuries are on children. Children are more susceptible to make stupid decisions like staring into a lit firecracker (or to use them as projectile weapons and so on) because even libertarians will have to agree that children are unable to make sensible or sane decisions like not staring down a lit firework.

So fault one with Liberty, is people make stupid decisions.

To continue, we now have a small group of people who find the number of people injuring themselves and/or others distressful. They do not have to be a majority. They do not even have to make sensible suggestions. They just have to be able to communicate effectively. So these people now say “we must do something about fireworks”. The situation become more charged politically if children are affected. After all, how many of our liberties are sacrificed to “protect the kiddies?”

Hence there is a demand to regulate. A libertarian will argue that the people who injure themselves or others only have themselves to blame. However people do get injured when watching fireworks conducted by professionals using best of breed safety procedures (admittedly rare, but an fatality in Parramatta during a NYE firework display springs to mind).

Even if there was no vocal group demanding to stop fireworks, a sane and sensible government will need to weigh up the risk of people having access to fireworks versus the cost in injury and death they cause, as well as property damage.

And here is a second issue regarding libertarianism. Many regulations are created because people can not make sane or sensible decisions.

While people may decry the “nanny state” mentality or the cost and hindrance regulations cause, generally regulations are a response to a problem, real or imaginary.

Now lets expand our thought experiment to markets, something libertarians hold dear the market. Economists believe that a market is the best mechanism to regulate price. In a perfect market, a supplier will supply a product dependant on cost plus reward (called profit) and a buyer will either chose to buy or not to buy at the set price. The lower the price offered by the supplier, the higher chance a buyer will elect to purchase a good.

This is all well and good. However again this is again working off the assumption that every person in the marketplace is making sane and sensible decisions that do not impact negatively upon others.

And history has shown that this rarely, if ever, happens. Given the market model, suppliers are encouraged to reduce cost while avoid risk to profit. So while there is some economic gains like economies of scale, reducing cost can have some intended or unintended consequences.

Like people dying. Industrial accidents, using unsafe materials, using violence and intimidation to reduce labour costs, destroying the environment to extract materials cheaply, dumping waste in dangerous or harmful ways. Cheating customers and other companies. Or even manipulating the market in dangerous ways (and yes I am looking at the current Global Financial Crisis). The list is endless.

Economists have a term for this. Market Failure. Governments are often forced to regulate market s to protect people and companies and sometimes this regulation is to protect said people and companies from themselves. Sometimes regulations are over the top or even inappropriate (the loud effective communicators problem), but generally they are implemented to protect people or companies from unsafe or unfair practices.

People may feel that regulations are not appropriate. But there are many mechanisms available to affect change. The easiest way is electoral, that is, remove a government who inappropriately regulates. However, the cost of elections (and in the USA, the strange decisions to allow unfetted donations and allowing companies to have the same standing in the political system as individuals) are moving the power from the voter to the companies with money. Libertarians like these decisions for the general principle of regulations are bad, however we are seeing an already money fueled electoral system being hijacked by SuperPACS and big money.

The irony, I believe, that in a push to remove regulations, Libertarians risk having their liberty stolen by people and companies with money, as election spending not electoral votes, becomes the currency of politics.

So to summarise, Libertarianism only works when everyone can stick their eye over a lit firework, but chose not to.