Must you be Grateful to the Government?

            One common criticism of libertarians is that they are ungrateful for everything that their government has done for them. Libertarians make use of government roads, government police provision, often government schools, in many countries government healthcare facilities, among other things, just like everybody else. Like everyone else, it is alleged, libertarians should be grateful to the government for these things, and not constantly criticize it and seek to shrink it. 

            

           According to most well-accepted codes of morality, showing gratitude when someone does you a favor or gives you something that you value is morally right, not showing such gratitude morally wrong. I have no problem with this tenet of morality, but in this post I will endeavour to show why the government does not deserve the gratitude of its citizens and why the charge of ingratitude is not a valid argument against libertarianism.

1. The government is a conduit; it does not create wealth on its own:

            The first thing to look into when deciding whether one should be grateful to someone for doing you a favor or not is whether that person was actually the one directly responsible for the favor. Imagine that you have run into some hard times and your child is sick and you need some money to pay for their medical bills. A wealthy man named John Smith, through his John Smith Children’s Charitable Foundation, decides to give you the money to pay for your child’s medical bills. John Smith, being a busy man, does not hand you the money himself, rather, his hired administrator does that. I ask: who deserves the bulk of your gratitude for helping you out in your time of need, John Smith or the hired administrator? I think most people would answer that John Smith, having provided the resources to be handed out by the administrator, is the one that deserves the bulk of their gratitude.

            

           The case of government is similar. The people forming the government, as a general rule, are not the ones struggling to produce valuable economic resources. Rather, they tax the citizens who produce valuable resources, and then use those taxpayer resources to finance government operations and distribute some of the resources to other citizens. Linking this to our hypothetical above, it would seem that government is more like the hired administrator, while the taxpayers who actually provide the resources to be ‘distributed’ are more like the generous John Smith. As such, the bulk of our gratitude for whatever government ‘services’ we might value should go the taxpayers whose conscripted resources make these services possible. Demanding that even more of their resources be conscripted through higher taxes, as most statists do, seems a peculiar way of showing gratitude for the favor provided.        

2. One need not be as grateful for an unsolicited service or for a service which you must pay for:

            As a general rule, people are expected to be more grateful for the favors that they asked to be bestowed on them than for favors that are unsolicited. Thus, if you ask someone to buy you a donut and they do, you should be more grateful to that person than to the person that just smuggles a donut into your knapsack unsolicited. Still though, I will grant that if the unsolicited favor is appreciated by the recipient, the recipient should still be grateful to the donor, although not as much as if the favor was solicited.

            

           Another thing that should lessen the obligation of gratitude is if payment is demanded in order for a solicited ‘favor’ to be bestowed. Thus, when you exchange a dollar for a cup of coffee, it is certainly polite to thank your server, even though you paid for the service, although the gratitude need not be as great as if the cup of coffee that you asked for was given to you for free.

What should wipe out the obligation of gratitude entirely though is if a ‘favor’ granted is not only unsolicited, but payment for the favor is demanded anyway! Thus, imagine that you plan to take the subway train down to work and there is a musician playing near the platform. Ordinarily, if you like the music, you might feel a touch of gratitude for the free, though unsolicited, favor bestowed, and you might even give the musician some money if you think his performance is worth it. But now imagine that the musician has hired thugs to insist that you pay a specified amount for the performance, upon threat of you being beaten up by the thugs if you do not. Even if you might appreciate the music being played under normal circumstances, this performer should certainly not be entitled to any of your gratitude. If you do not appreciate the music and wish it would stop, than being forced to pay for an injury bestowed on you by another adds insult to injury, and certainly the performer deserves no gratitude, just the opposite.

These latter two situations are the closest to governments’ mode of operations. Governments take your money as taxation, and then use some of that money to provide you with ‘services’. You may appreciate the services (‘free’ medical care, ‘free’ education, etc…) or you may not appreciate the services (aggressive military ventures if you are a peace lover or a pacifist). In either case, you need not be grateful for either unsolicited, but appreciated, services that you are forced to pay for, or especially for unsolicited, and not appreciated or actively disliked services that you are forced to pay for.

It does not matter in this regard if the government is democratic or authoritarian. Would the thuggish subway musician deserve your gratitude if he were elected every four years by regular subway customers in a poll by majority vote, with no chance of voting for having no coercive subway musician at all? I submit that he would not, and the same goes for governments.       

3. Government actions typically impose all kinds of unseen costs on the economy, injuries to everyone that often outweigh the apparent benefits of the ‘favor’:

            In order to determine whether we should be grateful for a favor bestowed or not, it would make sense to consider all of the benefits and costs of the favor to us, even those that are not as directly evident. For example, imagine that a rich and powerful man offers you the following: he will give you $100 000 if you give your moral consent to him installing handcuffs on half of the population (not including yourself) of your city. Now, for a selfish and short-sighted person, this might seem like a great deal. Someone who even somewhat cares about others would probably not accept the deal. If you were a long-sighted individual, even if you were completely selfish, you would also be advised not to accept the deal. The fact is, with half of the population of your city handcuffed, the productivity of these potential exchange partners and partners in regional economic development would be crippled. The result would be a significant lowering of your standard of living, especially your long-run standard of living, even with the $100 000 added.

            

           Though not as obvious, a similar analysis can be applied to government actions. I will not here get into detail about how government actions cripple productivity (for that, see section 1 of: http://thinkingabouthumansociety.blogspot.ca/2013/04/dissecting-leftist-statism.html and http://thinkingabouthumansociety.blogspot.ca/2013/03/issue-analysis-higher-taxes-on-wealthy.html).  

              

           For now, suffice it to say that any potential productivity crippling effects of government actions should be carefully considered before labelling anyone ungrateful for a governmental ‘favor’ bestowed. If it can be shown that the costs, including indirect costs, of an unsolicited ‘favor’ outweigh its benefits, than we must cease calling it a favor and start calling it an imposition, something which we certainly should not be grateful for.

4. In any case, past gratitude should not stand in the way of future reform:          

If we want to do our duty as truth-seeking social scientists and good society-seeking citizens in the present, we must not let past gratitude stand in the way of beneficial reforms. Take a computer scientist who learned his discipline in the 1950s and 1960s. Let’s say he did most of his programming and learning in those years on an IBM Type 650 computer. He might, like Donald Knuth, author of the famous computer science book the Art of Computer Programming, “affectionately” dedicate his book to the Type 650 computer he had worked on out of gratitude to the computer (http://en.wikipedia.org/wiki/The_Art_of_Computer_Programming). Nevertheless, this does not mean that he is somehow morally obligated to only use that computer to which he is grateful for the rest of his life. He can still recognise (and must recognise for the good of his career) when a new computer is an objective improvement over the Type 650 and use it for that reason, past feelings of gratitude notwithstanding.

            

           A similar analysis applies to government policies. Even if you were to ignore the three previous points I have made about why you need not be grateful to the government for its ‘favors’ and still insist on being grateful for past government actions, this does not mean that you have a moral duty to continue to advocate the same policy which benefited you in the past. Your feelings of gratitude for past government actions do not change anything about the likely societal effects of government policy in the present, the effects that must be analyzed in order to rationally decide whether a particular government policy is a good idea or not. Abdicating this duty in the name of past gratitude is not a morally commendable action, it is just intellectually lazy.

          

           Thus, we have pointed out three reasons why one need not be grateful for most governmental ‘favors’ bestowed, and shown that even if despite all this one still insists on being grateful for governmental ‘favors’ bestowed in the past, this should not decide your policy analysis in the present one way or the other. Given all this, the criticism of libertarians accusing them of being ungrateful for government actions is not a valid critique of libertarianism and does nothing to discredit the ideology.       

Government Budget Cuts Versus Privatization

            For most people, the term ‘libertarian’, if it signifies anything at all to them, is associated with ‘right-wing’ political groups, especially the current Republican Party in the United States. Often, right-wing politicians will try to get the government to cut its ‘social spending’ budget for things such as health and education, because they argue that the private sector is better at providing these services. From the point of view of genuine libertarians, so far so good. The problem with the right-wingers is that most are not consistent enough libertarians to realize that just cutting the government budget is not enough, measures must be taken in conjunction to deregulate or privatize the industry in question, or else the budget cuts may be harmful.

            

           Let us take an extreme hypothetical example to flesh out the point I am trying to make. Imagine a country where the government has completely socialized the food industry, from agricultural production, to processing, to wholesale, to retail. There are laws on the books preventing any private individual from involving themselves in food production or distribution, backed-up by strict punishments and a ruthless police force. Seeing this, some politicians in this country who have a ‘right-wing’ orientation argue as follows: ‘Food socialism is not the way; government has no business involving itself in the food industry. Therefore, we propose that the government’s food budget be slashed by a third’. The politicians pass this bill, declare a victory for liberty, and then satisfied with their work, go back to arguing about gay marriage and abortion.

            

           The problem with this ‘solution’ is clear: as the laws are currently set up in this country, there is no private option that could spring up to fill in the gap in food production capacity which will be left by the food budget cut. What happens in this: citizens will indeed bear less of the burden of taxes, inflation, and government budget deficits because of the budget cut, but some of the country’s food production capacity will be lost. Citizens have more money to spend on everything that the private sector is allowed to provide; but they lose in terms of the amount of food available. Depending on the circumstances, this could lead to mass starvation and death; the fact that citizens now have more money to spend on movies and cars is little consolation.

            

           We must always remember that governments do not just tax and spend; they also monopolize and ‘regulate’ industries. To move towards a free-market in a certain industry, cutting government spending in that industry is often not enough, the government’s restrictions and ‘regulations’ on that industry, or at least a significant amount of them, must also be lifted in conjunction if the reform is to be worth praising.

            

           Let us now apply these principles to some real-life examples. In Canada, the government has, for all intents and purposes, monopolized the most important parts of the healthcare industry. In many provinces, setting up private medical practices for many purposes is simply not allowed, especially for complicated medical procedures such as surgeries. In my opinion, this incredibly inefficient system is very undesirable and should be reformed based on free-market principles, the healthcare industry should be privatized. The way to do so, however, is not just to call for reduced government spending on healthcare. The result of this would just be an even worse system which citizens could not escape from, and which might actually cause the deaths of more Canadian citizens. Cuts in spending must be accompanied by a significant change in the laws governing the healthcare industry, namely, allowing private practices to be set up and to perform all medical procedures and not stifling these private practices with excessive regulations.

            

            The principle applies a bit differently in the US healthcare industry’s case. Here, private provision of medical services is allowed, but the industry has been crippled by a mass of harmful government regulations. Through restrictive licensing requirements for doctors and hospitals, the supply of most medical services has been artificially reduced. The industry, through government action, has been burdened with a very uneconomic practice: the practice of comprehensive health insurance as opposed to payment upon receipt of service being the dominant method of payment. Most people’s needs for most medical services cannot be classified as an insurable risk, a risk that must, as much as possible, be beyond the control of the service consumer and the service provider. In a free-market system, it would probably only make sense for medical insurance to cover the most truly unpredictable and serious diseases, with the rest paid for upon receipt of service.

Through its actions, the government has encouraged the comprehensive health insurance model. Income tax does not have to be paid on medical insurance granted to workers in lieu of cash payment of wages, and labour unions have often, through their coercive actions, forced employers to provide medical insurance to their workers, thus encouraging the prevalence of medical insurance. To make matters even worse, governments have set up tough licensing requirements for medical insurance providers, thus contributing to the cartelization of the industry and restriction of competition. Moreover, many governments have prohibited medical insurers from ‘discriminating’ against clients with certain known medical risk factors (something that any viable insurance business must do to keep its premiums lower for less risky clients), and many have forced insurers to cover certain medical procedures (treatments against alcoholism for instance) for all of its plans. These actions have made the price of medical insurance skyrocket, and the artificial dominance of the whole comprehensive medical insurance model lends itself to skyrocketing prices for all medical procedures covered due to an artificial stimulation of demand, thus making it very dangerous for people not to be insured.

            

           When Republicans, then, propose that government medical spending in the form of Medicare or Medicaid, or on public hospitals be reduced, without suggesting any reforms of the crippling government regulations on the private healthcare market, libertarians may be skeptical. While perhaps not as serious as in a fully monopolized system such as in Canada, where cuts in government medical spending simply result in less medical service available, no matter how urgently people need it, the results are not all that better in a healthcare system such as the United States has. Here, what citizens lose in government medical provision, they must look for in the ‘regulated’ private market that has been monstrously deformed and crippled by ill advised government interventionist policies. Any intelligent reform of the US medical industry along free-market lines must couple government spending cuts with repealing many of the harmful government interventionist policies in the private healthcare market.

            

           One of these two variants of the analysis can be applied to the industries of education, transportation, protection of ‘environmental’ resources, and other industries where governments tend to have a very visible presence. In order to gain much-needed clarity in policy analysis, we must refrain from comparing ‘public sector’ provision of a service and the provision of the service by a private sector crippled and deformed by government intervention. Rather, we should compare government provision of a service to the provision of the service as it would be based on free-market principles. Then, if we think that free-market provision of the service will be more effective and the service is currently provided largely or entirely by government, we should advocate a concurrent cutting of the government’s spending in that area and the loosening or elimination of the government’s interventionist restrictions of that industry. In other words, the real question is not: to cut the government budget or not to cut the government budget? It is: should this particular industry be run primarily by the government or should it be run primarily by competing private entrepreneurs according to free-market principles? Only by answering the latter question can we then answer the former question intelligently and effectively.             
         

Why Employers Cannot 'Exploit' Their Laborers

            In a previous post (http://thinkingabouthumansociety.blogspot.ca/2013/05/will-human-labor-become-superfluous.html), I explained why it is extremely unlikely that human labor, even unskilled human labor, will ever become superfluous, and hence why there is no reason for there to be permanent mass involuntary unemployment in a free-market system. Given this, human labor should be conceived of as an ever-scarce, ever-valuable, non-reproducible at will factor of production that is not specific to any particular industry. In this post, I will show how when we correctly conceive of human labor like this, it is clear that on a free-market, it is impossible for employers to ‘exploit’ their labourers.

            

           A labourer is someone who has something to sell, his labor services, to a purchaser that desires it, a producer (or for personal labor services, a consumer). This is similar to, say, someone who seeks to sell uranium to a (private) nuclear power plant owner, who needs it to produce power. What price and terms of sale will the uranium seller and the power plant owner agree on? Well, that depends on what the market price of uranium is, determined by the complex of mutually advantageous exchanges made by all market participants buying and selling uranium and made roughly uniform through the profit-seeking activities of market participants on the lookout for speculative or arbitrage gains on uranium. Neither the power plant owner nor the seller of uranium can unilaterally dictate the price and terms of sale because if they are unacceptable, one of them can find a buyer/seller of uranium elsewhere on the market who will probably be willing to make a deal closer to the market rate.

           

           If we just apply the same analysis to the labor market as we did to the uranium market, both markets for scarce, valuable, non-reproducible at will factors of production, we see how absurd the contention that employers routinely ‘exploit’ their laborers really is. If the power plant owner cannot ‘exploit’ the seller of uranium (and no one, to my knowledge, claims that they do), then why can employers ‘exploit’ sellers of labor services? An employer cannot just unilaterally and arbitrarily dictate the terms of employment and the wage of the laborers in his employ, unless he wishes to end up with no laborers at all. Sellers of labor services, like the sellers of uranium, can always look elsewhere if they are unsatisfied with the current purchaser of their goods/services. Like for uranium, a market price for a specific type of labor will indicate what employers are generally willing to pay for that type of labor and what laborers are generally willing to accept, so that the laborer and the employer know roughly what wage and terms of employment they have to settle on in order to reach a mutually beneficial deal.

           

            In the world of the exploitation myth, market prices are determined for every factor of production except for labor, but once labor is being bought and sold, suddenly price determination becomes a matter of ‘power relations’ and ‘exploitation’ rather than the standard market procedure. This makes no sense, as there is no good reason to assume one method of price determination for material factors of production, and a completely different one for human labor service factors of production.

            

           To this, some would reply that there is a difference. It is claimed that laborers absolutely need to work in order to survive, so they are pressed to sell at whatever terms are currently going. But the business selling uranium absolutely needs to sell its uranium in order to survive as a business, or else it will bring in no revenues and go bankrupt. Similarly, the employer of labor also absolutely needs labor services if his business is to survive, and if his business does not survive, what exactly is he going to be living on? Another contention is that human labor is different because being unemployed is such a traumatic experience and it is hard to find a new job, and thus people seek to avoid the possibility of unemployment even at the cost of being ‘exploited’. But is it really that much easier for a seller of uranium to quickly find a new bulk buyer, or for the employer of labor to seek out and train a new employee to fill the vacant position? Besides, unemployment is scarier currently than it would be in a free-market system because of the institutional wage rigidities created by the minimum wage policies of governments and their tolerance of coercive labor union activities, thus creating a significant amount of institutional unemployment. The government creating the boom-bust cycle through its inflationary policies also creates prolonged periods of high unemployment in the bust phase. Moreover, the government’s inflationary policies, through a sapping of the purchasing power of the worker’s wage, and its policies which discourage capital accumulation, both serve to reduce the real wages of workers, thus making the workers more desperate for work than they otherwise would be.

            

           The existence of unemployment, it is true, creates more of a ‘buyer’s labor market’ where employers have the advantage, when hiring for certain positions, of knowing that there is a pool of eager potential workers seeking jobs to fall back on, and thus tending to make the employers bolder in their demands. But this unemployment is primarily caused by government policies, and government policies sapping the worker’s real wage rates also serve to weaken the worker’s bargaining position. Thus, to claim that this situation is a result of the ‘exploitation of labor’ inherent in a free-market is not correct, when it is interventionist government policies that create many of the problems in the first place.

            

           With this discussion in mind, I will now go on to consider various so-called ‘pro-labor’ laws imposed by interventionist governments. These laws implicitly assume that the exploitation theory is correct and that employers have arbitrary power over their laborers, an arbitrary power that can only be curbed through government action. In fact though, we will see that these laws have one, or more, of three effects: 1. To create institutional unemployment. 2. To raise the price of consumer’s goods. 3. To limit the worker’s employment options.

1. The Minimum Wage: Minimum wage laws are based on the erroneous assumption that employers have the power to pay their employees whatever they want, unless the government intervenes. Their main effect is to create institutional unemployment. By setting a legal minimum price on human labor services, any human labor service not worth more than the minimum price to an employer will not be purchased, and the laborer selling this service will be forced into unemployment. People who can somehow land a job whose wage has been pushed above its market rate by the minimum wage are benefited in their capacity as laborers, but at the expense of laborers forced into unemployment and of consumers who are forced to pay more for the good in question which now requires more expensive labor to produce.

2. Tolerance of Coercive Labor Unions Activities: When a labor union can use its special privileges, granted by the government, to engage in coercive actions such as strikes which physically prevent employers from hiring ‘strike breakers’, they have the power to set a minimum wage above the market rate in their field of operation. When unions are confined to only certain sectors of an economy, they do not directly create unemployment, but rather raise the wages of their members at the expense of forcing other laborers out of the field. These other laborers will presumably now work in another, less optimal field, and through increasing the supply of workers, will decrease the wages of workers in the fields they enter. This can, of course, lead to unemployment if the unions are prevalent economy-wide, or if the forcing of laborers out of the unionised field into non-unionised fields sends the market wage in the non-unionised fields below or further below the government’s minimum wage.

3. Maximum Hour Legislation: This type of legislation imposes a legal cap on the amount of hours per week certain types of laborers are allowed to work for an employer. It is based on the erroneous assumption that employers have the power to make their laborers work however long they want them to, no matter what wage they are paying them for their work. In reality, in most cases such legislation is superfluous, as it is often set at such a level that most laborers probably would not want, or have to, based on market conditions, work for more hours per week than the cap. When it is not superfluous though, it is usually harmful. It limits the worker’s options, preventing him from working more hours per week if he really wants the extra money. If coupled with coercive labor union ‘take-home pay’ demands, where the unions demand shorter hours for their members but the same weekly pay, upon threat of coercive strike, than the effects are the same as an increase in the union-imposed minimum wage rates for their members, discussed above.

4. Mandatory Overtime Legislation: This type of legislation usually provides for a buffer between the legal maximum hours per week and the legal standard work week hours where employers, if they want their laborers to work those extra hours, must pay extra wages, in Canada 1.5 times the normal hourly wage. The assumptions behind it and the effects are similar to Maximum Hour Legislation, except that at least for overtime there is an expensive option for employers who really need the extra hours from their laborers for a certain period. On a free-market, overtime provisions could of course be stipulated in individual employment contracts, but that would be between the laborer and the employer, probably based on the standard market rates and practices with regards to overtime for that kind of job.

5. Mandatory ‘Benefit’ Legislation: Sometimes governments, or coercive labor unions, force employers to provide ‘benefits’ to all of their permanent employees, such as health insurance or unemployment insurance or a pension plan. It is assumed that these are pure gains to the workers, heroically extracted from the grasping, exploiting hands of the employers. In fact, they are just a substitute for the equivalent amount of cash wages. If a minimum wage above the market rate is not in place, employers will tend to just pay less of a laborer’s wages in cash and more in the form of ‘benefits’. If a minimum wage above the market rate is in place, the result of forcing employers to provide ‘benefits’ is a de facto increase in that minimum wage, as on top of the minimum cash wage are added minimum benefits, which cost the employer money just as surely as cash wages do. The result is unemployment and the raising of consumer goods prices, or if employers can hire in such a way that their laborers do not count as full time employees entitled to ‘benefits’, a proliferation of a sub-optimal type of labor relation and less options for the laborer in choosing his terms of employment.

6. Workplace Safety Regulations: These kinds of government regulations mandate that certain pre-cautions to help ensure the safety of the laborers must be set in place by their employers. They are based on the erroneous assumption that employers have the power to put laborers in however dangerous of a workplace that they choose, and the laborers have no power to protest. In fact though, just as laborers do have bargaining power over wages and ‘benefits’ based on the market price for their services, they also have bargaining power over the level of workplace safety, which can be analyzed like a benefit. Employers would have to compete with each other to buy labor services not just based on wages, benefits, and working hours, but also on workplace safety. Probably, on a free-market, third-party ‘workplace safety certification organizations’ would pop-up to rate the workplace safety of a particular employer. Those with a reputation for attention to detail and integrity would be heeded by both laborers and employers, employers seeking to gain as good a workplace safety level with these trusted organizations as was cost-effective and laborers taking the workplace safety level of their potential employers into account when making their decision. Workplace safety regulations take competition and voluntarism out of this process, and simply decree, essentially, that employers must pay the workers less in cash wages and other benefits in order to invest money in meeting the workplace safety regulations. As with benefits, the result is either a lowering of the cash wage in the name of workplace safety or the creation of more institutional unemployment if a minimum wage above the market rate is in place. It is highly likely that workers, on a free-market, would value workplace safety highly and be willing to give up some of their potential cash wage in exchange for it, but under the current system, as with ‘benefits’, they have no choice or discretion in the matter. Moreover, on a free-market, the law should still require employers to disclose any significant known risks of their workplace to the employee, and if they fail to, hold the employer liable for damages should the employee be injured, as the employer would essentially be guilty of fraud. We should not of course, fail to mention most governments’ hypocrisy in this matter, legislating workplace safety regulations for private employers but themselves sending soldiers to be shot at in hostile countries and astronauts on risky space missions.

            

           Thus, it is simply not the case that laborers’ wage rates and terms of employment are determined by employers’ exploitative urges on one hand and governments’ and coercive labour unions’ valiant attempts to curb this exploitation on the other. As with any factor of production, wage rates and terms of employment are determined based on market prices and standard market arrangements for that kind of labor, themselves based on the complex of mutually beneficial exchanges with regards to that labor service made by all market participants. Given this, government ‘pro-labor’ policies are just attempts to set, directly or indirectly, minimum prices for labor services above their free-market prices, which, as with any other kind of price control, lead to unintended effects that most people would not consider desirable.   

              

             

    

                                 

Do Libertarians Assume Too Much Individual Competence?

            One criticism of libertarianism is that it assumes too much individual competence among people. The critic argues something like this: ‘Libertarianism is fine if we assume everyone knows what their individual interests are and how best to achieve them. But the fact is that most people are too ignorant to know either of these things, hence they need the strong, guiding hand of a paternalistic government’.

            

           First off, libertarians do not assume that individuals are omniscient or anywhere close to omniscient. They would definitely not agree with the critical statement made above though. So what do libertarians actually think on the subject of individual competence and its implications for political theory? I will talk about three main libertarian stances on the subject in this post. I am speaking as the utilitarian libertarian that I am of course. Natural rights libertarians would undoubtedly modify the discussion somewhat.

1. Individuals can be reasonably expected to know their own desired subjective ends better than anyone else:

            
           A key tenet of free-market economic theory is that all value is subjective, emanating from the subjective evaluation of goods and services by individual actors. Given this, it seems eminently reasonable to state that the individuals themselves will best know the contents of their own subjective evaluations of goods and services, and hence will know best which ends they wish to pursue with their resources, effort, and time. I hope I will not elicit any disagreement when I state that the individuals themselves will best know whether they enjoy eating chocolate ice cream, or vanilla ice cream, more, or, whether they derive more enjoyment and satisfaction from working as an architect, or from working as a computer programmer, once they have had experience with both. Social scientists, government bureaucrats, or even close family members, cannot know these things as well as the individuals themselves do. Coercive interventions to prevent individuals from pursuing their freely-chosen ends will frustrate individuals and make them less well-off.

2. Individuals can certainly err in their choice of means to achieve their ends, but private experts will be more effective at helping them than a coercive government will:

            
           Individuals are not omniscient, and hence may err in their choice of the means they seek to use to achieve their desired ends. Primitive farmers who prayed to the agricultural gods in the hopes of increasing the fertility of their fields chose inappropriate means to achieve their subjectively determined end of increasing the yield of their fields. Someone with knowledge of fertilization techniques, an expert, could help the primitive farmer to adopt more appropriate means to achieve his end.

            

            Both libertarians and statists recognize these facts: the difference is that statists use this as an excuse for government coercion in the name of ‘protecting the consumers’, while libertarians argue that private experts offering their services on the free-market will be more effective and not result in the negative effects associated with coercion. Essentially, the issue is this: individuals often need specialized information in order to adopt appropriate means to achieve their respective ends. Thus, the need for an information industry is created. As with every industry, the issue is: should it be run according to free-market principles or run by the government?

            

           The libertarian arguments against socializing the information industry run parallel to the libertarian arguments against socializing any industry. They are:

a. The separation of payment from service in government operations impairs the process of economic calculation. In this case, it impairs the ability to compare the cost of gathering and disseminating more information versus the benefits of that information. More funds devoted to information gathering can result in more information gathered and disseminated, but where to stop? In the private sector, the answer is clear: when it is no longer profitable to provide more information for more marginal uses.

b. The funds necessary to fund government information gathering and regulation based on this information must be levied through taxation, a process which progressively undermines incentives to produce and incentives to accumulate and maintain capital. On the free-market, on the other hand, the ability to purchase information from private experts with earned money serves as an incentive to amass more money by serving the consumers effectively.

c. Government has the ability to legally monopolize the industry if it so chooses. Competition in information provision serves as a spur for experts to increase their knowledge, their reputation, and their customer base. This force is absent in government information operations. Also, the government often makes its ‘expert’ seal of approval the legal requisite for providing a good or a service at all, thus artificially restricting the supply of the good or service in the name of protecting ‘quality’. Some people do not have the money to afford ‘quality’ though, and hence they are just priced out of the market entirely by the government’s restrictions. This would not be the case in a freely-competitive information industry, where a stamp of approval by an expert organization would be a very good thing for goods and service providers to have, but not a legal requisite. It would then be up to the individual consumer to decide if he is willing to pay only for products with an exacting expert stamp of approval, or take his chances with cheaper offerings with a less rigorous expert stamp of approval or with no stamp of approval at all.

d. By separating payment from service, and then providing the service for ‘free’ or at a subsidized price, information consumers’ needs for information are all artificially placed on the same plane. In a free-market, certain information consumers would be ready and willing to pay higher prices for crucial information, and then information experts would know what areas of information gathering to focus on particularly. Government information gatherers are not as keen to this signal, and hence may spend their time and the taxpayers’ resources gathering less essential information.

e. There is no good reason to assume, as many statists do, that government bureaucrats will be on average smarter and more caring than private information providers. In fact, on the free-market, an information expert’s monetary rewards will be directly related to his expertise and reputation for having expertise, which is not as directly the case for the government bureaucrat.

            

           Thus, to call for the government to use its expertise and information gathering skills to ‘protect the consumer (or the producer) from himself’ by providing free information and restricting private business based on this information is really just to call for the socialization and monopolization of the information industry by government. As usual, the libertarian has many good reasons for opposing the socialization of this industry, as with any other industry, recognizing the many advantages of the voluntary, free-market provision of information services by private experts and expert organizations.

Note: Sometimes private information providers are not paid directly by the information consumer, but indirectly by advertisers who want ‘eye-time’ with that information consumer or by goods and service providers who want their product to be evaluated by a private information provider or organization to make it more marketable. In either case though, maintaining a strong reputation for expertise and trying to provide the amount of information that people are willing to spend time and effort to obtain and use, not more and not less, are crucial for the private information provider to succeed monetarily.   

3. Dependence tends to lead to incompetence; independence tends to lead to competence; applying this to political systems:

            
           It is a fairly well-established psychological and pedagogical fact that if you treat someone like an incompetent who can’t do anything for himself, he will be more likely to become an incompetent who can’t do anything for himself. On the other hand, if you treat someone like a competent person who can do things for himself, he will be more likely to become a competent person who can do things for himself. A more independent person will tend to have more opportunity and drive to hone his skills and thinking abilities than a perpetually dependent person.

            

           While many recognize these truths, libertarians apply them in their analysis of political systems. Thus, imagine you have two political systems: one which treats its subjects as incompetents that must be taken care of as dependents, and one which treats its subjects as generally competent individuals who are more or less capable of making their own way through life independently. Skill, thinking abilities, and independence will tend to be fostered in the latter, while incompetence, passivity, and perpetual dependence will tend to be fostered in the former. The latter political system will be a better climate for fostering ingenuity and economic prosperity than the former political system because of these psychological forces. This is one important reason why libertarians support a political system characterized by freedom rather than one characterized by paternalistic statism.

            Thus, we have seen that libertarians do not assume that individuals are omniscient or anywhere near it, they just think that the fact that individuals are not is not a valid justification for paternalistic statism. This is because individuals are the best judge of the ends they personally want to pursue, because a free-market information industry will be more effective than a socialized and monopolistic information industry, and because treating people like dependents will tend to make them more dependent, while treating people like capable, independent individuals will tend to make them more capable and independent. Thus, pointing out that individuals are not universally competent in no way undermines any of the tenets of libertarian thought, contrary to popular belief.

        

            

The Toronto Transit Dilemma: A Case Study of Government versus Private Operations

            One of the most significant features of most government operations, as opposed to private business ventures, is that payment and service are separated. When dealing with a private business, you pay the asked price, and then you typically receive the promised service. It is different with most government operations. Here, payment for the ‘service’ is collected coercively through the process of taxation of the government’s subjects, and then the ‘service’ is seemingly delivered either for free or at a subsidized rate.

            

           This is the feature of government operations that make many egalitarians advocates of more government ‘services’. They seek to put some diluted form of the communist slogan: ‘From each according to his abilities, to each according to his needs’ into action by collecting payment through progressive taxation hitting the rich harder, and then providing ‘service’ indiscriminately to members of the ‘general public’.  We may approve or disapprove of this egalitarian aim, but in either case, there are certain consequences of separating payment from service through government operations that must be recognized regardless.

            

           In order to explore these consequences, I will use the current debates over the proposed expansion of the city of Toronto’s government-run transit system, under the aegis of the Toronto Transit Commission (TTC), as a case study. The situation is this: Toronto, compared to most other cities of its size, has a pretty minimalist subway system, with regular instances of overcrowding and many areas of the city totally inaccessible by subway. Most Torontonians and Toronto municipal politicians agree that Toronto’s transit system should probably be expanded in some way; the question is, in what way and how to pay for it? Some want more subways; some Light-Rail Transit. Some want more service in the suburbs and other underserved areas; others want more service in the downtown core to relieve the overcrowding. Some think taxes should be raised to pay for it; others think that spending cuts in other areas should be enough to pay for it. The province of Ontario’s government wants the city of Toronto’s government to bear most of the brunt of the financing; the city of Toronto’s government wants the province of Ontario’s government to bear most of the brunt of the financing. In short, we have a classic political squabble, with little decisive action on the issue foreseen in the near future.

                   

           Why, some might ask, all the political squabbling? Can’t we just consult ‘transit experts’ on the best place to build the new lines and the best vehicles to use, and consult ‘economic experts’ on what the best way of financing it would be? The problem is that there is no objective ‘best’ of any of these things for some abstract ‘general public’, separated from the geographical positions and subjective value judgements of individual Torontonians. Building a proper subway to the suburb of Scarborough would be great for people and businesses situated there, but would be little consolation to central Toronto residents forced to pay more taxes to support this expansion. Similarly, building more lines to relieve the congestion of central Toronto would be great for people living and working there, but would annoy most suburb dwellers forced to pay more taxes in order to ‘pamper’ their downtown counterparts. Building Light Rail Systems would be cheaper, but would be a less high quality transit experience than subways and would result in more road congestion for personal vehicle drivers. Neither is objectively better.

            

           How about financing, should taxes be raised or not? The answer will depend on both your general political ideology and on the proportion of the general tax burden that you are forced to bear. Yes, if the government collected more revenue they could probably provide more service (at the expense of private sector services that had been paid for with money that had not been taxed away previously), but there must be a point when enough is enough. When the government coercively monopolizes important sectors such as transit, education, and health care, the question is a difficult one to answer.

            

           There is, however, a solution to these seemingly insurmountable problems, a solution that no one in the mainstream media ever talks about. The solution is the privatization of Toronto’s transit system, with the reconnection of the currently severed link between payment and service that it would entail. Users of the TTC do currently pay a fare, but the fare is not enough to allow the TTC to break even with all of its monopolistic inefficiencies, let alone have money to expand, and the government subsidizes it, thus it is a subsidized rate, representing a partially severed link between payment and service. Privatization would mean the following: if an entrepreneur, probably backed by investors, predicted that he would be able to recoup the costs of building a new transit line, along with netting a decent profit, through charging the free-market rate for fares, the line would get built. Rather than the section of the city with the most political clout getting the transit line, the line would go to the section of the city whose residents or visitors are predicted to actually be willing to pay enough to make the line profitable. The people willing to pay for it would receive the service that they paid for, that is the way of the free-market.

            

           Moreover, privatization would introduce competition into Toronto’s transit industry. Rather than the monopolistic, subsidized TTC calling all the shots, anyone with brains, money, and experience could enter the transit industry and compete. Even if multiple subway lines along the exact same street wouldn’t at the moment be feasible, surface vehicles could compete with subways from different companies on the same street, and if the demand warranted it, subway lines built by competing companies could be built close enough together and going along similar enough routes to make them real competitors. The result would be both price competition and quality/service competition, something that would be a welcome change from the surly TTC employees, constant delays, and ever-rising (even though subsidized heavily) fares.  

            

           There are bound to be a few common objections to this privatization proposal, so we will take the time to anticipate and answer them here. The first would be a worry about a private monopoly springing up. The critic would argue that due to the nature of the transit industry, real competition is impossible, and thus privatization would just mean a substitution of a government monopoly for a private monopoly, hardly a worthwhile goal. In response, yes it is true that currently, it is probably technically infeasible for two subway lines to compete on the very same street. It is also true that it is technically impossible for a Wal-Mart and a Target to be in the exact same location, and it is commercially unlikely that these two stores would exist in the same mall or plaza due to excessive catering to a limited demand. Does that mean that these companies are monopolists? No it doesn’t, businesses don’t have to have the exact same features, in this case location, in order to vigorously compete with one another.

As we saw above, private subway line owners would be faced with the potential competition of different owners’ surface vehicles on the same street, as well as possibly from competitors’ subway lines nearby. For instance, a private owner of the Yonge Street subway line may be the ‘monopolist of subways on Yonge Street’, but if the demand warranted it, a competitor could build a subway line nearby, say on Jarvis/Mount Pleasant, to effectively compete with the Yonge Street owner. If the demand to justify another subway line wasn’t there, it quickly would be if the Yonge Street subway owner started running his line inefficiently or unreasonably (the main outcome people worry about from private monopolies), which would create space for competitors to enter on nearby streets.

In addition, besides having to compete with other subway lines that might pop up and surface vehicles, the privatization of the transit industry would make private subway line operators more responsive to existing forms of transit competition than the TTC currently is. The TTC is faced with the competition of personal vehicles and taxi cabs. However, the TTC is kept afloat by government subsidies. If they lose some business to personal vehicles and taxi cabs, the TTC is not going to go bust; most likely it’ll just receive more government subsidies. These subsidies would not be available to private subway operators, which would mean that they would have to take the competition from personal vehicles and taxi cabs far more seriously than the TTC currently does. Thus, worries about an inefficient private transit monopoly are unfounded; privatization would feature far more competition in the transit industry than the current system of a government-subsidized monopoly.

Another objection would probably have to do with positive externalities (see my post on externalities here: http://thinkingabouthumansociety.blogspot.ca/2013/03/economic-externalities-raison-detre-for.html). Critics would point out that the building of a subway line servicing a neighbourhood would result in external, unpaid-for benefits to the residents and business owners of that neighbourhood, in the form of more accessibility to the neighbourhood and a corresponding rise in property values. The problem with this is that because subway entrepreneurs are not remunerated for providing these external benefits, they will not factor it in to their calculations, and hence will be less likely to build a subway line, even if the benefits outweigh the costs if the external benefits are taken into account.

In response, given the possible external benefits, there are two options: either the subway line is built or it is not built. If it is built on the strength of the anticipated consumer demand for the transit services alone, than the external benefits just shower on the residents of the affected neighbourhood and no one is made worse off. Who can complain about that? If it is not built based on the strength of the anticipated consumer demand for the transit services alone, then there are two possibilities: either it would have been built had there been a way of ‘internalizing the positive externalities’, or it would not have been built even if there was a way of ‘internalizing the positive externalities’, because the benefits simply did not outweigh the costs. The problem is that we have no way of knowing which possibility applies to each particular case. Positive externalities, precisely because they are externalities, are immeasurable. Flawed surveys asking, without actually demanding the payment, how much people ‘would have’ paid to have a subway line in their neighbourhood is not a scientific way of ‘measuring externalities’ for the simple reason that people tend to be more generous in words than they are when it comes time to actually open their wallets. Because externalities are immeasurable, it is unscientific for an observer to say that this subway line ‘should have been built if it had not been for the selfish profit motive’: they simply have no way of knowing if the externalities were significant enough to justify the cost.

Besides this problem with the positive externalities argument, another problem is that it assumes that people are too inert and apathetic to actually organize and try to ensure that the beneficial, positive externality-showering subway line comes their way. In reality, people can and often do organize to internalize some of the potential positive externalities in order to ensure that the project is undertaken. For instance, a private subway entrepreneur could be faced with the choice of whether to build a subway line on Eglinton Avenue or on St Clair Avenue, or to not build a new subway line at all and invest in another, more profitable, project. Let us assume that on the strength of anticipated consumer demand for subway transit alone on either of these streets, building either line is anticipated to be not as profitable as other uses for the same amount of investment money. There are potentially un-internalized positive externalities for the property values of people on and around these streets though, what can be done? Well, an Association for Encouraging the Eglinton Subway, for instance, could be organized by residents and business owners near Eglinton. It could be organized on the foundation of a contingent contract, where subscribers promise to give a certain amount of money to the cause, provided that, say, 50% of business owners and residents in the designated area do the same. The money could then be offered to the subway entrepreneur as an incentive to build his line there, thus effectively internalizing some of the positive externalities. The same could be done by St Clair residents, and presumably whichever neighbourhood managed to raise more money, assuming it was enough, would get the cherished subway line. This process would be even easier if neighbourhoods, as many probably would be in a more libertarian society, were organized on a town house/condominium-type basis, in which case residents’ associations or ‘neighbourhood entrepreneurs’ would already be in place to gather money from residents to improve the infrastructure, including subway encouragement, of the neighbourhood.

Thus, as usual, the positive externalities argument against privatization does not hold up because it mistakenly believes that externalities are accurately measurable, mistakenly assumes that people are inert in the face of potential positive externalities rather than voluntarily organizing to reap them, and overestimates the ability of coercive governments to deal with the problem satisfactorily.

Finally, as the night follows the day, the egalitarians are bound to oppose transit privatization with their signature argument. They would argue that transit should be something that people should have more or less equal access to, and that being rich should not determine how well your transit needs are met. It is for this reason that egalitarians favor the government method of separating payment from service, and oppose privatization with its indissoluble link between payment and service. For my evaluation of egalitarianism in general, see section 2 of the following post: http://thinkingabouthumansociety.blogspot.ca/2013/04/dissecting-leftist-statism.html

Here, suffice it to say that while there is nothing objectively wrong with valuing a more egalitarian societal distribution of wealth as a good in its own right, there is something objectively wrong with ignoring the effects of implementing egalitarian policies. Most importantly, it must be recognized that egalitarian policies have a weakening effect on incentives to make money by producing for the world’s consumers. In the case of transit, the egalitarians are really saying (though most would never put it this way) that better ability to serve the consumers, as measured by someone’s disposable wealth/income in a free-market order, should not result in access to a better subway line than poorer people. Transit privatization, according to the egalitarian argument, is ‘unfair’ because the fares necessary to actually make the business profitable might result in pricing poor people out of the subway market. Now, we do not actually know whether fares under a private subway system would be higher than under the auspices of a subsidized, but also cost heavy and inefficiently run, government monopolist. Most likely they would be at first, but would gradually get lower (forgetting about monetary inflation for now) as the private lines got a chance to innovate and improve their processes, spurred on by competition and the profit motive. Even if they were perpetually higher though, all that means is that people actually have to pay for the services that they are using and that people who have had more success serving the consumers in other fields have more purchasing power to purchase more and better transit services with. This is how the incentive structure of the market works and even an intense love of egalitarianism cannot conjure away the effects of interfering with it.

Thus, my proposed solution to the Toronto transit political dilemma is one that is rarely ever talked about: to take transit out of the hands of politics entirely, and return it to the market where it can thrive. The monopoly, positive externalities, and egalitarian objections to this proposal do not really hold up, and should certainly not be held up as grounds for dismissing the proposal entirely without a proper discussion of its merits.           

                    

         

           

               

The Meaning of Libertarian Individualism

            One commonly employed cheap shot often directed at libertarians that supposedly goes a long way towards instantly refuting all of libertarian thought is to claim that libertarianism rests on the assumption that individuals are like isolated atoms, just pursuing their own interests, not influencing or being influenced by anyone else and not participating in social organizations. One gets the sense that people who make such claims have never actually read anything by a libertarian thinker or free-market economist. If they had, they would realize that the vast societal system of exchanges and market prices, as well as the division of labor which they enable and coordinate, are eminently social phenomena that are central to libertarian thought and free-market economics.

            

           Given this popular confusion over what libertarian individualism means, in this post I will discuss three important manifestations of libertarian individualism and show why they in no way assume or imply anything about ‘isolated atomic individuals’.

1. Methodological Individualism:

            Methodological individualism is a key tenet of libertarian thought. It is by no means unique to libertarianism; many other schools of thought adhere to it as well. Methodological individualism consists of a belief in the simple statement that it is only individuals who are capable of thinking, feeling, and acting, only they can have desires and only they can attempt to find and employ suitable means to attain those desires. Individuals can join together and interact with other individuals for certain purposes, forming a society, but this society or any of its subsets (such as nation, race, class, or family) is not capable of having desires of its own or choosing means to pursue them. It is simply not the case that society or one of its subsets has certain desires, and then splits itself off into hive-minded individuals whose purposes are to attain those desires for ‘society’.

            

           It should be clear that methodological individualism in no sense implies a belief in ‘atomic individuals’. It recognizes that individuals can sometimes, individually, decide to put the perceived interests of a collective (such as their family or country) above their own narrowly-defined individual interests. But it is always the individuals who are deciding that advancing the perceived interests of a collective is their desire, and it is always the individuals who are deciding upon and employing means to advance this desire. A collective is incapable of doing these things, because at the end of the day it is just a conglomeration of individuals. The clearest proof of this is the phenomena of immigration, where a person decides or is forced by circumstances to leave one national collective and join another one. How can collectives, who cannot think, feel, decide, or act, possibly be a good basic unit of social analysis when individuals have the power to leave them whenever they so choose?

2. Not much emphasis on any satisfaction that could be derived from contemplating abstract characteristics of collectives:

            This aspect of libertarian individualism is not methodological, but partly normative and partly based on psychological estimation. Most libertarians do not think that much personal satisfaction can be derived from contemplating abstract characteristics of collectives, separated from any individual goods which these characteristics might be associated with. For example, most libertarians would not agree with the statement: ‘I know that our country has enough military capacity to defend itself against threats, but I derive great satisfaction from knowing that my country is really strong militarily, hence I think that more taxation in order to provide more tanks, fighter planes, and atomic bombs is justified’. Or with the statement: ‘I accept that socialized health care will result in a general decline in living standards due to the extra taxation, a decline in the quality and quantity of available medical care, and relative allocational chaos in its distribution, nevertheless, I derive great satisfaction from knowing that my country is a ‘caring’ one, hence I think that socialized health care should be implemented”.

            

           In these two statements, the individual is, unrealistically, admitting that his proposed political measures are harmful to his and other people’s other interests, but that the satisfaction derived from contemplating an abstract collective characteristic such as a country being ‘strong’ or ‘caring’ trumps these negative effects. This statement construction allows us to isolate the abstract ‘collective good’ from considerations of general material prosperity for individuals.

Most libertarians would hold, normatively, that they do not derive satisfaction from contemplating such abstract collective characteristics and would estimate psychologically that most people don’t actually desire much satisfaction from such things either. Most people probably don’t derive that much satisfaction from contemplating abstract collective characteristics, but support policies that libertarians oppose because they disagree with the libertarian analysis of the effects of the policies. Thus, most supporters of beefing up the military probably think that more defense is actually needed or that military spending by government will boost the economy in some way, and underestimate the damage caused by taxation, inflation, and budget deficits. Similarly, most supporters of socialized health care probably think that it is a more effective way of distributing health care to citizens of a country than free-market health care, and also underestimate the damage caused by taxation, inflation, and budget deficits.

This aspect of libertarian individualism is partly normative because it is certainly possible for people to gain great personal satisfaction from contemplating abstract perceived characteristics of the collectives they belong to, and to support political measures based on that subjective evaluation. Most libertarians would not derive any satisfaction from such things though, and estimate that the vast majority of people would not either, and hence do not really factor it into their policy analyses. Whether you agree with this assessment or not, holding this opinion in no way constitutes an assumption of ‘atomic individualism’.

3. Opposition to coercive collectives:

            Another charge commonly levied against libertarians, related to the charge of ‘atomic individualism’, is that libertarians fail to realize that certain big projects or achievements can only be accomplished by ‘a nation’ (a political collective whose governing body has coercive powers considered legitimate), not by individuals. It is said that only ‘a nation’ could have built the Hoover Dam, could have sent a man to the moon, could have invented and developed the atomic bomb, etc… An observer unacquainted with the facts, armed with this theory, could just have easily maintained that only ‘a nation’ could develop the retailing juggernaut with giant superstores and distribution centres located throughout the world that is the contemporary Wal-Mart. However, he would be mistaken, for in fact Wal-Mart was built by individuals voluntarily joining together to pursue a common purpose.

            

            Thus, it is not big projects that only ‘a nation’ can tackle; it’s hard to get bigger than Wal-Mart. However, the theory of public goods and economic externalities does provide a rationale for why certain beneficial projects may not be undertaken through voluntary cooperation. I discuss this theory, and what it does and does not imply, in this post: http://thinkingabouthumansociety.blogspot.ca/2013/03/economic-externalities-raison-detre-for.html   

           

           For now, suffice it to note that it is conceivable that certain beneficial projects might not be undertaken through voluntary individual cooperation because a lot of their benefits take the form of positive externalities, benefits that accrue to other people not involved in the project for which the people involved in the project are not remunerated monetarily for. Most economic goods involve some positive externalities, but it is theoretically conceivable that economic goods which involve a significant amount of positive externalities will either not be produced or not produced in ‘optimal quantities’ through voluntary interaction. The main problem with the theory is that it is impossible to measure the existence or extent of positive externalities in an even marginally reliable fashion, and that the common proposed solution, provision of the good through government coercion, involves a host of other problems and may not even solve the externalities problem in the first place.

            

           The libertarian response to the issue is generally to try and find innovative free-market solutions to ‘internalize the externalities’ and point out historical occasions where so-called ‘public goods’ exhibiting potentially significant positive externalities have been provided voluntarily. Railroads (James Hill’s Great Northern Railway: http://en.wikipedia.org/wiki/Great_Northern_Railway_(U.S.)), roads (turnpikes in early American history: http://www.uctc.net/research/papers/018.pdf), and municipal infrastructure (St Louis Private Places: http://en.wikipedia.org/wiki/Private_place), all classic examples of goods with potentially significant positive externalities, have in the past been provided effectively through voluntary individual associations.

            

            Through these examples, we see that what libertarians oppose is not individuals joining together for some kind of collective action per se. Rather, libertarians tend to oppose collectives that are established and maintained coercively, rather than through voluntary agreement (unless you are a minarchist libertarian such as myself, in which case it is permissible for the basic political society providing law and order and defense against aggression to be maintained through coercion). Even if the purpose of the coercively established and maintained collective is to ‘solve an externalities problem’, this does not reduce the general negative effects of coercive actions, and thus libertarians try to find ways to solve any externalities problems through voluntary, free-market arrangements.

            

              Recognizing the serious negative effects of extensive social arrangements based on coercion and not accepting the positive externalities argument as a trump card justification for coercive arrangements characterizes this aspect of libertarian individualism. It by no means implies a rejection of the beneficial nature of (voluntary) collective action nor a belief in ‘atomic individualism’.