Liberalism and Economic Freedom

In recent months, Matt Yglesias has had a series of excellent posts about the anti-competitive effects of regulations on barbers, dental hygienists, tour guides, and various other industries. And each post has been greeted by a chorus of condemnation from his readers, who accuse him of being a libertarian sellout.

Now obviously, as a libertarian I think Matt is right on the merits. But I also think Matt’s critics are wrong about the ideological valence of these issues. It’s true that in contemporary politics there’s a tendency for people on the “right” to be reflexively anti-regulation and people on the “left” to be reflexively pro-regulation. But I think this is largely a matter of folks on the left not knowing their own history. Matt’s posts are, in fact, comfortably within the confines of liberal intellectual traditions.

If you look back to the work of early liberals who are the common intellectual ancestors of both liberals and libertarians, you’ll find a lot of concern about interest groups using the power of the state to enrich themselves at the expense of the general public. Early European liberals strongly opposed the state practice of selling state-enforced monopolies as a way of raising revenue and rewarding political supporters. The free-market and free-trade arguments of 19th Century liberals often took a populist, anti-business cast precisely because government interventions of the time were often such blatant attempts to benefit entrenched interests at the expense of the general public.

This liberal strand of leftist thought declined in the early 20th century. It was largely displaced by illiberal progressive and socialist movements that favored favored the centralization of economic decisions in the hands of either industry cartels (in the case of FDR’s National Recovery Administration, for example) or in the hands of the state itself. These trends created a schism in the liberal intellectual tradition, with libertarian-leaning liberals such as Henry Hazlett permanently distancing themselves from their erstwhile intellectual allies.

Yet the corporatist and socialist strains of leftist thought never completely eclipsed the liberal strain, and the former has made a comeback in recent decades. At the urging of staffer (and future liberal Justice) Stephen Breyer, and with the support of President Carter, Ted Kennedy spearheaded a sweeping deregulation of the nation’s transportation and communications industries, which had been organized as cozy government cartels since the New Deal. Presidents Kennedy and Clinton were both strong free-traders.

There’s a tendency to view this kind of thing as a fluke: liberals inexplicably deviating from their ideological commitment to government regulation. But this is stupid. Even the most hardened left-winger doesn’t see government regulation as an end in itself; they see government as a means to various ends, such as public health and safety, economic stability, and so forth. When regulations aren’t achieving those ends, and are instead benefitting special interest groups, it makes sense for liberals to favor their repeal. Not because they favor “deregulation” in the abstract, but because doing so is consistent with liberal values of equality, fairness, freedom, and so forth.

A big part of the problem is that the political right has become so effective at branding deregulation as their issue that people have come to talk about these things in a very right-wing way. Libertarians see the deregulation of barbering as part of a broader “economic liberty” agenda that also includes privatizing government services, cutting taxes, and so forth. And this means that even when regulations have clearly inegalitarian effects, the left has a knee-jerk tendency to support them on the grounds that anything the other side supports must be bad.

What’s needed, then, is an authentically liberal (in the modern American sense) way of talking about economic freedom—one that allows liberals to claim the mantle of Stephen Breyer without simultaneously signing up for Social Security privatization, abolishing the inheritance tax, and so forth. We need a vocabulary that reclaims the populist, egalitarian spirit of classical liberal thought. Modern libertarians spend an awful lot of time defending the deregulatory agenda of large corporations. We’re often right on the merits in these arguments, but it understandably makes the left suspicious that all our deregulatory proposals are somehow benefitting the wealthy and powerful. One of the brilliant things about the Institute for Justice is that they almost always choose “little guys” as their clients: individuals or small businesses who are having their livelihoods destroyed by more powerful incumbents. Even if these cases are not any different in principle from deregulations favored by large corporations, they’re much more likely to win over skeptical observers on the political left.

Incidentally, this is one of the reasons I’m so interested in copyright and patent issues, an issue about which (not coincidentally) Matt has sensible views as well. These legal regimes are remnants of the monopolies that were the focus of much 18th and 19th century liberal agitation. In recent years, we’ve seen the rise of the free culture movement, a deregulatory movement that largely identifies with the political left. Larry Lessig’s work, with its focus on corporations using government to enrich themselves, gives us an excellent model for advocating deregulation in a way that appeals to the left-hand side of the political spectrum.

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21 Responses to Liberalism and Economic Freedom

  1. I like the word “open” (as in “open source”). Maybe the phrase “open access” would work. As in, I support an open access business policy. An open access trade policy. Open access small business policy…I’m just thinking out loud.

  2. Rhayader says:

    Good piece Tim, and good for Yglesias.

    …but it understandably makes the left suspicious that all our deregulatory proposals are somehow benefitting the wealthy and powerful.

    Which brings us back to the “means to an end” question. It’s funny to hear a libertarian and a progressive argue about an issue, each considering his own viewpoint the most effective way to manage the balance of power and wealth. We’d probably benefit from toning down the “statist!” finger-pointing and the accusations of rank antipathy to free choice.

    Better to recognize what are often very common goals, and focus on the details and mechanisms that objectively show promise. Seeing someone like Yglesias making this sort of argument means there’s got to be some fertile ground out there.

  3. Brian Moore says:

    Definitely. These types of de-regulation are both libertarian and liberal, and both factions should support them. And I definitely, 100% agree that people who support them should express themselves on liberal principles, because like you said, there are genuinely liberal principles involved.

    But I’ve been reading the “is CATO topping off your paycheck??” comments at Yglesias’ site, and there are literally people there who wrote many paragraph treatises on why it would be a terrible blow to humanity if DC tour guides were unlicensed. (or barbers). I think there must be something more at play than just “well, evil right wing people like de-regulation, so it must be bad in all cases” because the “we must make rules to make things better” phenomena is so widespread, even amongst those evil right wingers. As far as I can tell, only a small number of “right wing” people even think about deregulation at all — only the especially crazy policy people.

    The average person, right left or otherwise, accepts the idea that laws work as designed; that if a law is on the books to Improve The Quality of DC Tour Guides by X, Y and Z methods, that it does so, and has such a status quo bias towards it that unless there is some personal harm that comes as a result of it, will not support overturning it. I think if you copied the same Yglesias’ post on the average right wing site, saying that “Nasty Liberals Support Unsafe and Unclean Barbers!” most people would agree.

    Even say with prohibition, the king of all dumb regulation – that most people are actually against, I absolutely guarantee you that the vast majority does not oppose it because it was a stupid law that caused a great deal of unintended harm, but because it is opposed to the status quo of legal alcohol today. And therefore adopts the opposite stance on pot prohibition.

    For almost every single person, every part of their daily life is “regulated.” If you don’t like X at home, you tell your kid its a rule they can’t do it. If your bosses doesn’t want you doing Y, they make a rule about it. Every interaction with a software company or telephone provider or bank comes with multi page contracts outlining the regulatory environment and hoops you must jump through. And the absolutely only time people object is if the rule personally affects them, and even then, they don’t say “there are better ways to achieve the goals of this rule” but rather “change that specific rule so it stops bothering me.”

    Is there any surprise that people that people would apply the exact same methods and principles that guide their daily lives to the political sphere?

  4. Wonks Anonymous says:

    Citizens United were not a big mega-corporation, but a non-profit that didn’t like Hillary Clinton (who wasn’t going to be president anyway). But liberals still were upset by the Supreme Court’s decision because big for-profit corporations would gain the same rights as well.

  5. Brett says:

    What’s needed, then, is an authentically liberal (in the modern American sense) way of talking about economic freedom—one that allows liberals to claim the mantle of Stephen Breyer without simultaneously signing up for Social Security privatization, abolishing the inheritance tax, and so forth.

    Isn’t that basically what Liberal-tarianism is? Strong safety nets + pro-market and -trade policies.

  6. It’s worth noting that Democratic presidents have almost always been more favorably disposed to free trade than Republicans. For example, the Carter to Reagan switch led to a shift in a more protectionist direction according to William Niskanen.

  7. Red Tulips says:

    I don’t know if I fully agree with this, Tim.

    I think in broader terms. I believe that you too narrowly categorize the intellectual history of the ‘left.’ In truth, one could as easily argue that today’s ‘left’ is in fact the intellectual grandchild of statist thinking (such as Mussolini), and is not the intellectual grandchild of, for example, John Stewart Mill. I think the bottom line is that today’s ‘left’ and ‘right’ come from a mishmosh of many different sources, and both the Democratic and Republican parties would not be recognizable to their 1900 selves.

    And while it is true that Clinton passed NAFTA and welfare reform, he did so over the objections of his own party, and often with lots of help from Repubs. It is clear that as a party, the Dems are not known as the party of deregulation, despite what Clinton accomplished.

    Anyway, my bottom line is that I think it unwise to ally with either the left or the right. I believe that certain aspects of both the left and right are intellectually dishonest to the very ideologies they claim to have, and will always be intellectually dishonest. That’s why I basically go issue-by-issue, and vote for and support candidates not based upon party affiliation, but by how closely they support the specific views that I hold (based upon a ranking of how much I care about each issue). Sometimes I will find someone from the ‘right,’ and sometimes I will support someone on the ‘left.’ But for libertarians, I think it unwise to affiliate with either party.

  8. Rhayader says:

    @Red Tulips: I don’t think what Tim is saying is necessarily inconsistent with an issue-by-issue approach. The question isn’t “should we ally ourselves with Democrats or Republicans?”

    It’s more like “how can we position our stances on de-regulation to appeal to mainstream liberals in order to move forward with this issue?”

  9. Mojotron says:

    Yglesias got roasted in his comments section about barbershop deregulation because he essentially said that he couldn’t think of a single good reason why they should be regulated, legions of commenters said “well, there’s issues regarding hepatitis, lice, and chemical burns for starters” and MattY never addressed this, not to mention that this has not been a barrier to entry by any means (H Street NE has about 4 barbershops per block for a six block stretch). “Regulation” doesn’t ensure that you won’t have these issues just as having a driver’s license doesn’t ensure that someone is a good driver, but it does show that they are aware of the rules and safety, have some basic competency, and there’s a mechanism for preventing those who don’t abide by the rules and endanger public health from continuing to do so.

    Tour guides not so much.

  10. Jorge says:

    @redtulips: “one could as easily argue that today’s ‘left’ is in fact the intellectual grandchild of statist thinking (such as Mussolini), and is not the intellectual grandchild of, for example, John Stewart Mill.” Examples, please. Who on the American “left” fits into that mold?

    @mojotron: local governments are probably motivated to regulate tour guides because they see a common economic interest in promoting tourism, and if the region gets a reputation for ripping off tourists, it’s bad for everyone else’s business. Not saying I agree that that’s a compelling argument in all cases, but it’s not irrational.

  11. Bill G says:

    This is a great concept for discussion. I would love to get Tim’s take on what I think is the elephant in the room here: regulatory capture. I think the reality is that most regulators end up captured. This is why much libertarian discussion of deregulation is just so much arm-waving. The arguments turn on the beneficiaries of the capture, left and right. (And this is why Cato prattle is so disingenuous when the beneficiaries are right-wing elites.)

  12. Grandchile says:

    In truth, one could as easily argue that today’s ‘left’ is in fact the intellectual grandchild of statist thinking (such as Mussolini)

    I believe that certain aspects of both the left and right are intellectually dishonest to the very ideologies they claim to have, and will always be intellectually dishonest.

    mmmm. irony.
    so delicious.

  13. Dina says:

    Hang on a second. *Liberal* values are “equality, fairness, freedom, and so forth”?

    I don’t mind a good debate on what political label actually means what, in terms of the means of implementation towards an end, as you say. But to equate liberalism with broad, inarguable, humanist ends like “freedom” (seriously?!) simply makes the same argument that Andrew Sullivan does for conservatism, in reverse. In otherwords, “If it’s good and true, it’s mine.” Where’s the usefulness or elucidation in that?

    As a matter of fact, Tim, doesn’t such an approach lend itself far less to the “can’t we all get along” intent of this piece, and far more to the demonization of anyone who disagrees with your particular brand of political implementation? After all, it’s a very short walk from “Liberal values are equality, fairness, freedom, and so forth” to “And anyone else is Pol Pot.”

  14. Anonymous Realist says:

    Regulations aren’t always bad. In many cases they are a good thing. A good deal of regulation is however meant to benefit entrenched interests. Some of the entrenched interests on both sides are severely damaging to the nation. As our society progresses it instills many of our learnings through regulation. We do not dissolve old regulation, we simply add new ones. Both good and bad regulation requires resource to ensure compliance and enforcement. That resource must be taken from elsewhere in an enterprise but often results in society as a whole paying a lesser burden from the broader impacts of that behavior. The biggest challenge with regulation in our current environment is globalization. Many that regulate corporate interests in America still view our domestic companies as behemoths that dominate the world. Outside of our technology and wounded financial services sectors that is sorely no longer the case (one could argue the reason these two industries remain dominant is the current and former regulation regimes aren’t too burdensome, whether society benefits is an entirely different matter). When you regulate domestic production of a good or service but don’t enforce that regulation on consumption of that good or service within our borders, you choke the domestic producer and simply export the behavior you were trying to regulate abroad. Sometimes regulation is so impactful that it ceases the behavior all together, not through compliance but simply through shuttering of a sector as it is no longer economically viable on a global stage. For example, the cost to properly dispose of chemicals is far less than the cost to clean up chemicals disposed of improperly both in financial and environmental terms. Forcing a local producer to dispose of things properly when that producer’s competitors don’t have to puts the local producer at a competitive disadvantage and, in the global scheme, does nothing but ensure twice as much bad behavior is done somewhere else. This goes for environmental, safety, labor and financial regulations, all four of which come with substantial costs. We should not advocate getting rid of all regulation. Rather we should advocate for consumption compliance to be enforced on the regulations we as a society deem important and not the outdated US based production centric compliance regime that has, in many cases, irreparably damaged our local producers.

  15. Red Tulips says:

    @Rhayader – Fair enough that Tim Lee wants to appeal to American liberals to show the beauty of “deregulation” and the like. But why appeal particularly to American liberals and not the public in general? That is my ultimate question. In fact, both liberals and conservatives have engaged in increasing the size of the government in different ways. Both liberals and conservatives have sought to shrunk the size of the government in different ways. Why is this a “liberal” or “conservative” issue? I would think this simply transcends politics generally.

    @Mojotron – Much of Mussolini’s “Third Way” corporatism essentially placed much of the economy under state control. This is also what many so-called ‘liberals’ have been pushing for (in varying degrees).

    To sum this up – the definition of ‘liberal’ has undergone significant changes over the years. It firstly referred to economic liberals, and a sort of laissez-faire system, as well as small government. But it has since referred to almost the opposite. Once you start to say that “Well, I am the real liberal,” then I do worry that Dina’s point starts to take hold.

  16. Anthony Damiani says:

    @Dina: “Hang on a second. *Liberal* values are “equality, fairness, freedom, and so forth”?”

    Yes.
    These are things that have value in the liberal political calculus. Just because they are things that liberals value does not mean that we believe others don’t value them, just that these are the things liberals think liberal policies promote. They are things that liberals value.

    Libertarians value, among other things, a smaller state; you can’t appeal to liberals on that basis without selling them on the basic idea of a smaller state beforehand, because it’s not one of the things liberals value.

    @Red Tulips: “Much of Mussolini’s “Third Way” corporatism essentially placed much of the economy under state control. This is also what many so-called ‘liberals’ have been pushing for (in varying degrees).”

    No, it really isn’t.

    Liberals aren’t the same as socialists. We tend to prefer regulation (carbon tax, cap and trade, card check) rather than direct control, unless there’s a demonstrable market failure (health care) or the consequences would be dire (auto industry). Libertarians are, of course, free to disagree with these means (and usually do), but it is making a category error to mistake the liberal objective as prioritizing state control as an end onto itself.

  17. Rhayader says:

    @Red Tulips — But why appeal particularly to American liberals and not the public in general? That is my ultimate question.

    I think you’re inferring a larger scope here than Tim has in mind. I don’t mean to put words into Tim’s mouth, but he did title the post “Liberalism and Economic Freedom.” People from “the right” tend to value economic freedom and deregulation, at least at a rhetorical level. So with this specific issue, liberals tend to need more convincing than conservatives.

    Tim could easily write about “Conservatism and Civil Freedom”, and discuss the need for a concerted effort to get buy-in from the right. In fact the argument would look almost identical; strong civil liberties are actually in the interest of conservatives, and will help them achieve their stated goals. In fact Tim has written about issues like that before. He’s not saying that liberals would make better allies for libertarians; he’s saying that, with this particular issue, the folks on the “left” are the ones we need to focus on.

    Again though, this is just my read on it; Tim’s words speak for themselves.

  18. Dave Lynch says:

    Your understanding of the roots of modern liberalism conflicts with mine. The “liberals” of the late 19th and early twentieth century became the moderates and conservatives of the late twentieth century. Modern Liberalism has its roots in progressive at the turn of the century. Liberals and libertarians have always shared common ground on ends, but the gulf in core values is unbridgeable. Progressivism and modern liberalism are social reform movements. The root of power is the group, rights come from the group. Ideologically modern liberalism is antithetical to libertarianism. Conservatism is not an ideology. It is not an accident that Reagan called libertarianism the heart and soul of conservatism. A significant percentage of conservatives are closet libertarians.
    Political labels are often deceiving. Theodore Roosevelt, Woodrow Wilson, and Herbert Hoover are the progressive antecedents of modern liberalism. Modern conservatives are too dependent on religious groups focused on issues that demand state interference in individual liberty. Democrats are increasingly identified with liberalism, and republicans with conservatism, but Kennedy, Carter, and Clinton were far less liberal than Hoover, Nixon, and Bush.
    Economic freedom is a consequence of individual rights, not an end in and of itself.
    Some liberals are coming around on some economic issues – because of building empirical evidence. Even if there was total congruence on the ends, modern liberalism is ideologically incompatible with individual liberty as a first principle.

  19. Panglott says:

    The comments may be nasty. But I’d draw a distinction between commenters and readers.

    There are those of us among his readership who ~love~ those posts.

    Liberaltarianism is a man without a true home, and I’m glad to see him find a place to hang his hat whenever he can.

  20. Brian Moore says:

    “The comments may be nasty. But I’d draw a distinction between commenters and readers.

    There are those of us among his readership who ~love~ those posts.”

    Thanks for mentioning that, I was trying to plug what Yglesias was saying, and people kept telling me “but look, all his liberal commenters hate him now!” I replied that people usually don’t comment when they agree — so it’s nice to know I was right about at least one person! :)

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