Libertarianism, private property and redistribution: A primer
Libertarians are capitalists. Or, the word I should use is pro capitalism. You see there is a misconception around what it actually means to be pro market. People confuse a pro market stance with a pro market player stance i.e. they assume that libertarians bat for capitalists. But that's incorrect. Libertarians bat for capitalism, not capitalists. The fidelity is to the system and not the players that try to bend it to their advantage. I often say that the biggest enemies of capitalism are capitalists. And that is simply because the core of capitalism is free competition. As Joe Biden recently put it, ‘Capitalism without competition isn’t capitalism, it’s exploitation’. Capitalists want to eliminate competition to secure monopoly profits and market power. Which is why they are also likely to get in bed with the government to grant them special status and immunity to competition. Thus as a result, most sort of ‘market failure’ are not byproducts of the organic functioning of the free market itself, but is often a result of undue corrupt state intervention to shield some select private players.
If you enjoy reading pieces like this, do consider subscribing to this newsletter to receive interesting posts like this straight into your inbox. I write about a range of issues from ideas, mental models, book reviews to policy analysis, law and technology etc. It’d be great to have you over!
The major argument against any central planning or socialist control of capital and state is that it even if only some individuals acquire huge amounts of wealth - in the long run, that is better for everyone, even the most worse off. Most debates assume that we need to end economic inequality, but libertarians will argue that it is not a bad thing as long as everyone benefits - and the major argument used here is that wealth proliferates through investment, purchase, employment, buying and other financial activities. It doesn't matter if most of this is done a by few individuals, the impact, which is large scale, is what matters. People who disagree with trickle down effects mostly do so because the benefits of it are distributed and not very concretely visible. When Jeff Bezos gains a billion dollars in his wealth, what is seen is a concentrated amount of money being gained by one individual, but what is unseen is the leverage it gives to Bezos to expand Amazon, provide more jobs, build companies like Blue Origin, indulge in philanthropy etc. The benefits are not concentrated, and they're rarely tracked. But they exist because we see an increase in the GDP and living standards throughout the world. That doesn't mean that all increase in wellness has been uniform, but it hasn't been unfairly concentrated as well.
Libertarians however do not trade off property rights for better outcomes. They're anti utilitarian. If there is X amount of wealth in all of the world that can be spent by private individuals, there is also an associated opportunity cost associated with every spending decision. What that means is that there can always be a better way to spend or invest money. The framework within which both better spending and better investment arguments are made is of course one in which we look at either maximizing certain principles (opportunity, equity, quality of life), or take a utilitarian lens and say that the best use of private money is that which will produce the best kinds of outcomes for the most number of people. Of course there is no single idea of what the best outcomes are, or in the earlier example - which principles should be maximized. However, that does not mean that either of these things are undecidable.
Coming back to libertarianism as anti utilitarian - libertarians will not trade off property rights for efficiency or net greater economic output. The whole idea of property rights as being sacrosanct is the idea that there are some individual rights that you do not and can not trade off for any 'societal good'. So for example, someone might make an argument for why Bezos wealth should be distributed in some section of population which in turn is likely to produce better economic outcomes than what Bezos' spending his own wealth can generate. But because libertarians do not work on efficiency principle, the question of outcomes does not matter. Only the person who owns the property should get to decide what he wants to spend it on. More importantly, the libertarian concern with central planning and redistribution isn't only that it violates property rights, it is also that central planning is bound to fail. Famously known as Hayek's knowledge problem - the idea that no single person holds the complete knowledge to produce any single good or goods, and that the reason why products are made, purchased and sold is due to market forces of supply and demand. By interfering with the market dynamics that are 'authentic' in so far as they decide the prices of commodities by supply and demand signals, any central authority is bound to disturb both the supply and demand side. Not only that, any such central planning is also bound to produce unintended consequences that harm the market and consumers.
A connected question with state intervention in markets is the idea of 'market failure'. A market failure simply described is a condition in which the market forces by themselves are unable to satisfy the supply and demand. The argument used is that without state intervention, such market failure will not and can not be fixed. Libertarians and pro market individuals usually counter this argument by of course raising Hayek problem objections, but more fundamentally argue that there is no such thing as a market failure. The markets are self correcting in nature, and every such 'failure' can be corrected by market forces themselves. They also argue that the reason why markets 'fail' is mostly a result of state intervention of some kind, either through bad regulation, unintended consequences of good regulation, or plain crony capitalism.
In the end, I recollect a phrase I read somewhere which said, 'Saying that you're pro market is like saying you're pro government'. The idea was that when you declare something as being pro to, you attach a dogma to that idea or lens and refuse to critically evaluate it. But there is one fatal flaw in this equivalence, which is the fundamental difference between a market and a government. A government is a defined set of self centered individuals whose incentives do not align with what is good for the general public most of the times. They want power. In that sense it is correct that saying that you're ‘pro govt’ doesn't make much sense because then you're operating on blind faith rather than on any rational basis. But market is not market players. The free market is the organic and free exchange of goods based on supply and demand forces. It is not a power hungry entity. 'It' has no incentive. The free market is a system, the government is a group of people. When you say you're pro market, it means that you're for a system of exchanging goods and services that is based on liberty and consent.