Come on Mr. Krugman, Give Real Libertarianism a Chance

By: Walter Block

Professor Paul Krugman asked a very important question in his January 10 New York Times essay “Trump’s Big Libertarian Experiment; Does contaminated food smell like freedom?”.  In his opinion piece, Krugman maintained that the recently concluded governmental shutdown demonstrated the hypocrisy of Republicans. The Nobel Prize winning economist also defended a plethora of government programs such as the Small Business Administration, food stamps, the FDA and socialized medicine.

As a libertarian, I strongly and enthusiastically support his claim of Republican hypocrisy. With regard to most of the rest of his assertions, I respectfully disagree. Let us consider the specifics.

Mr. Krugman noted that according to Ronald Reagan government was the problem, not the solution. Yes, Ronald Reagan’s rhetoric was strongly libertarian. But talk, no matter how eloquent, is cheap. When he was governor of California, that state’s budget increased, not the other way around. Ditto for when he was president of the United States and federal spending zoomed. Krugman is absolutely correct in asserting that “Republicans have echoed his rhetoric ever since,” but they do not follow through. They held the Presidency and both houses of congress for the last two years, and nary was there any noticeable reduction in government expenditure. However, fair is fair: President Trump did eliminate a few onerous business regulations and lowered tax rates somewhat.

But Krugman’s claim that the shutdown in effect provided some sort of natural experiment for libertarianism is wide of the mark. The idea, here, is that with government out of the picture, if the libertarians are correct, the free enterprise system will quickly ride to the rescue and take up the slack. But no. When government is giving it away for free down the street (courtesy of the long suffering taxpayer), it is difficult, just about impossible, for private firms to provide goods and services competitively. The latest shutdown lasted longer than any previous one. The strong expectation is, now that it has ended, that there will either be a compromise on the wall (a trade for the status of the DACAs), or Trump will build it as part of his claim of national emergency. A much fairer test of this “big, beautiful libertarian experiment” would be if there were a credible announcement that the government would end these initiatives on a permanent basis. Even better would be an announcement from Trump that he would work with Congress to establish free enterprise zones with an eye on actually experimenting with true libertarianism. 

This is the entire point of free enterprise zones: government taxes, regulations, prohibitions, do not apply in a small test area, say, the size of Rhode Island, maybe located in the wilds of Alaska, Nevada or Wyoming, or in that entire state. There would be no laws there against drugs, sex between consenting adults; no welfare for anyone; the whole libertarian nine yards would be implemented. I challenge Mr. Krugman, a fair minded man, to call for exactly this sort of “experiment” instead of the present one he offers almost tongue in cheek, which does not at all qualify for that honorific. Ceteris was hardly paribus, during the recently ended shut down.

Krugman mentioned that SBA loans and farm subsidy checks were no longer being sent out during the partial shutdown, but he was curiously silent as to whether or not he favors these elements of “crony capitalism” that Republicans, but certainly not libertarians, support. The case against them is easy to make for left-liberals: They take money from all taxpayers, and direct the funds to the relatively rich. Libertarians oppose welfare programs both for the poor (they can creative incentives for family break up) and for the wealthy. We all have a word for compelling some people to give money to others against their will: theft. But only libertarians employ it when the government is involved as intermediary. This opposition holds true whatever the wealth of donors and recipients. Both of these programs, farm subsidies and SBA, should be abolished in their entirety; immediately, if not sooner. Moreover, they are both elements of central planning and government picking winners (Solyndra, anyone?). Have we learned nothing from far better “natural experiments” than the one alluded to by Krugman: that between East and West Germany, North and South Korea? 

Let us now consider the Food and Drug Administration, a shibboleth amongst so-called “progressives.” Why should we be forced to put all our eggs in one basket: to trust the views of but one institution for the all-important task of ensuring safety regarding these products? It is a basic premise of economics 101, to which even Mr. Krugman should adhere, that competition brings about a better result than a compulsory monopoly. That applies to all industries, certainly including the one tasked with ensuring food and drug safety.

Then there is the question of why FDA pronouncements should be compulsory. Why not, merely, advisory? How does it help the consumer to reduce options among medications? Our friends on the left side of the spectrum favor “choice” in the debate over abortion. Why not here, too? The FDA, along with programs such as compulsory Social Security, are profoundly incompatible with democracy, yet another favorite of this sector of the political spectrum. If people are so stupid as to require prohibitions of medicine deemed inappropriate by the FDA, not merely warnings, and cannot save for a rainy day or for their retirements, then it cannot be reasonable to give them the right to vote. On the other hand, if we entrust them with access to the ballot box, we cannot also logically think they need FDA advice, let alone prohibitions, or nanny state requirements that they save their money (put the Ponzi scheme elements of social security to one side). But even governmental advice is highly problematic. Nowhere in the Constitution is there provision made for government to function as an Ann Landers.

Then, too, brand names are a source of security for quality of food and drugs. Who is really more responsible for insuring excellence, Pfizer, Heinz and McDonalds, or the FDA? If the former fail us, they will be heavily penalized, even bankrupted. When the latter fails they keep on going, just like the Energizer Bunny. (The Army Corps of Engineers is still in charge of the Mississippi River, even though it was the failure of their levies which led to the deaths of some 1900 people in late 1920s; were a private enterprise responsible for such a horror, it would have long ago have been replaced by a different business firm).

Nor must we sweep under the rug past FDA mistakes. For example, it failed to warn pregnant women of the morning sickness medicine thalidomide, which created birth defects. That was a Type I error, approving of a negative. Once burned, twice shy. As a result of that horror, the FDA has been busy manufacturing all sorts of type II errors: refusing to allow people to use safe medicines. That is, not until after years and years of very expensive testing. This pushes pharmaceutical prices through the roof, and deprives needy patients for long durations of unavailability. Many unnecessary deaths can be attributed to this failure of theirs. No, the FDA is nothing to brag about. It should be terminated and ashes sowed where once it stood. Milton Friedman indeed hit the nail precisely on the head when he condemned “the F.D.A.’s existence as an unwarranted interference in the free market,” as Krugman accurately states.

By the way, contrary to Krugman, Friedman always characterized himself as a small l libertarian, not a conservative. His intellectual and moral soldier in arms, Friedrich Hayek, wrote an essay “Why I am not a conservative.”

Professor Krugman opines that “libertarian ideology isn’t a real force within the G.O.P.; it’s more of a cover story for the party’s actual agenda.” This is only partially true. There are several libertarians now in the congress: Senator Rand Paul and Congressmen Justin Amash, Walter Jones and Thomas Massie. Dr. Ron Paul was a long time member of the latter institution. There is also the Congressional Freedom Caucus composed of many other libertarians as well as conservatives. Senator Paul is now widely discussed (not only within libertarian circles) as Donald Trump’s Vice Presidential running mate for 2020, instead of Mike Pence. Yes, libertarianism sometimes serves as a fig leaf for Republicans, but, this philosophy plays a role just a little bit more vital than that.

No truer words were ever said about all this than Krugman’s: “In the case of the (Republican) party establishment, that agenda is about redistributing income up the scale, and in particular helping important donor interests. Republican politicians may invoke the rhetoric of free markets to justify cutting taxes for the rich and benefits for the poor … but they don’t really care about free markets per se. After all, the party had little problem lining up behind Trump’s embrace of tariffs … Stick it to the bums on welfare, but don’t touch those farm subsidies.” But this, of course, does not at all apply to libertarians.

Next consider health services, whether Medicare, Medicaid, Obamacare or the single payer system of Canada and much of Europe. Basic supply and demand analysis indicates that when prices are held below equilibrium, demand exceeds supply. Every freshman economics student can tell you that this means there is a shortage. And, a shortage there is, in these systems. In Alberta, Canada, both a woman and a horse she owned had kidney stones. Her pet was treated right away (there is no veterinary socialism in that country); were it not, she would have been arrested for animal cruelty. As for her, she had to endure several long months of pain, until she was treated. That is but one sad story in this tip of the iceberg.

Why is medical care so expensive in the U.S.? It is so for two reasons. One, we have covered above: the FDA boosts prices of medical drugs. Two, even more important, the strongest labor union in the country, the American Medical Association, practices restrictions on entry, similar to what the taxi cab crony capitalists attempt to do against Lyft and Uber, and downtown hotels vis a vis Airbnb. They strictly limit the intake of medical schools and their number. They strive mightily to ensure that highly qualified foreign doctors are not allowed to practice in this country. Eliminate their unwarranted powers, and there will be no felt need for medical socialism. Relative prices of computers, television sets, and other products of the somewhat free sectors of the economy continually fall. Next, perhaps, to banking, the health industries are the most highly regulated and prices remain high, there.

Professor Krugman ends on this note: “Knowing that the food you’re eating is now more likely than before to be contaminated, does that potential contamination smell to you like freedom?” I say, in contrast, if you want to be free of tainted food and drugs, the last thing we should rely on is the FDA. Yes, eliminate it, and allow the “magic of the market” as Ronald Reagan would say, to bring us security in this regard.

Originally published at Real Clear Markets

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