Where does libertarianism go from here?
Deregulation, state capacity, and growth-oriented centrism.
I spent a lot of my early blogging years criticizing libertarianism. Some of my old posts included:
“Do property rights increase freedom? (Japan edition)”: Observing that in 2011 it cost a little bit of money to sit down, use a bathroom, or throw away trash in Tokyo, I mused that a world where everything is marketized would have too many transaction costs. (Fortunately, Tokyo now has more public benches and bathrooms, though still very few trashcans.)
“The Tamerlane Principle”: Here I argued that maximizing liberty today — however you define it — can be detrimental to long-term liberty, because a society that fails to provide public goods will not be able to provide for the common defense, and is thus vulnerable to being conquered by a tyrant. This post seemed more speculative a decade ago, but in light of the Ukraine War it seems a bit more relevant.
“The liberty of local bullies”: I argued that the government is not the only institution in a society that can oppress people — companies, churches, universities, etc. can do it to, so often the government bullying these smaller bullies is the freedom-maximizing solution.
You’ll notice that all of these were pretty general, theoretical critiques. That was because even in the early 2010s, libertarianism felt like a very powerful force, especially if you spent your time in economics circles. It made sense to talk about the very foundations of the idea.
But after the political upheavals of the late 2010s, discussing the finer points of libertarian ideology seems almost quaint. The whole movement — to the degree that it ever really was a movement — seems to have been swept aside in the convulsions that rocked our society and our politics. In fact, libertarianism had already been weakened by a series of policy failures in the 2000s — the inability of Bush’s tax cuts to goose economic growth, the outmigration of jobs and manufacturing industries to China, and a massive financial crisis that most believed had been precipitated by financial deregulation. Then the political ructions of the late 2010s fractured the movement into two parts — intellectual neoliberals and “liberaltarians”, and grassroots libertarians who cared mainly about right-wing cultural vibes. Meanwhile, there emerged a widespread belief (whether true or not) that the set of voters who were “socially liberal but fiscally conservative” was quite small, so that politicians felt they didn’t have to cater to the libertarian vote.
Add all this together, and it’s little wonder that I don’t hear a lot of people eager to label themselves “libertarian” these days. And yet I feel like something important has been lost. Small and confused as it always was, the libertarian movement constituted something of a counterweight to our society’s seeming tendency to impose ever-more onerous regulation on our lives and livelihoods. And now that counterweight is mostly gone.
Deregulation was always sort of the black sheep of the libertarian agenda. At the Presidential level, it was Carter who deregulated energy and transportation, and Clinton who deregulated finance and some aspects of information technology, while Reagan and Bush made only minor changes. Instead, libertarian-leaning politicians focused their political capital on tax cuts and trade agreements. And there was a good reason for this, or at least a reason — taxes and trade barriers were simple, easy levers to push on, while regulation itself is a hellishly complicated tangle of useful and counterproductive rules.
The difficulty of dealing with regulation in any sort of general way could be seen any time someone attempted to quantify it. Measures based on length of text — for example, the number of pages in the Code of Federal Regulations — didn’t seem to correlate with much. Text-mining regulations for words like “will not” and “shall not” seemed a little better, but it was still hard to observe any effect at all. There was the frustrating knowledge that some regulations are good and others bad, but to tell which was which required a long, hard, case-by-case slog.
But people have been doing that slog, and finally it’s starting to bear fruit (apologies for the mixed metaphor). Researchers and activists are starting to zero in on several types of regulation that seem especially detrimental both to the economy and to society in general.
For example, there’s NEPA, which is less an environmental regulation than a meta-regulation — a law that requires development projects to go through arduous multi-year studies to assess whether they comply with environmental laws, effectively punishing development even when it’s perfectly in line with the law. People argue back and forth about NEPA’s impact and what ought to be done to reform it, but there’s a growing realization among most observers that something has gone very wrong with this policy:
If we want to do our part to save Earth from climate change, we’re not going to be able to wait three or four years to build every power line or solar power plant.
Then there’s zoning regulation, which cities across the country have used to preserve their neighborhoods in amber. This is holding back housing construction in the U.S., and helping to keep rents high. The burgeoning YIMBY movement, though it’s mostly aligned with the political left rather than the old libertarian right, has been fighting to upzone American cities for greater density, and are finally starting to see some success, especially in California.
Meanwhile, Europe’s zeal in regulating tech companies is starting to wake people up to the danger that excessive regulation of technology can stunt a region’s growth and allow its overseas competitors to steal a march on it. It’s also highlighting an unintended consequence of over-regulation: giving an advantage to Big Business. Intuitively, onerous regulatory compliance is easier for Google than for the startups that might disrupt Google, meaning that the big get bigger. Singla (2023) provides some evidence that regulation tends to increase market power pretty substantially.
(You can even see this process potentially at work in the emerging AI industry. OpenAI CEO Sam Altman recently called for greater government regulation of AI. The main purpose of this was probably to reassure legislators that AI won’t be able to kill them, and that the government is still in the driver’s seat. But regulation could benefit the big companies like OpenAI and Google in another way — amid worries that these companies might not have a “moat” to protect their profits, regulation could potentially constitute such a moat.)
Then there are cases where specific regulations are clearly put in place to protect politically favored businesses from disruption — laws prohibiting direct car sales to consumers, for instance, are obviously designed to protect car dealers. There’s little chance that these laws help consumers.
Finally, the pandemic showed that government agencies can often be too rigid in applying rules. The FDA had numerous failures. And the incredible therapeutic boom that resulted from the accelerated approval of mRNA vaccines during the pandemic suggests that there’s a lot of low-hanging technological fruit to be picked, if the regulators will just allow it.
All of this slow, hard-won progress in identifying the most harmful regulations in the economy sets the stage for a libertarian revival of sorts. This kind of detailed knowledge allows deregulation to evolve from an indiscriminate hack-and-slash campaign to a more surgical operation.
That in turn would allow libertarianism to shed the right-wing political valence that it acquired in the 20th century. In many cases, reforming or removing regulation would allow progressivism to be more effective at achieving its goals, by preventing the government from stepping on its own toes. Of course some deregulation would still be pro-business. So a new libertarianism would be more like a tool that can be used by either political side.
Very early on, I think, Tyler Cowen accurately perceived this new vision. In a 2020 blog post, he defined an idea called “State Capacity Libertarianism”, which balances the need for deregulation with a fundamental respect for a strong and efficient state apparatus. Cowen argues that the fundamental value that this new kind of libertarianism would promote would be long-term growth in living standards and human possibilities, rather than adherence to rigid ideological rules in the short term.
But personally, I also think libertarianism should retain some of its zeal for battling regulations that impose undue burdens on our daily lives, even if those burdens ultimately don’t affect economic growth. Pointless plastic straw bans and rules that make children use car seats through the age of 7 despite dubious safety value aren’t going to change our descendants’ standard of living a thousand years from now, but in the present these little things can add up to a very annoying blanket of social control. We need libertarians to fight against things like this, because with no opposition, these rules seem likely to accumulate steadily over time.
In any case, after having spent years bashing libertarianism, I find myself now cautiously hoping for it to return soon, in a new and more helpful form.