Saturday, March 25, 2006

The Meaning of Liberty

This is a compilation of six related posts at Liberty Corner: "The Paradox of Libertarianism," "Liberty as a Social Compact," "Social Norms and Liberty," "A Footnote about Liberty and the Social Compact," "Liberty and Federalism," and "Finding Liberty." It complements an earlier series of posts, "Practical Libertarianism for Americans," which should be read first. "The earlier series makes the case for consequentialist libertarianism; the present series considers more deeply the meaning of liberty in the real world of real people.


It is easy to invoke "liberty" -- I do it often, as do most bloggers with a political agenda: libertarians of all kinds; Burkeans and neoconservatives; and, most perversely, big-government liberals and ardent Leftists. But to invoke liberty as a bloodless abstraction is to skirt the essential fact that liberty and its concomitant, the pursuit of happiness, are intensely personal concepts. There is no one-size-fits-all liberty; there are as many kinds of liberty as there are groups of consenting adults who subcribe voluntarily to common sets of social norms.

The purposes of this essay, therefore, are to explore the deeper, personal meaning of liberty; to explain what liberty means in the real world of real people; and to explain why federalism -- in something like its original form -- is the surest route to liberty.

What do I mean by the real world of real people? I mean the mundane world in which most people live their lives: working alongside people from a wide variety of backgrounds, making a home, raising children, having friends, taking care of elderly parents, practicing a religion, paying taxes, seeking entertainment, being a neighbor, belonging to social organizations, and on and on. That is the world in which liberty must be found, not the imaginary world of ideas where liberty seems as simple as leaving other people alone as they wish to be left alone.

Liberty cannot be that simple because humans, as social creatures, must "go along to get along" -- as the saying goes. What one person may find harmless, many others may not. The "odd person" out may have to acquiesce in the group's norms in order to derive the benefits that come from socialization: love, friendship, mutual help, mutual defense, and the like. The pursuit of happiness, in other words, is multi-dimensional and replete with trade-offs. That is the real world of real people. Now let us explore the meaning of liberty in such a world.

This essay is, in part, an extended critique of simplistic libertarianism. That brand of libertarianism, which is rampant on the Web, simply bears almost no relation to human nature. It seems to flow from a kind of introverted intellectualism that conflates autonomy and liberty, but which takes no account of the inescapable complexities of human nature. Autonomy and liberty are not the same, and therein lies the paradox of libertarianism.


Chris Matthew Sciabarra touts his entry about libertarianism in the International Encyclopedia of Economic Sociology. The entry leads off with this:
Libertarianism is the political ideology of voluntarism, a commitment to voluntary action in a social context, where no individual or group of individuals can initiate the use of force against others.
Sciabarra's rendition emphasizes the non-aggression principle and has nothing to say about government, as one would expect of a person who blogs at an anarcho-capitalist site. My version has a somewhat different emphasis and allows for a minimal state:
If you are doing no harm to anyone, no one should harm you physically, coerce you, defraud or deceive you, steal from you, or tell you how to live your life. "No one" includes government, except to the extent that government is empowered -- by the people -- to defend life, liberty, and property through the circumscribed use of police, courts, and armed forces.
The first sentence of my version is operationally equivalent to the quotation I pulled from Sciabarra's entry. To put it more simply:
The core of libertarianism is liberty: briefly, the negative right to be left alone -- in one's person, pursuits, and property -- as long as one leaves others alone.
The problem with all such formulations, however, is that they gloss over two important questions:
  1. What is harm and who defines it?

  2. How does one ensure that one is "left alone" in a world where there are predators and parasites who will not subscribe voluntarily to a pact of mutual restraint?
The paradox of libertarianism lies in the answers to those two questions, which I'll answer in reverse order.

Here is how one ensure that one is "left alone":
  1. All members of a group agree as to what specifically constitutes harm.

  2. All members of the group agree to honor the obligation to leave other members alone, as long as those other members do not commit acts that are recognized as harmful.

  3. By the same token, all members of the honor the obligation to defend a fellow member or members against predators (renegades within the group, or outsiders).
The "catch" is point 1, which requires an answer to the question "What is harm and who defines it?"

To be a member of the group and to merit its protection (through mutual restraint and mutual defense) requires acceptance of a common, specific definition of harm. Various members might prefer different definitions. (For example, some might view abortion as harmless; some might view it as the murder of a prospective member of the group; and others might view it as an act that will inevitably lead to harm because it invites, say, euthanasia.) But unless each member subscribes to the same, specific definition of harm there can be no basis for mutual restraint -- or for mutual defense. Where some see harm -- from other members of the group or from outsiders -- others may see no harm.

In summary: Liberty rests on an agreed definition of harm, and on an accompanying agreement to act with mutual restraint and in mutual defense. Given the variety of human wants and preferences, the price of mutual restraint and mutual defense is necessarily some loss of liberty. That is, each person must accept, and abide by, a definition of harm that is not the definition by which he would abide were he able to do so. But, in return for mutual restraint and mutual defense, he must abide by that compromise definition.

That insight carries important implications for anarchists and pseudo-anarchists. Real liberty is necessarily ordered liberty. It is not "anything goes" or "do your own thing." It is not even the more respectable variant of those things, a variant known as anarchism. For anarchism is based on self-governance by a voluntary group. Self-governance implies the acceptance of and adherence to a compromise definition of harm, in return for mutual restraint and mutual defense. Therefore, as I wrote here, anarchy is an empty concept.


There are two main views of the source of liberty:
  • Liberty is innate in humans.
  • Liberty arises from a social compact.
I am of the second view: Liberty arises from a social compact, it is not in our genes and does not flow from heaven like manna. The social compact -- in its simplest terms -- is this: Each of us may do as he or she pleases as long as what we do does not bring harm to others. But that formula (essentially John Stuart Mill's "harm principle") is misleadingly simple.

Liberty requires a consensus about harms and the boundaries of mutual restraint -- the one being the complement of the other. Agreed harms are to be avoided mainly through self-restraint. Societal consensus and mutual restraint must, therefore, go hand in hand.

Looked at in that way, it becomes obvious that liberty is embedded in society and preserved through order. There may be societally forbidden acts that, to an outsider, would seem not to cause harm but which, if permitted within a society, would unravel the mutual restraint upon which ordered liberty depends.

The inculcation of mutual restraint depends mainly on the existence of viable families -- families in which the parents are present and at least one of them (traditionally the mother) spends a great deal of time inculcating in children the value of self-restraint (also known as the Golden Rule).

Honesty is a corollary of self-restraint, and is implicit in the Golden Rule. Honesty is essential to liberty because the security of one's livelihood and property depends primarily on voluntary adherence to contracts, formal and informal.

A third familial value essential to liberty is mutual aid -- the practice of mutual assistance and defense. The teaching of mutual aid at home spills over into the community. As I wrote here,
the willingness of humans to come to each other's defense has emotional and practical roots:

1. An individual is most willing to defend those who are emotionally closest to him because of love and empathy. (Obvious examples are the parent who risks life in an effort to save a child, and the soldier who throws himself on a grenade to protect his comrades.)

2. An individual is next most willing to defend those who are geographically closest to him because those persons, in turn, are the individual's nearest allies. (This proposition is illustrated by the Union and the Confederacy in the American Civil War, and by the spirit of "we're all in this together" that prevailed in the U.S. during World War I and World War II. This proposition is related to but does not depend on the notion that patriotism has evolutionary origins.)

3. If an individual is not willing to defend those who are emotionally or geographically closest to him, he cannot count on their willingness to defend him. In fact, he may be able to count on their enmity. (A case in point is Southerners' antagonism toward the North for many decades after the Civil War, which arose from Southerners' resentment toward the "War of Northern Aggresssion" and Reconstruction.)
What happens to self-restraint, honesty, and mutual aid outside the emotional and social bonds of family, friendship, community, church, and club can be seen quite readily in the ways in which we treat one another when we are nameless or faceless to each other. Thus we become rude (and worse) as drivers, e-mailers, bloggers, spectators, movie-goers, mass-transit commuters, shoppers, diners-out, and so on. Which is why, in a society much larger than a clan, we must resort to the empowerment of governmental agencies to enforce mutual restraint, mutual defense, and honesty within the society -- as well as to protect society from external enemies.

But liberty begins at home. Without the civilizing influence of traditional families, friendships, and social organizations, police and courts would be overwhelmed by chaos. Liberty would be a hollower word than it has become, largely because of the existence of other governmental units that have come to specialize in the imposition of harms on the general public in the pursuit of power and in the service of special interests (which enables the pursuit of power). Those harms have been accomplished in large part by the intrusion of government into matters that had been the province of families, voluntary social organizations, and close-knit communities. As Hans-Hermann Hoppe writes in "The Rise and Fall of the City,"
[a]fter the race and the class cards have been played and done their devastating work, the government turns to the sex and gender card, and "racial justice" and "social justice" are complemented by "gender justice." The establishment of a government — a judicial monopoly — not only implies that formerly separated jurisdictions (as within ethnically or racially segregated districts, for instance) are forcibly integrated; it implies at the same time that formerly fully integrated jurisdictions (as within households and families) will be forcibly broken down or even dissolved.

Rather than regarding intra-family or -household matters . . . as no one else's business to be judged and arbitrated within the family by the head of the household or family members, once a judicial monopoly has been established, its agents — the government — also become and will naturally strive to expand their role as judge and arbitrator of last resort in all family matters. To gain popular support for its role the government (besides playing one tribe, race, or social class against another) will likewise promote divisiveness within the family: between the sexes — husbands and wives — and the generations — parents and children. Once again, this will be particularly noticeable in the big cities.

Every form of government welfare — the compulsory wealth or income transfer from "haves" to "have nots" lowers the value of a person's membership in an extended family-household system as a social system of mutual cooperation and help and assistance. Marriage loses value. For parents the value and importance of a "good" upbringing (education) of their own children is reduced. Correspondingly, for children less value will be attached and less respect paid to their own parents. Owing to the high concentration of welfare recipients, in the big cities family disintegration is already well advanced. In appealing to gender and generation (age) as a source of political support and promoting and enacting sex (gender) and family legislation, invariably the authority of heads of families and households and the "natural" intergenerational hierarchy within families is weakened and the value of a multi-generational family as the basic unit of human society diminished.

Indeed, as should be clear, as soon as the government's law and legislation supersedes family law and legislation (including interfamily arrangements in conjunction with marriages, joint-family offspring, inheritance, etc.), the value and importance of the institution of a family can only be systematically eroded. For what is a family if it cannot even find and provide for its own internal law and order! At the same time, as should be clear as well but has not been sufficiently noted, from the point of view of the government's rulers, their ability to interfere in internal family matters must be regarded as the ultimate prize and the pinnacle of their own power.

To exploit tribal or racial resentments or class envy to one's personal advantage is one thing. It is quite another accomplishment to use the quarrels arising within families to break up the entire — generally harmonious — system of autonomous families: to uproot individuals from their families to isolate and atomize them, thereby increasing the state's power over them. Accordingly, as the government's family policy is implemented, divorce, singledom, single parenting, and illegitimacy, incidents of parent-, spouse-, and child-neglect or -abuse, and the variety and frequency of "nontraditional" lifestyles increase as well. . . .

It is [in the big cities] that the dissolution of families is most advanced, that the greatest concentration of welfare recipients exists, that the process of genetic pauperization has progressed furthest, and that tribal and racial tensions as the outcome of forced integration are most virulent. Rather than centers of civilization, cities have become centers of social disintegration, corruption, brutishness, and crime.

To be sure, history is ultimately determined by ideas, and ideas can, at least in principle, change almost instantly. But in order for ideas to change it is not sufficient for people to see that something is wrong. At least a significant number must also be intelligent enough to recognize what it is that is wrong. That is, they must understand the basic principles upon which society — human cooperation — rests: the very principles explained here. And they must have sufficient will power to act according to this insight.

The state — a judicial monopoly — must be recognized as the source of de-civilization: states do not create law and order; they destroy it. Families and households must be recognized as the source of civilization. It is essential that the heads of families and households reassert their ultimate authority as judge in all internal family affairs. Households must be declared extraterritorial territory, like foreign embassies. Free association and spatial exclusion must be recognized as not bad but good things that facilitate peaceful cooperation between different ethnic and racial groups. Welfare must be recognized as a matter exclusively of families and voluntary charity and state welfare as nothing but the subsidization of irresponsibility.
In sum, liberty is not an abstract ideal. Liberty cannot be sustained without the benefit of widely accepted -- and enforced -- social norms. A society that revolves around norms established within families and close-knit social groups is most likely to serve liberty.

Related posts:

The State of Nature
Some Thoughts about Liberty


The Wisdom Embedded in Social Norms

Social norms can and do evolve. Moreover, in a society with voice and exit they will evolve toward greater liberty, rather than less, if exit is not mooted by legislative and judicial imposition of common norms across all segments of society. I will discuss, in a future post, how liberty is thwarted by governmentally imposed norms. Here I want to expand on the concept of socially evolved norms and their critical importance to ordered liberty. I begin by quoting from a post by John Kekes at Right Reason:

Traditions do not stand alone: they overlap, and the problems of one are often resolved in terms of another. Most traditions have legal, moral, political, aesthetic, stylistic, managerial, and multitude of other aspects. Furthermore, people participating in a tradition bring with them beliefs, values, and practices from other traditions in which they also participate. Changes in one tradition, therefore, are likely to produce changes in others; they are like waves that reverberate throughout the other traditions of a society. Since many of these changes are complex and have consequences that grow more unpredictable the more distant they are, conservatives are cautious about changes. They want them to be incremental and no greater than necessary for correcting some specific defect. They are opposed to experimental, general, or large changes because of their uncertain effects on good lives.

Traditions, of course, may be defective. Conservatives need a way of distinguishing between defective and non-defective traditions. A non-defective tradition has stood the test of time. It has endured for a long period, measured in decades, rather than months; people adhere to it voluntarily; and it forms part of their conception of a good life. It may happen that a tradition has endured because of coercion, that people have adhered to it because of indoctrination, or that the lives of which it formed a part were bad rather than good. Those who suspect a tradition of these defects must provide a reason for it, and defenders of the tradition must consider this reason. If the reason is good, the tradition should be changed. But if there is no reason to change, then there is reason not to change. That reason is that the tradition has stood the test of time. Conservatism, therefore, is not the mindless and indiscriminate defense of all traditions, but only of those that have passed this test.

Social norms may evolve beneficially, but they are overthrown by legislators and judges to the detriment of society. As Edward Feser explains in "Hayek and Tradition,"
[t]radition, being nothing other than the distillation of centuries of human experience, itself provides the surest guide to determining the most rational course of action. Far from being opposed to reason, reason is inseparable from tradition, and blind without it. The so-called enlightened mind thrusts tradition aside, hoping to find something more solid on which to make its stand, but there is nothing else, no alternative to the hard earth of human experience, and the enlightened thinker soon finds himself in mid-air. . . . But then, was it ever truly a love of reason that was in the driver’s seat in the first place? Or was it, rather, a hatred of tradition? Might the latter have been the cause of the former, rather than, as the enlightened pose would have it, the other way around?)

The rationality of tradition and the irrationality of hostility to it were themes of Burke’s Reflections on the Revolution in France. But it is possible that the work of F.A. Hayek (which was largely inspired by Burke [see here: ED]) presents the most fully developed and compelling account of these matters, an account presented in terms the post-Darwin enlightened modernist must find difficult to dismiss out of hand, viz., a theory of cultural evolution by means of a kind of natural selection. The aim of the present essay is to articulate and defend Hayek’s position—defend it against the objections of Hayek’s detractors, of course, but also against the misunderstandings of many of his admirers. Some of these admirers are keen indeed on the “evolution” part of his views, but, being less keen on the “tradition” part, make him out to be an advocate of constant change, of “dynamism” over “stasis.”

But he was not that at all, at least, not in the sense these would-be Hayekians imagine. Technological advance, market innovation, and the like were things of which he was a great defender, but those are not the things at issue here. Where fundamental moral institutions are concerned, Hayek was very much in line with the Burkean conservative tradition, a tradition wary of tampering with those institutions (including the specific moral institutions underlying the free market order rightly valued by libertarians). Of course, Hayek did not rule out all change to these institutions in an absolute way, but then, neither do conservatives. At issue is where the default position lies, with who gets the benefit of the doubt in the debate between the traditionalist and the moral innovator. And in this dispute, Hayek is indisputably on the side of the conservative. . . .

Hayek’s view is that the specific content of a traditional practice is indeed often important. It isn’t just a matter of its happening to be traditional; rather, its being traditional is taken by Hayek to be evidence that it has some independent intrinsic value. It is vital to keep this in mind, for Hayek’s position is sometimes mistakenly taken to entail a kind of relativism—as if the traditional practices prevailing in one society must be the best for that society, and the ones prevailing in another are the best for it, with there being no fact of the matter about which society’s traditions are superior. But Hayek believes nothing of the sort; indeed, he insists on the objective superiority of some traditions over others. This sort of relativism could be defended only with regard to traditions (like traveling specifically to grandmother’s house every Christmas) the value of which lies solely in the fact that they are traditional. Hayek is not primarily interested in that sort of tradition.

Hayek’s work clearly expresses ideas that resonate with this conception of tradition as the gradual, internal working out of the implications of a system of thought or practice. This is most evident in Rules and Order, wherein he examines the evolution of rules of practice—as embodied in systems of morality, and especially within the common law—as a process whereby often inexplicit or tacit rules gradually become articulated and their implications drawn out as new situations arise. Law and morality, in his conception, form an organic and evolving structure rather than an artificial closed system created by fiat—a spontaneous order which, in the nature of the case, cannot be fully articulated all at once, but only progressively, and even then not in any finalized way, for there is no limit in principle either to new circumstances or to the system’s inherent but unknown implications. This is part of the reason socialism is impossible, in Hayek’s view: Systems of law—including the laws by which a scheme of “just distribution” of wealth would have to be implemented—are simply too complex for human beings consciously to design, for the circumstances the law has to cover are, like the economic information a socialist planner would need in order to do his job, complex, fragmented, and dispersed, unknowable to any single mind. A workable system of law must, at the most basic level anyway, evolve spontaneously, with conscious human design involved at most in refining it, tinkering around its edges.
Liberty in the Real World

Social norms may be consistent with the abstract idea of liberty -- that one may be left alone if one leaves others alone -- but they necessarily go beyond that generality to set specific limits on acceptable behavior. Behavior that strays beyond those limits is that which may lead to the subversion of liberty, either through the direct harms it may cause or through its subversive effects on social cohesion. (Such prospects underlie much of the opposition to legislatively or judicially imposed abortion rights and same-sex marriage, for example.*)

Think of life in a small town where "eveyone knows everyone else's business." The sense of being "watched" actually tends to foster liberty, in that it discourages crime. As a result, one's life and property generally are safer in small towns than in large cities. By the same token, the sense of being "watched" can seem oppressive; one feels less free to do things that might draw social opprobrium, even if those things do no more than offend others' sensibilities.

Why should everyone in a small town have to put up with small-town mores for the sake of a safer, saner life, you may ask? Well, if you don't like small-town mores, fine, pack up and go to the big city, but don't forget to take your handgun (if you're allowed to have one in the big city), and keep your life and homeowner's insurance paid up. (Alternatively, you can stay in the small town and try, through example and persuasion, to change its mores so that there is greater tolerance of social diversity.)

The point is that liberty and happiness cannot be found in the abstract; they must be found in the real world, among real people (or totally apart from them, if you're inclined to reclusiveness). Finding an acceptable degree of liberty and happiness in the real world means contending with many subsets of humankind, each with different sets of social norms.** It is unlikely that any of those sets of social norms affords perfect liberty for any one person. So, in the end, one picks the place that suits one best, imperfect as it may be, and makes the most of it. Sometimes one even tries to change it, but change doesn't always go in the direction one might prefer.

Think of the constrasting visions of liberty and happiness represented in a hippie commune and a monastic order. The adherents of each -- to the extent that they are free to leave -- can be happy, each in his and her own way. The adherents of each are bound to, and liberated by, the norms of the community, which set the bounds of permissible interaction among the adherents. Happiness is not found in the simplistic "harm principle" of John Stuart Mill; happiness is not found in a particular way of life; happiness is found in the ability to choose (and exit) a way of life that, on balance, serves a person's conception of happiness.

In sum, there is no escaping the fact that the attainment of something like liberty and happiness requires the acceptance of -- and compliance with -- some social norms that one may find personally distasteful if not oppressive. But it is possible -- in a large and diverse nation where each social group is free to establish and enforce its own norms -- to find a place that comes closest to suiting one's conception of liberty and happiness. The critical qualfication is that each social group must free to establish and enforce its own norms, as long as those norms include voice and exit.
* The knee-jerk libertarian (and "liberal") will say, for example, that abortion and same-sex marriage are consistent with and required by liberty. But they are not, as I have argued in the several posts linked here. They are steps down a slippery slope toward the further loss of liberty, just as the "progressivism" of the Roosevelts nudged and pushed us down a slippery slope toward the regulatory-welfare state in which we are now enmeshed.

What few libertarians seem willing to credit is the possibility that abortion is of a piece with selective breeding and involuntary euthanasia, wherein the state fosters eugenic practices that aren’t far removed from those of the Third Reich. And when those practices become the norm, what and who will be next? Libertarians, of all people, should be alert to such possibilities. Instead of reflexively embracing “choice” they should be asking whether “choice” will end with fetuses.

The same principle applies to same-sex marriage; it will have consequences that most libertarians are unwilling to consider. Although it's true that traditional, heterosexual unions have their problems, those problems have been made worse, not better, by the intercession of the state. (The loosening of divorce laws, for example, signaled that marriage was to be taken less seriously, and so it has been.) Nevertheless, the state -- in its usual perverse wisdom -- may create new problems for society by legitimating same-sex marriage, thus signaling that traditional marriage is just another contractual arrangement in which any combination of persons may participate. Heterosexual marriage -- as Jennifer Roback Morse explains -- is a primary and irreplicable civilizing force. The recognition of homosexual marriage by the state will undermine that civilizing force. The state will be saying, in effect, "Anything goes. Do your thing. The courts, the welfare system, and the taxpayer -- above all -- will "pick up the pieces." And so it will go.

** There is a kind of pseudo-anarcho-libertarian who asserts that he can pick and choose his associates, so that his interactions with others need consist only of voluntary transactions. Very few people can do that, and to the extent they can do it, they are able to do it because they live in a polity that is made orderly by the existence of the state (like it or not). In other words, anarcho-libertarian attitudes are bought on the cheap, at the expense of one's fellow citizens. But most people cannot and do not wish to escape the influence of groups. Think of the many kinds of groups to which we belong -- even fleetingly -- because our membership in them yields net benefits, even though we must sometimes make compromises in order to meet the expectations of the other members of the group. For example, most of us reside in a neighborhood where there usually are minimal expectations about how one keeps up one's property, even if one avoids the neighbors. Working in a factory, office, or store is certainly a matter of group membership that requires one to make all sorts of compromises. Then, there are athletic activities (sports teams, gym workouts) which usually involve the observance of certain niceties. The list could go on for a long time.


This is an appendix to the two preceding sections, where I first made the case that
liberty is not an abstract ideal. Liberty cannot be sustained without the benefit of widely accepted -- and enforced -- social norms. A society that revolves around norms established within families and close-knit social groups is most likely to serve liberty.
From which it follows that
the attainment of something like liberty and happiness requires the acceptance of -- and compliance with -- some social norms that one may find personally distasteful if not oppressive. But it is possible -- in a large and diverse nation where each social group is free to establish and enforce its own norms -- to find a place that comes closest to suiting one's conception of liberty and happiness. The critical qualfication is that each social group must free to establish and enforce its own norms, as long as those norms include voice and exit.
The validity of these observations depends critically on the source of rights. As I have argued at length,
[r]ights -- though they can exist without the sanction of government and the protection of a state -- are political. That is, although rights may arise from human nature, they have no essence until they are recognized through interpersonal bargaining (politics), in the service of self-interest. It is bargaining that determines whether we recognize only the negative right of liberty, or the positive right of privilege as well. The preference of human beings -- revealed over eons of coexistence -- is to recognize both liberty (usually constrained to some degree) and privilege (which necessitates constraints on liberty).
The liberty I alluded to there was the "pure" liberty of John Stuart Mill's "harm principle" (see footnote), which can be summarized as the negative right to be left alone -- in one's person, pursuits, and property -- as long as one leaves others alone. "Pure" liberty is a mere abstraction. Actual liberty must necessarily involve compromises (constraints), which are inevitable in a society of varied personalities that exists in a particular time and place.

In support of the argument that rights are political, I quoted from Denis Dutton's review of Paul H. Rubin's Darwinian Politics: The Evolutionary Origin of Freedom; Alan Fiske's essay, "The Inherent Sociability of Homo Sapiens"; David Stephens's "Impulsive behavior may be relict of hunter-gatherer past"; and a summary of J. Philippe Rushton's article, "Genetic and environmental contributions to prosocial attitudes: A twin study of social responsibility."

The full implication of those studies is that what we call "rights" -- the kinds of behaviors in which we may engage with impunity -- must be consistent with morality -- the kinds of behaviors that society recognizes as "right." The kinds of behaviors that society recognizes as "right" must, in turn, foster the survival and success of society. Robin Allott explains, in "Objective Morality":
No society is healthy or creative or strong unless that society has a set of common values that give meaning and purpose to group life. . . . Empathy is seen both as the foundation of the unity of feeling which forms an aggregation of individuals into a coherent group and as the source of the effectiveness of the group's code of behavior, the group morality. . . .

One can list various types of motivation which do, or may, lead individuals to accept and seek to observe the morality of their group. There may be childhood imprinting of the moral rules of the family or group, leading to a prerational application of the code, operating rather like post-hypnotic suggestion -- automatic moral responses to predetermined situations. A variant or support of this takes the form of religious endorsement of moral principles -- religious sanctions reinforcing introjected moral reflexes. Or morality may be rationalized as the pursuit of happiness, pleasure or utility -- high level ethical theories perhaps, rather than practical motivations. Or moral behavior may result from prudence or superstition -- following the rules for fear of something worse. . . . More generally, moral behavior may flow from a desire for a worthwhile, productive life, a rational desire of the individual to survive and avoid bodily or mental damage. This may be associated with empathetic identification with the group, its survival and prosperity. . . .

The objective necessity of morality has been demonstrated by life over many generations. However it is not open to immediate rational demonstration. Morality is concerned with remote consequences. The problem is that we have no easy way of seeing the long-term or otherwise distant consequences of following or not following moral rules or showing the consequences for ourselves, for our family or for the group to which we belong. What can we say to the immoralist who claims total moral freedom, who asks: Why not lies? Why not intemperance? Why not promiscuity? Why not theft or fraud? Why not murder? Why not cruelty?

One answer may be: In the absence of morality, you are in a world of powerful, clever, unpredictable animals. Only by understanding others can you protect yourself. Others in the group will only be predictable to the extent that they follow the same moral rules and are moved by the same emotions. A group's morality is concerned not only with how an individual should judge his own action but with how other members of the group, and the group collectively will judge the individual's actions and respond to them. Judge your own action so that you are not judged by others. Others will do unto you what you do unto them. So do not do unto them what you would not want them to do unto you. An individual who rejects the morality of the group rejects empathetic membership of the group and empathetic recognition by others of his membership of the group. The individual becomes a moral parasite living on the morality of the group which he does not observe. To him a different level of morality will apply -- the more primitive kind of morality applied to those not members of the group, to outlaws and outcasts. By asserting your unlimited moral freedom, you risk losing your own freedom.
We ignore, at our peril, the lessons of the ages. Contrary to libertarian purists, the path to liberty is not found in Mill's simplistic "harm principle," which is a formula for atomism. The path to liberty winds tortuously through the complexity of human nature, which shapes -- and is shaped by -- a society's mutual striving to survive and prosper. To give a stark but apt example: If you will kill an unborn child for your convenience, why should I trust you not to kill me for your convenience when I am old? And if I cannot trust you, why should I subscribe to the defense of your life, property, and pursuits?
The "harm principle," from Chapter 1 of On Liberty:
That principle is, that the sole end for which mankind are warranted, individually or collectively in interfering with the liberty of action of any of their number, is self-protection. That the only purpose for which power can be rightfully exercised over any member of a civilized community, against his will, is to prevent harm to others. His own good, either physical or moral, is not a sufficient warrant. He cannot rightfully be compelled to do or forbear because it will be better for him to do so, because it will make him happier, because, in the opinions of others, to do so would be wise, or even right. These are good reasons for remonstrating with him, or reasoning with him, or persuading him, or entreating him, but not for compelling him, or visiting him with any evil, in case he do otherwise. To justify that, the conduct from which it is desired to deter him must be calculated to produce evil to some one else. The only part of the conduct of any one, for which he is amenable to society, is that which concerns others. In the part which merely concerns himself, his independence is, of right, absolute. Over himself, over his own body and mind, the individual is sovereign.

The Centralization of Social Norms Undermines Liberty

Liberty can never be perfect in the real world of emotions, prejudices, stupidity, and ignorance. But liberty is most attainable when societies and polities must compete with one another for the allegiance of members and prospective members.

Legislation and judge-made laws are especially destructive of liberty when they emanate from a central government because they dilute the effectiveness of "exit" -- the ability to vote with one's feet. Local and regional differences become hard to detect when the central government encroaches into issues ranging from elementary education to working hours to speed limits, not to mention abortion. When all places become subject to the same set of imposed norms they tend to become almost uniformly unattractive. The forceful imposition of norms compounds the risk to liberty, for people are less likely to value and defend that which is not of their own making.

There is a "race to the top" -- toward liberty, that is -- when societies or polities must compete for adherents, based on the attractiveness of the norms of those societies and polities. For example, the Freedom Forum offers this relevant bit of history:
Although early Americans built on their English heritage when developing rights in the new land, many colonies before 1689 had laws that far exceeded the scope of the English Bill of Rights. Rhode Island, established in 1636, was the first American colony to recognize freedom of conscience. In 1641, Massachusetts Bay enacted the Massachusetts Body of Liberties, the first detailed protection of rights in America. Maryland was founded as a haven for Catholics, but its citizens extended the right of religious toleration (1649) to other Christians as well.

In June 1776, Virginia adopted a new constitution, prefaced by a declaration of rights including many that would later appear in the U.S. Bill of Rights. The Virginia Declaration of Rights, served as a model for eight of the 12 other states that adopted new constitutions during the revolutionary period.

While the new state governments protected individual rights, the Articles of Confederation, the first constitution of the United States, did not. The weak national government under the Articles of Confederation created many problems. In 1787, these problems finally led to a convention to draft a new charter for the national government, the Constitution of the United States. Lack of a bill of rights became the main reason many people opposed the Constitution.
The Framers understood that the decentralization of governmental power is essential to liberty. They wanted to leave the bulk of governmental power in the hands of the States. (A reasonable prospect at the time; the average population of a State in 1790 was about 1/25 the average population of a State today.) And the Framers saw the multiplicity of States as a bulwark against tyranny in the nation as a whole. Here, for example, are excerpts of James Madison's entries in The Federalist Papers:
The influence of factious leaders may kindle a flame within their particular States, but will be unable to spread a general conflagration through the other States. A religious sect may degenerate into a political faction in a part of the Confederacy; but the variety of sects dispersed over the entire face of it must secure the national councils against any danger from that source. A rage for paper money, for an abolition of debts, for an equal division of property, or for any other improper or wicked project, will be less apt to pervade the whole body of the Union than a particular member of it; in the same proportion as such a malady is more likely to taint a particular county or district, than an entire State. (Federalist No. 10)

* * *

The powers delegated by the proposed Constitution to the federal government are few and defined. Those which are to remain in the State governments are numerous and indefinite. The former will be exercised principally on external objects, as war, peace, negotiation, and foreign commerce; with which last the power of taxation will, for the most part, be connected.

The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State. The operations of the federal government will be most extensive and important in times of war and danger; those of the State governments, in times of peace and security. As the former periods will probably bear a small proportion to the latter, the State governments will here enjoy another advantage over the federal government. The more adequate, indeed, the federal powers may be rendered to the national defense, the less frequent will be those scenes of danger which might favor their ascendancy over the governments of the particular States. If the new Constitution be examined with accuracy and candor, it will be found that the change which it proposes consists much less in the addition of NEW POWERS to the Union, than in the invigoration of its ORIGINAL POWERS. The regulation of commerce, it is true, is a new power; but that seems to be an addition which few oppose, and from which no apprehensions are entertained. . . . (Federalist No. 45)

* * *
. . . If an act of a particular State, though unfriendly to the national government, be generally popular in that State and should not too grossly violate the oaths of the State officers, it is executed immediately and, of course, by means on the spot and depending on the State alone. The opposition of the federal government, or the interposition of federal officers, would but inflame the zeal of all parties on the side of the State, and the evil could not be prevented or repaired, if at all, without the employment of means which must always be resorted to with reluctance and difficulty.

On the other hand, should an unwarrantable measure of the federal government be unpopular in particular States, which would seldom fail to be the case, or even a warrantable measure be so, which may sometimes be the case, the means of opposition to it are powerful and at hand. The disquietude of the people; their repugnance and, perhaps, refusal to co-operate with the officers of the Union; the frowns of the executive magistracy of the State; the embarrassments created by legislative devices, which would often be added on such occasions, would oppose, in any State, difficulties not to be despised; would form, in a large State, very serious impediments; and where the sentiments of several adjoining States happened to be in unison, would present obstructions which the federal government would hardly be willing to encounter. But ambitious encroachments of the federal government, on the authority of the State governments, would not excite the opposition of a single State, or of a few States only. They would be signals of general alarm. Every government would espouse the common cause. A correspondence would be opened. Plans of resistance would be concerted. One spirit would animate and conduct the whole. The same combinations, in short, would result from an apprehension of the federal, as was produced by the dread of a foreign, yoke; and unless the projected innovations should be voluntarily renounced, the same appeal to a trial of force would be made in the one case as was made in the other. But what degree of madness could ever drive the federal government to such an extremity. In the contest with Great Britain, one part of the empire was employed against the other. The more numerous part invaded the rights of the less numerous part. The attempt was unjust and unwise; but it was not in speculation absolutely chimerical. But what would be the contest in the case we are supposing? Who would be the parties? A few representatives of the people would be opposed to the people themselves; or rather one set of representatives would be contending against thirteen sets of representatives, with the whole body of their common constituents on the side of the latter. (Federalist No. 46)
Ironically -- and tragically -- the Commerce Clause, touted by Madison in Federalist No. 45, has been the foundation for much of the undoing of the Framers' plan. In fact, it is hard to imagine a facet of social and economic life that is no longer touched by the central government, as the Supreme Court and Congress have acted, especially since the 1930s, to nationalize and homogenize Americans' mores. David F. Forte offers a leading example of this in his article about the Commerce Clause in The Heritage Guide to the Constitution (pp. 101-7):
. . . By 1941, in United States v. Darby, it was clear that the new majority [of the Supreme Court] had embraced a very expansive [view of the Commerce Clause] and, as events were to show, these Justices were able to find that any local activity, taken either separately or in the aggregate, Wichard v. Filburn (1942), always had a sufficiently substantial effect on interstate commerce to justify congressional legislation. By these means, the Court turned the commerce power into the equivalent of a general regulatory power and undid the Framers' original structure of limited and delegated powers . . . .
The Framers' Fatal Error

The Framers underestimated the will to power that animates office-holders. The Constitution's wonderful design -- horizontal and vertical separation of powers -- which worked rather well until the late 1800s, cracked under the strain of populism, as the central government began to impose national economic regulation at the behest of muckrakers and do-gooders. The Framers' design then broke under the burden of the Great Depression, as the Supreme Court of the 1930s (and since) has enabled the central government to impose its will at will. The Framers' fundamental error can be found in Madison's Federalist No. 51. Madison was correct in this:
. . . It is of great importance in a republic not only to guard the society against the oppression of its rulers, but to guard one part of the society against the injustice of the other part. Different interests necessarily exist in different classes of citizens. If a majority be united by a common interest, the rights of the minority will be insecure. . . .
But Madison then made the error of assuming that, under a central government, liberty is guarded by a diversity of interests:
[One method] of providing against this evil [is] . . . by comprehending in the society so many separate descriptions of citizens as will render an unjust combination of a majority of the whole very improbable, if not impracticable. . . . [This] method will be exemplified in the federal republic of the United States. Whilst all authority in it will be derived from and dependent on the society, the society itself will be broken into so many parts, interests, and classes of citizens, that the rights of individuals, or of the minority, will be in little danger from interested combinations of the majority.

In a free government the security for civil rights must be the same as that for religious rights. It consists in the one case in the multiplicity of interests, and in the other in the multiplicity of sects. The degree of security in both cases will depend on the number of interests and sects; and this may be presumed to depend on the extent of country and number of people comprehended under the same government. This view of the subject must particularly recommend a proper federal system to all the sincere and considerate friends of republican government, since it shows that in exact proportion as the territory of the Union may be formed into more circumscribed Confederacies, or States oppressive combinations of a majority will be facilitated: the best security, under the republican forms, for the rights of every class of citizens, will be diminished: and consequently the stability and independence of some member of the government, the only other security, must be proportionately increased. . . .
Madison then went on to contradict what he said in Federalist No. 46 about the States being a bulwark of liberty:
It can be little doubted that if the State of Rhode Island was separated from the Confederacy and left to itself, the insecurity of rights under the popular form of government within such narrow limits would be displayed by such reiterated oppressions of factious majorities that some power altogether independent of the people would soon be called for by the voice of the very factions whose misrule had proved the necessity of it. In the extended republic of the United States, and among the great variety of interests, parties, and sects which it embraces, a coalition of a majority of the whole society could seldom take place on any other principles than those of justice and the general good; whilst there being thus less danger to a minor from the will of a major party, there must be less pretext, also, to provide for the security of the former, by introducing into the government a will not dependent on the latter, or, in other words, a will independent of the society itself. It is no less certain than it is important, notwithstanding the contrary opinions which have been entertained, that the larger the society, provided it lie within a practical sphere, the more duly capable it will be of self-government. And happily for the REPUBLICAN CAUSE, the practicable sphere may be carried to a very great extent, by a judicious modification and mixture of the FEDERAL PRINCIPLE.
Madison understood that a majority can tyrranize a minority. He understood that the States are better able to prevent the rise of tyranny if the powers of the central government are circumscribed. But he then assumed -- in spite of the race to the top that I noted above -- that the States themselves could not resist tyranny within their own borders. Madison overlooked the importance of exit as the ultimate check on tyranny. He assumed (or asserted) that, in creating a new central government with powers greatly exceeding those of the Confederacy, a majority of States would not tyrannize the minority and that minorities with overlapping interests would not concert to tyrannize the majority. Madison was so anxious to see the Constitution ratified that he oversold himself (possibly) and the States' ratifiying conventions (certainly) on the ability of the central government to hold itself in check. Thus the Constitution was lamentably silent on nullification and secession.

What has been done by presidents, Congresses, and courts will be very hard to undo. Too many interests are vested in the regulatory-welfare state that has usurped the Framers' noble vision. Democracy (that is, vote-selling) and log-rolling are more powerful than words on paper. Even a Supreme Court majority of "strict constructionists" probably would decline to roll back the New Deal and most of what has come in its wake.


Exit Is the Key

Exit -- the ability to flee a highly taxed and regulated State (that is, one of the United States) for a somewhat less taxed and regulated State -- remains an option, and those who avail themselves of it are sending a message that is lost in the tumult and shouting of electoral politics. Despite the erosion of local and regional differences in governance -- owing to the centralization of power in Washington and the general expansion of government power at all subordinate levels -- there is net migration from the Northeast and Midwest toward the "sun belt" States of the South and West (excluding California), which generally have lower tax rates and less unionism than the Northeast and Midwest. (Summary statistics on internal migration are here, at Table H on page 14. An index of economic freedom, by State, is here.)

It is therefore no coincidence that the mean population center of the U.S. has since 1940 moved smartly southwestward, from southern Illinois into south central Missouri. Incentives matter; that which enhances economic liberty also enhances personal liberty, for the two are indivisible. The urge for liberty drives people out of high-tax States and toward (relatively) low-tax States, as illustrated by this graphic from "Revolution on Wheels" (Barron's Online, February 13, 2006):

The lesson here is simple: As long as there is meaningful exit there can be a race to the top. Exit serves liberty because it enables each person to find that place whose values come closest to his or her preferred way of life. Places deemed among the most attractive will grow in numbers and prosper; places deemed less attractive will wither, economically if not in terms of population. Under the right conditions (to which I will come), the balance will tilt toward liberty, that is, toward a modus vivendi that seems, for most people, to offer happiness. That is the essence of federalism, as it was envisioned by the Framers.

But, today, the 50 States (and their constituent municipalities) are incompatible with the kind of federalism envisioned by the Framers. Today's State and municipal governments are too bureaucratic and too beholden to special interests; they have become smaller versions of the federal government. A devolution of power to the States would advance liberty in some States, but it would fall well short of reversing the depradations of liberty that began in earnest with the New Deal. For, in today's populous States and municipalities, coalitions of minority interests are able to tyrannize the populace. (The average State today controls the destinies of 25 times as many persons as did the average State of 1790.) Those Americans who "vote with their feet" do not escape to regimes of liberty so much as they escape to regimes that are less tyrannical than the ones in which they had been living.

The kind of federalism envisioned by the Framers -- and the kind of federalism necessary to liberty -- would require the devolution to small communities and neighborhoods of all but a few powers: war-making, the conduct of foreign affairs, and the regulation of inter-community commerce for the sole purpose of ensuring against the erection of barriers to trade. With that kind of federalism, the free markets of ideas and commerce would enable individuals to live in those communities and neighborhoods that best serve their particular conceptions of liberty. (To grasp this critical point, please read or re-read the preceding installments of this series: here, here, here, and here.)

A "Modest" Proposal for an Experiment in Liberty

Unfortunately, most proponents of federalism remain fixated on the State as the common denominator. Consider the Free State Project,
an agreement among 20,000 pro-liberty activists to move to New Hampshire, where they will exert the fullest practical effort toward the creation of a society in which the maximum role of government is the protection of life, liberty, and property. The success of the Project would likely entail reductions in taxation and regulation, reforms at all levels of government to expand individual rights and free markets, and a restoration of constitutional federalism, demonstrating the benefits of liberty to the rest of the nation and the world.
Why New Hampshire?
After obtaining 5,000 committed members, the FSP membership voted and chose New Hampshire. The vote was conducted in accordance with the Participation Guidelines; detailed results of the vote may be found here. The FSP membership selected New Hampshire because of its many political, economic, and cultural advantages, which can be seen in our NH Info page. In addition, New Hampshire's low population ensures that each individual can have an effect on the political system.
Why not Missouri, which has an excellent index of economic freedom, celebrates an early tax freedom day, and generally has better weather than New Hampshire (except for skiing). Better yet, why not a county or city in a State like Missouri? Best yet, why not convince the federal government and a State to perform an experiment by allowing the establishment of a "zone of liberty" within a State -- an experiment in liberty, if you will. If it succeeds, others will flock to it or demand the establishment of similar zones of liberty. If it fails . . . well, that seems unlikely.

What do I have in mind? A zone of liberty would be something like a "new city" -- with a big difference. Uninhabited land would be acquired by a wealthy lover (or lovers) of liberty (call him or them the "developer"). The zone would be populated initially by immigrants, who would buy parcels of land from the developer, and who would be allowed to build the home or business of their choosing on the land that they buy. Sub-developers would be allowed to acquire large parcels, subdivide those parcels, and attach perpetual covenants to the use of the subdivided parcels -- covenants that initial and subsequent buyers would knowingly accept. Absentee ownership would be prohibited.

Infrastructure would be provided by competing vendors of telecommunications and transportation services. Rights-of-way would be created through negotiations between vendors and property owners. Any resident homeowner or businessperson could import or export any article from or to any place, including another country; there would be no import controls, duties, or tarrifs; the only restrictions on commerce would be those that are imposed by outside governments.

A zone's government would comprise an elected council, a police force, and a court (all paid for by assessments based on the last sale price of each property in the zone). The police force would be empowered to keep the peace among the residents of the zone, and to protect the residents from outsiders who come into the zone without permission from a resident and/or who breach the peace. Breaches of the peace would be defined by the development of a common law through the court. The elected council (whose members would serve single, four-year terms) would oversee the police force and court, and would impose the assessments necessary to defray the costs of government. The council would have no other powers, and it would be able to exercise its limited powers only by agreement among three-fourths of the members of the council. The members, who would not be salaried, would annually submit a proposed budget to the electorate, which would have to approve the budget by a three-fourths majority. The electorate would consist of every resident who is an owner or joint owner of a residence or business (not undeveloped land), and who has attained the age of 30.

A zone of liberty would not be bound by federal, State, or local statutes, except that the federal government could impose a per-capita tax on residents of the zone that is sufficient to defray the zone's per-capita share of the national budget for defense and foreign affairs. The actions of the zone's government would be reviewable only by the U.S. Supreme Court, and then only following the passage of a bill of particulars by two-thirds of the number of U.S. Senators and Representatives, which must be signed by the President. (A zone could be abolished only with the approval of four-fifths of both houses of Congress and the President.)

Absent such an experiment, I fear that organized minorities will continue to constrain liberty, mooting even the modest degree of inter-State migration that now prevails. Our only hope for liberty -- albeit a slim one -- would then rest in the hands of the Supreme Court.

I am being realistic in my assessment of what it would take to attain something like liberty in the United States: either an upheaval of the Supreme Court or the creation of something like zones of liberty. Politics as usual will only take us further down the road to serfdom. Frankly, I see little chance of averting serfdom. All I can do is propose an alternative -- unlikely as it is -- and pray.

The Moral of the Story

The bottom line of this series:
  • Liberty suffers when a central government does more than make war, conduct of foreign affairs, and regulate inter-State commerce for the sole purpose of ensuring against the erection of barriers to trade.
  • Liberty suffers when a central government imposes rules on all at the instigation of the majority or coalitions of minorities.
  • Liberty thrives when the rules that govern relations among the members of a group are agreed among the members of the group -- even if those rules vary from group to group. One group's liberty may be another group's strait-jacket, and vice versa.
It is easy to say that liberty consists of doing what we please as long as what we do does not bring harm to others. It is very hard to say what will and will not do harm. Socially evolved norms offer the best guide. We ignore and summarily reject those norms at great peril to liberty.

The simplistic definition of liberty -- do as you please but do no harm to others -- is superficially appealing. But it glides over the definition of harm, which may vary widely from group to group. Those who advocate abortion and same-sex marriage, for instance, may see those practices as harmless, but they fail to take into account the downstream effects of those practices on civility, without which life would be "solitary, poor, nasty, brutish, and short."

Those who wish to live the simplistic libertarian life of "do no harm to others" are welcome to it, if they can find it in a group of like-minded persons. There is no such thing as a neutral or objective definition of "harm." Simplistic libertarians merely have a particular conception of "no harm" that they should not be able to impose on others who disagree with that conception. I, for example, do not wish to be bound by the simplistic libertarians' blind adherence to the non-aggression principle, which is both fatuous and suicidal. (See this, this, this, this, and this.)

That is why it is so important to devolve most governmental power to small groups. Doing so enables exit and makes it more likely that leaving will be rewarded by finding membership in a more congenial group. (For that reason I would constrain the size and membership of each zone of liberty, creating more of them instead of allowing any one of them to grow beyond the size of a small town (perhaps not exceeding a population of 150).

In conclusion, true liberty can be found in these four rules:
  1. A group's behavior must be governed by norms that have evolved among its members, rather than being forced on them through executive, legislative, or judicial edict. (Though legislation, if backed by a super-majority of the populace, may reflect evolved norms.)

  2. The norms must be susceptible of further, unforced change.

  3. Dissidents must be free to state their dissent openly, without fear of coming to physical harm at the hands of society or the state. (One must accept the possibility of disapproval, and even ostracism, but disapproval and ostracism are much less likely if one begins as an accepted member of a social group.)

  4. Dissidents must be free to leave, without paying any penalty other than the cost of leaving.

The essential fallacy of simplistic libertarianism is that it does not account for the deeply embedded human impulses that we often call "human nature":
Man evolved in cooperating groups united by common cultural and genetic ties, and it is only in such a setting that the individual can feel truly free, and truly protected. . . .

The meaning of liberty is inseparable from the founding anthropology of man, an individual sharing a common history and common culture in a common community.

Alain de Benoist, "Gemeinschaft and Gesellschaft: A sociological view of the decay of modern society" (originally published in The Mankind Quarterly, Vol. 34, No. 3, pp. 263-270).

* * *

The scene of evolution is the Environment of Evolutionary Adaptedness, the EEA, essentially the Pleistocene, the whole, long period lasting from 1.6 million years ago up until the shift to the Holocene with the invention of agriculture and large settlements 10,000 years ago. Our present intellectual constitution was achieved by about 50,000 years ago. . . . [T]here were 80,000 generations of humans and proto-humans in the Pleistocene, while there have been a mere 500 generations since agriculture and the first cities. It was in the earlier, much longer period that selective pressures created genetically modern humans. . . .

. . . Libertarianism was not a viable strategy for the EEA. The actions of individuals produce by-products to affect whole communities, and [according to Paul H. Rubin, author of Darwinian Politics] “we have evolved preferences to control these actions.” We are genetically predisposed, it seems, “to interfere in the behavior of others,” even where the behavior has little demonstrable adverse effect on a community: we want to control recreational drug use, when people can gamble or drink, where they can smoke, and whether they can engage in private sex acts. We succumb to periodic moral panics about youth — the music they listen to or their hairstyles, their language, and so forth. We set up laws to regulate all aspects of behavior. We are fundamentally meddlesome creatures.

Rubin speculates that this impulse to control our fellows, even in matters that have little or no material effect on living standards or resource allocation, is an adaptation designed to increase group solidarity. In fact, he even suggests that a group in the EEA that put into practice libertarian values would likely be less able to survive than one that more tightly controlled social behavior: I have a picture of laid-back, freedom-loving Pleistocene libertarians being massacred by a nearby tribe of Pleistocene fascists. What makes the fascists successful is the enforcement of specified beliefs and rituals, “our” culture. Punish­ing defectors keeps the group strong. The result is a marked human taste for paternalism, for interfering in private behavior in the name of morality.

Denis Dutton, in a review of Rubin's Darwinian Politics: The Evolutionary Origin of Freedom

Friday, March 17, 2006

Trade, Government Spending, and Economic Growth

Executive Summary

One reason for continued economic growth and the resurgence of productivity is the trade deficit, which is not a form of debt. A trade deficit offsets government spending and therefore alleviates the "crowding out" effect that government spending has on private-sector consumption and investment. American consumers and businesses are better off than they would be in the absence of a trade deficit. For the trade deficit is nothing more than a manifestation of voluntary exchange, which -- by definition -- benefits both parties. In the case of international trade, foreigners (on net) are selling us goods and services while we are selling them a combination of goods, services, stocks, bonds, and mortgages. The so-called deficit, then, is nothing more than foreigners' purchases of U.S. stocks, bonds, and mortgages.

Thus, instead of using resources to produce goods and services and sending them overseas in exchange for goods and services of equal value, some resources remain in the U.S. And some of those resources are then converted into capital investments that help make American businesses more productive and profitable. In effect, some foreigners are using the income they receive from Americans to "invest in America," just as some Americans use some of their income to "invest in America." There is no difference.

Nevertheless, when there is a trade deficit we are treated to gloom-and-doom-saying about "foreign "ownership" of U.S. assets and the "exportation" of American jobs. But foreign ownership of U.S. assets is not a threat to Americans; rather, it gives foreigners a stake in America's economic growth. The threat of job "exportation" is just as bogus; when foreigners "do jobs that Americans could be doing" they are enabling Americans to make more productive use of their abilities. If you don't care (and you shouldn't) whether your car in made in Detroit or Tennessee, why should you care whether a computer technician works in the U.S. or overseas? What you should care about is the value you receive when you buy a car or use a computer help line.

The real villain of the piece is government spending, not government deficits. Government deficits are simply the result of government spending. It is government spending -- not government borrowing -- that threatens Americans' prosperity.Through spending (whether it is financed by taxes or borrowing), government confiscates resources and puts them to generally wasteful and counterproductive uses.

Where does the trade deficit fit in? It doesn't create government spending or government deficits. To the contrary, the trade deficit helps to offset the essential wastefulness of government spending by enabling Americans to enjoy and benefit from goods and services that government spending deprives them of.

You will come to understand the logic of these conclusions if you can bear with the bit of simple algebra that lies ahead. But first . . .

Some Background

The "real" economy -- the economy that produces and uses goods and services -- is healthy (though not as robust as it could be) in spite of (and not because of) government spending and regulatory activity. Although real GDP continues to grow at a lower rate than it did before the advent of the regulatory-welfare state about 100 years ago (Figure 1), the resurgence of productivity (Figure 2) offers hope for the future.

Figure 1

Source and explanation: "The Destruction of Income and Wealth by the State."

Figure 2

Source and explanation: "Productivity Growth and Tax Cuts."

As Figure 2 suggests, the so-called boom of the 1990s really began in the early 1980s, as inflation was tamed and Reagan's tax cuts and pro-business attitude gave new hope to inventors, innovators, and entrerpreneurs -- and to those who finance them. It is those economic actors, not government, who are responsible for economic growth. The best thing government can do, when it comes to the economy, is to get out of the way.

When I say "get out of the way" I am not talking about reducing government deficits. Nor am I talking about eliminating the so-called trade (or current-account) deficit, which many commentators see (wrongly) as a cause of government budget deficits. Government spending is the real obstacle to robust economic growth. It is a drag on the economy because it diverts resources to what are mainly nonproductive activities. Moreover, government regulatory programs have a cumulative, counterproductive effect that is out of proportion to their cost because the regulatory burden on business activity keeps piling up. (Refer again to Figure 1, and go to the source for the depressing details.)

Figure 3 (which encompasses spending and deficits at all levels of government) provides some needed perspective. Notice the historical disconnect between the government deficit and the current-account deficit. The fact that both have been rising in recent years is a coincidence, about which many commentators have drawn the wrong inference. The "500-pound gorilla" in Figure 3 is government spending, in particular, the growing burden of transfer payments (e.g., Social Security, Medicare, and Medicaid), which take from those who produce and give to those who do not, and which discourage saving and encourage consumption. The rise in transfer payments has kept total government outlays above 30 percent of GDP since 1970. Figure 4 indicates that the situation is likely to worsen considerably, given current "commitments" to Social Security, Medicare, and Medicaid.

Figure 3

Sources: Bureau of Economic Analysis, National Economic Accounts, Table 1.1.5. Gross Domestic Product (lines 1, 20-24), Table 3.1. Government Current Receipts and Expenditures (lines 17, 29), Table 4.1 Foreign Transactions in the National Income and Product Accounts (line 29).

Figure 4

Source: Government Accounting Office (see also "Funding the Welfare State").

This recitation of dreary facts sets the stage for the rest of this post, which focuses on the real problem, which is government spending -- not government deficits (per se), and certainly not the so-called trade deficit.

The "Real" Economy in Simple Formulae

The following formulations depict the "real" economy at a given time. (See this article for a more complex but equivalent depiction.) These formulations do not, by themselves, depict the dynamics of economic growth or the cause-and-effect relationships among the various parameters of the real economy. I supply some of those missing ingredients in the commentary that follows.

The totality of real economic activity can be expressed as an identity:

(1) Income ≡ Output

That is, aggregate income (the claims on or distribution of output) must be equal to the aggregate of all types of output.

Income and output can be expressed in terms of certain parameters:

(2.a) Income = C + S + T + M

(2.b) Output = C + I + G + X ,

where the parameters are defined as follows:

C = consumption (private-sector consumption of goods and services produced domestically, excluding consumption that is subsidized by government transfer payments to the beneficiaries of such programs Social Security and Medicare)

S = saving (private-sector income not consumed, taxed, or spent on imports)

I = private-sector investment (output invested by non-governmental entities in technology, buildings, equipment, etc., for the purpose of increasing the future output of goods and services)

M = items imported for private-sector consumption or investment from other countries

X = private-sector output exported to other countries

T = taxes, including transfer-payment taxes for Social Security, etc.

G = government spending (including spending that is subsidized by transfer payments for such programs as Social Security and Medicare)


(X - M) or (M - X) = trade surplus or deficit

(T - G) or (G - T) = government surplus or deficit.

These definitions vary from the standard version in that any spending subsidized by government transfer payments for such programs as Social Security and Medicare is included in G rather than C . These definitions also implicitly reject a role for government in saving and investment, for reasons spelled out in my post, "Joe Stiglitz, Ig-Nobelist."

Key Relationships

Because Income ≡ Output, it follows that:

(3) C + S + T + M = C + I + G + X
In a closed economy without government the Income ≡ Output identity reduces to this:
(3') C + S = C + I
Given that C ≡ C, it follows that S = I in a closed economy without government.That is, absent government (which usurps saving through taxation), the backbone of private-sector investment is private-sector saving.

In an open economy without government the Income ≡ Output identity becomes this:
(3'') C + S + M = C + I + X
Given that C ≡ C, it follows that (S + M) = (I + X) in an open economy without government. That is, given a level of exports, the backbone of private-sector investment is the combination of private-sector saving and imports that are not consumed. It therefore follows that . . .

The Trade Deficit Is Good

Solving 3 for (M - X), the trade deficit, we get:
(4) (M - X) = (I - S) + (G - T)
What (4) tells us is that a trade deficit is a boon to economic growth. That is, an increase in M (or a decrease in X) supports an increase in I , even when T reduces S .

Consider, for example, an exogenous increase in M (e.g., because of economic growth or a drop in the prices of imported goods relative to the prices of domestic substitutes). An exogenous increase in M means that more resources become available for I (as well as C). By the same token, an exogenous decrease in X (e.g., because a rise in U.S. interest rates attracts foreign money away from U.S. exports and toward U.S. bonds and mortgages) means that more resources become available for I (as well as C).

In sum, the causality runs from trade. Trade is an enabler. Foreign trade is just another form of voluntary exchange, which benefits all parties. In the case of foreign trade, Americans stand to capture real resources that can be invested in growth-producing capital. The so-called trade deficit isn't the "bad" side of trade, it's the good side of trade.

The catch is that government may confiscate some of the potential gains from a trade deficit by adding to its debt when G is greater than T . Which leads me to this . . .

A Trade Deficit Is Not a Form of Debt

Solving (3) for (G - T), we get:

(5) (G - T) = (S - I) + (M - X).

It is apparent that a trade deficit can finance a portion of the government deficit. That is why government-deficit and trade-deficit hysterics liken the trade deficit to a form of debt -- which it is not. The trade deficit does not create the government deficit. The government deficit arises mainly from exogenous decisions about the size of G and the various taxes that result in T .

To repeat and elaborate: The trade deficit -- when there is one -- merely helps to finance the government deficit -- when there is one. The two are essentially independent of each other. Consider an increase in the trade deficit, which enables an increase in private investment and/or consumption (see the preceding section). The government may (through taxing or borrowing) confiscate some or all of the increase in the trade deficit. Thus a trade deficit, which is potentially beneficial because it enables an increase in private investment, simply "soaks up" some of the government deficit. But the trade deficit is merely coincidental with the government deficit, and is not created by it.

In the absence of a trade deficit, the burden of a government deficit would fall entirely on the domestic private sector. For example, referring to (5), in the absence of a trade deficit, an increase in G would require an offsetting reduction in I (as well as C). (It would be ludicrous to interpret (5) as saying that an increase in G leads to an increase in S .)

In other words, a trade deficit makes things better for the private sector -- not worse -- and the trade deficit has nothing to do with the size of the government deficit. The coincidental rise of the government deficit and the trade deficit in recent years (Figure 3) is just that: coincidental. Anyone who says that the trade deficit is a form of debt is guilty of (a) mistaking coincidence for causality, and (b) misunderstanding the meaning of "deficit" in the term "trade deficit."

There is no trade deficit. The things foreigners buy from us have exactly the same value as the things we buy from them. The mix of things foreigners buy from us simply happens to include a higher proportion of stocks, bonds, and mortgages than the mix of things Americans buy from foreigners.

Bogus "Threats": Foreign "Ownership" and "Job Exportation"

There is the notion that the holding of U.S. stocks, bonds, and mortgages gives foreigners a "hold" over us. How so? It hurts foreign holders of U.S. equities, securities, and real estate if those things lose value. Foreigners have absolutely no incentive to "dump" their holdings of U.S. financial instruments unless financial markets already have signaled that those instruments are losing value for reasons unrelated to the ownership of financial assets. Foreign "dumping" in a panic is no different than "dumping" by domestic holders of financial assets. Anyone can panic; Americans have no monopoly on steadfastness when it comes to financial markets.

A foreign investor who "dumps" U.S. paper simply out of pique would be the loser because the investor would be driving down the value of the very holdings it wishes to "dump." The value of the "dumped" holdings would return to something like their former levels once the investor had finished "dumping," thus rewarding the buyers with windfall profits.

As for "job exportation," I must quote from a post I wrote several months ago:
Outsourcing, which is really the same thing as international trade, creates jobs, creates wealth, and raises real incomes -- for all. Economics is a positive-sum "game."

If you're not convinced, think of it this way: If product X is a good value, does it matter to you whether it was made in Poughkeepsie or Burbank? Well, then, there's nothing wrong with Laredo, Texas, or Calais, Maine, is there?

Now imagine that the Rio Grande River shifts course and, poof, Nuevo Laredo, Mexico, becomes Nuevo Laredo, Texas. Or suppose that the Saint Croix River between Maine and New Brunswick, shifts course and the former St. Stephen, New Brunswick, becomes St. Stephen, Maine. Juan and Pierre are now Americans. Feel better?

What's in a border? A border is something to be defended against an enemy. But do you want a border to stand between you and lower prices, more jobs, and economic growth? I thought not.

Taxes Always Hurt

Solving (3) for I , we get:

(6) I = S + (T - G) + (M - X)

That is, private-sector investment is equal to private-sector saving, plus the government surplus (or minus the government deficit), plus the trade deficit (or minus the trade surplus). I re-emphasize: plus the trade deficit (see "The Trade Deficit Is Good," above).

Equation (6) might be (and has been) taken to mean that a tax increase would lead to an increase in private-sector investment. (That ludicrous assertion is owed to "Rubinomics" -- the true "voodo economics.") Remember, however, that a tax increase must be financed by a decrease in C, S, or M (or some combination of them). A tax increase almost certainly will cause a decrease in I because I depends largely on S and (M - X). Equation (6) is best understood this way: Given the level of T and G , I rises (or falls) with S and the trade deficit (M - X).

When the economy continues to grow in the wake of a tax increase it is because the forces underlying private-sector growth (e.g., returns on prior investments) are sufficiently strong to overcome the inhibiting effects of the tax increase. Think of the economy as a healthy child. Think of a tax increase as a common cold. The cold will cause the child to have less energy than usual, but it will not cause the child to stop growing. On the other hand, too many colds -- like too much taxation -- can take their toll and turn a healthy child into a sickly one who never fulfills his potential. (See Figure 1 again, and visit the source for it, if you haven't already done so.)

Government Spending Always Hurts (with a Few Exceptions)

Recall (2.b)? This is what follows from it:
If G goes up, C, I, or X -- or a combination of them -- must go down.
The key parameter is I , which represents new technology, buildings, equipment, software, etc. -- all of which yield more jobs and higher incomes. (By the way, G is not a viable alternative to I ; don't even consider it.) But X is important, too, because exports enable us to exchange goods and services with foreigners, to our mutual benefit. In sum, G confiscates resources that could have gone into I and X (not to mention C). G also supports the accretion of burdensome regulations.

G is good only when it supports defense and justice. Defense is an insurance policy for our lives, liberty, and property. Justice is that, too, and it also promotes the kind of orderly environment that enables economic activity to thrive.

It follows that the real threat to the well-being of Americans isn't government deficits (per se) or trade deficits or foreign holdings of U.S. stocks and bonds. The real threat is government spending. Whether government spending is financed by debt or taxes, it is a generally destructive force. Government spending (with exceptions for defense and justice) results in the gross misuse of resources. Beyond that, government spending on regulatory activities inhibits growth-producing investments and blunts the productivity of those investments that are made. And the ways in which Americans are taxed to fund government spending (most of it is funded by taxes) tends to penalize, and thus discourage, invention, innovation, and entrepreneurship. I once estimated the cost to Americans of the regulatory-welfare state that has become dominant over the past 100 years:
  • Real GDP (in year 2000 dollars) was about $10.7 trillion in 2004.
  • If government had grown no more meddlesome after 1906, real GDP might have been $18.7 trillion [Figure 1].
  • That is, real GDP per American would have been about $63,000 (in year 2000 dollars) instead of $36,000.
  • That's a deadweight loss to the average American of more than 40 percent of the income he or she might have enjoyed, absent the regulatory-welfare state.
That loss is in addition to the 40-50 percent of current output which government drains from the productive sectors of the economy [the direct burden of taxes, plus the direct costs of regulatory compliance].
Those vast losses of income have resulted in vast losses of wealth; for example (from the same post):

[T]he stocks of corporations in the S&P 500 are currently undervalued by one-third because of the depradations of the regulatory-welfare state, which have lowered investors' expectations for future earnings. . . .

And that's only the portion of wealth that's represented in the S&P 500. Think of all the other forms in which wealth is stored: stocks not included in the S&P 500, corporate bonds, mortgages, home equity, and so on.

If government had left its grubby hands off the economy, there never would have been a Great Depression, Social Security, Medicare, Medicaid, and the myriad regulations that have us tied in knots.

And we would be vastly better off.

Our "leaders" in Washington obviously don't want to do much of anything to cope with the real threat to our well-being. They're like terminal alcoholics who keep ordering triple shots.

"Crowding Out" in Perspective

What about the notion that government deficits "crowd out" private-sector investment? In a growing economy -- both national and global -- government spending rises alongside private-sector investment because there is room for both to grow. We would be better off with decreases in most kinds of government spending (excepting defense and justice). But we would be better off because government would be confiscating fewer resources that could go into consumption and growth-producing investments. It's not government deficits (per se) that matter; it's government spending that matters. Government deficits are a drop in the proverbial bucket of global liquidity. To quote myself again:

The crowding-out hypothesis . . . is based on a static analysis -- a mere truism -- which says that a given level of national output can be reallocated, but not changed. But the crowding-out hypothesis, which has reputable critics and doubters (see here, here, here, and here, for instance) doesn't apply to a dynamic economy. The actual effect of government borrowing on interest rates -- and thus on the cost of private capital formation -- is minuscule, and perhaps nonexistent, as Brian S. Westbury explains:

The theory [that deficits drive up interest rates] suggests that deficits "crowd out" private investment, putting upward pressure on interest rates. In other words, government borrowing eats up the available pool of capital. But today's forecasted deficits of $300 to $500 billion are just a small drop in the pool of global capital markets. In the U.S. alone, capital markets are $30 trillion dollars deep, for the world as a whole they approach $100 trillion. Deficits of the size projected in the years ahead cannot possibly have the impact on interest rates that many fear. . . .

The trade deficit -- fortunately -- blunts the confiscatory effects of government spending. Why? Because if foreigners aren't spending all the dollars they earn on U.S. produced goods and services, it means that they are buying U.S securities, equities, and mortgages. That is, they are enabling private-sector investments that help to make American businesses more productive and profitable.

Net foreign buying of U.S. securities, equities, and mortgages also has been a major cause of the decade-long decline in U.S. interest rates. (See, for example this, this, and this.) American stockholders and homebuyers are therefore "indebted" to foreigners who buy U.S. stocks and bonds. American bondholders (on the whole) also have gained because rising bond prices have more than offset the decline in interest rates.

What Does the Future Hold?

There is no reason to believe that rising interest rates will cause the net inflow of foreign funds to dry up. Rising interest rates might cause foreigners to shift from stocks to bonds, but rising interest rates will attract money from abroad, not repel it. Even if the net inflow of foreign funds were to slow down for some reason, it is not going to suddenly dry up. And even if it dries up eventually, it won't dry up forever because -- in the world of economics -- nothing is forever. A trend usually creates the conditions for its reversal:

We've been through periods of high inflation, high interest rates, large trade deficits, and low exchange rates at varying times, and we'll go through them again. Today we have relatively low (but rising) inflation, and relatively low (but rising) interest rates, a persistently large trade deficit (willingly financed by foreigners), and therefore a falling exchange rate. But all of that can and will change as higher interest rates and lower exchange rates work their way through the economy, dampening investment and consumption spending and, therefore, imports.

Today is not forever. Doomsaying is an ancient and long-discredited profession. Remember the ten years between the "oil shocks" of the early 1970s and the end of double-digit inflation in the early 1980s? Remember the next 20 years of almost unmitigated economic growth with low inflation? Extrapolating from current economic conditions is a sucker's game, unless you bet on the underlying trend in the U.S., which is long-term economic growth.

In any event, future changes in the net inflow of foreign funds cannot undo the benefits that have accrued to Americans because of past inflows. Those who fear a "drying up" of the inflow are like bums who have been getting free meals and then complain when the soup kitchen shuts down. You take what you can get, when you can get it, and invest it wisely. That's evidently what Americans have been doing, thanks to the trade deficit -- and no thanks to government spending.

Related posts:

The Destruction of Income and Wealth by the State
Why Outsourcing Is Good: A Simple Lesson for Liberal Yuppies
Curing Debt Hysteria in One Easy Lesson
Trade Deficit Hysteria
Brains Sans Borders
Understanding Economic Growth
The Real Meaning of the National Debt
Debt Hysteria, Revisited
Why Government Spending Is Inherently Inflationary
Understanding Outsourcing
Joe Stiglitz, Ig-Nobelist
Professor Buchanan Makes a Slight Mistake
More Commandments of Economics
Productivity Growth and Tax Cuts
Do Future Generations Pay for Deficits?
Liberty, General Welfare, and the State
Starving the Beast, Updated