Glaeser: The Economics of Libertarianism

Ed Glaeser confronts the paradox of libertarianism

I always find it refreshing to take a quick, clean intellectual shower in the cold, pure waters of libertarian thought, but I find myself most interested in the murky areas on the edge of libertarianism, which Professor Miron explores with aplomb. Libertarians are rarely anarchists. Almost all of them believe in some form of state power, at the very least the protection of private property and the enforcement of contracts. Many of them, including Milton Friedman, are quite comfortable with larger exercises of state power, including the redistribution of resources to those who have less. Professor Miron writes that “anti-poverty spending is the most defensible kind of redistribution,” because “the goal of this redistribution – helping the poor – is reasonable and the costs of a well-designed limited anti-poverty program (e.g., a negative income tax set on a state-by-state basis) are modest.”

But once the need for public action is accepted, things start getting very muddy and we can’t rely on either a love of liberty or fear of the state for guidance. Consider the purely hypothetical case of a massive oil spill in the Gulf of Mexico. The traditional libertarian would argue that regulation is unnecessary because the tort system will hold the driller liable for any damage. But what if the leak is so vast that the driller doesn’t have the resources to pay? The libertarian would respond that the driller should have been forced to post a bond or pay for sufficient insurance to cover any conceivable spill. Perhaps, but then the government needs to regulate the insurance contract and the resources of the insurer.

Even more problematically, the libertarian’s solution requires us to place great trust in part of the public sector: the court system. At times, judges have been bribed; any courtroom can be influenced by the best attorneys that money can buy.