A Libertarian Experiment

“I prefer Obama over McCain in much the way I prefer rancid milk over rancid milk regurgitated by a cat.”

–Will Wilkinson

Executive Summary: Electing Obama will be a great way to test whether having good people in government makes government good.

With the deadline to register to vote in Virginia safely past me, now is a good time to lay out the libertarian case for Obama.

Despite my best efforts, most people still believe that the biggest problem with George W. Bush is that his character is flawed in some way. Pick one, or mix and match: He’s not smart, he’s an evangelical Christian, he’s arrogant, he’s a right-wing ideologue. As for Dick Cheney, the problem is easy enough to identify: he’s evil, perhaps Evil incarnate. (Just Kidding! No Liberal would ever say that. Believing in the Devil is something for idiot fundamentalist right-wingers.)

First, let me note the insanity of believing in a system where 60 million people you will never talk to or want to talk to can put a President in charge of your country who is so clearly wrong for the job. I realize that the Republicans and Karl Rove are really good at fooling Kansans and other uneducated boobs into voting for the right, but that doesn’t explain why Democrats are so enthusiastic about letting such people pick their President. Shouldn’t it reflect poorly on the political system itself that this is how leaders are chosen?

Still, Democratic voters play a role in determining the viability of the current political system. If they refuse to believe that there is anything wrong with government itself as long as we have bad people in the executive branch, then as a libertarian, I’d prefer to move past that objection by putting a good person in office. Barack Obama fits the bill. He seems like an intelligent, educated, thoughtful, caring person. The late-night talk shows don’t even have a way to make fun of him yet, which must be a good sign.

So when Barack Obama becomes President, I hope we can stop placing the blame for failed government policies on the motives of government officials. This is the perfect libertarian experiment. I stipulate that Obama is a good man, probably the best man we could ever hope to get as a president. If his policies have disastrous consequences, can that finally count as evidence that there is something wrong with government? If his presidency makes things really great, I promise to revise my position that government is always terrible.

This doubling down isn’t a great bet for me to take, since I believe that things are getting better all the time, and government is usually marginal enough that it can only slow, not prevent, that improvement. Perversely, in order to win the bet I have to hope that Obama’s policies are so monumentally bad that the country is ruined, or that we somehow slip into a fascist dictatorship. I estimate the probability of either of those two outcomes to be roughly equal to the conditional probability that given either of those outcomes, the majority of current Democratic voters would believe that government in general is a bad idea.

Rice Box Regulation

At a party on Saturday night, I got the news from someone who identified himself as “an economist.” He studies economic sociology at GMU, and is preparing to give a talk at Yale. If there could be any remaining doubt about his credentials (and how could there be?), he assured me, “I’m very well respected.” And so this well-respected Yale man gave me the scoop on how we could have avoided this whole financial crisis. A paraphrasing:

He: The problem was overleveraging. If you’re holding ten mortgages, and you can only afford for one of them to default, that’s overleveraged.

Me: So should there have been a regulation to disallow leverage?

He: No, some leverage is okay. If you are only holding two mortgages, that’s okay. But overleveraging is not okay. If you have ten mortages, that’s overleveraging.

Try as I might, that was the best definition of “overleveraging” I could get out of him. As such, it makes an excellent example of a phenomenon that I will dub “rice box regulation.” I once bought a particularly memorable box of rice which warned me, quite earnestly, “For Best Results, Do Not Overcook.” Thank you, box of rice. Cooking the rice is necessary, of course, because you wouldn’t be able to eat it otherwise. But if you want to get the best results possible, you should cook it just the right amount, and not more than that.

And apparently, at least according to one sociological economist, the same principle should guide us in how we manage regulation of the financial industry. Some leveraging is good, so we should allow it, but too much is bad. How much leveraging should we have, then? Easy: the right amount.

This is another one of those points that is obvious but not trivial. Often, people assume that “government regulation” can solve problems without bothering to posit a mechanism by which the government can actually determine which activities to allow and disallow and in what quantities. As I wrote a while ago on the problem of externalities and government, it’s not enough to show that some market failure exists. You must also have a plausible account of how well-intentioned regulators could know enough, ex ante, to improve the situation. (Extra credit: Make it much harder for yourself by relaxing the assumption that regulators are well-intentioned. Next, allow asymmetrical information and lobbyists. Good luck.)

Addendum: The reliably snarky Megan McArdle posted on this back in June.

Will Wilkinson on Palin

My feelings on Palin line up with Will Wilkinson’s one hundred percent. I like Sarah Palin, I think she was a great VP pick, and I can’t help wanting her to win. However, that doesn’t mean my beliefs about politics and government have changed. Wilkinson writes:

I do not think politics is noble, and I deplore career politicians like Barack Obama, John McCain, Joe Biden, and, yes, Hillary Clinton. I would in fact rather be ruled by competent small-town mayors than accomplished professional rent-seekers. (Palin, being very smart, made great strides in this regard during her short time as Governor, because opportunistic predation is what politics is.) 

Like Kevin Kline in the movie Dave, Palin is appealing because she seems like a normal, genuine person somehow thrust into politics. The audience is supposed to like Dave, and I did; liking him didn’t make his policy of creating “a job for every American who wants one” any better.

Rationally, I don’t think that the choice of President, much less the Vice President, has much influence over the country; nobody is going to “clean up Washington,” because that phrase has no real meaning. Politics is opportunistic predation. Still, my gut, like Wilkinson’s, wants to root for Palin anyway.