As part of this month’s exchange Cato Unbound, Tyler Cowen argues that libertarian ideas have, paradoxically, led to a substantial increase in the size and scope of the federal government.
I am not so worried about this paradox of libertarianism. Overall libertarians should embrace these developments. We should embrace a world with growing wealth, growing positive liberty, and yes, growing government. We don’t have to favor the growth in government per se, but we do need to recognize that sometimes it is a package deal.
The old formulas were “big government was bad” and “liberty is good,” but these are not exactly equal in their implications. The second motto — “liberty is good” — is the more important. And the older story of “big government crushes liberty” is being superseded by “advances in liberty bring bigger government.”
Cowen doesn’t explain this paradoxical “package deal,” except to assert that “human beings have deeply rooted impulses to take newly acquired wealth and spend some of it on more government and especially on transfer payments.”
I’m far from expert in economic psychology but suspect a far simpler explanation would suffice. More economic freedom yields more economic growth at the macro level but also more inequality and disruption. Wealthy societies try to maximize the former while minimizing the effects of the latter.
As advanced societies develop, formerly cutting-edge technologies become obsolete. Whole economic sectors either die off entirely or are transferred to less developed countries as part of the natural processes of creative destruction and comparative advantage. While this almost invariably makes the society richer, people in individual sectors of the economy are often suddenly far worse off.
Over time, most of those people will shift to other sectors and be better off, too. Some won’t. A 25-year-old whose job in a textile mill is replaced by a robot or shipped off to Pakistan may well use this sudden “opportunity” to go back to school and improve his lot; a 60-year-old in the same situation may well be irreparably harmed. Wealthy societies often enact transfer payments to assist the former in making that leap and cushioning the fall of the latter.
UPDATE: Cowen is getting some good comments at his own site, Marginal Revolution.
