A Though Experiment: What Would a Perfect Libertarian State Look Like a Hundred Years Later?
byMike Kimel [edited to make authorship clearer]
Libertarians come in many flavors, but I think most of them would agree that in an ideal world, the government would be very small and have limited powers – essentially, the government would control national defense and perhaps adjudicate over property rights disputes (i.e., maintain police and/or the courts). Otherwise, people would be free to engage in whatever activities they wished provided the specific purpose of that activity was to harm a third party. Based on conversations with libertarians, I believe negative externalities, or inadvertent harm to third parties is OK. I have yet to have a discussion with a libertarian and come away thinking: now this is a person who views negative externalities as an intrusion on someone else’s private property requiring government intervention to halt. (If I am incorrect about this, I’ll be happy to stand corrected… but it has little effect on the rest of this post.)
Now, one of the side effects of a very small, laissez-faire government is that tax rates will be very low. This means that the accumulation of wealth will be faster for those with a comparative advantage at creating goods and services other people want to buy. (I’m ignoring this effect, which is easy to verify empirically, but then libertarians believe lower taxes result in faster economic growth and I want to focus on their assumptions here.)
Furthermore, without an inheritance tax or estate tax (I think it is fair to say most, perhaps even all libertarians are against these types of taxes), fortunes would pass on more intact from one generation to the next than we see happening today. In such a world, the accumulation wealth over two or more generations could allow a person or family to accumulate a greater percent of a given area’s wealth than we see happening today.
But… the libertarian world is one without public infrastructure. So who would build or own the roads in a given area? Well, it won’t be folks who don’t have any money, that much is evident. Presumably those who otherwise have accumulated significant resources… such as a person or a family that controls a sizable piece of the wealth in that area.
Now, a lot of types of infrastructure, such as roads, electric grids, and the like, have significant first mover advantages. There may be a lot of traffic on a road from A to B, or an electric grid serving the area, and monopoly rents could easily be extracted. If a second mover built a duplicate road or electric grid, it would harm the first mover… but it also wouldn’t happen, because the second mover knows the price war would make it impossible for it to profit as well.
This, by the way, isn’t pie in the sky theorizing or guesswork. We’ve seen precisely that in the real world. For example, in the years following the 1996 Telecom Act, incumbent phone companies were deathly afraid that their network would be duplicated… and except for a few BLECs in big cities (most of which promptly went under even so) there was no replication of the last mile. Similarly, you don’t see replication of the last mile in the electricity industry, which I mention because when it comes to deregulation, the electricity industry is where telecom was in the late 1990s. (Yes, it is not a perfect analogy, but electricity and phone calls aren’t the same thing.)
We do, occasionally, see the private provision of toll roads, but usually after the owner of that toll road extracts a promise from the government to reduce maintenance of any competing publicly owned road. Which means… in any given area, there isn’t going to be competition in the provision of roads and other infrastructure.
This is important for a combination of two reasons. The first is that a monopoly extracts monopoly rents. Monopoly rents, of course, will increase and speed the process by which wealth is concentrated, and, as most libertarians will tell you, monopoly rents create market inefficiencies. But movie theaters run their own concession stands, and if you want to set up a snack bar in a Wal-Mart, you better expect to turn over most of your profits to Wal-Mart. Unless there are rules preventing it (not likely in a libertarian paradise), the owner of the infrastructure calls the shots, deciding who can and who cannot do business.
But the second problem with a monopoly in roads and other infrastructure is far more important. It means, simply put, there is no voting with one’s feet if the road owner chooses to prevent it. (Of course, the next region over might be run the same way anyhow.) So if you don’t like the way the people that own the roads and the markets and the apartment you rent do business, you can’t exactly up and leave without using their road or otherwise cutting across their land. And if they don’t let you do it, well, you’re breaking the law… and the Pinkertons could easily prevent you from doing that. The average person, the person not born into resources, could be left with one option to full cooperation – loss of shelter, food, and even membership in society.
Now, if this sounds unrealistically dystopian to you, remember that it took far less coercion than that to keep people tied to Company Towns not a hundred years ago in this country. The Company Towns did not own the roads or the land once you were out of town, the only chains were financial.
The road to serfdom is very pretty when you first get on it, so much so that those who are most vocal in warning us about the perils of where it leads don’t realize that’s the destination they’re promoting.
Someone wrote something fun about this:
http://bradhicks.livejournal.com/393124.html
Sounds very Feudal.
Min,
It doesn’t matter how many times you say it, they won’t believe you. LOL
Indeed.
http://jazzbumpa.blogspot.com/2011/04/brute-economics-of-slavery.html
WASF!
JzB
Any enlightening analysis of a libertarian perspective should begin with a strong familiarity with the extant literature, a familiarity which Mr. Kimel doesn’t display. For instance, there is rigorous scholarship across the globe on the concept of clarifying property rights so as to effectively eliminate negative externalities. Similarly, there’s robust academic exploration into the effectiveness of private infrastructure which suggests non-violent solutions to all the issues Mr. Kimel describes.
We do have a good historical model of transport with some to little government action, yes a lot on the first transcontinental railroad, but less on the others, and a lot of later railroads (branches in particular) were built without any subsidy. The RRs engaged in traffic pooling except when one of the tycoons felt he could do better by ignoring the pool. If you want to see a buble look at railroad building between 1878 and 1893 going from about 52k miles in 1870 to 129k in 1890. So in many respects to see what a libertarian world would look like look at 1878 (end of the 1873 depression) until 1893 when the railroad bubble collapsed taking all down with it.
Only towards the end was the Sherman anti-trust law passed but it was not enforced in this time period. Grover Clevland was a very conservative democrat who favored the bankers. It was a upset when William Jennings Bryan won the democratic nomination in 1896. McKinley was favored by the business types over the activist populist Bryan.
poppies,
Ummm, I worked for a phone company in the late 1990s at the 1996 Telecom Act. What the economic literature said was irrelevant, companies simply refused to lease UNEs (unbundled network elements) unless forced into doing so by the government. I was also a consultant for other phone companies both here and abroad. I can tell you this wasn’t a pattern limited to the US market.
You see something similar in the electricity industry today. So in order to encourage competition, the government has essentially gotten companies to disassociate their generation and long distance transmission from local distribution.
In both instances, the local monopolies only allowed some semblance of competition when forced into it by the government. The only alternative to government coercion is an overbuild, and overbuilds don’t happen on the last mile except in rare, localized cases. Apologies if the real examples I provided contradict the theory you endorse.
Additionally… as to the elimination of negative externalities… this is actually an area in which I’m interested, and have been since reading a Problem of Social Costs by Coase. I have a bit of familiarity with the economic literature on the subject.
But, I have yet to come across any example where a party eliminates the negative externalities it imposes where it had sufficiently more resources than the individual third parties on whom the externalities were imposed unless the government wasn’t involved or there was an ulterior motive. (I.e., a plant was going to be shut down anyway and good PR was involved.) I would be happy to counterexamples you can name. For examples, can you produce a list of oil refineries that were voluntarilly shut down simply because they were causing health damage to people in the region? Or perhaps examples where the refiners, rather than shutting down, sent checks to those whose health was damaged to compensate them for it. Again, please make sure you only consider examples that don’t involve government enforcement.
“Now, a lot of types of infrastructure, such as roads, electric grids, and the like, have significant first mover advantages.”
In a hypothetical libertarian state, city public transportation systems would have had a different history. Electric trolleys and rail were services provided by many private electric companies. Governments and their regulatory bodies forced utilities to separate their rail business from their electric generation/delivery unit. As a separate entity, many trolley/rail companies could not remain in business.
Without government commissions, the electric grid would be far different than what we know today. Instead of three major grids serving the nation, microgrids would have been the adopted topology. In fact, microgrids may be our future system (some neighborhoods have already adopted it as a backup). Also, the large scale generation facilities (100 MW+ coal burning plants, gigawatt capacity hydroelectric dams, gigawatt nuclear plants) that feed the grid today would not have been created. On the positive side, providing service to rural areas was sped along by government action (or made it possible altogether).
“but it also wouldn’t happen, because the second mover knows the price war would make it impossible for it to profit as well.”
Actually, it HAS happened. Private highways already exist in many parts of the world, including the United States. They were created despite the fact that they have to compete with free, public alternatives. In my experiences in northern Virginia and Europe, private highways are in better shape and less congested than their public counterparts. The owners have an incentive to keep it this way… the government does not. In fact, many on the left discourage public road construction as they believe it created the unsustainable transportation system.
The great advantage of competent governments lies in their ability to organize people and resources for large scale objectives, especially ones that markets cannot address. In other words, the main disadvantage a libertarian state would face is their inability to take on endevours of discovery and exploration.
Again, all these issues are dealt with in the extant literature. I recommend exploring Libertarian Papers and the Quarterly Journal of Austrian Economics. Note, please, that judicial intervention doesn’t have to be conflated with governmental intervention. The literature discusses private arbitrage quite often in these matters.
Crassus, an enterprising libertarian so rich he could buy the Roman senate, might figure it out, but he would need to avoid his Carrhae, which seems to be the direction the US is going woth Pakistan.
Looks like Somalia with half the world weapons’ spending.
In the 1980’s the Reagan administration to gain a foothold in the Horn of East Africa against Soviet entreaties in the area gave a modern radar and air defense system to the Somali’s. It could have been a dirt poor third world country with radars and SAM’s.
Then the Somali “government” collapsed, as did the Soviets, but the US still had to check them out in 1992, and see first hand what a place where no government interference was broached with the locals.
Unfortunately, the tax base eroded too.
Maybe the libertarians can make the militarism pay for itself after the US is squandered into thrid world poverty.
Interesting, check on the trends toward trusts and monopolies.
@Kevin “In my experiences in northern Virginia and Europe, private highways are in better shape and less congested than their public counterparts. The owners have an incentive to keep it this way…” … there might be other reasons they are less congested. Such as the expense of using them. As anyone who uses the Internet can tell you, people avoid paying for things if they can. And people will go a LONG way out of their way to save a ridiculously small amount of money.
It seems quite uniform among libertarians that any solution to externalities is worse than the externality. They promote courts to replace regulation even though courts are more dysfunctional than regulation. The golden rule would prevail, the person with the gold will make the rules. A feudal society would result, but this is in accord with their wishes, for those with the most gold are best positioned to put it to use.
“… there might be other reasons they are less congested. Such as the expense of using them. As anyone who uses the Internet can tell you, people avoid paying for things if they can. And people will go a LONG way out of their way to save a ridiculously small amount of money.”
All the more reason that the business model for a private highway works. If a firm can provide a superior service for its customers by changing prices, then it would be a rational move. Why criticize it for taking the action? The highway in northern Virginia takes vehicles off of congested public roads and makes a profit while doing so. Seems like a win-win-win for the enterprise, the government, and the driver.
ilsm,
Are you endorsing governments’ actions to split the electric rail operation from the electric service business or criticizing it? I could be missing something, but in hindsight, public transportation took decades to recover, especially in most urban areas.
Kimel brings up an interesting thought experiment, but I think he overlooks the main consequences to a severely limited government while overemphasizing some “advantages” due to bureaucratic regulation.
I can confirm this. I worked at Covad in the late 90s and they had to have a team of lawyers to sue each and every LEC to gain access to the central office and then sue again to get access to the UNEs. It was absurd.
Can you post references to these articles?
I kept getting messages saying that my post had failed to go through. That’s why I kept trying. 🙁
A post on another thread did not send that message, and it appeared three times! 🙁
This one may appear three times, as well. 🙁
“courts are more dysfunctional than regulation”
There are no libertarian courts in the world currently.
“the person with the gold will make the rules.”
The person with the gold makes the rules now. A libertarian society would force such a person to at least pay full price, instead of simply whatever it costs to buy off government officials to use their overwhelming force on your behalf.
Baseline estimates of government cash subsidies to railroads between the Civil War and the 1890s was about $2 billion nominal dollars. (My source was an 1890s Scribner’s article.) Back then, that was real money, and this estimate did not include land grants, military protection, subsidized government contracts, and a host of other goodies as local governments competed for rail access.
The simple fact is that transportation systems require government intervention. None has ever been profitable in the medium or long run. More interestingly, I’ll bet that any successful transportation system will manifest increasingly obvious government like characteristics, even if it is constructed and operated without control or subsidy by any government.
I can’t see a libertarian society lasting as long as 100 years. Everyone would be dead of starvation well before then as agriculture has always, since its invention, required government intervention. By the time Joseph set up Pharaoh as the buyer, and then seller, of last resort for wheat, that type of government intervention had been around for millenia. Societies that didn’t have such mechanisms simply vanished in the face of famine and forced migration.
Do the math. Look at the market equilibria, and remember, dead people don’t come back to life when you feed them. It makes the model a bit more complex, but much more realistic.
With current technology we can track and record vehicle movements, so it’s feasible to privatize city streets.
Some local governments in financial trouble might find this an attractive option.
I imagine you could negotiate a bulk rate with the owner for using the street in front of your house, but your visitors might be charged a different rate. We could call it a ‘roaming charge’.
Regarding Min’s duplicate posts — I have the same problem quite often, hitting the “post” button only once plops in three posts. I have no idea why but it has been that way for a couple years now. I’m currently experimenting by hitting “post” and then closing the window or tab. Seems to be working, but damfino why.
Of course none of this — none of this! — would happen in a libertarian nation. There would be no duplication.
Snicker.
poppies,
“A libertarian society would force such a person to at least pay full price”
Ah… this is the crux of the issue. Explain how a libertarian society would foce such a perston to at least pay full price. I think it should be fairly clear that just about everyone who isn’t a libertarian doesn’t believe that would happen in any environment that could remotely described as libertarian.
Kaleberg,
And the land grants was probably the biggest subsidy of all. The rails are considered private property. So when they were built on public land, it was a land grant. And when they were built on someone else’s private property? Sometimes the previous landowners were willing to sell. But not always…. in whcih case, well it was seized by eminent domain (with some compensation determined by the courts). If that isn’t a humongous subsidy, what is?
In a libertarian society, would there be a concept like eminent domain? And if not, how can you build a railroad, a road, an electric grid, or anything else that speads across vast distances unless you own all the land?
Kevin,
Having worked for an electric company, I can say that without the government there would be no electric grid. Period. Every so often, a new transmission line has to be built. Often, private property owners who own the land on which the electric company wants to build the line refuse to sell. What allows the electric company to get the land, in the end, is eminent domain.
“ In my experiences in northern Virginia and Europe, private highways are in better shape and less congested than their public counterparts. “
Also true in Orange County, CA. The reason… a non-compete clause that prevents Caltrans from making improvements on public highways that are deemed to be alternatives to the private toll roads.
Texas prohibits non-competes of this sort, but…. if the state decides to build a road or extension of a road that isn’t in its long run transportation plans at the time a private toll road was built, and that construction is within 4 miles of the private toll road, the toll road owner can ask for compensation for lost tolls.
Either way, the whole private road concpt only works if the public sector is given a disincentive to compete.
Kevin,
Then the provisions I mentioned upthread, like noncompete agreements with the state (which caused so much of an uproar in California) or requirements that the state compensate toll road owners if they do construction within four miles of a toll road (as is done in Texas) shouldn’t be necessary, right? It almost sounds like the superior service requires hobbling the state.
First off the concept of a “perfect” libertarian society has no validity. Unless there are only a small group of citizens who have come together with a preconceived constitutional structure for their government. And even if they start out in agreement, unless the group is a latter day Oneida Society, new members (citizens that is) will change the original conceptualization from what was “perfect” to something else. How small does a social order have to be in order to retain its original concept of structure and interaction between members? Government isn’t static, at least not ours. The Constitution enumerates the need for change in the structure of the government. What is perfect in one generation is modified by the next, and that change is often more frequent then generational. The very idea of a perfect libertarian government is absurd. Any government is defined by its laws and those laws are subject to continuous modification.
“Having worked for an electric company…”
I was a distribution planner for a municipal utility and a transmission engineer for an investor owned utility, so industry experience is not on your side.
“I can say that without the government there would be no electric grid. Period.”
That’s patently false. The creation and expansion of electric grids occurred well before government intervention. State regulation occurred when electric companies expanded across state lines and city limits. Please read up on the history of the electric grid in the United States.
“Every so often, a new transmission line has to be built. Often, private property owners who own the land on which the electric company wants to build the line refuse to sell. What allows the electric company to get the land, in the end, is eminent domain.”
That’s actually not how it works. The overwhelming majority of the time, in distribution and transmission line construction, utilities pay landowners for a right-of-way. In addition to price, ROWs have a time component and ensure that the land owner is not responsible for possible injuries due to the electric line being on his/her land. Utility use of eminent domain is rare and they often, if not usually, lose their case in court. For the most part, utilities only purchase land for substations and power plants.
“Either way, the whole private road concpt only works if the public sector is given a disincentive to compete.”
That’s incorrect. Non-competes are used by governments to encourage the building of private roads, but many private roads are built without these contracts. A better way to view the situation: If you’re a government with limited transportation funds/resources, wouldn’t you create an environment that gives private enterprises an incentive to build roads and alleviate congestion?
Businesses do not need non-competes to invest in sectors where the government is involved. Radio stations and package delivery are great examples.
The repetitions are deleted, but you are funny nanute.
The message is a cache problem at the servers sometimes….usually best to refresh first to see if the message took…usually works well.
Being human is a messy business, and does not include perfection of incentives either. Econ says people respond to incentives and then projects behaviors beased on a limited set of incentives it prefers to acknowledge.
Mike,
Non-competes are used to encourage private investment and construction. If they only benefit private companies as you make them out to be, why would governments agree to them? Also, governments would be shirking their fiduciary responsibilities.
Ferry companies (use of boats to shuttle people/cars) have non-compete contracts, but they do not limit a government from building a bridge that could take away ferry traffic. Non-competes ensure that governments won’t change the situation in a way that prevents customers from reaching their terminals. Building a nearby bridge is allowed, but destroying the road that leads to the terminal would require compensation. This is the case with private road non-competes I am familiar with as well.
Similar examples are outsourcing contracts. Private businesses that clean buildings, provide IT services, and operate cafeterias at NASA/military bases have an agreement for added compensation in case the government closes the facility. In an era of base closings, such agreements provide incentive for businesses to service the public/government’s needs. Without these stipulations and non-compete contracts, the public would be served less effectively.
Mike,
And you get immediately to the problem with this libertarian paradise. At some point the courts would have to have a police force, with guns, to enforce the rules. And voila, you have a government again. The most basic ability of the government is its sole ownership of the right to use force. In our case the US Federal Government have the last say on enforcement of the rules. There is no appeal and no legal ability to fight it directly (by force of arms).
In the libertarian paradise there is no enforcement arm. This is very similar to ‘International Law’. Without an enforcement arm international law has really no teeth at all. Now it may be in a nations interest to go along with it, but in no way is any nation bound by it. A good thought example: If the US rep was gone from the UN for a few days and they passed a law saying that all US citizens could not own any firearms and had to turn them in. The US would obviously ignore such a law as unconstitutional and the UN has no enforcement mechanism to force the US to comply.
The libertarian paradise doesn’t work for just such a reason. No ability to enforce judgments.
Islam will change
Thanks for deleting the repetitions, Rdan! 🙂
And thanks for the refresh trick. 🙂 But the triplicate seems to be out of my control. Once I get the message that the post has not gone through, doing nothing still produced triplicates. 🙁
Thanks for deleting the repetitions, Rdan! 🙂
And thanks for the refresh trick. 🙂 But the triplicate seems to be out of my control. Once I get the message that the post has not gone through, doing nothing still produced triplicates. 🙁
Thanks for deleting the repetitions, Rdan! 🙂
And thanks for the refresh trick. 🙂 But the triplicate seems to be out of my control. Once I get the message that the post has not gone through, doing nothing still produced triplicates. 🙁
Rdan
Thanks!
Nanute
I’m not going to respond to the whole thing…. just to the key point you’re skating over. See, you wrote this: “The overwhelming majority of the time, in distribution and transmission line construction, utilities pay landowners for a right-of-way. “
And as I’ve noted time and again, and not just on this post, the landowners sometimes do not want to be paid for a right of way, They don’t want a transmission line going through their farm or their backyard.
In the real world, what happens then is that the right of land is eminent domained over to them. Yes, they get paid for the right of way… an amount the government decides is fair. But in a libertarian paradise, if Farmer John decides ain’t nobody gonna build a transmission line thorugh his farm, it simply won’t happen. Period.
I note that the same issue happens on a smaller scale in people’s backyard. The electric company has a legal right (granted by the government) to trim the bushes and trees around the lines going to people’s houses. Sometimes they have to take down trees in some dude’s backyard. You may recall the big multi-state blackout some years back. As I recall, the official explanation was that the whole thing started with a failure to keep trees off of a transmission line. I have to imagine if you worked for a power company, you heard the stories about homeowners who were very irate about the bucket truck in their backyard.
The electric companies try their best not to piss off homeowners too much, but
Kevin,
The examples of reasons for non-competes and added compensation are not the ones which led to the provisions in CA and TX.
In Orange County, CA, the issue was very simple – if there was an expansion of the freeway, the attractiveness of the toll road would have diminished.
In TX, the 4 mile provision is not because work done within 4 miles of a private toll road would physically prevent people from getting on the toll road. Its because improving a major highway that close would cause people to take the highway rather than the tollroad.
But all this bets the question… how do you build the road in the first place in a libertarian paradise? Remember, you can’t use eminent domain in such a world.
The land grants applied really to the lines built by 1883 (Todays BNSF Southern LIne, the Up Line from Dallas to El Paso, the BNSF (partly sold to Montana Rail Link) Northern Pacific line).
The branch lines which are what has been abandoned in the last 30 years were built without subsidies in order to collect the traffic, as it was found out early that thru traffic did not make the railroad pay (they did get the right of way for free however). Many towns paid to get their line as it was a matter of the survival of the town. Business whenever it gets the chance will try to hold the public up.
Also there was a lot of land speculation. Consider that the D&RGW stopped 5 miles from Trinidad CO, in order to sell lots in its town, so that when the ATSF passed thru Trinadad on its way to Raton pass, it became a hero.
Anyway the pooling rebates and the overall way rates were structured at the time did not before the ICC got teeth have any government regulation, and the RRs behaved like the airlines today, competing themselves into chapter 11.
Note if you check most transit systems were private until they went bankrupt in the 1950s and the municipal government bought them out. Recall Chicago where Charles Yerkes made a lot of money off the elevated railroad, Also why there are 3 sets of different subway lines in NYC, although all are run by the same government entity after the private operators went broke. In La Pacific Electric was private… At one time people thought they could make money on transit, but when the unions organized the companies and the auto came on in full force after WWII they all fell into financial trouble.
“At some point the courts would have to have a police force, with guns, to enforce the rules.”
Buff, Kimel recognizes that a libertarian state would “maintain a police [force] and/or a courts [system]”. The premise being that an ideal libertarian state would desire that property and other private rights be recognized and enforced.
“In the libertarian paradise there is no enforcement arm.”
I believe most would consider your description as the anarchists paradise, moreso than a libertarian’s. That issue aside, I believe we have already experienced similar situations. Many segments of society do not recognize or trust their government’s enforcement system. The mafia replaced many government functions for many areas of the country. They had their own enforcement system, laws, arbitration, and even taxed their community. Many gangs do that today (coming from my experience with Asian gangs). An enforcement arm appears to be a natural order of society.
An additional point… this from AEP’s website: http://www.aep.com/about/transmission/transmissionqa.aspx
By their own figures, 95% of the rights of way they need are acquired through negotiation. The rest require eminent domain. But note that the existence of the eminent domain process skews the numbers – it discourages parties from turning down AEP’s offer because the alternative is just having a court imposed “agreement” that is even less attractive.
So once again… even under ideal conditions, an electric company cannot build what it needs to operate without government help. Explain how it will do so in the absence of eminent domain laws.
In the libertarian paradise there is no enforcement arm.
Actually, though, there is. It’s a private army leased from an insurance company. This is no joke. This at NC makes an excellent companion piece to Mike’s post, and it is not a straw man – it quotes extensively from prominent Libertarian literature.
http://www.nakedcapitalism.com/2011/11/journey-into-a-libertarian-future-part-ii-%E2%80%93-the-strategy.html
The libertarian future is basically 13th century Europe, but with better weapons.
WASF!
JzB
Hey Mike! I hear you-I was just reading about Hayek whose own vision as you say would take us up the road to serfdom.
For a vision that is decidely non-lbertarian please take a look at my addition to the optimum tax debates. With all the tax proposals out there I add my own to the mix
http://diaryofarepublicanhater.blogspot.com/2011/11/ok-lets-talk-taxes.html
If I’ve said it once, I’ve said it three times: 😉
How about a natural experiment? Isn’t the closest thing we have had to a perfect libertarian state in recent history the U. S. in 1836? I chose that year because it marks the demise of the 2d Bank of the U. S. We had a weak Federal gov’t in modern terms, no central bank, no Federal debt, no corporations in the modern sense, plenty of land, wilderness where people could go to escape gov’t oppression, republican gov’ts, enforcement of contracts and property rights, and a national ethos of self-sufficiency.
What did we have 100 years later, in 1936? The Great Depression.
I am not saying that the one followed the other. After all, the Great Depression was a global phenomenon. But in between we saw the concentration of wealth and power into the hands of the few, the rise of trusts and modern corporations, and growing socio-economic inequality, the likes of which we have not seen again until the present time.
Perhaps the age of the Robber Barons was not libertarian. But isn’t that the point? Isn’t the Libertarian Garden of Eden a power vacuum, one that will be filled by warlords, dukes, or their equivalents? Laissez-faire becomes Might Makes Right?
JzB,
The guy interveiwed at the link is a real loon. The crazy literally oozes from his responses. 13th century Europe with automatic weapons is correct. Heck this guy makes Fuedalism look good…
If this is a real example of the libertarian idea these guys are just as looney as the socialist/communists on the left and fascist on the right. Heck they all seem to get to the same tyranny just from different angles.
I’m in great favor of reducing the size and scope of teh Federal government and beleive the Leviathon is way to big and far-reaching. But that doesn’t mean I beleive in NO government….which is what that nut espoused.
Islam will change
JzB and all,
Here is the first part of the interveiw.
http://www.nakedcapitalism.com/2011/11/journey-into-a-libertarian-future-part-i-–the-vision.html
This has got to be a parady.
markets gravitate toward monompolies and monopolies would defacto assume ever greater political power. Viola, end of libertarian fanstasyland. Human nature being what it is, it would take 10years..even assuming a PERFECT system at inception!
“By their own figures, 95% of the rights of way they need are acquired through negotiation.”
In my book, 95% falls under “overwhelming majority of the time”, which is how I described it. And read CAREFULLY. The number does NOT include distribution line ROW contracts. This, along with the fact that you never consider the number of transmission line projects that have been scrapped or delayed skews the number.
“In the real world, what happens then is that the right of land is eminent domained over to them.”
Actually, that’s not what happens in the REAL world. The actual process involves creating alternate routes. It’s not uncommon for a transmission line to have four alternate corridors with each having ten or more iterations: Forty plus routes in total. When negotiations fail, alternate routes are pursued. If all viable routes are rejected due to ROW contracts, compensation is increased and the process repeats. This can and does go on for many rounds as the cost of taking the case before a commission and the PR hit for using eminent domain are significant.
“But in a libertarian paradise, if Farmer John decides ain’t nobody gonna build a transmission line thorugh his farm, it simply won’t happen. Period.”
Exactly! Microgrids would be the topology of electric service in a libertarian nation instead of the current system of three large interconnected grids, a point I mentioned in my original post. In fact, many neighborhoods have adopted microgrids to provide renewable source and/or a backup (when the utility source goes down). These microgrids stop expanding and cannot service interested parties when adjacent homeowners do not allow its equipment on their property. However, new microgrids are often created to service these customers.
“The electric company has a legal right (granted by the government) to trim the bushes and trees around the lines going to people’s houses.”
It’s not granted by the government. The ability to conduct “vegetation management” in the right-of-way is part of agreement with the landowner.
“Sometimes they have to take down trees in some dude’s backyard.”
If a utility damages a tree outside of the ROW, the customer has a right to compensation. This often occurs when utilities outsource line maintenance duties to non-utility crews.
“As I recall, the official explanation was that the whole thing started with a failure to keep trees off of a transmission line.”
Yes, and that failure cascaded to multiple states and even affected parts of Canada. It’s one of the huge consequences to the large electric grid topology that has developed. Large blackouts such as this example do not occur with microgrids.
“So once again… even under ideal conditions, an electric company cannot build what it needs to operate without government help. Explain how it will do so in the absence of eminent domain laws.”
You mean it cannot build what it needs to meet the government’s requirments without government help. This should be common sense. If you want a service to reach a specific area, you […]
Kevin,
Why would private investors need “encouragement” (non compete clauses)? Either a project has the potential to pay off, or it doesn’t. If you look at the case of the Charles River Bridge, you will see clearly why non compete clauses are required by private actors providing “public” services. This case, allowed the State of Mass. to build a free bridge in close proximity to the Charles River Bridge, which the state had previously chartered with a toll provision. Charles River Bridge Co. sued and lost its case in the US Supreme Court. Charles River argued that the contract implied that there would be no competition. The court essentially said that when the contract is between a public and private entity “nothing passes by implication.” If the contract had included a non compete clause, I suspect the ruling would have been settled against the State.
Kevin,
You’re spinning so fast you aren’t keeping track of what you’re stating. With several alternate planned paths, AEP has to settle for one in which 5% of the route has to be eminent domained. That means, in the real world, even the path with least resistance would not and could not be built without government assistance.
The fact that there’s a west coast grid, an Ercot, and an East coast grid doesn’t change any of this. If AEP, to use an example, were divorced from MISO and were a grid unto themselves the previous paragraph wouldn’t change one whit.
Sure, there would be no brownouts that cascade across multiple states, but each tiny microgrid would need its own ISO-equivalent. We’re talking a lot more spinning reserves with all the waste and pollution that entails, not too mention far more frequent system overloads.
“It’s not granted by the government. The ability to conduct “vegetation management” in the right-of-way is part of agreement with the landowner. “
You’re thinking for the long haul transmission lines. (And some of that, as we’ve discussed, simply comes from eminent domain anyway.) But in somebody’s backyard things are a bit more nebulous. If a tree in someone’s yard is encroaching on the lines on the street, it will be trimmed at the discretion of the power company. That is true whether the owner of the tree has any relationship whatsoever with the power company.
I don’t even know what the last paragraph of yours means, but I’m guessing you intend to say that in a libertarian world, the power company will negotiate separately with each customer. Some customers will happily accept service that is spotty, with electricity being cut off with no notice at all six times a day. Sometimes there will be spikes that create fire hazards for the neighbors. Still, its a crying shame that the government won’t allow the power company to efficiently negotiate a completely different level of service with each and every customer.
Jazzbumpa, that Naked Capitalism piece is hilarious. Just this morning I was reading about Hermann Hoppe-he and George Selgin(who evidently is the one that inspired Sumner) argued within Austrian theory whether fractional-reserve banking is or is not the work of the devil-for Hoppe it is of course.
Hoppe’s libertarian paradise evidently prefers monarch to democracy as can be seen from his book “Democracy the God that Failed.”
“The examples of reasons for non-competes and added compensation are not the ones which led to the provisions in CA and TX.”
Yes they are. Non-competes encourage private enterprises to build roads, which is why governments agree to them. They’re also why the new roads were built with private investment and not tax dollars. Do you really think government officials often engage in impetuous contract signing?
“… how do you build the road in the first place in a libertarian paradise? Remember, you can’t use eminent domain in such a world.”
Many roads have been and still are built/maintained by private enterprises. This occurred well before the invention of the automobile, when the merchant class saw the advantage of good roads for business. More than 60% of roads in Sweden, not a free enterprise paradise, are constructed and maintained by private road associations.
Personally I prefer benevolent despotism, but only with the provision that I get to choose the despot and also the individual who gets to replace me as the decision maker. It’s certainly a more efficient structure of government, but far from a libertarian ideology. As I’ve already said, and I think, as the running discussion regarding the electrical grid points out, governments change along with the ideals of the governed. There is always government intervention needed to adjudicate the conflicts between individuals and groups. It would be more constructive to debate the size of the sociopolitical group best suited to a libertarian political structure. I’d guess that if there are more than three people trying to live in peace with one another the libertarian way is out. Ask your spouse or significant other if its OK to revise your relationship along libertarian ideals. Yeah, right.
“With several alternate planned paths, AEP has to settle for one in which 5% of the route has to be eminent domained. That means, in the real world, even the path with least resistance would not and could not be built without government assistance. “
You arrive at the wrong conclusion because of your assumptions. Utilities can obtain right-of-ways without negotiations through various methods, one of which includes eminent domain. Purchasing existing easements and public land use are non-negotiated ROWs, so your statement that 5% of transmission ROWs required an eminent domain process is false.
On top of it, you assume the utility “had to settle for” the route. It didn’t. A route could have been chosen due to its cost advantage over alternatives. You want to know why utilities have been slow to adopt underground transmission and distribution topologies?
“The fact that there’s a west coast grid, an Ercot, and an East coast grid doesn’t change any of this. If AEP, to use an example, were divorced from MISO and were a grid unto themselves the previous paragraph wouldn’t change one whit.“
Uh… you titled it “What Would a Perfect Libertarian State Look Like a Hundred Years Later” and then brought up the electric grid. The very existence of huge interconnected electric grids has EVERYTHING to do with it. Large grids would not exist in a libertarian state…. maybe you should change the title of the post. If you grant a company the ability to use private land, you can’t be surprised if that right is exercised.
“Sure, there would be no brownouts that cascade across multiple states, but each tiny microgrid would need its own ISO-equivalent. We’re talking a lot more spinning reserves with all the waste and pollution that entails, not too mention far more frequent system overloads.”
You again make incorrect assumptions. Microgrids are more efficient. They don’t require large step-up/step-down transformers, large number of expensive relays and switchgear, hundreds of miles of transmission/distribution lines, poles, towers, etc. In fact, large grids were not very reliable until private enterprises invented and produced advanced protection devices. You should go to anyone at the end of a circuit and try to convince the bill payer that they have great reliability and electric quality. They’ll reply with the truth.
Renewable sources are being adopted much more quickly in microgrids than the system you advocate. After hurricane Irene and the recent snowstorm, microgrid customers in the northwest and mid-Atlantic did not have to wait weeks for their power to be restored, unlike homes served soley by Connecticut L&P and other utilities. You and other defenders […]
“Why would private investors need “encouragement” (non compete clauses)? Either a project has the potential to pay off, or it doesn’t.”
Private investment wants a favorable environment for its investment. Let’s use an example that doesn’t consider the state or government: Acme corporation is outsourcing its IT department. Would you invest in computer equipment and employee training to provide the service knowing there is a good possibility Acme Corp will create their own IT division in 6 months?
“If the contract had included a non compete clause, I suspect the ruling would have been settled against the State.”
In the government’s case, getting a firm to build and invest in a private highway or bridge without a non-compete is a great strategy, especially in a highly congested area. After its construction, you just price them out of business by building a parallel road. When they go out of business, you take over their creation and you get two roads for the price of one.
Oh, now I see why you guys don’t like non-compete agreements.
Jack,
You’re onto something. Top tier rulers can turn around any bureaucracy.
“Ask your spouse or significant other if its OK to revise your relationship along libertarian ideals. Yeah, right.”
Interesting. An alternative take is the idea of government arranging all marriages. The added function would surely create a few jobs. I’m sure some lucky individuals would defend the state’s new role if they were under the impression that it benefited them.
Plus, governments would be better at it than its citizens as this is always the case. Or so we’re told.,,
Kevin,
When AEP tries to put its best foot forward, it states this (from the link provided earlier):
“This simple premise has helped AEP to successfully negotiate more than 95 percent of the transmission line rights of way that it obtains. AEP’s eminent domain authority is the exception, rather than the rule when it comes to acquiring rights of way.”
Last I checked, a purchase also involved some negotiation. The only thing that isn’t a negotatiation is when you come in and get the government to bigfoot on your behalf. So stop accusing me of making assumptions based on my worldview.
Now, if you have to eminent domain 5% of the route, and eminent domain was not an option, then its fair to say the route you selected could not have been built in the absence of eminent domain, cost advantages or not. Period.
“Microgrids are more efficient.”
First, individual power companies aren’t required to purchase or sell power to other power companies. They can withdraw from any ISO agreement they signed and immediately after, they serve their own customers as if they’re a grid onto themselves. Yes, with shorter transmission lines there is less loss of energy, but then, as I note, they have to do all their own generation, and manage the ups and downs.
If your microgrid is the size of several utility companies (which is the example you provided) all this means is more spinning reserves. You can’t start or shut down a coal plant quickly enough tto handle rapid fluctuations in demand, much less a nuke, so unless you have a big pile of hydro stashed away somewhere, you are going to rely a lot on less efficient, smaller plants.
As to your easement example…. yes, that’s one where things got signed. And I noted to you… if a tree on your property looks to the power company like it might interfere with a transmission line on the street, they will trim it if they choose… and it doesn’t much matter that you didn’t sign an agreement with them saying they could. Its the law (read – government).
As to 40 utilities serving Chicago alone… we come back to the inefficiencies I mentieneed earlier.
http://www.seriforum.org/skrivutprojektaktuellt.asp?ID=2
“The Swedish road network totals about 420,000 km (261,000 miles). Two thirds of this consist of private roads, primarily unpaved forestry roads. Most private roads are open for use by the general public. “
And then this (http://www.worldbank.org/transport/roads/ism_docs/annex3b.pdf)
“The approximate size of the road network is 419,000 kilometers., i.e. 98,000
kilometers of national roads under SNRA; 37,000 roads under municipalities; 74,000
kilometers of private roads with (partial) government subsidy; and 210,000 private roads
with no subsidy. Whereas private roads by length account for over two thirds of all
roads, they cater for only about 4% of total traffic volume (of which 3% on the
subsidized private roads).”
My guess is that figures for the government subsidies of these “primarily unpaved forestry roads” that you are touting do not count the value of the land on which the roads are built.
Kevin,
Take your argument about electricity and apply it to car sales and it becomes this: “if you produce cars locally you don’t have to transport them to buyers across the country, and that eliminates a lot of inefficiency.”
The problem is, of course, that its less inefficient to transport the car across the country than to have the facilities to build cars locally. That may change, eventually, but that has been a technological constraint for quite a few decades now.
But you see Kevin your reply is the typical argument of the typical libertarian. I describe a real time human relationship, marriage/cohabitation, and you suggest that an analogous situation would be that government arranges all marriages. But our government, indeed no government I can think of, seeks to arrange marriages. Government gets enough grief from its governed by only trying to structure the concept of marriage and cohabitaion.
In effect you’re constructing a strawman, govet arranged marriage, as an example of the most extreme extent to which a government might go. Stick with electrical utilities if that’s your personal experience. None of us have any experience with government arranged marriages. Though given current divorce rates it is difficult to see how government could do any worse, but I’m not advocating the approach.
The government does arrange marriages.
It regulates what a marriage is and isn’t, it issues licenses for valid marriages, and it further licenses people to represent the government in acknowledging a marriage has taken place. It also assigns social benefits to those that it considers to be in a valid marriage, encouraging marriage as an institution.
It also provides a legal framework for settlement of property and income rights when a marriage is terminated.
What constitutes divorce in a libertarian society? Who gets what? Alimony? Child support? Probably not.
“Last I checked, a purchase also involved some negotiation. The only thing that isn’t a negotatiation is when you come in and get the government to bigfoot on your behalf. So stop accusing me of making assumptions based on my worldview.”
You have an incorrect notion about easement procurement. A negotiated contract occurs when the landowner agrees to a specified use of his/her property with the grantee. Purchasing an existing ROW is a simplified acquisition or acquired contract. In rare cases, ROWs can be obtained through bidding procedures. No commission will allow the latter two types to be labeled as negotiated contracts.
“ then its fair to say the route you selected could not have been built in the absence of eminent domain, cost advantages or not.”
And that statement is far different from your original assertion :”even under ideal conditions, an electric company cannot build what it needs to operate without government help.” On top of that, your updated statement isn’t accurate since it does not mention line construction (many landowners are willing to grant a ROW to an underground line, but not an overhead one).
“They can withdraw from any ISO agreement they signed and immediately after, they serve their own customers as if they’re a grid onto themselves.”
The utility would still be interconnected to their regional grid, so they wouldn’t be an isolated grid onto themselves. As a result, they would be affected by events/disturbances outside their territory. Cascading blackouts occur because instability on one utility’s system affect others by way of their interconnection.
“If your microgrid is the size of several utility companies … you are going to rely a lot on less efficient, smaller plants.”
That’s false. Micro-grid systems are already being adopted in many communities in developed nations and they are widely considered to be the method to bring electric service to rural areas in underdeveloped nations. Research on the topic arrives at a far different conclusion than you. One example (http://www.iset.uni-kassel.de/abt/FB-A/publication/2006/2006_Vandenbergh_Aix.pdf)
“The operation of microgrids offers distinct advantages to customers and utilities, i.e. improved energy efficiency, minimisation of overall energy consumption, reduced environmental impact, improvement of reliability and resilience, network operational benefits and more cost efficient electricity infrastructure replacement“
The fact that communities are going back to the first, unregulated grid design should be of interest to those with an open mind to how the future electric grid will look.
“As to 40 utilities serving Chicago alone… we come back to the inefficiencies I mentieneed earlier.”
Again, microgrids are MORE efficient. With microgrids, companies didn’t go thousands of miles to mine for coal, ship it great distances by rail to power plants, and then transmit it over thousands of miles of line.
“As to your easement example…. yes, that’s one where things got […]
“I describe a real time human relationship, marriage/cohabitation…”
Oh really? I do not know of anyone in a relationship based on “libertarian ideals”, or any other view of government and individuals.
“In effect you’re constructing a strawman, govet arranged marriage, as an example of the most extreme extent to which a government might go.”
It’s not even a novel concept. In fact, didn’t Republic use the concept of arranged couplings to describe the Good City.
“In effect you’re constructing a strawman, govet arranged marriage, as an example of the most extreme extent to which a government might go.”
Although the concept of government arranged marriages might be hyperbole, like”libertarian-style marriages, I don’t think it’s the most extreme extent to which governments are capable. Governments have done far worse.
You apparently didn’t understand my reference to libertarian ideals in regards to marriage. I surely did not say that the government was involved in that scenario. The ppoint is that people cannot function in social groups in accordance with libertarian principles without becoming embroiled in issues of one sort or another. Governments set the guidelines for formal contractual agreements, which is what a marriage is. Who decides to enter such agreements, and with whom, is left up to each of us to decide.
That government might arrange a marriage is not a novel idea does not negate that it is still a strawman argument against government interference in our private lives. It’s just not a factual idea. I find it amusing that often the libertarians of our world seem to work hand in hand with the social conservative nuts who want to dictate how we all live our lives within our families. J. Goodwin is half right in pointing out that government regulates marriage, but that’s not the same as arranging marriages. That’s the half that’s wrong.
Kevin,
“You have an incorrect notion about easement procurement. A negotiated contract occurs when the landowner agrees to a specified use of his/her property with the grantee. Purchasing an existing ROW is a simplified acquisition or acquired contract.”
Oh please. Technically true but irrelevant, kinda like your Swedish forrestry roads. Here’s a more authoritative source than you located in 30 seconds via google (http://www.window.state.tx.us/specialrpt/energy/uses/electricity.php)
“According to the Lower Colorado River Authority (LCRA), a general wholesaler in Central Texas eminent domain authority is typically used in 6 to 15 percent of land easement acquisitions for transmission lines.”
Doesn’t sound like a purchase of ROW to me.
“And that statement is far different from your original assertion :”even under ideal conditions, an electric company cannot build what it needs to operate without government help.” “
If you are trying to build a line and there’s a hole where 5% of the line should be, the line serves no purpose. You cannot build an operational line without government help if you rely on eminent domain to get the row or an easement. Period.
The rest of your answers seem to be playing fast and loose with definitions of microgrids, making them bigger and smaller as you need to fit your point of the moment. I can’t keep up with that much dancing.
“According to the Lower Colorado River Authority (LCRA), a general wholesaler in Central Texas eminent domain authority is typically used in 6 to 15 percent of land easement acquisitions for transmission lines.”
The LCRA is a government entity. The fact that it uses eminent domain powers frequently, especially compared to AEP, should come as no surprise.
The fact is, your assertion that an electric grid would not exist in a libertarian state is false. There would be electric service, but the system would be a different structure: microgrids.
“You cannot build an operational line without government help if you rely on eminent domain to get the row or an easement. “
Electric lines can be, have been, and are currently built without the use of eminent domain. An electric grid is not made possible by government service, as history and current technology demonstrates. That government has involved itself in a sector does not mean that industry was not possible without its actions. That’s one of the major mistakes you make.
“The rest of your answers seem to be playing fast and loose with definitions of microgrids, making them bigger and smaller as you need to fit your point of the moment. I can’t keep up with that much dancing.”
You don’t understand the technology, the field, nor its terms. There is an alternate way to bring electric service to the nation without relying on regulated monopolies and large interconnected grids. It happened in the past, it’s happening now, and it will happen in the future. Just be thankful there are people out there open to the idea and who understand the technology and science behind it.
“You apparently didn’t understand my reference to libertarian ideals in regards to marriage. I surely did not say that the government was involved in that scenario.”
No, I understood just fine: “Ask your spouse or significant other if its OK to revise your relationship along libertarian ideals.” I don’t know any relationship like that or based on communist ideas or any other view of government and the individual. So let’s not label someone else’s reply as a strawman argument.
“I find it amusing that often the libertarians of our world seem to work hand in hand with the social conservative nuts who want to dictate how we all live our lives within our families.”
And the nuts on the left want to ban cigarettes, homeschooling, guns, and they also want to dictate what can be served on your plate, what instruments an individual can invest, and what shows they can listen to on the radio/watch on TV.
I’m sure if government did get involved in arranged marriages, it wouldn’t take many years until some would think marriages wouldn’t be possible without its involvement.
“I don’t know any relationship like that….”
That’s the point. There may be some marriages wherein the two people have agreed to take a laissez-faire attitude towards the general behavior of each other. That would certainly be the exception and that makes the point. A libertarian approach to a two person relationship is virtually a contradiction to the purpose of that relationship wherein the people take a vow to each other regarding most aspects of their lives together. Does the libertarian mate expect that the spouse will acquiesce when he or she starts to express a need to fulfill them self in one way or another, if you get my drift.
“…what instruments an individual can invest,….”
It’s not what can be invested in that is regulated, but what is sold to the public as an investment that is regulated in an effort to prevent wholesale fraud. Damn regulators are always insisting that securities be what they are described as being and that the building was actually built in a safe manner with proper HVAC and fire safety systems in place. I sure wish that I could invest in a gold mine sold by a Nigerian banker. Oh darn, I’ll buy some bonds backed by AAA mortgages. A banker wouldn’t sell me crap, would he?
“…and what shows they can listen to on the radio/watch on TV.”
That’s almost laughable if it weren’t so idiotic. Efforts to regulate the media are initiated by the left? Left of what? The religious right and their brethren in the social conservative movement love that kind of government control. And what does the good libertarian have to say regarding a woman’s right to decide the issue of birth control?
Give it a break Kevin. You’re out in left field trying hard to justify the right wing’s convoluted logic of applied libertarianism. That’s selective libertarianism. The law is too confining if I say it is.
“Any enlightening analysis of a libertarian perspective should begin with a strong familiarity with the extant literature … rigorous scholarship … robust academic exploration…”
Yeah, and Marxism works in theory, too.
I chose that year because it marks the demise of the 2d Bank of the U. S….
What did we have 100 years later, in 1936? The Great Depression.
That’s pretty funny, considering that the Federal Reserve was created in 1913.
Now this critique is neither a brief for nor against the Fed, just a critique of flawed logic.