Recently a friend of a friend, upon finding out that I was a fan of Ron Paul, proceeded to explain how “libertarianism takes liberalism to the extreme”. After summing up the libertarian mindset as “leave me alone, don’t tax me, don’t provide services for me”, he enlightened me on the flaws of the free-market, explaining that a free market lacks a “mechanism to control the consumption of scarce resources” and that without government intervention there is nothing to deter what he referred to as “idiot” marketplace decisions.
Of all the libertarians I’ve met (they are easy to find in the military) I’ve never met one that doesn’t acknowledge the role of taxes and regulations. The key is what is their purpose.
Libertarians believe their constitutionally-sanctioned existence is for the sole purpose of protecting liberty (including economic liberty…ie the free-market). Reasonable regulations are necessary to ensure others (including companies) don’t encroach upon another’s rights. For example, the toxic waste of one company must be regulated to keep it’s improper disposal from damaging the resources available and enjoyed by other individuals & companies.
Taxes are necessary to provide a limited number of services and infrastructure that cannot be effectively provided by non-government institutions (due to conflict of interest etc.).
Libertarians believe that beyond this limited scope taxes & regulations encroach upon the right to private property and to make ones own choices (an increasingly extreme idea to today’s liberals). Libertarians believe that beyond this limited scope it is the individuals actually doing the work and producing, not some detached government bureaucracy, that has the solutions. Liberals on the other hand believe people (normal people not the “anointed intelligentsia” as Thomas Sowell calls them) are too stupid to be left on their own without the help of the government to tell them how to live and to organize society. Every decision as mundane as how to carry home your groceries or what size soda to order to the very personal and serious manner in which you manage your own health must be made for you or at least influenced by the government. This is why people who have no problem with & even enjoy being completely dependent upon the government flock to the Democratic party (home of this brand of liberalism). So you can see how irritating it is to hear libertarianism so mis-represented and to hear the outlandish claim that there is any greater connection than a similar use of letters.
In regards to free-markets, I’ve never heard a libertarian claim that the free-market is flawless (such use absolutes is seriously irritating) only that it has less flaws than any other system where the government steps in to manipulate the marketplace. It’s almost comical to hear someone say the free-market cannot address scarcity. Ever heard of supply and demand? If a resource is truly scarce than (ceteris paribus) the price increases and demand drives innovation. Whale oil, for example, was replaced by kerosene. The problem is eco-fascists have an irrational believe that a scarcity exists when it clearly does not. Since the free-market isn’t promoting the agenda their irrational belief demands, they must us the government to force the changes the free-market is not yet ready to make…and they’ll do it at a great economic loss. Since most of these eco-fascists view humans as a plague upon the earth, the very real and cruel damage caused by such economic loss actually fits in nicely with their irrational belief.
As for “idiot” marketplace decisions (hedge funds, NINJA loans, etc.) there is another important economic concept that apparently slipped through the cracks of economic illiteracy. We call it “risk”. With higher risk comes the greater potential for both profit and loss. The problem is the “too big to fail” concept made popular by G.W. Bush (you’d be hard-pressed to find a libertarian who agrees with the bailouts) and continued by Obama effectively removes the risk associated with these “idiot” decisions. So it was Fannie and Freddie (gov’t sponsored entities) and the liberal push for low-income housing that was the primary factor of the sub-prime mortgage collapse. And a legal system crafted by lawyers’ unions with politicians (of both parties) in their pocket has removed much of the individual responsibility that helped managed “idiot” marketplace decisions on the individual level.
Here is a more entertaining explanation of how government interference in the marketplace worsens the boom & bust cycle & only promotes cronyism. (*Note: Libertarian / Austrian economics is represented by Hayek)
UPDATE: I found the following video in the recommended section of YouTube and it perfectly explains many of the points I made above.