Ep. 53 Krugman’s Stern Warning: Don’t You Dare Vote for the Crazy Libertarians

23 September 2016     |     Tom Woods     |     23

Krugman sternly lectures millennials: DO NOT vote for Gary Johnson. You are wasting your vote. Plus, the Libertarian Party platform is nuts!

We respond, in one of Tom’s favorite episodes of Contra Krugman.

Krugman Column

Vote as If It Matters” (Sept. 19, 2016)

Contra Columns

Almost Everything Paul Krugman Says in This Awful Column About Gary Johnson Is Wrong,” by Robby Soave
Law, Property Rights, and Air Pollution,” by Murray Rothbard

Article Mentioned

Paul Krugman on Gary Johnson, Libertarianism, and Pollution,” by Tyler Cowen

Video Mentioned

Related Episode (Tom Woods Show)

Ep. 730 Labor Unions Didn’t Bring You This or Any Other Weekend

The Contra Cruise

Join us October 9-16 for an unforgettable week at sea!

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  • RobertRoddis

    As someone who has been an attorney since 1980 and is licensed in the three states, present concern about turning everything over to “the courts” is justified. THEY ARE GOVERNMENT COURTS. While they work better than those in Nazi Germany, they are the equivalent of the government schools. Most judges are elected by voters who know nothing about them or appointed by elected politicians. Once in office, they generally remain there until they retire. Private competitive courts subject to economic calculation and information sharing, devoted by contract to understanding and protecting the rights of the litigants, are an entirely different animal.

    When you find people who do not trust “the courts”, remind them that they are afraid of the GOVERNMENT COURTS.

    • lucenut

      These concerns are dwarfed by the proven corruption and ineffectiveness of government regulation.

  • James Adams

    That song could possibly be the most smooth Contra Cruise segue ever. I like it!

  • JimD

    Nice episode!

  • Joshua Crosby

    Murphy, What you doing in Houston?

  • disqus_QZX8ENhLyb

    Why are you guys dancing around Gary Johnson? He’s a confused, inconsistent person. Where did and where does he come from? I’ve never heard of him before and I’ve been around the libertarian “movement” since I abandoned “conservative” Barry Goldwater in 1964. Rothbard would flip him off in a microsecond.

    • universe

      They aren’t dancing around him. Both Woods and Murphy have criticized Johnson’s lack of principles, at length.

    • http://www.TomWoods.com Tom Woods

      As Bob noted in the episode, he’s written plenty on the subject on his blog. My own views aren’t exactly a secret, given that I’ve devoted at least three episodes of my own show to the subject: http://www.tomwoods.com/episodes

      Not much point in continuing to repeat ourselves.

      • disqus_QZX8ENhLyb

        I’m sorry. I haven’t heard too many of your podcasts. You guys are way ahead of me. I’m too involved in other things to hear them all.

        You’re doing outstanding work. Keep it up! I love it.

  • http://latticedesign.com/ Michael Pierone

    So when your position is that the courts cannot be trusted to rule on pollution trespasses and therefor you favor regulation, what does Krugman think will happen if a Corporation IGNORES the regulation? Then suddenly the courts will be trustworthy?

    • Bob_Robert

      You’re expecting consistency from a man whose own columns ignore his own economic textbook?

  • http://www.economicmanblog.com Roger Barris

    This podcast is an excellent example of why minarchists, such as myself, find the arguments of Rothbardian anarchists so completely unpersuasive. And why the general public finds them even less so.

    Fully expecting to be pilloried for expressing these views in this forum, here goes:

    1. Tom argues against government schools on the basis of their manifestly poor results. This is absolutely true and an easy argument to make. However, this argument against the government PROVIDING education is not an argument against the government FUNDING it, through something like a school voucher program or charter schools. Arguing against the government providing universal public education is easy. Arguing against the government funding it, on the basis of economic efficiency or the need to spread opportunity if we are to have a functioning democracy, is much tougher. This is why most minarchists fall into the camp of a Chicago-school voucher program.

    Likewise, although Tom is right that most parents would adequately educate their children even without government compulsion, by the same token, most people would not commit murder even without a law against it. This is not a valid argument against compulsory education in circumstances where a child is not free and competent to make his own decisions about education.

    2. The Rothbardian argument for pollution control via tort law is unworkable for a whole variety of reasons. Let me elaborate:

    a. Advocates of this position very often refer to the case of a known (and small number) of polluters affecting a known (and small number) of victims, with a direct causal relationship between the pollution and some harm. This can be appropriately addressed through tort law, but this is the trivial case both in terms of circumstances and magnitude. The more complex and realistic cases involve MULTIPLE polluters affecting MULTIPLE parties with a merely STATISTICAL relationship between the pollution and some harm. Think of car emissions and many forms of industrial pollution of either the air or water. Or, for that matter, climate change. Tort law is completely unsuited to deal with this type of situation, which is the preponderance of the problems in this field.

    b. Tyler Cowen is correct in pointing out that one result of this approach is too little pollution, particularly in the complex (and more realistic) situation described above where there is significant risk of a “holdout” making the type of Coasian bargains described by Bob Murphy impossible. (This is analogous to the situation with eminent domain and roadbuilding, where the Rothbardians are also unrealistic.) In this situation, the Rothbardians often resort to the argument that, since it is impossible to precisely calculate the “right” level of pollution, then the right answer is to do nothing. This is an obvious logical fallacy of letting perfection be the enemy of the good. We KNOW that the optimal level of pollution involves some tradeoffs between industrial activity and the environment, and the fact that we cannot know precisely the point of optimal tradeoff is not a valid argument for accepting a situation where zero pollution (to avoid any form of “aggression”) is a very real possibility.

    c. Rothbardians also often ignore, or trivialize, transaction costs. In the realistic situations described above, the cost of reaching any type of Coasian bargain would be huge, not only between the classes of polluters and victims, but also within these classes. Bob Murphy briefly raises this issue, but then dismisses it by pointing out that the EPA is also expensive. This is a straw man argument. No minarchist would defend the EPA in its current form, with its “command and control” (as that term is used by Bruce Yandle) form of regulation. The question is what would be the relative transaction costs between environmental regulation that relies on economic incentives (through taxes or “cap and trade”) versus the transaction costs of a tort law solution. Here, I am convinced that sane regulation would be much more cost effective.

    d. This issue has been briefly raised in other comments, but it is also worth pointing out that Rothbardians have a very naïve and overly optimistic view of the workings of the courts. Why Rothbardians think that these types of decisions can be more readily and more accurately made by a court is a mystery to me. The courts would be subject to the same limitations of information that any political or regulatory process would experience, but they could operate with even greater arbitrariness and less transparency than a political or regulatory process. (Courts would also be subject to the same type of special interest pressure as a regulatory or political process.) The bad decision of a particular court could also be rapidly propagated through precedent, since most Rothbardians are fans of common law.

    Contrary to some of the comments here, these problems would not be eliminated by moving to private, as opposed to government, courts. As someone who has experience with arbitration, I can tell you that a private decision maker would be in no better position to make these decisions.

    (As an aside, it seems to me that the Rothbardian fascination with the courts and common law is a misplaced extension of Hayek’s views on the superiority of organic, bottoms-up processes to top-down ones. Although I agree with this argument as a general matter, I think that it is a false analogy in these circumstances.)

    e. Since I have been listening my way through the Mises University presentations from this year, there is at least a strain of Austrian economics which would make it absolutely impossible for tort law to work. The presentation by Tim Terrell on “Environmental and Resource Economics” made the argument that it is impossible to come up with a societal calculation of costs and benefits with respect to externalities because both of these are subjective and therefore cannot be aggregated. He gave the example of the “sentimental” value that a farmer might attach to an apple orchard that is burned down by a passing train, which might greatly exceed its market value. However, if you take this view that you cannot rely on market values to make these judgments, then on what basis would a court decide on damages? It is obvious that a court cannot award damages on the basis of subjective, rather than market, values, so the tort law solution runs into the same problem as the Austrians use against the conventional view.

    f. Finally, although I am not a lawyer, I believe that tort law requires the plaintiff to demonstrate a direct relationship between the tort and the damages. Since most pollution has only a statistical relationship with the harm done, it would be impossible to ever meet this standard of proof for an individual plaintiff. For example, although air pollution clearly increases the risk of lung cancer, it is impossible for an individual cancer sufferer to prove that his/her cancer is the result of pollution. (And even more difficult if there are multiple polluters, in which case it is doubly impossible to prove a direct link between an individual polluter and an individual cancer victim.) Although you could imagine class actions overcoming this problem, this would require the entire class of victims acting against the entire class of polluters, and having a single court decide the result. I fail to see how this process, which would be subject to enormous arbitrariness, would produce superior outcomes to a political or regulatory process.

    I would love to be able to fully endorse the Rothbardian/Austrian view on issues like these, since they are fully in line with my political and ethical instincts, but these types of unrealistic simplifications and illogic make it impossible. Without addressing these issues, I also think that this podcast is setting up its listeners for a severe beating if they attempt to argue these points with any reasonably sophisticated opponents. These unrealistic views also make it much more difficult to bring sophisticated members of the general public around to reasonable libertarian positions.

    • DZ

      A few thoughts.
      1. Fair enough
      2. a) Is gov. regulation doing that great?
      b) “doing nothing” does not mean free and unfettered pollution. It means the _State_ should do nothing. Just like the “doing nothing” during a recession doesn’t really mean the absence of any action. The tort system will still result in _some_ actions being taken to “regulate” pollution.
      c) let’s not rule out the probability of charitable donations allowing for transaction cost relief for effected parties. This is already happening today for small-time parties in litigation with large companies.
      d) sure, but when a gov court is suspected of political influence there’s nothing for “consumers” (litigants which lack commercial power) to do. At least with private courts, assuming litigants have to agree to a court or judge, the perception of dishonesty or corruption will direct business away from certain judges/courts.
      e) yea but I this doesn’t mean tort law doesn’t work, it just means it has similar limitations as all other court systems.
      f) same as 2a.

      • http://www.economicmanblog.com Roger Barris

        A few responses:

        2 (a) The fundamental problem of pollution is a “tragedy of the commons” problem. Rothbardians try to overcome this problem by privatizing the issue and treating it as a tort — I think that this is totally unworkable in the complex situations I mention. The alternative is regulation, which has been applied VERY BADLY (eg., “command and control” versus “cap and trade” or taxes), but allowing this to continue as a “tragedy of the commons” is not possible. Again, for most types of pollution, the tort route is simply not a viable alternative. If I have to choose between a non-viable alternative and an imperfect one, I will choose the latter.
        (b) The “do nothing” argument is a specific Rothbardian argument against regulation, which falls prey to the fallacy of perfection. The tort method is a “do something” approach but, for all the reasons I have explained elsewhere, it is unworkable.
        (c) My point is not a question of who pays — although this is important — but about the AGGREGATE cost to society of solving the problem. Although I think that Rothbardians greatly exaggerate the possible role of charitable contributions for solving problems — this is a deus ex machina argument for many of them — even if this were possible, this would not reduce the aggregate transactions costs, but would only reallocate them.
        (d) Fair enough, but my point is not primarily about bias or corruption in the courts, but about any court having the information necessary to make the balancing decisions required in this case. Since Rothbardians generally deny the ability of any central authority to have this information, this applies also to a court, public or private. In addition, if you had multiple courts applying multiple legal standards and precedents — which presumably would not apply across different private courts — then the possibilities for chaos multiply.
        (e) No, on the face of it, it does mean that tort law doesn’t work. One of the Rothbardian responses to any regulatory action that relies on social calculations is that this is not possible due to the subjectivity of costs and benefits. But, if this is your position, then tort law is also impossible because it too cannot access subjective costs.
        (f) I don’t understand you point. My point is that, where there is only a statistic relationship, tort law cannot work. This is but one aspect of the complete unworkability of a tort law solution.

        • Kenn Williamson

          I don’t think you should be pilloried for having these views. Seems like you make some pretty good points here.

          One questions I have though is whether or not you have read For a New Liberty or Ethics of Liberty? I think your view of Rothbardian courts is different from how they are presented in his work. It seems like you are translating problems with government courts onto private courts. You have brought up a lot of points however so I don’t think I can do your great post justice without going point by point. So here we go:

          1. I think you make some valid points here but how I and I think other anarchist would answer your point is that funding creates control. I think it would be naive to believe that the government would provide funding in a voucher system without creating some sort of accreditation system to make sure we aren’t “wasting” the voucher on a “bad” school. Who would define what wasting and bad mean? The government. This would create just as many problems as direct control they would just be different.

          2. (a) Your point here is opposite of what I think is reality. Not only does tort work in this case it is the only process that can work. Rothbard in his work addresses your exact concern stating that in a libertarian society there would be like CSI for pollution so that exact causes and effects could be ascertained even in complex multi causal/multi effect situations.

          (b) While I agree that there is an optimal amount of pollution. In my view the only way that amount could be arrived out would be the contracts and litigation between private individuals. Any blanket regulation is necessarily going to favor one group over another and if you think that is ok than this is possibly one sticking point because I can’t favor screwing one group for the benefit of another because of “progress” or “society”

          (c) Here it is a subtle trap that many fall into. If transaction costs become prohibitive then there is a profit incentive to create a business to minimize them. In the case of pollution there could be a business that charges a small fee to help companies find all the litigants against a certain polluter. Transaction costs are like other costs. They can be handled on the free market.

          (d) I don’t think you a characterizing private courts very fairly. Any private court must satisfy its customers. For a court this means giving fair and unbiased decisions. If a court is being arbitrary or unfair it would go out of business.

          (e) Market prices are subjective prices. I don’t see how it is so that courts can’t award damages based on subjective prices when all market prices are subjective. In your example its the sentimental value of an orchard burned down. But what if someone shot your beloved pet or destroyed a heirloom. Surely we would all agree that the court could award some punitive damages based on the sentimentality. We don’t think it would be strange that the award would be far greater than the “cost to replace” or “market price.”

          (f) If you are basing your analysis of Rothbardian courts on how current tort law works then I think you don’t have to go any further than that. I am not smart enough to predict exactly how private tort law would develop but I feel pretty confident that it will be different from current government run tort law.

          Anyway great post with some great points. I hope I’ve answered them well.

          • http://www.economicmanblog.com Roger Barris

            Thanks, Kenn, for the thoughtful response. Sorry about the tardy reply, but I am in a different time zone.

            No, I haven’t read For a New Liberty or Ethics of Liberty. Frankly, I come much more from a Chicago-school approach.

            Here are my further thoughts on your comments:

            1. Yes, a voucher system would doubtlessly require some kind of control by the payer. But to argue that this would create as many problems as the current system, in which the government BOTH directly controls content and provides the service, is way overstating the case. What would emerge would doubtlessly be some kind of skeletal curriculum and accreditation requirements (ie., the subjects required to be taught, the minimum number of hours, qualifications of teachers, etc.) and probably a system of testing (eg., SATs) so that, among other things, parents would have standardized data on which to judge schools. I believe that charter schools already operate under similar rules and I don’t think that they have been found to be overly restrictive (although rules about student selection and discipline probably have gone too far).

            2. I have some specific responses to your comments, which I will cover below, but as a general response I think that we should consider a fairly typical scenario and the issues that it would raise:

            Imagine that you lived in mid-1970s Los Angeles and you had a kid whose asthma was worsened by air pollution, mostly coming from cars. You are going to in initiate a tort suit to address this damage and, hopefully and ultimately, force polluters to reduce their level of pollution through economic incentives. Here are some of the issues you would face:

            Whom do you sue? The car manufacturers, the drivers, the owners of the roads, the oil companies? All of the above? What about the other sources of environmental pollution of the same or different kinds (ie., I am pretty sure that asthma can be made worse by several different pollutants, which probably even interact)? Electricity generators? Other factories?

            Within each of these categories, whom do you sue? All of them? Or do you single out single polluters?

            How do you prove that a particular polluter is responsible for the particular pollution that afflicts your child? How do you prove that pollution is the cause of his affliction, as opposed to, say, pollen? How do you deal with interactions between pollutants and other sources of asthma? Remember: there is only a statistical relationship between pollution and aggravated asthma, but you cannot use a general statistical relationship to prove a particular case.

            How do you establish damages? What is the damage your child experiences because of his aggravated asthma? If there are multiple polluters, how should this damage be apportioned among them? (The first part of this issue, I will admit, also arises in the case of a regulatory response to pollution, which also requires an estimate of damages. But at least this shows that the tort alternative does not avoid this problem.)

            What about defenses the polluters might be able to raise? How much mitigation should your child be required to employ? Stay indoors on high pollution days? Wear a mask? Take medicine?

            I don’t see how these issues would differ between a private and a government court. I think that they are largely insolvable in either case. To argue, as some Rothbardians do, that you cannot anticipate how these issues would be solved in completely private legal system is, frankly, an evasion that will convince no one. This is an example of what I meant when I said that many Rothbardians have unrealistically optimistic views on what courts, public or private, can accomplish.

            3. Turning to particular responses:

            2(a). You say “there would be like CSI for pollution so that exact causes and effects could be ascertained even in complex multi causal/multi effect situations.” Frankly, this is an example of another bad habit of Rothbardians, which is to assume technological solutions for fundamental problems. I am not a scientist, but I don’t think this exists and I see little prospect for it in the immediate future. But, even if we ultimately develop the technology, what do we do in the interim? I agree that we should remain vigilant for new technology that allows us to expand the scope of completely private action (eg., mobile phones overcoming the “natural monopoly” of fixed line networks), but to assume that this will arise is to fall into the old joke about the economist who finds himself trapped in a well: “First, assume you have a ladder….”

            2(b) I think that you missed my point on the risk of “holdouts” or “ransom-seekers.” The problem is that, if somehow you were able to construct a reasonable deal between an entire class of polluters and an entire class of victims, there would be tremendous risk of this being subject to holdouts, since on libertarian principles this could not be imposed on any party. This, frankly, is the same issue as the use of eminent domain for things like roads, where I also find the Rothbardian position (as articulated, for example, by Walter Block) to be untenable.

            2(c). Again, I think that this is a bit of the “first, assume you have a ladder…” approach to economics. Some things are simply very difficult to solve. This is also an argument that cuts both ways, because innovation can also reduce the cost of regulatory action as well as the costs of tort action. Since it is the DIFFERENCE which interests us, it is not clear which way this changes.

            2(d). As an aside, in a completely private legal system, how would you sue anyone where there isn’t a pre-existing contract specifying the procedure for adjudicating disputes? What would oblige a polluter to accept the ruling of a court or even accept it as a venue for the dispute? How would a court decision be enforced against a polluter who refuses to accept the authority of the court? Wouldn’t this give a veto over venue to the polluter, who would only accept courts biased in his favor? (Note that this is not symmetric, since damages are only expected to flow one way.)

            2(e). Market prices arise from a subjective process of valuation, but they are not themselves subjective. I can objectively observe market prices everywhere, from my Bloomberg screen to the shelves of Walmart. I don’t know how a court would treat the death of a pet or the loss of an heirloom, but I do know that, as a general matter, courts can only take into consideration market prices for determining damages. Otherwise, the situation is hopeless. Therefore, both a regulatory and a tort process have to rely on objectively observable market prices and not subjective valuations.

            Thanks again for your responses. Happy to keep up the conversation. It would be even better if Bob Murphy chimed in, assuming that he is not already lounging on a deck chair somewhere in the middle of the Gulf of Mexico, a drink at his side with a little pink umbrella in it and hopefully well slathered with suncream since his Irish heritage does not generally welcome prolonged exposures.

          • Kenn Williamson

            Very good points. I have to say I think we are at an impasse. My knowledge of the specifics of these issues is exhausted. I would recommend reading either one of the books I mentioned because a lot of your points are directly addressed in them. For the school questions I would recommend Education: Free and Compulsory.

          • http://www.economicmanblog.com Roger Barris

            Thanks, Kenn. I will take a look at the books, but I have read the Rothbard article that has been linked to this podcast and I have read a lot, listened to a lot, of things from the Mises Institute on this subject, and I really don’t think that there are answers to these problems. Most of the stuff I have read/heard, like the discussion in this podcast, simply avoids the tough questions.

            Be well.

          • Kenn Williamson

            Thanks Roger! I would only add that we’re disagreeing about a relatively minor thing when you consider the gigantic state that I think we both are fighting to dismantle. Let’s agree to fight as hard as we can to get to the minarchist state and then we can’t have it out no holds barred on whether to go for full anarchocapitalism.

          • http://www.economicmanblog.com Roger Barris

            Total agreement. This is one of my ongoing frustrations with the libertarian movement, that we spend 90% of our time debating the 10% that we disagree on, when we should be doing the opposite. Frankly, we are like the Marxists in this respect. Sadly.

          • universe

            But the Marxists have accomplished so much of their agenda already.

            But yes, ultimately I believe the Rothbardian anarchists, if we can get to a limited, effective, and transparent government, won’t really care about pushing liberty further once we get to a certain point.

            The priorities for the modern libertarian movement are:
            – Education (School Choice)
            – Federalism
            – Abolishing Fiat Currency and Central Banks
            – Ending Government Surveillance
            – Abolishing federal welfare and letting the states decide
            – Ending U.S. imperialism abroad
            – Protecting gun rights
            – Getting government out of healthcare and medical research

  • http://mishochu.com Mish Ochu

    Absolutely hilarious (and informative too).

  • Bob_Robert

    The New Hampshire average is $17K/student/year

    Staggering. Some places 3/4ths of the property taxes go to the school system.