Getting the insignificant pedantry out of the way up top:
* If you’re paid to write papers about classical liberal policy, I certainly hope you think about what you’re writing.
* The reason I picked the phrase “sacrificing wealth” was that if, as you say, markets are optimal at creating wealth with respect to physical constraints, then reallocating wealth in a non-market fashion (like dropping it from helicopters) is the same thing as sacrificing created wealth.
* I’m puzzled as to how you distinguish some basic effects of markets, like wealth creation, as “inherent,” and others, like wealth concentration, as “side effects.” Can we split the difference and say “inherent side-effects” for all of it?
* I am honestly fascinated by your suggestion that reducing the strength of government relative to interests that wish to manipulate it makes is less susceptible to manipulation and not more so — but that is a whole other ball of wax entirely, and not one that I’m eager to, er, what does one do with a ball of wax? Yeah.

Okay, that’s done with.

I happen to think that your scenario above is a great example of when it’s worth it to oppose market forces. I would describe this as an inherent result of the force of wealth concentration: eventually, some group of people within the system face what is essentially gambler’s ruin; no matter how good the game may be, they can no longer pay to play.

I’m not sure that I would say that there are inherent effects of markets which make it worth sacrificing wealth to counter act. I’d agree that there are certain side effects of certain markets at certain times which make it worth reallocating wealth, certainly.

For example, the work of Amartya Sen tells us that people can in fact end up starving even when there’s no shortage of food. What can (and in the case of most late 20th century famines did…those that weren’t deliberately caused) happen is that a certain group, a certain section of society, doesn’t have the purchasing power to buy the food that is there. The famine in Niger a year or two ago was of this type: as was the appalling mid 1970s one in Ethiopia.
The solution is simply to give money to those without the purchasing power. The solution is not to ship in food, that takes 6- 10 months to arrive, bought from American farmers, shipped on American ships (what overseas food aid really means).
The phrase is, quite literally, that we should drop money out of helicopters. Provide those starving with the purchasing power to go and buy food. This saves them from dying and also has further effects: for example, higher prices will encourage farmers to grow more next harvest (and free food being shipped in would reduce that urge).

I hope you see what I’m getting at here. I don’t want markets to be sidelined, abandoned, abolished: but I am willing to agree that some of the outcomes can be undesirable. But the undesirability, at least in this case, is the inability of some to take part in those markets. I would rather subsidize their ability to do so than abandon the market itself (specifically, with food, as one who spent 7 years living in Russia from before the end of the Soviet Union onwards, I really don’t want to see markets in food abolished: even if some do need subsidy in order to take part in them).

If, in your original question, we replace “inherent” with either “sometimes” or “side effects” then certainly, there are times when we should intervene.

I should also point out that I’m not paid to think about these things: I don’t write position papers. I’m paid to write about them, sure, but not to come up with original policy.

One thing that might annoy some around here. There’s been one proposal by the current Bush Administration which I think is fabulous, a real advance, a certain gain in human happiness. That is that they asked Congress to alter the rules about emergency food aid. They wanted to be able to do the money out of helicopters thing and also , when food did need to be purchased, to do so locally, rather than buying it from American farmers. Really, who would have thought it, a government listening to a recent Economics Nobel winner (as Sen is) and then changing Govt policy to fit the new reality?

Unfortunately Congress refused. The combination of the farmers’ intrerests and of the shipping industry closed down the possibility of a policy that actually alleviated more famine for less taxpayers’ money.

But then that’s why I’m a classical liberal: entrenched interests tend to do that, which is why I want a government smaller than it is, so that the interests have less possibility of buying favour.

Increased wealth certainly makes it “possible” to satisfy more desires.

Sure, especially if you keep the qualifying quotes around “possible.” The structure of your sentence I was asking about seemed to imply that there would never be a means of creating more wealth would be detrimental to the health of society. I agree that it’s worth talking about absolute improvements in the lowest concentrations of wealth, as long as we’re not pretending that the extra wealth created by markets has gotten down to help the least wealthy without some nonmarket help by individuals and governments.

I’m cautious about using absolute standard of living as the only metric of benefit and ignoring relative wealth, however, since at the end of that path lies the apology for slavery that slaves had their basic needs provided for better than the free poor. Clearly, that’s not your argument, but in a world where wealth is power, a system that increases your wealth slightly (say, the margin between making your rent and not) while increasing my wealth enormously (say, the margin for running a small competitor out of business on legal fees) is an incremental approach towards a communal indentured servitude — and I don’t think that is what you’re wanting to argue for, either.

I guess this comes back to your idea of markets constraints as being optimal with respect to the constraints of the physical universe. There are plenty of things which the physical universe puts heavy constraints against — flying, for example, or living after a major heart attack — which humans decide are worthwhile to undertake regardless. I’m curious about how you, as someone who gets paid to think about these things from a neoliberal perspective, would enumerate inherent effects of markets that are worth sacrificing wealth in order to counteract.

Increased wealth certainly makes it “possible” to satisfy more desires. A world which, in the past two decades, has seen hundreds of million come up out of absolute poverty (that $ or two a day level) to something like a middle class lifestyle, certainly seems to be delivering that as well.

I have read a long review of the book and IIRC an accompanying interview when the book was translated into German, but I haven’t actually read the book itself.

This is a topic I have mostly been following in Germany, and the longer I look at it the more frustrated I get with the realities of the reasonable-sounding approach “Welfare is for those who cannot help themselves”.

There is this huge bureaucracy working to determine if you could, maybe, help yourself, or if you have family who could do it, and they mete out hunger and fear as punishment to the ill, the confused and the disorganized, while the magazines are full of stories of people willing to put in the effort to game the system.

I know some people where I cringe at the thought of giving them no-strings-attached money, because I disapprove of the way they live their lives. But personal squicks are no base for policy.

Besides, if you could get all the people who prefer a frugal lifestyle to having to work off the unemployment rolls, it would do wonders for the unemployment numbers, and if everyone had a chance to walk away from a job they hate without the fear of ruin it would increase workers’ bargaining power immensely.

And the latter is why I’m sure that a system as discussed will never be implemented.

Unfortunately, most self-identified libertarians seem too attached to their money to invest it into the freedom to opt out of the rat race if they need to and the vast simplification that not having to think too much about other people’s worthiness brings.

The obvious idea to make joining the system voluntary might work in some utopia with minimal social differences to start with, but as we lack such an utopia, a voluntary system would die of averse selection.

So it would have to be taxes, and we’re back on square one as far as most libertarians are concerned.

Internet libertarians and those actually proposing policy are really rather different creatures.

Half-joking: then libertarians who actually propose policy have one hell of a message problem between themselves and their constituency.

how do we satisfy as many desires as we can with what we have to hand? And how do we create more wealth to satisfy more desires?

Do you really mean to imply that the creation of more wealth will necessarily satisfy more desires? There’s a strong argument to be made that market forces have the emergent effect of concentrating created wealth where wealth already exists. I’m assuming that this anti-social structural constraint of markets is part of your concept of the benefits of State involvement in the economic life of citizens.

Great Disco Ball, the CAPTCHA I pulled is hard. Is that a ‘9′ or a ‘0′?

Edit: I guess it was a ‘0′.

“We hit a new low with 1996 welfare reform under Clinton.” You might be interested to know that the academic behind that whole idea is actually an Englishman called Richard Layard. He’s of the left (is now a Labour peer) and the idea came very much from the left originally.

“Seriously? Markets impose no structural constraints ?”
Of course you’re right in one sense. It’s a silly thing to say. In another, not so much. I would argue that the universe imposes structural constraints: we have scarce resources and unlimited desires, so we can’t solve all of our desires with the resources we have. That’s the basic point of economics, after all: how do we satisfy as many desires as we can with what we have to hand? And how do we create more wealth to satisfy more desires?
I’m not convinced that markets impose more structural constraints than that basic unpleasant fact does. I am sure that, at least in certain cases, government or the State can make things worse (and, of course, in some cases make it better).
This is where the distinction between classical liberal and libertarian might be important: I agree that there is a place for the State, that it can at times make life better. Just that the number of such times is lower than many commonly assume.

“I know this seems nit-picky, but I can’t imagine the above scenario being acceptable without at the very least a pragmatic appreciation for social safety nets, which internet libertarians seem to consider inconsistent with liberty.”

Internet libertarians and those actually proposing policy are really rather different creatures. My occasional employers, the ASI (and they were very much influential in proposing privatisation in the UK, just as an example), the people at Cato, Megan McArdle herself, me, we’d all agree that there does need to be a social safety net. Our arguments would revolve around what is the best one to have, what provides the maximum help to people, with the least cost…and we’d also want to insist on it providing the maximum of liberty at the same time. That last is what leads to (some of) us proposing the simple flat benefit. It’s often called a Citizen’s Basic Income. Just give everybody the minimum necessary to live upon. Tear down all of the highly restrictive programs that determine where people can live, or how much they can earn part time, or dependent upon marriage status. Given that there will indeed be a social safety net, let’s make it the best one we can. As an example of ASI tax policy currently you start paying income tax at about $10,000 a year in the UK. The ASI argues that it should be about $28,000. The poor simply should not be paying income tax. Or another classically liberal/libertarian idea, the negative income tax. This is now known as the EITC and Milton Friedman spent 50 years arguing for it, supporting it and stating that it should be expanded.

I’d also want to make very clear that there’s an ocean of clear blue water between “conservative” and classical liberal. Again, my occasional employer the ASI argues that drugs should be, if not legalised, at least decriminalised. As did Milton Friedman:
http://www.fff.org/freedom/0490e.asp
We argue that how you deploy your gonads and with whom is entirely up to you as a consenting adult. The ASI (although I personally disagree) is strongly in favour of legal abortion and supports the further liberalisation of it going through the UK legal system now. You’ll find that most libertarians agree with these as well. But just as we want government to stay out of your sex life, your social life, your private life, we also want them to stay out of your economic life: at least, as far as is possible in all of those things while still protecting the rights of others to also do as they desire.

Wrong. Libertarians - taken as a broad term here - would argue that “structural coercion” is just verbal flim-flam. For example, if a person has to take a low-paid job, at least for a short while, that is not because he has been “forced” to do so because of some coercion, but because he is only able at that point in time to command such a job, given his skills, the supply and demand for labour, etc. It is a bit like saying that I am “coerced” into carrying an umbrella because it is raining.

Oh I wasn’t arguing that this was what Libertarians professed (or actually in some cases) believed, but rather the objective outcomes they work for when viewed outside of the narrow lens of Libertarian ideology.