Friday, July 15, 2005

L&S: How Far Down Does Libertarianism Go?

Our final formal lecture of the week is Tom Bell talking about "Living Lives that Respect Liberty." Tom's theme is whether "the political is the personal." That is, does the libertarian understanding of the ideal political order also apply to our personal and family lives? Can we apply the ideas that we've been exploring all week to solve inter-personal problems in what Hayek called the "micro-cosmos?"

This is a question that I find to be particularly fascinating. In a recent contribution to a symposium on "Ayn Rand Among the Austrians" in The Journal of Ayn Rand Studies, I tried to argue that Hayek's work suggests that the organizations of the micro-cosmos (like firms or families) not only are, but in some sense should be, organized along collectivist, altruistic lines. This differs from Rand's belief that the principles of individualism and self-interest should go "all the way down."

Another recent contribution along these lines is a fascinating article by the economist Donald Wittman, entitled "The Internal Organization of the Family: Economic Analysis and Psychological Advice" that was published in the journal Kyklos in February 2005. Here's the abstract:
This article shows that therapeutic advice for behavior within the family is to create a functioning property-rights system and to emulate voluntary transactions within a competitive economic market. The optimal organization of the family requires that relations are structured so that non-cooperative game playing is minimized and transaction costs are reduced. The article employs economic analysis to explain why 'setting limits' is preferred to punishment (Pigouvian taxes). It also explains why there is conflict between children and their parents even when the parent's utility is the present discounted value of the child's utility function.
That abstract undersells how good this article really is. I read this article and said "Yes!! This perfectly articulates my own tacit understanding of why I parent the way I do." Wittman's running example is the middle school kid who keeps forgetting his lunch every day. The "punishment" parenting strategy is to yell at the kid or take something away, but only after bringing that lunch to school for him. Wittman argues that a more efficient and effective solution is to simply say "you forget your lunch, you don't eat," which internalizes the cost back on the child and relieves the parent of having to bear the costs of bringing the lunch and enforcing the punishment, all of which are deadweight losses in comparison to the "Coasean" solution. It should be noted that more "libertarian" sorts of parenting strategies are more effective the older the child is. The "Coasean" solution requires children of an age to understand the costs and benefits of the choices in front of them.

Tying it to Tom's lecture, Wittman is arguing that the libertarian political also works in the personal. To be clear, Tom is not saying that it is always the case that the political works in the personal, but that we should at least think about the ways in which it might and might not.

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