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March 03, 2009


In the 2008 election, the majority of voters chose the limited-government candidate over the unlimited-government candidate. The limitation under consideration was the government's power to order its employees to torture its captives.

"can you imagine any crisis where voters would expect a substantial reduction in government to be the best response?"

Yes, perhaps: a constitutional crisis. Here in northern Europe, there is a strong vein of "euroscepticism", i.e. resistance to the political project that produced the European Union. I can imagine - though I don't think it's especially likely in the near future - a situation where a new development in this area might lead to a crisis of public confidence with the result that one or more countries like the UK might seek to secede from the EU. That would amount to a significant decrease in government for those countries (for better or worse).

It's becoming increasingly clear that the administration's response to the crises has been insufficient, and that we need more stimulus spending and more direct involvement in the banking sector.

Libertarianism, however well it applies to lines drawn on a graph, has nothing to do with the way that humans actually act, and therefore nothing to do with human history.

In 1980, the highest tax rates were around 70%. Reducing rates was a worthwhile goal at that time.

can you imagine any crisis where voters would expect a substantial reduction in government to be the best response

Unlikely. The costs of too much govenment are diffuse and general, and unlikely to result in a single identifiable `crisis'. At least for modern acceptably competenent developed country governments.

Given the degree to which identifying with a political party influences politics, any perceived failure by one half of the political spectrum is going to be seen as a strong endorsement for the other half, even if neither is appreciably better than the other.

Therefore, for a crisis to result in a massive swing to libertarianism would require first that libertarianism be a credible political philosophy on the national level, which it isn't (c.f. Ron Paul in the primary), and second that it be the dominant philosophy in the power structure of its party, which it emphatically isn't (c.f. the religious conservative, national security, and business welfare wings of the Republican party, none of which are very libertarian and most are actively opposed).

For that matter, there's little to no evidence that the Republican party in practice is actually more libertarian than than the Democratic party. I've never been sure why libertarians seem to preferentially identify with one party over the other, when both shit all over their ideology.

As for your actual question, the only other option would be a disaster caused DIRECTLY by too much government--typically the sort of disaster that is only rectified by armed revolution. I'd rather not go there, personally.

If you view all policy as a one dimensional line between "small government with no intervention" and "big government with lots of intervention", as many people both socialist and libertarian subconsciously do...

And if you believe that the banking/housing crisis was caused by a failure to properly regulate banks and the financial sector under the "pro-market" Bush administration, which is the most common public/media presentation of it...

...then the housing crisis is a sign that the country has gone too far to the "small government with no intervention" side. So clearly we must restore the balance by making government bigger and having it intervene more.

I think that's a pretty common mode of illogical thinking among the large group of people who think Small Government versus Big Government is some great cosmic duality.

For example: you want a crisis that makes people want less government? How about voters responding to Carter's poor economy in the late 1970s by electing Reagan? Back then, after the economy failed during the administration of a Democrat who used big-government rhetoric, a charismatic Republican managed to spin the issue as a failure of big-government and get elected on a small-government platform. Nowadays, after the economy failed during the administration of a Republican who used small-government rhetoric, a charismatic Democrat managed to spin the issue as a failure of small-government and get elected on a big-government platform.

That seems like a sufficiently complete explanation of the current response that it doesn't leave much room for a ratchet effect.

Toby, what happens in a "constitutional crisis"?

soulless, what disaster would be seen by voters as being caused directly by too much government?

Yvian, but Reagan did not reduce the size of government.


Yvian, but Reagan did not reduce the size of government.
But wasn't he perceived by voters as reducing government control of the economy, and didn't the voters support that because of the economic crises of the '70s? If so, that seems to make the "Reagan revolution" a valid example of a "crisis where voters would expect a substantial reduction in government to be the best response".

I've been told that the Depression was a major contributor to the end of Prohibition. As a result, I have some hope that the economic crisis will lead to at least fading out some of the war on drugs.

"can you imagine any crisis where voters would expect a substantial reduction in government to be the best response? If you can't, that says there is almost no prospect for a crisis-induced libertarian revolution"

seems right - however if the usual bias is always toward 'more' government, which it seems indeed to be - it's hard to explain, then, how it is we are not already all living in totalitarian regimes elready.

The constitutional crisis in US? It's here. Half a Briton as the President.

I feel like the question demands a Naomi Klein joke, but it hardly seems worth it.

It's no surprise they're being unusually bold: Obama is wildly popular and the opposition party is in total disarray.

can you imagine any crisis where voters would expect a substantial reduction in government to be the best response

What if the crisis itself is government effectiveness? The larger it becomes, the more people and systems it must employ to manage itself. Seen the movie Brazil? That's what I'm imagining in some sense.

This is a very odd question (essentially "could there be a crisis where the response was to do more of nothing?") which betrays the stunning degree of incomprehensible magical thinking involved in making sense of laissez-faire economics.

"Yvian, but Reagan did not reduce the size of government."

That wasn't your question. Your question was when voters would expect a reduction in the size of government to be the best response. That just requires voters to believe during the election that he would reduce the size of government.

Voters elected Reagan because they expected him to reduce the size of government. He constantly used small government, pro-market rhetoric. Because voters elected him, we conclude they wanted the size of government reduced. If voters had really thought the best response to the economic crisis was the increase the size of government, they would have voted for Carter.

Reagan's failure to follow up on that rhetoric, and the voters' failure to realize he wouldn't follow up, are completely different issues.

If something stupid you're doing is contributing to the crisis, then doing less is the appropriate response.

Interesting question. I'm afraid I'd have to say that a good deal of what changed is political fashion. Bush-hating went out of vogue and was superseded by Obamania. Didn't you hear Springsteen and Puffy say that? And all that TV coverage about how lovely and right he was?

'Agreeing with Obama' became, y'know, cool. Didn't you get the memo?

"can you imagine any crisis where voters would expect a substantial reduction in government to be the best response?"

Does rapid American-soldier-death-rate in a foreign war count as a crisis? Then yes.


"seems right - however if the usual bias is always toward 'more' government, which it seems indeed to be - it's hard to explain, then, how it is we are not already all living in totalitarian regimes elready."

Except that more government doesn't lead to totalitarian regimes. Totalitarianism requires a certain kind of efficiency, usually allowing one person to oversee all of the major parts of the government. If the government's ridiculously big and usually gridlocked, like the US government, then it's much more likely to stay out of the way of people.

@ Robin: off the top of my head, by "constitutional crisis" I mean "a crisis of popular political opinion, or a series of events likely to bring about serious political change, in which the constitutional arrangements of a country play a leading role".

If I understand it correctly, I think New Zealand's 1984 election might be a case of the public voting for less intrusive government during a crisis. From Wikipedia: "In June 1984 Muldoon announced a snap election to be held in July. This caused an immediate run on the dollar, as currency speculators believed a Labour win would mean devaluation." Wikipedia describes this as a currency crisis.

And: "Labour's primary campaign message was one of change — Muldoon's government, which employed wage and price controls in an attempt to "guide" the economy, was widely blamed for poor economic performance. Labour also campaigned to reduce government borrowing."

Labour followed through on those campaign promises. It seems to me that sometimes the public does understand that the government can cause economic problems, and votes for economic freedom.

The effect doesn't last, and does seem to be exceptional. The economic policies of 1984-1990 were called Rogernomics (after Roger Douglas, the finance minister of the 1984 government), which is used mostly as a term of abuse in fashionable circles today.

How has they myth persisted that Democrats are the party of "more government" and "more spending" and Republicans are the party of "less government" and "less spending?"

Both parties spend money...the difference is "WHAT" they spend the money on. We have to stop this oversimplification of big issues. The problems we face are too critical to boil it down to these ridiculous "myths" of political parties. Republicans spend money and lots of it on the industrial-military complex and Democrats spend money and lots of it on social programs. Both are WELFARE based....it just depends on whose WELFARE they are for.

Politicians often fail to do what they say, in part because they expect voters care differently about doing versus saying. If there is a ratchet is it a doing ratchet, not a saying ratchet, and evidence about it must come from what they do, not what they say. By "voter expectations" I meant how voters would punish or reward a politician who did something.

Paul and Ben, that is what I meant by "affiliate with the impressive unusually high-status elites".

Silas, wars with higher soldier deaths did not obviously lead to more public rejection of those wars.

Keishia, I didn't say Democrats spend more.

Has there ever been a case in recent history where the government size has actually decreased (adjusted for total population)? If not, that would seem to make it difficult to correlate a reduction in government with solutions to any problems.

I am not sure on what basis you say "It is becoming increasingly clear that Obama's proposed policies go well beyond what we might need just to respond to the economic crisis; he's making a bid for great changes in national policy."

Why do you think he's going beyond what is necessary? This is a debate among economists, with the majority now thinking with Krugman that the stimulus is not enough.

We elected him to make great changes, both socially and economically. There are no atheists in foxholes, and there are no libertarians when the bubble bursts.

It seems like voters are happy with small government when nothing extraordinarily bad happens, and when they aren't flooded with partisan rhetoric. Aside from his extra-presidential actions, Clinton was a very popular president. Relative to GDP, the size of government shrunk when he was in office, yet liberals did not complain.

Liberals seemed to support Clinton because he was one of their own, and did not betray their rhetoric by preaching small government like Reagan did. They could still signal their devotion to liberal ideals by supporting him.

Conservatives seemed to be in the same boat with Bush. He didn't betray conservative rhetoric, but he did betray conservative ideals.

If the housing crisis had of happened in 1998, would people blame Clinton for shrinking the size of the federal government? I'm not sure, but I don't think they would.

Nathan Fiala: "There are no atheists in foxholes, and there are no libertarians when the bubble bursts."

1. False.

2. Even if that statement is true, that doesn't make the truth or goodness of the assertion more likely. The (lack of) existence of god and the (problems of) big government are pretty much the same no matter who believes what. That's the beauty of objective truth.

In 1932, FDR's campaign was based on the principle that Hoover's administration was doing too much to try to combat the Great Depression. Of course, after he was elected, his position became the exact opposite...

Could you be more specific, Robin? If you're referring to issues like health care, taxes, and carbon emissions, Obama is mostly just following through on what he proposed as a candidate. These policies (especially health care) are similar to what the other Democratic candidates campaigned on last year and to what Democrats (with a great deal of public approval) have been proposing for the last few years. I'd expect more of a backlash if Obama didn't do anything on these issues, with or without the economic crisis.

If you're referring to the direct responses to the economic crisis, like the stimulus, bailouts, and housing plan, these are large policies but they seem relatively short-term. Given that we already passed TARP under Bush, it does not seem accurate to say that Democrats are making a sudden leftward shift in the government. There is a lot of debate over whether these policies go too far or not far enough in dealing with the crisis (do we need nationalization & a bigger stimulus?). Democrats' political fortunes will probably depend on how much the economy improves, more than on the specifics of these policies, so it makes sense for them to do what they think is best for the economy.

There are no atheists in foxholes

I find that offensive.

I don't think most people who identify as libertarian really want smaller government, they simply want government to leave them alone.

Smaller government ranting otherwise is simply an excuse to use government for the purpose of diverting money to the libertarian or conservative's friends, rather than to the good of the country. For instance, war spending, tax cuts for the rich, etc are fine, but actual programs that help "those people" are not.

If people dislike government, I think they shouldn't run for office, really.

I haven't read Naomi Klein and, frankly, I consider her a twit; but doesn't she at least try to make the case for the existence of crisis induced libertarianism? Anybody read that book and think at least one of the examples she cites is legit?

As with Nathan Fiala, I also question your premise that it's "increasingly clear" that Obama is doing far more to combat the stimulus than economists agree is necessary. One of the key differences between Robin and Eliezer is that Eliezer questions his premises in his posts (or links to his earlier questioning) as if he were a reader trying to cross an inferential distance. Robin, meanwhile, writes things based on his assumptions about the way the world works, even when he knows (or should know) that readers will not agree with his assumptions. This leaves us, the readers, in the position of being asked to agree with the premises before even starting the discussion. Robin also often simply does not respond to inconveniently obvious comments, which suggests he's not interested in the obvious answer that he's ignoring in the first place -- and that would be fine, if he'd already shown, somewhere, why he believes the obvious answer is wrong.

As for the rest of the post, this crisis is based on a market failure, and it's not at all obvious to many other people that this is a normal part of the business cycle. For example, this graph of jobs in recent recessions. I've also seen personal debt comparisons that suggest that we look most like the Great Depression. This would suggest that the onus is on Robin to explain why this is just a normal part of the business cycle that will get over itself all on its own. Lacking an explanation, I would suggest that Robin has shown himself to be free-market partisan on this issue. Both the free-market partisans and the regulation-solves-everything partisans seem obviously wrong as dichotomizing a complex thing.

I do find the question about when to expect a smaller government in response to a crisis interesting. As a market failure, I would not expect less government in response. I would expect less government in response to a government failure of this magnitude and speed, and I'm not sure what that would look like. Was there a significant decrease in government in the Axis countries in response to WWII? Losing a war and having the world turn against you would seem to be a government failure of similar magnitude.

I would also expect a Libertarian crisis in response to clear, crisis-like evidence that our government was inadequate -- if China were suddenly to show its vastly superior everything (if they were to put a base on the Moon and also start designing microchips?).


Robin's question is more interesting than any specific partisan political example in the context of a more serious interest, that of catastrophic risk. In the case of nuclear war or the asteroid strike, is it possible any more that civil society could recover in the absence of functioning government? Will 50s-style fallout shelters and a "national broadcast system" still do, even if that system is now the internet?

Large crises present problems of coordination, communication & funding. Civil society often has the capability to marshall 2 of these legs, but not all 3. This is why modern societies resort to government more and more, as it alone has the ability to draw up large manpower, tax revenues, and mass communication.

In the past when society was smaller and more localized, it was more possible for civil associations such as religious groups and charities to respond effectively. But with society's current scale and globalization, is this still possible?

Doesn't Robin's question point out the need for the creation of a new form of "corporation" - part multinational company, part non-profit, with some quasi-governmental powers to act in the case of widescale catastrophe?


I don't believe its correct to say that modern societies resort to government to overcome communication, coordination and funding problems. These problems have always existed, and are generally much less problematic now than they were in the past, though it does seem like we have more of the tools to deal with them now. Government can certainly coordinate, fund and communicate on a massive scale, and those abilities are needed to overcome massive coordination problems. However, it doesn't follow that government therefore exists because of those problems.

I would say government can grow when its ability to profitably tax grows. Democracy was successful because it reduced the costs of legitimizing taxation. It seems more likely to me that a crisis is an opportunity to increase taxation and grow government, and that this growth may or may not have anything to do with problem-solving.

It also isn't clear to me that modern societies are getting bigger government. Has the scope of government, relative to the scope of civil society, really increased? I don't think measuring government as a percentage of GDP spending is really all that helpful. How could you measure slavery, for example? Or the rise of the unregulated Internet?

Doesn't Robin's question point out the need for the creation of a new form of "corporation" - part multinational company, part non-profit, with some quasi-governmental powers to act in the case of widescale catastrophe?
If such a thing could be successful, it would probably be best to start small. There are plenty of local catastrophes that need dealing with. It seems to me the big problem would be funding, so you'd have to use something like (dominant?) assurance games to fund everything. I believe the good old-fashioned business model of for-profit insurance companies already have the mechanisms in place to fund and coordinate public crisis relief, they just need the ability to act against catastrophes as well as pay out claims.


"I believe the good old-fashioned business model of for-profit insurance companies already have the mechanisms in place to fund and coordinate public crisis relief, they just need the ability to act against catastrophes as well as pay out claims."

This is an interesting theory: please explain how AIG, the world's largest insurance company, can solve our current global catastrophe. Or perhaps you are thinking of Lloyd's?

Jeff: claiming that either side is obviously wrong is intellectual laziness. Remember, you don't get wisdom points for standing above the conflict. Smarter people than you or me don't find it obvious at all.

It's quite obvious that the decline will continue as long as the mortgage banks and investment banks remain intact, supported by government dollars.

What is needed, for starters, is write-down of bad mortgages and government cancellation of all CD swaps that do not involve parties with interest. Until both are done, the credit market will remain stuck.


I was referring to the financial mechanism of insurance, not the firms as they currently exist. AIG has every incentive to fix the current crisis, if they could, but I don't believe their business model includes actually preventing claims. I'm saying maybe it should? I really don't know anything about AIG, but if they didn't know of the incoming disaster until it was too late to do anything about it, then there would be nothing they could do.

As an example, at least one fire insurer in California deployed private firefighters to keep from having to pay out claims.

Another good example might have been Katrina. If only private flood insurance was available, might the insurers have tried to fix the levees? They'd have the incentive, the knowledge and the funding (equal to how much residents were willing to pay to be free from flood risk) to do so.

More generally, an insurer pays $X to receive payout Y if event A occurs. In a dominant assurance game funding some public good that aims to stop A, a participant pays $X for event A not to occur, and receives a payout Y if the event does occur. The goal of insurance and assurance games are very different (one is purchased to offload risk, the other to fund public goods), but the mechanism seems very similar to me.

Or put more simply, I think systemic risk is a private good to insurers.

T L Holaday: they could have picked Ron Paul or Dennis Kucinich in the primaries, who were far more anti-torture and anti-war, and in the case of RP, far more anti-government. Nor was it overwhelming in terms of numbers - the popular vote was a close run thing. Obama is just an awfully skilled strategic player.

Robin: all the Libertarian gains in the 20th and early 21st centuries, in terms of open borders and un-intrusive economic policy, were all the product of peace and increasing interdependence, not of strife. This seems to be a repeated pattern - liberty loses when the world goes to war (against anything, including abstracts such as poverty, drugs, and economic depressions).

@nazgulnarsil: You would be right if we were talking about a specific case of regulation vs. free market thinking, and I hope I don't try to stand above the fray in any specific case. My comment regarding "obviously wrong" was about the ideological case for regulation or free market thinking as The Solution. I do not see a need to defend my argument that anyone arguing for one or the other regardless of circumstances is not to be taken seriously. But that's only tangential to my complaint about Robin, which is actually that he writes so tersely, leaves out so much of his thinking, that it often seems that he is hiding a free-market ideology which I don't think he actually has.

An example of this is that he keeps saying that this recession is equivalent to all prior recessions and will get better, without ever supporting that claim. This is not obvious to the rest of us, and so feels more like an ideological Republican's statement or talking point than an actual argument. Debt, unemployment, and mortgage failures have all massively exceeded any recent recession.

I don't see any contradiction between being a Libertarian and supporting government action in this instance. A crisis is by definition a time when the normal rules don't apply.

By the same token of course, you can't use a crisis - an exceptional event - to justify changes in day to day policies. There would have to be ongoing problems to justify ongoing changes.

I just thought it odd that such a critique would appear right when Robin wrote the most obviously political post in a while. I am frustrated by political discussion because I feel that one should be able to point at various arguments for and against various positions without being accused of supporting all arguments supporting that position.
So when Robin points to an argument by someone like Caplan I think he is assuming the reader also understands this. I don't believe Robin is hiding justification for anything, he is pointing to the justification of others.

but sure: Robin doesn't fill his posts with links to other essays in order to make compound points. I enjoy Eliezer's style more too. But that has nothing to do with the validity of Robin's posts. You just have to work a little harder if you want to justify them to yourself.

Ian C. can you point to a time period post 1920's in which the U.S. government hasn't used a "crisis" as justification for broad action?
The american people still have libertarian leanings that politicians must overcome, otherwise they wouldn't need to bother with the rhetoric.
what you're describing as a failure mode has become the norm: push for change during a crisis that will have effects that extend far beyond the crisis. By the time the crisis is over everyone will forget all about it, relieved to be out of the mess.

nazgulnarsil: It takes away from the later points if the premises are assumed when they're clearly controversial.

Sorry if this has been said, but it seems obvious to me that the more likely explanation is that the things above and beyond response to the crisis are things that a democratic candidate would have liked to do anyway, with or without a crisis, and the fact that a lot of it is actually getting done is because crises give the person in power more political capital to actually do things.

I am surprised that no one mentioned that there is a type of crisis that will induce a widespread libertarian response. It is the sort of crisis that led to the creation of Switzerland or the United States. It involves the public perception of an oppressive, exploitative government.

As long as the public does not perceive the government as oppressive and exploitative overall, however, the drive towards totalitarianism is strong, because people in general are weak, and need external frameworks to cling to.

Grant: They could have started from having sane amount of leverage.

Juan Enriquez claims in the beginning of this Ted Talk that while commercial banks have an average of 9x leverage and investment banks 15-20x leverage, Bank of America had 32x and Citibank 47x leverages.

For insurance companies, common leverages leverages are little bit lower. In 2007 Berkshire Hathaway and Montpelier had 2x leverage. Markel, Travelers, White Mountains and Chubb had 4x leverage. AIG had 11x leverage.

denis bider, Bryan Caplan disagrees on the American revolution (which I don't even think was caused by any sort of crisis). Also, I thougth Switzerland has been around since the middle ages, what oppressive government did it split off from?

I think this all makes sense if you think of the vast majority of people as very uncritical thinkers who cling to any ideas they naively think they understand.

Such ideas have been dubbed "conventional wisdom" by Galbraith. Part of the conventional wisdom of many Americans has involved notions like "smaller government is better than bigger government" and "freer markets are better than regulation."

Suppose most Americans substitute thoughtfulness for blind adherence to such generalities. But the present financial crisis has made clear -- even to a very thoughtless person -- that such generalities aren't always true. Clearly at least some times regulation helps (if for example it prevents bad mortgages and/or banks taking on too much risk) and at least some times bigger government is better (if for example it prevents depositors from losing all their money when a bank fails).

To a person who has always been critical and thoughtful, the lessons learned from the present crisis might be relatively subtle. But to a thoughtless person with the above accepted wisdom, this produces huge cracks in their worldview. And because such a person isn't very critical or thoughtful, they're likely to rather blindly accept the next bit of imparted 'wisdom' that makes sense of the world to them.

I think for many people, Obama has successfully filled the cracks in the old conventional wisdom with a new narrative. He has been so successful in part because of circumstance -- being the focus of attention of an uncritical audience at just the right time -- in part because of his intelligence, eloquence, and charisma -- which make him a more compelling advocate for those who put at least a modicum of thought into their beliefs -- and in part because he has been shrewd in his approach to policy so far, at least giving the appearance of bipartisanship and honest concern, and thus presenting himself as trustworthy.

And so, I think what "changed" was just that a major event caused people to consider that their accepted wisdom was wrong, and the political discourse at the time was dominated by a different voice than the one that dominated whenever they adopted their previous worldview.

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