Tim Worstall wrote a response to George Monbiot’s recent article and by proxy a blog post I wrote a short while ago. I do not intend to get into a back and forth between different blogs here, but one thing brought up by Worstall — both in a comment he left on my blog and the post he made on his own blog — provides me an opportunity to make a point about libertarians I already wanted to make: there are different kinds.
Worstall brings up the Coase Theorem which shows that when there are low transaction costs, externality problems among parties can work themselves out efficiently through private bargaining. When transaction costs are high however, government regulation is needed. In the case of climate change — which is what Monbiot and I were writing mainly about — we are clearly in the high transaction cost part of the theorem. We have a situation where millions of property owners are under the risk of future property harm from the aggregate behavior of millions of greenhouse gas emitters. The idea that all of those parties could sit around and privately bargain out a deal to solve the problem is pretty absurd. In any case, if some grand conference was held for the millions to billions of relevant parties to hash it out, that would surely be a costly affair.
So under Coase’s theorem then, we would need regulation. In fact, I suspect that Coase — being a fan of efficient market solutions — would favor the Cap & Trade approach to preventing climate change because that approach allows market actors to allocate among themselves a scarce amount of emissions established by government regulators.
So here is the payoff to that tedious analysis: Coase would favor regulation in this case. In fact, Coase’s theorem explicitly allows for cases where government regulation is the optimal solution to an externality problem. Assuming he was a libertarian, he would be a consequentialist libertarian in the same vein as Milton Friedman was. Consequentialist libertarians are concerned with maximizing utility, and they think that keeping the government out of things as much as possible is the best way to do so. Their interest then is not explicitly with protecting property rights as if they are an ultimate moral good; rather, they think that the protection of property rights is instrumentally valuable because markets and private property deliver the most utility to society.
Contrast these consequentialist libertarians with the procedural justice libertarians that Monbiot and I are criticizing. The procedural justice libertarians are not concerned with social utility; they are concerned only with the mechanics of property rights and the processes involved in the institution of property. For them, property rights are the ultimate good whether they lead to the most utility or not. The violation of someone’s property rights through an externality is not bad because it hurts their personal welfare; instead, it is bad because it violates their ownership rights and is a form of aggression.
I argue that the modern day libertarians have taken a tilt towards the procedural justice side of things. Milton Friedman and Ronald Coase are not the intellectual inspiration of the contemporary libertarians that fill most of the think tanks. Murray Rothbard and Hans-Hermann Hoppe are. These libertarians — which some might also call deontological libertarians — oppose all state regulation as being forceful aggression against property owners. Coase and Friedman do not. In fact, Hans-Hermann Hoppe actually wrote an article against the Coase Theorem claiming that it ignored the ethical centrality of property rights.
If Worstall is right and Coase’s theorem is supposed to be the libertarian way out of this problem, nobody told Hoppe and the procedural justice focused libertarians about that. They think the theorem ignores property rights and is thus unjust. That is because we are dealing with two different kinds of libertarians. Libertarians like Milton Friedman — who are increasingly rare — hold up utility and social welfare as the most important, but argue that very small governments achieve those things the best. Libertarians like Rothbard and Hoppe — the procedural justice kinds that make up the modern libertarians I argue — hold up property rights themselves as the most important, and see government action then as inherently wrong because it violates those rights.
The procedural justice libertarians are the ones who cannot handle climate change within their framework of economic justice and who thus have to deny it. Milton Friedman and Ronald Coase would not need to deny it; they have solutions for externalities of this complicated and rare sort. The procedural justice libertarians do not; so, they deny the existence of climate change as it is the only way to salvage their brand of libertarian ideology.