So in the spirit of providing politically feasible “libertarian policies,” I want to offer a set of proposals to improve one area of American society that desperately needs it: the inner city. There’s no need to recite the gory statistics on incomes, unemployment, poor schools, violence, fractured families, African-American men in jail — or the challenge that folks in these core urban areas face in extracting themselves from that mess. Here then is my three-point libertarian program for urban renewal.

Allow School Choice

First, institute some form of meaningful school choice. Abolishing the government schools is the ideal solution but unlikely in the short run. Expanding parental choice through a voucher or tax-credit system is more politically feasible as we’ve seen in several U.S. cities in the last decade or two. The evidence from these systems generally indicates that they have been successful in improving student outcomes, and the excess demand for the limited spots indicates that parents want alternatives to the disaster of inner-city schools. Education is supposed to enhance human capital, but those schools arguably destroy it because students not only don’t get a decent education, they also learn how to avoid doing so and face strong cultural pressure to not be smart. Opening up the school system to real competition from the private and religious schools would give the students who want to succeed real options and would put more powerful pressure on the government schools to reform or go private.

End the Minimum Wage

There are numerous paths out of poverty, but almost all of them involve either a good education or real job opportunities, which leads to my second policy proposal: Repeal minimum-wage and occupational licensing laws. The economic analysis of minimum-wage laws is well-known and is supported empirically by hundreds of studies over the years. A minimum wage acts as a minimum productivity law, requiring that people reach a certain productivity threshold before employers will be willing to employ them. Such a law cuts off the bottom rungs of the income ladder for people with less education or lower skills — in other words, the products of inner-city government schools. Firms will hire less-skilled workers if they are willing to work for a wage commensurate with their skills. Minimum-wage laws prevent employers and low-skilled potential employees from striking such mutually beneficial bargains.

Occupational licensure similarly shuts poor workers out of the labor market by imposing unnecessary costs on people who can least afford it. Licensure is usually lobbied for by well-resourced incumbents as a way to keep out lower priced competition. From beauticians to hair braiders to taxi drivers, licensing laws prevent people from selling goods and services to willing buyers. Eliminating such laws would create numerous job opportunities for workers with specific skills but insufficient resources to acquire the needed license. Such laws protect the privileged at the expense of the poor.

Terminate the War on (Some) Drugs

Finally, we need to end the War on (Some) Drugs. Whatever one’s perspective on whether people should be allowed to do as they please with their bodies, there’s little doubt that making pot, cocaine, and other drugs illegal has been a huge contributor to the level of violence in so many inner cities. When your product is illegal, there’s no way to settle disputes under the umbrella of law and the peaceful coordination it promotes. Just as the CEOs of Anheuser-Busch and Coors don’t have gunfights when one rolls out a new beer, so would legalizing drugs reduce, if not eliminate, the violence among drug sellers. And the corresponding drop in price would reduce the criminal behavior of users who steal to support their habit. By taking the huge profits out of the drug trade, legalization would also end the glamour of the dealer and help kids see alternative pathways to success. With violence reduced, both schools and the marketplace would be more conducive to learning and peaceful trade.

People on both the left and right might disagree with my program for urban renewal, but they cannot say that this libertarian hasn’t offered concrete policy proposals to address the problems. I would hope that conversations about public policy in any realm can move beyond accusations about “having no solutions” and instead debate the merits of concrete proposals. More freedom is a policy proposal and one that works. If libertarians can put “more freedom” in the right packaging, we might well start to see real results.

The Act contains two important provisions. Section 1 outlaws contracts and conspiracies in restraint of trade. Section 2 prohibits monopolization and attempts to monopolize.

Most people have a knee-jerk response to monopoly and collusive agreements and condemn such behavior out of hand. Before making a broad condemnation, we might consider the behavior more generally. The Bible’s book of Exodus gives us the Ten Commandments. The first two, and presumably most important, are: “Thou shalt have no other gods before me,” and “Thou shalt not make unto thee any graven image, or any likeness of anything that is in heaven above, or that is in the earth beneath, or that is in the water under the earth. Thou shalt not bow down thyself to them, nor serve them: for I the LORD thy God am a jealous God.” These two commandments establish God as a monopoly and to reinforce the monopoly, there shall be no God-substitutes. I do not think that many would condemn Christianity on the basis of its monotheism.

Another area of monopoly and collusion is marriage. The marriage license is in fact a collusive monopoly contract between two persons that closes—or at least is supposed to close—further competition.

The monopolistic and collusive characteristics of religion and marriage emerge naturally and benefit society. Therefore, we are faced with the question of what kinds of monopoly and collusion we would wish to restrain. I would venture to suggest that government-coerced and -encouraged monopoly and collusion should be restrained. Moreover, if the Department of Justice were really serious about Sherman antitrust provisions, it would focus on Washington as the main source of collusion in restraint of trade.

One of the most egregious examples of conspiracy and monopoly in the restraint of competition are Private Express Statutes. These are a set of civil and criminal federal laws that outlaw the delivery of first-class mail by all entities other than the U.S. Postal Service. As such they represent government coercion that bans peaceable, voluntary exchange in the delivery of first-class mail. Aside from the well-documented inefficiencies of the Postal Service, the postal monopoly should be condemned on that basis.

The U.S. Department of Agriculture (USDA) establishes fruit and vegetable marketing orders and milk marketing orders with the stated purpose of balancing the products’ availability with an adequate return to producers and the needs of consumers. Federal marketing orders are locally administered by committees of producers. Initiated by industry and enforced by the USDA, they bind an entire industry in a geographical area.

For example, there’s the Navel Orange Administration, in which growers get together and establish citrus production quotas in California and Arizona. Any citrus grower exceeding his market quota by bringing too much to market and threatening to lower prices faces fines and imprisonment. This collusion applies to nearly all commercially produced fruits and vegetables. The effect of market quotas is to generate prices that are higher than they would be without the government-backed collusion.

Mandated maximum quantities and/or minimum prices are surefire indicators of seller collusion in restraint of trade. An example of the latter is minimum wage law. The effect of a minimum wage is discriminating against low-skilled workers. What employer would find it profitable to pay the mandated wage of $7.25 to a worker capable of producing only $4 or $5 an hour?

The minimum wage can be used as a tool of collusion. For some activities low-skilled workers are a substitute for higher-skilled workers. Imagine that 100 yards of fencing could be produced per day either by employing three low-skilled workers at $13 each or one high-skilled worker at $38. A profit-motivated employer would hire the high-skilled worker because it’s cheaper. If the high-skilled worker demanded $50 a day, the employer would replace him with the three low-skilled workers. But suppose the high-skilled worker could lobby Congress to enact a $20-a-day minimum wage in the fencing industry. Now using the three low-skilled workers would cost $60. Thus the probability of the high-skilled worker getting $50 would be greater because he has been able to use government to price his competition out of the market.

The Davis-Bacon Act is a 1931 federal law that mandates that “prevailing wages” be paid on all federally financed or assisted construction projects. As such it is a union-supported super-minimum wage law. Its stated intention—as seen in the 1931 congressional testimony supporting the Act—was to price black workers out of the market. Representative Clayton Allgood of Alabama said, “Reference has been made to a contractor from Alabama who went to New York with bootleg labor. This is a fact. That contractor has cheap colored labor that he transports, and he puts them in cabins, and it is labor of that sort that is in competition with white labor throughout the country. This bill has merit, and with the extensive building program now being entered into, it is very important that we enact this measure.”

Representative John J. Cochran of Missouri voiced similar sentiments, saying he had “received numerous complaints in recent months about southern contractors employing low-paid colored mechanics getting work and bringing the employees from the South.” AFL President William Green made clear the unions’ interests: “Colored labor is being sought to demoralize wage rates [in Tennessee].”

The Davis-Bacon Act remains on the books today. The political rhetoric in support of the Act has changed but its effects have not. It remains an ongoing collusion against lower-skilled, non-union construction workers.

Just about every cabinet-level federal agency enforces some kind of collusive restraint on competition. Without government support, collusion has a tendency to break down primarily because what is in the best interests of an individual colluding member is not necessarily in the best interests of other members. For example, it pays a member to cheat on the agreement by, say, shading his price a bit to get more business. The members who abide by the agreement will find themselves losing business, and before long they will start cheating. The cheating becomes infectious, and the collusion breaks down. But if a federal law fixes the terms of the collusion, then to violate the terms is not simply a violation of a gentlemen’s agreement; it’s also a violation of the law, with the possibility of fines and imprisonment. In other words, effective collusion needs some kind of enforcement technique. Most often it is the threat of sanctions for noncompliance.

The bottom-line reality is that collusive monopolistic restraints on competition are deemed illegal and hence prosecutable only if the seller does not first secure Washington’s permission to rip off his fellow man.

Take a simple price ceiling, such as a maximum price for gasoline or maximum rent for Manhattan apartments.  People who support such laws think that somehow those who are selling or renting the good have the power to charge a higher price than what is perceived as fair or just, and that legislating a maximum below what would be charged must therefore protect consumers.  The traditional economic analysis rightly shows how this causes shortages and various other undesirable unintended consequences.

Buyers Limited Too

The point I want to make is that such laws also limit the behavior of buyers (or renters). In a genuinely free market, sellers who wish to maximize profits cannot charge any price they wish. They must be attentive to the intensity of consumer demand at various prices.  Ultimately the price of a given good is high because buyers find the product very valuable.  Price control says, “Sorry, buyers, you cannot express to sellers just how valuable you find this good, and therefore those of you who value it most highly will be unable to gain access to it.”  So rather than view price ceilings as laws to protect hapless buyers from ruthless sellers, we would be more accurate in seeing them as laws that prevent motivated buyers from outcompeting other buyers and communicating to ignorant sellers just how intensely they value the good.

We can make the same argument about price floors, or minimum-price laws such as farm price supports or the minimum wage.  Minimum-wage laws are normally couched in terms of protecting powerless sellers of labor against ruthless buyers, who have so much power, they can drive wages down to near-poverty levels.  Again, we know how the minimum wage causes all kinds of problems, most importantly high levels of unemployment among the least-skilled workers.  (In fact, many early proponents of the minimum wage recognized this, but saw it as a feature not a bug: It was a way to impoverish and eliminate the eugenically undesirable [pdf].)

However, like maximum-price laws, these laws really limit the other side of the market.  A minimum wage does not just prevent employers from “exploiting” workers at “too low” a wage; it also prevents workers from offering their services at wages they think will make them employable.  For lower-skilled workers, a minimum-wage law is effectively a minimum-productivity law that undermines their ability to outcompete other workers by offering to work for less when they can’t produce as much per hour as the minimum wage.  And this is precisely the feature of the law that higher-skilled workers like: It enables them to shut out competition from other workers.

Who Competes?

The key is to remember that market competition is not between buyers and sellers, but rather among buyers and among sellers.  As a result, all laws that limit prices necessarily limit the ability of both sides of the market to compete, regardless of how the law is framed or who its proponents say it will “limit.”  All price controls choke off market communication by preventing the competitive process on each side of transactions from telling the other side how much goods are valued.

The next time someone tells you that price controls or minimum-wage laws put the brakes on powerful firms that sell necessities at too high a price or buy labor at unfairly low wages, don’t believe it.  Those laws limit consumers and workers, especially lower skilled ones, at least as much as they limit powerful firms.

What’s surprising about those reactions is that they seem at odds with the facts and tone of the article.  My point in demonstrating the changes in the economic condition of poor Americans is not to suggest all is well, but instead to celebrate how much progress we’ve made in reducing absolute poverty and to counter the claim that poor Americans are worse off than they used to be.  Nothing in the data I presented indicates that every single poor person is better off now.  Rather I was arguing that on average poor people today live better than a generation ago. (They live longer than they did in 1980 as well).  I was also arguing that this is a good thing.  How this qualifies as “hating” poor people is beyond me.

It’s also not clear how this means that I don’t care about getting rid of the poverty that does exist in the United States.  Celebrating the gains also does not mean I am blaming the remaining victims.  In a recent column I argued that libertarians can certainly accept that there are structural reasons for poverty.

What’s to Be Done

Okay, so what can we, as libertarians, do to reduce the poverty that remains?   My own libertarian antipoverty agenda, which is mostly focused on urban poverty, would have three major planks, all of which involve getting government out of the way so that it stops being the structural cause of poverty.

First, eliminate all minimum-wage and occupational-licensure laws.  Almost all these laws have their origins in racism and xenophobia: One need only look to the racist authors of South African apartheid, who used minimum-wage laws to help carry out their malign objectives, and the U.S unions that pushed for such laws to explicitly keep blacks and foreigners from competing for jobs.  Racial or ethnic majorities with political power have consistently harmed their poorer, minority fellow citizens this way. These laws cut off the bottom rungs of the economic ladder for those lacking the skills to earn higher wages or the capital to pay for the licensing requirements.

Second, open up the public schools to competition, if not outright abolishing them.  Urban public schools are not just ineffective, they are also positively destructive of human capital.  Throwing more money at them hasn’t worked, and it’s time to give poor Americans, especially poor folks of color, the opportunity to get the education they deserve by making schools actually compete for students.  The combination of awful public schools and minimum-wage and licensure laws has kept more Americans poor than any other set of policies of the twentieth century, and they have damaged African-Americans more than anything the Klan ever did.

War on Drugs

Third, end the War on Drugs.  The culture of violence created by the drug war, along with the way that it has driven legitimate businesses out of poor areas, has done a great deal to impoverish Americans — especially Americans of color.  In addition, it has destroyed families by arresting people, disproportionately poor and nonwhite, for victimless crimes.  (The police enforcing these laws also routinely destroy families by arresting the wrong people, often killing innocents in the process.)  Legalization would take the profit and violence out of the drug trade and make poor urban areas increasingly hospitable for businesses and thus jobs.

My list could have been longer, but this is where I would start. Too many poor Americans are stuck in poverty because government puts structural barriers  in their way.

My critics might disagree with my diagnosis of the problem, but that’s different from claiming I don’t care about the poor.  I care about them very much, which is why I chose to highlight how much progress we’ve made in the last generation.  Now if we can get the State out of the way, we’ll do even better in the next and spread those gains even more widely.

The concentrated public-relations campaign against Walmart has been moderately successful, and the company has drawn criticism from all sides: Commentators on the left criticize the company for its alleged impact on wages and jobs; those on the right criticized its decision to join the National Gay and Lesbian Chamber of Commerce and to offer “abortion pills” in 2006. Recently, Walmart announced support for mandatory health coverage by large employers, bringing more criticism. Walmart’s handling of the attacks has been less effective than the company would have liked, and its attempts to defend itself have been a distraction.

The criticisms too often rely on anecdotes or statistical comparisons that are difficult to interpret. When one considers that Walmart is the world’s largest corporation, with revenues of about $300 billion and almost two million employees, anecdotes that cast the company in a good or bad light are not particularly surprising. Similarly, a simple comparison of employment (or wages) in a city with a Walmart to a city without one is only minimally informative because such comparisons often fail to control for other explanatory characteristics. Current research suggests that the economic, political, and social case against Walmart is exaggerated. Further, Walmart’s “Every Day Low Prices” do not come at an unacceptable social cost in the form of negative spillovers not reflected in prices. Walmart is certainly imperfect, and there are reasons to view the company with a critical eye, but the usual criticisms of the company collapse under the weight of the evidence.

Does Walmart Squeeze Workers and Suppliers?

Economists Jerry Hausman and Ephraim Leibtag argue that we systematically overstate the rate of price inflation because we don’t account for Walmart’s and other big-box companies’ impact correctly. Walmart claims to save consumers $2,500 per capita per year. This is probably an overestimate, but studies I have done with Charles Courtemanche of the University of North Carolina-Greensboro do suggest that Walmart increases our options.

Critics claim that Walmart can deliver low prices because it destroys jobs, lowers labor standards, and squeezes suppliers. The data, however, do not support the first two, while the third is misleading. Retail labor market studies by University of Missouri economist Emek Basker show that Walmart modestly increases retail employment. Critics are quick to counter by questioning the quality of those jobs, correctly noting that Walmart pays less than its unionized competitors. However, this should be qualified. Union pay scales restrict the labor pool from which unionized stores can hire: If the union contract specifies minimum compensation of $12 per hour, then people whose labor cannot produce at least that much in revenue will not be hired. Since Walmart is an open shop, it has no such artificial floor for the productivity of the people it can hire. Those who would not be employable under union conditions are made better off despite the illusion of exploitation.

The company’s critics correctly point out that the last several decades have seen a large gap open between manufacturing and retail wages. But these data must be interpreted with caution because immigration and changing labor participation have altered the distribution of the workforce. People who are today earning Walmart’s “Every Day Low Wages,” as the critics call them, might not have participated in the labor force several decades ago and their wages would not have appeared in the official data.

Supposedly, Walmart drives small local mom-and-pop retailers out of business, spreading economic havoc and weakening a community’s social fabric. In a paper published in Economic Inquiry, West Virginia University economists Andrea M. Dean and Russell S. Sobel fail to detect a statistically significant effect of Walmart on self-employment, the number of small businesses, or bankruptcy among small businesses. It is true that Walmart causes some businesses to close, particularly in sectors that directly compete with the company. However, these businesses can be replaced by businesses in other sectors. In a summary of their research that appeared in the Spring 2008 Regulation magazine, Dean and Sobel offer the example of Main Street in Morgantown, West Virginia, which was decimated by Walmart but which soon recovered as clothiers and electronics stores were replaced by small businesses in other industries.

They also discuss the obvious objection that perhaps Walmart’s wake leaves a swath of low-value, low-wage businesses. They show, however, that Walmart penetration does not appear to reduce the values of small
businesses. Stacy Mitchell, author of The Big-Box Swindle, argues that Dean and Sobel’s result relies on an incorrect interpretation of Census data. For their part, Dean and Sobel say Mitchell misunderstands the data. If they are correct, the effects of Walmart’s penetration are consistent with what economists believe about technology and economic growth as well as with Joseph Schumpeter’s well-known concept of “creative destruction.” Walmart’s expansion allows people to produce more with fewer resources and less labor, which frees those resources and that labor to move into other occupations.

Walmart also allegedly uses its raw bargaining strength to extract concessions from suppliers. It is usually able to get lower prices, but it also provides something of great value in return: access to its supply chain and logistical support. While anecdotes of Walmart’s hard bargaining abound, a 2001 Journal of Retailing study by Paul N. Bloom and Vanessa G. Perry found that while dealing with Walmart can hurt financial performance for companies that do only a small share of business with the company, “large-share suppliers to Wal-Mart perform better than their large-share counterparts reporting retailers other than Wal-Mart as their primary customers.” Bloom and Perry note that Walmart offers access to broad markets and that companies taking advantage of this prosper as a result.

Sweatshops

Another common refrain is that Walmart and other large retailers obtain their goods from third-world “sweatshops.” In an important 2006 study published in the Journal of Labor Research, economists Benjamin Powell and David Skarbek showed that “sweatshop” labor paid better than the alternatives. In a June 4, 2008, article for the Library of Economics and Liberty, Powell summarizes this research and points out that criticisms of “sweatshop wages” (like those aimed at a factory in Honduras making clothes for Kathie Lee Gifford in 1996) invariably compare the wages and working conditions to American rather than Honduran working conditions—a comparison he calls “irrelevant” because of restrictions on international labor mobility. Sweatshops are a blessing, not a burden. As Powell points out, sweatshop wages more than double the average in some countries. Unfortunately, boycotts and legislation will not improve working conditions around the world. Powell summarizes the conditions that create low wages in countries like Honduras:

Wages are low in the third world because worker productivity is low (upper bound) and workers’ alternatives are lousy (lower bound). To get sustained improvements in overall compensation, policies must raise worker productivity and/or increase alternatives available to workers. Policies that try to raise compensation but fail to move these two bounds risk raising compensation above a worker’s upper bound, resulting in his losing his job and moving to a less-desirable alternative.

Unwillingness to recognize this can lead to policies that do more harm than good. Abuses undoubtedly occur, but Walmart has the resources to be able to have an effective monitoring program—not necessarily because of explicit humanitarian impulses, but because consumers are willing to pay for the guarantees and assurances that they are not buying the products of slave labor. Since consumers demand information about the conditions in which those who make these goods labor, it is in Walmart’s best interests to monitor carefully the conditions in which people produce the goods they obtain from abroad.

The thesis that Walmart’s ethical-standards monitoring is an elaborate ruse is tempting, and a ruse might pay off in the short run. However, Walmart should be disciplined by the capital market. Failure to provide consumers with what they demand—guarantees about international labor conditions, for example—at the price they are willing to pay will hurt long-run profitability and, therefore, the stock price. It is wise to read with a critical eye, but if Walmart’s managers are running a systematic campaign of misinformation, then they are failing in their responsibility to shareholders. Someone who discovered such a ruse would be in a position to profit handsomely by acquiring Walmart stock and fixing the problem.

Walmart, Communities, and the Environment

In his 2000 book, Bowling Alone, political scientist Robert Putnam documented a decline in “social capital”—which he defines as “networks and norms of reciprocity” that hold communities together—in the United States since the 1950s.  Walmart has been accused of contributing to this phenomenon. In a 2006 study agricultural economists Stephan Goetz and Anil Rupasingha reported evidence that Walmart reduced several measures of social capital like census participation, voting, and a measure they themselves constructed. However, in a study published in Public Choice in early 2009, Charles Courtemanche, Jeremy Meiners, and I use Putnam’s data to show that there is no identifiable, systematic negative relationship between increased Walmart density/longevity and measures of noneconomic “quality of life” or civic participation. As Walmart penetration increases, we cannot tell that people spend systematically less time with friends or less time civically engaged.

Others have alleged that Walmart erodes American values. United States of Wal-Mart author John Dicker calls the company a “conservative cultural gatekeeper,” and right-wing critics like those who operate the Christian website www.saveWal-Mart.com took Walmart to task for joining the National Gay and Lesbian Chamber of Commerce. (The company discontinued this affiliation in 2007.) Using similar data and methods to those used in our study of social capital, my coauthors and I were unable to find a systematic relationship between Walmart’s penetration and individual values. It appears that while people get their groceries at Walmart, they get their politics and their values elsewhere.

Finally, Walmart has been criticized for its alleged contributions to environmental degradation, but its cost-cutting has considerably reduced the amount of packaging manufacturers use. This was particularly important in 2008 as gas prices hit record highs. A May 29, 2008, article on CNNMoney.com used Hamburger Helper as an example: To meet Walmart’s demands, General Mills produces “denser pasta shapes” that can be put into a box that is 20 percent smaller, saving “890,000 pounds of paper and eliminat[ing] 500 trucks from the road.” Conditions create solutions: Walmart has been able to use recent increases in fuel prices to trim additional fat from the supply chain and to innovate in ways that will lead to permanent increases in productivity.

Discrimination, Health Care, and Subsidies

Finally, Walmart has been criticized for alleged systematic discrimination against women and for aggressive patterns of seeking local government subsidies. Walmart is the defendant in the largest class-action civil rights lawsuit in history—Dukes versus Wal-Mart, in which an estimated 1.6 million women allege a decades-long pattern of discrimination—but the central tenet of the case is inconsistent with Walmart’s alleged morbid obsession with profits. In spite of their incompatibility, these criticisms often appear side by side. There are conditions under which firms can maximize profits while discriminating in employment, but before we can reconcile discrimination with profit maximization we have to prove that these conditions are in place. Otherwise, the hypothesis of profit maximization works against discrimination and discrimination works against profit maximization. If an employer insisted on discriminating by refusing to hire productive women or by paying them less than they were worth, he would create profitable opportunities for competitors to scoop up members of the victim group and earn profits by paying them something closer to their market value. An employer’s ability to discriminate will be sharply limited by competitive pressure.

Walmart’s critics have also argued that the company places undue burdens on the government’s public health infrastructure. But this is a “problem” that exists because that infrastructure exists and not because of Walmart as such. One could argue more plausibly that by paying better than their employees’ next-best alternatives, Walmart actually relieves some of the pressure on the public health infrastructure. The critics also miss that Walmart’s existence provides a larger pool of resources that can be taxed to provide these benefits.

One robust criticism remains: Walmart has sometimes used the State to redistribute resources to itself and to cripple its competitors. Walmart is aggressive about seeking subsidies, such as acquiring properties through eminent domain, from governments eager to “attract new jobs” and new tax revenue, as critical groups like Good Jobs First, WalMartWatch.com, and WakeUpWalMart.com point out. These subsidies distort patterns of economic activity and sometimes can have the perverse effect of taxing one firm to subsidize a competitor. The problem is compounded further by the alleged need for more subsidies to redevelop areas blighted in Walmart’s wake. This issue provides a setting in which Walmart’s critics can play a constructive role.

In 2005 Walmart supported an increase in the minimum wage, and in July 2009 it earned a front-page mention in the Wall Street Journal for teaming up with the Service Employees International Union and the Center for American Progress to advocate mandatory employer-provided medical coverage. Walmart’s seemingly counterintuitive advocacy is a classic example of what economist Bruce Yandle terms the “Baptists and Bootleggers” phenomenon. Among the supporters of Prohibition were Baptists, many of whom felt that consuming alcohol is a sin, and bootleggers, who stood to profit handsomely if the government crippled potential legitimate competition. In the health care scenario the “Baptists” are groups that believe everyone has a fundamental right to health care. The bootleggers are large firms (like Walmart) that know that mandates will hurt their smaller competitors.

There is also reason to believe that Walmart’s business model is partially underwritten by transportation subsidies. Critics often overlap with people who criticize the American “love affair” with the automobile. The two are related. While it is true that, all else equal, Walmart has been good for consumers, it is also an unintended consequence of the massive subsidies to transportation infrastructure that created today’s urban sprawl. To the degree that Walmart is undesirable, it is a symptom of a larger pattern of interventionism rather than a cause.

Perhaps most unsettlingly, Walmart’s embrace of the proposed health care mandates and advocacy of a higher minimum wage illustrates a disturbing truth about the reality of doing business in the twenty-first century. By backing President Obama’s health care proposal, Walmart might be able to use this to fend off more damaging legislation later. In short, Walmart could be aiding and abetting what Ayn Rand called “an aristocracy of pull.” A 2006 volume of critical essays called the company “the face of twenty-first-century capitalism.” If twenty-first-century capitalism means competition by politics rather than competition by production, we will see lower economic growth as a result. This does not excuse the company’s use of the coercive power of the State for its own benefit, but Walmart is an effect rather than a cause.

The economic, political, and social case against Walmart has been tried and measured against the best available data. For the most part, it has been found wanting. We are left with a rather flimsy criticism, which is that for all its virtues (or at least its non-vices), Walmart is aesthetically unappealing. This visceral reaction to capitalist aesthetics has been called “the yuck factor,” and economist Alvin Roth has argued that we have to take “repugnance” seriously as a political constraint. However, just because I find another’s choices repugnant, I don’t have the right to supplant those choices with my own. People have argued that what happens in someone’s bedroom is none of the government’s business. By the same logic, what someone puts in his or her shopping cart is none of the government’s business. Even if Walmart causes people to make bad aesthetic choices, the civility necessary for a functioning society must take over.

Walmart’s “Every Day Low Prices” policy has been alleged to reduce labor standards, to squeeze suppliers, to decimate small retailers, and to tear the social fabric. In virtually every instance, the empirical evidence available suggests that what Charles Fishman called The Wal-Mart Effect is at best positive, at worst benign. Walmart is a retailing innovator and a force for competitors and suppliers to reckon with. As a social phenomenon, however, the alleged negative spillovers from Walmart are greatly overstated.

The importance of the answer depends on the interests of the person asking the question. If you owned a restaurant and wanted to skimp on the wine, you would rather your customers focused on what they are getting and not on what they aren’t. You won’t get many complaints if your patrons think that half a glass of wine is normal.

We are facing exactly that problem in America with respect to freedom. “Half-empty” people notice that a lot of freedom is missing. They are aware that they’re prevented by force of law from doing many things they would like to do, and compelled by force of law to do many others that they would prefer not to do. Most of those people also know that in the past there were far fewer restrictions on freedom than today; they sense that with each passing year, the glasses contain less and less wine.

Looking on the Bright Side

“Half-full” people, in contrast, rarely think about the government’s innumerable laws and taxes as deprivations of their freedom. They focus on what freedom they still have and regard it as enough. Just as restaurateurs prefer customers who see half-full glasses and are content with that, so rulers prefer citizens who are content with whatever freedom they choose to permit. For that reason, crafty rulers—and the form of government doesn’t matter—try to condition the people to think that they are enjoying the best possible state of affairs. Rulers want the people to believe that all the state’s numerous mandates, prohibitions, and confiscations are actually good; they’re done not to take away freedom but only to improve society. If you can get your citizens to look at things that way, they will be as docile as sheep.

A survey by George Mason University economics professor Daniel Klein helped me (a half-empty person) to see what’s going on. Klein had written critically about minimum-wage legislation, mentioning that such laws not only have adverse economic consequences but also abridge freedom—namely, freedom of contract. Imposing a minimum wage commands employers: Either pay each employee at least the legal minimum or else face prosecution. To Klein’s surprise a number of economists responded that they did not think that law has any important impact on freedom. Klein subsequently conducted a poll asking economists if they felt that minimum-wage laws were an attack on freedom. A majority of those who responded said that they regarded them as having little or no impact on freedom.

So here is a government mandate—do this or you’ll be punished—yet a majority of economists see no loss of freedom. An obvious explanation is that the minimum wage simply has no effect on professors. They don’t hire low-wage workers and therefore feel no sting from the law. But even when people are directly affected by government actions that restrict their freedom, they’re apt to shrug it off as “just one of those things.” They still have a lot of other freedoms, after all. Why get upset over the part of the glass that’s empty? Enjoy the part that’s full.

Most people view taxation like that. For working, successful Americans, federal, state, and local taxes take about half their income. If it weren’t for those exactions, they would be able to spend, invest, and donate to charities much more than they now can. True, the tax system is cleverly designed to hide the impact of taxes through another piece of coercion—withholding. Nevertheless, intelligent people know that a great deal of their money is confiscated by the government. Few complain. In fact, many support political candidates who have pledged to increase their taxes. How do we explain that? The “half-full” mentality does it. The glass may be down to 49 percent, but that’s enough.

Freedom of contract gives us another illustration. Government has steadily whittled away at it over the last several decades but few people seem to care. The minimum wage is just one aspect of the attack on freedom of contract; there are many others. Employers may not “discriminate” when hiring workers, meaning that they are subject to legal action by the government if they allegedly decline to hire an applicant because of his race or some other immutable characteristic (“forbidden grounds,” as legal scholar Richard Epstein puts it). Do Americans regard “affirmative action” laws as an abridgement of freedom? Mostly, no. It’s not just that most of us don’t hire any workers, but also that freedom to choose with whom to contract has been tarred with the pejorative “discrimination,” and therefore laws taking away that freedom are actually applauded. Why should people be free to do something that’s bad?

Medicine is another part of life where our freedom has been trimmed. We are not allowed, for example, to purchase any medicine that hasn’t been approved by the Food and Drug Administration. A concerted effort to overturn that law on constitutional grounds failed recently. This can be a matter of life and death for a few people, but the court held that the government was doing nothing wrong in making it illegal for sick people to use unapproved medicines. There was almost no protest. Apparently, Americans are so used to government agencies regulating their lives that freedom to decide which medicines to take is now in that unobserved empty part of the glass.

Too Much Freedom?

If a law or regulation seems to take away some freedom, “half-full” people think, “It’s not that we’re now less free but that we had too much freedom before. The government is giving us a better balance.”

Let’s look at a few more examples. The government punishes merchants if they increase prices “too much” following a natural disaster (“price gouging”). Hardly any Americans object that this deprives merchants (not to mention consumers) of freedom.

The government dictates that only certain kinds of light bulbs may be used in the future. Americans offer hardly a peep of protest.

The government makes it illegal to drive a car unless the driver and passengers are buckled in. Are any of the politicians who supported the law voted out of office? No.

The government forces banks to make mortgage loans to people who would not qualify for one under prudent lending standards. No complaints about that attack on freedom, although some Americans are now unhappy that it helped catalyze the mortgage crisis.

The government requires people to buy official stamps for all documents to make them legal. Do the people care? Well, this one’s a trick. It’s the Stamp Act, imposed in 1765 by the British government. The law sent a great many Americans into the streets to protest and threaten the officials charged with enforcing the law. Most Americans were not “half-full” people back then. If a similar law were passed today, people would meekly obey, saying to themselves, “Well, the government needs more money for all the good things it does.”

Skeptics may be thinking, “Okay, some peripheral bits of freedom may have been whittled away over the years, but the government would never deprive the people of any really important aspect of freedom.” Put aside the riposte that what one person thinks peripheral may be extremely important to another. I think that the “glass half-full” view most people apparently have puts all of our freedom at risk. Could we lose, say, freedom of the press the way we have lost other, “peripheral” freedoms? I think so. Here’s a hypothetical case to make my point.

Suppose that a new law were proposed, the “National Truth and Civility in Publishing Act.” It would establish a federal agency with authority to punish anyone who published a book, magazine, newspaper, blog, or anything else that was adjudged to be either false or potentially harmful to the feelings of a reader. Would Americans tolerate a law like that? It tears the heart out of the First Amendment. But I think most Americans would be assuaged if the political spin doctors said, “Look, people are still free to write what they want. The law merely tells them that they need to get their facts straight and not write in a way that could be demeaning or offensive. The government has a compelling interest in promoting truthful and respectful writing, doesn’t it? What good ever comes from lies or disrespectful writing? Freedom of the press has never been absolute and we are merely refining it a little to make life better.”

“Half-full” people would probably fall for that since they focus on the freedom that’s left, not that which has been taken away. They’d never give a thought to the consequences of putting federal officials in a position to harass those who write what the government does not want the public to read. With a law like that in place, the baseline concept of what freedom means would adjust downward again. No, the freedoms protected by the First Amendment are not secure. Nothing is if people only look at the freedom that’s left, not that which is being taken away.

Frédéric Bastiat taught that people’s thinking is usually influenced by what they see, not what they do not see. His point is at the root of the slow death of freedom in America.

Block’s free-market perspective is libertarianism. Throughout, he searches for “the proper libertarian answer” to several labor-related questions. He begins, as did his mentor Murray Rothbard, with the two foundations of libertarian thought: The nonaggression principle and the law of free association. Taken together, Block writes, they imply, “In the free and prosperous society everyone may act precisely as he pleases, provided, only, that he does not initiate violence against non-aggressors.” Following Rothbard, Block’s theory of justice in original acquisition of property is the Lockean homestead principle, without Locke’s famous proviso, and with Nozick’s principle of justice in transfer of property rights based on voluntary exchange.

I think the book best serves as a handbook for teachers and students on how to apply libertarian thought to several labor questions. Unfortunately, the book has no index so it is rather difficult to find Block’s treatment of any specific issue. For example, the National Labor Relations Act (NLRA) imposes mandatory good-faith bargaining, exclusive representation, and “union security” on private-sector collective bargaining. Each of these egregiously violates the law of free association. Block briefly considers these topics, but it is impossible to pick up the book and quickly find his statements about them. His main free-association argument against NLRA-style unionism focuses on the use of picket lines to stop “scabs” and others willing to engage in voluntary exchange with strike targets. His argument is brilliant, but I wish he had applied it to those other issues as well. On strikes, Block draws out the important distinction between NLRA-style strikes and strikes that can be justified as applications of the principles of voluntary exchange. Chapter 8 (a blog post) presents a short but effective argument in favor of “yellow dog” (union-free) contracts among consenting adults.

In addition to unions, Block and his coauthors discuss other standard labor topics, including wage determination, the minimum-wage laws, the negative income tax, academic tenure, worker’s compensation, and unemployment insurance. In Chapter 15, Block chastises two Heritage Foundation authors for conceding too much to those in favor of increases of legal minimum wages. In Chapter 23 he demonstrates the irrelevance of “perfect competition” to policy questions. Chapter 25 is an interesting short paper which demonstrates that comparative advantage is a sufficient but not necessary condition for mutual gains from trade.

In three papers Block argues in favor of absolutely open borders for all immigrants who seek only to engage in voluntary exchange with natives. In two of these papers Block argues against the more restrictive views of his fellow libertarian Hans-Hermann Hoppe.

Two papers take up redistributive justice. In Chapter 21, which examines reparations for slavery, Block takes issue both with those who advocate reparations and also with David Horowitz, who famously opposes them. Here Block deploys his theory of justice in property rights to destroy the arguments of both sides of the debate. Chapter 22 is a devastating response to the Pontifical Council for Justice and Peace’s ill-informed ruminations about land reform. As a Catholic I am constantly embarrassed by economically illiterate authoritative statements by spokesmen for the Church. Block demonstrates that if the Church were really interested in its vaunted “preferential option for the poor” it would join the fight to promote economic freedom rather than coercive redistributionism. His paper is an excellent addition to the growing effort to educate religious thinkers about free-market economics.

In sum, if you want to know to what conclusions a rigorous application of libertarian thought leads on several labor-related questions, this book is where they can be found. Block’s arguments are on point, clever, pithy, humorous, and effective. Unfortunately it is not easy to find them.

After explaining the ten variables used and identifying the five states with most, and the six states with least, worker freedom, I will explain why I think Congress may eliminate interstate differences in some of these variables in the next few years. This “harmonization” will significantly reduce both worker freedom and the usefulness of the IWF.

The ten variables, and the reasons for their inclusion, are:

Right to work (RTW) laws. Twenty-two states have RTW laws. They receive a 1; the others receive a 0. RTW laws protect workers from being forced to pay union dues.

Minimum wage (MW) laws. States with MWs lower than the federal minimum, and the five states with no such laws, receive a 1; the others receive a 0. A free worker is one who decides the minimum he will accept for himself.

Union density (UD). This is the percentage of the workforce, both private and government, who are union members. States with UDs below the national average (12 percent) receive a 1; the others receive a 0. In states with high UDs the usual union apparatus of coercion, intimidation, and wholly owned politicians will be more prevalent and well established than in states with lower UDs.

Paycheck protection (PP) laws. States with them receive a 1; the others receive a 0. PP prevents union bosses from using dues forced from government employees for political purposes without their express permission. A free worker is one who decides for himself whether to engage in political advocacy.

Prevailing wage (PW) laws. States without them get a 1; the others get a 0. They stipulate that union wage rates must be paid—even by union-free firms—on construction projects funded with tax money. A free construction worker is one who may work for a union-free firm on terms to which he and his employer agree.

Defined contribution (DC) pension plans. States that offer them to their government employees get a 1; those that don’t get a 0. Workers have control over their DC plans, and they are free to move from job to job without losing benefits.

Government-employee collective bargaining (CB) laws. The 13 states without them receive a 1; the others, a 0. While the National Labor Relations Act (NLRA) exposes private-sector workers to coercive unionism, the states, at least for now, are free to decide whether to do the same to their government employees.

Government-sector union membership (UM). States with UM lower than the national average (36 percent) receive a 1; the others, a 0. UM indicates the extent to which government-sector unions can override decisions by individuals as to whether they will be represented by a union.

Entrepreneurial activity (EA). This is measured as the number of entrepreneurs who start new firms in a year as a percentage of total adult population. The national average is 0.3 percent. States with EA above the national average receive a 1, while the others receive a 0. EA activity creates additional union-free employment alternatives for workers, and states with more worker freedom are more hospitable to EA.

Workers compensation (WC) premiums. States with premiums below the national average ($2.49 per $100 of payroll) receive a 1; those above the national average, a 0. WC premiums are most often paid to government monopoly agencies rather than private insurance companies, which would compete with each other. High monopoly premiums reduce the amount of money for capital and other business expenses, thus reducing worker employment alternatives.

Ranking Worker Freedom

A state’s ranking is determined by summing up the scores for the ten variables. Utah, the state with the best score, received a 9 (out of 10); it does not offer DC plans. Colorado, Idaho, Mississippi, and South Carolina each had 8. The six worst states—Connecticut, Hawaii, Minnesota, New York, Pennsylvania, and Rhode Island—received 0.

The IWF is a helpful resource for employers and employees alike who are trying to locate in states with a more favorable labor environment than others. Just as the Heritage and the Fraser–Cato indices of economic freedom have resulted in healthy competition among nations to increase economic freedom, the IWF might be expected to result in healthy competition among states to increase worker freedom. For this, union bosses have called AWF an antiunion group. But AWF is concerned with worker freedom. It is antiunion only insofar as unions decrease worker freedom.

There are ominous noises in Congress that suggest interstate competition in worker freedom will be thwarted by naked government force. For example, the Public Safety Employer–Employee Cooperation Act was passed in the House in 2007, and the Senate voted 69–29 to limit debate on the measure (cloture) in May. At this writing the Act has not received a final vote in the Senate, but the margins in both bodies are veto-proof. The Act would force state and local governments to submit to the unionization of their police and firefighters. Before this, states could decide whether to expose their employees to unionization or not. Remember the camel’s-nose-under-the-tent strategy of the New Deal: Get part of what you want first and later use that base to grab it all. Today it is police and firefighters. Later, the union bosses pray, all state and local government employees will be herded into unions. This would eliminate any interstate differences in AWF’s collective-bargaining and union-membership variables. Individual state CB laws will be moot, and each state’s UM will be 100 percent.

By any reasonable reading of the Tenth Amendment, the federal government has no power over state- and local-government labor relations. But in 1935 Chief Justice Charles Evans Hughes wrote in the Gold Clause Cases, “We are under a Constitution, but the Constitution is what the judges say it is.” Any five justices of the Supreme Court can reinvent the Constitution anytime they wish. In Garcia v. San Antonio Metropolitan Transit District (1985), five justices decided that state and local governments are mere players, on an equal footing with unions, in the game of influencing Congress on questions of labor relations. Alas, the federal government may pass any state and local labor-relations statutes it likes.

Further, union bosses have long sought to eliminate the right-to-work clause of the NLRA. If they have their way with the new Congress and president, state RTW laws will be abolished. And the recent attempts by Congress to apply the federal Davis–Bacon Act’s prevailing-wage provisions through legislation concerning farms, cap-and-trade, global warming, clean water, school construction, and housing bailouts suggest that individual state PW differences may not survive for long.

Just as the bureaucrats in Brussels seek to “harmonize” economic policy among members of the EU, the new Congress and the new president are likely to try to restrict interstate competition in worker freedom. This is “change we can believe in.”

Experience with economic freedom illustrates the opposite point: When it comes to saving their economic lives, even otherwise-prejudiced people are downright tolerant. The reason is that markets make people pay for discriminating unless they’re discriminating in favor of the productive. Moreover, governments and government officials rarely bear a cost for, and often benefit from, discriminating against unpopular people, which is why the greatest horror stories of discrimination are about governments.

The insight that markets break down discrimination is not new. Over 200 years ago Voltaire wrote: “Go into the London Stock Exchange. . . and you will see representatives of all nations gathered there for the service of mankind. There the Jew, the Mohammedan, and the Christian deal with each other as if they were of the same religion, and give the name of infidel only to those who go bankrupt.”

Voltaire was pointing out that people on the London Stock Exchange wanted so much to make money that they were willing to deal with others who had different religions and cultural backgrounds. This seems an obvious insight, but apparently it is not. How often have you heard people denounce businessmen for ruthlessly pursuing profits and, in the next breath, castigating those same businessmen for discriminating against a minority group simply because they’re a minority? Well, which is it? Are they trying to maximize profits or are they discriminating? It can’t be both.

Institutionalized Discrimination

Think about the most notorious examples of racism, and the odds are high that you will think of a government implementing it and private citizens, out of the profit motive, opposing it. Take South Africa’s apartheid. Please. The apartheid regime and the “colour bar” that preceded it illustrate both points. From the early 1920s to the early 1990s, the South African government put barriers in the way of employers’ hiring black people for the plum jobs, especially, early on, in mining. In other words, the government officially enforced discrimination. Among the strongest opponents of this discrimination and the strongest advocates of tolerance were white employers. They hated that the government prevented them from hiring qualified black people to work in mines and elsewhere. Interestingly also, among the strongest supporters of the colour bar and, later, apartheid were white labor unions.

Indeed, something happened under the colour bar in 1923 that is so striking that the story should be told by parents everywhere to their children and talked about incessantly in coffeehouses. It was a strike by members of the powerful white Mine Workers’ Union, who were protesting white mine owners’ plans to hire less-expensive black workers. The 12-word banner that they proudly carried through the streets read, “Workers of the world unite, and fight for a white South Africa.” This Karl-Marx-meets-David-Duke slogan is further evidence of the connection between government power (socialism is the ultimate in government power) and racial discrimination. Interestingly, the union received support for this strike from its allies in the South African Labour Party (SALP), formed in 1908 with the explicit goal of achieving privilege for white workers. The SALP was modeled intentionally on the British Labour Party, an avowedly socialist party.

And if you think something like that would never happen in the United States, then consider the origins of the minimum-wage law. The main proponents of the minimum wage were northern unions that wanted to harm their lower-wage southern competition, many of whom were black. This goal animated unions as recently as the 1950s. At a 1957 hearing on increasing the minimum wage, a northern U.S. Senator who favored the increase stated: “Of course, having on the market a rather large source of cheap labor depresses wages outside of that group, too—the wages of the white worker who has to compete. And when an employer can substitute a colored worker at a lower wage—and there are, as you pointed out, these hundreds of thousands looking for decent work—it affects the whole wage structure of an area, doesn’t it?”

Who was the senator? Here’s a hint: just four years later he was the President. His name: John F. Kennedy.

Paying for Discrimination

That markets break down discrimination is such an important finding that the economist who first showed it in a rigorous model, Gary Becker, earned the Nobel Prize, in part, for that work. In his book The Economics of Discrimination, Becker pointed out that free markets make discriminators pay for discriminating because they give up opportunities to work with productive people. That doesn’t mean, he noted, that people in a free market will never discriminate; the most extreme racists and bigots will often be willing to pay the price for discriminating. But pay they will.

Becker’s book pointed out that the wage differential between black and white workers of a given ability and experience level is a measure of the remaining discrimination against black workers; the larger the differential, other things equal, the more discrimination black workers face. This insight has been abused two ways in discrimination lawsuits in the United States. The statistical abuse is to assume that the whole wage differential between blacks and whites is due to discrimination rather than to other factors that the researcher has failed to measure. Yet, as virtually every economist who studies wage data will admit, you can never account for all factors, especially those that you can’t observe. You can’t know someone’s earnings simply by knowing that person’s age, experience, union affiliation, and education. Many people are the same age as Bill Gates and are similar in all other respects, but none of them has close to his level of wealth.

The second abuse of Becker’s insight is an even more fundamental breach of justice. Workers who feel discriminated against sometimes sue their employers, often seeking compensation. What they fail to recognize is that these employers, who actually hired blacks and other minorities, are helping to eliminate discrimination. To the extent that lower wages are due to discrimination, they are caused by those not hiring people in the discriminated-against group. But haven’t we all heard of the minister who blames those present for the low turnout?

It should be noted, though, that the U.S. economy is not free but hampered by many anticompetitive government interventions, such as licensing. Yet competition is the key to minimizing discrimination. Thus those who oppose bigotry could do no better than to work to eliminate all such interventions.

More fundamentally, though, people should be free to discriminate. Freedom includes freedom of association, the freedom to choose whom you work for and whom you hire. Employees are free to discriminate against employers for any reason they wish; employers should have the same freedom. Let’s have markets, not governments, punish those who exercise their prejudices.

In Libertarianism: For and Against (Rowman & Littlefield, 2005), two philosophers debate the merits of libertarianism. Arguing in favor is Professor Tibor Machan, a contributing editor to The Freeman. His opponent is Professor Craig Duncan, who attempts a refutation of libertarianism and seeks to persuade readers that they should embrace “democratic liberalism.”

It is always welcome to find a debate over a serious topic, and whether we would be better off with government limited to libertarian “night watchman” functions or with whatever government emerges under “democratic liberalism” is to my mind as serious as philosophical questions get. I found the debate in the book enlightening, especially for the insight it gives us into the mind of the nonlibertarian.

Like many Americans, Duncan commits four errors that are common among non-libertarians both of the “left” and the “right.”

The first mistake in this set is to overestimate the problems of a free society. To nonlibertarians, the thought of a truly free society is frightening. They imagine that a few wealthy individuals would crush the rest with their enormous economic power, abuse the environment, establish monopolies, underpay workers, discriminate against people in unpopular groups, ruin the morality of the people, and much more. Nonlibertarians don’t think their own freedom should be curtailed, but believe that in the absence of laws to make others behave properly, the nation would become a Hobbesian horror.

Closely related to that mistake is the underestimation of the ability of free people to solve problems. Poverty, pollution, discrimination—those and many other problems—will fester and grow in a free society because the poor, oppressed people can accomplish nothing against them. To suggest that voluntarism can work usually gets the nonlibertarian’s eyes rolling, accompanied by a dismissive shake of the head. We just can’t rely on voluntary action to take care of society’s problems.

Nonlibertarians don’t just misjudge the free society; they also misjudge government. The first of their errors here is to overestimate the capacity for laws and coercive programs to actually solve socioeconomic problems. Many nonlibertarians believe, for example, that poverty will be alleviated if only the state spends enough money on a welfare “safety net.” Many others believe drug addiction will go away if only the state tries hard enough to enforce the laws against drugs. And if poverty and drug addiction persists after decades of government efforts against them, the explanation is never that government is the wrong instrument to use, but that insufficient money has been appropriated, corrupt or uncaring people have been in charge, or that something else has undermined the efficacy of the programs.

The second of the errors regarding government is to underestimate the harm done by laws and policies designed to help people. Let someone propose a new government program to solve a socioeconomic problem and rarely will you hear a nonlibertarian utter a sentence beginning, “But if we do that, the following harmful consequences will ensue. . . .” So if someone advocates price controls to keep a necessity, say medical care, “affordable,” do not expect a nonlibertarian to point out that artificially low prices will lead to shortages. In fact, the counterproductivity of government action is usually not merely underestimated but completely ignored.

With that discussion as background, let’s turn to Duncan ‘s argument that libertarianism is unacceptable. To understand why he insists on a coercive and far-more-extensive state than libertarian theory prescribes, we must first try to comprehend his belief that the most important function of a political system is to advance “human dignity.” While he uses the term repeatedly, he never clearly explains it. There’s an imposing ring to the term, but exactly what does Duncan mean?

His favorite phrase, one that seems to capture his sense of what “human dignity” means, is “the ability to shape one’s life.” Now a libertarian would say, “Sure—leave people alone and they can shape their lives as they think best.” But Duncan maintains that the state must take positive steps to enable people to “meaningfully” shape their lives. Mere freedom is not enough. Government must do things for and give things to the mass of people who wouldn’t be able to live a “dignified” existence without its assistance. (“Dignity” seems to boil down to a rather misleading synonym for “comfortable.”)

In Duncan’s view, poorer people can’t “shape their lives” unless assisted by the state with money, housing, medical care, and so forth. Furthermore, the government needs to intervene in the labor market to prevent discrimination that would keep members of unpopular groups from finding employment and also to have minimum-wage legislation ensuring that all workers will be paid “decently.” A complete list of all the actions required of government by the supposed need to help people lead dignified lives could go on for pages.

If we examine the statist egalitarian measures Duncan advocates, we see the four errors on exhibit. He makes both estimation errors about freedom and both estimation errors about government action. To illustrate, I propose to examine a policy that Duncan insists on and which is widely favored among nonlibertarians—the minimum wage.

The Minimum Wage and the Free Society

According to Duncan , the libertarian policy of nonintervention in the economy is flawed for many reasons, among them that it allows employers to pay workers at rates that aren’t adequate for the workers to “shape their lives” and live with “dignity.” He writes, “Wages below a decent minimum treat workers more like disposable instruments for others’ needs than people with their own lives to live. The current level of $5.15—which totals a mere $10,300 a year for a full-time worker who works fifty weeks per year—is surely too low.” (The national minimum wage was just raised to $5.85, and will rise to $7.25 in the summer of 2009.) Duncan doesn’t inform us how high the minimum wage needs to go, but he is absolutely certain that it must be raised significantly.

Recall the first type of error in the quadrant, that of overestimating the problems of a free society, and then note Duncan ‘s fevered rhetoric. Employers who pay workers only the minimum wage are said to treat them like “disposable instruments.” That makes it sound as though people employed at the minimum wage are rather in the same situation as were prisoners in the Soviet Gulag, where millions of them actually were disposed of—literally worked to death under astoundingly inhumane conditions. Now Duncan isn’t saying that the American minimum-wage employee is worked to death, but his “treating them like disposable instruments” talk is calculated to make the reader think that workers are suffering terribly and that their employers are hardly better than slave masters. Is freedom, even when limited in the mixed economy, really so awful as this nonlibertarian depicts it?

Duncan ‘s eagerness to attack the morality of those who employ workers without ensuring that they are paid enough to “shape their lives” is the first point we should examine. Their actions certainly don’t indicate that they regard low-paid workers as “disposable” since they want them to continue working for them and frequently grant pay increases to induce them to stay rather than look for other employment. No employer can force anyone to work or prevent an employee from quitting. When an employer contracts with an individual for labor, he is not mistreating the individual simply because the rate of pay is lower than Duncan would accept.

Next, let’s ask how serious the supposed problem of minimum-wage employment is. Undoubtedly it would be hard to support yourself, much less a family, on only the earnings from a minimum-wage job, but very few people do. The typical minimum-wage worker is a teenager living with his parents, earning some spending money. Many others are older people with other sources of household income besides the minimum-wage job. People like that can “shape their lives” tolerably well. It is only a small fraction of those who work at the minimum wage who fit Duncan ‘s image of struggling, suffering people. But there are some, and that brings us to the next mistake Duncan makes.

Nonlibertarians underestimate the ability of free people to deal with problems. If some people struggle and suffer because they can’t earn enough money, why not assist them through voluntary means? Duncan, however, does not want to hear about voluntarism, airily dismissing the idea that there could ever be enough funds and donations to solve the poverty problem. Why? Because, he points out, many individuals and businesses take advantage of tax “loopholes” to minimize their taxes. This is a non sequitur. The deduction for charitable giving is one of the main “loopholes” Americans take advantage of. Duncan never explains how he concludes that private charity could never be sufficient from the premise that people and businesses prefer to keep as much of their income as they legally can. There’s simply no logical connection. The fact that people would rather put their money toward purposes of their own choosing rather than see it go to the vast array of government expenditures—most of which have nothing to do with the alleviation of poverty—tells us nothing about the extent of their desire to help others in need.

A libertarian polity would have far lower government expenditures and would therefore impose far less drag on the economy. More resources would be available for production; more jobs would be created and prices would fall. As a result, there would be less poverty. Furthermore, private charitable groups would expand to replace inefficient government programs and agencies, and consequently there would be more effective assistance to the poor than currently. Actually, it is the mega-state that ensures there will never be enough resources to alleviate poverty.

Evidence for the efficacy of voluntary programs to relieve poverty abounds. Long before there were government welfare programs or any income tax to avoid, America had a vibrant network of charities to assist the poor and self-help mutual-aid societies. Anti-libertarians who pooh-pooh voluntarism would do well to read David Beito’s book, From Mutual Aid to the Welfare State. With the revolution in communications and information of the last decade, it is now easier than ever to identify and assist individuals who truly are struggling in life. Contrary to Duncan ‘s beliefs, voluntary action would be much more effective than the blunt, clumsy policies of minimum-wage laws or welfare entitlements.

Mistakes Regarding Government

Looking at Duncan’s case for the minimum wage and increasing its current level, we also see the predictable mistakes that nonlibertarians make regarding government action.

First, he overestimates the capacity of government to solve the supposed problem of poverty among low-wage workers. Although Duncan doesn’t say exactly how much higher the minimum wage needs to go to guarantee all workers enough income to “shape their lives,” let’s assume that if we doubled it, that would be sufficient. Make it illegal for an employer to pay any worker less than $11.70 per hour and poverty goes away for those workers who used to earn between the current minimum and the new amount. Right?

Not so fast. Employers tend to make adjustments when the cost of any factor of production goes up, and the cost of labor is no different. Putting aside the likelihood that some workers would be terminated—we will get to that in our fourth error—employers have ways of offsetting the mandated increase in the cost of labor, which would affect all workers who had been making less than the minimum previously. Break time might be reduced. Previously “free” benefits such as uniforms might be charged against pay. Unless the minimum-wage advocates are prepared to also legislate away managerial freedom (as some are), workers won’t benefit as much as expected from their vicarious generosity.

Furthermore, since most workers who start at minimum wage earn pay increases within a short time, all that the mandatory wage increase does is to accelerate somewhat the time at which they start earning more. While the minimum-wage advocate may think that by increasing it, he “lifts people out of poverty,” the truth is that most workers lift themselves out of poverty. Government action accomplishes much less than people like Duncan believe.

Now we come to the final quadrant of the matrix of mistakes, namely, the tendency of nonlibertarians to underestimate the harm done by government action. If they don’t underestimate it, they ignore it entirely.

With regard to the minimum wage, economists have long understood that if government sets a price floor below which no transaction may legally be entered into, the result will be a surplus of the item. There won’t be enough demand to buy up the supply. In the labor market, the word for that is unemployment. Therefore, most people who have studied labor markets conclude that raising the minimum wage will lead to some job losses among current workers and a reduction in job opportunities for people who will be trying to enter the labor market in the future. Raising the minimum wage benefits workers who keep their jobs—predictably, those regarded as the most productive and promising employees—but at the expense of the workers who are laid off immediately and all future workers who will find fewer opportunities available to them. Fewer legal opportunities, anyway. People who are priced out of legal employment will often resort to illegal employment.

Duncan is aware of that criticism, but he dismisses it. He does so by pointing to a 1995 study by economists David Card and Alan Krueger, which found no disemployment effect in the fast-food industry when New Jersey raised its minimum wage. That’s enough for Duncan to brush away the argument that this interference with the price system is harmful. His conscience is clear.

It shouldn’t be. The Card-Krueger study certainly does not disprove that raising the price of labor reduces the demand for labor. All it shows is that the authors did not find a short-run increase in unemployment in a small slice of the labor market at a time when the economy was growing robustly. It is logically impossible to get from the findings of that study to Duncan ‘s conclusion that increasing the cost of hiring low-skilled workers will have no effect on their employment prospects.

As an aside, one reason why nonlibertarians ignore the harm done by government intervention is that the harm usually is felt by other people. If Duncan were thinking of taking some medicine but his wife pointed out that a dozen clinical studies show that the medication often has serious side effects in men his age, would he dismiss all that evidence just because he read that one doctor somewhere said he didn’t think it hurt his patients? I doubt it. People tend to behave more cautiously when they stand to bear a personal cost from being wrong. When it comes to grand social experiments, people who are well-off aren’t so cautious about the harmful effects their experiments will have on others.

Besides creating higher unemployment among low-skilled workers, the minimum wage has another bad consequence, namely that it encourages people to look to politics to get what they want. Duncan thinks he sees a brighter future for the poor through legislation that supposedly helps them, but many other people will also use politics to get things they want, things that may undo whatever benefit Duncan expects from the political actions he favors. Business firms will try to obtain competition-stifling laws that drive up prices or subsidies that come at taxpayer expense and divert resources from more productive uses. Professional groups will seek government favors, especially licensing laws that keep down the number of practitioners in their field, thus increasing the cost of services. (The legal profession plays that game beautifully, with the result that many poor people cannot afford legal assistance when they need it.) Regulations promoted by environmental organizations will drive up the cost of housing, gasoline, and many other items everyone needs. The liberal democracy to which Duncan and others like him look for the passage of minimum-wage laws, welfare programs, and so on inevitably grows into a Leviathan that will do just about anything except leave people alone. In the effort to help a few people shape their lives, Duncan ‘s political meddling opens the floodgates to limitless government tampering that misshapes everyone’s life. Unfortunately, that’s a problem he can’t see.

Nonlibertarians advocate a vast array of governmental laws and policies that drain away people’s liberty. Most of the time the problems they want to eliminate are real, but have their roots not in freedom, but rather in existing laws and policies that benefit a few at the expense of the many. They want to mandate that we behave in certain ways and prohibit us from behaving in others. I submit that whether it’s the minimum wage, Social Security, public education, welfare, the war on drugs, or anything else, when you examine their arguments, you always find the four errors I have outlined here. They overestimate the problems of freedom while underestimating the ability of people to deal with the problems that do exist without the use of coercion, and they overestimate the ability of government to solve problems while underestimating the damage that government does when it interferes with the spontaneous social order.

The next time you hear someone say, “We need to have the government do this . . . ,” examine his argument carefully. See if you don’t find that he has made those four mistakes.