Policy All the Way Down
By Bryan Caplan
Are policy reformers naive? Both libertarians and public choice economists (and especially libertarian public choice economists) often say so: “The policies we have are a rational response of political actors to the institutional incentives they face. The only way to change policy is to change the institutional incentives.” Over at the Distributed Republic, Jason Lyles applies new labels to this old dispute:
Libertarian thinkers can be plotted on many axes. Presently, the
axis I am most concerned with is Policy Libertarianism vs. Structural
Policy Libertarians (PLs) include the vast majority of the most
visible organizations and writers in the modern libertarian movement:
the Reason Foundation, the Cato Institute, the Ron Paul campaign, the
LP, the Constitution Party, most libertarian economists (e.g. Milton
Friedman), and single-issue organizations like Students for a Sensible
Drug Policy. PLs, as their name suggests, focus their energies on
inventing and advocating a list of policies that governments should
follow. For example, you can find policy libertarians opposing liberal
eminent domain laws, fighting for lower taxes and deregulation,
supporting cultural tolerance, opposing invasive police searches, and
advocating the rest of the familiar libertarian manifesto.
Structural Libertarians (SLs) are much rarer in modern times than
PLs, although the opposite used to be the case. Structural libertarians
include Patri Friedman, Mencius Moldbug, David Friedman, Murray Rothbard,
all libertarian Public Choice economists, Lysander Spooner, and the
classical liberals that libertarians have adopted as intellectual
ancestors. SLs often have the same moral and policy beliefs as PLs, but
they focus their energies on the alternative ways to structure a
government and the effect that government structure has on its
incentive to adopt good policy.
At first glance, what Lyles calls the SLs seem a lot more realistic: To change policy, you’ve got to change institutions, right? Unfortunately, institutions themselves are a kind of policy. They arise because previous institutions create incentives for change, and endure because current institutions create incentives for stability. Or as we economists like to say, “Institutions are endogenous.”
Suppose, for example, that the SL advocates more federalism in order to get more libertarian policies. Isn’t this more “realistic” than advocating drug legalization? Hardly. The level of federalism is low and stable for a reason – when there was more federalism, political actors have incentives to reduce it; now that’s low, political actors have little incentive to change it. Alas, it’s policy all the way down.
P.S. Even if I’m wrong about this, the SLs still need the PLs. After all, unless the PLs are right that existing policies are bad, what’s the point of working for structural change?