In their book We’ve Got You Covered, which I reviewed here, Liran Einav and Amy Finkelstein have a short section in which they discuss a 1975 article by James Buchanan titled “The Samaritan’s Dilemma.” They summarize it briefly. It has been almost 50 years since I’ve read Buchanan’s piece but I think they get it basically right. Buchanan argued that when people are bailed out from their risky decisions that go wrong, they are likely to take fewer precautions. Thus the dilemma: do we help them, which will signal them and others not to take precautions, or do we not help them, recognizing that some people who didn’t take precautions will be in bad shape? (I guess I’ve answered that for myself. I have friends who have not made nearly as good provision for their old age as I have, and I sometimes help them.)
Then they write:
The issue with the Good Samaritan, in other words, is one of unintended consequences, a perennially popular theme of economists’ lunchtime chatter and PhD dissertations alike.
This summing up of Buchanan’s point surprised me. I would have thought that the authors would identify this theme of “chatter” and dissertations for what it is: moral hazard. Finkelstein has written extensively on moral hazard, making their failure to use the term even more puzzling.
Then they write:
How then to protect ourselves against our own well-intentioned but ultimately misguided charitable instincts? True to his libertarian roots, Buchanan offered no public policy solution. “Modern man has ‘gone soft,'” Buchanan lamented, as he exhorted the reader–in the spirit of Lady Macbeth urging her husband to murder the king–to try to restrain our natural impulses, to “screw [our] courage to the sticking place.”
I know a little about libertarianism, having been one for over 50 years. I’ve never seen someone who understands it say that being true to my libertarian roots means I can offer “no public policy solution.” I probably don’t go a day without offering some kind of public policy solution that is rooted in my libertarian views, whether it be to cut government spending, end rent control, end tariffs, end certificate of need laws, liberalize immigration. or many others. And specifically, since the discussion is about people not buying health insurance, I have often argued for allowing bare-bones health insurance that many people could afford rather than throwing people off those policies the way the Biden administration is attempting to do.
Whatever their intent, Einav and Finkelstein come off as people who want their readers not to take libertarians seriously. More important, they do it by distorting.
READER COMMENTS
Roger McKinney
Sep 5 2023 at 11:54am
Marvin Olasky provides the libertarian response to poverty in his book The Tragedy of American Compassion, though he despises libertarians. In the 18th and 19th centuries, churches divided up the poor in their towns among the churches. Then each church assigned people to get to know the poor in their area, determine their needs and recommend church actions. If women had children, they provided food and cloth for making clothes. They never gave cash, especially to men of working age. They kept piles of logs near the church and would pay any man to chop would. The greatest fear of churches was giving too much to the poor so that many would depend on it instead of working.
T Boyle
Sep 5 2023 at 1:33pm
Adam Smith discusses parish-based poverty responses at some length in The Wealth of Nations. In that discussion he pointed out the many regrettable consequences of tying charitable responses to parishes and thus to specific communities and geographic areas. In light of his exposition, I’d hardly describe it as “the” libertarian response.
Dylan
Sep 5 2023 at 12:12pm
It’s an interesting dilemma, but I’m not sure that the policy implications lean libertarian. There’s a lot of research that points to humans generally being fairly risk averse. Given that taking certain types of balanced risks , like entrepreneurship, is one of the main reasons that we live so much better than our ancestors, it could be argued that there are positive externalities to (certain types) of risk taking, and that we tend to take fewer risks than optimal.
I’ve been influenced recently by reading Matt Levine’s characterization of the banking industry’s primary innovation is creating the illusion of safety that induces regular savers to take on more risk with their savings than they normally would on their own, and banks then take those savings and make risky loans to small business entrepreneurs at lower rates than would be possible in a more straightforward model where maturities are matched. That should get us more growth and innovation than we otherwise would get, but with the cost of semi-regular banking crises.
steve
Sep 5 2023 at 2:49pm
I think the modern norm is to avoid the better arguments made by the people who are better at making cogent arguments instead going after the weaker arguments made by the more extreme or stupid people whose ideology you oppose. Within that context it is possible to find libertarians who offer no solutions. You do kind of own the anarcho-capitalists who. I think that is unfair to libertarians in general who do have a lot to offer, but then I also think this happens with liberals and conservatives.
I think the claims for no solutions often really means you dont have a solution I like. Libertarians seem to emphasize markets and often that makes sense but is interpreted as not doing anything. That said market remedies can take a while and it is in that between period where I do think libertarians are often weak.
Steve
David Seltzer
Sep 5 2023 at 3:42pm
Steve said, “That said market remedies can take a while and it is in that between period where I do think libertarians are often weak.” Compared compared to government remedies? Or more likely government interference that reduces free market incentives to produce? Rent control in NYC has property owners deferring maintenance and forestalling new rental construction. What does weak mean? A rather amorphous claim if you don’t define your evidence to support it.
steve
Sep 5 2023 at 6:52pm
I have agreed before and will so again that rent control is bad. What I am really thinking of is our response to “creative destruction”. The buggy whip maker lost his job and overall it was good for the economy that we moved on to cars. many new jobs were created, many of them better. However, it took a while for some of those buggy whip makers to learn a new job and the older ones may really have lost the ability to learn the new jobs on offer so they went from being at the top of their profession to maybe pushing a broom somewhere. It’s for those who were in between and those who suffered permanent loss I don’t think libertarians have much to offer. The market will eventually make a new job for you just doesn’t get it.
Or look at the moral hazard issue. If you look at real world cases it gets complicated. The reality is that half of the population is below average in intelligence. They really do rely on the advice of people they perceive as experts. If the people giving that advice are putting their own needs/profits ahead of the person paying them for a service and the person paying doesn’t have the skills or just the brights to recognize that do we just say “too bad, moral hazard” or down look at remedies?
Steve
David Seltzer
Sep 5 2023 at 7:06pm
Steve said, The market will eventually make a new job for you just doesn’t get it. Really? What do you propose? That government(s) create jobs like the failed shovel ready initiative or, during my experience as a steal worker, Hard Core Unemployed gov initiative? Those in the first quintile of earners get 45k in taxpayer transfers. Where is the incentive for the able bodied to seek any employment? I see your point Steve. I just disagree.
David Seltzer
Sep 5 2023 at 7:09pm
Meant steel worker. Parapraxis on my part Steve? Good conversation. Thanks!
steve
Sep 6 2023 at 11:30am
I am not 100% sure what would work but if a libertarian answer to this exists I am unaware of it. I dont think this is so much an issue of hard core unemployment but rather people who were working, who want to work, but things changed. Not everyone has the skills to quickly change. Half the world is below average. David has suggested moving, maybe a good idea if you can, but some people will have family obligations and for some that wont make much difference as they will just be moving to a new area and still have no marketable skills.
My gut feeling is that it might make sense to offer temporary financial assistance to these people with a proven work record. Maybe job training, vocational or community college stuff. Maybe just being honest while recognizing them. Dont lie and tell them you will get their jobs back but tell them you know they want to work and will provide counseling help to advise on best job fits for them.
Steve
Richard W Fulmer
Sep 5 2023 at 5:37pm
Many remedies that libertarians have offered boil down to undoing progressive “solutions” that have either created problems or made them worse.
steve
Sep 5 2023 at 6:54pm
I agree, but not always.
Query- Is it possible for libertarians to be wrong? I know that I am often wrong, just not always when.
Steve
Richard W Fulmer
Sep 5 2023 at 7:16pm
Of course. Libertarians disagree among themselves all the time. But when libertarians are wrong, their mistakes don’t impact millions of people because, unlike progressives, they don’t impose their views – or use government to impose their views – on millions of people.
Dylan
Sep 5 2023 at 9:29pm
That sounds good, but is not really accurate. Or at least it is accurate only in the fact that libertarian positions rarely get implemented in anything close to the form a libertarian would suggest.
Let’s take education and healthcare as two examples, I think it isn’t too controversial to suggest that most libertarians would suggest making pretty radical changes to both industries, getting rid of a ton of government intervention in these markets. That might be for the best! The current systems leave a lot to be desired, and I tend to come in on the side that more market oriented reforms would make them better. But, I could be wrong! And, any change that is made to either system will impact millions of people, maybe in really bad ways.
Richard W Fulmer
Sep 6 2023 at 9:37am
Dylan,
Here are my (libertarian?) suggestions for improving education. How would they harm millions of people?
Stop forcing children to go to bad schools.
Stop preventing parents from sending their children to the schools of their choice.
Stop letting teachers’ unions prevent schools from firing bad teachers.
Require that teachers have degrees in the subjects they teach.
Stop promoting students to the next grade even if they haven’t learned the material.
Stop emphasizing self-esteem above accomplishment.
Stop adding fad courses to the K-12 curricula that leave less time for students to learn the basics.
Stop teaching children that they are either oppressors or oppressed by virtue of their skin color.
Stop teaching children that the deck is stacked against them and that they have no hope of bettering their lives or those of their loved ones through their own efforts.
steve
Sep 6 2023 at 11:15am
Is there any proof that your recommendations would work? Some of those are just talking points so we can ignore those and I agree with a couple but look at requiring people to have a degree. I assume that would not be for K-6, but I think we all know or should know that teaching is a separate skill. I have lots of people with lots of education and degrees from top universities. Some cant teach. It’s a skill. So if you want to conduct the experiment of having people with no training in teaching take over teaching on a large scale, then you should have evidence. There are individual cases where schools have used people who had a degree and were interested in teaching but that hardly proves it can be done at scale. Plus, how many math majors do you think would want to teach 8th graders? Could we generate enough to do it?
This ignores that we have years and years of experience with places that have had success with teaching. Massachusetts, if rated as a separate country, would rank 2nd in the world in science, 4th in reading and 9th in math, tied with Japan on international test scores. This has been true for years and it’s a proven model.
Steve
Richard W Fulmer
Sep 6 2023 at 12:05pm
Which are “just talking points” and why?
Having a degree in, say, mathematics doesn’t preclude having training in education. Two of my kids are elementary school math teachers – one 6th grade the other 8th. They received liberal arts degrees at St. John’s College in Annapolis. They then both got their master’s in education from the University of Mississippi as part of its two-year Mississippi Teacher Corps program. During the two years, they taught in some of Mississippi’s worst schools. They are qualified to teach English, math, and science, but schools are usually desperate for math teachers.
Today, both teach in Title 1 schools in the Houston area. Because of their experience, they get the toughest students, many of whom can barely read. Despite everything, their students learn. They’re strict with their kids, and their kids love them.
john hare
Sep 6 2023 at 5:38pm
@Richard 9:37 am,
I agree with all but your fourth point. A degree is not a guarantee of ability to teach. In my observation, it is not even a guarantee of subject knowledge. Credentialism. Let results speak for themselves starting with the school itself. With accountability to parents and the community for results, schools can find ways of getting results. Also need less oversight from those with no skin in the game except political theater.
Dylan
Sep 6 2023 at 6:32pm
@Richard
You’re right that I’m not sure most of your suggestions qualify as libertarian. I think these first two, might, but it depends a lot on how you interpret them. First, I don’t think anyone is prevented from sending their kids to pretty much any school they want. Private schools exist, and many parents of all income backgrounds send their kids to a private school instead of public. Yes, they are essentially paying twice for school, through taxes as well as private tuition. But, I don’t have kids and am paying the same school taxes, so not sure that is all that strong of an argument.
I’m going to make a bit of a leap then, and say you’re advocating for something akin to school vouchers? Giving parents the ability to take their tax dollars away from their local bad public school, and instead use that money for a different public or private school? It’s not a topic I’m an expert in, but I lean to thinking this is probably a good idea and would improve schools. But, lots of people strenuously disagree and think it would be a disaster. And, a lot of those people are experts in education! Yes, they have self-interested motivation for thinking the way they do, but many of them presumably care a lot about kids and also know the way teaching/schools work, so I don’t think it is wise to 100% discount their opinions.
The broader point I was trying to make though is, this is definitely a policy that will impact millions of people. I think there’s a good chance it would on net benefit a bunch of those people. But, I could be wrong! It’s really hard to know before the fact (heck, as David’s comment suggests, it can be really hard to know if it on net helped or harmed people even decades later).
Richard W Fulmer
Sep 7 2023 at 9:37am
Dylan,
Check out Thomas Sowell’s book, Charter Schools and Their Enemies.
David Henderson
Sep 6 2023 at 2:18pm
Yes, it’s possible for libertarians to be wrong. I often make mistakes. The difference between me and many of my allies and many of my critics is that I admit them more readily.
Richard answered:
I would suggest a friendly amendment. When libertarians are wrong, their mistakes usually don’t affect millions of people.
I’ll give an example where I think I was wrong and I do think the policies that followed from the view I favored hurt potentially millions of people. In the 1970s, I was strongly influenced by Thomas Szasz’s work on involuntary commitment and, I confess, by the novel One Flew Over the Cuckoo’s Nest. That led me to oppose involuntary commitment. I think a big part of the reason for the pathologies we see among many of the homeless is that they, unlike their counterparts of 50 years ago, are not in mental institutions.
I say the above with some humility. Maybe I wasn’t wrong but it sure didn’t work out the way I expected.
robc
Sep 6 2023 at 2:35pm
I don’t think you were wrong, but agree that it didnt work out the way you (or others) expected.
One of the nice things about being a deontological libertarian is the end result doesn’t change the morality of the action.
Involuntary commitment for the non-criminallly mentally ill is wrong. Full stop.
The solution for the mentally ill homeless is something else. I am not sure what the solution is.
Richard W Fulmer
Sep 6 2023 at 3:27pm
robc,
We wouldn’t put orphaned children out on the streets and some of the mentally ill are less capable than is the average six-year-old kid. Involuntary commitment is terrible, but I believe that it’s less bad than the alternatives. Institutions staffed with trained psychologists and psychiatrists are preferable to prisons staffed with guards and ruled by prison gangs, which is, effectively, the tradeoff that we’ve made.
With the development of antipsychotic drugs in the 1950s and 1960s, deinstitutionalization became an attractive alternative to the expense and questionable morality of forced institutionalization. Unfortunately, medications work only while patients take them and, once outside of the institutions, many fail to do so.
Perhaps with today’s technology, patients’ medications could be monitored or even administered remotely. On the other hand, is involuntary medication any less immoral than involuntary commitment? It’s certainly less restrictive, but does that make it right? On yet another hand, is it as immoral as letting people wander the streets to become a danger to themselves and others?
At some point, don’t even deontological libertarians have to bend?
robc
Sep 7 2023 at 10:05am
I would say that bend point is children, and like children, people who are literally incapable of making adult choices.
But, to use one of your examples, someone who while on their medication is capable who chooses to not continue their medication is making their own capable (although probably stupid) choice.
Richard W Fulmer
Sep 7 2023 at 10:23am
Agreed. But, once off their medications, they become literally incapable of making adult choices. So, what do we do?
David Seltzer
Sep 5 2023 at 6:58pm
Richard, Thank you! Spot on!
Dylan
Sep 7 2023 at 11:53am
@Richard
I’ve not read Sowell’s book, but I have read a couple of reviews of it. As I mentioned, I’m inclined to be in favor of charter schools and I find the arguments (as summarized in the reviews I’ve read) to be fairly persuasive.
However, I also think we should be pretty aware of selection effects (both for students, teachers, and administrators). There’s also a lot of evidence that relatively small scale pilot programs can have a lot of success, and that success can mostly disappear when they try to scale.
There’s also an ethical component. I think by and large better and more motivated students will do better in a charter or magnet school than they would in a traditional public school. But, I also think it is possible that the left behind students, with less positive role model peers, will do worse. My instincts are that it is better to let the students who want to learn do so, even if it makes the remaining students worse off. But I don’t think that is a slam dunk argument ethically, and could potentially be bad on utilitarian outcomes based measures too. What if, in the absence of good role models, a lot more marginal students decide to join gangs and crime spikes for a generation?
Richard W Fulmer
Sep 7 2023 at 1:31pm
My understanding is that when public schools have to compete with charter schools, they tend to get better. People tend to be about as efficient and productive as they need to be to keep their jobs.
I’ve also read that having a at least a few parents who are active in their children’s schools makes a big difference in school quality. If that’s true, then that weakens my argument for charter schools to the extent that they siphon involved parents out of public schools. On the other hand, teachers’ unions tend to work to minimize parental involvement, so weakening union control over the education system is a plus.
In any event, giving parents more say in their children’s education won’t happen overnight. Rather, it will occur incrementally, school by school and district by district. So, if things go wrong, there will be plenty of off-ramps before millions of students are hurt.
Contrast that to the current system in which untested educational fads are rolled out to hundreds of school districts very quickly.
Thomas L Hutcheson
Sep 7 2023 at 1:34pm
That is true, but I think misses the point that the “undoing” could be replacing a validly criticized bad policy with a better policy. Rent control should be replaced by reforms to land use, building codes and pricing of road and street use. Subsidies to investment in “green energy by taxation of net emissions of CO2. Taxation of business income by taxation personal income. Minimum wages could be replaced with wage subsidies, removal of occupational licensing. Import protection by deficit reduction to reduce capital inflow and dollar overvaluation.
James Anderson Merritt
Sep 7 2023 at 4:29pm
Ever since I first became aware of libertarianism, in the mid-1970s, opponents have been doing everything possible to ensure that libertarians are not taken seriously, with distortion and misrepresentation being among their key tools. In that sense, nothing has changed in 50 years.
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