This essay first appeared in the International Encyclopedia of Economic Sociology, edited by Jens Beckert and Milan Zafirovski (London and New York:  Routledge, 2006, pp. 403-407).  It was posted as a Notablog entry on 5 January 2006.  Comments welcome (post here).

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"LIBERTARIANISM"

By Chris Matthew Sciabarra

International Encyclopedia of Economic Sociology

Libertarianism is the political ideology of voluntarism, a commitment to voluntary action in a social context, where no individual or group of individuals can initiate the use of force against others. It is not a monolithic ideological paradigm; rather, it signifies a variety of approaches that celebrate the rule of law and the free exchange of goods, services, and ideas – a laissez-faire attitude towards what philosopher Robert Nozick (1974) once called ‘capitalist acts between consenting adults’.

Modern libertarians draw inspiration from writings attributed to the Chinese sage Lao Tzu, as well as the works of Aristotle, among the ancients; [seventeenth-,] eighteenth- and nineteenth-century classical liberalism (e.g. John Locke, the Scottish Enlightenment, the American founders, Carl Menger, and Herbert Spencer); individualist anarchism (e.g. Benjamin Tucker and Lysander Spooner); Old Right opponents of Franklin D. Roosevelt’s New Deal (e.g. Albert Jay Nock, John T. Flynn, Isabel Paterson and H. L. Mencken); modern Austrian economics (e.g. Ludwig von Mises, F. A. Hayek and Murray Rothbard), as well as the economics of the Chicago school (Milton Friedman) and Virginia school (James Buchanan); and the Objectivist philosopher Ayn Rand.

Classical liberalism is the most immediate predecessor of contemporary libertarianism. Locke and the American founders had an impact on those libertarians, such as Rothbard and Rand, who stress individual rights, while the Scottish Enlightenment and Spencer had a major impact on thinkers such as Hayek, who stress the evolutionary wisdom of customs and traditions in contradistinction to the ‘constructivist rationalism’ of state planners.

Among evolutionists, Spencer in particular made important contributions to what would become known as ‘general systems theory’; some consider him to be the founder of modern sociology. Indeed, he authored Principles of Sociology and The Study of Sociology, which was the textbook used for the first sociology course offered in the United States, at Yale University. A contemporary of Charles Darwin, he focused on social evolution – the development of societies and organizational structures from simple to compound forms. In such works as The Man Versus the State, he presented a conception of society as a spontaneous, integrated ‘growth and not a manufacture’, an organically evolving context for the development of heterogeneity and differentiation among the individuals who compose it. Just as Spencer emphasized organic social evolution, so too did he focus on the organic evolution of the state – with its mutually reinforcing reliance on bureaucracy and militarism, and how it might be overcome.

The Austrian-born Carl Menger, a founder – along with W. S. Jevons and Léon Walras – of the marginalist revolution in economics, held a similar view of social life as a dynamic, spontaneous, evolving process. Influenced by Aristotle in his methodological individualism, Menger was fervently opposed to the historical relativism of the German historicists of the Methodenstreit. Menger focused on the purposeful actions of individuals in generating unintended sociological consequences – a host of institutions, such as language, religion, law, the state, markets, competition and money.

In the twentieth century, the Nobel laureate Austrian economist F. A. Hayek carried on Menger’s evolutionist discussion and praised it for providing outstanding guidelines for general sociology. For Hayek (1991), Menger was among the ‘Darwinians before Darwin’ – those evolutionists, such as the conservative Edmund Burke and the liberals of the Scottish Enlightenment, who stressed the evolution of institutions as the product of unintended consequences, rather than deliberate design.  Hayek drew a direct parallel between his own concept of spontaneous order and Adam Smith’s notion of the ‘invisible hand’. Hayek argued that, over time, there is a competition among various emergent traditions, each of which embodies rival rules of action and perception. Through a process of natural selection, those rules and institutions that are more durable than others will tend to flourish, resulting in a relative increase in population and wealth. Though he didn’t argue for a theory of inevitable progress, as Spencer had, he clearly assumed that liberalism was the social system most conducive to such flourishing.

Like Karl Marx, Hayek criticized utopians for their desire to construct social institutions as if from an Archimedean standpoint, external to history and culture. But Hayek turned this analysis on Marx; he developed a full-fledged critique of socialism and central planning as utopian – requiring an unattainable ‘synoptic’ knowledge of all the articulated and tacit dimensions of social life. Hayek argued that market prices were indispensable to rational entrepreneurial calculation. He also focused on the sociological and psychological ramifications of the movement away from markets. He maintains in The Road to Serfdom (1944), for example, that there is a structural connection between social psychology and politics: to the extent that the state imposes collectivist arrangements on individuals, it is destructive of individual choice, morals and responsibility, and this destruction of individualism reinforces the spread of statism. And the more the state comes to dominate social life, says Hayek, the more state power will be the ‘only power worth having’ – which is ‘why the worst get on top’.

The Austrian economist Ludwig von Mises was similarly opposed to statism and collectivism, and presented, in [1922], an influential book entitled Socialism, which was ‘an economic and sociological analysis’ of all forms of state intervention – from fascism to communism. Mises used the tools of praxeology, ‘the science of human action’, to demonstrate the calculational problems that all non-market systems face, due to their elimination of private property, entrepreneurialism and the price system. More important, perhaps, is Mises’s development of a non-Marxist, libertarian theory of class. Like Charles Dunoyer, Charles Comte, James Mill and other classical liberals, Mises argued that traders on the market share a mutuality of benefit that is destroyed by political intervention. For Mises, the long-term interests of market participants are not in fundamental conflict. It is only with government action that such conflict becomes possible, Mises claims, because it is only government that can create a ‘caste system’ based on the bestowal of special privileges.

Mises located the central ‘caste conflict’ in the financial sector of the economy. In such books as The Theory of Money and Credit, he contends that government control over money and banking led to the cycle of boom and bust. A systematic increase in the money supply creates differential effects over time, redistributing wealth to those social groups, especially banks and debtor industries, which are the first beneficiaries of the inflation. 

Mises’ student, Murray Rothbard, developed this theory of ‘caste conflict’ into a full-fledged libertarian class analysis. Rothbard views central banking as a cartelizing device that has created a powerful structure of class privilege in modern political economy. These privileges grow exponentially as government restricts market competition and free entry, thereby creating monopoly through various coercive means (e.g. compulsory cartelization, price controls, output quotas, licensing, tariffs, immigration restrictions, labour laws, conscription, patents, franchises, etc.).

Rothbard’s view of the relationship between big business and government in the rise of American ‘statism’ draws additionally from the work of New Left historical revisionists, such as Gabriel Kolko and James Weinstein. These historians held that big business was at the forefront of the movement towards government regulation of the market. That movement, according to Rothbard, had both a domestic and foreign component, since it often entailed both domestic regulation and foreign imperialism to secure global markets. The creation of a ‘welfare-warfare state’ leads necessarily to economic inefficiencies and deep distortions in the structure of production.  Like Marx, Rothbard views these ‘internal contradictions’ as potentially fatal to the economic system; unlike Marx, Rothbard blames these contradictions not on the free market, but on the growth of statism.

Drawing inspiration from Franz Oppenheimer’s and Albert Jay Nock’s distinction between state power and social power, or state and market, and from John C. Calhoun’s class theory, as presented in Disquisition on Government, Rothbard saw society fragmenting, ultimately, into two opposing classes: taxpayers and tax-consumers. In his book Power and Market, Rothbard identifies bureaucrats, politicians and the net beneficiaries of government privilege as among the tax-consumers.  Unlike his Austrian predecessors Hayek and Mises, however, Rothbard argues that it is only with the elimination of the state that a fully just and productive society can emerge. His ‘anarcho-capitalist’ ideal society would end the state’s monopoly on the coercive use of force, as well as taxation and conscription, and allow for the emergence of contractual agencies for the protection of fully delineated private property rights (thereby resolving the problems of externalities and public goods) and the adjudication of disputes. His scenario had a major impact on Nozick, whose Anarchy, State, and Utopia was written in response to the Rothbardian anarchist challenge.

Ayn Rand, the Russian-born novelist and philosopher, author of best-selling novels The Fountainhead and Atlas Shrugged, was one of those who eschewed the libertarian label, partially because of its association with anarchism. An epistemological realist, ethical egoist and advocate of laissez-faire capitalism, Rand maintained that libertarians had focused too much attention on politics to the exclusion of the philosophical and cultural factors upon which it depended. But even though she saw politics as hierarchically dependent on these factors, she often stressed the reciprocal relationships among disparate elements, from politics and pedagogy to sex, economics and psychology. She sought to transcend the dualities of mind and body, reason and emotion, theory and practice, fact and value, morality and prudence, and the conventional philosophic dichotomies of materialism and idealism, rationalism and empiricism, subjectivism and classical objectivism (which she called ‘intrinsicism’). Yet, despite her protestations, Rand can be placed in the libertarian tradition, given her adherence to its voluntarist political credo.

From the perspective of social theory, Rand proposed a multi-level sociological analysis of human relations under statism. Echoing the Austrian critique of state intervention in her analysis of politics and economics, Rand extended her critique to encompass epistemology, psychology, ethics and culture. She argued that statism both nourished and depended upon an irrational ‘altruist’ and ‘collectivist’ ethos that demanded the sacrifice of the individual to the group. It required and perpetuated a psychology of dependence and a group mentality that was destructive of individual authenticity, integrity, honesty and responsibility. Rand also focused on the cultural preconditions and effects of statism – since coercive social relations required fundamental alterations in the nature of language, education, pedagogy, aesthetics and ideology. Just as relations of power operate through ethical, psychological, cultural, political and economic dimensions, so too, for Rand, the struggle for freedom and individualism depends upon a certain constellation of moral, psychological, cultural and structural factors that support it. Rand advocated capitalism, ‘the unknown ideal’, as the only system capable of generating just social conditions, conducive to the individual’s survival and flourishing.

See also: inflation; laissez faire; monopoly and oligopoly.

References and further reading

Calhoun, John C. ([1853]1953) A Disquisition on Government and Selections from the Discourse on the Constitution and Government of the United States, Indianapolis, IN: Bobbs-Merrill.

Hayek, F. A. (1944) The Road to Serfdom, Chicago: University of Chicago Press.

—— (1991) The Collected Works of F. A. Hayek, Volume 3: The Trend of Economic Thinking: Essays on Political Economists and Economic History, Chicago: University of Chicago Press.

Mises, Ludwig von ([1912]1981) The Theory of Money and Credit, Indianapolis, IN: Liberty  Classics.

—— (1936) Socialism: An Economic and Sociological Analysis, London: Jonathan Cape.

Nozick, Robert (1974) Anarchy, State, and Utopia, New York: Basic Books.

Rand, Ayn (1967) Capitalism: The Unknown Ideal, New York: New American Library.

Rothbard, Murray ([1970]1977) Power and Market: Government and the Economy, Kansas City, MO: Sheed Andrews and McMeel.

—— (1978) For a New Liberty: The Libertarian Manifesto, revised edition, New York: Collier Books.

Sciabarra, Chris Matthew (1995) Ayn Rand: The Russian Radical, University Park, PA: Pennsylvania State University Press.

—— (1995) Marx, Hayek, and Utopia, Albany, NY: State University of New York Press.

—— (2000) Total Freedom: Toward a Dialectical Libertarianism, University Park, PA: Pennsylvania State University Press.

Spencer, Herbert (1873) The Study of Sociology, New York: D. Appleton.

—— (1882–98) The Principles of Sociology, three volumes, London: Williams and Norgate.

—— ([1940]1981) The Man Versus the State, with Six Essays on Government, Society, and Freedom, Indianapolis, IN: Liberty Classics.

CHRIS MATTHEW SCIABARRA

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Note:  [bracketed words] above are corrections to online version


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