As with Derek Wall, I’m gratified by the thoughtful tone of Steven Horwitz’s response to my lead essay.
Where he agrees with me, he makes some good points of his own that add to what I was trying to say — particularly in regard to “free markets” not meaning the domination of society by the cash nexus.
I’m especially pleased to learn of our shared respect for the Ostroms, which he mentions in this regard. The distinction he makes between governance and government, in discussing Lin Ostrom’s work on the commons, is a good one; and his point about “community-based institutional solutions in a free society, particularly on a local scale,” is also important. In recognizing (with reference to Vincent Ostrom) that “democracy” need not mean mere majoritarianism, “but instead refers to the participatory way that each of us negotiates with each other to develop rules of social conduct,” Steven perceives something that too many mainstream libertarians fail to grasp. “Each time people avoid or resolve conflicts by working with others to solve the problem at hand, they are engaged in the task of democracy.”
The Ostroms shared the concern that community-based solutions to commons problems and our ability to avoid and resolve small-scale conflicts were being crowded out by both the state and the market (in Carson’s sense of the “cash nexus”). These other forms of human cooperation were being crushed from both sides by the regulatory state and narrow conceptions of economic institutions. One way of reading this opening point from Carson is that a truly free society opens up that middle ground to a range of Ostrom-style organizational forms. A free market need not be only markets. And an anarchist society is not without governance. The institutional forms that emerge may look much more like the ones we associate with civil society, and Carson rightly notes they are likely to play a much bigger role in a free society.
Where we do disagree on how a society with a freed market would differ from the existing one, a considerable part of the disagreement is a matter of degree, not direction. Steven accuses me of “overstating … the distortions created by the state” and, while acknowledging that a freed market would differ in many ways from the existing economy, goes on to say that “[w]hat I am much more skeptical about is the degree of those differences.”
In this regard I can only say that, in my own research on the effects of various general categories of state intervention — perhaps most important among them the large-scale expropriation of land from the peasantries of industrializing Western countries (as well as both land and natural resources from the colonized countries of the Global South), and so-called “intellectual property”) — I found it hard to mentally encompass the sheer magnitude of the effect of each one of these categories of intervention taken severally, let alone their cumulative effect. I think a world in which the land of the open fields and the common pasture and waste of Europe, and the land expropriated by the haciendas, Warren Hastings and British East African colonial authorities of the world had all remained in the hands of the original cultivators, would be unrecognizable; certainly the scale of the wage labor market, and the terms on which wage labor was accepted by wage labor, would be far different. A world without the cartelizing effects of patents, and without the service that patents and trademarks currently provide to global corporate control of offshored production, would also be far different. Trying to imagine the cumulative effect of removing these, and other, interventions is — for me at least — still more mind-blowing.
Still, there is a significant amount of disagreement even over the direction of the changes that would result from the removal of state intervention in the economy. Steven finds me guilty of a fault that, in his opinion, I share with much left-libertarian writing: “too many assertions without careful economic argument about what a truly free market would look like …” Although he concedes that a world without subsidies and other government action to promote centralized long-distance transportation systems might have resulted in “more regional and local” economies, he reminds left-libertarians that “you can’t prove a counter-factual.”
This is a bit odd coming from an adherent of Austrian economics, which I believe Steven is. Although I am not a follower of that school, I do agree with its tenet that we can often predict a priori the general direction of the effect that, all other things being equal, a given change will produce.
In the specific case of transportation, he raises the possibility — which he expresses some surprise that I dismissed so quickly — “that ensuring the existence of such transportation systems to facilitate a nationwide market might not be worth it for the private sector.” Although Walmart benefits from infrastructure subsidies, “[i]t is not as obvious as Carson seems to think it is that the private sector would not replicate something close to what we have now.”
In weighing the question of whether Walmart would find it “worth it” to fund an infrastructure system on the present scale fully at their own cost, all I can say is that cases where people use just as much of something when they have to pay the full cost themselves as they do when using it on somebody else’s nickel are pretty rare. A subsidy to any factor input — like transportation — is a subsidy to those firms whose business models rely most heavily on that particular input. So unless large-scale mass-production for large market areas was already more efficient than small-scale production for local markets, we would expect subsidized long-distance transportation to shift the competitive balance to some degree from the latter towards the former. And in fact the supply-push distribution model associated with mass production for large markets carries a considerable number of diseconomies and irrationalities that offset even a portion of the benefit resulting from the transportation subsidies. Far from enabling an increase in overall efficiency, subsidies to long-distance transportation promote a net increase in inefficiency.
Steven also finds fault with my arguments on the superior efficiency of local craft production over mass production for integrating electrical power into manufacturing, and on the industrial district as the ideal model for taking full advantage of such technology.
I can see no meaningful argument or evidence to support this assertion. It might be true, but there’s no reason to think so that I can see. It strikes me as a bit of wishful thinking whereby Carson is able to draw a much greater contrast between the capitalist status quo and his idealized free society.
My lack of citation to back up this claim in the lead essay is a legitimate weakness that Steven has rightly pointed out. It’s a claim I’ve substantiated elsewhere at considerable length and with accompanying documentation (most notably in the first chapter of my book The Homebrew Industrial Revolution ) that I should have footnoted here as well.
Steven takes issue, finally, with my point about low-cost and ephemeral production technology blurring the lines between “employment” and “unemployment,” and between being “in business” and “out of business” (which Marxists and much of the mainstream Left make so much of in their prediction that even a non-capitalist market would eventually lead to the reconstitution of capitalism through the cumulative effect of “winners” and “losers” in the competitive marketplace).
At the end, he argues that in a truly free market we would see less of the sort of unemployment and “going out of business” that we see today thanks to the fluidity of a market with lower capital requirements for entry in smaller-scale production. What Carson appears to misunderstand here is the nature of capital goods, at least in the eyes of the Austrian economists. Even where the scale of production is smaller, “capital” in the abstract does not exist, in contrast to the implication Carson leaves by referring to “capital requirements.” Capital comes in the form of specific goods with a limited number of productive uses, not all of which deliver the same value. The same is true of human capital. The fact that it takes less investment to start a business in a smaller-scale economy doesn’t help much when even the smaller-scale machinery that a firm uses cannot be costlessly refit to new uses when demands change or competition favors other firms. The same is true of people. They cannot costlessly “refit” their human capital in the face of exogenous change. Even if production is at smaller scale, inevitable economic change will require costly and time-consuming adjustments by capital and labor, leaving some capital idle and some labor unemployed for some period of time. Perhaps those time periods will be smaller, but again absent more argument, that would be mere assertion. But thinking the length of idleness would approach zero is precisely the sort of utopianism of which left-libertarianism is too often guilty.
In this case, I may have left implicit things I should have made explicit in my argument. Although I referred to craft labor quickly shifting back and forth between production runs of different goods, I think I unjustifiably left out a step in my reasoning, and assumed the reader’s prior knowledge that craft production is amenable to such rapid shifts without major outlays for physical capital or retraining. Unlike mass production, which uses highly specialized dies and requires extensive retooling to shift between product lines, craft production relies on general purpose machinery that can quickly be reset to produce a wide variety of different products (something also true to a certain extent even within mass-production, as exemplified by the Single Minute Exchange of Dies (SMED) under the Toyota production system). Likewise, craft production in small shops relies on skilled artisans who can adapt their general-purpose machinery to a variety of products without retraining. These, also, are topics I dealt with extensively in my earlier work on the history of production technology, and shouldn’t have assumed general readers’ familiarity with.
It’s my own belief that the underlying economic processes matter more for the relevant costs and benefits than do the distorting effects of the state, and along more margins, than the left-libertarians believe. I might well be wrong, but the danger for the left-libertarians is that they are making the same sort of utopian (in the bad sense) promises that have been made by the traditional left. If people are skeptical of that utopianism, it may also backfire onto more mainstream libertarians.
Kevin Carson’s essay reminds us not to succumb to what some have called “vulgar libertarianism” in taking the status quo as evidence for what a free society would look like. At the same time, though, that reminder can turn into an equally unproductive utopianism that makes promises that have little evidence to support them and are therefore unlikely to be kept.
I’m gratified — to repeat myself — by Steven’s regard for the value of my work in combating vulgar libertarianism. As for my utopian promises with their lack of evidence, I hope my rejoinder will go some way towards remedying that lack.
1. Kevin Carson, The Homebrew Industrial Revolution: A Low-Overhead Manifesto (2010), Chapter One.