View source for A Libertarian Case for the Moral Limits of Markets

<!-- you can have any number of categories here -->
[[Category:Matt Zwolinski]]
[[Category:Markets]]
[[Category:Bleeding Heart Libertarians]]
<!-- 1 URL must be followed by >= 0 Other URL and Old URL and 1 End URL.-->
{{URL | url = https://www.academia.edu/12442105/A_Libertarian_Case_for_the_Moral_Limits_of_Markets}}
<!-- {{Other URL | url = }} -->
<!-- {{Old URL | url = }} -->
{{End URL}}
{{DES | des = [[Matt Zwolinski]], hobbled by libertarian propaganda and framing, attempts to square the circle of libertarian faith in markets with the reality of the involuntary nature of property and market externalities. | show=}}
<!-- insert wiki page text here -->
<!-- DPL has problems with categories that have a single quote in them.  Use these explicit workarounds. -->
<!-- otherwise, we would use {{Links}} and {{Quotes}}  -->
{{List|title=A Libertarian Case for the Moral Limits of Markets|links=true}}
{{Quotations|title=A Libertarian Case for the Moral Limits of Markets|quotes=true}}

{{Text |
A Libertarian Case for the Moral Limits of Markets
MATT ZWOLINSKI*
I. INTRODUCTION ...................................... 275
II. WHATLIBERTARIANSBELIEVE ........................... 276
III. LABORMARKETS .................................... 279
IV. PRIVATIZATION ...................................... 283
V. TOWARD A NON-IDEAL LIBERTARIAN THEORY OF MARKETS . . . . . . . 285
REFERENCES ............................................ 288
I. INTRODUCTION
To be a libertarian, it is thought, is to be an unabashed defender of the
market—a “market fundamentalist,” to use a phrase that is popular among some
1
of libertarianism’s more colorful critics. That phrase is meant to suggest, I
suppose, that libertarians believe in the goodness of markets with a faith that is immune to rational criticism or empirical counterevidence, thus rendering them blind to what critics see as the numerous economic and moral failures of markets. But it also meant to convey something about the scope of markets in the libertarian vision. Libertarians are thought, to borrow a phrase from Karl Polanyi, to believe in a “market society,” where “instead of the economy being embedded in social relations, social relations are embedded in the economy.”2
Exactly what Polyani meant by the phrase “market society” is a little unclear. But the general idea, I take it, is that a market society is one in which market values, market norms, and market institutions dominate and shape all other values, norms, and institutions. Libertarians who favor a market society are thus thought to favor markets everywhere, in all things, regardless of the ways in which those markets might affect or undermine other moral values, other (non-market) norms, or other important social institutions.
For purposes of this paper, I want to put to the side the question of whether any libertarians actually believe in something like Polanyi’s market society. Instead, I want to ask the normative question of whether libertarians should believe in it. Should libertarians always be in favor of expanding the role of
* Department of Philosophy, University of San Diego, mzwolinski@sandiego.edu. © 2015, Matt Zwolinski.
 1. (Stiglitz, 2009).
2. (Polanyi, 2001, p. 60).
275
276 THE GEORGETOWN JOURNAL OF LAW & PUBLIC POLICY [Vol. 13:275
markets? And should they support market institutions to the exclusion of other social institutions?
The correct answer to both of these questions, I think, is “no.” There is, of course, an important libertarian argument to be made on behalf of markets, but that argument has its limits. This is because the libertarian case for markets is derivative of other and more fundamental libertarian moral commitments. Sec- tion II discusses these commitments more fully. Briefly, libertarians favor markets because and to the extent that markets can facilitate a voluntary, decentralized, and mutually advantageous form of social cooperation. But not every market has these morally attractive characteristics. And not everything that has these characteristics is a market.
One purpose of this paper, then, is to explore the limits of the libertarian case for markets. What particular kinds of markets should libertarians not support, and what are the common types of defects that such markets exhibit? Sections III and IV examine labor markets and the privatization of public utilities and prisons and discuss various ways in which these particular markets fail to instantiate the values that make markets attractive from a libertarian perspec- tive. The analysis of these particular markets, as we will see, raises a question of deeper philosophical importance: what practical implications does the libertar- ian ideal of free markets have in a world that falls well short of that ideal? Libertarians are adept at painting an attractive picture of what a society of
3
purely free (or “freed”) markets would look like. But the fact that purely free
markets would be desirable tells us, by itself, relatively little about what we
should do now, when the choices available to us are almost always between
institutional arrangements of varying degrees of imperfection. The second
purpose of this paper, then, is to begin an examination into a “non-ideal”
libertarian theory of markets—one focused less on creating a vision of a
normatively ideal end-state for society and more on providing reasonable
guidance for the sorts of moral trade-offs we face when that ideal is not on the
4
II. WHAT LIBERTARIANS BELIEVE
Among academic philosophers, libertarian thought is most closely identified
with the neo-Lockean theory set forth by Robert Nozick in Anarchy, State, and
3. The term “freed markets” has been adopted by a number of contemporary “left-libertarians,” who employ it as an alternative to the more common “free markets” in order to emphasize that freedom is something still to be achieved in the future, not a fait accompli or a memory of a bygone Golden Era. See (Gillis, 2007).
4. Discussions of the relative merits of “ideal” and “non-ideal” theory have become increasingly common in the academic literature within the last ten years, but the immediate inspiration for this emphasis is Amartya Sen’s call to think about justice less as a “transcendental ideal” and more as a “comparative” notion. See (Sen, 2009, part I).
table.
 
2015]
A LIBERTARIAN CASE FOR THE MORAL LIMITS OF MARKETS 277
5
Utopia. Brilliant and important though Nozick’s work may be, however, it is
neither the alpha nor the omega of libertarian thought. Nozick himself devel-
oped many of his most distinctive ideas in response to a tradition of libertarian
6
thought that long preceded him. That tradition is far richer, and far more
7
8
property play a large role. But there are numerous other strands, as well, such
that it would be a mistake to identify a focus on self-ownership as definitive of libertarian thought. Nozick’s desire to provide an “invisible-hand” explanation of the state, for instance, is self-consciously derived from a longstanding focus within the libertarian intellectual tradition on the nature and normative signifi-
9
cance of spontaneous order. But while there is certainly some overlap, the
libertarians who made the greatest contributions to our understanding of sponta- neous order were largely not ones who identified with a broadly Lockean framework in political philosophy or who made regular use of the standard
10
necessary and sufficient conditions. Rather, it is a family of theories, united by rough agreement on a set of empirical, methodological, and normative proposi-
12
5. See, for instance, the discussion of libertarianism in (Kymlicka, 2002), which is almost entirely focused on Nozick’s book, (Nozick, 1974).
6. Nozick notes in the acknowledgements to his book that: “It was a long conversation about six years ago with Murray Rothbard that stimulated my interests in individualist anarchist theory” (Nozick, 1974, p. xv). And while mention of earlier libertarian thinkers is mostly absent from the main text of the book, references in the endnotes are made to Lysander Spooner, Benjamin Tucker, Morris and Linda Tandehill, David Friedman, Ludwig von Mises, Friedrich Hayek, among others.
7. With John Tomasi, I provide a partial coverage of that diversity in (Zwolinski & Tomasi, 2016).
8. Apart from Nozick, the most well-known figure in that strand is Murray Rothbard, who presents and develops a roughly Lockean approach to political philosophy in (Rothbard, 1973, 1982). Notable earlier intermediary figures include Thomas Hodgskin (Hodgskin, 1832) and Auberon Herbert (Herbert, 1978).
9. (Nozick, 1974, pp. 18–22).
10. That tradition has its origins in the Scottish Enlightenment, in Hume’s analysis of property, Smith’s analysis of the division of labor and the “invisible hand,” and the social thought of Frances Hutcheson. It received its most important contemporary development in the work of Friedrich Hayek (Hayek, 1945, 1973, 1994, 2011).
11. I elaborate on this “family resemblance” account of libertarianism in (Zwolinski, 2008) and at greater length in (Zwolinski & Tomasi, 2016, chapter 1).
12. See, for an overview, (Barry, 1982).
diverse, than academic philosophy’s myopic focus on Nozick would suggest. Within that tradition, there is, of course, an important strand of thought in which considerations of self-ownership and a natural, labor-based right to
conceptual tools of that approach.
Libertarianism is not a single theory that can be identified by a neat set of
11
order often arises “spontaneously,” rather than by command, as a result of the
tions.
Empirically, as we have seen, libertarians believe that beneficial social
voluntary, decentralized, and participatory actions of numerous individuals. This empirical belief in the power of market mechanisms is connected to libertarians’ most distinguishing and significant normative belief: their belief in
 
278 THE GEORGETOWN JOURNAL OF LAW & PUBLIC POLICY [Vol. 13:275
13
the existence of any legitimate political authority whatsoever.
alists through and through, not only in the political sense of believing in the primacy of individual rights, but in the normative sense of believing that each person’s life is a moral end in itself, and in the ontological sense of believing that individuals constitute the ultimate unit of social analysis, in terms of which
15
against forceful aggression by others.
On this understanding of libertarianism, the libertarian support for markets is
not foundational or definitive of libertarianism as such. It is, instead, dependent on the more foundational moral and empirical commitments described above. Libertarians believe in markets because and only to the extent that they consti- tute a form of spontaneous order, a corollary of respect for private property rights, a way of treating individuals with equal respect, and an important competitive mechanism for restraining individuals’ ability to wield dominating power over others.
More specifically, libertarians support markets because and to the extent that they are:
1. Voluntary (rather than coercive)
2. Decentralized (rather than centralized)
3. Competitive (rather than monopolistic)
4. Positive-sum (rather than zero- or negative-sum)
It is possible for a particular market to have all of these characteristics. But there is no a priori reason to believe that all markets necessarily will. A market, after all, is merely a form of human interaction characterized by price-based exchange. And there is no reason to suppose that everything that is a market in
13. Libertarians believe in strong rights of property insofar as they believe that property rights can only be overridden—if they can be overridden at all—by the weightiest of competing moral consider- ations. Libertarians believe in extensive rights of property insofar as they believe that property rights should be assigned to an unusually wide range of objects—such as highways, national parks, and human kidneys.
14. The best contemporary libertarian presentation of this skepticism is (Huemer, 2012), but the libertarian skepticism of authority has a long and fascinating pedigree. See, for a partial overview, (Martin, 1953).
15. See, for a discussion, (Mack & Gaus, 2004, p. 116).
16. This cosmopolitanism manifests itself in the libertarian opposition to protectionism (Bastiat, 1964), to immigration restrictions (Huemer, 2010), and to war (Palmer, 2014).
the moral imperative of strong and extensive rights of private property. Libertarians are characteristically deeply skeptical of authority, especially (but not exclusively) in its political manifestation, some so much that they deny
14
all other units such as nations, races, and governments must be understood. Finally, and partially by virtue of their individualism, libertarians are cosmopoli- tans who deny the moral significance of national boundaries, racial and sexual divisions, etc. All humankind is one, united in its possession of a natural right
16
They are individu-
 
2015] A LIBERTARIAN CASE FOR THE MORAL LIMITS OF MARKETS 279
this sense will have the normatively attractive characteristics described above. A slave market, to take only the most obvious example, is a market. But however decentralized and competitive it may be, the fact that human beings are being bought and sold against their will and for the benefit of others, renders them morally grotesque from a libertarian perspective.
Of course, none but the most unfair critic of libertarianism would ever suppose that libertarians support a market in human slaves. But the example is only meant to demonstrate in extreme form one way in which markets can be defective from a libertarian perspective. In the following two sections, I will examine markets that libertarians are often thought to support (and sometimes really do support) and see that the ways in which they share similar defects, in less obvious ways.
III. LABOR MARKETS
To many non-libertarians, certain segments of the labor market seem deeply problematic. I put aside here the Marxist claim that any market in human labor is objectionable. Whatever the merits of such a claim, it does not play much of a
17
Nevertheless, libertarians often position themselves as defenders of these markets. They point to the ways in which unions restrict labor market competi- tion, thus benefitting their own members at the expense of other non-union workers, and to the various special political privileges that unions receive from the state, such as the right granted by the 1935 National Labor Relations Act to exclusively represent all workers in a unionized workplace, even if workers would prefer to negotiate their own contracts.
In response to criticisms of sweatshop labor, libertarians note that sweatshops are almost always a significantly better opportunity than the alternative sources of employment available to workers in the developing world. After all, if they were not, workers would not choose to take the job. The fact that they choose to do so is evidence that they regard the employment offer as a mutually beneficial one, and indeed the most mutually beneficial option to which they have access. Taking away that option through legislative fiat or over-regulation would only harm the very workers well-intentioned reformers are trying to help.
In making these responses, libertarians are not saying anything obviously wrong. If there is a problem with the arguments, it lies in what they do not say, rather than what they do. Libertarians are right to say that labor contracts are mutually beneficial, and they are right to argue that dismantling special political privileges for unions through legislation, such as the Right to Work Act, would
17. See, for example, (Sandel, 2012; Satz, 2010).
role in the arguments put forward by contemporary critics of the market.
does not need to be a Marxist, however, to think that there is something deeply wrong with the power relationship between unskilled workers and capitalists, or with sweatshop labor in the developing world.
One
 
280 THE GEORGETOWN JOURNAL OF LAW & PUBLIC POLICY [Vol. 13:275
increase the competitiveness of the labor market. But there is more to the story than this, and libertarians must be careful not to cut their analysis short or to draw stronger conclusions about these markets than is warranted by the evidence.
Consider, for example, the argument made by Friedrich Hayek regarding Right to Work legislation. Hayek, like many libertarians, supported such legisla- tion as a means of increasing labor market competitiveness by prohibiting agreements between employers and unions to restrict employment to union members. Such “special legislation” ran afoul of Hayek’s commitment to governance by general principles. But, according to Hayek:
If legislation, jurisdiction, and the tolerance of executive agencies had not
created privileges for the unions, the need for special legislation concerning
them would probably not have arisen in common-law countries. But, once
special privileges have become part of the law of the land, they can be
removed only by special legislation. Though there ought to be no need for
special ‘right-to-work laws,’ it is difficult to deny that the situation created in
the United States by legislation and by the decisions of the Supreme Court
may make special legislation the only practicable way of restoring the prin-
18
On their face, Right to Work laws look like they ought to be anathema to libertarians. After all, the mechanism by which they operate is one that prohibits a voluntary and presumably mutually beneficial agreement between employers and unions. Libertarians do not generally regard the suppression of voluntary economic agreements as a permissible activity of the state, even on the supposi- tion that such suppression might produce various important social benefits, such as increased market competition.
Hayek recognizes this, of course. His argument is that Right to Work Laws are necessary because past legislation has rigged the game in favor of unions. And in claiming that government privileges have invested unions with powers that they would not have in an open, competitive market, Hayek is no doubt correct. But Hayek seems to ignore the fact that government has also handi- capped unions in various respects. Two of the most important pieces of labor legislation in the United States—the Taft-Hartley Act and the Wagner Act— deprived unions of some of their most potent economic weapons. By placing restrictions on sympathy, boycott, and wildcat strikes, imposing mandatory cooling-off periods and otherwise restricting unions’ powers by forcing them to work through the official channels in which management had a large compara- tive advantage, U.S. labor regulations served to create stability within the workplace and secure management’s control of production. The privileges granted to labor were, in an important sense, a bargaining chip that the govern- ment was willing to give to unions in order to tame them. The result was a
18. (Hayek, 2013, pp. 397–398).
ciples of freedom.
 
2015] A LIBERTARIAN CASE FOR THE MORAL LIMITS OF MARKETS 281
solidification of power for the large, established unions, a power for which they were willing to trade away many of their most effective weapons and the rights
19
libertarians note, and as I myself have stressed in several articles on the topic, that the choice of workers to accept a sweatshop’s offer of employment is generally a mutually beneficial one, even if the terms of that agreement may
20
But this is only part of the story. For even if it is true that sweatshop labor is often workers’ best option for meeting their needs and the needs of their family, we must still ask why it is their best option. Sometimes, perhaps, the causes will be unexcep- tional: sweatshop labor is workers’ best option in a particular country because that country is poor, and the country is poor because the things that need to happen in order for wealth creation to occur never happened. In cases like these, there is not much to explain, and probably not much to object to, from a moral perspective.
In other cases, however, a darker story can be told. Sweatshops in urban centers find a pool of ready workers partly because subsistence farmers have been driven there by the forced appropriation of their land. Collective bargain- ing by workers to improve wages is legally forbidden or, if allowed, suppressed by businesses with the passive consent of the law. Restrictions on workers’ access to credit and ability to start their own businesses keep their opportunities
21
None of these conditions, deplorable though they may be, change the fact that
sweatshop employment is mutually beneficial, and mutually beneficial in a way
that provides a much-needed benefit to workers in dire economic circum-
22
So should libertarians condemn sweatshops or praise them? Are labor unions—as they exist in the United States—a force for good or evil? Of course,
19. For an overview and discussion, see (Carson, 2007, chapter 6). 20. (Powell & Zwolinski, 2011; Zwolinski, 2007).
21. See, for discussion, (Arnold & Bowie, 2003; Chartier, 2008). 22. (Zwolinski, 2012).
of smaller, less well-organized workers’ collectives.
The situation of sweatshop labor is similarly complex. It is true, as many
seem insufficient or unfair to outside observers.
would do sweatshop workers no favors by banning sweatshop labor or regulat- ing it out of existence, for this would leave such workers in the very conditions of desperate poverty that drove them to sweatshops in the first place, while depriving them of what they perceive as their best route out of that poverty.
limited to wage labor and restrict their entrepreneurial freedom.
stances.
surplus created by that mutually beneficial relationship is divided. By buttress- ing the power of employers and weakening the power of employees, these conditions make it likely that more of that surplus is going to find its way into the pockets of capitalists, and less into the pockets of laborers. And it is precisely this sort of unfair distribution of the social surplus, it seems to me, that many of the more sophisticated critics of sweatshops have in mind when they decry sweatshop labor practices as “exploitative.”
They do, however, arguably change the way in which the social
And it is also true that we
 
282 THE GEORGETOWN JOURNAL OF LAW & PUBLIC POLICY [Vol. 13:275
the issues are not as simple as that. In some ways, labor markets in the United States and elsewhere embody the virtues that libertarians see in markets more generally, and to that extent libertarians will and ought to support them. In other ways, however, those markets will be deeply objectionable from a libertarian perspective. What’s a conscientious libertarian to do?
What is to be done will depend to a considerable degree upon the details of the particular market under consideration. There is only so much that can be said about “sweatshops” as an ideal type before we need to turn to particular sweatshops situated in particular historical, social, and legal contexts in order to gather the information necessary to draw any useful conclusions.
There is, however, at least one useful lesson that we can draw at the level of philosophical reflection: libertarians should be careful in drawing inferences about real world markets from their theoretical ideals. It is one thing to argue that inequality between capitalists and laborers would be acceptable in a situation in which private property was justly acquired through a peaceful process of Lockean labor-mixing and where freedom of contract, property, and association are rightly protected by law. It is quite another to argue that they are acceptable in this world, where those conditions are decidedly not satisfied. And it is entirely invalid to draw any firm conclusions about the actual acceptability of the first kind of inequality from the theoretical acceptability of the second.
This lesson seems so obvious that it is hardly worth stating. Libertarians believe free markets are good, but it does not follow that they believe that unfree markets are also good. Were it not for the fact that this point were routinely ignored, not only by many of libertarianism’s critics but by many libertarians themselves, I would think it obvious too. But the fact that, for instance, libertarian discussions of property rights so routinely jump from the supposed validity of a historical theory of property like Locke’s or Nozick’s to conclusions about the sanctity of actual property rights in the real world shows
23
24
that actually exist are not necessarily good. Still, though, one might think that even if we grant this point, at the very least more free markets must necessarily be a good thing from a libertarian perspective. As plausible and even mundane as this principle might seem, however, it is false. In the next section, we will see why.
23. This error might be becoming less common among libertarians, thanks in part to the efforts to call attention to it represented in this excellent collection of essays: (Chartier & Johnson, 2012).
24. Herbert Spencer makes a similar point in his own critique of the Lockean theory of property. See (Spencer, 1995, pp. 104–105).
that the lesson is still very far from absorbed.
distribution of property might have come about in a morally acceptable way should strike libertarians as no more relevant to the justification of actual property rights than the fact that the state might have originated in a voluntary
social contract is to the justification of the actual state.
So even if free markets are good, the partially-free, partially-rigged markets
The fact that an unequal
 
2015] A LIBERTARIAN CASE FOR THE MORAL LIMITS OF MARKETS 283
IV. PRIVATIZATION
Libertarians have been some of the earliest and most vocal supporters of “privatization.” And this should come as no surprise. For the basic idea of privatization involves transferring power out of the hands of the state and into the hands of the market. Whether it be selling off industries that were formerly owned and controlled by the state, as was done in Britain under Thatcher with British Airways, British Petroleum, and a host of other industries, or merely opening up state services to competitive bidding from the private sector, as is increasingly done by the US military, privatization appears to move society in the direction of greater competition, greater efficiency, and smaller government. What’s a libertarian not to love?
In some cases, nothing. On the libertarian view, many of the resources to which governments lay claim are ones to which government has no moral right. It obtained them by conquest and theft and retains them only by virtue of a combination of superior force and the popular perception of legitimacy. Libertar- ians would like to see these resources returned to their rightful owners or, if that is not possible, at least out of the hands of a coercive government and into the hands of voluntary civil society. They favor, to borrow a quip from Charles Johnson, the “socialization of the means of production.”25
Sometimes selling off state resources to the highest bidder is a fair and
effective way of achieving this socialization. Privatization in Britain under
Thatcher seems to be a good example. The British government had no business,
from a libertarian perspective, owning airlines, a petroleum company, and
millions of units of public housing. And so it sold them in a way that was
transparent and open to almost anyone to participate in, divesting itself of any
stake in its illegitimately claimed businesses and transferring them to the private
26
sector.
during the 1990s.
Much the same could be said about privatization in the Czech Republic 27
But not everything that goes under the label of “privatization” is something of which libertarians should approve. Three types of problems are especially significant and pervasive.
First, sometimes privatization does not really end the coercive government monopoly at all; it merely shifts the management of that monopoly into private hands. Most instances of “privatized” utilities take this form. The government auctions off the management of its utility company to private firms, often in a less-than-transparent process. The winning bidder gets ownership rights over the company, but that’s not all. It also gets a government guaranteed and enforced monopoly in which would-be competitors are kept out of the market
25. Charles Johnson, “Sprachkritik: ‘Privatization,’” 8 Nov 2007, http://radgeek.com/gt/2007/11/08/ sprachkritik_privatization/.
26. See, for discussion Robert Poole’s entry on “Privatization” at the Concise Encyclopedia of Economics: http://www.econlib.org/library/Enc/Privatization.html.
27. Thomas W. Hazlett, “The Czech Miracle,” Reason Magazine, April 1995.
 
284 THE GEORGETOWN JOURNAL OF LAW & PUBLIC POLICY [Vol. 13:275
by force of law. Along with that monopoly power, however, comes the require- ment to submit to a whole host of government restrictions on the exercise of
28
that power, often including detailed controls on price and output levels.
In cases such as this, government resources and power are nominally trans- ferred into private hands, but with virtually none of the benefits libertarians typically see in markets. There is, to be sure, some competition in the initial bidding process that has the potential to bring down costs. But beyond that, competition is strictly limited by the government-backed monopoly. That mo- nopoly is maintained by government force, coercively preventing new firms from entering the market, and locking consumers into a single seller. And the monopoly is heavily regulated by a government agency which faces the usual problems of knowledge and interest in setting prices, determining output levels,
and so on.
The privatization of prisons in the United States since the early 1990s
exemplifies this first problem, and a second as well. Prison contracts take the form of state-backed monopolies. It is hard to imagine what real “competition” would look like in this industry. But even more worrisome, from a libertarian perspective, is that prison contracts involve the “privatization” of work that shouldn’t just be taken out of the hands of government—it should be taken out
29
drug offenses. Libertarians generally believe that coercive punishment and imprisonment ought to be used only against those who have fraudulently or violently violated the rights of others. Since non-violent drug users (or manufac- turers, or sellers) have not done this, libertarians believe it is morally wrong for the government to imprison them. It is, in fact, an act of aggression against them—a violation of their rights.
Transferring the management of prisons from the government to a private party does not make this wrongful imprisonment acceptable. To the extent that privatization has created a “market” in prisons, it is not a market that libertar- ians ought to celebrate. For what is being bought and sold is the legal right to do something that nobody has a moral right to do. In this respect, prison markets are very much like the slave markets of the 18th and 19th centuries.
Markets do not turn a wrongful activity into a rightful one. Indeed, they may even make those wrongful activities worse. The reason that prison privatization occurred in the United States in the 1990s was that prisons were becoming too expensive for the government to run. Expanding prison populations, fueled by the war on drugs, pushed the physical resources of existing prisons to their limits, leading to a boom of new construction. Prison privatization was seen—
28. This is the case with the energy companies involved in the California deregulation programs of the late 1990s and early 2000s.
29. See Sheldon Richman, “From State to Society,” Cato Unbound, October 1, 2012, http://www.cato- unbound.org/2012/10/01/sheldon-richman/state-society.
of the hands of everybody.
Many of the people inside U.S. prisons, for example, are there for non-violent
 
2015] A LIBERTARIAN CASE FOR THE MORAL LIMITS OF MARKETS 285
rightly, it turns out—as a way of bringing some much-needed efficiency into the system.
But this seems like precisely the last thing that libertarians ought to want. A more efficiently run prison system means a prison system that is better able to do the things that libertarians don’t want it to be doing in the first place. If privatization had not occurred, governments would come under increasing pressure to find some other way to bring down costs—perhaps by releasing prisoners who should not have been there in the first place.
Finally, even in cases where neither of these two problems are present, there might still be a third problem with privatizing resources by auctioning them off to the highest bidder. After all, if the resources are ones that should not have belonged to government in the first place, then what right does the government have to collect money in exchange for them?
A market in stolen goods is not a market that libertarians should endorse, at least as a first-best solution to the problem of government’s illegitimate claim on resources. As a second-best solution, it might sometimes be all we can do. If a government has obtained its resources by stealing them from someone else, then ideally we should like to see those resources returned to their rightful owners. But if the rightful owners no longer exist, then it is not obvious just what the government ought to do instead. Perhaps it should try to track down the descendants of those from whom the resources were stolen. Perhaps it should throw the resources back into the commons and allow them to be homesteaded by those who work on them. Murray Rothbard once suggested this latter approach as a way of dealing with the problem, suggesting that it meant that military bases should be turned over to the soldiers and civilians who
30
worked there, universities turned over to the students and faculty, and so on. The shortcomings of privatization demonstrate what should probably be obvious: dressing up a morally illegitimate activity in the guise of a market does not make it any less morally illegitimate. If coercive monopolies are illegiti- mate, then a coercive monopoly obtained by a private sector company through a competitive auction is illegitimate too. If locking young men away because they held, used, or sold drugs is illegitimate, then it is still illegitimate when the entity locking them up is an economically efficient private firm, rather than a sluggish state bureaucracy. And if it is illegitimate for the government to claim rights over stolen goods, then it is illegitimate for the government to profit by
selling those goods in a public auction.
V. TOWARD A NON-IDEAL LIBERTARIAN THEORY OF MARKETS
Perhaps this paper has merely belabored the obvious. Libertarians support free markets; they don’t support unfree markets. If all I have done in this paper is point out the ways in which some markets are rendered unfree by various
30. (Rothbard, 1969).
 
286 THE GEORGETOWN JOURNAL OF LAW & PUBLIC POLICY [Vol. 13:275
forms of government regulation and control, and then pointed out that libertar- ians do not or should not support such markets, then I have not really said anything that libertarians, or libertarians’ more perceptive critics, did not al- ready know.
But things are not so simple. It is true enough to say that libertarians support free markets (truly free markets, we sometimes emphasize), and not unfree ones. But what does that mean in a world in which most actually existing markets are a troubling mix of freedom and unfreedom? To the extent that sweatshops would not exist without various forms of government coercion— such as land seizures, restrictions on credit, and anti-union legislation—they are, we might properly say, not a genuinely free market phenomenon. And yet, for all that, the kind of market in which they operate is not entirely unfree either. Taking the constraints imposed by government as a given, workers nevertheless freely choose from among their constrained set of options to work at a sweat- shop rather than do something else. Employers compete with each other over employees, wages are responsive to forces of supply and demand, and within a sizeable range, both employees and employers are free to act as they wish without government constraint. The kinds of markets in which sweatshops exist don’t look much like Libertarian Utopia. But they don’t exactly look like Stalinist Russia either.
Given all this, what sort of evaluative attitude should libertarians have toward sweatshops and the markets in which they exist? And, on a more pragmatic level, what should they advocate doing as a result of those attitudes? What policy changes should they recommend? And how should they advise agents to act within the imperfect policy framework that exists right now?
These questions might seem to admit obvious answers. Libertarians should support policy changes that move us in the direction of freer markets and oppose ones that move in the opposite direction. The ideal of perfectly free markets is one to be aimed at, but commitment to that ideal as the ultimately desirable end-state should not prevent us from taking small steps in its direction.
Once again, however, matters are not so simple. What does it mean, after all,
for a policy change to move us in the direction of freedom? Many policy
changes increase personal freedom in some ways and limit it in others. Con-
sider, for example, the policy of school vouchers. Such a policy increases
freedom for a great many—allowing parents to opt out of their local, geographi-
cally-mandated public school and into a different public or private school of
their own choosing. But this freedom comes with strings attached. In this case,
those strings are attached to the schools that wish to claim eligibility for the
31
31. For a libertarian critique of vouchers along these lines, see (Huebert, 2010, pp. 122–126).
voucher program.
tion of freedom? Or does bringing formerly free schools under greater control by the federal government actually produce the opposite effect? Do we subtract the unfreedoms from the freedoms, cheer the policy if the difference is positive,
Should libertarians consider this policy a step in the direc-
 
2015] A LIBERTARIAN CASE FOR THE MORAL LIMITS OF MARKETS 287
and jeer if it is negative?
Even policy changes that move us unequivocally in the direction of freedom
are not unambiguously good. For such policy changes might shift the distribu- tion of burdens and benefits in a way that offends against the idea of equality before the law. To see this, imagine a society in which no one is allowed to engage in any kind of economic activity on Mondays. Then suppose a policy change is proposed that would allow white men, but no one else, to shop on that day. From the perspective of freedom alone, the change is a Pareto-superior one: some people’s freedom is increased, and no one’s is diminished. But the change seems obviously to violate a commitment to legal equality, which, if it is not always at the forefront of the libertarian vision, is at least implicit in it.
A related, but more realistic example: many libertarians believe that the
32
government should not be involved in the business of marriage at all.
extent that government-sanctioned marriages confer legal privileges upon indi- viduals that are not similarly available to others, such marriages constitute an injustice from a libertarian perspective. Given this background, what should libertarians should say about the push to legalize gay marriage? On the one hand, expanding state-sanctioned marriage to gays would represent the expan- sion of a privilege that libertarians believe no one ought to have. On the other hand, extending that privilege to some citizens while denying it to others on a basis as arbitrary as sexual preference seems capricious and unfair. Here again, I think, it is not at all unreasonable to think that the desirable policy change from a libertarian perspective is one that results in bigger (but more equal) government.
Again, suppose government unjustly restricts certain kinds of activity and unjustly subsidizes others. Government imposes a number of restrictions on the labor market which (let us stipulate) ought not exist. These regulations, such as minimum wage laws, occupational licensing laws, and so forth, make it harder for individuals to support themselves through honest work. At the same time, the government has in place various redistributive measures that, purportedly, make unemployment more bearable—subsidized medical care, subsidized hous- ing, food stamps, etc.
Suppose, then, that a policy was proposed that would end the redistribution, but not the restrictions. As before, such a policy would appear to be Pareto- superior from the perspective of libertarian freedom. But as before, the system seems deeply unfair. The libertarian Harry Browne liked to point out that government was good at one thing: it knows how to break your legs, hand you a crutch, and say: “See, if it weren’t for the government, you wouldn’t be able to walk.”33 True enough. But so long as government remains in the leg-breaking business, it does not seem obviously better for it to get out of the business of handing out crutches.
32. See, for example, (Huebert, 2010, p. 38).
33. Harry Browne, “A Solution for the Middle East,” World Net Daily, 04/11/2002, http://www.wnd. com/2002/04/13469/.
To the
 
288 THE GEORGETOWN JOURNAL OF LAW & PUBLIC POLICY [Vol. 13:275
Whether it is desirable for a particular market to be more free, then, depends partly on issues of fairness and equality that, while not technically alien to the libertarian worldview, sometimes slip into the periphery. It also depends to a certain extent on issues of strategy. These strategic differences seem to partly explain the difference between more moderate and more radical elements of the libertarian movement. Like communists who opposed state-sponsored welfare programs because they believed they only delayed the inevitable fall of the capitalist system they opposed, some libertarians oppose market-based reforms that make government more efficient for the same reason. And as a matter of technical strategy, they might be right. We can’t know a priori whether a small increase in freedom now will make a larger increase in freedom in the future more or less achievable. And so we are faced with a question of strategy that is intimately tied to a deep question of morality: to what extent is it legitimate to sacrifice some freedom, for some people now for the sake of hopefully greater gains in freedom, for other people later?
I raise these difficult questions not with any hope of answering them but merely with the hope of pointing out that they exist and that libertarians need to develop a better theory to deal with them. It is good, and useful, and beautiful, to set forth elaborate visions of the perfectly free society and to explain in detail how such a society might function despite the not unreasonable worries that many people might have about it. But such visions, by themselves, do relatively little to tell us what we ought to do or hope for now, when the full realization of our vision is so distantly removed as to be practically irrelevant. We need the vision. But we also need some kind of roadmap for how to get from where we are to where we want to be.
REFERENCES
Arnold, D. G., & Bowie, N. E. (2003). Sweatshops and Respect for Persons. Business Ethics Quarterly, 13(2), 221–242.
Barry, N. P. (1982). The Tradition of Spontaneous Order. Literature of Liberty, v(2).
Bastiat, F. (1964). Economic Sophisms. Irvington-on-Hudson, NY: Foundation for Economic Education.
Carson, K. A. (2007). Studies in Mutualist Political Economy. Retrieved from http://www.mutualist.org/id47.html.
Chartier, G. (2008). Sweatshops, Labor Rights, and Comparative Advantage. Oregon Review of International Law, 10(1), 149–188.
Chartier, G., & Johnson, C. W. (2012). Markets Not Capitalism: Individualist Anarchism Against Bosses, Inequality, Corporate Power, and Structural Pov- erty: Autonomedia.
Gillis, W. (2007). The Freed Market. In C. W. Johnson & G. Chartier (Eds.), Markets Not Capitalism (pp. 19–20). New York: Minor Compositions.
Hayek, F. A. (1945). The Use of Knowledge in Society. American Economic Review, 35(4), 519–530.

2015] A LIBERTARIAN CASE FOR THE MORAL LIMITS OF MARKETS 289
Hayek, F. A. (1973). Law, Legislation, and Liberty, Vol. 1: Rules and Order. London: Routledge.
Hayek, F. A. (1994). The Theory of Complex Phenomena. In M. Martin & L. C. McIntyre (Eds.), Readings in the Philosophy of Social Science (pp. 55–70). Cambridge, MA: MIT Press.
Hayek, F. A. (2011). The Constitution of Liberty (R. Hamowy Ed.). Chicago: University of Chicago Press.
Hayek, F. A. (2013). The Constitution of Liberty: The Definitive Edition (Vol. 17): Routledge.
Herbert, A. (1978). The Right and Wrong of Compulsion by the State. Indianapo- lis, IN: Liberty Fund.
Hodgskin, T. (1832). The Natural and Artificial Right of Property Contrasted. Huebert, J. H. (2010). Libertarianism today: ABC-CLIO.
Huemer, M. (2010). Is There a Right to Immigrate? Social Theory and Practice,
36(3).
Huemer, M. (2012). The Problem of Political Authority: An Examination of the
Right to Coerce and the Duty to Obey: Palgrave Macmillan.
Kymlicka, W. (2002). Contemporary Political Philosophy: An Introduction
(2nd ed.). Oxford: Oxford University Press.
Mack, E., & Gaus, G. (2004). Classical Liberalism and Libertarianism: The
Liberty Tradition. In G. Gaus & C. Kukathas (Eds.), Handbook of Political
Theory (pp. 115–130). London: Sage.
Martin, J. J. (1953). Men Against the State: the Expositors of Individualist
Anarchism in America, 1827–1908. DeKalb, IL: Adrian Allen Associates. Nozick, R. (1974). Anarchy, State, and Utopia. New York: Basic Books.
Palmer, T. (2014). Peace, Love, & Liberty: War Is Not Inevitable. Ottawa, IL:
Jameson Books.
Polanyi, K. (2001). The Great Transformation: The Political And Economic
Origins Of Our Time (2nd ed.). Boston, MA: Beacon Press.
Powell, B., & Zwolinski, M. (2011). The Ethical and Economic Case Against Sweatshop Labor: A Critical Assessment. Journal of Business Ethics, 107(4),
449–472. doi: 10.1007/s10551-011-1058-8.
Rothbard, M. N. (1969). Confiscation and the Homestead Principle. The Libertar-
ian Forum, 1(4).
Rothbard, M. N. (1973). For a New Liberty. New York: Collier.
Rothbard, M. N. (1982). The Ethics of Liberty. New Jersey: Humanities Press. Sandel, M. J. (2012). What money can’t buy: the moral limits of markets:
Macmillan.
Satz, D. (2010). Why Some Things Should Not Be For Sale: The Moral Limits of
Markets. New York: Oxford University Press.
Sen, A. (2009). The Idea of Justice. Cambridge, MA: Belknap Press.
Spencer, H. (1995). Social Statics. New York, NY: Robert Schalkenbach
Foundation.

290 THE GEORGETOWN JOURNAL OF LAW & PUBLIC POLICY [Vol. 13:275
Stiglitz, D. J. (2009). Moving Beyond Market Fundamentalism to a More Balanced Economy. Annals of Public and Cooperative Economics, 80(3), 345–360.
Zwolinski, M. (2007). Sweatshops, Choice, and Exploitation. Business Ethics Quarterly, 17(4), 689–727.
Zwolinski, M. (2008). Libertarianism. The Internet Encyclopedia of Philosophy. from http://www.iep.utm.edu/libertar/.
Zwolinski, M. (2012). Structural Exploitation. Social Philosophy and Policy, 29(1).
Zwolinski, M., & Tomasi, J. (2016). A Brief History of Libertarianism. Prince- ton, NJ: Princeton University Press.
}}