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Freedom Is Natural

Actually, we wanted to phrase the title of this article as Basic Economy Under Libertarianism, but given the fact that these are "Burning Libertarian Questions", we had to do it the other way around. Nevermind.

We already approached this subject in our introductory question What Is Libertarianism but we will repeat it again because it is worth repeating because in ultimate analysis this is good stuff.

Theories

Any sort of mainstream Libertarian thinking will be based on… well… freedom! How much freedom we can't tell you exactly, because as we mentioned before, there are as many Libertarianisms as Libertarians in the world, and probably more. However, what we can tell you for sure is that under Libertarianism you would experience an almost unbelievable amount of freedom by comparison with today's so-call "freedom".

Within this environment of freedom, you are… well… free to do as you choose and this includes… well… everybody! But if you are free to do as you please, you are also free to trade as you please. This freedom of trading naturally creates well… free markets! This conclusion is not exactly worthy of PhD dissertation, more like kindergarten stuff. Yet, you would be surprised how many people don't grasp this very simple and very basic truth.

But if we have a free market, we must ask ourselves which economic theory applies? And for this question, we only have one answer: Austrian Economics. Why Austrian Economics? Because every single other economic theory assumes and makes use of a "higher authority" which has the duty to "manage" the economy "for the greater good". In other words, of all economic theories "out there", there is actually only one that specializes in truly free markets.

Thus, we come to the inevitable conclusion that under Libertarianism the best explanation as to how would the economy operate is provided by Austrian Economics.

Perspectives

The problem with many economic arguments against Libertarianism is that they treat economic problems as political problems! They don't realize that for every question they can possibly have, Austrian Economics has been there decades ago providing consistent and coherent answers. As we explained above, as Austrian Economics is the natural child of Libertarianism, it is fair for us to use this powerful theory to explain economic questions. To do otherwise would be nonsensical!

For example, if you are a socialist, would you abstain from using socialist economic theories to answer economic questions? Of course not! You would see Socialism and Socialist Economic Theories as one and the same.

Well… we do too! The only difference is that Libertarianism and Austrian Economic evolved separately in history, but the one is a direct consequence of the other. Furthermore, we can go so far as to say that the other way around is also true!

Think!

If you are economically free, if you have enough to go around, wouldn't you want to have the freedom to do with your wealth as you please? Of course you would! A free market naturally reinforces a Libertarian view.

A skewed perspective

Once you understand that people asking Libertarian questions are not schooled in Austrian Economics, you begin to understand why their questions are so skewed. They simply do not know better. They either assume things that are not correct or, they create a "straw man" which then they proceed to attack. Allow us to provide you with one arching example:

Example

They say that of Libertarianism that:

"In a free market, all transactions are voluntary thus you will only agree to transactions that are selfish and benefit only you and this includes labor. This way of thinking goes only two ways because two people (actors) are required in order to have a contract. These people will agree on a deal only if they believe that that particular contract is the best they can get at that point in time. When a government steps in, it can only restrict the conditions under which contracts are made because in a free market any condition is on the negotiating table. Thus, government action is bad because it restricts conditions that would benefit both parties. But the problem is that the world is not a system of independent contracts, the world is a system where every transaction affects everybody else. Furthermore, Libertarianism assumes that consumers are rational and coherent people who think in terms of "demand" and "utility" and know what those variables are. This is something that clearly does not work"

Let's begin by saying that yes, contracts are stipulated between two or more parties (typically two), and those parties only look after themselves. No question here.

And no. Austrian Economics teaches that decisions leading to contractual agreements are purely subjective. People do not consider "demand" or "utility" in the classic Keynesian or modern sense, where "demand" and "utility" can be measured accurately and objectively. Yes, entrepreneurs do perform Economic Calculations, but those calculations are simply best guesses which are not objective. In ultimate analysis, even with Economic Calculations at hand, decisions are taken based on subjective beliefs. Furthermore, those beliefs do not have to be -and often are not- of economic nature. For example, John wants a beer. For John the satisfaction that a cold beer will bring surpasses the pain of spending some money to buy it. That enjoyment is not "economic" in nature. In Austrian Economics, that enjoyment is intended to reduce uneasiness. Austrian Economics teaches us that contrary to "straw man" arguments, economic actors act subjectively and they do not know what the true values of economic parameters are, even if those parameters would exist and could be calculated objectively - which do not and they cannot-. People can't know this because those parameters depend of what other people are doing at that time, which is also subjective! Furthermore, Austrian Economics teaches us that when people act (in an economic sense) they do so seeking a goal but they also do so in a fallible manner. This is, just because somebody wants something and enters in a contractual agreement to get it, this does not mean that they will actually get it. Yes, people make mistakes all the time.

In this scenario government action is bad indeed because it diminishes the capacity of people to decrease their uneasiness. In a scenario which is considered win-win by both parties contracting, suddenly governments enter into the picture and make the contracts win-lose or lose-win or lose-lose. How is this good? Well, it isn't!

And what about the world? Is each contract between two people affecting other people? Sure it is! So what? The world can be viewed as a large number of people making contracts between two parties all the time. In a free market those parties always engage in win-win contracts. Thus, the entire world is engaging in win-win contracts all the time! But if this is the case, who loses? Well, nobody!

The only way in which such a system can exhibit loses going in is if a government enters into the game and forces the artificial downgrade of wining contracts. Now we have a large number of people who are losing parties to a contract. This will most certainly make the world worse off.

Of course, nobody is saying that contracting in a free market is perfect. Thus, yes, naturally there will be a certain percentage of contracts that will be lose-win or win-lose or even lose-lose. But getting into a contract (as we don't know the future), with the most current and available information, all contracts in a free market are win-win. Not so under governments, which create a large number of lose-win or win-lose or lose-lose agreements from inception. For example, would you pay for a car with features you don't want? No. Because you don't want them. Thus, this lose-win contract would never take place in a free market. Under a government, however, you are obligated to buy cars with certain characteristics, whether you like it or not, e.g. day lights.

There is a clear contradiction in terms in this thinking. Their "straw man" states that free market contracts are the best you can have (so says Libertarianism), but through government manipulation of those very same markets, you can get better contracts or that the outcome of such manipulated contracts the outcome could be better! Well, they can't have it both ways. You can't have better than the best!

And even if this could be somehow possible, what guarantees do we have that government won't make the same mistakes that contracting people do? None whatsoever. If anything, history shows time and time again that the worse infractors and worse guessers are governments!

And what about the implications that some contracts will hurt "society"? Here again we see the error in their thinking. They are taking current economic conditions, current laws and current governmental behaviors and transplanting them into Libertarianism! This is again, a critical error in thinking. In a free market the golden rule is that should you act in such a manner as to interact with other peoples' property without their previous and voluntary agreement, you are liable! Which means that when you enter into contracts, you will make darn sure that you are not "hurting society" because "society" will demand payment. In real wealth! In a Libertarians system it literally does not pay to harm other peoples' properties.

CONCLUSION

Under Libertarianism the economy is a free market and a free market is nothing more than a network of people seeking the best they can achieve with scarce resources. In so doing they make the best utilization of scarce resource they can possibly think of. As such, a free market is simply the perpetual and permanent search for the best and most optimized economic solution we can have. Two parties at the time.

Note: please see the Glossary if you are unfamiliar with certain words.

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