As I’m in substantial agreement with Steve Horwitz’s response, I’ll concentrate on the contributions of Yglesias and Baker.
Reply to Matthew Yglesias
Matthew Yglesias is puzzled by Horwitz’s contention—and by extension my own—that markets are more beneficial than government programs. It’s not so much that he disagrees with it as that it seems to him beside the point: “the question facing government programs is not whether they are more or less beneficial than the existence of a market economy, the question is whether the programs are more beneficial than would be the absence of programs.”
I suspect the reason that Yglesias and Horwitz are talking past each other here is that Yglesias is thinking of the market economy as a basic background fact, on top of which one may or may not add various government programs. Even if oxygen is more crucial to human survival than clothing and shelter, it would be puzzling to point this out as an argument against food and shelter; analogously, I suspect Yglesias thinks, even if markets are more important for human well-being than government programs, that’s no argument against government programs.
From a libertarian standpoint, however, the market is not a substratum that persists unaffected through changes in policy; the market is the sphere of voluntary transactions, and so every law that either mandates or prohibits some transaction (for what else do government programs generally do?) shrinks the market. Libertarians object to such shrinkage both on grounds of justice (forcible interference with our neighbors’ peaceful activities treats those neighbors as though they were our property rather than our equals) and on grounds of efficiency (every reduction in the sphere of activities open to free competition increases the scope of the incentival and informational perversities endemic to monopoly).
Yglesias mentions that he opposes free-market solutions to pollution, but he doesn’t say what he takes those free-market solutions to be or why he opposes them. I fear he may think that the libertarian solution to pollution is to leave firms free to pollute; no, the libertarian solution is to make firms legally accountable for the damage they cause, thus preventing them from socializing the costs of their polluting activities. Naturally enough, then, polluting firms tend to oppose the libertarian approach to pollution. Environmental regulation, however distasteful they may find it, is far less threatening to polluters than judicial liability, because it is easier for firms to “capture” a concentrated mass of regulators than a dispersed abundance of juries.
Since free-market rhetoric has so often been used as a cover for corporatist policies, how, Yglesias asks, can we now make use of it without thereby enabling the very corporatist strategies we oppose? The answer, I suggest, is that our use of free-market language must self-consciously and explicitly emphasize the difference between genuine and phony free-market solutions. We must persistently call BS whenever corporatist stratagems are either credited to or blamed on the free market—whether it is a President Sarkozy attributing the financial crisis to some supposed regime of laissez-faire or a President Bush wrapping the biggest corporate welfare handout in history in the mantle of the free market. We must develop a new (or revive an old) way of speaking about free markets, one openly aligned with left-wing ideals and openly hostile to corporate interests. While such a left-libertarian language will encounter resistance from traditional libertarians and traditional leftists alike, it is being explored and shaped even now by those on the libertarian left. I invite libertarians and leftists alike to join in the process.
Reply to Dean Baker
Dean Baker is skeptical as to whether replacing “intellectual property” laws with a noncoercive system of securing payment for intellectual innovators can ensure “that sufficient funds are devoted to the task.” My question is: “sufficient” by what standard? That of consumer preferences—or of special interests? If we prefer that consumer preferences prevail, then the venue for making such decisions should be the one that is most responsive to consumer interests—and that is the relatively accountable market sphere as opposed to the relatively unaccountable political sphere.
Baker is “not convinced that [my] mechanisms are workable or efficient.” How well would the specific mechanisms I’ve described work? Would they be the ones that prevail in a freed market? Like Baker, I don’t know. What I do know is that in a freed market any entrepreneur who could figure out how to overcome obstacles to satisfying the demand for intellectual innovation would stand to make a profit, and entrepreneurs in that situation are likely to devise solutions that those (like Baker and myself) whose income does not currently depend on solving such problems are not going to be as driven to discover. (Need I mention the lighthouse?) Moreover, on the market different ways of addressing these problems have to compete against each other, thus allowing their respective merits and flaws to be assessed.
By contrast, the salary of politicians and bureaucrats does not depend to the same extent on the ability to solve such problems—indeed in many cases there’s an inverse correlation, as government functions that perform less effectively tend to get more money thrown at them—so we would be unwise to look to them for as much creativity in addressing these issues; furthermore, whatever solution they do devise is likely to be imposed monopolistically on everyone, thus short-circuiting the competitive discovery process and leaving us unable to determine how well or badly the chosen solution would fare against competitors. Should the problem of securing adequate remuneration to intellectual innovators be entrusted to a system that creates incentives to solve it, or one that does not?
With regard to the funding of pharmaceutical research, Baker says he would have no objection to “an entirely voluntary insurance system” if only he could see “how to prevent free-riding.” Let me remind him that there once existed a voluntary system of health insurance for the working poor that was quite effective at keeping costs down and policing free riders – until the government shut it down.
 See once again the pieces I cited earlier – Murray Rothbard’s “Law, Property Rights, and Air Pollution” and Mary Ruwart’s “The Pollution Solution” and “Destroying the Environment.” For the application of libertarian principles to cases where the responsibility of each individual contributor to a pollution problem is marginal, see my own On Making Small Contributions to Evil.”
 By the “libertarian left” or “left-libertarianism” I refer to the fusion of libertarian and left-wing concerns that prevailed among 19th-century radical libertarians; was revived in the 1960s and 1970s by writers like Samuel Konkin (founder of the “Movement of the Libertarian Left”), Karl Hess, and (for a time) Murray Rothbard; and continues to be developed within the Alliance of the Libertarian Left. This usage is not to be confused with the recent, more narrow use of the term “left-libertarianism” to describe a neo-Georgist view on land ownership held by such writers as Michael Otsuka, Peter Vallentyne, and Hillel Steiner.