Libertarian Social Engineering: Why and How

I would like to thank the response authors this month for thoughtfully engaging with my lead essay: Alex Tabarrok, Edward Peter Stringham, Tom W. Bell, and Vitalik Buterin, it’s an honor to discuss with you all.

In my reply I’d like to start with terminology: Why did I use “libertarian social engineering” to describe the activism that I prefer?

First, I chose the term to echo Cass Sunstein and Richard Thaler’s provocative “libertarian paternalism.” Ideas in this vein have caused a sensation, and a clever word choice probably helped.

But I also mean to reference Karl Popper’s famous endorsement of “piecemeal social engineering” in The Open Society and Its Enemies. The engineering that I have in mind would likewise be piecemeal. Although my moral commitments look very much like radical libertarianism, I share Popper’s disdain for comprehensive social planning, and I recognize that any attempt to instantiate radical libertarianism would necessarily be an instance of the type. There are strong reasons for intellectual modesty here, because utopias usually end badly. Why should I expect my utopia to be any different?

Thus I am neither cheered nor inspired by seasteading. And beyond the knowledge problems inherent in all comprehensive social engineering, there are other reasons for caution. As Vitalik Buterin writes, isolated communities “give up many of the network effect advantages of living in a way that is strongly connected to the mainstream society.” In today’s industrialized world, those network effects are so vast that a group of people with entirely superior institutions but a smaller population baseand thus a much less extensive market—might struggle to demonstrate that their institutions were any better: They might be better, but how could that be proven when a lower living standard was baked in from the outset?

Given the otherwise unfavorable network effects, the only way to demonstrate the practical superiority of a set of institutions may be to build them in close contact with the mainstream, or perhaps within the mainstream itself. I therefore offer two challenges.

My first challenge is to statists, that is, to those who are intellectually committed to the idea of a state. I ask them to imagine, per impossibile, that a form of anarchism exists, one laden with institutions and values that together provide the following:


  • Pareto superior provision of all currently state-supplied public goods
  • Higher living standards for all
  • Social inequalities that, to the extent they exist, are more justified than our own
  • Greater stability against internal and external threats

I submit that if such an ordered anarchy existed, then every respectable argument for the state would stand refuted. We wouldn’t even have to ask whether taxation was theft, because this system would be preferable on statists’ own terms. They would get everything that they profess to want and more.

If it existed: Tom W. Bell showed great insight when he flagged the word “if” for making basically the same enormous leap in my lead essay. It’s time to address that leap more directly.

Libertopia does not exist, and I submit that we do not yet know how to build it. We would do well to be much more frank about this fact, which brings me to my second challenge: Libertarians, I want you to become tinkerers. I want you build libertopia carefully, bit by bit, from within the confines of the not-entirely-terrible state-endowed mixed-economy system that we now enjoy. I think that that system, while not ideal, is still good enough to allow for improvement while protecting bystanders from harm in the event that your experiments go awry. The mixed economy mainstream isn’t so bad a fallback position.

Mainstream political theory has written off the ideal of the stateless society, but I am not sure that the mainstream’s reasons have been sufficiently strong. Even if a stateless society can’t be instantiated overnight, it may still be a useful guide in designing new institutions piecemeal. If we are still more pessimistic, we may grant that statelessness is completely impossible—and yet there’s still maybe a lot of good to be had by imagining state retreat, because the state is still usually terrible, and it may often be possible to do better with less of it.

Libertarians, you will know that you’re succeeding at my challenge when you see people of all ideological backgrounds, and of none, lining up to use your new institutions and practices—not because they’re trying to prove a libertarian point, but because this new thing you’ve built really works. Build enough new things, gain enough outside support, and you will have built the libertarian ideal, only without the risks that social engineering usually entails.

On this point, Alex Tabarrok is right to mention limited liability and fee simple property as good past examples of the sorts of innovation that we should emulate, even if, I’d caution, they both originated with the state. Edward Peter Stringham suggests some fully private examples as well; these are a more direct template, if anything, for future imitation. Even communists use clever, market-based all the time—not because they are convinced by these institutions’ goodness, but because they are incentivized by these institutions’ usefulness. That’s a good pattern to try to follow.

Note, however, that I am not calling communists who use clever private property institutions hypocrites here—tu quoque is not my game—rather I am saying that when you build something that works quite well, people are going to use it, and ideology becomes an afterthought when people start voting with their feet.

Admittedly, we libertarians must build this world while under some severe constraints. Tom W. Bell despairs of this and suggests that not only must we change the software of government—the particular laws and binding private agreements that we live by—but also the hardware of government—the constitutional and enforcement mechanisms that make our agreements binding in the first place.

This is not so clear to me. If, for example, we developed social institutions that provided for nearly all of the public goods now supplied by government, but that relied only on the state’s contract and private property enforcement mechanisms to do so, we might build strong pressure for realizing the idealized night watchman state, even from within the present system. The added public goods provisions of that system would tend to be experienced as a nuisance, not a benefit, and democratic support for these features would vanish.

One constraint to libertarian social engineering has so far gone unmentioned, namely the problem of crowd-out. Other things being equal, it’s difficult to build a replacement institution that does better than the state when the state can use taxation to fund its efforts, and when we can’t. If the competition offers the good for free, then you’d better be able to say why your good, priced at $0.05, is a better deal. And even then you should expect that some people will prefer to take the free version.

Of course, sometimes the goods in question are not perfect substitutes: Cryptocurrency has many attributes that fiat money lacks, and vice versa; each also has attributes that it does not share with private commodity money. One’s choice of currency will therefore depend on how one values these various attributes in the context of a particular transaction. This is liable to change from one transaction to the next, and in ways that it would take far too much space to describe in full. 

What all of this says is that the landscape is complex, and crowd-out may or may notbe a significant problem in various cases. A priori, crowd-out is neither a reason for us to despair nor for statists to exult: Although the state has the ability to compel purchase, its services also have certain inherent drawbacks that private agents never face. A particularly salient challenge for libertarian social engineers is therefore to find ways to amplify the values and advantages of privateness. If we can make private action more attractive, we will see more of it and less of state action.

There are good reasons to believe that we have not yet had all of the ideas that we might think up in this area of research. If we apply the same intellectual modesty to our opponents as we ask of ourselves, we will have to conclude that they are asking us to start small and go slowly, not to surrender forever to the One True God of the central state. That ought to be okay by us.

Libertarians who see things my way face three choices: We can retreat to a utopia that will likely fail for many reasons. We can scold everyone insufferably. Or we can attempt a piecemeal—and distinctly anti-statist—type of social engineering. This last course is the one I recommend. We should build the pieces of a freer society even as we live in the world of today. The risks are low, and the rewards are potentially quite high.

Also from this issue

Lead Essay

  • Jason Kuznicki recommends what he calls “libertarian social engineering,” which builds institutions and practices for a freer society. Libertarians are well versed in moral arguments, he says, but moral arguments alone tend to generate only a short burst of enthusiasm before fading. Much better would be to get to work on building the practical - and voluntary - future that we all profess to desire.

Response Essays

  • Some institutions aren’t necessary to a free market as a matter of principle, but they make life in market-oriented society much better. Those of us who believe that markets are a key part of a well-ordered society should take the lead in developing these institutions. Not only might they bring about a more voluntary society, they will also improve the quality of our lives. Tabarrok cites several some surprising examples of institutional innovations to justify these claims.

  • Edward Stringham argues that there’s been a lot more real-world private governance than one might imagine at first. Historically, banks, payment processors, and financial markets have commonly created their own, self-enforcing rules, which were often highly effective. A persistent habit among statist thinkers is to assume the necessity of the state; libertarians will often counter a persistent tendency to speculate. Neither is quite warranted, says Stringham.

  • Tom W. Bell suggests three ideas that might help achieve a freer society. Together they form a general approach to privatizing state-supplied goods. He cautions that libertarian engineering will have limited capabilities under existing governments; to significantly change how law functions, and to move it in a libertarian direction, may require new systems entirely. Bell concludes with a sketch of three possible features they may contain: shared ownership, jointly held democracy between citizens and private owners, and open-source law.

  • Vitalik Buterin argues that the way to build a more decentralized world is to make that world rewarding. Most people aren’t libertarians, and few will change their minds about politics simply because libertarians urge them to. But when specific social systems make it relatively advantageous to engage in market behavior, and when people can trust one another in a context that does need the state, their actions will take on a libertarian character anyway, and the world itself will improve, both by our standards and by those of others.