Neoliberalism and Libertarianism

"Neoliberalism" is a dirty word in some circles. A lot of my market-oriented friends view it as nothing more than an empty slur. And, to be fair, that is precisely how a lot of people on the left do, in fact, use it.

But as some pretty good scholarship over the last decade has shown, neoliberalism is a term with a fairly specific historical and philosophical meaning. The term has its origins in the 1938 Colloque Walter Lippman where individuals like Friedrich Hayek, Ludwig von Mises, Michael Polanyi, and Wilhelm Röpke gathered to discuss the principles of a “new liberalism” that would serve as an alternative both to the socialist authoritarianism of the 20th century and what they regarded as the extreme laissez-faire of the 19th. Many of these same individuals would go on to play an influential role in the Mont Pèlerin Society.

There have been a ton of books published about neoliberalism lately, but so far I haven’t found anything better than Angus Burgin’s 2015 The Great Persuasion: Reinventing Free Markets Since the Depression. I also highly recommend Kevin Vallier’s entry on neoliberalism at the Stanford Encyclopedia of Philosophy.

One of the questions that Vallier takes up in his essay is how neoliberalism is related to libertarianism. And I’d like to elaborate on that question here. After all, many of the individuals most closely identified with neoliberalism - people like Friedrich Hayek, Ludwig von Mises, and Milton Friedman- are also often identified as libertarians. (By the way, if you haven’t read Friedman’s nice little 1951 essay on "Neo-liberalism and its Prospects,” you really should.) So what’s the difference?

To start with the most obvious difference, libertarians and neoliberals disagree about the proper size and scope of the state. According to Vallier’s definition, neoliberalism holds that “a society’s political and economic institutions should be robustly liberal and capitalist, but supplemented by a constitutionally limited democracy and a modest welfare state.” So neoliberals like capitalism, but they aren’t advocating anything as extreme as the night-watchman state favored by libertarians like Robert Nozick or Ayn Rand. They generally support some kind of welfare state, and they also believe that government has an important role to play in regulating externalities, providing public goods, and preventing monopolies and certain forms of anti-competitive behavior. You can see all of this in Henry Simons’ Economic Policy for a Free Society, or, for that matter, in Hayek’s Road to Serfdom. When Hayek decried the “wooden insistence… [on] the principle of laissez-faire,” he meant it!

So libertarians and neoliberals have important disagreements about issues of public policy. But underlying those disagreements, I think, lies an even more fundamental difference over methodology. One way of glossing this difference is to say that neoliberals are consequentialists while libertarians are deontologists or natural rights theorists. There’s something to this way of carving up the terrain. Hayek, von Mises, and Friedman are all neoliberals, and all consequentialists of a sort. Rand, Rothbard and Nozick are all libertarians, and all non-consequentialists.

But, as John and I discuss in The Individualists, things are actually a bit more complicated than this. After all, Herbert Spencer, whose 1851 Social Statics is a paradigmatically libertarian work, is nevertheless a consequentialists. And von Mises, I would argue, is actually better thought of as a fairly strict libertarian than a neoliberal.

The dividing line between neoliberalism and libertarianism is not so much consequentialism vs non-consequentialism, but empiricism vs. rationalism. Strict libertarians like Rand, Rothbard, and Nozick - and Spencer too! - tend to approach political questions in a heavily rationalistic way - as a matter of logical derivation from first principles. (1) The initiation of force is always wrong, (2) The minimum wage involves the initiation of force, therefore (3) The minimum wage is wrong. QED.

Neoliberals, in contrast, tend to be more empiricist in their approach. Questions of public policy, for them, are at least in part determined by what they think works. That’s not to say that neoliberals are pure consequentialists, without any commitment to deontological principles. But neoliberals do tend to be pluralist about those principles, in a way that libertarians are not. For libertarians like Rothbard, there’s basically one fundamental principle - individual self-ownership. Neoliberals, in contrast, might hold that individuals have a right to bodily autonomy, but that this right is one that needs to be weighed and balanced against competing moral claims.

If you think that both liberty and equality are valid moral principles, then which one wins out in any particular case of conflict is going to depend upon the circumstances of the case. In contrast, if you’ve only got one fundamental principle in your system, then there’s never any question of balancing it against anything else. Libertarians thus tend to be absolutists about their principles in a way that neoliberals are not. For Rothbard, “wooden insistence on laissez faire” is a compliment, not a burn.

These days, I identify much more as a neoliberal than a strict libertarian. I’ll have more to say about why in future essays here. But that’s not to say that I don't find the radicalism and absolutism of libertarianism compelling and inspiring. Hayek is great and all. But sometimes, like when you’re dealing with the manifest injustice of something like human slavery, what you need is not reasonable pluralism but bad-ass absolutism. No matter how wishy-washy I get, there’s always going to be a soft spot in my heart for Lysander Spooner.