A Defense of libertarianism (and response to Zed, etc.)

True, but have you ever been driving on an icy road and seen people going the speed limit, 55 miles per hour?

The psychology people seem to have is to believe that if the government regulates it, then anything that falls under the regulation requires no independent thought.

On the icy road, the safe speed maximum is probably about 30 mph, but many accidents are caused by people going the posted limit, as people seem to trust the wise planner above their own ability to judge.

Similarly, people assume that a firm that is regulated by the SEC and backed buy the FDIC is going to be a safe place to put money, which is not always true.

I agree with your last statement, but note that 1) the SEC required insufficient reserves, and 2) because the government set the reserve limits, there is the implication that it ought to bail out the firms that were "just following the rules".

Hence the view of firms being "too big to fail" comes from the idea that regulation is perfect and if only it's followed then everything will be fine.

In a better, more libertarian world, banking crises would result in some failures, and once-burned investors would look carefully at what reserves actually mean, look sceptically at rating-weighted reserve requirements, and expect that if things go wrong there will not be a bailout.

This would help put money into firms that actually know how to act in a trustworthy, sound way, not just the firms that are able to successfully lobby the SEC, the way Madoff's did.

If you are interested in Libertarianism but you instinctively are suspicious of capitalism or even currency, perhaps you would be interested in Anarchism. You can read about many interesting aspects of Anarchism with regards to its relationship to other ideas such as Capitalism, Marxism, State Socialism, and the current system we have in America. http://www.infoshop.org/faq/index.html If you think the abolition of money and markets is the abolition of economies, you are wrong and I invite you to read this very short intro to Anarcho-Communism, a post-capitalism way to live and organize. http://struggle.ws/wsm/rbr/rbr10/communism.html

The problem that I have with your examples is that it requires all actors, including consumers, to have nearly perfect information access, and to be able to act on that.

In the car example, I think we have a difference of philosophy. I think that regardless of the posted speed limit, some people will not exercise the proper judgement because they have evaluated the conditions differently.

In the example of reserve funds, imagine a world with similar information asymmetry to today. Banks are semi-transparent, and deposits are backed to some extent by the FDIC. However, the SEC takes less of an active regulatory role, the result of which is that some unscrupulous banks have started offering insanely high interest rates based on dangerous fractional reserves. People will likely flock to those banks, especially given that the FDIC is backing their investments... and then the whole thing collapses.

One solution is to get rid of the moral hazard inherent in the FDIC, and make it clear that the only way to hold your money safely is in cash, in your home. But one of the signs of civilization is increased specialization of labor; I should not have to do the job of banker and regulator all rolled into one, just to have a place to keep my money. Worse, it's not even clear that this is possible, because of inherent information asymmetry.

We can argue about whether an adequate ad-hoc bank insurance solution would arise, however, I'm not sure that such an invention would increase efficiency in the market.

As for regulation, there doesn't really seem to be any real alternative, unless the direct consequences for the operators of failed financial institutions became much more dire. And criminalizing poor business decisions doesn't seem very Libertarian at all.

>The problem really is that freedom doesn't exist. There's definitely more freedom and less freedom, but freedom doesn't exist. Why? Because your actions affect me. The fact that some geniuses at Citibank and others screwed up makes it harder for me to switch jobs, means raises are going to be nil this year, etc. The freedom they had took away freedom I had. And so it becomes a balancing act and often I get lectures about freedom as if it isn't such a balancing act.

To be clear, the items you state here aren't _rights_. Rather, they're privileges that aren't guaranteed. If you work and do a great job, you're not entitled to a big house in the suburbs, but you're increasing the odds of being able to afford it.

The Constitution guarantees rights to life, liberty, and property, as well as several other rights in the Bill of Rights and other amendments. But nowhere there will you find a right to have a job or right to make x% interest in the stock market (or right to be bailed out if you get in over your head in the real estate market).

As a nation we have a real problem of mistaking opportunities for rights, and feeling entitled to things that we want.

Privatization of fishing grounds, in the form of fishing rights distributed by auction, is a widely used means of managing fisheries. It works well when property rights are actually enforced (e.g. a body of water controlled by only one nation).