Tyler Cowen is a brilliant, brilliant man and one of contemporary libertarianism’s brightest lights. His scholarly and bloggerly contributions are far above my poor powers to add or detract. Which is why it comes as a surprise that his mini-essay contribution to the Cato Unbound discussion of Brian Doherty’s “Radicals for Capitalism” is shockingly, embarassingly bad.

I can only imagine that the giant holes with which he so generously littered his contribution were left unplugged due to the enforced brevity of the Cato Unbound format. Cowen begins by correctly noting the movement of policies in a more libertarian direction (lower inflation, less confiscatory tax rates) and the death — or at least persistent vegetative state — of many of our bete noires (Marxism, central planning) in the last 30 years.

Then, bizarrely, he unfurls the so-called “libertarian paradox”:

Those developments have brought us much greater wealth and much greater liberty, at least in the positive sense of greater life opportunities. They’ve also brought much bigger government. The more wealth we have, the more government we can afford. Furthermore, the better government operates, the more government people will demand. That is the fundamental paradox of libertarianism. Many initial victories bring later defeats.

I am not so worried about this paradox of libertarianism. Overall libertarians should embrace these developments. We should embrace a world with growing wealth, growing positive liberty, and yes, growing government. We don’t have to favor the growth in government per se, but we do need to recognize that sometimes it is a package deal.

The old formulas were “big government is bad” and “liberty is good,” but these are not exactly equal in their implications. The second motto — “liberty is good” — is the more important. And the older story of “big government crushes liberty” is being superseded by “advances in liberty bring bigger government.”

Libertarians aren’t used to reacting to that second story, because it goes against the “liberty vs. power” paradigm burned into our brains. That’s why libertarianism is in an intellectual crisis today. The major libertarian response to modernity is simply to wish that the package deal we face isn’t a package deal. But it is, and that is why libertarians are becoming intellectually less important compared to, say, the 1970s or 1980s. So much of libertarianism has become a series of complaints about voter ignorance, or against the motives of special interest groups. The complaints are largely true, but many of the battles are losing ones. No, we should not be extreme fatalists, but the welfare state is here to stay, whether we like it or not.

The germ of a decent idea — or at least a position that could be cogently defended — is buried in here somewhere, but Cowen goes off the rails pretty quickly. Yes, it is true that greater wealth is usually accompanied by greater welfare spending but it must not necessarily be so. (And it is more accurate to say that government growth is accompanied by … the spinning of the globe. Always and everywhere government has grown; it is the rare exception when the friends of liberty succeed in rolling it back a little bit.) Even if we concede that some form of welfare statism is appropriate, if we accept it as part of the “package,” left undetermined is the contours of that welfare state.

There is a difference between government growth in the sense that we pay more each year for certain programs in order to keep up with inflation and, say, expanding Medicare to cover prescription drugs (price tag: $1.2 trillion). There is a meaningful, important distinction to be drawn between limited, state-run welfare programs for the sick and the poor and the who-needs-means-testing-and-long-term-fiscal-sustainability-anyway federal behemoth we have today. What should we accept as part of the package, exactly?

What difference would it make to the economic growth rate if we could cut government spending by half, and taxes by half? (This is not to mention the boosting effect of a libertarian program of deregulation and tax simplification.) What if our growth rate were reliably 7% or 8% instead of 3% or 4%, thanks to those changes?

There is a pretty direct correlation there between “big government is bad” and “liberty is good” — that smaller government and a faster-growing economy means more money in the hands of individuals would surely add to the “positive sense of greater life opportunities.” Otherwise, why not just be France?

Furthermore, there were certainly a heck of a lot of folks back in the ’70s who — before stagflation, Reagan and Greenspan proved them wrong — thought that “modernity” indeed meant super high tax rates and wasteful stimulus spending and price controls and all the rest. Why wasn’t that part of the package? Why weren’t those losing battles?

A time of crisis caused by big government policies came, and libertarian ideas helped ease that crisis and the make the world a better place. Cowen argues that the next crises are not likely to break down along such neat libertarian lines: global warming, natural disasters and contagious diseases, and nuclear proliferation. He may be right, and he certainly has a case in arguing that those are the kinds of issues that governments are uniquely suited to addressing and that libertarians ought to take them up with vigor and with an ideological blank slate. (That said, his Russian roulette argument on global warming is beyond facile. See this excellent Glen Whitman post to learn why.)

But while those are issues may some day hurt us in a big way, we know that a huge welfare state, oppressive regulation, a godforsaken tax system, failing government schools and an irredeemably stupid drug war are hurting us right now. (Oh, yeah, and Iraq.)

Moreover, the next crisis most likely will be the impending bankruptcies of Medicare (2019) and Social Security (midcentury at the latest). If we libertarians follow Cowen’s suggested course on the welfare state — like it or lump it, suckers — we could again wind up with confiscatory tax rates in order pay for dwindling benefit packages that will leave the poor destitute in old age and with inadequate health care. The most devastating effect of all will be on economic growth — you remember, that force that always seems to drive welfare spending.

Cowen is aware of all of this, I know. I will assume he was just being a little too glib in his essay. Not much else could explain it.

(Originally posted to Sinners in the Hands of an Angry Blog.)