1. The Libertarian Conundrum
How do I know which is the proper libertarian policy? Can there be something like THE proper libertarian policy? Or will a spontaneous order emerge from the competitive deliberations and disparate approaches that different parties take concerning the political and technical implementation of their preferred policies?
Will policies not be altered by the very process that makes them advance from the visionary stage to open-ended fruition?
I would tend to argue that if you do not factor into your policy proposal a realistic account of the intermediary conditions created by scientific and political competition - that is: how to register and analyse these intermediary conditions, how to instrumentalise them, how to deal with opponents and the need for compromise - what you offer is not really a policy proposal, but a mere expression of wishful thinking.
Attempts at overcoming hard and manifold theoretical and political resistance are just as important a source of realistically informed policy as is the ability to open up to competition and compromise, to try out, and alter the scheme in operative reality.
Successively, Friedrich Hayek supported at least three different, mutually exclusive policies to deal with the overall money system: the gold standard, a commodity-backed-currency, and freely competing private currencies.
Which one of these is more libertarian than the others?
What this puzzle confronts us with is the peculiar logic of scientific competition as well as political competition. These non-market arenas of competition form a vast delta of path-defining parameters, a system of intricately ramified intermediary conditions from which contingent results emerge that need to be acted upon as they appear. These intermediary conditions cannot be built into and dealt with appropriately in advance by a set of initial premises.
Intellectual competition requires and, indeed, forces admission of diverging views, by which dynamic the issues fit to be pursued are defined, i.e. accepted for handling by the political machinery and the public behind it. Political competition is inevitable, if only to organise scientific and economic competition and transform their results into concrete policies. Political competition requires and forces admission of widely diverging views and policy aims, opening up another vast area of contingent ramifications, i.e. intermediary conditions determining the path along which outcomes will be arrived at. This process and its results cannot be preempted by libertarian precepts. They are embodiments of the indeterminacy of freedom, which keeps advancing by bursting her banks.
2. The Hayekian Deficit
Although Friedrich Hayek is often credited with initiating the resurgence of research in alternative monetary systems, his own proposal received sharp criticism from Milton Friedman (1984), Stanley Fischer (1986), and others at the outset and never gained much support among academic economists or the wider population. According to Friedman, Hayek erred in believing that the mere admission of competing private currencies will spontaneously generate a more stable monetary system. In Friedman’s view, network effects and switching costs discourage an alternative system from emerging in general and prevent Hayek’s system from functioning as desired in particular.
Hayek simply assumes that a competitive environment "will spontaneously generate" the desired outcome. But he disregards important "intermediary conditions" on which the set of realistically attainable outcomes depends.
According to the above paper opponents of Hayek's proposal argue that economic actors are not likely to desert an established money in favour of newly created competing private monies owing to inordinate switching costs, negative network effects, and rational expectations - for more see here. Milton Friedman supports this contention by pointing to a lack of empirical evidence that economic actors would react to the offer of competing monies in the way Hayek predicts (e.g. in the face of a weak and volatile Dollar, Americans did not typically switch to German or Swiss money). Hayek replies that people tend to be discouraged to switch currencies owing to legal restrictions; if the latter were lifted, his predictions would prove correct. Regardless of Hayek's objection being pertinent or not, characteristically, he does not address the essentially political condition on which he expressly claims his policy proposal hinges.
3. The Libertarian Non-Policy Bias
The entire spectrum of libertarian thought espoused from anarcho-capitalists to crypto-anarchists to Hayek-type of classical liberals are united in systematically avoiding analysis of politics as a means both representing and structuring intermediary conditions that ultimately link up or decouple initial premises (e.g. competition is good, so currency competition must be good) and final outcome (the operative monetary system).
- (i) Anarchists live in total denial of the need of politics and the state (henceforth simply "government" or "state"), which is the most convenient and least convincing way of dealing with the issue.
When it comes to policy proposals,
- (ii) crypto-anarchists like von Mises ascribe such a minute role to government that in its reduced night-watchman-format it appears as a factor hardly relevant to the policies in question. The policies can either somehow go ahead without government involvement, or the state's support for libertarian goals is simply assumed to be forthcoming, notwithstanding a view of the state practically incompatible with such compliance or neutral to affirmative midwifery.
- (iii) Hayek, oscillates between contradictory views of government, which latter he is happy to enlist for the management of his vision of a minimalist welfare state ("Hayek's socialism," in Richard Epstein's provokingly paradoxical formulation), while at the same time figuring out at great effort a system of currency competition whose purpose it is to decouple money from the odious import of government.
What is not clear is how it is possible to fruitfully enlist and control government for the one purpose, but not for the other. Why should government not abuse its powers to expand far beyond a minimalist welfare state, when it cannot be trusted with the monetary system?
My message in a nutshell: you cannot have an effective policy that is supposed to organise the monetary order of society unless you have the intellectual and practical means to understand and participate in the processes of civic competition through which the monetary order is implemented and enforced.
Libertarians do not seem to be able to pursue effective policies in this area because they adhere to a truncated view of spontaneous order, which reflects only the self-organising features of market processes, ignoring an even broader dimension of spontaneous order that does not grow as analogous to market interactions, but follows its very own logic.