“How much do you have?” is a common poker question in casinos. If the player asked won’t answer, in most casinos the dealer will count the player’s chips. The information is supposed to be public – you can’t hide your chips – and the answer can affect the correct decision in a hand. (More.)

Whose Liberty, Part II – Libertarian Myths and Privilege

This week Morning Feature examines libertarianism. It’s become a hot topic with the victory of Tea Party Republican Rand Paul in the Kentucky senate primary, but our focus is not on him. Yesterday we talked about about whether libertarianism would offer as much “liberty” as it claims, and for whom. Today we’ll see that its claims of “liberty and justice for all” are based on myths rather than facts. Tomorrow we’ll offer a progressive concept of “liberty” that is as relevant today as when President Franklin Roosevelt spoke it in 1941.

As we saw yesterday, libertarianism would protect you only from intrusive public laws written by government. It offers no protection from private laws – such as the terms of an employment contract – as libertarians claim that interferes with “liberty of contract.” In practical terms, the independently wealthy would have a lot of liberty in Libertaria, but for someone who needs a job basic human rights like freedom of speech, religion, political activity, marriage, parenthood, or even indentured servitude become negotiable. The more desperately you need a job, the less leverage you have in negotiations and the more likely you may sign away such rights.

Liberty and justice for all?

When I’ve debated that with libertarians, the responses are best summarized in this quote from J. Philmore’s Libertarian Case for Slavery:

It would be far nearer the truth to say, “that some were born with sad­dles on their backs, and others booted and spurred to ride them.”

This needlessly abrasive (and illiberal) formulation of the insight should be recast in terms of the technical language used by the Chicago school of libertarian economics to explain the social function of the wage contract. People enter the marketplace with risk-preference differentials: some are risk averters and others are risk takers.

In the libertarian worldview, opportunity shines on everyone and those desperate for jobs today were too risk-averse to seize earlier opportunities. Or maybe they’re risk-averse by nature, “born with saddles on their backs.” Regardless, they come to the job interview we saw yesterday by paths of their own choices and public laws that limit the terms of contracts deny them opportunities for risk-averting livelihoods bound by the private laws of employment contracts.

But that libertarian worldview is based on myths of Homo economicus (the rational economic actor), Efficient Market Theory, and most of all a suspicious silence on risk-of-ruin analysis.

“How much do you have?”

As noted above, this is a common question in casino poker. Sometimes players ask it to gauge an opponent’s confidence, and some players refuse to answer to avoid the risk of giving away that information. In most casinos the dealer would count the player’s chips, because in poker you’re not allowed to hide how much money you have in play. There are plays that are mathematically correct only if an opponent has a small stack and others that are correct only if an opponent has a big stack. This weighs even more in tournament poker, where a player who runs out of chips is out of the tournament.

I mention poker because it’s a good example of those libertarian myths. A rational player in Efficient Market Poker would know the opponent’s hand as well as his/her own, calculate the odds of finishing with the best hand, estimate the odds of an opponent chasing a second-best hand, compare those to amount of money in the pot and the amount of the next bet, and make the mathematically correct choice.

But not even the best professionals play poker that way. To start with, they don’t know the opponents’ hands. They can guess, based on the opponent’s bets and mannerisms, but it’s only a reasoned guess. Few can precisely calculate odds in the heat of the action. They learn shortcuts that approximate knowable odds, and make reasoned guesses for the rest. If that sounds like a lot of guessing it is. And in tournament poker, a lot of that guessing is keyed to your risk-of-ruin: whether you’ll be out of the tournament if you lose this hand. The more chips you have, the more reasonable options you have. If you have very few chips left, your only reasonable option may be to wait for a decent hand, bet all your chips, and hope for the best.

Realworldia is more like poker, but worse….

While the Efficient Market Theory says every actor has equal information about a transaction, that’s rarely true in Realworldia. Few of us know or can know every relevant fact about every decision we make. Indeed economists George Akerlof, Michael Spence, and Joseph Stiglitz won the 2001 Nobel Prize for their research on information asymmetry, and how it challenges core myths of classical economics. (Drs. Akerlof and Stiglitz are notable progressive economists.)

And few of us can calculate precise probabilities for every decision. That’s even less possible in life than in poker, because Realworldia doesn’t deal from a standard, 52-card deck. More things can happen, and often we can only guess at how likely they are. Research shows we’re prone to overvalue short term risks and opportunities, undervalue long term risks and opportunities, and we don’t learn from experience as well as we think. For example: 40% of first marriages, 60% of second marriages, and 73% of third marriages end in divorce. That’s a lot of guessing.

As in poker, risk-of-ruin weighs heavily in that guessing. Those with plenty of resources can take more risks because they can weather some failures until other risks pay off. Those at the edge of ruin don’t have that luxury; a single failure may be catastrophic. Unlike in poker tournaments, in Realworldia we don’t all start with the same number of chips, and how many chips you have at a given moment often has more to do with your parents than your choices.

But that’s fine in Libertaria. Venerating private laws written in contracts is all about venerating privilege, whose roots mean “private law.” Libertarianism is not about liberty as a basic human right. It’s about liberty as a privilege for the privileged. In Libertaria they were born “booted and spurred to ride” the rest of us, who were “born with saddles on [our] backs.”

That “liberty” smells a lot like horse manure.


The Janitor Professor of Astrology was unable to get out to look at your stars this morning. Kossascopes will return next week.


Happy Friday!