Samizdata

The other day I encountered this argument, which I failed properly to swat away and as a result, got rather rude to my interlocutor and he went off in a huff (sorry about that mate). What he said that made me go red was this:

“You libertarians keep banging on about the terrors of regulation. Yet you also slag off massive lawsuits and things like that. But if you want to get rid of huge payouts for things like people suing for damages, you need regulations. So why are you so hostile to them?”

As I pointed out, this is what is called a straw man argument.. Such “arguments” hold up a false, or in some cases deliberately false and weak, version of a point of view that a person wants to knock down easily (hence the “straw” bit). So let us fisk it.

First, I do not know any liberals or libertarians who argue that regulations are and always are a bad thing. Private sector bodies and voluntary associations of all kinds have them. A privately owned hospital, for instance, would regulate the behaviours of people who entered the premises. Why? Because that hospital would not want its reputation and bank account to be wrecked by outbreaks of disease, which lead to nasty insurance payouts. So it is in the self interest of said institutions to operate regulations, and more important perhaps, to be seen to do so. Another case is the London Stock Exchange. Long before modern financial regulators like the Financial Services Authority came along, the LSE was founded (back in the 18th Century, I think) and it had rules, albeit not always formal ones, but rules nonetheless (“my word is my bond”, etc). Trust is the key. And if you do not have trust, and have ways of enforcing said, then networks of commercial or other transactions do not work so well. So let us dispose of the canard that classical liberals are agin regulations. They are not. What we are against is one-size-fits-all regulations imposed heedlessly by the state. This is the crucial thing. Regulations, to be useful, need to be tried and tested, and if need be, discarded. State regulations tend not to be like that, but rather resemble clumps of ivy climbing up the side of a tree. They are much harder to reverse.

Okay, so now we come to the idea that libertarians hate expensive lawsuits. I suppose it is true that we hate frivolous, massively costly lawsuits, by definition (and who does not, except lawyers?). But sometimes you need to have lawsuits because you will not always have perfect knowledge of the kind of problems that can arise. Take the example of the hospital again – its managers may not know about new diseases that can be transported into the building in unexpected ways. A lawsuit following a disaster may be the trigger for a new rule. In this sense, lawsuits, although unpleasant for those on the receiving end of them, act as a sort of discovery process about what sort of problems exist. Lawyers have their uses.

In other words, this is quite a complicated argument. I just will not make the same mistake of trying to explain it after two beers and a 13-hour day at the office.