I recently saw a thoroughgoing Twitter conversation between a Caleb Brown, which most of you presumably know from the Cato Daily Podcast, and the Neoliberal Project, an American project founded to promote the ideas of neoliberalism, regarding the differences between libertarianism and neoliberalism. For those who follow the debate, it is nothing new that the core of this contention goes way beyond an etymological dimension – it is concerned with one of the most crucial topics in the liberal scholarship: the relationship between government and free markets.

Arbitrary categories?

I can understand the aim to further structure the liberal movement into subcategories which represent different types of liberalism. Furthermore, I often use these different subcategories myself to distance my political ideology from liberal schools I do not associate with, such as paleo-libertarianism or anarcho-capitalism. However, I do not see such a distinct line between neoliberalism and libertarianism in practice.

As describes by Caleb Brown (and agreed on by the Neoliberal Project), neoliberalism wants to aim the wealth generated by markets at specific social goals using some government mechanism, whilst libertarianism focuses on letting the wealth created by free markets flow where it pleases, so to say. In my opinion, the “difference” between these schools is rather a spectrum of trust in government measures with libertarianism on one side and neoliberalism on the other.

I’ve often reached a certain point in the same discussion with fellow liberals:

Neoliberal: I agree that free markets are the most efficient tool to create wealth. They are just not very good at distributing it. By implementing policy X, we could help to correct market failure Y.

Libertarian: Yeah, I agree with you. Markets do not distribute wealth efficiently. However, the government has also done a poor job trying to alleviate the effects of market failures, especially when we look at case Z… (Of course, libertarians bring forth other arguments than public choice, but it is a suitable example.)

After reaching this point, advocating for governmental measures to fix market failures often becomes a moral and personal objective. My favourite example is emission trading. I am deeply intrigued by the theoretical foundation of the Coase-Theorem and how market participants still can find a Pareto-efficient equilibrium by just negotiating. Based on this theoretical framework, I would love to see a global market for carbon emission trading.

However, various mistakes were made during the implementation of emission allowances. First, there were way too many emission allowances on the market which engendered the price to drop dangerously low. Additionally, important markets such as air and ship transportation were initially left out. All in all, a policy buttressed by a solid theory had a more than rough start due to bad implementation.

At this point, neoliberals and libertarians diverge in their responses. A libertarian sees another failure of the government to implement a well-intended policy, whereas a neoliberal sees a generally good policy which just needs a bit further improvement. In such cases, the line between neoliberals and libertarians becomes very thin. And from my point of view, we make further decisions based on our trust in the government and on our subjective-moral relation to the topic as well.

I saw government too often fail (e.g. engaging in industry politics), which should be left nearly entirely to free markets. However, I also saw the same government struggling to find an adequate response to climate change. Contrary, I believe that officials should carry on with their endeavours to counteract climate change whereas they should stay out of industry politics.

Furthermore, in the recent past, there has been a tremendous amount of libertarian policy proposals put forth which remodeled the role of government in a free society: A libertarian case for mandatory vaccination? Alright. A libertarian case for UBI? Not bad. A libertarian case for a border wall? I am not so sure about that one.

Although these examples may define libertarianism in their own context, the general message remains clear to me: libertarians are prone to support governmental measures if they rank the value of a specific end higher than the risk of a failed policy. Since such an article is not the right framework to gather a robust amount of data to prove my point empirically, I rely on the conjecture, that the core question of where the government must interfere is heavily driven by subjective moral judgements.

Summary

Neoliberals and Libertarians diverge on the issue of government involvement in the economy. That’s fine.

Governmental policies often do not fully reach their intended goals. That’s also fine.

The distinction between neoliberals and libertarians is merely a threshold of how much trust one puts in the government’s ability to cope with problems. Both schools should not value this distinction too much since it is an incredibly subjective issue.