My colleague Paul Mueller recently published an AIER Paper on Fusionism. He was kind enough to share it with me for review. I agreed with most, and disagreed with some, of Paul's arguments. This is healthy. You see, Paul was my student at Hillsdale College 15 years ago, when we first discussed the tension between libertarianism and conservatism.

Then, as now, I have major concerns about conservatism. On the one hand, much of what conservatism (at least some brands of conservatism) stands for is essential as a foundation for a free society. On the other hand, much of what conservatism is trying to do runs counter to the free society, as it would make undue impositions on individual liberty.

My purpose here is not to address Dr. Mueller's paper or to revisit the libertarian-conservative debate. Rather, I will discuss a tension within the classical liberal movement, a tension that is captured in the works of Austrian economist F.A. Hayek. 

As I like to remind readers, Hayek is one of three thinkers, along with Adam Smith and Frédéric Bastiat, who look down on fellows and students in the AIER library.

The tension has to do with the size and scope of a state necessary for the preservation of liberty. In this 250th anniversary year, I would be remiss not to mention that this same tension nourished the debates around the US Constitution. The Federalists thought the young country needed a vigorous — but limited — central government to unify it, protect against enemies foreign and domestic, and preserve liberty. The Anti-Federalists disagreed, foreseeing that any such central government would inevitably impose on the liberties of Americans. 

At least then — unlike the current political fracture in the USA — both sides agreed on the goal: the preservation of liberty. They disagreed on the institutional structure to advance the goal. 

F.A. Hayek

I suspect F.A. Hayek is well known to most readers of The Daily Economy, so I won't belabor a biography (if you're interested, I recommend Hayek's Challenge, by Bruce Caldwell, among others). Hayek was born in 1899 in Vienna, and while serving at the London School of Economics as the Tooke Chair of Economic Science and Statistics, he made a name for himself with his 1944 book, The Road to Serfdom. The book is a warning that the Western democracies were turning to socialism, just as they were defeating national socialism (and about to enter a cold war with international socialism). But it also contains the kernel of a political economy Hayek would develop over his lifetime of thinking, most notably in The Constitution of Liberty (1960), Law, Legislation, and Liberty (1973/1976/1979), and his last book, the Fatal Conceit (1988). Hayek received the Nobel Prize in Economics in 1974, and died in 1992.

Hayek was no slouch in the defense of liberty. The Road to Serfdom is still a clarion call against socialism's inevitable slide into tyranny. In 1947, he founded the Mont Pelerin Society, an international forum dedicated to advancing the free society. And his entire career was dedicated to preserving rule of law and a "constitution of liberty." 

And yet, for all that, Hayek was not a small-government libertarian. He saw a place for the state to provide what later scholars dubbed public goods — parks, fire insurance, and limited macroeconomic stimulus. All cautiously, of course, and all with an eye to preserving individual rights and constraining the state.

An Economic Theory of the State

Just as the American Framers agreed on liberty and disagreed on the institutional mechanism to deliver it, so do "sincere friends of freedom" (to use Lord Acton's phrase) disagree on the size and scope of the state best suited to protect freedom and individual rights.

Anarcho-capitalists believe that the state is immoral — because it is, by its very nature, coercive — but also that it is unnecessary (see Murray Rothbard's For a New Liberty: the Libertarian Manifesto). Markets will handle allocation of scarce resources among competing wants, incentives for innovation, and security (through private security forces and arbitrators). What markets can't handle will be left to civil society. Instead of coercing our neighbors through taxation to take care of the poor or protect the environment, we will convince them to participate, through families, clubs, churches, or other voluntary associations.

The minarchists (a large subsection of libertarians) reject anarcho-capitalism as a chimera. Ayn Rand notably argued that anarcho-capitalism would lapse into civil war between competing security agencies (see her essay, "The Nature of Government"). Along with Ludwig von Mises and other minarchists, she argued that a "night watchman" state was necessary for the protection of individual rights — a neutral police force, independent courts, and a military. The rest, however, was to be left to markets and civil society.