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Libertarianism and its discontents

CNET News.com's Michael Kanellos says that while those in the tech world want to see government out of our lives, they don't really mean it.

The 2008 presidential race has begun, and the libertarian machine in the tech world is already cranking up.

It's the same story every couple of years. Let's clear the deck of lawyers! Let's stop supporting failing industries and others with subsidies! A national ID plan is the first step toward totalitarianism! There's even a candidate--Ron Paul, running as a Republican--championing many of the signature causes. He wants to eliminate the IRS and claims you may need a doctor's prescription for vitamins if the U.S. stays in the WTO.

Our God-given right to Flintstone's Chewables! You'll have to pry them out of my cold, dead hands.

In general, the platform revolves around two principles. One, we should only pass laws that make sense. And two, the government should interfere in the economy and people's lives as little as possible. In the abstract, these are fine principles with which nearly everyone can agree. In practice, they're a crock, and here are some of the reasons why:

1. Government regulation is good. Not always, but often. The unfettered free market cannot solve all problems. Even Adam Smith said there's a tendency toward collusion. Thus, you need to apply regulatory frameworks to keep it in line.

Besides being the home of the free and the brave, America has also given birth to more chiselers than perhaps any nations on earth.

History makes the regulatory case. Critics said the creation of the SEC in the wake of the 1929 stock market crash would end free enterprise. Instead, it curbed fraudulent trading and created a stable foundation for a huge expansion of equity. Zoning and land use laws were derided as "takings" of property in the early 1900s. But now you don't have to worry about your neighbor erecting a hog-rendering plant next to your condo, or threatening to do so without a payoff. And the stock market explosion of the '90s? Was it caused by scaled-back regulation or the implementation of retirement laws that let people put more money into the stock market?

Admittedly, health and safety laws can add costs and delay products. Just ask the factory owners in China who have been exporting products with lead paint.

2. It can also open opportunities. The above just goes over preventative laws. What about laws that create freedoms? Until the 1860s, limited-liability corporations--which allowed investors to pool their money and not easily get sued directly--didn't exist. Limited liability massively interferes with free market principles: large organizations couldn't exist without it. Getting rid of it might actually be good for controlling campaign contributions and income inequality. But few people probably want to seriously reverse the policy.

3. We live on government subsidies. One of the chief ironies of Silicon Valley is that it's a hotbed of antigovernment sentiment and one of the biggest beneficiaries of government spending. Stanford went from being a regional university to a global powerhouse through aggressive pursuit of federal and state grants in the '50s. The Internet? A military project. Ask all of the cellular carriers if they'd really like to pay the fair market value for their spectrum.

We don't want to go bonkers with funding. If NASA offered someone $5.6 million to develop a lazy Susan that could operate in zero gravity, I'd say no. But if you take the money, you shouldn't be allowed to whine too much.

The green-tech revolution will require a lot of up-front spending from the government, as well. T.J. Rodgers, Cypress Semiconductor's CEO, underscored the dichotomy on the issue in an interview last year.

"I don't like subsidies. I don't think the government ought to be taking money from people and giving it to other people, for any reason," he said. "Having said that, the subsidies in Germany--I'm all for the German subsidies (laughs). I'm real happy to take money from the German government...I just don't like American subsidies."

4. Individuals don't always act reasonably. People can be motivated by carefully calculated self-interest, but they also act out of spite, jealousy, group solidarity and delusions of grandeur. In a world run by logic, there is no place for pistol-whipping someone in a Las Vegas hotel room for O.J. memorabilia.

Thus, trying to pass laws or resolve conflicts through a shared notion of "common sense" invariably will fail. Unfettered freedom of speech? Everyone loves it. But should there be restrictions on pornographic sites? On pornographic sites in which your head is grafted onto that of an actor? We live in world of gray.

5. We're born to cheat. Besides being the home of the free and the brave, America has also given birth to more chiselers than perhaps any nations on earth--another reason I love this country. Everyone has an angle.

Simplifying regulations--only passing laws that are three paragraphs long at most (another common libertarian chant)--would lead to all sorts of creative scams. The flat tax wouldn't be imposed for five minutes before a thriving gray market existed.

6. Compromise isn't fun. This is the untidy, unspoken secret of libertarianism: it's no fun holding office. To get bills passed, you have to water them down and engage in horse trading. Carping from the sides holds much more promise.

The federal bureaucracy is by no means perfect and tax revenues are spent imperfectly. But what happens when you get a small, centralized government with little money, a hamstrung police force and few enforceable laws? You get Somalia.