Libertarian Viewpoints: Constitutional Economics

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Restrictions within the marketplace are one of the main things that libertarians are fighting against. Libertarians feel that the place of government is in a very different area than the marketplace. They also feel that there should be as few restrictions upon trade as possible using the Austrian economic system popularized in America by Ludwig von Mises.  Laissez-faire capitalism has been found by Libertarians to be the only system that could possibly be constitutional.

A brief background of libertarianism is needed to understand why libertarians support these systems. The libertarian beliefs are founded upon the axiom of non-aggression. This theory is that each person should be left alone to do as they wish unless their wishes harm another human directly. We cannot interfere with the doing of another person unless he or she is willing to have us interfere in his or her affairs.

From the libertarian axiom of non-aggression it is easy to see that the government should not restrict trade or business in any way. This leads to a belief that the government has greatly overstepped its bounds in the marketplace. Because it doesn’t hurt anyone directly for companies to charge whatever they want, the government should not force them to not charge an obscenely high amount for their goods. If people are willing to pay this amount for the goods then the company should be able to charge this amount.

It is from a similar view that libertarians feel the minimum wage should be abolished. It doesn’t hurt anyone directly if you are paying employees almost nothing. If you can find an employee who is willing to work for an amount then you should be able to pay them that amount. This will also lead to a decrease in prices because the cost to manufacture a product will decrease as well. In turn, this will lead to slight deflation, thereby making everyone richer in the long term.

A libertarian also cannot support any regulation of the free market because libertarians believe that the government should under no circumstances extend beyond its constitutional bounds. The only power of regulating the market in the listed powers in Article I Section 8 of the Constitution is “To regulate commerce with foreign nations, among the several states, and with the Indian Tribes.” While this may at first seem like the government is given the power to regulate business within the country, we must look at the actual wording of the document.

“Among” is not the same as “in”. Among would be regulating how the states trade with one another or with the federal government.  However, in Article I Section 9 it states that “No tax or duty shall be laid on articles exported from any State.”  Based on this we can see that the federal government cannot actually regulate trade within the US.

This same wording shows that the government cannot actually tax any imports to the country either. This is because States are defined as “Entities that have a defined territory and a permanent population, that are under the control of their own government, and that engage in, or have the capacity to engage in, formal relations with other such entities.”  Therefore, based on the definition of state, the federal government cannot tax any imports or exports. We can see from this that even some of the earliest laws were unconstitutional. The most blatant of these was the tariff.

Because of the unconstitutionality of any law taxing imports and exports, libertarians don’t support these. Libertarians also don’t support an amendment to the Constitution that would allow the federal government to constitutionally tax imports and exports. This is again not supported because it violates the libertarian axiom of non aggression.

Other reasons that libertarians don’t support any regulation of the market place are the two economic systems supported by them. One of these is laissez-faire capitalism. The other of these is the Austrian economic system repopularized in the US by Ludwig von Mises whom the Mises Institute is named after.

To explain why libertarians support these it is first necessary to understand what these policies are. Laissez-faire literally means to “allow to act.”  It is the theory that government should intervene as little as possible in economic affairs.  It is fairly obvious why libertarians support this system.  This is a very popular theory because it leaves the government almost entirely out of the free market, and, in its most pure form, leaves the government completely out of the marketplace.  This system also supports deregulating business as any regulation of the marketplace is an interference on the part of the government.

Compared to laissez-faire, the Austrian System is rather complicated. This theory has its origins in the 15th century Spain. It was created by the followers of St. Thomas Aquinas who were known as the Late Scholastics. Over the course of several generations they discovered and explained the laws of supply and demand and the laws of inflation. They were early advocates of property rights and celebrated the contributions of business to society. The idea of government being ruled by business originated with later people educated in their teachings.

A later economist in France who supported these ideas was Jean Baptiste Say. He came up with the law of economics that deregulation of the marketplace is based upon. This law, known as Say’s Law, stated that there will never be sustained overproduction or underconsumption if businesses are allowed to freely adjust the price of goods.

Because of the soundness of this system and its hands off role of government, many libertarians find this to be the best economic policy. This policy was mostly followed in the US until the authoritarian reforms of the Progressive Era. It was also the policy supported by Thomas Jefferson and James Madison. Because the writers of the Constitution clearly found this system good, it must have been the system that was expected to be created by the wording in the Constitution, thus, the marketplace should be as unregulated as possible.

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