The extreme free marketers have their pros and cons.

Question: What positions do Libertarians take?

Dean Baker: Most of the people—I shouldn’t say most because I haven’t done a poll—many of the libertarians or self-styled libertarians really are not. They want the government to structure markets in ways that cause income to flow upward and they call themselves libertarians because they don’t want to pay any taxes. You do have more honest libertarians that won’t always come to the same conclusions with me but they do raise a lot of the same issues. They recognize copyrights and government interference. They recognize that patents are government interference in the market. They recognize that the government does a lot of things to push income upwards. So I think there might be some room for common cause with at least some of those people.

But one of the things I would say in general where I am very sympathetic to libertarian philosophy is that we should be very conscious of where the government is forcing people to do things and ask ourselves if that’s really necessary. I’ll just give you a very concrete example. Obviously, I’ve worked a lot on social security. I very much want to preserve that pretty much as is, not necessarily 100% but the basic story of core retirement income I think is a very good one. We want to preserve that principle. We are mandating that. You don’t have a choice. Anyone who works pays into it and I think that’s right. Now, basically, our private pension system has collapsed. Private benefit plans are going down very quickly. Very few people in the private sector have them anymore. Defined contribution plans, most people haven’t put much into it and as we see there’s no security there. So what do we do? I would like to see us have a second tier added on to social security that wouldn’t be mandatory but you would be pressured into it. Here I’m working on some behavioral economics in recent years, that if we said, you contribute three percent of your wages to this pension plan unless you choose not to, unless you ask not to. So the default is you contribute three percent of your wages.

I think we could do something like that and probably get the vast majority of people to contribute three percent. Three is not a magic number but a ballpark that I think would be appropriate for this second tier that’s not mandatory but not fully optional either. And what you say in that case, or arguments I’ve had with some of my friends on this is that some people won’t contribute. And I would say that’s right. Some people won’t but my guess is that probably close to 90% of the people will consider contributing most of the time. Now, the question I’d ask is how much work do we want to go through to get that other 10%, to make them contribute? So if you have 10% that actively are saying, I don’t want to contribute to this, I just think as a political matter it probably doesn’t make sense. We’re going to make it so it’s real easy for you to do it. You’re going to have jump through some hoops not to do it. But if you’ve sat back and you’ve decided, no, I’m going to take my chances, we already made you contribute to social security and I don’t want to touch that. But if you want to say no, I’m not going to contribute another three percent, I’ll either provide for my retirement in other ways or I don’t care, I’d say it’s probably not worth our while to use political pressure to force people to do it. It’s just not good judgment. So I think that’s where I give the libertarians a lot of credit. We have to think carefully where we want to use the power of the state. And it will be better if everyone did it but is it worth the power of the state to force those 10% that really say they don’t want to do it? I’d say no, probably not.

Recorded on: April 28 2009