In my first essay for AIER, back in July, 2018, I wrote:
I’m a ‘directional’ libertarian. That means that if a proposed new policy or reform of an existing policy cuts spending or increases liberty, I’m for it, even if it isn’t a ‘real’ libertarian policy.
Destinationism insists that any new policy must be the ideal, or oppose it; directionalism is willing to support any move toward the ideal, if the ideal is not on the table as an alternative. Most people take a combination of these views, depending on the context.
But on almost every major policy question — school choice, tax policy, immigration, and so on — we end up fussing with folks who agree with us on almost everything. Tiny points of doctrine (“vouchers mean the government is still involved, and I reject that!”) become the very fulcrum of the faith. We pursue, but give infidels a free pass.
That’s why we can’t have nice things, like coherent party platforms or effective political organization. It’s more fun to fight among ourselves. To be fair, this is hardly new. One of the most famous instances of the never-ending “direction vs destination” battle was the “FEE rent-control pamphlet” incident of the late 1940s.
FEE Hires “Reds”
In 1946, Leonard Read was trying to establish the Foundation for Economic Education (FEE) as a policy-relevant think tank, while retaining a commitment to classical liberal philosophical principles. In August of that year, it had published an essay by F.R. Fairchild explaining that profits were essential for financing investment and creating higher wages. But the essay had little impact, because it either seemed obviously true to market advocates, and absurdly false to readers on the left, who all “knew” that labor was the only source of value.
President Read looked to commission a more policy-relevant paper, and settled on rent control. Given the inflation rates — 8 percent in 1946 and 14 percent in 1947 — politicians wanted to limit rent increases. In fact, more than a few political leaders saw rent controls as a permanent solution to the housing shortage, as hundreds of thousands of enlisted people and wartime workers returned to civilian life.
Read enlisted two then-young college professors, Milton Friedman (Chicago) and George Stigler (then at Brown) to write a monograph. The result was even shorter, at 22 pages total, than the Fairchild piece, which had been 66 pages. The two economists approached the problem as purely a question of welfare economics, the kind of contingent advice directionalists often focus on: given that the objective is [Y], then the most economically efficient way to achieve that end is to use means [X].
In this case, the settled political objective was to reduce inequality. Taking that as given, Friedman and Stigler argued (and correctly, in retrospect, as even Paul Krugman agrees) that rent control makes inequality worse, not better. Friedman and Stigler used a tactic often used by directionalists, stating a goal that we all share, including those on the opposing side, then using economic reasoning to demonstrate that the policy fails to achieve the goal. In the case of rent controls, this means that the policy will lead to housing shortages, and that these shortages will hit the poor worst of all. So if one does care about the poor, rent controls are the last thing he should choose as a policy.
As is common among economists, Friedman and Stigler characterized the allocation of scarce resources among competing uses as rationing. In a now-famous paragraph, the authors said:
The fact that, under free market conditions, better quarters go to those who have larger incomes or more wealth is, if anything, simply a reason for taking long-term measures to reduce the inequality of income and wealth. For those, like us, who would like even more equality than there is at present, not alone for housing but for all products, it is surely better to attack directly existing inequalities in income and wealth at their source than to ration each of the hundreds of commodities and services that comprise our standard of living. It is the height of folly to permit individuals to receive unequal money incomes and then to take elaborate and costly measures to prevent them from using their incomes.* (emphasis added)
Which brings us to the “*”, inserted by the “Editor” (Leonard Read). Read had demanded that the offending paragraph be cut out, but the authors flatly refused. Read could have rejected the piece, but eventually went ahead, with the following footnote:
*Editor’s Note: The authors fail to state whether the ‘long-term measures’ which they would adopt to go beyond elimination of special privileges, such as monopoly now protected by government. In any case, however, the significance of their argument at this point deserves special notice. It means that, even from the standpoint of those who put equality above justice and liberty, rent controls are ‘the height of folly.’
And then….the manure hit the ventilator. Destinationists have no interest in marginal, “less bad” policy improvements. For many people who supported FEE financially and intellectually, any policy whose stated objective was to reduce inequality was per se unacceptable. Saying that one pro-equality policy was better than another was to give away the game, because the real principle to be defended was a moral imperative: respect property rights. The problem with rent control wasn’t inefficiency; rent control was a violation of the freedom of property owners to contract for any price they could secure in the marketplace.
Ayn Rand, author of fiction and later treatises on political philosophy, was one of the most vocal critics of the pamphlet. Worried about just this sort of error, Rand had offered to vet FEE publications — for free, without pay — before they went out. When she saw this document after it had already been distributed as a main FEE publication, she saw it as a betrayal of the cause.
In her now-famous letter to William Mulendore (September 20, 1946), Rand decried the very idea of “rationing.” For Rand, rationing recalled standing in lines in the Soviet Union of her youth. Worse, the idea of a government policy allocating “the housing stock” presumed that the state was responsible for who gets what in the first place. In the Mulendore letter, Rand seethed:
What reasons do they [Friedman and Stigler] offer in support of free pricing? Not one word about the inalienable right of landlords and property owners. Not one word about the inalienable right of tenants to pay whatever they wish to pay. Not one word about any kind of principles. Just expediency (we’ll get more housing space) and humanitarian (sic) concern for those who can find no houses…
Here is my question: At a time when good, competent conservative writers are being blacklisted and starved by the pink clique that controls so many commercial magazines — why did Leonard Read hire two reds, with money entrusted to him by conservatives anxious to preserve Capitalism?
Less than a month later, in a letter to V. Orval Watts (October 11, 1946), fellow former FEE enthusiast Rose Wilder Lane expressed her view of the Friedman-Stigler pamphlet:
I have re-read RENTS AND CEILINGS with the intention of reviewing it. I am appalled, shocked beyond words. This is the most damnable piece of communist propaganda I have ever seen done. And I can prove that it is, sentence by sentence and page by page. What is the Foundation doing, good God, and WHY? Honest American writers in this country are hungry and desperate, blacklisted by the solid communist front holding the publishing field; why in decency (or lack of it) does the Foundation feed a couple of borers-from-within?…the Foundation writes checks for two of the most damnably clever communist propagandists that I’ve read for a long time. I’m physically sick about it.
We are Not Winning
What is the point of recounting these obscure, long-ago contretemps among libertarian elites? This is pretty “inside baseball,” in terms of practical effect. Except that it’s not. There is far more housing — more than a million units — under some form of rent control today in New York City than there were in 1946. We are not winning, folks.
The question is why. I focused on price controls on rental housing because it is an instance where there is nearly universal agreement among economists that it’s a bad policy. Directionalists would claim that the problem is the insistence on destinationist “whole nine yards or nothing” policy stances. Actual politics is largely about “expediency (we’ll get more housing space) and humanitarian (sic)” concerns. A focus on whether a policy works, given its objectives, doesn’t require a transformation of the listener’s basic moral principles, only a willingness to listen to evidence.
And: “sic”? Seriously? Ayn Rand was saying that the very idea that public policy might have some element of humanitarian concern is a category mistake. You destinationists need to get out more. Being proud of the purity of your positions by defining Friedman, Stigler (and Munger, let’s face it) as “reds” is a recipe for well-deserved irrelevance in a system governed by numerical majorities.
Or is that backwards? A destinationist might plausibly reply that it is precisely the willingness of directionalists to compromise on moral imperatives, and to focus on consequentialist concerns alone, that has led to a lack of progress. By grubbing for scraps, and being satisfied with the collectivist framing of what “we should do” about matters that can only be solved by emergent structures resulting from individual action under a system of inalienable private property, perhaps it is directionalists who have weakened our movement.
Of course, we could all be wrong. I’ll leave that to the reader to decide.
This article, This is Why We Can’t Have Nice Things: Directionalists vs. Destinationists, was originally published by the American Institute for Economic Research and appears here with permission. Please support their efforts.