Assessing State Capacity Libertarianism

Ryan Murphy and Colin O’Reilly suddenly have a 33 pp. (yes substantive) paper on my January 1 blog post on State Capacity Libertarianism (on speed, perhaps they have learned from a master).  Here is the abstract:

Cowen (2020) argues for a redirection of effort towards “State Capacity Libertarianism,” which keeps the core of policy proposals from libertarianism intact while emphasizing a select set of policies aimed at furthering economic growth. These policies center on the ability of the state to accomplish that which it sets out to accomplish, i.e. state capacity. This paper interprets Cowen’s proposal in terms of an interaction between economic freedom and state capacity. Using four measures of state capacity, it finds that state capacity and economic freedom are neither additive nor complementary. Rather, they are substitutes for one another. These results are uncomfortable for conventional libertarianism, for the advocates of state capacity, and for State Capacity Libertarianism itself. One measure of state capacity we use is a novel measure using data from the Varieties of Democracy dataset, which may be useful for researchers in other contexts.

I am very pleased (and flattered) they undertook this investigation.  In terms of response on the particulars, I would say that State Capacity Libertarianism is about living standard levels, not marginal growth rates holding per capita income constant (as they do), which tends to drain off the benefits of state capacity.  You can run into similar misspecification problems by regressing against growth rates for the particular American states, whereas again the levels ought to be central to the analysis.  I readily admit the levels are not easy to handle econometrically, mostly because (outside of some oil principalities) “all good things go together,” and the correct causal model is not well understood.

In any case, the debate will go on.