Assessing State Capacity Libertarianism

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.

Keywords: Economic Freedom, Institutional Quality, State Capacity, State Building

JEL Classification: O43, P50, P10