Libertarianism presents itself as a simple, clear, and principled view. It appears to provide a moral basis, in the value of individual liberty, for a specific political program of limited government and low taxes. The moral significance of liberty seems obvious even to those who believe it is not the only thing that matters. But the claim of the libertarian political program to be founded on this value is illusory. Three lines of thought lead to conclusions that might be seen as libertarian. But none of these shows that respect for the value of individual liberty should lead one to support the political program of low taxes and limited government that libertarians are supposed to favor.
One route to libertarian conclusions appeals to an idea of productive efficiency. As Hayek argued, the market is, in an important range of cases, a more efficient mechanism for deciding what to produce than decisions by any central planner. This is so for two reasons. The first is the flow of information: no planner could acquire information about what consumers want to buy as efficiently as the market does. The second is capture by interests: decisions by state-owned industries are likely to be guided by the interests of those who run or work in those industries rather than by the goal of efficient overall production. Where they apply, these arguments are powerful. As recent financial crises show, however, these considerations do not lead to the conclusion that government regulation is always a bad thing. And even Hayek would not deny that government intervention is needed in the case of externalities such as pollution and climate change. The considerations just mentioned provide some guidance about how to deal with these problems, but they provide no reason for thinking that they should be dealt with by simply leaving it to the market.