1.

Recently, I overheard a fellow Amtraker back off a conversation on politics. "You know, it's because I'm a libertarian," he said, sounding like a vegetarian politely declining offal. Later that afternoon, in the otherwise quite groovy loft I sometimes crash at in SoHo, where one might once have expected,say, Of Grammatology or at least a back issue ofElle Decor, there sat not one but two copies of something called The Libertarian Reader. "Libertarianism" places one—so believes the libertarian—not on the political spectrum but slightly above it, and this accounts for its appeal to both the tricorne fringe and owners of premium real estate. Liberty's current bedfellows include Paul Ryan (his staffers are assigned Atlas Shrugged), Glenn Beck (he flogged The Road to Serfdom onto the best-seller list), Slate's Jack Shafer, South Park, the founder of Whole Foods, this nudnik, P.J. O'Rourke, now David Mamet, and to the extent she cares for anything beyond her own naked self-interest—oh, wait, that is libertarianism—Sarah Palin.

With libertarianism everywhere, it's hard to remember that as recently as the 1970s, it was nowhere to be found. Once the creed of smart set rogues, H.L. Mencken among them, libertarianism all but disappeared after the Second World War. What happened? The single most comprehensive, centrally planned, coordinated governmental action in history—that's what happened. In addition to defeating fascism, the Second World War acted as a magnificent sieve, through which almost no one, libertarians included, passed unchanged. (To pick one example: Lionel Robbins, the most prominent anti-Keynesian before the war, served as director of the economic division of the British War Cabinet; after the War, Robbins presided over the massive expansion of the British higher education system.) By the '50s, with Western Europe and America free, prosperous, happy, and heavily taxed, libertarianism had lost its roguish charm. It was the Weltanschauung of itinerant cranks: Ronald Reagan warming up the Moose Lodge; Ayn Rand mesmerizing her Saturday night sycophants; the Reader's Digest economist touting an Austrian pedigree.

Libertarians will blanch at lumping their revered Vons—Mises and Hayek—in with the nutters and the shills. But between them, Von Hayek and Von Mises never seem to have held a single academic appointment that didn't involve a corporate sponsor. Even the renowned law and economics movement at the University of Chicago was, in its inception, heavily subsidized by business interests. ("Radical movements in capitalist societies," as Milton Friedman patiently explained, "have typically been supported by a few wealthy individuals.") Within academia, the philosophy of free markets in extremis was rarely embraced freely—i.e., by someone not on the dole of a wealthy benefactor. It cannot be stressed enough: In the decades after the war, a kind of levee separated polite discourse from free-market economics. The attitude is well-captured by John Maynard Keynes, who wrote in a review of Hayek's Prices and Production: "An extraordinary example of how, starting with a mistake, a remorseless logician can end up in Bedlam."*

And then came Robert Nozick.

To my knowledge, in writing Anarchy, State, and Utopia, his breathtaking defense of libertarianism, Nozick never accepted a dime other than from his employer, the philosophy department at Harvard University. (Unless it was from the Center for Advanced Study in the Behavioral Sciences at Palo Alto, the "minimally structured academic institution bordering on individualist anarchy" as Nozick put it, where he wrote the book's early chapters.) In fact, Nozick was the disinterested intellectual that laissez-faire had been searching for since Congress passed the Emergency Banking Act of 1933. Nozick started out a classic of the type: a Brooklyn kid, one generation off the shtetl, toting a dog-eared Plato. But along the way to a full Harvard professorship, attained at the age of 30, he'd lost the socialist ardors of his upbringing. "For a while I thought: 'Well, the arguments are right, capitalism is the best system, but only bad people would think so,' " he once told a journalist. "Then, at some point, my mind and my heart were in unison."

The Times Literary Supplement ranks Anarchy, published in 1974, as one of the "100 Most Influential Books Since the War," and that, I think, is underselling it. To this day, left intellectuals remember where they were when they first heard Nozick's arguments against not just socialism but wealth redistribution of any kind. "It is no exaggeration to say," the Telegraph wrote, after Nozick died in 2002, "that Nozick, more than anyone else, embodied the new libertarian zeitgeist which, after generations of statist welfarism from Roosevelt's New Deal to Kennedy, Johnson and Carter, ushered in the era of Reagan and Bush, pere et fils." Prior to Anarchy, "liberty" was a virtual synonym for rolling back labor unions and progressive taxation, a fig leaf for the class interests of the Du Ponts and the B.F. Goodriches. After Anarchy, "liberty" was a concept as worthy of academic dignity as the categorical imperative.

As a moral philosopher, Nozick was free to stretch liberty further than even an Austrian economist. That is, he was able to separate out a normative claim (that liberty is the fundamental value of values, and should be maximized) from an empirical claim (that the most efficient method for allocating goods and services is a market economy). Free to pursue liberty as a matter of pure principle, Nozick let nothing stand in his way. Should we tax the rich to feed the poor? Absolutely not, as "taxation of earnings is on par with forced labor." (Or more precisely: "Taking the earnings of n hours of labor is like taking n hours from the person.") Well, isn't at least some redistribution necessary on the basis of need? "Need a gardener allocate his services to those lawns which need him most?"

To the entire left, Nozick, in effect, said: Your social justice comes at an unacceptable cost, namely, to my personal liberty. Most distressingly, to this end Nozick enlisted the humanist's most cherished belief: the inviolability of each human being as an end unto himself—what Nozick, drawing on Immanuel Kant, calls "the separateness of persons." For Nozick, the principle of the separateness of persons is close to sacred. It affirms, as he writes, "the underlying Kantian principle that individuals are ends and not merely means; they may not be sacrificed or used for the achieving of other ends without their consent. Individuals are inviolable."

I like to think that when Nozick published Anarchy, the levee broke, the polite Fabian consensus collapsed, and hence, in rapid succession: Hayek won the Nobel Prize in economics in 1974, followed by Milton Friedman in '75, the same year Thatcher became Leader of the Opposition, followed by the California and Massachusetts tax revolts, culminating in the election of Reagan, and … well, where it stops, nobody knows.

True, a recondite book by an obscure professor wouldn't have made any difference if it hadn't caught the drift of public feeling. But also true: Public feeling might have remained begrudging, demagogic, sub-intellectual if the public's courage hadn't been shored up (or its conscience bought off, depending on your point of view) by intellectuals like Nozick. Take Margaret Thatcher's infamous provocation—"There's no such thing as society"—with its implication that human beings are nothing more than brutishly competitive atoms. Now listen to its original formulation, in Anarchy: "But there is no social entity with a good that undergoes some sacrifice for its own good. There are only individual people, different individual people, with their own individual lives." The tone is different—it's Kantian, not Hobbesian—and so is the moral emphasis: Society is unreal not because individuals are brutish but because they are dignified.

With the solemn invocation of individual lives, the liberal humanist ought to push away from the table, take a deep breath, and ask whether any of this remarkable assault is true. Can it really be that eliminating the income tax shows maximum moral respect for others? I thought a fraction of a rich man's fortune is to the rich man only money but to a starving man is freedom. Am I a moral idiot? It is impossible without writing a book (and many have) to do Anarchy justice. Nonetheless, one argument from its pages is considered its most central, most famous, most bewitching. This is the so-called "Wilt Chamberlain" argument, and pausing to pick it apart, we can begin to see why Nozick's defense of libertarianism, as Nozick himself came to believe, collapsed.

2.

When I think with my own brain and look with my own eyes, it's obvious to me that some combination of civil rights, democratic institutions, educational capital, social trust, consumer choice, and economic opportunity make me free. This is not what Nozick is arguing. Nozick is arguing that economic rights are the only rights, and that insofar as there are political rights, they are nothing more than a framework in support of private property and freedom of contract. When I study American history, I can see why America, thanks to a dense bundle of historical accidents, is a kind of Lockean paradise, uniquely suited to holding up liberty as its paramount value. This is not what Nozick is arguing. Nozick is arguing that liberty is the sole value, and to put forward any other value is to submit individuals to coercion.

How does so supple a mind end up committed to so seemingly brittle a belief system? The leap of faith here is, no surprise, in the construal of liberty itself, which unlike other values (says the libertarian) makes no restricting or normative claims on anybody; liberty is instead like oxygen—invisible, pervasive, enabling. Every other value, meanwhile, represents someone else's deranged will-to-power by which, under the guise of high-mindedness or disinterest, he would "pattern" all of society to his own liking. "Almost every suggested principle of … justice is patterned," Nozick says, by way of setting up the Chamberlain argument. "To each according to his moral merit, or needs, or marginal product, or how hard he tries …" By way of showing us how an unpatterned, or libertarian, society is more just than any patterned one, Nozick asks the reader to consult her own preference, and choose a society patterned in any way she sees fit—Marxist, bell-curve meritocracy—you pick. Now call that pattern D1. Then, Nozick writes:

"Wilt Chamberlain is greatly in demand by basketball teams, being a great gate attraction. (Also suppose contracts run only for a year, with players being free agents.) He signs the following sort of contract with a team: In each home game twenty-five cents from the price of each ticket of admission goes to him. (We ignore the question of whether he is "gouging" the owners, letting them look out for themselves.) … Let us suppose that in one season one million persons attend his home games, and Wilt Chamberlain ends up with $250,000, a much larger sum than the average income and larger even than anyone else has. Is he entitled to his income? Is this new distribution D2 unjust?"

Nozick assumes our dream society is in some respect egalitarian; that to prevent Wilt from grossly out-earning his fellow citizens, the system we've imagined in D1 will curtail Chamberlain's right to the whole fruit of his own labor. To the liberal humanist, Nozick is saying: You don't take your finest hero, Kant, seriously, because if you did, you would never sacrifice Wilt's autonomy to the social planner's designs. To the socialist, he is saying: You don't take your own finest hero, Marx, seriously, because if you did, you would never expropriate his surplus value (via taxation) as blithely as the capitalist. And to his own fellow Harvard professors, he is saying: You don't take your own finest hero—yourself—seriously, because if you did, why would you ever curtail the prerogative of a superstar?

For all its intriguing parts, Anarchy can be thought of as one long Excuse me? in response to one Harvard colleague in particular, the political philosopher John Rawls. In A Theory of Justice, Rawls argued that our talents are not really our own, because they are not morally intrinsic to us. Rawls asked us to imagine that we know nothing about our life advantages—that how gifted, smart, attractive, charismatic we are, as well as the socio-economic status of our parents, lie behind a veil of ignorance. He then asked us to design an insurance policy against poor accidents of birth. That insurance policy would be "justice," in the form of a society that was fair even from the perspective of its least well-off citizen—who, after all, passing through the veil of ignorance, might turn out to be us.

To this, Nozick replies: All that intellectual pomp, arrayed to convince me that my talents are not mine? But my talents aren't like fire and disease. They aren't fatalities I insure against. Quite the opposite: My talents constitute the substance of who I am, and I am right to bank on them. Having cornered us with Kant, with Marx, and, most of all, with our own vanity, Nozick concludes, "No end-state principle of justice can be continuously realized without continuous interference with people's lives," confident that "interference" is sufficiently morally offensive to carry the day.

Here the liberal humanist needs to relax, take a second breath, and realize that, while clever, the Wilt Chamberlain argument is maybe a little too clever—i.e., what seems on first blush to be a simple case of freedom from interference is in fact a kind of connivance. Anarchy not only purports to be a defense of capitalism, but a proud defense of capitalism. And yet if Anarchy would defend capitalism unashamedly, why does its most famous argument include almost none of the defining features of capitalism—i.e., no risk capital, no capital markets, no financier? Why does it feature a basketball player and not, say, a captain of industry, a CEO, a visionary entrepreneur? The example as Nozick sets it out includes a gifted athlete (Wilt Chamberlain), paying customers (those with a dollar to see Wilt play)—and yet, other than a passing reference to the team's "owners,"no capitalist!

In Nozick's example, we know what portion of every ticket (25 cents) represents the monetary equivalent of every paying customer's desire to see not the game itself but Wilt Chamberlain play in it. Bearing in mind that all thought experiments beg our indulgence without requiring our stupidity, notice that, in order to abstract out this allegiance from allegiance to the team, to the sport, etc., and give it a dollar figure, Nozick has assigned what amounts to a market price to Wilt's talents while also suggesting the price was achieved by negotiation between Wilt and the owner. Now, here we must pause, and note that "price" is not an incidental feature of a libertarian belief system—it is what obviates the need, beyond enforcing the basic rule of law, for government. To a libertarian, price is, in effect, the conscience of society finding its highest expression in every swipe of the debit card. Just as the thought experiment, "If there were purple cows on the moon, they would certainly be purple" tells us nothing about the moon, cows, or the color purple, assuming a world in which labor and management arrive at gentleman's agreements—and in which those agreements capture the precise value, down to the penny, of labor's marginal product—tells us very little about justice.

Put another way, Nozick is cornering us into answering a ridiculously loaded question: If every person were a capitalist, and every capitalist a human capitalist, and every human capitalist was compensated in exact proportion to the pleasure he or she provided others, would a world without progressive taxation be just? To arrive at this question, Nozick vanishes most of the known features of capitalism (capital, owners, means of production, labor, collective bargaining) while maximizing one feature of capitalism—its ability to funnel money to the uniquely talented. In the example, "liberty" is all but cognate with a system that efficiently compensates the superstar.

The connivance is thus hidden in plain sight. "Wilt Chamberlain" is an African-American whose talents are unique, scarce, perspicuous (points, rebounds, assists), and in high demand. We feel powerfully the man should be paid, and not to do so—to expect a black athlete to perform for (largely) white audiences without adequate compensation—raises the specter of the plantation. But being a star athlete isn't the only way to make money. In addition to earning a wage, one can garnish a wage, collect a fee, levy a toll, cash in a dividend, take a kickback, collect a monopoly rent, hit the superfecta, inherit Tara, insider trade, or stumble on Texas tea. For each way of conceiving wealth, there is at least one way of moralizing its distribution. The Wilt Chamberlain example is designed to corner us—quite cynically, in my view—into moralizing all of them as if they were recompense for a unique talent that gives pleasure; and to tax each of them, and regulate each of them, according to the same principle of radical noninterference suggested by a black ballplayer finally getting his due.

3.

To my critique of the Chamberlain example, a libertarian might respond: Given frictionless markets, rational self-maximizers, and perfect information, the market price for Wilt's services could not stay separable from the market price to see Wilt play. (Visionary entrepreneurs would create start-up leagues, competing leagues would bid up prices for the best players.) In a free-market paradise, capital will flow to talent, until rewards commensurate perfectly with utility. Maybe; and maybe in a socialist paradise, no one will catch the common cold. The essence of any utopianism is: Conjure an ideal that makes an impossible demand on reality, then announce that, until the demand is met in full, your ideal can't be fairly evaluated. Attribute any incidental successes to the halfway meeting of the demand, any failure to the halfway still to go.

How could a thinker as brilliant as Nozick stay a party to this? The answer is: He didn't. "The libertarian position I once propounded," Nozick wrote in an essay published in the late '80s, "now seems to me seriously inadequate." In Anarchy democracy was nowhere to be found; Nozick now believed that democratic institutions "express and symbolize … our equal human dignity, our autonomy and powers of self-direction." In Anarchy, the best government was the least government, a value-neutral enforcer of contracts; now, Nozick concluded, "There are some things we choose to do together through government in solemn marking of our human solidarity, served by the fact that we do them together in this official fashion ..."

We're faced then with two intriguing mysteries. Why did the Nozick of 1975 confuse capital with human capital? And why did Nozick by 1989 feel the need to disavow the Nozick of 1975? The key, I think, is recognizing the two mysteries as twin expressions of a single, primal, human fallibility: the need to attribute success to one's own moral substance, failure to sheer misfortune. The effectiveness of the Wilt Chamberlain example, after all, is best measured by how readily you identify with Wilt Chamberlain. Anarchy is nothing if not a tour-de-force, an advertisement not just for libertarianism but for the sinuous intelligence required to put over so peculiar a thought experiment. In the early '70s, Nozick—and this is audible in the writing—clearly identified with Wilt: He believed his talents could only be flattered by a free market in high value-add labor. By the late '80s, in a world gone gaga for Gordon Gekko and Esprit, he was no longer quite so sure.

Even in 1975, it took a pretty narrow view of history to think all capital is human capital, and that philosophy professors, even the especially bright ones, would thrive in the free market. But there was a historical reason for Nozick's belief: the magnificent sieve. Harvard's enrollment prior to World War II was 3,300; after the war, it was 5,300, 4,000 of whom were veterans. The GI Bill was on its way to investing more in education grants, business loans, and home loans than all previous New Deal programs combined. By 1954, with the Cold War in full swing, the U.S. government was spending 20 times what it had spent on research before the war. "Some universities," C. Wright Mills could write in the mid-'50s, "are financial branches of the military establishment." In the postwar decades, the American university grew in enrollment, budget and prestige, thanks to a substantial transfer of wealth from the private economy, under the rubric of "military Keynesianism." As a tentacle of the military-industrial octopus, academia finally lost its last remnant of colonial gentility.

At the same time the university boomed, marginal tax rates for high earners stood as high as 90 percent. This collapsed the so-called L-curve, the graphic depiction of wealth distribution in the United States. The L-curve lay at its flattest in 1970, just as Nozick was sitting down to write Anarchy. In 1970, there were nearly 500,000 employed academics, and their relative income stood at an all-time high. To the extent anyone could believe mental talent, human capital, and capital were indistinguishable, it was thanks to the greatest market distortion in the history of industrial capitalism; and because for 40 years, thanks to this distortion, talent had not been forced to compete with the old "captains of industry," with the financiers and the CEOs.

Buccaneering entrepreneurs, boom-and-bust markets, risk capital—these conveniently disappeared from Nozick's argument because they'd all but disappeared from capitalism. In a world in which J.P. Morgan and Cornelius Vanderbilt have been rendered obsolete, reduced to historical curios, to a funny old-style man, imprisoned in gilt frames, the professionals—the scientists, engineers, professors, lawyers and doctors—correspondingly rise in both power and esteem. And in a world in which the professions are gatekept by universities, which in turn select students based on their measured intelligence, the idea that talent is mental talent, and mental talent is, not only capital, but the only capital, becomes easier and easier for a humanities professor to put across. Hence the terminal irony of Anarchy: Its author's audible smugness in favor of libertarianism was underwritten by a most un-libertarian arrangement—i.e., the postwar social compact of high marginal taxation and massive transfers of private wealth in the name of the very "public good" Nozick decried as nonexistent.

And the screw takes one last turn: By allowing for the enormous rise in (relative) income and prestige of the upper white collar professions, Keynesianism created the very blind spot by which professionals turned against Keynesianism. Charging high fees as defended by their cartels, cartels defended in turn by universities, universities in turn made powerful by the military state, many upper-white-collar professionals convinced themselves their pre-eminence was not an accident of history or the product of negotiated protections from the marketplace but the result of their own unique mental talents fetching high prices in a free market for labor. Just this cocktail of vanity and delusion helped Nozick edge out Rawls in the marketplace of ideas, making Anarchy a surprise best-seller, it helped make Ronald Reagan president five years later. So it was the public good that killed off the public good.

Since 1970, the guild power of lawyers, doctors, engineers, and, yes, philosophy professors has nothing but attenuated. To take only the most pitiful example, medical doctors have evolved over this period from fee-for-service professionals totally in control of their own workplace to salaried body mechanics subject to the relentless cost-cutting mandate of a corporate employer. They've gone from being Marcus Welby—a living monument to public service through private practice—to being, as one comprehensive study put it, harried "middle management." Who can argue with a straight face that a doctor in 2011 has more liberty than his counterpart in 1970? What any good liberal Democrat with an ounce of vestigial self-respect would have said to Nozick in 1970—"Sure, Bob, but we both know what your liberty means. It means power will once again mean money, and money will be at liberty to flow to the top"—in fact happened. The irony is that as capital once again concentrates as nothing more than capital (i.e., as the immense skim of the financiers), the Nozickian illusion (that capital is human capital and human capital is the only capital) gets harder and harder to sustain.

Sustained it is, though. Just as Nozick would have us tax every dollar as if it were earned by a seven-foot demigod, apologists for laissez-faire would have us treat all outsize compensation as if it were earned by a tech revolutionary or the value-investing equivalent of Mozart (as opposed to, say, this guy, this guy, this guy, or this guy). It turns out the Wilt Chamberlain example is all but unkillable; only it might better be called the Steve Jobs example, or the Warren Buffett* example. The idea that supernormal compensation is fit reward for supernormal talent is the ideological superglue of neoliberalism, holding firm since the 1980s. It's no wonder that in the aftermath of the housing bust, with the glue showing signs of decay—with Madoff and "Government Sachs" displacing Jobs and Buffett in the headlines—"liberty" made its comeback. When the facts go against you, resort to "values." When values go against you, resort to the mother of all values. When the mother of all values swoons, reach deep into the public purse with one hand, and with the other beat the public senseless with your dog-eared copy of Atlas Shrugged.

4.

Calling yourself a libertarian is another way of saying you believe power should be held continuously answerable to the individual's capacity for creativity and free choice. By that standard, Thomas Jefferson, John Ruskin, George Orwell, Isaiah Berlin, Noam Chomsky, Michel Foucault, and even John Maynard Keynes are libertarians. (Orwell: "The real division is not between conservatives and revolutionaries but between authoritarians and libertarians." Keynes: "But above all, individualism … is the best safeguard of personal liberty in the sense that, compared with any other system, it greatly widens the field for the exercise of personal choice.") Every thinking person is to some degree a libertarian, and it is this part of all of us that is bullied or manipulated when liberty is invoked to silence our doubts about the free market. The ploy is to take libertarianism as Orwell meant it and confuse it with libertarianism as Hayek meant it; to take a faith in the individual as an irreducible unit of moral worth, and turn it into a weapon in favor of predation.

Another way to put it—and here lies the legacy of Keynes—is that a free society is an interplay between a more-or-less permanent framework of social commitments, and the oasis of economic liberty that lies within it. The nontrivial question is: What risks (to health, loss of employment, etc.) must be removed from the oasis and placed in the framework (in the form of universal health care, employment insurance, etc.) in order to keep liberty a substantive reality, and not a vacuous formality? When Hayek insists welfare is the road is to serfdom, when Nozick insists that progressive taxation is coercion, they take liberty hostage in order to prevent a reasoned discussion about public goods from ever taking place. "According to them, any intervention of the state in economic life," a prominent conservative economist once observed of the early neoliberals, "would be likely to lead, and even lead inevitably to a completely collectivist Society, Gestapo and gas chamber included." Thus we are hectored into silence, and by the very people who purport to leave us most alone.

Thanks in no small part to that silence, we have passed through the looking glass. Large-scale, speculative risk, undertaken by already grossly overcompensated bankers, is now officially part of the framework, in the form of too-big-to-fail guarantees made, implicitly and explicitly, by the Federal Reserve. Meanwhile, the "libertarian" right moves to take the risks of unemployment, disease, and, yes, accidents of birth, and devolve them entirely onto the responsibility of the individual. It is not just sad; it is repugnant.

*Correction, June 20, 2011: The article originally misspelled Warren Buffett's surname.

*Correction, June 24, 2011: The article originally stated that Keynes wrote his line critical of Hayek in the margins of his copy of The Road to Serfdom.