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Libertarians have tended to focus on the role of political institutions in securing a free society at the expense of ideology. Given the importance of economic theory to libertarian thought, as well as the libertarians uncompromising tolerance of the private sphere, this is entirely understandable. The libertarian cannot treat a persons mind as a valid object of regulation, and the economist does not normally deal with ideology. Stigler and Becker provided the most thorough argument for the proposition that economists should take preferences as given and focus exclusively on incentives in 1977, arguing that preferences are reasonably stable across time and individuals and can safely be ignored. Since that time, economists have for the most part followed their advice. Taking preference as given is often extremely valuable in making economic puzzles tractable, and it is entirely valid for the economist qua economist to take this approach. To reach a full understanding of the factors promoting or undermining freedom, however, we need to bring preferences, ideology, and virtue back into the equation.
Political institutions certainly have a significant effect on freedom, but so too, I will argue, does ideology. The virtues of tolerance and neighbourliness are paramount in a securing a free society. Genuine liberty requires an acceptance of styles of life different from our own, combined with some degree of social trust and fellow feeling, and can thus only flourish between the oppressive communitarianism of the tribe and the paranoid individualism of the Hobbesian jungle. There is, in one sense, a tension between these two virtues: tolerance can easily become apathetic and neighbourliness can easily become meddlesome. I will argue, though, that avoiding both intolerance and apathy is not a matter of finding the correct balance between two extremes on a single dimension. Humanistic concern for the welfare of others is not a moderated form of paternalism, and tolerance is not a moderated form of indifference. It is possible to simultaneously have high levels of the good sort of community and the good sort of individualism.
Unfortunately, the bloated and hyperactive forms of government which today dominate the developed world are prone to produce both the worst sort of community and the worst sort of individualism. Political action forces us to take undue concernand ultimately coercive actionin the private lives of others, while government provision of services crowds out the institutions of civil society which serve to bind people together in mutual interdependence. Big government undermines both tolerance and community.
The Importance of Ideology
The modern economist who has most advanced our understanding of the ways in which ideology influences political and economic institutions is Douglass North. North argues that ideology, which he defines as the positive and normative mental models we use to understand and evaluate the world around us, affects political institutions both directly and indirectly. Prosperous societies have ideologies which enable them to overcome collective action problems and generally reduce transaction costs. Formal contracting can act as a substitute for trust to some extent, but since no contract is ever complete, tacit understandings remain important. Ideology also indirectly affects freedom through the workings of the political process, altering the constraints we impose on each other through collective choice. We might add a third avenue through which ideology affects freedom: that of changing political institutions themselves. It was the libertarian ideals of Americas founding fathers that led them to write a constitution designed to protect liberty, and no reform ever happens unprompted.
The set of political institutions of a society can be seen as a machine which takes the preferences of individuals as input and produces political rules and their enforcement as output. Each set of institutions has a different process of conversion, and will therefore spit out different rules from the same set of preferences, but sufficiently illiberal preferences are likely to produce illiberal rules in any political system. Even market anarchism, which some think is bound to produce something approaching libertopia, will be illiberal if people are strongly committed to illiberal ideologies.
If a large majority of people despise recreational drugs and are willing to back up their preference with money, for example, it will be near impossible to openly use or trade drugs even in an anarchist society. No matter how hard we try to come up with political institutions which promote liberty, it will be impossible to overcome a populace which is overwhelmingly bigoted or otherwise illiberal: garbage in, garbage out. A free society does not, of course, require that people approve of the lives of others, but merely that they respect the rights of individuals to live their own lives as they see fit.
Simple indifference towards others, though, is not sufficient for freedom. Informal institutions, which rely on the social capital produced in trusting and cohesive society, are also a crucial element. People need the ability to cooperate in order to pursue their goals. The secure property rights which facilitate exchange go a long way in fostering cooperation but, as North points out, enforcement costs would be overwhelming if people were always out to fleece each other. Trust advances freedom by lubricating social relationships, reducing the frequency with which force must be resorted to as a means of dispute resolution.
Neighbourliness also allows people to more effectively protect their freedom against those who would take it from them. Our rights would often go unprotected without the help of our fellows. A bystander will intervene to protect the vulnerable from violence only in a society with a sufficient level of social capital, and a neighbour will only take notice of a stranger walking out of your house with your television if he knows who you are. Professional police, whether provided voluntarily or through the state, are an important means of protection against aggression, but cannot completely replace the vigilance of a community.
On the one hand, excessively bigoted or paternalistic sentiments erode freedom by encouraging people to take coercive action against externally harmless activities; on the other, excessively self-regarding preferences precludes the social capital needed to ensure that the rights of the weak are upheld. If people have too much concern with the affairs of others, they will not let them live their lives. If people have too little concern, they will not defend their fellows against the coercive actions of others.
If ideology is the most important factor affecting freedom, given that it produces rules through the workings of political institutions and also produces those institutions themselves, it is tempting to suppose that political institutions are unimportant. This would be a mistake. Political institutions also feed back upon preferences by changing the conditions under which they develop, making the relationship between institutions and ideology reciprocal. We need, then, to carefully consider which institutional arrangements best promote the virtues of tolerance and neighbourliness. In the remainder of this essay, I will argue that government tends to undermine both.
Government Undermines Tolerance
Public Choice theory has long pointed out that a vote only matters when an election would otherwise be tied. That is to say, never. Since the probability of a tie in a moderately large electorate is infinitesimally small, voters have no incentive to expend resources becoming informed about policy and will rationally remain ignorant. There is, however, a paradox implicit in the rational ignorance argument, since taking the time to vote also takes effort. A rational person would not vote unless the expected benefit of voting was greater than the time and effort of getting to a polling booth. It is difficult to believe that the tiny change in expected political outcomes exceeds the cost in enough cases to explain current levels of voter turnout. There must be something else going on.
That something else has been described by theorists working within the Public Choice tradition. Apparently-irrational voting can be based on a general rational-choice theory of behaviour. Brennan and Lomasky offer an alternative model of voting focused on its expressive rather than instrumental value. In this view, ideological appeal is more important than pragmatic consequences in determining policy choice, with people voting not to influence policy, but rather to express themselves. Political action is not directed at particular ends, but is an intrinsically valued activity which is much more like cheering at a football match than . . . purchasing an asset portfolio.
Bryan Caplan uses standard economic theory to argue that voters are rationally irrational. Since a single vote does not generally influence the outcome of an election, irrationality is costless to voters. The act of voting is not causally connected to electoral outcomes from the individuals point of view. Caplan argues that people have preferences over their own beliefs and in the low-consequence environment of the voting booth will believe and vote for whatever makes them feel good. Irrationality is a normal good and people consume it to the point of satiation when it is free.
Caplan shows that voters have systematically biased and demonstrably false beliefs about economics, despite consistent attempts by experts to correct public opinion. This is not simple ignorance, but irrationality. The existence of policies, such as subsidies, which benefit special interests at the expense of the general public would not be accepted by rational voters. Caplan identifies four distinct voter biases: anti-foreign bias, make-work bias, anti-market bias, and pessimistic bias. It costs voters nothing to indulge these biases in the voting booth, and so they do. Caplans argument is broader than that of Brennan and Lomasky. Where Brennan and Lomasky see expressive concerns as counteracting instrumental calculation, Caplan also sees concern for self-image combining with evolved biases to alter perception. People do not rationally choose to express themselves rather than vote for the policies they would truly prefer, but simply do not make rational calculations when there is little at stake. Voters take the path of least resistance.
Caplan provides strong empirical evidence and plausible explanations for the existence of these biases, and they undoubtedly play a role in democracys illiberal tendencies. There is also another reason to think that democratic politics will elicit illiberal sentiment, though, which is more in line with Brennan and Lomaskys theory of expressive voting.
Much human behaviour can be explained by signalling. People act not only to produce results, but to demonstrate their competence, virtue, or allegiance to others. Political behaviour, being of little consequence to the individual and often involving public debates and displays, is a very useful way to signal to others which groups we are loyal to and how we would like the world to work.  While signals generally need to be costly in order to be effective, political behaviour provides a smooth gradation of costliness which is publicly observable. The diehard campaigner can dedicate his life to fighting for a particular cause, while one wishing to commit less need only express opinions on political matters when prompted. This publicly knowable commitment gradation provides incentives against free-riding in group membership while allowing the weakly committed to make whatever contribution they desire, much like many non-profit organizations have tiered membership structures. Even the weakest political signalling has some costs in terms of alienating potential allies on the other side of the debate. The expression of political beliefs, though, remains unrelated to the eventual political outcomes from an individual point of view.
This asymmetry between the personal and social cost of political behaviour leads to enormous problems. People may use their political behaviour to signal those things of which they approve and disapprove, rather than what they, on reflection, would think should be subject to state intervention. People may vote for gun control because they wish to be seen by othersor to see themselvesas the sort of person who does not like guns, or for restrictions on consensual sexual behaviour because they wish to express their disapproval of acts they deem immoral. The lack of consequence at the individual level allows people to express how they feel with impunity. These feelings are aggregated and physical force is used to prevent behaviour not in line with voter preferences: idle thoughts are enforced at the point of a gun.
When a hyperactive state has the potential to regulate any sphere of action, neutrality is impossible. A government that prohibits marijuana but permits alcohol can be seen as implicitly condemning the former and condoning the latter. To voters, this means that they cannot simply leave the choice of whether to behave in ways of which they disapprove up to individuals. A popular definition of public policy is whatever governments choose to do or not to do. Under this definition, silence is no more neutral than voice: to ignore is to condone. As more of life becomes politicized, people are forced to express their feelings through politics. The result is often heavy regulation of unpopular activities and lifestyles.
The impossibility of a government which is both neutral and active is clearly demonstrated by recent controversies over same-sex marriage. Marriage-equality advocates rightly argue that the state should not grant special privileges to heterosexual couples which they deny to homosexual couples. Opponents see state sanction of same-sex marriage as making them complicit in condoning and legitimizing these marriages. Government actions are purportedly based on will of the people. It is impossible to live and let live when it comes to democratic choice, since every choice is a matter of how we, rather I or one, should behave.
In itself, democracys penchant for extracting our prejudices does not change the distribution of preferences, but only the means through which they are expressed. The very act of expressing a preferencewhich in a depoliticized world would often go unarticulatedand deliberating over it, however, will tend to reinforce it. Cass Sunstein has shown that group deliberation tends to strengthen prior opinion and increase bias. The fact that individuals are compelled by politicization to express their views on guns or homosexuality and will tend to discuss these things most often with likeminded folks, then, will not only mean that otherwise latent views will be represented in policy, but also that those views will become stronger and more extreme over time.
Government Undermines Neighbourliness
Proponents of big government often argue that the market creates a dysfunctional form of individualism and selfishness. The truth, I will argue, is that the market and other voluntary institutions serve to create community and fellow feeling. It is government, not the market, which tends to promote the abstract individualism so feared by communitarians on both the left and right. 
Most libertarians, contrary to caricature presented by the left, recognize the value of voluntary cooperation not mediated by the profit motive. Charity, mutual aid, and clubs all perform useful functions, and their role would only increase in a free society. Many of the goods produced by the voluntary non-profit sectorsuch as health care, education, and social insuranceare also produced by government. The public and the voluntary sectors are substitutes, and as the size and scope of government expands, civil society is squeezed out.
Many public goods now produced by government, and which many economists assume could not exist without the state, were once produced privately through a variety of organizational arrangements. A particularly telling example is given by Ronald Coase. The lighthouse had been taken by economists as the prototypical example of a public good: one boat using the lighthouse as a navigational guide does not reduce its usefulness to other boats, and it is impossible to prevent any nearby boat from making use of it. Coase pointed out that many lighthouses had in fact been provided voluntarily, since their utility is restricted to boats berthing at a particular port, which is excludable. Similarly, police, judicial services, health, education, urban planning, and social insurance have been provided voluntarily, either through markets or non-profit organizations. The reason that supposedly public goods can be provided privately is in part that very few goods are genuinely public. Most are rather territorial or club goods from which exclusion is possible, and which will often be rival at certain levels of utilization.
Not only does decentralized private provision of such goods allow them to be provided in variety of ways better tailored to the diverse preferences of individuals, it also creates social capital by creating a site of community interaction which is absent from top-down government provision. Social capital, once created, is strengthened rather than diminished by further use. The trust and understanding produced through cooperation on one venture can be used time and again, and will grow stronger with each use.
Private charity is similarly a rich source of social capital. The sick, disabled or chronically unlucky would be sometimes be left in dire poverty were not for the kindness of others. The left argue that this makes coercive redistribution through the welfare state necessary. While redistribution does provide for the poor, it does so only at great cost to the relationship between the giver and receiver. As Tibor Machan persuasively argues, the welfare state does not allow development and expression of generosity, but is merely a hollow simulation which undermines genuine virtue.
Casual introspection and observation reveal that people feel good about helping others, and that those they help are generally appreciative. The recipient knows that his benefactor is making a sacrifice for his welfare, and will wish to avoid further reliance. Private charity provides help when it is needed, but seldom produces dependence. Coercive welfarism creates the illusion among beneficiaries that the money they receive appears from thin air, created by the all-powerful and benevolent force of government. Since no identifiable individual is helping them and their right to assistance is formalized in legislation, the welfare recipient feels entitled to other peoples money and has less motivation to provide for himself. This understandably creates resentment among taxpayers and antagonism between the two groups. Voluntary charity reinforces social capital; coercive welfare erodes it.
Finally, it should not be forgotten that commerce itself builds community. All economic action is embedded in a social context, relying on informal norms and understandings as well as formal rules. As people cooperate to meet their material needs, their interaction creates mutual interdependence and understanding. Whenever two people meet as buyer and seller they also meet as two human beingsintensely social creatures. When exchange is confined within the tribe, village, or nation, there is no basis for people to interact, and thereby reach common understandings and sympathies, across these borders. As the sphere of economic interaction expands, so does the moral community of individuals he hold worthy of moral consideration and respect.
Jane Jacobs describes the community-promoting aspects of voluntary cooperation and the community-destroying effects of top-down control with uncommon eloquence and clarity in her classic book The Death and Life of Great American Cities. Her description of bustling cities demonstrates that humans, left to themselves, will form tight networks of cooperation and mutual affection. Communities with high levels of social capital are the norm towards which people naturally gravitate, and top-down interference is one of the few things which can divert this tendency. The question, then, is not how to promote the virtue of neighbourlinesspeople will naturally cultivate that virtue themselvesbut how to avoid destroying it. The most effective means of destruction is the frustration of the decentralized and voluntary interaction which comes so naturally to human beings.
While formal institutions are an important factor affecting the level of freedom we enjoy, we cannot ignore the vital role played by ideology, social capital, and virtue. Without these things, political institutions can improve outcomes only so far. The same factors which tend to produce particularly bad government also undermine the ability of individuals to voluntarily cooperate to solve problems and pursue their goals. This can clearly be seen in the worlds poorest nations, which suffer from both extremely predatory governments and poorly functioning voluntary institutions. As nations become vicious, they may have more need of rulers, but their very viciousness will also reduce their capacity to be ruled humanely.
The tolerance and neighbourliness required for a free society cannot be acquired through conscious effort, but must emerge through interaction over time. While virtue cannot easily be created, it can easily be destroyed. As big government enters any sphere of life it both eliminates the virtues created by voluntary cooperation and introduces the vices created by politicizing private behaviour. The institutions of civil society and commercewhich in fact often overlapnaturally tend to promote the virtues necessary for freedom. The best thing we can do is leave them alone.
 Classical political economists such as Adam Smith and John Stuart Mill were very concerned with Mans moral nature. More recently, Deidre McCloskey (2006) has sought to understand the relationship between virtue and commerce and Jeffrey Rogers Hummel (1990, 2001) has argued that ideology plays a crucial role in providing public goods and securing freedom.
 See especially North (1981, 1988)
 See Macneil (1980) for more on this point.
 Friedman (1989) and Rothbard (1973) each provide book-length defences of market anarchism.
 Taylor and Crampton (2009) describe the conditions under which an anarchist society is likely to be less free than a statist one.
 See Halpern (2005) for an overview of the concept of social capital.
 Bowles 1998.
 Brennan & Lomasky 1993.
 Brennan & Hamlin 1998, p. 150.
 Spence (1973) provides the classic economic explanation of signalling. Zavahi (1975) and Caryl (1979) extend the insight to evolutionary biology. Iannaccone (1998) and Sosis & Alcorta (2003) attempt to explain religious behaviour in terms of signalling. Hanson (2002, 2003, 2008) argues that signalling group loyalty is an important factor in human behaviour, focusing on various aspects of health care and regulation.
 Secret ballots mean that voting itself cannot effectively signal group loyalty to others. Voting should be seen as part of a larger political identity.
 Dye 1987, p. 14.
 Sunstein 2002.
 For example, Marglin (2008).
 Boje (1996), Fukuyama (2001), and the essays in Beito et al (2002) all make this argument. The empirical relationship between the government intervention and social capital is ambiguous at the aggregate level. This should not be surprising, since social capital is notoriously difficult to measure, and a high degree of fellow feeling may be correlated with a stronger expressive preference for government spending. Van Oorschot et al (2005) provide an overview of the debate.
 The fact that states substitute for voluntary associations also means that, as Taylor and Crampton (2009) argue, the absence of government can lead to proportionately more cult-like religious groups which would push preferences in a more meddlesome direction.
 Coase 1974. Some have questioned Coases analysis. See Bertrand (2006).
 Foldvary (1994), Beito (2000), and the essays in Beito et al (2002) detail at length how specific public goods have been privately produced throughout history.
 Buchanan 1965; Foldvary 1994.
 Machan 1998.
 Granovetter 1985; Macneil 1980.
 Singer 1981.
 Jacobs 1961.
 The recent experience of Somalia is a telling example. See Leeson (2007) and Powell et al (2008).
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