It was clear from the beginning that the public sector union battle was going to expose fault lines between Pragmatic Libertarians and Progressives. For a time, a strain of self styled  liberaltarians had managed to convince themselves that the American left was just a bit misguided and if they only understood the economic arguments against their favored policies they would reject them.

True, progressive allegiance to the nanny-state was strong but even here pragmatic libertarians felt the weight of the empirical evidence was on their side. When the progressive assault on salt, soda and even meat failed to achieve its goals progressives would abandon it; just as they abandoned the similarly widespread but similarly misguided notion that the state should own and operate the major industrial concerns.

In the wake of Wisconsin, Kevin Drum called a resounding but by no means solitary, bullshit, on those hopes and dreams

If unions had remained strong and Democrats had continued to vigorously press for more equitable economic policies, middle-class wages over the past three decades likely would have grown at about the same rate as the overall economy—just as they had in the postwar era. But they didn’t, and that meant that every year, the money that would have gone to middle-class wage increases instead went somewhere else.

. . .

If the left ever wants to regain the vigor that powered earlier eras of liberal reform, it needs to rebuild the infrastructure of economic populism that we’ve ignored for too long

This sentiment is resolute among progressive bloggers. The decline of economic populism in general and unionism in particular is the front line of the new war. Wisconsin its cause celebre.

This fault line strains a potential liberal-libertarian fusionism to its core. The health care debate could be dismissed as a battle between monopolistic health insurance companies and a monopolistic state for control of fundamentally dysfunctional industry. That the federal government might choke the health care serpent to death in its future efforts to balance its budget could be seen as consolation for the growth in state control.

However, there is no such consolation to be offered in the unionization battle. Economic populism is precisely what libertarians hope to dissuade liberals of and to the extent public sector unions matter at all, its because they stand in the way of educational reform. Making public unions the heroes of a new populist revolution is not going to make any of this any easier.

What I didn’t expect though was a divide even within the libertarian camp. Libertarians are coming out in favor of private sector unions. Will Wilkinson is a representative

The right of workers to band together to improve their bargaining position relative to employers is a straightforward implication of freedom of association, and the sort of voluntary association that results is the beating heart of the classical liberal vision of civil society. I unreservedly endorse what I’ll call the "unionism of free association".

That free association is to be respected is without question. What is at issue of course, are contracts in restraint of trade – that is, “the right to band together to improve their bargaining position”

Does industry likewise have a right to create and have enforced by the state contracts which restrict supply and raise prices. May the Airlines, invoking their right to associate, form an organization and contract to hike fairs? May the automakers enter into an agreement to sell their cars at higher prices?

In a perhaps more parallel example, may the pharmaceutical companies enter into a collective bargaining agreement with the health insurers that the health insurers will cover only non-generics or they will not be sold any patented drugs at all?

What justification can there be for permitting labor to enter into such contracts but not business? I can’t help but suspect that it is a sympathy for economic populism and the notion that what is bad for the business must be good for the worker.

We must not forget that these restrictions work by driving up the cost of hiring the least advantaged members of our society. A man who could be profitably employed before a collective bargaining agreement may be forced into a lower paying occupation or even out of the labor force entirely after collective bargaining.

Perhaps, Will can clear it up for me but it seems that this line of reasoning goes against the core liberal-libertarian message as articulated by Will himself

It’s best to just maximize growth rates, pre-tax distribution be damned, and then fund wicked-good social insurance with huge revenues from an optimal tax scheme.