While a few libertarians base their views strictly on moral grounds, the vast majority are at least willing to supplement any moral arguments with practical arguments about the ineffective or counter-productive nature of government action. When it comes to government regulation of the economy, such practical arguments often involve appeals to the deterant effect taxes or regulations can have on productive activity. If you raise the cost of doing business, Libertarians will say, and you discourage economic growth, as these increased costs will discourage people from engaging in otherwise profitable activity, to the detriment of society. The underlying assumption of such arguments is that people respond to laws raising the cost of doing something by doing less of it.
When the subject turns to so-called “victimless crimes,” however, the Libertarian argument seems to be exactly the reverse. Laws against drug use, say, are ill advised as they will not stop people who want to do drugs from doing so, but will only drive such activity underground. Here the operative assumption is that law cannot deter behavior, or get people to do less of something by making it more costly. Of course, libertarians do not make this argument about laws against murder, rape, or theft. In those cases it is assumed that the law does exert a deterent effect sufficient to justify their continuation. While not rising to the level of a formal contradiction, one might wonder what it is about things like prostitution, drug use, gun ownership, etc., that make them unique among all human activities in that they are unresponsive to changes in cost.
A sophisticated Libertarian can, I think, avoid this inconsistency through two considerations. The first is that the effect of a law on behavior is not an all or nothing matter. When a libertarian argues against regulation and taxation of business on the grounds that it will deter business activity, he does not mean to make the ridiculous claim that it will deter all business activity, only that it will deter some such activity. Likewise, an honest libertarian should acknowledge that laws against drug use, say, do decrease the total amount of drug use to some extent, even if (as is undoubtedly also true) many people will still take drugs even if illegal.
By itself, the fact that making a given activity criminal will not completely eradicate it is not a cogent argument against its being criminal. The fact that a law is not a complete success does not mean that it is a complete failure. Murder and rape still occur, despite being illegal, and no one considers this a reason to legalize murder and rape. The libertarian insight, however, is that certain activities become much more harmful when they are forced underground than they would be otherwise. This is because black markets, being unable to rely on the courts for protection of property and contract, are forced to employ private violence to “protect their rights.” The result, in the case of drugs, is street gangs at home and narco cartels abroad, with the resulting loss of life measured in the tens of thousands every year, many of them innocent bystanders. The large amounts of money made from the sale of drugs becomes a tool to corrupt the police and justice systems, and the resulting attempts to fight the drug trade often involve a loss of privacy and civil liberties on the part of the entire population, both of which contribute to a decline in respect for the law generally. A similar story, with varying particulars, can also be told for the other activities libertarians typically wish to see criminalized.
Whether these sorts of harms attendant on suppression are sufficient to outweigh any benefit that comes from suppression is, of course, an open question, and one that may vary from case to case. I happen to think, for example, that such a case is weak with regards to abortion (the idea that a market in murder would be more harmful in driven underground not seeming very plausible), strong with regard to drugs, and unclear with regard to prostitution. But the argument should at least suffice to acquit libertarianism on the charges of inconsistency.
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