We are all losers in this current economic crisis. On an intellectual level, though, no one has been more damaged by the crisis and the bailout than property rights libertarians. I think this is true across the libertarian spectrum.There are two broad types of property rights libertarian. First, there are what some have called moral libertarians. This category encompasses those who have a moral commitment to respect for a certain conception of individual liberty understood as the so-called negative freedom from coercion by third parties, and particularly by the state. It is exemplified by libertarian theorists such as Ayn Rand and Robert Nozick. On this view, the absence of state regulation or redistribution of property is valued for its own sake, and not because of any good consequences it might generate for society. Indeed, on some versions of this view, libertarian principles are to be respected even when they generate results that are catastrophic for society.In contrast, there are those who subscribe to a consequentialist defense of libertarian policy. Wealth will be maximized, they argue, when the state respects and enforces rights of private ownership and freedom of contract. Think here of Milton Friedman. This is obviously a bit simplistic. Even Friedman was not a pure libertarian, and there are some figures, like Hayek, who seem to straddle both categories. But I think the broad distinction between a consequentialist defense of libertarian limits on state power and the moral defense of libertarian principle remains a valuable one.Consequentialist libertarians have suffered the hardest blow. The current crisis is widely attributed to lax regulatory oversight and the corporate welfare currently being doled out to the financial industry gives the lie to the consequentialist argument that the government maximizes aggregate wealth by refusing to butt into the workings of the market system. Of course, there are those on the right who will dispute this and attempt to blame the current crisis on regulation (not its absence), but they have not as yet been able to marshal very convincing arguments in support of their position. Perhaps with the benefit of hindsight, they will be vindicated, but I doubt it. As it now stands, it would seem that a fairly robust regulatory state is required to maximize aggregate wealth.The current crisis interacts with "moral" libertarians in a more subtle way. Because their position is not based on the favorable consequences that will be generated by protecting rights of private ownership, the crisis, even if the result of insufficient regulatory intervention in the market, cannot undermine their position. Only moral argument can conclusively rebut the claims of moral libertarians. Nevertheless, it seems to me that the state's response to the economic crisis fatally undermines efforts to draw robust policy implications from the principles of moral libertarianism, even if the moral libertarian position is the correct one as a matter of abstract moral theory.Consider Nozick's position. In broad strokes, Nozick argues that a property distribution is just if it is the result of just original acquisition followed by just transfers, where just transfers are understood as those that result from consensual transactions with a few narrow exceptions for forced transfers that are justified by the need to maintain a viable (though minimal) state. Nozick used this "historical" theory of just property distribution to argue against the validity (at least in the abstract, as I'll explain in just a moment) of redistributive taxation and the welfare state.As many people (including Nozick himself) had already argued, the implications of Nozick's arguments for current policy are actually somewhat opaque. This is because existing property distributions are not themselves justified under Nozick's own system. The theft of land from Native Americans and of labor from African slaves, to give just two examples, cast a cloud that extends to the present day, perhaps justifying, even in Nozick's view, something like the welfare state, now cast as restitution for past injustice rather than an entitlement by its own right.The current crisis, and particularly the bailout of the financial industry, further drives home just how far from Nozick's ideal of justified property distribution we are. The use of tax dollars to subsidize the industries that employ the wealthiest Americans demonstrates the impossibility of pretending that those at the top have gotten there on their own steam such that they are somehow entitled to keep what they have "earned" and that it is unjust to take from them in order to give to those at the bottom of the economic pyramid. The social insurance on which the super-rich are currently drawing makes plain that they are as dependent as the single mother on welfare who was the subject of so much vitriol during the Reagan years.In other words, even if moral libertarians like Nozick are right as a matter of moral theory -- I don't think they are, but let's just assume it for a moment -- our current situation is so far from the necessary starting point for such a theory that the theory is, as a practical matter, nearly irrelevant.The discrediting of the hard-core libertarian position does not give us a great deal of guidance about where to go from here. There's a lot of space left for disagreement about how much state intervention in the economy or redistributive taxation is prudent, but at least we can dispense with some of the familiar arguments against the permissibility or wisdom of any such interventions.