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On UF.
A Questioning Note
Underlying the below text is a basic misconception that shines out in different hues and themes. The error is to ignore the fact that in a free society there will always exist an almost unlimited number of occasions for people to wish to interfere with economic activities in political / extra-economic fashion. This is as true for decisions that affect people strongly and directly (like taxes) as it is for decisions of a more narrowly local kind and special issues that do not impact society at large (is it admissible to build this factory when it is believed by some to be damaging to the living conditions of a certain species of owls?). In fact, it is exactly in a free society that interventions into the economy are inevitable and indeed most numerous.
In order to understand freedom we require a theory of a highly interventionist economy. For one is unlikely to encounter in the real world the purely ideological and much hyped cut and dried distinction between a free economy and an interventionist economy. The strictures presented in the below text may apply in comparing a free economy and a planned economy; they certainly do not apply when analysing a modern free (unplanned) economy. Liberalism is lacking a theory of the mixed economy, which is precisely the kind of economy characteristic of a free society. The economy of a free society will always be an interventionist economy, since freedom demands the right to compete for opportunities to define the parameters that shape social interaction in all aspects of life, concerning economic issues no less than issues at a remove from the economy, and the big issues no less than the small ones.
The Visible Hand’s False Premises
From a notebook containing draft segments of my book “Understanding Freedom.”
To put it pointedly: An economist used to be a person who was able to explain why the economy works well without interference by the state, and, indeed, better than if such meddling were to be effected. Nowadays, an economist is a person who affirms that the economy can only work properly thanks to interventions by the state.
The economist – versed in knowledge about the invisible hand – has metamorphosed into a staunch proponent of economic policy, the politician’s advisor ambitious to steer the visible hand.
In the last chapter on the “economy,” we have tried to gain an understanding of the invisible hand. In the first part of the present chapter on “politics”, we have dealt with the origin and the beneficial aspects of the visible hand, the state; in the second part of the present chapter, we examine the limits and problems of the visible hand.
The problems attending the visible hand are rooted in a propensity to adhere to customary patterns of thought unfit to comprehend the order to be interfered with, and therefore give rise to a habit of arguing from false premises, including the following two:
First premise – control illusion
No one is responsible for the full web of free markets; there is no superordinate authority that determines what is to be produced when, where, how, by whom, for whom, and at what price.
The absence of such a helmsman is regarded with suspicion by many, a sentiment that endears them to the first of the two false premises: the idea of the market is overshadowed by an intuition that obscures the subtle workings of the underlying spontaneous, ecological order with its complex feedback loops.
We believe that interventions in the economy are necessary because we attach more emphasis to the comforting sense of having things under control than to the need for research into relationships that unsettle our mental expectations.
Second premise – the moral engine of the economy
One is tempted to resort to the second erroneous premise due to the need for an intervening authority to morally defend the measures it takes. After all, who would not want economic policies to be morally satisfactory? However this gives rise to an unnecessary and often dubious process whereby the economy is being defined in terms of moralising claims and postures, subjecting it ultimately to a high degree of politicisation; the latter being tantamount to the “law of the stronger”, a regime of might-makes-right in favour of the politically dominant.
The free market is based on generally applicable rules of just conduct; it is neutral vis-à-vis the concerns of the individual, quite in keeping with the requirements of the rule of law as embodied in blindfolded Lady Justice. By contrast, in the politicised economy justice emerges in ad hoc fashion, as a result of political dominance, and hence often in arbitrary manner.
Imagine an economy that can only work if everybody loves everybody. The free market works well in the absence of such a condition. It is neutral in the face of the personal objectives and inner motives of those operating in it. It is immaterial whether Bill Gates is driven by greed or altruism, he can succeed in the free market only if he provides his fellow-men with products that they so welcome that they are willing to pay a price for.
In a politicised economy, however, there is a need for policies to be dressed up morally; their proponents are compelled to make a show of their virtue, often making promises that cannot be kept to begin with, or will be reversed as unintended consequences make themselves felt that have been previously unnoted or neglected for all the gratifying vistas envisioned.
Alternatively, economic policies may become dependent on pandering to morally embellished demands that
- (a) are considered moral only by some people while others must be coerced to accept them,
- (b) do not possess the moral quality asserted, and in particular
- (c) are erroneously advertised as they will give rise to unintended consequences that engender more damage than benefits.
In a politicised society it is necessary to enforce a common set of values or to act as if such a consensus existed, when in actual fact people are motivated by widely differing objectives and moral beliefs.
Written in March 2013 German twin post.
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