In Defence of Economics Imperialism

Under the guise of the end of “Neoliberalism”, economics is losing its grip. Troubles had begun with the 2008 financial crisis. As people had once lost their faith in the Gold Standard, by 2008 the consensus upon the self-regulation of the markets slept away. Even some of the most notorious free-marketeers -like Alan Greenspan- became renegade from their lifelong beliefs.

The COVID-19 crisis seems to complete that process. However, it is not a process of the end of Neoliberalism, but of the end of what Gary Becker called the “economic way of thinking” -and this is truly bad news. The end of the imperialism of economics is, in some way, the end of rationality and universalism in political thinking.

The demise of economics in politics, in fact, had begun just some months before the 2007-2008 Crisis: when Tony Blair stepped down from Downing Street. Or even before: when George W. Bush, trying to avoid losing his re-election as his father had done in 1992, crushed the superavit inherited from Bill Clinton’s administration and created twin deficits. But Bush’s misfortunes were at least generated by an ill-understanding of economics. We are in danger of the near future being ruled by a not-understanding of economics at all. That is why we should not renounce the use of the economic way of thinking.

The key is not to leave the task only to the economists. Philosophers, lawyers, sociologists, historians, and all sorts of social scientists should get involved. Milton Friedman was the scapegoat of the Left, but the 1980’s and 1990’s came after decades of works of thinkers of all nationalities and sorts, like Karl Popper, Robert Nozick, Friedrich Hayek, Bruno Leoni, Max Weber, Raymond Aron, T. S. Ashton, Gary Becker, Robert Mundell, James M. Buchanan, Gordon Tullock, Anthony Downs and many more.

The state as the illusionary Deus Ex Machina

The 20th century was a century in which societies consolidated the belief that governments should provide certainty and protection from collective risks and developed the expectation that governments are well equipped to do so through large-scale interventions in the social environment.

The image of the state was transformed from that of an alien and often hostile apparatus in the service of the king and nobility to that of a collective organization entrusted with society’s safety and prosperity. This view grew stronger in the years of war-like economy and post-war reconstruction during the 21st century. Nationalism gave it the face of a father taking care of his extended family. Socialism gave it the image of a collective machine serving the interests of the working class. Democracy promised to tame its power, make it accountable to its subjects and harness it for the provision of public goods, whose definition was open to public deliberation.

The image of the state was also shaped by a growing belief in the use of science to give meaning to the ‘common good’ and offer prescriptions as to how a powerful central planner should work to achieve it. The state and science together provided a replacement for the loss of divinity. They offered a rationalization of power as enlightened parenthood. They created a secular Deus Ex Machina. Governments cultivated this paradigm as they were strengthening their role and clout over society through increasing levels of taxation, regulation and distribution, which in turn fostered public expectations for state effectiveness and political accountability. Recurrent failures led to policy re-adjustments some of which were historical political transitions. Yet all these transitions were responses that complied with this paradigm and sought to re-establish confidence in it.

Consider one of the most discussed economic and political transitions, the neoliberal turn. In light of recurrent economic crises, most prominently long-standing stagflation in the 1970s, neoliberalism best describes a re-adjustment of the role of government in the economy through privatizations, a drift away from Keynesianism to monetarism, and the re-regulation of economic structure. In the field of ideology, there was an effort to reshape public perceptions of what the state should not do with the promotion of economic freedom. Governments – most of them very reluctantly, such as both the Conservative and Labour governments in the late 1970s and the Ford and Carter administrations, while others very enthusiastically such as the Reagan and Thatcher governments – adopted versions of a ‘take some economic decisions back to you’ approach.

In the so-called neoliberal era, the state did not become less interventionist overall. Instead, governments redefined the nature of interventions in some areas to forms of surveillance of the responsibilities and individual risks that were given back to businesses and workers. Neoliberalism was a large-scale intervention in itself. It was an effort to revamp the economy and protect the capacity of states to extract resources from the market for political allocation. Governments preserved interventions that privileged the few and maintained those that continued to offer a safety net for the many (such as health insurance, progressive taxation and welfare state spending).

A remarkable juncture occurred when the 2009 crisis posed a systemic threat. Governments intervened to patch the financial system from a sequence of cascading events – partly the result of imbalances attributed to its own macroeconomic policies. The management of collective risk came center stage.

Terrorism is another case of the interventionist state. Spectacular terrorist attacks triggered a war-like response that combined the use of the criminal justice system with extra-judicial actions, including the mobilization of security and military forces and the introduction of new intrusive norms of intelligence collection and surveillance.

It is easy to discern that, over time, demand for drastic state action is more pronounced in the presence of dramatic single-source events or cascading events that are traceable as a single sequence. While millions are killed by car accidents and diseases, large-scale massacres such as the 9/11 or unravelling developments from the collapse of a major bank trigger a collective alarm. The public expects the state to intervene and give a heroic fight against the visible threat on behalf of society.

The most extreme version of the protective state is the current general lockdown. Not knowing any way out, governments can only deliver a form of collective protection that requires a general population quarantine. They offer society the kind of shield that a medieval wall and a locked gate offers in times of siege. Society both expects and accepts this.

Yet in the current pandemic governments still cannot deliver a cure. If a safe vaccine is not found, if the epidemic does not recede with growing immunity, if seasonal change doesn’t make any difference with contagion and if an effective anti-viral treatment is not found, governments will oversee their economies in rapid collapse and will soon have to make tough choices about how to turn the epidemic into a chronic manageable condition. For the time being, citizens remain disciplined in their lock-down and are the ones demanding strict measures. Governments know that, like in terrorism, citizens can be overwhelmed by fear as well as managed through fear.

In our efforts to understand what has happened and to make informed guesses about what could happen, metaphors can help or distort our perception. Societies have subscribed to an ideal image of political power that metaphorically resembles the biblical God: omnipotent, omniscient and benevolent. They call for a divine intervention, they express their dissatisfaction when they see no signs of it but they never question its raison d’ être. But there is an ontologically different metaphor. In Greek mythology gods are superhuman creatures struggling for domination and survival with their own moral regards, vices and ignorance as they mess around with the world of humans. They struggle to rule based more on terror than wisdom, imposing justice that serves their order. Humans have to worship them in order to appease them. I find this imagery closer to a realist depiction of government.

Nightcap

  1. Goodbye, Neal Peart Suleman Khawaja, Policy of Truth
  2. Great economics, bad politics (Banerjee & Duflo) Chris Dillow, Stumbling & Mumbling
  3. The Golden Age of the Federal Reserve is here Scott Sumner, MoneyIllusion
  4. Randolph Borne and the Progressives Nikhil Pal Singh, New Statesman

2019: Year in Review

It’s been a heck of a year. Thanks for plugging along with Notes On Liberty. Like the world around me, NOL keeps getting better and better. Traffic in 2019 came from all over the place, but the usual suspects didn’t disappoint: the United States, United Kingdom, Canada, India, and Australia (in that order) supplied the most readers, again.

As far as most popular posts, I’ll list the top 10 below, but such a list doesn’t do justice to NOL and the Notewriters’ contribution to the Great Conversation, nor will the list reflect the fact that some of NOL‘s classic pieces from years ago were also popular again.

Nick’s “One weird old tax could slash wealth inequality (NIMBYs, don’t click!)” was in the top ten for most of this year, and his posts on John Rawls, The Joker film, Dominic Cummings, and the UK’s pornographer & puritan coalition are all worth reading again (and again). The Financial Times, RealClearPolicy, 3 Quarks Daily, and RealClearWorld all featured Nick’s stuff throughout 2019.

Joakim had a banner year at NOL, and four of his posts made the top 10. He got love from the left, right, and everything in between this year. “Elite Anxiety: Paul Collier’s ‘Future of Capitalism’” (#9), “In Defense of Not Having a Clue” (#8), and “You’re Not Worth My Time” (#7) all caused havoc on the internet and in coffee shops around the world. Joakim’s piece on Mr Darcy from Pride and Prejudice (#2) broke – no shattered – NOL‘s records. Aside from shattering NOL‘s records, Joakim also had excellent stuff on financial history, Richard Davies, and Nassim Taleb. He is also beginning to bud as a cultural commentator, too, as you can probably tell from his sporadic notes on opinions. Joakim wants a more rational, more internationalist, and more skeptical world to live in. He’s doing everything he can to make that happen. And don’t forget this one: “Economists, Economic History, and Theory.”

Tridivesh had an excellent third year at NOL. His most popular piece was “Italy and the Belt and Road Initiative,” and most of his other notes have been featured on RealClearWorld‘s front page. Tridivesh has also been working with me behind the scenes to unveil a new feature at NOL in 2020, and I couldn’t be more humbled about working with him.

Bill had a slower year here at NOL, as he’s been working in the real world, but he still managed to put out some bangers. “Epistemological anarchism to anarchism” kicked off a Feyerabendian buzz at NOL, and he put together well-argued pieces on psychedelics, abortion, and the alt-right. His short 2017 note on left-libertarianism has quietly become a NOL classic.

Mary had a phenomenal year at NOL, which was capped off with some love from RealClearPolicy for her “Contempt for Capitalism” piece. She kicked off the year with a sharp piece on semiotics in national dialogue, before then producing a four-part essay on bourgeois culture. Mary also savaged privileged hypocrisy and took a cultural tour through the early 20th century. Oh, and she did all this while doing doctoral work at Oxford. I can’t wait to see what she comes up with in 2020.

Aris’ debut year at NOL was phenomenal. Reread “Rawls, Antigone and the tragic irony of norms” and you’ll know what I’m talking about. I am looking forward to Dr Trantidis’ first full year at NOL in 2020.

Rick continues to be my favorite blogger. His pieces on pollution taxes (here and here) stirred up the libertarian faithful, and he is at his Niskanenian best on bullshit jobs and property rights. His notes on Paul Feyerabend, which I hope he’ll continue throughout 2020, were the centerpiece of NOL‘s spontaneity this year.

Vincent only had two posts at NOL in 2019, but boy were they good: “Interwar US inequality data are deeply flawed” and “Not all GDP measurement errors are greater than zero!” Dr Geloso focused most of his time on publishing academic work.

Alexander instituted the “Sunday Poetry” series at NOL this year and I couldn’t be happier about it. I look forward to reading NOL every day, but especially on Sundays now thanks to his new series. Alex also put out the popular essay “Libertarianism and Neoliberalism – A difference that matters?” (#10), which I suspect will one day grow to be a classic. That wasn’t all. Alex was the author of a number of my personal faves at NOL this year, including pieces about the Austro-Hungarian Empire, constructivism in international relations (part 1 and part 2), and some of the more difficult challenges facing diplomacy today.

Edwin ground out a number of posts in 2019 and, true to character, they challenged orthodoxy and widely-held (by libertarians) opinions. He said “no” to military intervention in Venezuela, though not for the reasons you may think, and that free immigration cannot be classified as a right under classical liberalism. He also poured cold water on Hong Kong’s protests and recommended some good reads on various topics (namely, Robert Nozick and The Troubles). Edwin has several essays on liberalism at NOL that are now bona fide classics.

Federico produced a number of longform essays this year, including “Institutions, Machines, and Complex Orders” and “Three Lessons on Institutions and Incentives” (the latter went on to be featured in the Financial Times and led to at least one formal talk on the subject in Buenos Aires). He also contributed to NOL‘s longstanding position as a bulwark against libertarian dogma with “There is no such thing as a sunk cost fallacy.”

Jacques had a number of hits this year, including “Poverty Under Democratic Socialism” and “Mass shootings in perspective.” His notes on the problems with higher education, aka the university system, also garnered plenty of eyeballs.

Michelangelo, Lode, Zak, and Shree were all working on their PhDs this year, so we didn’t hear from them much, if at all. Hopefully, 2020 will give them a bit more freedom to expand their thoughts. Lucas was not able to contribute anything this year either, but I am confident that 2020 will be the year he reenters the public fray.

Mark spent the year promoting his new book (co-authored by Noel Johnson) Persecution & Toleration. Out of this work arose one of the more popular posts at NOL earlier in the year: “The Institutional Foundations of Antisemitism.” Hopefully Mark will have a little less on his plate in 2020, so he can hang out at NOL more often.

Derrill’s “Romance Econometrics” generated buzz in the left-wing econ blogosphere, and his “Watson my mind today” series began to take flight in 2019. Dr Watson is a true teacher, and I am hoping 2020 is the year he can start dedicating more time to the NOL project, first with his “Watson my mind today” series and second with more insights into thinking like an economist.

Kevin’s “Hyperinflation and trust in ancient Rome” (#6) took the internet by storm, and his 2017 posts on paradoxical geniuses and the deleted slavery clause in the US constitution both received renewed and much deserved interest. But it was his “The Myth of the Nazi War Machine” (#1) that catapulted NOL into its best year yet. I have no idea what Kevin will write about in 2020, but I do know that it’ll be great stuff.

Bruno, one of NOL’s most consistent bloggers and one of its two representatives from Brazil, did not disappoint. His “Liberalism in International Relations” did exceptionally well, as did his post on the differences between conservatives, liberals, and libertarians. Bruno also pitched in on Brazilian politics and Christianity as a global and political phenomenon. His postmodernism posts from years past continue to do well.

Andrei, after several years of gentle prodding, finally got on the board at NOL and his thoughts on Foucault and his libertarian temptation late in life (#5) did much better than predicted. I am hoping to get him more involved in 2020. You can do your part by engaging him in the ‘comments’ threads.

Chhay Lin kept us all abreast of the situation in Hong Kong this year. Ash honed in on housing economics, Barry chimed in on EU elections, and Adrián teased us all in January with his “Selective Moral Argumentation.” Hopefully these four can find a way to fire on all cylinders at NOL in 2020, because they have a lot of cool stuff on their minds (including, but not limited to, bitcoin, language, elections in dictatorships, literature, and YIMBYism).

Ethan crushed it this year, with most of his posts ending up on the front page of RealClearPolicy. More importantly, though, was his commitment to the Tocquevillian idea that lawyers are responsible for education in democratic societies. For that, I am grateful, and I hope he can continue the pace he set during the first half of the year. His most popular piece, by the way, was “Spaghetti Monsters and Free Exercise.” Read it again!

I had a good year here, too. My pieces on federation (#3) and American literature (#4) did waaaaaay better than expected, and my nightcaps continue to pick up readers and push the conversation. I launched the “Be Our Guest” feature here at NOL, too, and it has been a mild success.

Thank you, readers, for a great 2019 and I hope you stick around for what’s in store during 2020. It might be good, it might be bad, and it might be ugly, but isn’t that what spontaneous thoughts on a humble creed are all about? Keep leaving comments, too. The conversation can’t move (forward or backward) without your voice.

Nightcap

  1. Gulf states and US hostility towards Iran Peter Henne, Duck of Minerva
  2. NAFTA 2.0 offers promise of stability Milton Ezrati, City Journal
  3. Free trade isn’t dead yet! Tyler Cowen, Bloomberg
  4. “All political careers end in failure” Scott Sumner, MoneyIllusion

Sunday Poetry: Rüstow vs. Mises

One of the bests books I’ve read this year was Serge Audier’s & Jurgen Reinhoudt’s relatively unknown (unfortunately!) translation of the protocols of the Walter-Lippmann-Colloquium. The NOUS-Network organized a wonderful seminar in which we thoroughly discussed the book and the emergence of Neoliberalism. For the preparation of this weekend’s Hayek-Kreis seminar, I reread the book and stood once again in awe of the magnificence of the discussion during the Colloquium.

By the way: If you are an undergraduate, graduate, or PhD scholar, please consider joining the NOUS-Network for Constitutional Economics and Social Philosophy as a Young Affiliate! NOUS is an information platform and a community for interdisciplinary research. The network links all academic fields relevant for thinking about social order and liberty. It spans philosophy, politics, economics and fosters scholarly research, contact and exchange.

In the following excerpt, it becomes clear, that the participant’s opinion on the psychological and sociological causes of the decline of Liberalism differed significantly. Mr Rüstow eloquently captures the standpoints of the two opposing groups (not without bias to be fair) and even cheekily disses Ludwig von Mises.

“Mr Rüstow: ‘All things considered, it is undeniable that here, in our circle, two different points of view are represented. One group does not find anything essential to criticize or to change in traditional liberalism, such as it was and such as it is, apart from, naturally, the adjustments and the current developments that are self-evident.

In their view, the responsibility for all the misfortune falls exclusively on the opposite side, on those who, out of stupidity or out of malice, or through a mixture of both, cannot or do not want to discern and observe the salutary truths of liberalism. 

We, on the other hand, we seek the responsibility for the decline of liberalism in liberalism itself; and, therefore, we seek the solution in a fundamental renewal of liberalism. In order to justify in a positive manner this second point of view, I have to refer to what I have said and, especially, to the excellent arguments of Mr Lippmann.

Here, I would only like to draw attention to the fact that if the unwavering representatives of old liberalism were right, the practical prospects [for liberalism] would be almost hopeless. Because it does not really seem that old liberalism has gained in persuasive and in seductive force or that the arguments, no matter how shrewd they may be, of these representatives have the least possibility of bringing about a conversion movement within the realm of Bolshevism, Fascism, or of National Socialism. If they did not listen to Moses and the prophets—Adam Smith and Ricardo—how will they believe Mr. von Mises?'”

As always, I wish you all pleasant Sunday.

 

Nightcap

  1. David Graeber’s poor grasp of economics Scott Sumner, EconLog
  2. Is capitalism a threat to democracy? Caleb Crain, New Yorker
  3. When did we start talking about life from elsewhere? Caleb Scharf, Scientific American
  4. Russia or California? Conservatives in 2020 John Quiggin, Crooked Timber

Nightcap

  1. How neoliberal thinkers spawned monsters they never imagined Wendy Brown (interview), INET
  2. Singapore’s thriving shadow education industry Sun Sun Lim, OUPblog
  3. The unraveling of Sino-Japanese relations Richard McGregor, History Today
  4. There is no end to history, no perfect existence Ludwig von Mises, Mises Institute

Nightcap

  1. Confessions of a confused ex-libertarian Irfan Khawaja, Policy of Truth
  2. Big Coal: Can Warren succeed where Trump failed? Scott Sumner, EconLog
  3. Warren’s health care albatross Ross Douthat, New York Times
  4. What, if anything, is neoliberalism? John Quiggan, Crooked Timber

Nightcap

  1. How American anthropology redefined humanity Louis Menand, New Yorker
  2. China’s new Great Wall rises in the heart of Europe Katsuji Nakazawa, Asian Nikkei Review
  3. Chile: neoliberalism’s poster boy falls from grace Branko Milanovic, globalinequality
  4. Turkey rejects German-NATO plan, cozies up to Russia Laura Kayali, Politico

Nightcap

  1. (Austro-)Hungarian Jews Lee Congdon, Modern Age
  2. Some thoughts on PPP in China, the US, and Japan Scott Sumner, MoneyIllusion
  3. The nature and origins of modernity Alberto Mingardi, Law & Liberty
  4. Foucault and neoliberalism Daniel Zamora, Jacobin

“Foucault’s Pendulum”: Social Scholarship, Ideology, and Libertarian Temptations

I'm no prophet. My job is making windows where there 
were once walls.
― Michel Foucault

Martin Luther, a German Augustinian monk, is credited with triggering a profound spiritual movement in the minds of early modern Europeans.  Luther, who was an extremely pious Catholic, eventually became a reluctant rebel by channeling the frustrations of the faithful over their inability to reach out directly to God within the then existing church matrix.  The Protestant Reformation, which he helped unleash, developed in opposition to the powerful institutions and guidelines of the Roman Catholic Church that acted as a gatekeeper to the sacred knowledge.  The reformation movement decentered and fragmented the once powerful Catholic ideology and bureaucracy, eventually shifting the minds of people toward the individual interpretation of Scripture.

In its condemnation of Luther, the papal court compared his heresy with that of Jan Hus.  One hundred years prior to Luther, this religious dissenter from Bohemia had been burned at the stake for essentially advocating the same things that were later ushered in by the Protestants.  Puzzled by the comparison, Luther, who had never heard about Hus, went to a library to research what the Bohemian had been up to.  Stunned by the obvious similarities between Hus’s and his own ideas, the rebellious German monk allegedly exclaimed, “Yes, I am a Hussite.”[1]  This historical anecdote was on my mind while I was following a recent debate about how and why, at the end of his life, Michel Foucault (1926-1984) – a 20th-century philosophical giant of a French-Jewish extraction and, simultaneously, one of the intellectual gurus of the modern left – became interested in “neoliberalism.”[2]

F_Wire

Foucault’s intention to explore the ideas of individual liberty and free enterprise – the process which led him to discovering for himself the writings of modern libertarian and libertarian-leaning thinkers, particularly F. A. Hayek (1899-1992), Ludwig von Mises (1881-1973), Wilhelm Röpke (1899-1966), Milton Freedman (1912-2006), and Gary Becker (1930-2014).  As the intellectual historian James Miller has informed us, the outcome of those insights was that Foucault implicitly came to defend “the value of a libertarian kind of liberalism.”[3] Continue reading

Nightcap

  1. Human rights as a troubling neoliberal project Stefan-Ludwig Hoffmann, Los Angeles Review of Books
  2. Liberals forgot that working for freedom is hard Richard Reeves, Literary Review
  3. Multi-party kleptocracies rather than illiberal democracies Branko Milanovic, globalinequality
  4. The demise of the Gandhi dynasty Krishnadev Calamur, the Atlantic

Watson my mind today: culture change

That, and spring time: that mystical time of year when a young student’s fancy turns to their neglected grades and wonders if there is anything they can do once the semester is over to raise them.

Culture is an emergent order. It cannot be owned, so you can’t have a “right” to a culture. It can’t be controlled, and while it can be influenced, it’s a complex system so beware lest your efforts backfire.

— Change doesn’t come, until it comes quickly. This serves as another reminder of the importance of keeping true ideals alive even when they are unpopular and they seem doomed to obscurity.

— It is also a warning about other changes, such as the growing anti-natalism of the left, brought in through environmentalism.

Caplan’s review of Moller’s Governing Least. “Instead of focusing on the rights of the victims of coercion, Moller emphasizes the effrontery of the advocates of coercion.” Even if “exceptions abound” to the “common-sense morality … that rights to person and property are not absolute … Moller sternly emphasizes … that these exceptions come with supplemental moral burdens attached.” Highly recommended.

— Responding to Ambassador Araud’s claim that the culture of neoliberalism and free trade are dead, Sumner says “Intellectuals focus too much on interesting rhetoric and too little on mundane reality.”

— On the importance of a culture that allows people to repent and change, that allows someone to apologize, make amends, and receive public forgiveness.

Nightcap

  1. The intellectual distrust of democracy Jacob Levy, Niskanen
  2. Leave John Locke in the dustbin of history John Quiggin, Jacobin
  3. In defense of neoliberalism William Easterly, Boston Review
  4. The predated mind (our animal origins) Nick Nielsen, Grand Strategy Annex