Don Boudreaux criticizes modern economics for “simply assum[ing]” that governments are able to intervene without being subject to the same, or worse — Boudreaux invokes public choice theory —, imperfections as markets. I am deeply sympathetic to “politics without romance.” But, I find critiques like Boudreaux’s unpersuasive, because they give their intellectual opponents too little credit and they are often susceptible to similar scrutiny. That is, governments may not be perfect, but they are not necessarily entirely worthless, either.
“Free market economists,” for lack of a better term, like to impute onto the intellectual opposition the belief that governments are, for all practical purposes, perfect and that they can realize the supposedly optimal solution these economists calculate on paper. But, this view has never been accurate. In a 2012 paper, Roger Backhouse and Steven Medema correct certain economists’ view on the assumptions and beliefs of the “Cambridge School” welfare economists, such as Alfred Marshall and A.C. Pigou. As it turns out, these economists were often just as skeptical of government as anyone else! The same is true of modern economists. It’s simply not true that any economist assumes: (a) apolitical politics;1 (b) no human imperfections; (c) with more information than markets.
I do agree with, for example, Peter Boettke when he suggests something along the lines of some economists do not take public choice problems as seriously as they should. But, the idea is that the margin at which the costs of applying government-skepticism are higher than the benefits are different for different economists, which is saying something much, much different to what Boudreaux is claiming. Boudreaux’s post presents these scientists as completely unreasonable, making obvious mistakes when drawing conclusions from their beliefs, but this simply is not the case. What does exist is reasonable disagreement on where public choice and radical ignorance problems become too relevant to choose collective action over private action, but Boudreaux has nothing to say about this, which is why his argument is unpersuasive.
Why do (some) “free market economists” characterize their relatively “pro-interventionism” peers so uncharitably? I don’t think there is any intention of wanting to mislead, or any purposeful deceit in any sense. Rather, I think that free market economists (including me) are much more skeptical of government than the mean, and that the margin at which we draw the line (delineating the proper functions of government, which many libertarians think is zero) is, in absolute terms, very far from that mean. We are so biased — and I use this term in a neutral (statistical) sense — that even the average opinion on government seems unreasonable. Given that some libertarians (not Boudreaux, of course) like to call others “sheep,” I don’t think I’m that far off.
In the introduction to The Better Angels of Our Nature,2 Steve Pinker channels his inner Tversky and Kahneman to explain the average person’s estimate of the probability of crime. He argues that because of the increasing quality of communication technology, we simply hear, watch, and/or read more crime than we used to. While crime has actually decreased over time, the average person today is likely to over-estimate the probability of crime, and even be prone to the belief that crime has increased over time. If someone were to ask us to estimate the probability of, say, murder, because examples easily come to our head — thanks to the news we read, watch, and listen to —, we will guess that probability as being higher than it actually is, maybe even by a wide margin.
The case is the same with government failure, and this is especially true of libertarians. We tend to choose our news sources based on how close their views fit our own, whether we think so explicitly or not. I am someone who thinks of themselves as being open-minded, and open to alternative views. I try to organize my blog roll, to the right, around this mantra. But, I still have more libertarian blogs than I do non-libertarian, and when it comes to actually reading what’s on my blog roll, I tend to choose libertarian over non-libertarian posts. I have been reading more non-libertarian material recently, but my views have changed during that time — in what direction does causality run? Some people rather read Lewrockwell.com, the Wall Street Journal, or Forbes, rather than the New York Times, Jacobin magazine, et cetera. If we think that some source of information frequently produces bad information, why would we want to read it? Selection bias has reasonable causes. But, if what we read produces 10x more articles on government failure than any other source, we are probably going to overestimate the relevance of government failure.
Pinker also argues that our standards on crime have significantly grown over time, and the same is true of politics. Our political institutions have gone through tremendous improvements. Hoppe aside, most of us rather live under developed democratic institutions than under a monarchy or dictatorship. We recognize that modern governments are more exchange-based, and less extractive. This is not left-liberal opinionating; Buchanan’s The Calculus of Consent is entirely on political exchange in a representative democracy (the other side of public choice theory that isn’t invoked as often by “free market economists”). Thus, the standards to which we hold government are much higher today than they were 100+ years ago. And, this is a good thing! It means governance has improved.
I am skeptical of government. I think public utilities should be turned over to the competitive market. I think the banking industry can be “deregulated” (or, that private regulation is superior to public regulation, in this case). I am not saying libertarians and other “free market economists” should become government-lovers. What I’m saying is that we need to map our own intellectual position in reference to that of others, and realize that we are the ones close to an extreme. We are the ones who are most likely to overestimate the probability of bad governance (granted, there are many who will underestimate that probability). Thus, when it comes to having intellectual discussions on these problems, we should be more open to what others have to say and less trigger-happy to make uncharitable interpretations of their position.
It’s not that many economists assume governments are perfect, it’s that many “free market economists” assume governments are completely broken.
Addendum: One last attempt to frame my point. A common complaint leveled against a large chunk of “mainstream” economists — I, for example, critiqued Mark Thoma on this topic — is that perfect competition should not be the assumed standard by which to judge markets. The reason markets work exist independently of perfect competition: the institutions which allow markets to overcome problems of the unknown unknown, information asymmetries, externalities, et cetera. The same criticism can be turned around, however. Maybe some libertarians judge government by the unfair standard of perfect governance. Of course governments will fail, but we also need to look at where, and how, they work.
- I’m actually not sure what Boudreaux means by “apolitical” politics. I don’t think “political” decision-making is necessarily discoordinating. Certainly, the process of vote trading will have some “political” aspect to it — there has to be a bargaining process between politicians, after all —, but vote trading can be Kaldor-Hicks optimal. It was none other than James Buchanan who made this argument.
- I temporarily abandoned Pinker’s book, in favor of Piketty’s Capital in the Twenty-First Century. I read both books’ introductions, and I thought Piketty’s was the most interesting.