One of the recurring themes we keep hitting here is the balance between freedom and behavioral intervention. Nudge theories, for instance, assume that pushing people in a direction that’s good for them is an unadulterated benefit to humankind. Yet history suggests that this kind of paternalism is a gateway to much more serious interventions, when governments decide that they know best for us.
In general economists, you’d think, would be soundly against such interventions. After all, what is the point of studying free markets if you don’t think free markets should be the preferred operating mode for people? Yet an underlying assumption of liberty seems to lull even these arch adherents of market forces into a preference for conservatism.
In The Forsaken-Liberty Syndrome: Looking at Published Judgements to Say Whether Economists Reach a Conclusion Daniel Klein suggests that the anonymous positions of many economists aren’t worth the electronic paper they’re published on, because the individuals all-too-often don’t actually bother thinking about the issues under consideration and, instead, cleave to a simple, kneejerk ideological position. On the other hand, when economists go on the record to explain their positions they often present a much more liberal position:
"When randomly sampled AEA members were asked their position on “Pharmaceutical market regulation by the FDA,” the response distribution was very preponderantly on the side of “support,” rather than “oppose.”1 But an analysis of the published judgments by economists on the core FDA issues shows that such judgments very preponderantly favor liberalization (Klein 2008, 318-324). I believe that the FDA case exemplifies a syndrome: Certain interventions that are hallowed and important to statist ethos and mythos are wrongheaded and fail to meet the liberal burden of proof; a substantial majority of economists are at the political center or the Democratic left, and their thinking and survey responses go along with such interventions; meanwhile such economists, with a few exceptions, are not willing to go on record with support for such interventions because justification is so poor, and that means that the judgments that do go on record come from economists who are willing to stray from such ethos and mythos.”
At the heart of the argument is the idea of liberty and the slightly peculiar idea that there are two types: positive and negative. Positive liberty is about being able to do things, negative is about not being prevented from doing things. If you can’t read you lack positive liberty, but if you can’t read because someone’s taken away your books you suffer from negative liberty. This was Isaiah Berlin’s formulation of freedom, one that’s been taken on and developed by other scholars.
The main driver behind Klein’s paper are the ideas of the economist Murray Rothbard, whose definition of liberty can roughly be summed up as:
“A man is free when he is not aggressed against”
Which is vague enough, but that tends to be the norm with theories of liberty. It’s a tricky area, but we’re looking at the idea of a lack of coercion in our private lives. We should be free to eat (and get obese), drink (and get liver disease) and be merry (and get arrested). We shouldn’t be forced to eat lettuce, drink water and stop partying at nine.
Now, applied to economic reforms the liberty principle, in Rothbard’s formulation, can be reduced to the idea that if one reform rates higher in liberty than another then it should be preferred: so if it’s less coercive then it’s better. Which is a relatively simple idea, albeit it comes trailing huge great black clouds of confusion, uncertainty and economic debate.
Applied to economists it turns out that this idea of the liberty principle has some interesting results. When Daniel Hendengren, Daniel Klein and Carrie Milton looked at Economist Petitions: Ideology Revealed they discovered that economists’ responses to petitions split neatly along the fault line of the liberty principle:
“The most notable finding of this investigation is that virtually every single economist who is active in signing petitions leans heavily in one direction or the other … Our investigation shows just how fundamental ideas about liberty and government intervention really are in the thinking of economists—or at least those who like to sign petitions.”
In fact only one economist out of 589 adopted a roughly neutral position in respect of the liberty principle. It seems that, whether consciously or not, economists adopt quite strong positions in respect of it. Yet if we go back to the genesis of the subject we can easily find evidence that Adam Smith believed that government intervention should be limited to preventing abuses of negative liberty, not dedicated to control of the positive.
Think and be Liberal
The point that Klein makes in the paper quoted at the head of this article is that economists, when presenting their views anonymously in surveys, quite clearly divide into interventionists and liberals, but when they choose to stand up and present their views in full light of day will overwhelmingly tend to favour the liberal view upon which economics was founded based on arguments derived from that foundation. The Forsaken-Liberty syndrome, then, is a reference to the idea that economists in general prefer to fall back on generalities that assume that liberty is a given, rather than something that needs to be continually fought for.
Which is interesting, because it offers a new front for those economists opposed to the new behavioral approaches, which are often characterised by a paternalistic benevolence generated out of government policies. Not everyone agrees, however, and in Behavioral Law and Economics: It’s Origins, Fatal Flaws and Implications for Liberty Joshua Wright and Douglas Ginsburg argue that:
“So long as behavioral law and economics continues to ignore the value to economic welfare and individual liberty of leaving individuals the freedom to choose and hence to err in making important decisions, libertarian paternalism will not only fail to fulfill its promise of increasing welfare while doing no harm to liberty; it will pose a significant risk of reducing both our welfare and our liberty.”
Economics is Liberty
Broadly speaking, the idea here is that the thrust of behavioral economics into social welfare and other government interventionists schemes is serving to reduce individual freedom by making a presumption of what is good and what is not. Whether it’s wearing seatbelts, smoking or eating too much our personal liberties are being increasingly constrained; the evidence of behavioral economics is simply not strong enough to support the policies being adopted. After all, if we can be nudged to eat better, save more and drink less why can’t we be induced to vote the “right” way?
Economics was founded on liberal principles that challenge the status quo; not conservatism that supports it. This isn’t a party political divide, but a mental one. There are indeed times when free-market policies need to be restrained because of market failures, but beyond a certain level of development individual liberty and free-markets are not mutually exclusive, they’re identical.