Jeffrey Friedman

A CRISIS OF POLITICS, NOT ECONOMICS: COMPLEXITY, IGNORANCE, AND POLICY FAILURE

ABSTRACT The financial crisis was caused by the complex, constantly growing web of regulations designed to constrain and redirect modern capitalism. This complexity made investors, bankers, and perhaps regulators themselves ignorant of regulations promulgated across decades and in different “fields” of regulation. These regulations interacted with each other to foster the issuance and securitization of subprime mortgages; their rating as AA or AAA; and previously their concentration on the balance sheets (and off the balance sheets) of many commercial and investment banks. As a practical matter, it was impossible to predict the disastrous outcome of these interacting regulations. This fact calls into question the feasibility of the century‐old attempt to create a hybrid capitalism in which regulations are supposed to remedy economic problems as they arise.

Popper, Weber, and Hayek: The epistemology and politics of ignorance

Abstract Karl Poppers methodology highlights our scientific ignorance: hence the need to institutionalize open‐mindedness through controlled experiments that may falsify our fallible theories about the world. In his endorsement of “piecemeal social engineering,” Popper assumes that the social‐democratic state and its citizens are capable of detecting social problems, and of assessing the results of policies aimed at solving them, through a process of experimentation analogous to that of natural science. But we are not only scientifically but politically ignorant: ignorant of the facts that underpin political debate, which are brought to our attention by theories that, as Max Weber emphasized, can be tested only through counterfactual thought experiments. Public‐opinion and political‐psychology research suggest that human beings are far too unaware, illogical, and doctrinaire to conduct the rigorous theorizing that would be necessary to make piecemeal social engineering work. F.A. Hayek realized that the public could not engage, specifically, in piecemeal economic regulation but failed to draw the conclusion that this was due to a specific type of political ignorance: ignorance of economic theory.

Economic approaches to politics

The debate over Green and Shapiros Pathologies of Rational Choice Theory sustains their contention that rational choice theory has not produced novel, empirically sustainable findings about politics—if one accepts their definition of empirically sustainable findings. Green and Shapiro show that rational choice research often resembles the empirically vacuous practices in which economists engage under the aegis of instrumentalism. Yet Green and Shapiros insistence that theoretical constructs should produce accurate predictions may inadvertently lead to instrumentalism. Some of Green and Shapiros critics hint at a better approach, which would eschew predictive testing in favor of testing the applicability of the theory to particular cases.

What's wrong with Libertarianism

Abstract Libertarian arguments about the empirical benefits of capitalism are, as yet, inadequate to convince anyone who lacks libertarian philosophical convictions. Yet “philosophical” libertarianism founders on internal contradictions that render it unfit to make libertarians out of anyone who does not have strong consequentialist reasons for libertarian belief. The joint failure of these two approaches to libertarianism explains why they are both present in orthodox libertarianism—they hide each others weaknesses, thereby perpetuating them. Libertarianism retains significant potential for illuminating the modern world because of its distance from mainstream intellectual assumptions. But this potential will remain unfulfilled until its ideological superstructure is dismantled.

THE IRRELEVANCE OF ECONOMIC THEORY TO UNDERSTANDING ECONOMIC IGNORANCE

ABSTRACT Bryan Caplan’s The Myth of the Rational Voter treats several immensely important and understudied topics—public ignorance of economics, political ideology, and their connection to policy error—from an orthodox economic perspective whose applicability to these topics is overwhelmingly disproven by the available evidence. Moreover, Caplan adds to the traditional and largely irrelevant orthodox economic notion of rational public ignorance the claim that when voters favor counterproductive economic policies, they do so deliberately, i.e., knowingly. This leads him to assume (without any evidence) that “emotion or ideology” explain mass economic error. Straightforward, unchosen mass ignorance of economic principles—neither “rational” nor “irrational,” but simply mistaken—is a more coherent explanation for economic error, and it is backed up by the vast body of public‐opinion research.

The new consensus: II. The democratic welfare state

The goal of the left has been predominantly libertarian: the realization of equal individual freedom. But now, with the demise of leftist hope for radical change that has followed the collapse of “really existing”; socialism, the world is converging on a compromise between capitalism and the leftist impulse. This compromise is the democratic, interventionist welfare state, which has gained new legitimacy by virtue of combining a “realistic”; acceptance of the unfortunate need for the market with an attempt to libertarianize capitalism as much as possible, by intervening in its operation and redistributing the wealth it produces. Since the neoliberal economic critique of socialism seems to have been borne out by the events of 1989, neoliberal economists might now be expected to provide a similar critique of the new interventionist consensus. Yet there are few signs of their interest in doing so. This might be due to their acceptance of an erroneous interpretation of liberty which equates it with capitalist...

The new consensus: I. The Fukuyama thesis

Fukuyamas argument that we have recently reached “The End of History”; is defended against writers who fail to appreciate the Hegelian meaning of Fukuyamas “Endism,”; but is criticized for using simplistic dichotomies that evade the economic and ideological convergence of East and West. Against Fukuyama, the economic critique of socialism, revisionist scholarship on early Soviet economic history, and the history of the libertarian ideas of Rousseau, Kant, Hegel and Marx are deployed to show that history “ended”; years ago: the creeds of the First and Second Worlds sprang from common assumptions; and even before Eastern European reform movements, both sides of the Iron Curtain had moved to economies that are neither capitalist nor socialist.

A “WEAPON IN THE HANDS OF THE PEOPLE”: THE RHETORICAL PRESIDENCY IN HISTORICAL AND CONCEPTUAL CONTEXT

ABSTRACT The Tulis thesis becomes even more powerful when the constitutional revolution he describes is put in its Progressive‐Era context. The public had long demanded social reforms designed to curb or replace laissez‐faire capitalism, which was seen as antithetical to the interests of ordinary working people. But popular demands for social reform went largely unmet until the 1910s. Democratizing political reforms, such as the rhetorical presidency, were designed to facilitate “change” by finally giving the public the power to enact social reforms. The resulting political order has created systemic pressure for policy demagoguery in place of rational deliberation. Mass political mobilization seems to be better achieved by contests of grand principle that pit the well‐meaning supporters of obviously needed reforms against “villains and conspirators,” than by technical discussions of the possibly counterproductive effects of those reforms.

The politics of communitarianism

Taylor, Sandel, Walzer, and MacIntyre waver between granting the community authority over the individual and limiting this authority so severely that communitarianism becomes a dead letter. The reason for this vacillation can be found in the aspiration of each theorist to base liberal values‐equality and liberty—on particularism. Communitarians compound liberal formalism by adding to the liberal goal, individual autonomy, the equally abstract aim of grounding autonomy in a communally shared identity. Far from returning political theory to substantive considerations of the good, communitarianism legitimizes really existing liberal politics—the politics of the nation‐state.

After libertarianism: Rejoinder to Narveson, McCloskey, Flew, and Machan

Postlibertarianism means abandoning defenses of the intrinsic justice of laissez‐faire capitalism, the better to investigate whether the systemic consequences of interfering with capitalism are severe enough to justify laissez‐faire. Any sound case for laissez‐faire is likely to build on postlibertarian research, for the conviction that laissez‐faire is intrinsically just rests upon unsound philosophical assumptions. Conversely, these assumptions, if sound, would make empirical studies of capitalism by libertarian scholars superfluous. Moreover, postmodern approaches to “libertarianism” perpetuate the same assumptions, in the guise of a critique of the rationalist hubris that has supposedly led to the tragedies of the twentieth century. The “libertarian” and postmodernist critics of postlibertarianism either ignore the assumptions undergirding their views, or they contend that these assumptions are not necessary when “freedom” and “morality” are properly defined. The latter contention amounts to an attemp...