The questions at stake aren’t just technical; they are moral and political.
March 3, 2019
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Mar 3, 2019
7 Min read time
The questions at stake aren’t just technical.
This forum is featured in Boston Review’s Summer 2019 issue Economics After Neoliberalism.
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For non-economists on the left, “Economics After Neoliberalism” is a welcome arrival. Having long been scolded or silenced by neoliberals with a dismissive “You just don’t understand how markets work,” outsiders like me can only celebrate the assistance that Naidu, Rodrik, and Zucman provide—from deep within the inner sanctum no less. It almost feels like our Marshall McLuhan moment.
What strikes me about their text is its boldness at the level of policy, but its modesty at the level of public philosophy.
I wonder if Naidu, Rodrik, and Zucman are selling themselves short, however. To hear them tell it, what has made neoliberalism so attractive and commanding as a politics is the borrowed authority of economics. Neoliberals sold their policies as the simple implementation of economic knowledge, so much so that neoliberalism “now appears to be just another name for economics.” Given that conflation, Naidu, Rodrik, and Zucman see their task as, first, debunking the notion that neoliberalism rests on “sound economics,” and, second, offering progressive policy alternatives that incorporate values—such as “fairness,” “equality,” and “inclusive prosperity”—that neoliberals and some economists consider external to the discipline. The point is to marshal the technical knowledge of the profession on behalf of new values, policies, and institutions.
Since Friedrich Hayek is one of the avatars of the neoliberal turn, it is worth revisiting how he envisioned the task of the neoliberal economist, especially because he was operating in a comparable moment for the right—that is, when social democracy rather than neoliberalism seemed coterminous with economics. Because Hayek’s conception of the economist’s task is different from how Naidu, Rodrik, and Zucman conceive of that task, it may offer a useful perspective on the best way forward.
By the mid-1930s, Hayek believed his beleaguered band of brothers—including Ludwig von Mises and Lionel Robbins—had won the economic debate of socialism versus capitalism. They had demonstrated—not just once (in Red Vienna after World War I), but twice (in 1930s Britain, as well)—that it was not possible for socialist planners to gather and process the necessary information to anticipate and provide for the needs of a modern society without private property, the price mechanism, and other market institutions.
But that victory, Hayek came to realize, was pyrrhic. For the questions at stake were not just technical; they were moral and political. As he put it in a pioneering article from 1939, “Many planners would be willing to put up with a considerable decrease of efficiency if at that price greater distributive justice could be achieved.” The crucial question, he said, was “one of ideals other than merely material welfare.” Far from resting neoliberalism on the authority of the natural sciences or mathematics (forms of inquiry Hayek and Mises sought to distance their work from) or on the technical knowledge of economists (as Naidu, Rodrik, and Zucman claim), Hayek recognized that the argument for capitalism had to be won on moral and political grounds through the political arts of persuasion.
Here’s where things get interesting. Though Hayek abandoned formal economics for social theory after the 1930s, his social theory remained dedicated to elaborating what he saw as the essential problem of economics: how to allocate finite resources between different purposes when society cannot agree on its basic ends. With its emphasis on the irreconcilability of our moral ends—the fact that members of a modern society do not and cannot agree on a scale of values—Hayek’s point was fundamentally political, the sort of insight that has agitated everyone from Thomas Hobbes to John Rawls and Jürgen Habermas. Hayek was unique, however, in arguing that the political point was best addressed—indeed, could only be addressed—in the realm of the economic. No other discourse— not moral philosophy, political theory, psychology, or theology— understood so well that our ultimate moral values and political purposes get expressed and revealed only under conditions of radical economic constraint—when one is forced to assign a limited set of resources to ends that favor different sectors of society.
Hayek translated moral and political problems into an economic idiom. What we need now, I would argue, is a way to uninstall or reverse that translation.
Morals are not really morals if they are not material, Hayek believed. Outside the constraining circumstance of the economy, our moral claims are so much wind. Inside the economy, they assume force and depth, achieving a revelatory clarity and profundity. “The sphere where material circumstances force a choice upon us,” Hayek wrote in The Road to Serfdom (1944), “is the air in which alone moral sense grows and in which moral values are daily re-created.” For this reason, Hayek concluded that “economic life is not a sector of human life which can be separated from” other spheres of life, including our moral life. Economic life “is the administration of the means for all our different ends. Whoever takes charge of these means must determine which ends shall be served, which values are to be rated higher and which lower—in short, what men should believe and strive for.”
The intrinsic links between moral and economic life, as well as the intractability of moral conflict, were the kernels of insight that animated Hayek’s most far-reaching writing against socialism. The socialist presumes an agreement on ultimate ends: the putatively shared understanding of principles such as justice or equality is supposed to make it possible for state planners to conceive of their task as technical, as the neutral application of an agreed-upon rule. But no such agreement exists, Hayek insisted, and if it is presumed to exist, nothing will reveal its nonexistence more quickly than the attempt to implement it in practice.
Now we come back to Naidu, Rodrik, and Zucman. What strikes me about their text is its boldness at the level of policy, but its modesty at the level of public philosophy. That may be deliberate. But if it is, it may reinforce the very neoliberalism that it is meant to contest, insofar as it presumes that what the economist has to offer is neutral or technical authority on behalf of assumed moral ends such as justice or equality or inclusiveness—values for which we do not have shared definitions. That was precisely the claim that Hayek sought to refute, and I am not sure if Naidu, Rodrik, and Zucman have a response. Conversely, I fear that if they continue the course they have set on, showing that alternative policies are technically feasible, they may find themselves foundering on the same shoals as Hayek did before his turn to social theory: invoking economic knowledge when the field of play is in fact moral and political.
Hayek translated moral and political problems into an economic idiom. What we need now, I would argue, is a way to uninstall or reverse that translation. Karl Marx attempted just such a project, but his answers were elusive. In a fascinating but little-known 1927 essay, “On Freedom,” Karl Polanyi also attempted such a project, giving us a stylized rendition of what it would mean for a political collective, rather than a firm or a consumer, to make an economic decision—not in the marketplace, where price helps determine our decisions, but in a deliberative assembly, where other considerations are at play. One part of the assembly, representing the interests of the collective, will want to make an investment in a long-term good; healthcare was the example Polanyi chose. Another part of the assembly, representing the workers who would have to make the specific sacrifices for that good, resists that decision. What to do? Argue it out, says Polanyi. Whatever is the final decision, it will be “a direct, internal choice, for here ideals within people are confronted with their costs; here everyone has to decide what his ideals are worth to him.”
Notice that Polanyi does not presume any agreement about moral and political ends, as Hayek claimed socialists must. Notice how insistent he is that decisions about production must confront the question of costs. Like Hayek, Polanyi is attuned to the materiality of moral choice, only he believes the question of costs and constraints is best mediated through moral and political arguments in the public square.
Hayek persuaded generations of elites that it is only the individual in the market who can engage in such a process. In a modern society, the combination of informational challenges, on the one hand, and the intractability of moral conflict, on the other, was seen as too great to make decisions about economic life through public deliberation. Like the generation of leftists from the early twentieth century, Naidu, Rodrik, and Zucman have an opportunity to reopen this question not just for elites (Hayek’s preferred audience) but for society as a whole: to ask whether it should be a political collective rather than the market that makes decisions about social value.
Polanyi thought that nothing less than human freedom was at stake in how we answer that question. Hayek, coming from the opposite end of the spectrum, did as well. Maybe it is time for us to ask why and start talking about it again.
Editors’ Note: This forum is part of Boston Review's special project Democracy’s Promise.
March 03, 2019
7 Min read time