Like Naidu, Rodrik, and Zucman, I celebrate the advantages of markets in aggregating information, allocating scarce resources, and promoting growth. I also agree that there is nothing built into the fabric of economic thought that leads to neoliberalism, and that economics has recently taken on a more empirical, less a priori cast. But I part ways in thinking of markets as only economic artifacts. The Economics for Inclusive Prosperity (EfIP) initiative promises to provide the basis for a robust alternative to market fundamentalism by mobilizing the latest insights from contemporary economics. But markets raise political and philosophical questions, too, and no strategy for taking on market fundamentalism will be complete without addressing them.
Markets differ in their technical and empirical aspects—whether information is asymmetric, whether firms exhibit monopoly behavior, and so on—but they also differ in how they structure relations of power and shape human development and motivations. Labor markets, as Adam Smith and Karl Marx observed, enable and inhibit various human capacities, a fact that raises different questions than are raised by a market in apples. Treating childcare as just another market good obscures the role of care in cultivating the capacities and ensuring the interests of small children.
Market fundamentalism elides such distinctions. As economist James Tobin wrote, “Any good second-year graduate student could write a short examination paper proving that voluntary transactions in votes would increase the welfare of the sellers as well as the buyers.” Market fundamentalism reduces the question of when and where markets are appropriate to the question of market failure. (Any good graduate student in economics could also prove that voluntary transactions in votes have third-party costs and are not efficient!) And its proponents’ preferred solution to market failure has been, when possible, to introduce missing markets to enhance efficiency.
To the extent that market fundamentalism has a “political philosophy,” it associates markets with a particular idea of freedom. Its proponents embrace the importance of the ability to exit from contractual relationships, the right to choose one’s occupation, and the absence of legal restrictions on entry into political and social positions. Finally, markets are seen as the ideal way of organizing social cooperation given that free individuals differ in their fundamental orientations to life and their priorities.
Offering an alternative to market fundamentalism, then, requires articulating not only a more adequate economics, but also a more adequate political philosophy. In particular, we need to explore alternative conceptions of freedom, fairness, and democracy.
The first part of a persuasive response to market fundamentalism involves offering an alternative idea of freedom, by showing that the same concerns that lead us to embrace the importance of exit, occupational choice, and formal freedom should lead us to embrace a more substantive idea of freedom. Consider that if one wishes for the poor to be able to compete with the rich for favorable social positions, it is not enough to simply remove legal obstacles. Similarly, without a decent fallback position, workers are not really “free” to exit from exploitative work.
In addition, we can and should develop an alternative vision of fair cooperation. Market outcomes can produce many good things, but their outcomes need not be fair. “Inclusive prosperity” gestures to one idea of fair cooperation, but there are others. Countering market fundamentalism means challenging the default position of the market, and thinking explicitly about the underlying rules of the game.
Moreover, there are important cases in which we should make decisions democratically, not as separate individuals. Markets allow individuals to cooperate without agreement on ends, and to act on their private desires and interests. But there are occasions when it seems more appropriate for us to deliberate together as citizens, in circumstances where acting separately would have undesirable consequences. Likewise, there are cases in which we have reason to want our interests as citizens to prevail over our interests as consumers or private parties. Evidence indicates, for example, that choice schools in the United States are more homogeneous than public schools with respect to social class and race. As citizens, we have reason to want an education system that integrates students across class and racial lines. To achieve that aim requires acting in common: each parent deciding alone what is the best school for their child will not yield racially and economically integrated schools.
Markets can also conflict with the wishes we have as citizens in the international context. While citizens have an interest in controlling the terms of their association, markets extend beyond national borders. Is it acceptable for a country to place limits on foreign ownership? Restrict immigration? Market fundamentalists have simple answers to these questions. The answers provided by an alternative economics should be complex because the values at stake are complex. I have already called attention to three such values: freedom, fair cooperation, and collective decision-making by citizens over features of their society. These values might be best furthered by significant restrictions on the scope of the market. Consider that the values of fair cooperation and substantive freedom might be best satisfied when health care, education, and childcare are provided as public goods.
It would be naïve to think that collective deliberation on such matters as education and immigration (or property arrangements, or taxation) will yield consensus. Even people who are committed to the three values above disagree about their weight and priority, and there are bound to be disagreements about the appropriate scope and place of such values in our collective life. In many circumstances, compromise, negotiation, voting—in, short politics—will be appropriate.
All this is to say that while I am excited by the launch of the EfIP, I do not think economists can do this all on their own. A significant alternative to the market fundamentalist program has to show that important values can be better served by policies that include not only redistribution, but also predistribution, as well as setting limits to the scope of market allocation in favor of collective democratic decision-making. I hopethat insights from other disciplines, including political philosophy and ethics, will be a more explicit part of this project.