Don Lavoie Fellowship Discussion: Module 4
'The Struggle for a Better World' by Peter J. Boettke
What is political economy?
Welcome to the fourth module of the Don Lavoie Fellowship discussion portal. In this module's discussions you will be joined by Dr. Peter Boettke, Dr. Erwin Dekker, and Dr. Alex Craig who will help lead the discussion, pose additional questions and comments.
As you are reading the assigned chapters ofThe Struggle for a Better World, please watch this video in which Professor Peter Boettke talks about his book, highlights the main topics, and offers some questions for you to consider as you engage in the discussion portal. Further, in this episode of the Hayek Program Podcast, the author is joined by Dan Rothschild to discuss liberal cosmopolitanism that is grounded in egalitarianism. The author explains why such a world is worth struggling for.
Question: What is “the culture of government spending?” (p. 127). What are some of the challenges associated with paying down government debt and changing future spending practices?
Aashish Reddy: Boettke argues that the increased size of government causes government failure, and government failure leads to further increased size of government. Once it was determined that government should use its power to pursue objectives over and above determining the "rules of the game" within which individuals freely interact with each other, its scope (he argues) thus drastically increases. People come to expect that the government will do more for them: see, for instance, the way in which governments declaring lockdown during the Covid-19 pandemic meant that some individuals couldn't go to work and thus received furlough from the government; this in turn may increase the expectation that government will and should "look after" people in this way. More generally, it comes to be regarded as a responsibility of government to maintain full employment and macroeconomic stability. But its resources are limited, so it may find itself in debt and running deficits, requiring it to further increase taxation in order to pay these down. I would add that with the increase in scope of government comes a culture which individuals are unlikely (since they lack incentive) to innovate better solutions (in, say, healthcare or the deliver of public services) in lieu of demanding government borrow/tax and spend more in order to improve quality.
Question: What are the core propositions that define the political economy approach?
Aashish Reddy: Individuals make choices, and there isn't much variance in the nature of different humans. We do not necessarily assume that they are all perfectly rational or self-interested all the time, but the complex core tenets that characterise human behaviour and psychology are consistent across all individuals. We can therefore analyse how individuals are likely to act as we vary their incentives, expectations, etc. - in general, the institutional environment in which they operate and pursue their own ends.
This is how I would see political economy in general. Then Boettke's approach specifically is to argue that in some kinds of institutions, a broadly-but-not-wholly self-interested human pursues his self-interest in a "Hobbesian" manner, which is to say that most interactions are zero-sum, and violence will reign. But with a state to curb the returns on private predation, we can develop institutions with private property, freedom of contract, constitutional constraints on the power of government (to curb public predation) so that the same broadly-but-not-wholly self-interested human pursues his self-interest by bartering and exchanging with others, producing wealth in positive-sum interactions.
Question: As you continue to read the book, think about the following. What is “political economy”? What makes it different from economics or political science?
Aashish Reddy: I think political economy is the application of the tools of economics and economic reasoning to questions of politics and political science. It is usually said that what is now economics used to be called political economy. I think Boettke agrees, in the sense that he sees the subject of economics/political economy as having taken a wrong turn, and become too mathematicised in the 20th century, and needs to return to its roots in comparative institutional analysis. But I think the often-mathematical discipline which is taught in economics departments simply is economics; and political economy is the thing that Boettke wishes economics would become.
Liberalism as an emancipation project
In this video talk, Pete Boettke continues to discuss a vision of a society in which free and responsible individuals voluntary participate in their communities as well as market interactions and therefore become more prosperous. In this more recent book panel discussion, Peter Boettke is joined by colleagues Drs Emily Chamlee-Wright, Alain Marciano, and Mark Pennington to discuss the role of institutions in improving the human condition around the world.
Question: On p. 161, Boettke quotes G. L. S. Shackle: “So far as men are concerned, being consists in continual and endless fresh knowing.” What does the idea of “endless fresh knowing” imply for understanding market processes and market regulation?
Aashish Reddy: Information simply is. We may find more of it, but it is mere data. Knowledge, by contrast, includes some subjective understanding or interpretation of that information. We can come up with better explanations and analytical lenses through which we perceive information - for instance, our understanding of economic history may improve due to some analytic advance without the facts having changed. Since it is not in the same way fixed, it must be created and discovered rather than simply gathered. The market process is one way we create and discover knowledge we couldn't know in advance (as argued by Lavoie); the regulator could not possess sufficient knowledge with which to regulate the market in advance of the market process creating that knowledge, and so would simply distort knowledge available through price signals.
Question: On p. 279, Boettke writes, “Liberalism, it must be reasserted, is liberal. It is an emancipation philosophy. It promises to free all from the bonds of oppression and the indignity of domination.” What definition of liberalism is Boettke working with here? Why does he characterize his version of liberalism as ‘cosmopolitan’ or ‘international’?
Aashish Reddy: He sees liberalism as beginning with analytic egalitarianism, and the notion that all the desires and visions that individuals have about how to pursue the good life must be respected. This means that we must develop institutions which allow for the freedom to pursue that conception for all, without being oppressed by arbitrary government force. It is thus cosmopolitan and international in the sense that there is no distinction between an individual of my nationality or of another: we are all as human as each other.
An Economic Understanding
In thinking on how to apply the ideas of the book to analyzing social issues, please consider listening to this installment of the Hayek Program Podcast in which Professor Boettke is joined by Dr. Bryan Cheang to discuss different schools of thought in economic growth and development, stressing the importance of considering the relationship between cultural differences, classical liberalism, and economic development. Dr. Cheang argues for a broadening of methodological approaches in studying economic development to include cultural and historical contexts.
Further, as an applied policy example, Professor Richard Wagner's article is helpful in understanding how economics is helpful in dealing with a public health crisis such as Covid-19. Read by clicking the link below.
Question: What role do ideas play in the struggle for a better world?
Aashish Reddy: An important one. To think through the question like how we should act, and what policies we should pursue as a society, we need to recognise that the world is constantly changing, and so the best answers are not simply to continue what has always been done, but require us to have novel ideas to solve problems to create a better world for everyone.
Question: On p. 91, Boettke writes, “The role of the economist in a free society is that of a teacher, scholar, and critic, but never that of a social engineer and planner.” What does this mean in practice? What actions or methods does this admonition encourage or discourage?
Aashish Reddy: Economists should not assume that their policy views have any more intrinsic worth than anybody else's, because they have not attained enlightenment by virtue of their knowledge of the subject. This means that economists should be discouraged from seeking and accepting powerful unelected roles in government, advising on things for which the discipline does not give them privileged insight.
Incidentally, this doesn't seem correct to me. The economic considerations are seldom the only ones, but they are often an important one. And we do know some things from the study of economics which, naturally, economists understand better than most. Not all things, but some. Take tariffs for instance: there may well be other reasons, such as national security, that justifies them. But it is certainly relevant that they have a negative effect on the domestic economy, and economists understand why. Isn't Boettke's commitment to free trade hugely informed by his understanding of economics? If asked, why shouldn't he advise the Trump White House of the very probable negative economic effects of imposing tariffs even on allies?
Ask the Author
As we continue the discussion of The Struggle for a Better World this week, please use this space to ask the author of the book, Pete Boettke, your question.
Question: Please use this thread to ask the author of the book further questions.
Aashish Reddy: One of the core tenets of classical liberalism is a strong focus on the nation state. Under neoliberalism, I would contend that the focus has instead shifted to supranational organisations, like the EU and the UN, etc.; and it seems as though this hasn't been working for a number of reasons. My current, provisional view is that classical liberalism is strictly better than neoliberalism, including on this question. The one thing that would dissuade me from this is if I could be persuaded that strong nation-states, as existed in the Victorian period where classical liberalism was prevalent in Britain, actually has a propensity to lead to wars between powers, as happened with WWI and then WWII. In that case, the usual concerns that war leads to an increase in the size of government etc. seem correct. So - do strong nation states have a tendency towards conflict, gains from trade and cooperation notwithstanding? If so, what is the solution?
Peter Boettke: Not sure I understand the claim about classical liberalism and the Nation Station. I understand the claim about neoliberalism. But classical liberalism is focused on constitutional constraints. As Buchanan put it, how can we empower the protective and productive state without unleashing the predatory state.