21 April 2021

A haystack of strawmen: academics should offer more than crude caricatures of economic liberalism

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Why are academics so fond of misrepresenting economic liberalism?

Take the recent New Statesman article co-written by Adrian Pabst, a highly respected political theorist at the University of Kent, and the writer and researcher Ron Ivey. The authors are, of course, perfectly entitled to tear into what they call “market fundamentalism”  – but in doing so they punch below the belt. (I should add that I believe the piece to be out of character as far as Pabst is concerned. I have very much enjoyed debating with him and he kindly appointed me as a Senior Research Fellow in the Centre for Federal Studies which he directs at the University of Kent. I am tackling the article here and not the man. I do not know Ron Ivey.)

A response to their piece is important because it raises questions that are at the heart of debates between the left and those who believe in a free society. Indeed, if Pabst and Ivey had done weeks of research, they could not have found a better way to illustrate how misguided the left’s attacks often are.

For example, they write that:

“The chief promoters of market fundamentalism such as the Austrian economist Friedrich Hayek…Building on the body of liberal political thought by Thomas Hobbes, John Locke and John Stuart Mill, market fundamentalists reduced humans to “homo economicus”, a rational, selfish animal in search of happiness in the pleasures of cheap consumer goods and wealth accumulation.” 

This caricature of Hayek is ridiculous. For example, in The Constitution of Liberty, JS Mill is certainly cited – but often critically. On the other hand, Alexis de Tocqueville, Edmund Burke and Lord Acton are three of the most widely referenced authors in that book, and many of the principles which Hayek develops arise from their thinking.

Moreover, homo economicus is explicitly not the model of Austrian school economists. In Human Action Ludwig Von Mises describes homo economicus as: “a phantom of a spurious armchair philosophy. No man is exclusively motivated by the desire to become as rich as possible; many are not at all influenced by this mean craving”.

Adrian Pabst and Ron Ivey would have been slightly closer to the mark if they had used the term “self-interest” rather than selfishness – though even this would have misrepresented the position of Austrian economists such as Hayek.

It is worth noting, as Pabst is an important contributor to the literature on Christian social thought, that in his Nobel Prize lecture Hayek praised the late scholastic thinkers who, in many ways, formed the bridge between the thinking of St Thomas Aquinas and the modern interpretation of the natural law tradition in Rerum novarum, the first major modern social teaching document of the Catholic ChurchIndeed, some Austrian school academics, such as Jesus Huerta De Soto, trace the roots of that school – of which Hayek is the most famous member – to those late scholastic thinkers.

Though Hayek opposes the central planning of economic and social life because he believes it to be impossible, and is in favour of a common law legal system enforced through courts, rather than detailed prescriptive regulation of economic life developed in and enforced through regulatory bureaus, his economic thinking does not even come close to Pabst’s and Ivey’s description.

Hayek’s last book, The Fatal Conceit, is partly a defence of tradition, including religion, in the evolution of successful societal orders. Indeed, Hayek’s main field of study was the role of the individual in society, though he did not believe in the central planning and direct organisation of society by the state. As he wrote in Individual and Economic Order:

“This fact should by itself be sufficient to refute the silliest of the common misunderstandings: the belief that individualism postulates (or bases its arguments on the assumption of) the existence of isolated or self-contained individuals, instead of starting from men whose whole nature and character is determined by their existence in society. If that were true, it would indeed have nothing to contribute to our understanding of society.”

It’s important to remember too that the height of economic liberalism in late 19th century Britain was also the height of the development of friendly societies, mutual building societies, mutual insurance companies and other vehicles for fraternity and collective action such as professions and trades unions, though the latter were given legal privileges and evolved into destructive organisations that promoted class conflict.

The essence of a free economy is not selfishness or unchecked individualism, but the development of a complex social order of economic co-operation which cannot be planned by any set of individuals such as those in government. It relies on individual action, but it is deeply social. It does not pre-suppose particular values or virtues that Pabst, as a Christian, would regard as important, but the social order will not thrive without them. It certainly does not assume selfishness or a materialistic view of wealth accumulation.

So why is it that haystacks of strawmen are built by esteemed academics when entering these kind of debates? Why do they put their own case well, but use arguments against others that simply do not make sense?

Perhaps these misconceptions come from the tendency of political theorists to over-categorise in the process of imitating the methods of the physical sciences. Over-categorisation is rather like the error of over-aggregation which Austrians are quick to criticise in economics. It simplifies. Sometimes, simplification can help, but it can often lead to error.

It is important that academics properly engage with thoughts and ideas, for doing so can lead to synthesis. In this case, it may be that there is more in Hayek with which Pabst agrees than he realises. There will still be plenty with which he disagrees, but both perspectives might be enriched by dialogue based on a fair representation of the other.

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Philip Booth is Senior Academic Fellow at the Institute of Economic Affairs, Professor of Economics at the University of Buckingham and Professor of Finance, Public Policy and Ethics at St. Mary’s University, Twickenham.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.