St. Martin’s Press · 2000 · 265 pages · $26.00 paperback
Reviewed by Michael D. Mallinger
Critiques of the market system are a dime a dozen. Authors of these critiques typically choose to gloss over most of the theory underlying classical economics and classical-liberal political philosophy. However, what sets Peter Self apart is his willingness to examine how the writings of modern scholars like F. A. Hayek and James Buchanan relate to the original views of political economy developed by Adam Smith, John Stuart Mill, and others.
Although Self is able to uncover some of the bridge between contemporary and historical supporters of economic liberty, he is unwilling to explain how the academic ideas of classical economists have led Public Choice scholars to question the efficiency of the political allocation of resources in an economy.
Self’s chapter on philosophy begins on a positive note. He characterizes the origin of political liberalism this way: “Liberalism is basically an individualist tradition. It celebrates the rights and responsibilities of individuals. Its strong attachment to individual freedom stresses the right of individuals to choose and make their own lives and to take responsibility for the outcomes. It also endorses equality in the sense of the equal moral worth of all individuals and their entitlement to respect and consideration. As a child of the Enlightenment, liberalism has always had strong belief in the value of human reason and in the possibility of human progress.”
From this he explains how the writings of Smith and John Locke enabled individuals to progress from a social system based on personal status to a system based on contractual relations made possible by the spread of market-based principles. He notes that Mill formally laid down the framework of how market economies function, but claims his unhappiness with the outcomes of those economies led him to advocate a guaranteed basic income for all workers. Thus, like Jan Narveson, Self claims that Mill’s work led to a split between “negative” liberals who accept market-based outcomes and “positive” liberals who believe that states should enable individuals to maintain their personal autonomy, but must also provide them with a “minimum of resources and opportunities.”
Self cites Hayek and Herbert Spencer as the key scholars who sounded the alarm on the growth of government. He rightfully credits Hayek for anticipating the tyranny of fascist and communist totalitarian regimes; he also credits Hayek with issuing “a comprehensive warning of the destruction of liberty, which results from the complete concentration of political and economic power in the same set of rulers.” As a result, he states that separating and dispersing political authority among autonomous individuals is necessary for liberty to persevere.
Unfortunately, although Self emphasizes the links from Smith and Mill to Hayek and Buchanan, he is unable to comprehend the logical consistency among all of their arguments. He asserts that individuals who lived in the era when the classical economists wrote had strong moral standards regarding their personal and family lives that are largely absent today. That may be true, but it doesn’t weaken the case for laissez faire. In addition, he claims that the growth of capitalism occurred to serve a specific moral mission—to lift the poor out of misery and exploitation. Had Self better understood Hayek, he would know that spontaneous orders do not grow to serve particular purposes.
While Self’s analysis of the philosophy of liberalism provides some insight into how markets produce wealth, his discussion of various policy issues leaves much to be desired. His section on the failure of the price mechanism to take account of environmental costs reads like a summary of Earth in the Balance rather than serious scholarship. His critique of free trade repeats much of the mindless rhetoric used by the various groups that demonstrated against the World Trade Organization in Seattle. His case against Gordon Tullock’s theory of rent-seeking rests on the assertion that certain interest groups seek to remedy social or environmental problems that “transcend the market” rather than pursuing their own selfish interests. But there is far too much evidence that idealistic groups are eventually captured by those who use them for personal gain to take Self’s argument seriously.
Overall, Self’s examination of the philosophy underlying classical economics and classical liberalism is more fair and enlightening than one would expect in a critique of the market system. Unfortunately, much of the rest of the book is gravely flawed.
Michael Mallinger is a research associate at the Competitive Enterprise Institute.