Self-Appointed Messiahs of the Nanny State

Economics has never been a neutral field. Value judgments have always crept in, if only through the back door of methodology. Traditional economics, for instance, assumes purposive individual behaviour and takes preferences as given. Technically this is done for the sake of abstraction and generality. But the more important reason is philosophical: it’s about respecting other people’s choices. Economics, then, simply means to analyse individual decision-making and its impact on the economic tissue of society. However, these basic assumptions have come under attack. Critics ridicule the so-called homo economicus as a caricature: People aren’t always so rational, they do not always know what they want or, perhaps worse, they sometimes want things that are bad for them. They make mistakes; they do not always weigh costs and benefits wisely. But isn’t it more humble and respectful of others to suppose that they do? Who are we to start from the assumption that they don’t? And who are we to tell people what they should want?

Traditional economists seem to be alone in bothering themselves with qualms of this sort. A long time ago, the Chicago economist and Nobel Prize winner George Stigler (1911-91) argued that “social policy and institutions, not individual behaviour” was the proper concern of the economist. Those days are gone and the distinction is collapsing at breathtaking pace. Even within modern economics, the evil poison of intrusiveness into other people’s designs is spreading fast. Richard Thaler and Cass Sunstein launched the notion of “libertarian paternalism”, justifying that the state “nudge” people towards desirable behaviour — in their own interest, of course. Today’s soft and subtle paternalists not only aim to influence social policy and institutions in such a way that socially desirable individual behaviour results, whatever that means. They also endeavour to lead people either to happiness, as “happiness economists” like Richard Layard do, or even to the vaster notion of personal fulfilment, to the “good life”. This is what the distinguished economic historian Robert Skidelsky proposes in his new book How Much is Enough? (Allen Lane, £20), written with his son Edward, a lecturer in philosophy at Exeter. 

Widespread dissatisfaction with the performance of the market system is behind the desire for a new approach to economics and  economic policy. Since the beginning of the global financial crisis in 2008, which the world is still far from having overcome, public opinion no longer seems to value the incomparable achievements of capitalism. The tide has turned. Notwithstanding the political mistakes that led up to the crisis, notwithstanding human hubris, including an excessively expansive monetary policy, the crisis has demonstrated the vulnerability of the system. Where was the invisible hand when crisis loomed? Invisible, rejoice those who happily close their eyes to government failure. They therefore embark wholeheartedly on the project of “taming the market”.

“Taming the market” — what a perversely solomonic formula. The first and hidden message in this expression addresses the free-market camp, and it consists in admitting that yes, the market is indeed useful. It is productive. But only to an extent. When it goes beyond certain limits, some taming will be needed. And this is how the second and not so hidden message brings the anti-capitalists out of the closet: in the end, government has to take over. Politics has to triumph over abstract market forces. Haven’t these people read any public choice theory? How come they so blindly trust the wisdom of the democratic process? Of course it is only through ignoring the pervasive evidence of government failure that they can have their cake and eat it: sure, spontaneous coordination in the marketplace is efficient and innovative, but let’s rein it in as we see fit. Rules are not enough; we are entitled to some enlightened ad hoc regulation. That will make the market process non-spontaneous? Oh well, it’s for our benefit, and some greater good.

Authors of the intellectual stature of the Skidelskys and the Harvard philosopher Michael Sandel (What Money Can’t Buy, Allen Lane, £20) don’t mean to be cynical. They are sincerely concerned about our moral health and therefore want us to pause and think. What is the sense of life? What do we really cherish in life? How do we want to use our precious time here on Earth? And why? Hasn’t the market done its job, haven’t we grown wealthy enough by now? They worry that the market may be the economic incarnation of personal liberty, but that it inevitably leads to severe social injustice. Isn’t that too heavy a sacrifice? The market teaches people always to strive for more, to think permanently in terms of supply and demand, to attach a price to everything. But there are things that money just shouldn’t buy. They complain that the market corrupts our souls, and without noticing we have been turned into its slaves. But salvation is near if only we heed the call and consider the stick to be a carrot. 

The common denominator of these authors who wrap their message in what is supposed to be merely a moderately anti-capitalist disguise is a quasi-religious language and pattern of thought. They walk the line between renunciation and redemption with great ease: he who giveth up on wealth shall find plenty. Renounce and thou shalt win paradise. Ascetism out of hedonism — now if that isn’t an interesting twist, what is?

Perhaps the economic paradigm has indeed accustomed us too much to measurement by money. Think about the university reforms everywhere in Europe demanding that courses be faster and more efficient, in the interest of immediate employability. Employers now find that graduates lack maturity. The reason is that some things are difficult to measure in monetary terms and thus escape our attention, such as the lessons for life that students may learn at college, beyond the income flows that will hopefully ensue one day. Sandel also has a point when he warns that we shouldn’t use monetary incentives without taking secondary effects into consideration. If you pay a child to read a book, he may read the book all right, but he will always view reading as a chore. But this example doesn’t prove, as Sandel seems to believe, that economic thinking in itself is bad and incentives are wrong. They just shouldn’t be used in a short-sighted way. Economic thinking has two components, and one of them is thinking. Part of the necessary thinking might even imply that we be aware of the limits of the market, as Sandel calls them: auctioning off voting rights, for example, would demean the idea of the citizen. True. Any doubts?

At any rate, it does seem a good idea to talk about values again. Economics has too long pretended to be a positive science, which it cannot be. Historically, it is an offspring of philosophy and ethics. It doesn’t abstain and it doesn’t need to abstain from normative judgment. In the case of Robert Skidelsky, the distinguished Keynes scholar, the master himself again allows him to build the bridge: after all, Keynes was a moralist, wasn’t he? Well, in the long run, we probably all are. With the valuable help of his son, Skidelsky reveals the philosophical underpinnings of his own thinking and courageously puts them up for discussion. In this new alliance between scholars in economics and philosophy, which seems to be a second-round effect of the reaction to the global crisis, a new light is shed on economic policy recommendations. It makes it easier to see where the pure economic reasoning in an argument may be correct but the philosophical premises prove untenable. 

To retain — or regain — our dignity as human beings, these authors claim, we must liberate ourselves from the mantra of money and growth and instead think more about the proper uses to which to put our wealth and energy. We should learn to cherish leisure again: meaningful, but not money-related, activity. We ought to rediscover the good life. Right. Up on their moral high ground, however, Skidelsky & Son persist in outright denial of an essential conceptual problem. The trouble with the notion of the good life is that there is no one-size-fits-all definition of just what it means and consists of. We may have opinions, intuitions, learned theories, visions, recommendations — but no possible universal objective standard. Even the Skidelskys, drawing on every philosophical source they can get hold of — from Aristotle, Marx, Keynes and Marcuse to Catholic social thought — cannot think of any more compelling justification of the general norm for the good life than to say that since it is realised in community with others, its criteria cannot be a matter of individual choice. That’s a perfect circle.

The Skidelskys produce a whole list of basic goods that constitute the good life as they see it: health, security, respect, personality (which in their view leads both to the right to a private sphere and to redistribution of property), friendship, leisure and harmony with nature. Not only are these items taken to be universal needs, but ends in themselves as well. 

The argument is by no means religious. It is Aristotelian, based on a notion of natural law — and thus axiomatic. It is not a very large step from there to imposing a lifestyle on other people. Such intrusiveness cannot be avoided by paying lip-service to the idea of liberty. Calling one’s version of paternalism “non-coercive”, as the Skidelskys self-consciously rush to do, is not enough. These days, the “road to serfdom” that Friedrich Hayek famously feared to see Western civilisation embark on in the 1940s is paved with the good intentions of a fast-growing group of libertarian paternalists. And the self-appointed messiahs who show us the way along this road are clothed in nannies’ uniforms. 

The policy recommendations that flow from the Skidelskys are as old as they are proven recipes for disaster: ever more government influence, massive income redistribution, a basic wage, progressive consumer taxes, a slower economic integration of the world. Some ghosts continue to haunt us. The Skidelskys deserve credit for thoroughly dismantling “happiness economics”, even though they express sympathy with the aims of the leading figures in this field. But measurement problems abound and the concept of happiness itself is empty. “Happiness is not a proper goal of policy, quite apart from any problems of measurement, for the simple reason that it is not necessarily good,” they write. And for the even simpler reason, they should add, that it is a highly personal thing.

They also warn that there lingers the danger of manipulation: “We do not want to banish the engineers of growth only to see them replaced by the engineers of bliss.” This, however, doesn’t mean that the Skidelskys dislike engineering generally. They wouldn’t mind being the engineers of the good life. Just like Keynes himself in his day, they too are conceited enough to believe they have found the key to it. And therefore they have no qualms about moving people around on the chessboard of society in a patronising manner. If the intention is right, the means don’t matter. Or do they?

Libertarian paternalism is a misnomer, a misleading one and a barbed one too. There is nothing libertarian about it, and it is even more dangerous than straight paternalism. Even though nobody is being physically coerced, rules and institutions are “intelligently” designed in such a way that people end up doing something others — typically government — believe to be in their best interest. Social coordination is indeed then “the result of the execution of human design”, to contradict Adam Ferguson’s famous dictum. Society’s potential for innovation is diminished by the same degree as liberty. There is no escape from the visible hand. Haven’t we had more than enough of that? The Skidelskys acknowledge that their concept entails forsaking the idea of personal autonomy and responsibility. But they couldn’t care less. They believe such autonomy and responsibility to be an aberration anyway. 

When George Stigler, reflecting on the “economist as preacher”, reminded his colleagues that “economists have no special, professional knowledge of that which is virtuous or just,” he certainly didn’t expect them to team up with philosophers who would just give them carte blanche for messing around with other people’s goals in life. They could do better — both of them.

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