It’s July 4th: Let’s celebrate neoliberalism

David Henderson liked my post on neoliberalism and asked me to expand it into an article at Econlib.org.  Here is the link.

Here are some other good articles in the neoliberal tradition:

Brink Lindsey on why there is no neoliberalism without liberalism.

Will Wilkinson on immigration.

The NYR of Books on the most illiberal society on earth.

Anonymous journalists at The Economist must die in order to get the recognition they deserve.

Matt Yglesias shares the libertarian view that Wilson was overrated and Harding was underrated.

PS:  Like Greg Mankiw, I don’t always agree with everything I link to, but thought these articles were worth reading.


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28 Responses to “It’s July 4th: Let’s celebrate neoliberalism”

  1. Gravatar of david david
    5. July 2010 at 12:34

    Do you advocate income transfers?

  2. Gravatar of david david
    5. July 2010 at 12:35

    Er, the link disappeared. Here it is.

    Also, I’m sensing that your use of “neoliberalism” fuzzily coincides with what The Economist likes to call “free market liberalism” and what Matt Yglesias calls “welfare state capitalism”. Possibly I am reading it wrong.

  3. Gravatar of ssumner ssumner
    5. July 2010 at 13:10

    In my blog post “The Great Danes” I argued that Denmark was arguably the most neoliberal economy on Earth. But I also understand that there are other definitions of neoliberalism.

    I certainly favor some income transfers. The question of whether those transfers should be done by private charity or government is much more complex, and I don’t have strong views. But I regard government income transfers as inevitable, and to some extent desirable if private charity is not adequate. Thus I try to think about ways of making government more efficient. I have recommended the Singapore fiscal model, which is a low tax model combined with forced saving.

  4. Gravatar of Indy Indy
    5. July 2010 at 13:38

    I often initially disagree with something Krugman writes, but despite his disdainful tone, he writes cleverly enough that it makes me hesitate in my disagreement and seek out a more thorough refutation.

    Will Wilkinson, on the other hand, while I would probably have held the same position before reading him, and while he writes with a tone that is equally contemptuous in that “People who disagree with me are evil idiots who clearly hold to their revolting opinions out of unjustifiable bad motives” kind of way, is so grating to me that I almost want to take an opposite position just to spit the spite and bile taste out of my soul.

  5. Gravatar of Doc Merlin Doc Merlin
    5. July 2010 at 14:27

    @Indy

    Krugman is far worse in my opinion, in terms of his distain for the other side.

  6. Gravatar of johnleemk johnleemk
    5. July 2010 at 22:49

    Scott,

    In the EconLib article you mentioned that some public services like fire departments have been privatised in Nordic countries. I was a bit skeptical, since a common left liberal talking point in the US healthcare debate was that, y’know, ambulances and fire departments are provided by the public sector, so the same ought to apply to general healthcare.

    I looked it up, and apparently 85% of Danes are covered by a private ambulance service, while 65% are covered by a private fire service (contracted via municipal governments, not on a household or central government basis). The same firm that provides these services (Falck) also covers 25% of Swedes for ambulance services. So much for socialism.

    In the course of looking this up, I stumbled across a 2004 working paper regarding privatisation in Denmark: http://cdi.mecon.gov.ar/biblio/doc/ifo/wp/1127.pdf

    Its comments on liberalism and what seems to be a Danish consensus (perhaps an apropos rejoinder to the “Washington consensus”?) reminded me a lot of your work.

  7. Gravatar of Snorri Godhi Snorri Godhi
    5. July 2010 at 23:21

    This might seem like quibbling on a minor point of an important and useful article, but it was jarring to me because it was at the beginning of the article:
    The best way to make sense of liberalism, in all its permutations, is to assume that liberals are people with constantly evolving policy views but relatively stable utilitarian values.

    Let me tell you how I see things, though this comes from nothing more than trying to make sense of clues that I found here and there. The story, as I understand it, is that John Dewey redefined “liberty” in the 1930s (taking a clue from European socialists) as the power to do specific things. American liberals are “liberals” in the Dewey sense of the word.
    By contrast, in Europe, even social-liberals are “liberals” in the Locke/Mill sense of the word — and that is why the Liberal political group (ALDE) is a distant third in the European Parliament: there just aren’t many Locke/Mill liberals around. This makes the neoliberal reforms even more remarkable.

    Further, not all Locke/Mill liberals are utilitarians; not in the sense of wanting to maximize economic welfare, at least. Already Pericles said that happiness is the fruit of freedom: if he thought that there is an intermediate stage of economic gain between happiness and freedom, he did not say so.

  8. Gravatar of Mike Mike
    6. July 2010 at 04:26

    I found your podcast through Russ Robert’s podcast- which was a great show. It got me to thinking about the question: “Are Americans honest enough for social programs to work here?” We cheat on our spouses, taxes, sports, and laws every chance we get. Do you think the honesty of the “Average American” would prevent social safety nets from working like they do in, say, Denmark?

  9. Gravatar of scott sumner scott sumner
    6. July 2010 at 05:51

    Indy, I think there is another difference. Krugman is nasty to people who have the same values as he does, but differ on how best to implement those values. Will is (to some extent) reacting toward people who have different values than he does, people who think that for public policy purposes some people are more important that others.

    When it comes to values, everyone in the world is to some extent like Will, to some extent contemptuous of those with different values. It is merely a question of where do we draw the line.

    johnleemk, Thanks, I’ll take a look.

    Snorri, I understand that the term ‘liberal’ is used in different ways, but I still think my definition is best. Mill’s views toward to role of government changed over time. He became slightly more socialist late in his life. But he was always liberal.

    I understand that there are followers of Locke who are not utilitarian, but I think the best way to handle this distinction is to differentiate between dogmatic libertarians (who favor freedom even if it lowers happiness) and pragmatic libertarians (who favor freedom only to the extent that it boosts happiness. I believe that it only makes sense to view pragmatic libertarians as liberals.

    Your last paragraph seems to confuse “economic gain” in a monetary sense and happiness. Utilitarianism is not about boosting GDP, it is about boosting happiness. If more freedom lowers GDP and raises happiness, then obviously utilitarians should support more freedom.

  10. Gravatar of scott sumner scott sumner
    6. July 2010 at 05:56

    Mike, Yes, they would not work nearly as well.

  11. Gravatar of johnleemk johnleemk
    6. July 2010 at 07:12

    Mike,

    While America is not as civic-minded as Denmark, it’s pretty good compared to a lot of countries out there. Coming from a much less civic-minded country, I’ve always been impressed by the conscientiousness of people throughout your society, in all walks of life and all vocations. It’s amazing to go to the store and not having to worry about being scammed unawares by the cashier, for example. Likewise, being able to return defective merchandise — that’s almost impossible where I’m from.

    And I’m not even from a particularly hellish place. Malaysia is a middle-income country, and I’m a fairly well off person living in the most developed city (Kuala Lumpur). America’s civic-mindedness still pales in comparison to the Nordic countries, or even to Germany maybe, but it’s well ahead of a lot of the world I’d say.

  12. Gravatar of Indy Indy
    6. July 2010 at 09:16

    @scott sumner:

    I don’t mind contemptuousness per se. A essay full of hatred for the supporters of, say, genocide, wouldn’t bother me at all. What bothers me is the presumption of “hidden bad motive” as the “real reason” someone expresses contrary opinion, when there are clearly reasonable alternative explanations or rationales for the differences.

    For example, let’s say I were to write about an Economist’s negative position on, say, the Community Reinvestment Act or other encouragements of lending to “undeserved communities” and I were to say the equivalent “Why don’t these closet racists just come out and admit how much they hate black people and that their stupid objections to these policies are nothing but amateurish and worthless attempts to cover their obvious racism?”

    Sure, that’s “contemptuous and nasty” but the reason I mind it so much is that it is essentially an ad-hominem argument through an unfalsifiable accusation. It is nasty AND sloppy and lazy AND distracts from real balanced consideration of the issue AND poisons the well of engagement with harsh feelings for everyone involved.

    Also, seeing this kind of thing pop up increasingly often from various quarters, I think this kind of nastiness is a part of the “new hip-cool nasty” trend of opinion and journalism, that I don’t find hip or cool or palatable in the least. I’d like to discourage the fad.

  13. Gravatar of Snorri Godhi Snorri Godhi
    6. July 2010 at 09:17

    Thank you for your reply. I guess what I was trying to get across is that I see no point in trying to find a common denominator between liberals, especially when it is only in the USA that neoliberalism is opposed by “liberals”.

    Still, I’ll add a few more words if you don’t mind.
    First, many utilitarian liberals, including JS Mill, seem to take it for granted that economic freedom increases happiness _only_ via a higher GDP. As you wrote:
    idealistic utilitarian reformers, aka “classical liberals,” believed that free-market capitalism was the best way to improve human welfare.
    (My emphasis.) However, I suspect that not all classical liberals were utilitarians in this specific sense.

    (Incidentally, Ruut Veenhoven, researching happiness across nations, has shown that economic freedom increases happiness even for constant GDP. Pericles was right and JS Mill was wrong, and this fact has practical policy implications.)

    Besides, many totalitarians are utilitarians, too: you can’t make an omelette without breaking the eggs, remember? In fact, utilitarianism seems to me intrinsically totalitarian, unless it is accompanied by a very heavy dose of skepticism — much heavier than the utilitarianism.

    Which brings me back to my starting point: even JS Mill had a conception of freedom different from that of John Dewey and his modern followers; JS Mill would have been horrified at the idea of speech codes, for instance.

  14. Gravatar of Snorri Godhi Snorri Godhi
    6. July 2010 at 09:20

    Sorry, I tried to put an html emphasis on “welfare” but failed.

  15. Gravatar of Contemplationist Contemplationist
    6. July 2010 at 16:26

    Overrated and Underrated? Er, more like centralizing, domineering, illiberal blowhard who jailed people for opinions, got involved in foreign wars vs benign, neglect-er who had a few lame domestic scandals, and presided over a SUCCESSFUL laissez-faire response to a depression.

    Damn those ‘Progressives’

  16. Gravatar of Lab Mixer Lab Mixer
    7. July 2010 at 02:12

    Mike, Yes – I agree.

  17. Gravatar of scott sumner scott sumner
    7. July 2010 at 07:06

    Johnleemk, I agree, except regarding Germany. I don’t think there is evidence that Germany is any more civic minded that the US (at least based on the indicators that I use.) Germany is much less civic-minded than the Nordic countries. But yes, the US is far more civic-minded than most countries. Of course there are big differences between Minnesota and Louisiana.

    Indy, You said;

    “What bothers me is the presumption of “hidden bad motive” as the “real reason” someone expresses contrary opinion, when there are clearly reasonable alternative explanations or rationales for the differences.”

    It was my impression that Will was reacting to people who came right out and said they thought the welfare of Americans was more important than the welfare of foreigners.

    I agree that ad hominem attacks are stupid.

    Snorri, You said;

    “I guess what I was trying to get across is that I see no point in trying to find a common denominator between liberals, especially when it is only in the USA that neoliberalism is opposed by “liberals”.”

    And yet all of the major neoliberal reforms in the US since 1975 were widely supported by liberals (NAFTA, welfare reform, cutting the top rate to 28%, deregulation of many industries.

    If Mill didn’t believe freedom was good for non-economic reasons (and I have trouble believing that, but let’s put that aside), then why would he have been horrified by speech codes?

    I can’t say for sure about Mill, but there is no doubt that utilitarianism puts equal weight on happiness from “non-economic” sources. For instance, econ textbooks talk about flaws in GDP as a measure of living standards from a very utilitarian perspective. So economists are quite aware of these issues.

    Contemplationist, I completely agree. I did a post trashing Wilson and praising Harding.

  18. Gravatar of Snorri Godhi Snorri Godhi
    7. July 2010 at 09:18

    Scott:
    And yet all of the major neoliberal reforms in the US since 1975 were widely supported by liberals (NAFTA, welfare reform, cutting the top rate to 28%, deregulation of many industries.

    You know much more about this than I do, but I note:
    [a] since there is no Liberal Party in the USA, the term “liberal” is subject to the No True Liberal fallacy;
    [b] your list looks suspicious to me: self-defined American liberals supported the Reagan tax cuts? deregulation? welfare reform? (The last was passed under Clinton, sure, but pushed through by a Republican Congress.)

    I’ll comment on JS Mill a bit later.

  19. Gravatar of Snorri Godhi Snorri Godhi
    7. July 2010 at 10:50

    If Mill didn’t believe freedom was good for non-economic reasons […]

    This is not what I said, but I made a mistake: I assumed that you are so familiar with On Liberty as to know what I found, fortuitously, by reading the beginning of chapter 5.

    I invite you to read the long 4th paragraph of that chapter, beginning with “Again, trade is a social act.” The only way I can make sense of it is as follows: for JS Mill
    [a] there are two kinds of freedom: economic freedom and “individual” freedom;
    [b] the State has no right to interfere with “individual” freedom (which presumably leads directly to happiness);
    [c] but the State has an absolute right to interfere with economic freedom, as long as it is for the benefit of society as a whole, ie as long as it increases some agreed-upon welfare indicators, such as GDP and economic equality;
    [d] the reason the State should nonetheless adopt the free market is that such indicators are optimized by the free market.

    Needless to say, after reading this, I lost interest in reading anything more by JS Mill.
    Hayek [though he did not define himself liberal] argued cogently, in chapter 7 of The Road to Serfdom, that when you take away economic freedom, you take away all freedom. I believe that many French xix century liberals, as well as Milton Friedman, agreed with Hayek on that. (And perhaps their arguments are easier to read than Hayek’s.)

    The vast majority of libertarians/classical-liberals probably place a high value both on economic welfare AND on freedom per se. I certainly do. JS Mill also did, but he did not believe that _economic_ freedom is valuable _in itself_.
    Ruut Veenhoven proved him wrong.

  20. Gravatar of Richard H. Serlin Richard H. Serlin
    7. July 2010 at 18:04

    “like Greg Mankiw, I don’t always agree with everything I link to, but thought these articles were worth reading.”

    Ok but do you link to articles that you know are grossly misleading or outright false on core issues, and not let the readers know? Mankiw has many times.

  21. Gravatar of scott sumner scott sumner
    8. July 2010 at 06:55

    Snorri, Yes, lots of liberal senators voted for the 1986 cut in the top rate to 28%. And lots of liberals supported welfare reform.

    Snorri, I don’t believe in any natural rights. I think all freedoms can only be justified on utilitarian grounds–as to whether they increase total happiness (which is, of course, very different from GDP.)

    Richard, I haven’t noticed any big problems with Mankiw’s blog, although I obviously don’t always agree with him.

  22. Gravatar of Snorri Godhi Snorri Godhi
    8. July 2010 at 11:08

    Scott: thank you for your reply — especially considering that your heart is not in this debate anymore.
    Nonetheless, I’ll answer because it helps me to put my thoughts into focus.

    I take a “utilitarian” to mean somebody who thinks that
    [a] happiness is the sum of passive reception of pleasurable sensations (net of unpleasant sensations);
    [b] therefore, we should try to maximize the balance of pleasurable sensations.

    Technically, this might or might not be a correct definition of utilitarianism; but you’d have a hard time trying to convince me that less than 99% of utilitarians believe in [a]. (And there is no point in quibbling about the meaning of “pleasurable” and “sensation”.)

    I myself vehemently reject [a], even in the broadest sense of “pleasurable sensation” (though I would accept [b] if [a] were true).
    Therefore, I also reject utilitarianism — even though I do not believe in natural rights, as I understand the definition of natural rights.

  23. Gravatar of scott sumner scott sumner
    9. July 2010 at 17:20

    Snorri, I can’t speak for 99% of utilitarians, but I don’t necessary equate utility with “pleasure”. There are hedonists, but others gain utility from a struggle on the battlefield. They seek “glory.” I wouldn’t say wars are “pleasant.” I define utility more broadly than others. Something more like “those brain states that people prefer to have.”

    We can’t measure this stuff anyway, so it has no impact on my policy views. I look at things like revealed preference (which countries do people want to move to) or introspection (does it seem desirable to me) or life expectancy or environmental quality or GDP/person or crime rate, etc, etc. It is very subjective when you get into real world policy issues.

  24. Gravatar of Snorri Godhi Snorri Godhi
    10. July 2010 at 03:57

    Scott: the example of would-be heroes seeking glory serves very well to illustrate my point.
    I call glory (or the expectation thereof) one of the “pleasures” under the broadest definition. People who just want glory, want to be passive recipients of a pleasurable sensation. But would-be heroes are not like that: they want to **actively** earn glory. They would not be happy (or not equally happy) if they got a medal without deserving it.
    This, I suspect, is the reason why the happiness of the unemployed does not increase when welfare benefits are increased.

    Another thing: would-be heroes probably would be less happy if they had just been following orders. What makes them happy is that it’s their choice to be heroes. This, I suspect, is why the self-employed are happier than dependent workers (after controlling for income).

    Your definition of utility would seem to leave room for this theory of happiness, but it’s not you I was railing against: it’s JS Mill (and maybe Bentham too).
    But even JS Mill looks good to me compared to John Dewey.

    PS: are there any indexes of happiness based on what country people want to move to, or out of?

  25. Gravatar of ssumner ssumner
    10. July 2010 at 06:49

    Snorri, You said;

    “I call glory (or the expectation thereof) one of the “pleasures” under the broadest definition. People who just want glory, want to be passive recipients of a pleasurable sensation. But would-be heroes are not like that: they want to **actively** earn glory. They would not be happy (or not equally happy) if they got a medal without deserving it.
    This, I suspect, is the reason why the happiness of the unemployed does not increase when welfare benefits are increased.”

    I completely agree, did you asusme I was saying something else? And surely Mill must have understood this?

    You asked:

    “PS: are there any indexes of happiness based on what country people want to move to, or out of?”

    I don’t understand the question. There are indices of happiness and indices of where people want to move. But they are different.

    I am pretty sure that people want to get out of unhappy countries like Moldova. And I know lots of people want to move to America, which has the highest happiness level among countries with more people than Canada.

  26. Gravatar of Snorri Godhi Snorri Godhi
    10. July 2010 at 11:19

    This is a good conversation: after every comment I write, I feel that nothing more needs to be said; and after every reply I read, I realize that I was wrong.

    First, I’d like to clarify that, even though I do not [consciously] believe in natural rights, I have no desire to live in a society where the concept is not [subconsciously] accepted by the vast majority. And even though I am not religious, I’d rather vote for somebody who honestly thinks that freedom is a Divine Gift that no man can take away, than for someone who thinks [like me] that freedom increases happiness.

    WRT JS Mill, I am no Mill scholar; however I offer these pieces of circumstantial evidence:
    * From the Internet Encyclopedia of Philosophy, a Mill quote:
    “By happiness is intended pleasure and the absence of pain; by unhappiness, pain and the privation of pleasure.”
    This quote does not say that humans are _passive_ recipients of pleasure and pain, but I think that most people would interpret it that way.
    * Further: given JS Mill’s view that knowledge is acquired from the senses, I find it hard to believe that he did not think that pleasure and pain are not passively acquired from the senses.
    * Then there is the paragraph that I mentioned in a previous comment; not conclusive, but highly suggestive.
    * Last and probably least compelling: Martin Wiener, in English Culture and the Decline of the Industrial Spirit, blames JS Mill, amongst others, for leading “a counterrevolution of values” against the Victorian work ethic.

  27. Gravatar of Snorri Godhi Snorri Godhi
    11. July 2010 at 01:39

    PS:
    “I find it hard to believe that he did not think that pleasure and pain are not passively acquired from the senses.”

    My mistake: the second “not” in the above sentence should have been removed. [Or the first “not”, the result is the same.]

    Going back to the definition of liberalism: there is an essay by Herbert Spencer that begins with the immortal line:
    “Most of those who now pass as Liberals, are Tories of a new type.”

    The evidence that those “liberals” were actually Tories, is that they introduced regulations designed to increase utility.
    Spencer did not think that those regulations were necessarily bad, just that people introducing them could not honestly call themselves “liberals”, because they decreased liberty.

    I am simplifying, but you can decide for yourself whether I am OVER-simplifying:
    http://www.econlib.org/library/LFBooks/Spencer/spnMvS1.html

  28. Gravatar of ssumner ssumner
    11. July 2010 at 09:31

    Snorri, I agree with your comment about society and its attitudes. I will defer judegement on Mill, as I don’t see those quotes as resolving the “passivity” issue you raise. You might be right, but I’d expect more from someone as bright as Mill.

    I think the original definition of liberal was someone who favored liberty, but by the later 19th century it had become a utilitarian, who often favored regulations. The utilitarian defintion persists through all three phases of liberaliism, the libery definition does not. So I think my definition best fits actual usage.

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