Wisdom from Mark Littlewood
In the last issue of Economic Affairs, Mark Littlewood, the Director-General of the IEA in London, offers his blueprint for arguing a stronger case for free markets in the contemporary world. Mark quotes (approvingly!) Tony Benn, “every generation has to fight the same battles again and again for there is no final victory and no final defeat”. The so-called “battle of ideas”, a metaphor dear to Littlewood’s predecessor John Blundell, is never over. And our current circumstances may suggest that emphasizing this element of a certain political vision might be in order, to calibrate them better for our contemporary audiences.
Mark has three points:
First, market liberals need to be much more comfortable with embracing failure. Too often, opponents claim that we assume that markets allocate resources perfectly, and participants in the marketplace always make wise and rational decisions. This is a straw man. The case for free market doesn’t rely on such heroic premises…
Second, markets do not guarantee incorruptible behaviour…
Third, those advocating a free market economy need to rediscover – and reiterate – Friedrich von Hayek’s concept of a fatal conceit. In a capitalist economy, there will always be plenty of wrong-headed and morally dubious decision to point at. However, this must not be allowed to lead seamlessly to the conclusion that ‘neutral’, well-intentioned, brilliantly informed state central planning is the antidote.
In short, we need to be “more modest about what markets can be claimed to achieve and more brutal about the illusory benefits of the alternative”.
This goes very well with Arnold Kling’s brilliant description of Masonomics:
At the University of Chicago, economists lean to the right of the economics profession. They are known for saying, in effect, “Markets work well. Use the market.”
At MIT and other bastions of mainstream economics, most economists are to the left of center but to the right of the academic community as a whole. These economists are known for saying, in effect, “Markets fail. Use government.”
Masonomics says, “Markets fail. Use markets.”
Mark Littlewood is a brilliant communicator, who successfully managed an outstanding expansion at the IEA. So I’m glad he buys into this more ‘modest’ description of markets – which makes justice of all the hullabaloo of “market fundamentalism” and similar buzzwords. Still I wonder how that can be packaged to be attractive to a wider constituency.
The alternative view somehow suggests that, whenever a problem appears, a benevolent planner will be able to fix it. This is a bit childish, and I fear it works precisely because it is; it offers a simple sketch of a causal link to people who do not spend much time pondering this kind of issue and who instinctively tend to believe the private sector is self-interested and rotten. The view by which markets are imperfect and therefore we need them focuses indeed on the shortcomings of central planning, but requires a basic understanding of the fact that orders may be ‘spontaneous’, the product of human action and not of human design, and that knowledge can sometimes be better activated to the benefit of society through decentralized decision making. None of these things is easily digested by laypeople. Perhaps the case for the immorality and corruption of government is more easily understood because, pretty much like the case for socialism, it gives people a villain – though this may not suffice to convince people that markets work better.
I personally find the case for imperfect markets for imperfect human beings plausibile, appealing, and right. But I wonder if it can be sold at all, in a world of instant communications, political polarization and ever growing demand for quick and all powerful “problem solvers” (aka populism).