The Public Policy/An Even More Dismal Science
Stark, Andy
THE PUBLIC POLICY AN EVEN MORE DISMAL SCIENCE by Andy Stark Connoisseurs of the subject by now will have noticed the - emergence of three genres in contemporary political economy, genres which...
...lumberman, nutritionist, tycoon, grocery clerk, and, yes, trade union organizer, which, without direction or plan,, have somehow, inexplicably, combined in the market to produce the Cheerios which our conservative political economist sees before him in ever fuzzier form as his eyes grow progressively misty...
...The socialist political economist carries the liberal critique further, and thereby demonstrates that conservatives and socialists for the most part talk right past each other...
...For, as Hayek himself has noted, liberalism is the doctrine that governmental decision-making should be minimized, whereas democracy is a system wherein control over decision-making, no matter what the division between government and market, is equally distributed amongst the population...
...Guilt-ridden, he leaves the house without eating breakfast...
...Thomas Sowell's Knowledge and Decisions' is written largely in the tradition of conservative political economy (Sowell mentions on page 3. "the complex economic processes which bring a slice of bread and a piece of butter to your plate at breakfast"), and it adds original and creative insights and approaches to the conservative doctrine...
...This seems to be the time-tested outcome of debates between liberals and conservatives, and perhaps the moment has come to ask why that should be so...
...political democracy is democratic governmental control...
...when in fact, they have shown only that minimum government and maximum market are necessary for liberalism...
...There are several criteria upon which such a division could be based...
...and sympathy, according to Arrow, "operates better in an institution, such as the government, designed to give some scope to expressing altruistic interests.'' It would therefore appear that Sowell's reformulation of the debate between conservative and liberal political economy in terms of knowledge and decisions is successful in demonstrating the superior efficiency of market decision-making in most cases, but is unsuccessful in answering the liberal objection that social preferences or values cannot be effectively communicated in the market...
...they have vindicated the market and undermined the command economy...
...when socialists scrutinize the market from a non-moral perspective, something like Kenneth Arrow's The Limits of Organization results...
...There is yet another communication gap between conservative and socialist...
...What if a consensus on a unitary scale of values deems the state of a person's health, and not his output, to be the appropriate standard upon which we decide whether or not he receives health care...
...an analysis which provides a set of criteria for "who shall decide...
...Will the conservative...
...Hayek is the intellectual godfather of Knowledge and Decisions...
...Will conservatives remain infatuated with the importance of the market to a liberal political order, while liberals and socialists stand mesmerized by the incompatibility between capitalism and democracy...
...THE PUBLIC POLICY AN EVEN MORE DISMAL SCIENCE by Andy Stark Connoisseurs of the subject by now will have noticed the - emergence of three genres in contemporary political economy, genres which correspond roughly to those three great mental blocks-conservatism, liberalism, and socialism-which between them have divided up most of Western political thought...
...First, he points to a further confusion in conservative political economy, namely, that conservatives believe that they have shown that minimum government and maximum market are necessary for democracy...
...These two recent works are symbolic of what ideas remain to be discovered if only political economists begin to communicate...
...This seems to be the time-tested outcome of debates between liberals and conservatives, and perhaps the moment has come to ask why that should be so...
...Satisfied that he is clean on both counts, the socialist eats heartily and then catches the bus to the factory...
...Unfortunately, while the market may be able to stand on non-morality, it is far more difficult for capitalism to do so...
...political democracy is democratic governmental control...
...Of course, this wrong is "righted" by the socialist political economist's neglect of the conservative critique...
...The essential stonewall in contemporary political economic debate results from the fact that the conservative, in successfully illuminating the advantages of the market, believes that in so doing he has exonerated capitalism...
...Thus, conservatives like Sowell have not justified capitalism and destroyed socialism...
...What can be gained from such a substitution is an effective role for the social welfare preferences of a society, and it is government, not the market, which better expresses these...
...Ihave provided these brief character sketches because it is important to understand the intellectual personalities at play before going on to consider the following questions which must be asked about any new book on political economy: First, is the author offering anything new to his particular genre...
...The latter seems doubtful: Despite the fact that Hayek (and presumably Sowell) acknowledge the pertinence of preferences as well as knowledge and information, they do not take into account society's preferences regarding social welfare in establishing criteria for the market-government division...
...Both of these contributions, which seem continuously to spin off insights (albeit far from incontestable ones), fuzzily converge on what may be the missing subject in diagnoses of Western economic problems: trust (Arrow) or faith (Gilder) and how to restore it...
...There does, however, remain the liberal complaint of the inequity of market distribution...
...they have vindicated the market and undermined the command economy...
...The salutary feature of Sowell's contribution is his virtuoso ability to cast the debate in terms other than those found in conventional debates over efficiency: Instead of analyzing maxima, minima, optima, and other things that don't really exist, Sowell speaks of the efficient use of knowledge and information, and masterfully applies his analysis to disparate fields of social endeavor...
...when in fact, they have shown only that minimum government and maximum market are necessary for liberalism...
...The concern of the conservative, particularly in his debate with the •Basic Books, $18.50...
...but, like most of its genre, it does not even address the major socialist critique...
...and here, recasting the debate in terms of knowledge and decisions does not greatly assist conservative political economy...
...And, Sowell concludes, in most cases, the market, not government, is better adapted to handle decisions...
...Sowell's basic principle is that there exists in society a network or segment which is possessed of the best (though not necessarily ideal) knowledge relevant to any social decision, and that that network or segment should make that decision...
...First, he points to a further confusion in conservative political economy, namely, that conservatives believe that they have shown that minimum government and maximum market are necessary for democracy...
...This latter point essentially renders efficiency an arbitrary standard because there are as many efficient market solutions to trading as there are possible initial distributions of resources...
...And second, as more and more talent jis applied to the contemporary problems of political economy which hamstring the Western world, it may come to be discovered that the new answers to our new problems (contrary to J.K...
...Conservatives often forget that the opposite of the market is not socialism, but the command economy-a fact to which any advocate of market socialism will attest...
...For, as Hayek himself has noted, liberalism is the doctrine that governmental decision-making should be minimized, whereas democracy is a system wherein control over decision-making, no matter what the division between government and market, is equally distributed amongst the population...
...Ironically, one of Sowell's most bitter critics would probably be Ayn Rand, who has excoriated her ideological kinfolk for abandoning moral defenses of capitalism...
...Social democracy is democratic market control...
...But is it correct to say that the "right" decision is made in the absence of complete knowledge of certain consequences of that decision...
...and the more they communicate, the greater will become the rewards and therefore the incentives to dialogue...
...Both Hayek and Sowell praise the market's ability to enable actors to make the "right" decision without possession of all knowledge of the causes of a particular situation (i.e., we do not need to know the causes of a tin shortage in order to respond to higher tin prices by conservation, substitution, and so on...
...liberal, and socialist political economists ever be able to sit down at the breakfast table and reason together...
...The liberal political economist, a lighter because more troubled sleeper than our friend the conservative, rises early, nervously seats himself in front of his box of Cheerios, and wonders, given that there are severe limits to growth and social tradeoffs, whether his grandchildren will ever be able to sit down in front of a box of Cheerios...
...second, does he squarely and successfully address the other genres...
...After having the terms of debate essentially rerouted from his favorite complaints about monopoly, externalities, and other annoyances, to questions about the relative sagacity of government and market, our friend the liberal political economist may find it more difficult to defend the efficiency of governmental decision-making in most cases...
...Essentially, Sowell tranforms Hayek's principle, namely, that not all knowledge need be consciously comprehended by the appropriate decision-maker (agents in the government or the market), for such knowledge can be embedded in the structure of incentives to which government and market habitually respond...
...Thus, the liberal is quite right in pointing out that the conservative political economist, in defending the efficiency of the market, has given us no reason to accept the social distribution that results from it...
...This thought leads him to further concerns that the efficient production of his box of Cheerios occurred only at the expense of social equity, and to doubts about the capability of the market to produce anything efficiently.in the first place, what with monopoly, oligopoly, externalities, transactions costs, signalling failures, managerial discretion, and so on...
...And Sowell sees nothing to be gained from the substitution of the former for the latter...
...For example, on those rare occasions when conservatives ad-dress the moral questions of capitalism, a product such as George Gilder's just-published Wealth andPov-ertyf is the outcome...
...Thus, while the conservative such as Sowell has shown that maximum market is advisable for a liberal political order, he has simply not addressed the question of whether democracy is compatible with capitalism...
...This talking past each other paralyzes debate...
...Will conservatives persist in praising the market's decision-making capabilities, while liberals and socialists hurl assaults on capitalism's compatibility with "true" social preferences...
...To make this clearer, one can examine the following argument from Knowledge and Decisions: Sowell maintains that government-controlled distribution of income according to need or merit would be to distribute wealth according to "some unitary scale of values applied, by some observer(s)," whereas to "reward output (as does the market) is to reward tangible results as assessed by those actually using the output, in light of their own respective, diverse preferences...
...Social democracy is democratic market control...
...With respect to the first liberal concern, conservatives have been quite successful in demonstrating that market efficiency is in most cases superior to government efficiency...
...Finally, the socialist political economist arrives in his kitchen, espies his box of Cheerios, and, like the no-nonsense intellectual he is, immediately fixes his mind on two concerns: First, in order to justify morally his private appropriation of them, he must ascertain that Cheerios are not a means of production, as Sraffa would maintain, but merely a consumption good...
...conservatives traditionally have favored the somewhat amorphous standard of efficiency, arguing that for most social decisions, the market, and not government, renders the most efficient outcome...
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...Knowledge and Decisions is also fairly successful in its frequent assaults on liberal political economy...
...Through his mind pass all of the uncoordinated efforts of wheat farmer, advertising agent, trucker, Andy Stark is a graduate student in the Department of Government at Harvard University...
...Buchanan to purchase his watermelons...
...As Hayek points out in ' 'The Uses of Knowledge in Society" (the contribution which is the seed of Knowledge and Decisions), the problem of "who shall decide" is not only one of knowledge and information, but also one of preferences...
...and sympathy, according to Arrow, "operates better in an institution, such as the government, designed to give some scope to expressing altruistic interests.'' It would therefore appear that Sowell's reformulation of the debate between conservative and liberal political economy in terms of knowledge and decisions is successful in demonstrating the superior efficiency of market decision-making in most cases, but is unsuccessful in answering the liberal objection that social preferences or values cannot be effectively communicated in the market...
...The socialist political economist carries the liberal critique further, and thereby demonstrates that conservatives and socialists for the most part talk right past each other...
...Or, like stale spouses marinated in the brackish backwaters of their marriage, will they continue to talk past one another over the very breakfast cereal which has become emblematic of their failure to communicate...
...The essential stonewall in contemporary political economic debate results from the fact that the conservative, in successfully illuminating the advantages of the market, believes that in so doing he has exonerated capitalism...
...Again, conservative and socialist talk past each other...
...There is yet another communication gap between conservative and socialist...
...Thus, the liberal is quite right in pointing out that the conservative political economist, in defending the efficiency of the market, has given us no reason to accept the social distribution that results from it...
...Sowell's contribution to conservative political economy comes, first, in his revival and reintroduction of Hayek's principle into the debate over the relative efficiency of markets and governments, and second, in his elaborate analysis of the different information-gathering and decision-making capabilities of market and government...
...as Sowell notes, "The most basic decision of all is who shall decide...
...In fact, however, the market and capitalism are to be evaluated on completely different dimensions, for the former is a system of exchange and the latter is a system of ownership...
...Second, he must convince himself that the extra economic power he possesses by virtue of his ownership of the box of Cheerios will not enable him to influence the political process unjustly and inequitably, thereby adding to plutocracy and diminishing democracy...
...Am I communicating not only information regarding the optimal allocation of resources to tin production, but my preferences regarding the distribution of income as well...
...In response, (as the pre-prandial deliberations of the liberal political economist demonstrate), liberals first of all maintain that the market has inefficiencies of its own, and second, that any market solution always assumes an initial distribution of income and wealth...
...In fact, they have done no such thing...
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...This identification of political economy with political philosophy may be easily made in the following way: The conservative political economist is the one who sleepily seats himself at his kitchen table in the morning and reaches for the box of Cheerios, whereupon his eyes turn misty, his limbs tingle, and his heart becomes surrounded by a warm and comforting glow as he contemplates the miracle that is his box of Cheerios...
...In other words, by paying more for tin, am I saying not only how much I value tin, but that I want tin moguls to become millionaires...
...Galbraith's recent asseveration in the New York Review of Books, we can no longer remain content with simply asking the right questions) may arise from rushing in where political economists have hitherto failed to tread...
...Rand, at least, holds out the hope that there may exist such moral defenses for capitalism, a hope which is not in the least fulfilled by nonmoral defenses of the market...
...Similarly, in centering their concern around democracy and capitalism, socialists often believe that they have effectively applied the ABC's of socialist culture-criticism (Avarice, Banality, Cupidity) to liberalism and the market...
...Thus, while the conservative such as Sowell has shown that maximum market is advisable for a liberal political order, he has simply not addressed the question of whether democracy is compatible with capitalism...
...This talking past each other paralyzes debate...
...In fact, they have done no such thing...
...Similarly, in centering their concern around democracy and capitalism, socialists often believe that they have effectively applied the ABC's of socialist culture-criticism (Avarice, Banality, Cupidity) to liberalism and the market...
...In fact, however, the market and capitalism are to be evaluated on completely different dimensions, for the former is a system of exchange and the latter is a system of ownership...
...As Kenneth Arrow notes, decision-making according to what Sowell calls a "unitary scale of values" (a term which possesses unnecessary author-itarian connotations) can be based on human sympathy (a term which needn't carry "patronizing connotations...
...Thus, conservatives like Sowell have not justified capitalism and destroyed socialism...
...There may be two ways out: First, political economists steeped in historical understanding could bring to bear diverse insights on the topic gleaned from specific historical analysis (after all, one needn't be a "nominalist" to wonder whether, in addition to maxima, minima, and optima, there exist such things as liberalism, demojcracy, capitalism, and socialism...
...The moral challenge of our friend the socialist political economist -that there is no justification for private ownership of property and in particular of the means of production -is also not settled by defenses of the market...
...Conservatives often forget that the opposite of the market is not socialism, but the command economy-a fact to which any advocate of market socialism will attest...
...liberal, is with the appropriate division of social decision-making between government and the market...
...As Sowell himself points out, this in itself is not a novel thought...
...Will conservatives continue to purvey non-moral defenses of the market,, while liberals and socialists sail on by with moral assaults on capitalism...
...The moral challenge of our friend the socialist political economist -that there is no justification for private ownership of property and in particular of the means of production -is also not settled by defenses of the market...
...Indeed, the market is defended precisely because of its "non-morality": In The Limits of Liberty, James Buchanan praises the market because neither he nor his watermelon vendor need know or care about the other's moral worth in order for Mr...
...Sowell likewise notes that the economic optimally of the market has nothing to do with moral justification...
...Indeed, the market is defended precisely because of its "non-morality": In The Limits of itarian connotations) can be based on human sympathy (a term which needn't carry "patronizing connotations...
Vol. 14 • January 1981 • No. 1
