Collective Conscious

Mar­kets are sub­or­di­nate to gov­ern­ment, says Roger Farmer:

The debate is too often couched in terms of free mar­kets ver­sus state con­trol. But mar­kets can­not exist out­side of the insti­tu­tional sup­ports pro­vided by gov­ern­ment. These include the courts, the police and the army, insti­tu­tions that are typ­i­cally accepted as nec­es­sary by even the most ardent sup­port­ers of free mar­kets. But should we move beyond these min­i­mal­ist institutions?

Once one rec­og­nizes that the courts are legit­i­mate insti­tu­tions, it becomes nec­es­sary to pro­vide a mech­a­nism to define what con­tracts are enforce­able and what are the bound­aries that legit­imize prop­erty rights. Slav­ery for exam­ple, was a legit­i­mate insti­tu­tion at the incep­tion of the Amer­i­can exper­i­ment in democ­racy. It is now widely con­sid­ered to be repug­nant. The bound­aries change. What is obvi­ous to men and women in one era is by no means clear to others.

…

It is tempt­ing to pose the fol­low­ing dichotomy. Is high unem­ploy­ment a sys­temic prob­lem of unreg­u­lated mar­kets? Or is it caused by over active gov­ern­ment inter­ven­tion? This is an overly sim­plis­tic way of orga­niz­ing a com­pli­cated ques­tion. Every sys­tem of trade exists within a set of legal insti­tu­tions. Some insti­tu­tional arrange­ments lead to higher wel­fare for most cit­i­zens than oth­ers. The right ques­tion to ask of a democ­racy is: Which set of min­i­mally inva­sive insti­tu­tions will lead to the high­est stan­dard of liv­ing for the largest pos­si­ble num­ber of citizens?

I don’t think that the very last cri­te­ria there is spe­cific enough. I brought this up yes­ter­day on Google+ when respond­ing to a sim­i­lar asser­tion about mod­ern lib­er­tar­i­an­ism. Will Wilkinson’s post stated:

One doesn’t want to say that self-​​rule or auton­omy requires total immu­nity from the influ­ence of oth­ers. And it’s plainly cir­cu­lar to say the prob­lem is being sub­ject to an exter­nal will in a way that lim­its our free­dom. But I think not­ing that helps us to see that the ques­tion is not really one of being sub­ject to an exter­nal will or not, but of the way in which one is made sub­ject to an exter­nal will.

And I replied:

 I think about this prob­lem through a sys­tem that isn’t all about individuals:

“We have what neo­clas­si­cals term ‘revealed pref­er­ences’, which is the actions that indi­vid­u­als take in the free mar­ket­place, and basi­cally reflects the align­ment of all their eco­nomic incen­tives. But it is also clear that there exists a second-​​order pref­er­ence, in which indi­vid­u­als col­lec­tively believe that some­thing ought to be dif­fer­ent about their incen­tives so that they could effect a dif­fer­ent aggre­gate outcome.

The way I see it, max­i­miz­ing util­ity is about sat­is­fy­ing these col­lec­tive desires, even if it means a lower level of ‘revealed pref­er­ences’ get­ting sat­is­fied.”  (http://​goo​.gl/​I​N5E)

When you take this approach to the prob­lem, it’s con­cep­tu­ally clearer. The ‘pater­nal­ism’ crit­i­cism dis­ap­pears if you approach gov­ern­ment as an agent for aggre­gat­ing meta-​​preferences; the ‘lib­er­tar­ian free­dom’ issue is reduced to non­sense since the whole point is col­lec­tive self-​​rule.

The core ques­tion of gov­er­nance is reduced to ‘is the present gov­ern­ment ade­quately reflect­ing meta-​​preferences?’ And the answer can be ‘yes’ in regimes where indi­vid­ual ‘lib­erty’ is rather restricted. In Sin­ga­pore, say, every­one wants to chew gum but they don’t want any­one else to chew gum. So the meta-​​preference is for a sys­tem where nobody can chew gum — even though that goes against every individual’s local preference.

Surely that’s not a ‘lib­er­tar­ian’ sys­tem in the imme­di­ate sense, but if we think about what a gov­ern­ment is - a free asso­ci­a­tion of indi­vid­u­als for mutual ben­e­fit, then it makes a lot more sense. Just the same way you object to the local pref­er­ences of your body (much of it would like to overeat, and be lazy, and so on, but your brain directs your legs to run so your heart can be health­ier, or what­ever), true lib­er­tar­i­an­ism i think has to take into account the sys­temic pref­er­ences of indi­vid­u­als instead of just con­sid­er­ing local ones (if only because the sys­temic out­puts are them­selves log­i­cally prior to local pref­er­ences, as you point out).

That is, the sys­temic design of gov­ern­ment cre­ates people’s per­cep­tions of what is a ‘good stan­dard of liv­ing’ or a ‘desir­able mar­ket inter­ac­tion’ or what­ever you are try­ing to mea­sure well-​​being by. Gov­ern­ment, then, is supe­rior to mar­kets, and we have to under­stand that before think­ing about any­thing else.