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The Great Persuasion Reinventing: Free Markets since the Depression [Stoat]

Monday, March 20, 2017 15:33
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The Great Persuasion: Reinventing Free Markets since the Depression is a history by Angus Burgin of… well, you can read the potted summaries there, none are quite exact, I’ll off you another gross simplification: of the transition from Hayek as prophet-in-the-wilderness to the triumph of Friedman. So, this post is yet more politics, or economics, as you please; with only tangential reference to science.

The context – relevant for me, and therefore fascinating for you – is me reading Law, Legislation and Liberty and The Road to Serfdom (both, I admit, uncompleted tasks; Hayek is many things but easy reading is not one of them). But what is always difficult to understand is the context these things arise in. For which this book is excellent. It isn’t particularly expensive or long; and it is moderately readable; so I won’t attempt to provide much detail; but I’ll summarise the context for those, like me, who didn’t know it.

In the 1930’s was the Great Depression following the Wall Street Crash, and not unnaturally this was a challenge to the advocates of Free Markets, and an opportunity for those who favoured planning and regulation such as the New Deal and Keynes. Strange as it may now seem in our times, “neoliberal” thought was in the minority and scattered. Efforts to organise, notably the Colloque Walter Lippmann, were interrupted by WWII; after which the Mont Pelerin Society was founded in 19472 to promote the gradual encroachment of its ideas6. Initially modelled after the reticent – barring the Road to Serfdom – pattern of Hayek, it nonetheless incubated ideas that burst forth with Friedman.

Although the MPS folk knew what they were against – planning; socialism; fascism – they had a hard time producing a positive programme of what they were for3, most famously including a name for themselves. From the 1930’s to its early years, those arguing against planning nonetheless distanced themselves from 19th laissez-faire (except von Mises). But while tRtS explicitly condoned govt intervention in various ways, it didn’t obviously resolve the contradiction between that and the repudiation of central planning1. I don’t think this was ever fully solved, but was roughly resolved in favour of reducing the support for intervention. Friedman, AB notes, was relentlessly optimistic and accounted for people’s intrinsic desire to act; and this is a lesson for us all in effectiveness.

Architecture and morality

There’s a huge problem in all this around morality5. Although, as economists, they are arguing for what they see as an economically more efficient structure; which would lead to both economic and intellectual freedom which they regarded as good; the question of morals remains. As Liberals, they distance themselves from Conservatives, who favour statis, which is anti-freedom. So they cannot be in favour of “a return to good ol’ fashioned morality”, no matter how much their dress sense might suggest that on a personal level. However Hayek, Polanyi and Oakeshott’s view was that markets were to be favoured not least because ignorance prevented central planning from being even in principle possible; a corollary of this was that institutions and society evolved, slowly; and that many institutions – that were valuable – would nonetheless function in ways inscrutable to those doing the functioning; and a corollary of that was respect for social traditions. This was probably not a majority view in MPS. Others would favour a somewhat paternalistic idea that markets and competition would tend to coarsen morality and “standards”4. Hayek saw markets as morally neutral; Friedman saw them as rewarding virtuous behaviour, a useful rhetorical tool. “Virtue”, in this sense, largely meant self-reliance; perhaps seen as a proxy for all other virtues. Like Hobbes, whose over-riding value is prevention of civil war and the need for a sovereign that allows all things to be deduced from it; Friedman’s approach is deference for the choices of others, in the Hayekian model, which doesn’t allow the imposition of an external moral framework.

Efficiency and values

There’s an interesting fragment towards the end, attributed to Irving Kristol: the idea that the Left had abandoned debate on economic efficiency, and instead switched their focus to values. This reminded me of the science-vs-religion wars.


* The Headquarters of Neo-Marxism by Samuel Freeman in the NY review of books.
* Did the lack of an election threshold save The Netherlands? – VV
* The US Libertarian party


1. This is AB’s view; I expect to finish reading tRtS looking out for this point.

2. Supported by the Volker fund. In the 50’s, by the Earhart and Relm foundations.

3. They were for Free Markets, obvs, but that’s the easy bit. They adduced connections between intellectual and economic freedom. They favour the rule of law.

4. The Ethics of Competition, Frank Knight, 1923.

5. And smaller one about democracy. I’ll come to that at some point; here I’ll note that Hayek explicitly argues for limits on the divine right of democracies; although characteristically has a hard time saying exactly what might enforce those limits.

6. Albert Dicey, Lectures on the relation between law and public opinion in England during the nineteenth century.


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