A Review of Enrico Colombatto, "Markets, Morals and Policy-Making. A New Defence of Free-Market Economics"1

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A review of Enrico Colombatto, "Markets, Morals and Policy-Making. A new defence of free-market economics"1

Enrico Colombatto's Markets, Morals and Policy-Making. A new defence of freemarket economics is a rich and dense and invaluable 200-page long book. Obviously, it would not be easy to review honestly its multiple dimensions - the methodology, history and ethical foundations of economics, and the interactions between economics and other social sciences - and the many important questions - social change and how institutions and ideas combine in the functioning of human societies, poverty, growth and economic crises as well as the moral principles on which our societies are based - it deals with. I will rather focus on one of its main aspects: the book is not just another defence of free-markets and free-market economics. On the contrary, I believe and insist that Colombatto weaves around the three keywords of the title a provocative but truly original thesis about free-market economics and he relates his claims to the issue of the foundations of economic policy-making.

Colombatto starts with the idea that, as one can observe, "the large majority of the population does support substantial government intervention in most areas of economic activities" (p. 82). Therefore, to him, the relevant attitude towards state intervention through policy-making should not consist in examining the virtues of specific rules - for instance, asking whether rule A is better than rule B or how to devise even better rules. More fundamentally, the question bears on the legitimation of government intervention itself. From this perspective, the claim Colombatto puts forward is rather negative. He thus argues that "the economic way of reasoning prevailing today is mostly inadequate for understanding the nature and legitimacy of policy-making" (p. 3; emphasis added); in which adequate means from a free-market perspective. Thus, the book is aimed at explaining what is a free-market approach and, as a corollary, at emphasizing the differences with what the views developed and promoted by those who claim to be free-market scholars.

About the latter point, upon which I will come back later, I already stress what one of the central and fascinating claims of the book: even those who are viewed and view themselves as pro-market scholars are not able to adequately defends their views: "a free-market approach built on consequentialism or wishful thinking will falter whenever a crisis strikes and necessarily force its advocates to acquiesce to some version of the third way" (p. 3). Thus, at best, the standard and well-known free-market approaches that are used in economics are only able to defend a third way between socialism and liberalism. The reason is that there is only one way to legitimate policy-making from a free-market perspective and it consists in adopting a moral principle: "the foundations of free-market thinking originate from moral philosophy" (p. 3). It is because economists have forgotten this fundamental principle that they are now incapable of envisaging a form of policy-making that would not imply more state intervention for the common good. It seems that free-market supporters and pro-state advocates all tend towards a similar - if not exactly the same - way of founding policy-making. They all share "a fairly peculiar notion of economics" (p. 32) which "consists of an enlarged version of the original Keynesian proposal, according to which the technocrat has explicitly replaced the politician" (p. 28).

Colombatto dates the origins of its incapacity in the evolution of the discipline since the beginning of the 19th century - "economics went the wrong way at the beginning of the nineteenth century" (p. 209). It results from a slow driftaway from the political economy approach of the founders of the discipline and towards a "hard" science, interested only in modeling mechanical systems, in understanding under which conditions interactions between rational utility functions maximizing "robots" produce order (peace), stability, efficient allocation of resources and general (or partial) equilibria. …