Libertarianism against Economism

By Caplan, Bryan | Independent Review, Spring 2001 | Go to article overview

Libertarianism against Economism


Caplan, Bryan, Independent Review


How Economists Misunderstand Voters, and Why Libertarians Should Care

It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest.

--Adam Smith, The Wealth of Nations

[T]he ideas of economists and political philosophers ... are more powerful than is commonly understood. Indeed the world is ruled by little else.

--John Maynard Keynes, The General Theory of Employment, Interest, and Money

Adam Smith's frank remarks about human motivation paired with J. Keynes's affirmation of the power of ideas form the fundamental antinomy of social science. Self-interest--interpreted substantively, not as a mere tautology--appears to explain most of what people want and do. But at the same time, politics--with its ideologues, heartfelt appeals, and heated debates--seems to determine the "rules of the game" that self-interested individuals are playing.

Economists and libertarians alike lavish praise on Smith's insight, but there is considerable disagreement about Keynes's claim. It resonates strongly with economically literate libertarians. They usually put part of the blame for statist policies on rentseeking special interests, but more on the public's weak grasp of opportunity cost, incentives, the mutual benefits of exchange, the function of prices, and other basic economic insights. To professional economists, however, even those with strong libertarian leanings, Keynes's confidence in the power of ideas sounds naive. People will not habitually vote to impoverish themselves. If human beings are basically selfish, then they will be selfish at the polls as well as in the marketplace. In both settings, they will be deaf to philosophical exhortation.

Yet an impressive body of empirical research now exists showing that in spite of its ability to explain market behavior, the Smithian insight has remarkably little to say about the political life of the general public (Mansbridge 1990). In politics, Keynes's assertion is far from wishful thinking. In this article, I begin by surveying the main findings of the literature on the connection between voting, public opinion, and selfinterest. I then present in detail my own analysis of the economic beliefs of the public, showing that even people's beliefs about economics itself seem driven by ideas, not by self-interest. Finally, I discuss how economists can make sense of these findings, and how libertarians--and anyone else interested in social change--can learn from them.

Voters and Self-Interest

The Meaning of Self-Interest

The meaning of self-interest ranges over a continuum from the purely tautologous ("Even Mother Theresa was self-interested because she did what she wanted to do") to the immediately falsifiable ("No one would pay even a penny to save the life of a complete stranger"). In itself, this variation is harmless, but there is a disturbing tendency toward equivocation--oscillatation back and forth between the tautologous and the substantive definitions. Throughout this article, I use self-interest in the falsifiable, ordinary-language sense of directly valuing only one's own material well-being, health, safety, comfort, and so on.(1) However, I impose three key provisos on this definition of self-interest:

1. I interpret "people are self-interested" as "on average, people are at least 95 percent selfish," not "all people are 100 percent selfish."(2) Thus, the public voluntarily gives away roughly 2 percent of its annual income to charity, keeping 98 percent for themselves; this fact suggests, as Smith would surely have granted, that some genuine altruism exists, but that its magnitude is miniscule compared to that of self-love. In contrast, if people on average gave away 20 percent of their income, then the self-interest hypothesis as I define it would fail. It would likewise fail if one person in ten were a selfless Mother Theresa type, but one or two in a hundred would not be enough. …

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