Symposium on Rationalism Pluralism and Freedom

A Pluralist Defense of Free Markets?

Libertarian arguments in favor of a free markets can be, in Jacob’s terminology, either rationalist or pluralist. Murray Rothbard, Ayn Rand, Robert Nozick, and Herbert Spencer are all probably best thought of as offering rationalist defenses. On their view, free markets are desirable because the institutional structures that constitute them conform to universal moral truths. Those truths cut across national and cultural boundaries, and are thought to place strict constraints on all institutions, both state and non-state. Local governments, universities, families, and churches all must respect libertarian rights. Those rights might be fairly minimal in their content, and thus in practice allow for a great deal of pluralism. But, on these rationalist views, pluralism isn’t doing any of the justificatory heavy lifting. It’s simply a byproduct – what’s left over after the rationalist system of rights eats its share.

Friedrich Hayek, on the other hand, is famously hostile to rationalism (see his essay “Individualism: True and False,” chapter one of this book). Hayek’s defense of the market is largely pluralist in nature. It is based on a constrained vision of the power of human reason, and the idea that a decentralized market order better respects and utilizes the local knowledge of individuals and communities uniquely hold. The resulting social order is a (largely) spontaneous one – the product of human action, but not of human design. But within that social order there will exist a great variety of institutions. Some of those institutions will mirror the liberal, decentralized character of the market as a whole. But others will not. Firms might be hierarchically organized, interest groups might be driven by a rationally-constructed theory of society, communes might dispense entirely with the institutions and private property and the price system. Within the extended order of society, there is room for a diverse array of local orders.

Does Hayek’s pluralist defense of libertarian, free-market position succeed? James Scott seems to think not, despite the great similarities between his worldview and Hayek’s own. In his Seeing Like a StateScott set forth a powerful critique of the “high modernism” that, in his view, gave rise to the twentieth-century disasters of state socialist schemes from the Soviet Union to Tanzania. State socialism fails because its rationalist vision leaves no room for what Scott calls “métis,” or local knowledge.

But according to Scott, the hubris of high modernism is not unique to socialism. Market liberalism can be form of rationalistic high modernism, too. As Jacob summarizes Scott:

[T]he attempts to render all things commensurable in monetary terms, to divide all land into legally identical plots of property, and to eliminate customary privileges and restrictions in favor of open, uniform, simple rules are all important parts of market liberalism, and they, too, can override métis  and the freedom to live as one has lived.

And, in Scott’s own words:

[A]s I make clear in examining scientific farming, industrial agriculture, and capitalist markets in general, large-scale capitalism is just as much an agency of homogenization, uniformity, grids, and heroic simplification as the state is, with the difference that, for capitalists, simplification must pay. A market necessarily reduces quality to quantity via the price mechanism and promotes standardization.

As a result, Scott claims, “global capitalism, not the nation-state, is perhaps today the key force behind planning, standardization, and homogenization.”

I know Jacob has a great deal of respect for both Hayek and Scott. And I’m also pretty sure I know whose side he comes down on in this particular debate. Indeed in a 2003 paper Levy notes intriguingly that he believes that “there is a great deal that can be said in response to Scott’s worries about the market.” But he doesn’t tell us what that great deal is.

So I’d like to use this symposium to press Jacob to say more. Given what he wrote in 2003, and given that he is, after all, writing for a blog called Bleeding Heart Libertarianism, I take it that he thinks a pluralist defense of free markets can be successfully made. But I’d like to hear him say a bit more about how that defense would go – at least in broad outline. Why is Hayek right, and Scott wrong? And how might the kind of free-market world that a pluralist argument can support differ from the sort of world envisioned by rationalists like Rothbard, Nozick, and Spencer?

  • Jerome Bigge

    A “free market” means everyone can offer their goods or services without restriction from a government. Of course those who benefit from restrictions upon who can offer goods or services enjoy higher incomes than they’d have without these restrictions.

    For example, what would your doctor (primary care, not a specialist) earn if there were no prescription laws and people could purchase medication from wherever they wished? Once there are no prescription laws or restrictions upon the import of any drug, suddenly the cost drops and far fewer people need the services of a doctor since everyone with a computer will effectively enjoy the use of “medical software” plus the opportunity to communicate with doctors anywhere on Earth.

    Do this same thing for the rest of the licensed professions and occupations and everyone suddenly is enjoying a lower cost of living of as much as $3,000 per capita. Reduce the size of government at all levels to protection from aggression against life and property and the gain grows even larger Much of what governments do today is merely favoring the few at the expense of the many. Also private agencies can replace most government agencies at a considerable saving in cost.. Plus of course there are a great deal more jobs to be had as everyone is free to use their talents and knowledge to their own gain.

  • Justin Simon

    I think there’s a strong relevance here to the questions of whether what has worked in the Nordic countries is applicable to more diverse communities (and in particular the Anglosphere). Does the welfare state work well there because the intermediate organisations it has replaced (or which would replace it, were it to step back) embody the same secular values as the rationalist state? It certainly seems like the secularist gives up a lot less by deferring to the state when they’ve smuggled their core values into the specification.

  • MARK_D_FRIEDMAN

    Matt,
    I’m a little confused by what you say in your first paragraph. As you know at least as well as I, Nozick’s “framework for utopia” envisions an endless variety of institutional arrangements, including collectivist and illiberal varieties. The only role of the state is to guaranty the right of exit and non-aggression by one community against another. Thus, churches or other insular groups need not conform to any particular idea of the good, provided membership is voluntary. So, I am not sure how this makes him a “rationalist.” Or, would pluralists not insist on an exit option and non-aggression?

    • Justin Simon

      Yeah I don’t think Nozick is rationalist in the sense defined by this book, if anything he’s the embodiment of the pure theory of freedom of association.

      • MARK_D_FRIEDMAN

        I haven’t read Prof. Levy’s book, and am just thinking out loud here, but I believe most libertarian thinkers would affirm both a right to participate in free markets, and a right to opt out of such arrangements with willing others. Thus, the key moral principle is the right to choose one’s economic environment. Therefore, I question Matt’s statement that they (with the possible exception of Rand) hold that “free markets are desirable because the institutional structures that constitute them conform to universal moral truths.” I believe that they regard autonomy as moral bedrock, and I wonder if “pluralists” could possibly deny this.

    • It’s possible that I’m misunderstanding Jacob’s distinction. I’ll be curious what he has to say on this point.
      In his book, Jacob sets up Susan Moller Okin and Chandran Kukathas as two extremes on the question of freedom of association. Okin seems to want the family and other intermediate institutions to go extinct insofar as they hinder individual autonomy, while Kukathas sees toleration as the main virtue of a liberal society, including the toleration of groups that are decidedly illiberal in their internal structure.
      Nozick, I think, is best read as falling somewhere in between those extremes. Like Kukathas, he thinks that a liberal society will tolerate groups with a great variety of internal structures. But unlike Kukathas (I think) he sees an important role for the state in securing individuals’ right of free exit. So there’s a kind of rationalistically-arrived-at universal right at work in Nozick that isn’t there in Kukathas. And the enforcement of that right is going to require at least *some* state-involvement in groups to ensure that they respect it. Indeed one might even say that it requires all groups to be libertarian – if what it means to be libertarian is to respect that the rights of self-ownership and tangible property are only waivable by consent.
      Is that enough to make Nozick a rationalist in Levy’s sense?

      • MARK_D_FRIEDMAN

        Thanks, Matt. To jump right to your question, I am surely not the best person to respond, having not read Levy’s book. Perhaps he will clear this up.

        I will say that Nozick’s framework for utopia is clearly operating at the level of ideal theory, and he is assuming that his minimal state would simply fumction to protect the right of exit and to prevent aggression. Kuthrathas’ criticism is grounded in his skepticism that ANY state could ever remain “minimal” in this way, so I am not sure that they differ in their conception of rights. And, indeed, I doubt that there are any classical liberals or libertarians who fail to endorse a right of free exit. I am not sure that even Okin does based solely on your description. So, if this is sufficient to make Nozick a “rationalist,” then Hayek and other pluralists must be as well.

        You may be interested in this little essay, since it addresses the Kuthrathas piece in the Cambridge Companion volume you reviewed for NDPR: http://naturalrightslibertarian.com/2012/12/has-nozick-failed-to-give-us-utopia/

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