The Character of the Case Against Interventionism

     

I earlier tried to explain one issue which Sandy raised about my initial response to him: why I was making a particular kind of point about the need for empirical work. I suggested that there were two kinds of argument that might be offered in this field. The first, relating to the structural characteristics of something, can – like Mises’s and Hayek’s arguments about economic calculation – be conducted on purely theoretical grounds. Mises, it seems to me, attempted this in his own argument about intervention; it would also seem to be needed to sustain the kinds of unconditional claims that he was making about interventionism. The second, in which it seems to me that we are largely involved in this area, would seem to require theoretical argument, but also empirical (or historical) argument that our theoretical claims are true of the specific material with which we were dealing. Sandy refers to Habermas. A good example of my second kind of argument is in fact Habermas’s account of “the structural transformation of the public sphere.”[47]

The key issue here is which kind of theoretical claim, and form of evaluation, should be used, when Mises claimed what he did about interventionism. (See my initial piece for documentation about this: I had taken it that Sandy’s concern was to offer a discussion and reconstruction of Mises’s arguments. I can’t, for reasons of space, widen the argument to a discussion of Sandy’s book.) My argument was that, aside from one particular kind of “dumb” intervention in which a government tries to bring about a particular result, and systematically reacts by controlling more of the economy each time people react in rational ways to what it has undertaken so far, so as to frustrate its aims, it is not clear that we are dealing with the first kind of argument. Accordingly, my claim was that one would have to argue both theoretically and empirically/historically. (About these kinds of arguments, I said something in my initial and subsequent reply). Here, what Castells reports about East Asia is pertinent. As I indicated initially, I’m not in a position to evaluate the empirical claims made in the material to which he refers; and as Coyne has mentioned, one clearly needs to take into account issues about opportunity costs (although this relates to the wisdom of intervention, rather than to claims about its instability). But on the face of it, one has claims that government has been effective in the fostering of economic growth, of a kind which looks as if it has to be evaluated empirically and historically.

This is also pertinent to the “trial and error” issue, which I was not able to take up in my previous response to Sandy for reasons of space. To invoke this in the face of arguments like those about economic calculation would be futile, and I would agree that this would also be the case for the special example of “dumb” interventionism. But in the context of interventionism in general, trial and error seems to me to have a point. First, pace Mises (see my initial discussion), people could have concerns other than economic efficiency and preferences concerning phenomena that emerge from the actions of all of them in the economy, to which they can’t respond at the level of individual action. To this, while there are public-choice problems, a political response might seem reasonable, and it is not clear that Misesian inevitable-instability problems have to occur. We might, say, be concerned that children under 12 years of age should have access to adequate nutrition. A specific tax might be levied on certain kinds of economic activity for this purpose; and different schemes might then be tried out to achieve this specific goal. Now that such a tax is levied will have other economic effects; but there is no special reason why these should be problematic. (After all, it would seem to be identical to the taxes that Mises himself presumably has to agree must be levied to support the limited activities of government he favored.) There would seem, in this example, to be no Misesian reason why intervention would have to escalate. Rather, if initial ideas about how such a tax might be levied proved problematic, they could be rescinded and changed. Similarly, if the specific welfare measures which are tried lead to problematic unintended consequences, we could again rescind the measures and try something else. It is also important to bear in mind, here, that not all forms of government behave in the same way.[48] I should also stress that I am not advocating this. But the problems would look to me to be of a public-choice rather than of a Misesian kind.

More generally, in the face of Mises’s claims about the inevitable instability (or, on occasion, uneconomic character) of intervention, one can surely also consider Hayek’s rather different claims. The broad argument of his Road to Serfdom was that certain kinds of intervention, if they were persisted with systematically, would have disastrous consequences for the economy and for people’s freedom. But as he developed his views in the face of criticism (not least concerning the interventionist aspects of his own views), he articulated an account under which certain kinds of interventionism, while not necessarily wise, would not have bad consequences of these kinds. He also argued for some specific sorts of intervention – e.g., that the government should provide certain kinds of information services, and that if people wished for it, a nonmarket welfare safety net could be provided in richer countries. In each case, however, the intervention would need to take place on a specific basis. [49] It is not my argument here that Hayek is correct, or that his ideas can withstand public-choice or moral objections. My point, rather, is that the cogency of his views about intervention, as compared to those of Mises, needs to be assessed by means of both theoretical and empirical/historical argument.

[47.] See Jürgen Habermas, The Structural Transformation of the Public Sphere (Cambridge, MA: MIT Press, [1962] 1989), and Craig Calhoun, ed., Habermas and the Public Sphere (Cambridge, MA: MIT Press, 1992).

[48.] See, in the context of arguments about environmental policy, Albert Weale, “Nature versus the State? Markets, States, and Environmental Protection,” Critical Review 6, Issue 2-3, 1992, pp. 153-70.

[49.] See, for discussion, my “Hayek, Keynes and the State,” History of Economics Review 26, Winter-Summer 1997, pp. 68-82.