June, 2013

Robust Political Economy: Classical Liberalism and the Future of Public Policy

Mark Pennington
  • Vlad Tarko

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It often seems that everyone's political beliefs today are shaped by their fear of what would happen if classical liberalism would happen. What one thinks about the proper role of the state as a manager of various issues is derived from one's fear of what the emergent market and social outcome would be in the absence of those interventions. Economists worry about externalities, the provision of public goods and the problems associated with asymmetric information. Going beyond basic economics, both conservatives and progressives have their concerns. Conservatives worry that impersonal market relations erode traditional morality and that, perhaps, capitalism tends to undermine its own moral foundations of trust and respect for property. Capitalism needs to be protected from itself. Progressives worry that free markets generate too much inequality and that the voice of various disadvantaged groups is not properly taken into account by those who set or change the "rules of the game". Perhaps markets generate such inequalities of income that the rich will be able to buy the government and change the rules such that they will remain forever on top. Once again, capitalism presumably undermines its own foundations and needs to be saved from itself.

Find the article at SpringerLink or SSRN.