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Democracy, Markets, and the Legal Order: Notes on the Nature of Politics in a Radically Liberal Society*

  • Don Lavoie (a1)

On the extreme wing of libertarian ideology are the individualist anarchists, who wish to dispense with government altogether. The quasi-legitimate functions now performed by government, such as the administration of justice, can, the anarchists claim, be provided in the marketplace.

George H. Smith

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1 Smith, George H., “Justice Entrepreneurship in a Free Market,” in Atheism, Ayn Rand, and Other Heresies (Buffalo, NY: Prometheus Books, 1991), p. 295.

2 See Sidney, Algernon, Discourses Concerning Government (1698; Indianapolis: Liberty Classics, 1990).

3 Classical liberals are well-represented throughout Eastern Europe; they include Vaclav Havel and many of Boris Yeltsin's economic advisors. But those I have particularly in mind are a number of young radical liberals I met in Warsaw, Moscow, and St. Petersburg.

4 A good example of the disillusion with democracy is expressed in Vaclav Havel's article “Paradise Lost,” New York Review of Books, 04 9, 1992.

5 The compromises have divided liberalism into two kinds, each of which bears little similarity to the original ideal. Some self-styled liberals favor conservative policies such as aggressive militarism; others favor socialist ones such as intrusive welfare statism. Gone is the principled opposition to government so characteristic of classical-liberal doctrine.

6 Western ideological socialism was also parasitic on really existing socialism in its notion of totality, which presumed that the standpoint of the proletariat was a kind of privileged, totalistic view of history which gave it meaning. The gradual loss of faith in this totality has meant a loss of historical meaning, and thus a collapse of the whole socialist perspective on the world. See Jay, Martin, Morxism and Totality: The Adventures of a Concept from Lukács to Habermas (Berkeley: University of California Press, 1984).

7 For a concise critique of the decline of radical liberalism, see Nock, Albert Jay, “Liberalism, Properly So Called,” in The State of the Union: Essays in Social Criticism (1943; Indianapolis: Liberty Press, 1991).

8 The next section will briefly summarize the two main correctives I believe a post-socialist liberalism needs to be built upon, pertaining to the illusions of modernism in philosophy and social engineering in economics.

9 Fukuyama, Francis, “The End of History,” The Natiotial Interest, Summer 1989, pp. 318.

10 See, for example, Charles Taylor's critique of atomistic liberalism in “Cross-Purposes: The Liberal-Communitarian Debate,” in Rosenblum, Nancy L., ed., Liberalism and the Moral Life (Cambridge: Harvard University Press, 1989).

11 See Prychitko, David L., “Socialism as Cartesian Legacy: The Radical Element within Hayek's The Fatal Conceit,” Market Process, vol. 8 (1990).

12 On this critique of socialism and the view of markets as knowledge-conveyance and discovery mechanisms, see Hayek, F. A., ed., Collectivist Economic Planning: Critical Studies on the Possibilities of Socialism (London: George Routledge & Sons, 1935); Hayek, , The Fatal Conceit: The Errors of Socialism (London: Routledge, 1988); and Lavoie, Don, Rivalry and Central Planning: The Socialist Calculation Debate Reconsidered (New York: Cambridge University Press, 1985). For an interesting view along these lines of markets as themselves a kind of language, see Horwitz, Steven, Monetary Evolution, Free Banking, and Economic Order (Boulder: Westview Press, 1992); and Horwitz, , “Monetary Exchange as an Extra-Linguistic Social Communication Process,” Review of Social Economy, forthcoming.

13 The chief difficulty with extending this critique of government to a radical position that seeks its elimination altogether is the well-known argument that there are certain “public goods,” such as national defense (and, many would argue, courts), which cannot be supplied adequately by the market. See Hummel, Jeffrey Rogers and Lavoie, Don, “National Defense and the Public Goods Problem,” in Higgs, Robert, ed., Anns, Politics, and the Economy: Historical and Contemporary Perspectives (New York: Holmes & Meier, 1990), for a discussion that suggests that this line of argument may not necessarily establish a case for government provision.

14 For a more extensive argument along these lines, see Lavoie, Don, “Glasnost and the Knowledge Problem: Rethinking Economic Democracy,” Cato Journal, vol. 2, no. 3 (Winter 1992), pp. 435–55. The idea of openness has been elaborated by hermeneutical philosophy in its account of the conditions for mutual understanding in everyday life, in the humanities, and in science. See, for example, Bernstein, Richard J., Beyond Objectivism and Relativism: Science, Hermeneutics, and Praxis (Philadelphia: University of Pennsylvania Press, 1983); Gadamer, Hans-Georg, Truth and Method, revised translation by Weinsheimer, J. and Marshall, D. (1960; New York: Crossroad, 1989); and Warnke, Georgia, Gadamer Hermeneutics, Tradition, and Reason (Cambridge: Polity Press, 1987).

15 See Arendt, Hannah, Between Past and Future: Eight Exercises in Political Thought (1954; New York: Penguin, 1977).

16 On the common law, see Hayek, F. A., Law, Legislation, and Liberty: A Neiv Statement of the Liberal Principles of Justice and Political Economy, vol. 1, Rules and Order (London: Routledge & Kegan Paul, 1973); and Hogue, Arthur R., Origins of the Common Law (Indianapolis: Indiana University Press, 1966).

17 See Habermas, Jürgen, The Theory of Communicative Action, vol. 1, Reason and the Rationalization of Society (Boston: Beacon Press, 1984), and vol. 2, Lifeworld and System: A Critique of Functionalist Reason (Boston: Beacon Press, 1987). For a particularly stark presentation of this image of markets as impersonal, see Anderson, Elizabeth, “The Ethical Limitations of the Market,” Economics and Philosophy, vol. 6 (1990), pp. 179205.

18 See Lomasky, Loren E., “Duty Call,” Reason, 04 1992, p. 51.

19 For examples of analyses of economic phenomena that take culture seriously, see Douglas, Mary and Isherwood, Baron, The world of Goods: Towards an Anthropology of Consumption (London: Allen Lane, 1979); and Simmel, Georg, Essays on Interpretation in Social Science, translated, edited, and introduced by Oakes, G. (1907; Totowa, NJ: Rowman & Littlefield, 1978). Even writings in the Austrian school, although far less guilty of this modernist vice than neoclassical economics, evidence an acultural view of human agents. See, for example, my critique of Israel Kirzner along these lines in “The Discovery and Interpretation of Profit Opportunities: Culture and the Kirznerian Entrepreneur,” in Berger, Brigitte, ed., The Culture of Entrepreneurship (San Francisco: Institute for Contemporary Studies, 1991).

20 The postmodern liberalism that is occasionally being presented in the pages of the journal Critical Review is beginning to correct for this atomistic element in traditional liberalism. See also Madison, G. B., The Logic of Liberty (New York: Greenwood Press, 1986), and Madison, , “Getting Beyond Objectivism: The Philosophical Hermcneutics of Gadamer and Ricoeur,” in Lavoie, Don, ed., Economics and Hermeneutics (London: Routledge, 1991), pp. 3458.

21 Rothbard, Murray N., For a New Liberty (New York: Macmillan, 1973).

22 Friedman, David, The Machinery of Freedom: Guide to a Radical Capitalism (New York: Harper & Row, 1973).

23 Nozick, Robert, Anarchy, State, and Utopia (New York: Basic Books, 1974).

24 Hospers, John, “Will Rothbard's Free-Market Justice Suffice? No,” Reason, 05 1973, pp. 1823.

25 I think that this anarchist policy conclusion is more reasonable than it must appear to most readers; however, I find the atomistic individualist perspective in which it is couched by Rothbard and Friedman unacceptable. This notion of free-market anarchism has to be distinguished, of course, from traditional left-wing anarchism, which does not necessarily share its hyper-individualism, but which has other serious problems. On left-wing anarchism, see Bakunin, Michael, “Statism and Anarchy,” in Dolgoff, Sam, ed., Bakunin on Anarchy (1873; New York: Vintage, 1971); and Shatz, Marshall S., ed., The Essential Works of Anarchism (New York: Bantam, 1971).

26 The study by Benson, Bruce L., The Enterprise of Law: Justice without the State (San Francisco: Pacific Research Institute for Public Policy, 1990), raises the scholarly level of debate considerably above that of the Rothbard and Friedman polemics. It persuades me that a free-market anarchist society would be workable, at least under certain plausible cultural conditions; but I think it will convince very few readers, mainly because the cultural preconditions are not discussed. Free-market anarchism remains unpersuasive to most people not primarily because of any shortcomings of the arguments its proponents make, but because of shortcomings of our background notions of markets and democracy. Behind the objections most people have to the anarchist position is a fear that it would rob us of a deeply cherished value, democracy. In my own view, a radically market-oriented society with a severely limited or perhaps even abolished government could turn out to be a more “democratic” kind of system, properly understood, than the Western-style democracies we are used to.

27 The term “ideology” is misleading here, since we are not interested in articulated systems of ideas but rather in the sorts of tacit beliefs that inform concrete practices.

28 Rothbard, Murray, “Will Rothbard's Free-Market Justice Suffice? Yes,” Reason, 05 1973, pp. 1925.

29 Covven, Tyler, “Law as a Public Good: The Economics of Anarchy,” unpublished manuscript, George Mason University, 1991.

30 Indeed, this may be giving these authors too much credit. Political discourse presupposes an open exploration of issues of mutual concern. It seems that for Rothbard and his followers, genuine political discourse is not even needed in order to get to the free society. Instead, it seems there needs to be what is essentially a religious-conversion experience. The definition of rights is not open to exploratory dialogue but presumed to have been accomplished once and for all in Rothbard, 's Ethics of Liberty (Atlantic Highlands, NJ: Humanities Press, 1982).

* I would like to thank Ellen Frankel Paul and the other contributors to this volume for helpful comments.

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Social Philosophy and Policy
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