Political Failure by Agreement

Political Failure by Agreement

Learning Liberalism and the Welfare State

New Thinking in Political Economy series

Gerhard Wegner

The purpose of this book is to reconsider economic liberalism from the viewpoint of political liberalism. The author argues that advocates of economic liberalism largely overlook empirical political preferences which, in many societies, go far beyond a limited role of the state. Recent difficulties of reforming the welfare state provide evidence that political preferences are at odds with liberal economic policy in numerous cases. This fact challenges a political conception which demands a limited state role but also claims that citizens’ preferences ‘as they are’ should determine the content of policies. Using an evolutionary perspective on economic liberalism, the book develops new arguments about how economic liberalism can be brought into line with political liberalism.

Chapter 1: Preferences for the Welfare State as a Challenge for Economic Liberalism

Gerhard Wegner

Subjects: economics and finance, political economy, public choice theory, welfare economics, politics and public policy, political economy, public choice, social policy and sociology, welfare states


1.1 INTRODUCTION The last quarter of the twentieth century witnessed an amazing renewal of economic liberalism. From the viewpoint of economic history as well as the history of economic ideas this renaissance is remarkable, because economic liberalism had survived for decades only in the archives of outdated political concepts. Many similar and sometimes rival conceptions of economic liberalism co-exist in theory and politics, so that a clear-cut definition of what makes up economic liberalism cannot be given at the outset. In Chapter 2, I present an evolutionary concept of economic liberalism and delimit it from equilibrium theory. For a first orientation, however, let us take economic liberalism as a conception which seeks to minimize the role of the state as to society, including markets. All advocates of economic liberalism seek to foster market development which requires economic liberty, whereas the state has to guarantee economic rights such as property rights, the right of abode, the freedom to choose and free trade. Other than anarchists which are constantly at loggerheads with the state, liberals accept that a social entity such as the state should exist and contributes to our well-being in society. Beyond a protective role of the state, however, economic liberals are sceptical about furnishing the state with ambitious tasks; instead they seek to bound further governmental intervention to a restrictive concept of market failure. The latter excludes far-reaching redistribution policies (but can include minimum welfare aid for the poor), as it avoids an extensive provision of public goods...

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