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 3: Preferences versus Choice in Politics: A Conception of Feasible Democratic Politics

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

Extract

3.1 STOCK-TAKING The concept of ‘spontaneous order’ reconceptualizes the welfaregenerating process in market society and sets it apart from general equilibrium theory. By understanding allocation as a societal experiment, the underlying market theory becomes evolutionary. The process which improves current solutions to the scarcity problem is given priority over the allocational results of the current solutions; this orientation towards the future brings the notion of liberty back into economic theory, as it emphasizes the institutional preconditions for liberty. The advantages of a spontaneous order notwithstanding, societal consent with this order remains open; so does the legitimacy of the market order if one considers agreement of society as the source for legitimacy. Specifically, legitimacy depends on the intrinsic value that society places on liberty. If society gives priority to the ongoing increase in well-being, it implicitly reveals a preference for an economic order which is based on liberty. However, as we have seen in the preceding chapter, uncertainty as to the current income of citizens turns out to be the opportunity cost of the spontaneous order. Its acceptance becomes a necessary part of the preference for higher well-being. But one cannot conclude that society will accept economic uncertainty if it sees a possibility of having both, that is, the permanent increase of income as well as income security. Depending on the perceived capability to cope with individual income uncertainty, a social preference for income security can emerge, something which accords with empirical evidence in advanced capitalism. Hence, one cannot logically...

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