Political Failure by Agreement
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Political Failure by Agreement

Learning Liberalism and the Welfare State

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.
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Chapter 5: Learning Liberalism in the Welfare State: Reviewing Economic Liberalism

Gerhard Wegner


5.1 INTRODUCTION: A BRIEF STATEMENT OF THE ARGUMENT In the previous chapters I developed several arguments which prompt a rethinking of economic liberalism; in the following I bring them together in conclusion. Liberals have tended hitherto to overlook the obstacles which citizens ‘as they are’ (which means empirical citizens) face when they seek to identify their political preferences.1 This makes it difficult to understand why citizens agree to policies which impair their well-being. Instead, liberals commonly explain the welfare losses of interventionist policies as a result of inefficiencies which appear when preferences concerning politics are to be realized in democracy. Besides the problem of aggregating preferences in one consistent social preference order (social choice), political institutions in representative democracy are held responsible for the distortion of preferences; they fail to curb vested interests of groups or of self-serving policy-makers. Without ignoring these insights, my arguments point to a different phenomenon: citizens themselves can fail to identify policies which serve their own interests, particularly when assessing policies which indirectly further self-organization in markets. Instead, citizens can form preferences for public activities while overlooking their opportunity costs. In order to single out this phenomenon I have made a further abstraction: I have ignored disincentives concerning informationgathering in politics; put differently, in my line of reasoning, citizens believe that their own engagement in politics makes a difference, something which textbook political economics would consider an illusion. Evolutionary market theory – which hitherto has not been used for that purpose...

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