What exactly is the link between economics and freedom? I’m prompted to ask by my gut reaction to the idea of banning drinking on trains and buses – that this is yet another numbskull New Labour assault on our freedoms.
Then I thought; is my instinctive revulsion the typical reaction of an economist? I suspect it is. There are good reasons why economists are more libertarian than others. It surely can be no coincidence that so many great economists, from Smith, Ricardo and Mill to (yes, Anthony) Hayek and Buchanan have been strong supporters of individual freedom. Even the statist Keynes was a social liberal by the standards of his time. (We’ll leave Pareto out of it, and discuss Marx some other time).
The most obvious reason for the link is that economics is the study of the gains from trading. This shows us that freedom to do what we want is not (just) valuable in itself, but also instrumentally valuable.
But there’s more to it than this. There are other reasons why economists are instinctively libertarian:
1. Public choice. Economists believe “public servants” are, like the rest of us, lazy and cowardly. So we don’t trust them to uphold laws in the way law-makers intend. If drinking is banned on trains, policemen and ticket-collectors won’t bother to confront a dozen lairy yobs who are intimidating passengers – that’ll be too much trouble. They'll pick on the weary commuter having a quiet can.
2. People are the best judges of their own actions. This view has of course been strongly challenged recently by behavioral economics – though I’ve yet to see a cognitive bias that the general public has but government doesn’t – but it’s still economists’ default view. So, when we see someone drinking, we don’t see someone about to become a violent menace. Instead, we see someone who can hold his drink, as most people (and all true Englishmen*) can.
3. Behaviourism. Economists believe behaviour matters, not character. We believe drunkenness – insofar as it troubles others – is a problem. But the disposition leading to drunkenness doesn’t trouble us. Economics is about finding ways to internalize externalities – not about peering into the human soul.
4. Limited ambition. Economics takes human nature as it is. When we think about how to improve society, we ask: what institutions (like the price mechanism) can harness human venality – greed and laziness – for beneficial purposes? We don’t wonder how to straighten the crooked timber of human nature.
It’s here, I suspect, that the big difference lies between us and New Labour’s managerialism. Economics recognizes that there are limits to what governments can do – let alone to what they should do. Managerialists don’t see such limits.
* This is true by definition - even of Oliver Reed.