Is libertarian freedom free of charge?

17 July, 2013 at 10:59 | Posted in Economics, Politics & Society | 5 Comments

As interpreted by the important Chicago school of economics, faith in human rationality is closely linked to an ideology in which it is unnecessary and even immoral to protect people against their choices. Ratonal people should be free, and they should be responsible for taking care of themselves …

The assumptin that agents are rational provides the intellectual foundation for the libertarian approach to public policy: do not interfere with the individual’s right to choose, unless the choices harm others … I once heard Gary Becker [argue] that we should consider the possibility of explaining the so-called obesity epidemic by people’s belief that a cure for diabetes will soon become available …

Much is therefore at stake in the debate between the Chicago school and the behavioral economists, who reject the extreme form of the rational-agent model. Freedom is not a contested value; all the participants in the debate are in favor of it. But life is more complex for behavioral economists than for true believers in human rationality. No behavioral economist favors a state that will force its citizens to eat a balanced diet and to watch only television programs that are good for the soul. For behavioral economists, however, freedom has a cost, which is borne by individuals who make bad choices, and by a society that feels obligated to help them. The decision of whether or not to protect individuals against their mistakes therefore presents a dilemma for behavioral economists. The economists of the Chicago school do not face that problem, because rational agents do not make mistakes. For adherents of this school, freedom is free of charge.

Daniel Kahneman

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  1. Professor Syll,

    This is off topic, but I hope you might respond.

    Have you ever read this?:

    Dow, Sheila C. 1995. “Uncertainty about Uncertainty,” in S. C. Dow and J. Hillard (eds.). Keynes, Knowledge and Uncertainty. Edward Elgar, Aldershot. 117–127.

    Specifically, do you think that Keynesian uncertainty can come in degrees or grades, as argued there? E.g., from total uncertainty to a low degree of (still) non-calculable, inexact uncertainty, and everything in between?

    • Lord Keynes,
      Science according to Keynes should help us penetrate to “the true process of causation lying behind current events” and disclose “the causal forces behind the apparent facts.” Already in the first chapter of Treatise, Keynes writes (emphasis added): “In metaphysics, in science, and in conduct, most of the arguments , upon which we habitually base our rational beliefs, are admitted to be inconclusive IN A GREATER OR LESS DEGREE.”

      To a large extent the rest of the book is (at least in my reading of it) an argumentation that since the real world is “organic” rather than “atomistic,” there is no way around this kind of “uncertainty”, and that the “openness” of reality gives rise to a “problem of induction” that makes probabilistic reduction to risk impossible as a GENERAL strategy (this is very clear in Keynes’s critique of econometrics).

      Not ALL probabilities may be quantifiable – and even if SOME are possible to rank ordinally, it’s quite obvious from Keynes’s writing – both in Treatise and later – that he never considered it a real possibility to be able to uniquely order ALL possible “states of nature” by using one-dimensional concepts of uncertainty or risk-equivalents.

      Since according to Keynes we live in a world permeated by unmeasurable uncertainty and not quantifiable stochastic risk (his concepts are not possible to squeeze into a single calculable numerical “probability”) – we have to base our expectations on the confidence or “weight” we put on different events and alternatives. To Keynes expectations are a question of weighing probabilities by “degrees of belief,” beliefs that often have preciously little to do with the kind of stochastic probabilistic calculations made by the rational agents as modeled by “modern” social sciences.

      Although (I think) I agree with Sheila that Keynesian uncertainty can come in different degrees or grades, I wouldn’t overemphasis the reach of that kind of differentiated uncertainty concept. Institutions, animal spirits, conventions, history, social norms and models MAY help us decide and act – but much of the time we “simply do not know” because of the way the world works. One of the most profound messages of Keynes’s works is that we really have to come to terms with this ontological fact if we want to epistemologically be able to handle genuine uncertainties and expectations about the future.

      • Thanks for this reply. I am happy to see my own views are more or less the same as yours.

        Incidentally, I am trying to get hold of your book John Maynard Keynes, which I am looking forward to reading.

      • Unless it’s in Swedish, which I realise now it probably is!

  2. […] particular, fond of everything done by his Chicago colleague Gary Becker. (On a related point, see Lars Syll, who quotes Daniel Kahneman remembering Becker’s way of thinking: “I once heard Gary […]


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