“Hayek’s Legacy … is Still Brightly Promoted”

Michael Giberson

Al Roth, at Market Design, points out an inadvertently amusing column from The Guardian a few weeks back, “Our speechless outrage demands a new language of the common good.”

The writer, Madeleine Bunting, asserts that economists of a certain sort (namely, Friedrich Hayek and his associates at Chicago in the 50s) came to dominate political economy with an essentially hollowed-out conception of humanity, the effects of which “now lies in ruins all around us.” Bunting says we now need a new language and framework with which to articulate our public outrage, but we shouldn’t look to economists to provide it. Instead, she said, we should consider political philosophy, mentioning two recent books from Harvard professors on justice.

The amusing part? As Roth observes, one of the books is by an economist, Amartya Sen.

The other book is Michael Sandel’s Justice, which we’ve discussed a little here before in the context of price gouging. It is Sandel that gets all of the attention in Bunting’s column, perhaps why Bunting overlooked Sen’s professional training and long career in economics.

I also found it amusing that Bunting confidently recommends an approach she claims not to understand clearly. Really. As in, “We need to be looking to political philosophy. I’m as hazy on the subject as the next person, but [in Sandel’s book] I see great insight into our current predicaments.”

I’m not sure that it quite comes across as the ringing endorsement it was intended to be.

[NOTE: My title is drawn from Bunting’s essay. Here are the first few paragraphs, which well illustrate her style:

There was a coterie of economists in the 50s in Chicago intensively working on a set of ideas that were widely regarded at the time as marginal. They had little influence on mainstream public debate for another 20 years, and their ideas didn’t win votes for nearly 30. But the story is now familiar of how Friedrich Hayek and his associates produced the intellectual roadmap for both Thatcher and Reagan, and the notions cooked up in Chicago – such as efficient market hypothesis – have dominated political economy for the last 30 years. Hayek’s legacy, which now lies in ruins all around us, is still brightly promoted, but its claims to fairness and freedom have been utterly discredited.

The institutions that so benefited from Hayek’s legacy – in the financial sector – seem oblivious to the crisis of legitimacy they have stumbled into. That’s because the public outrage they prompt has no language or intellectual framework to make sense of itself, or to shape a new settlement. But it’s only a matter of time.

But don’t look to economists to get us out of this hollow mould of neoliberal economics and its bastard child, managerialism – the cost-benefit analysis and value-added gibberish that has made most people’s working lives a mockery of everything they know to value. Economics developed brilliant technical skills for monitoring and managing complex economies, but an interpretation that allied them to grossly crude understandings of human nature came to dominate.]