Markets, Morals and Policy-Making: A New Defence of Free-Market Economics.

• Author: Coyne, Christopher J.
• Position: Book review

* Markets, Morals and Policy-Making: A New Defence of Free-Market Economics

By Enrico Colombatto

New York: Koutledge, 2011.

Pp. x, 285. $140.00 cloth.

"I abandoned free market principles to save the free market system." Those were the words of President George W. Bush during a 2008 interview as he discussed his administration's economic interventions in the wake of the financial crisis. Indeed, capitalism has come under renewed fire in the wake of the crisis, with politicians and "experts" offering a wide menu of interventions and regulations that they claim will cure the capitalist system's ills. For the most part, a large majority of the general public supports such interventions and views government as the solution to economic and social problems--for example, business cycles, unemployment, inequality, and poverty. Given the hostility toward capitalism, what is the advocate of free markets to do? This question provides the focus for Enrico Colombatto's Markets, Morals and Policy-Making.

Colombatto argues that advocates of free markets are losing the battle because they cannot adequately defend their position. This inadequacy, he argues, springs from their reliance on consequentialist arguments for the efficiency of markets. As suggested by my quotation of President Bush, in times of crisis those who hold a consequentialist position will find themselves supporting government interventions to maximize the "common good." The real solution, however, according to Colombatto, is a return to moral principles--or, as he puts it, "abandoning the standard of efficiency ('it is good because it works') and replacing it with that of justice ('it is good because it does not violate natural rights')" (p. 9).

Colombatto develops this core argument in ten chapters. In doing so, he covers a great deal of ground, including economic methodology, the ethics of policymaking and economics, the history of economic thought, economic development and transition, and state legitimacy. Given the breadth of topics covered, I cannot cover them all in a single review. Therefore, I summarize here what I see as the book's major strengths and weaknesses.

I see three major strengths. First, Colombatto does an excellent job of reminding us that policymaking requires value judgments and, hence, an underlying defense of the fundamental values that analysts and policymakers hold. Even though economists claim to be value free and scientific, they often smuggle in their value...