Robust Political Economy: Classical Liberalism and the Future of Public Policy.

• Author: Gordon, Richard L.
• Position: Book review

Robust Political Economy: Classical Liberalism and the Future of Public Policy

Mark Pennington

Cheltenham and Northampton, UK: Edward Elgar, 2010, 320 pp.

Pennington undertakes a needed effort to provide a systematic, analytic critique of recent efforts to discredit what he terms "classical liberal economics." His is effectively the standard but hard-to-sell proposition that prescient impartial counselors--Plato's philosopher kings--have failed to emerge from the development of modern knowledge. In particular, Pennington makes good use of Hayek's radical contrast between the competitive testing of concepts in a spontaneous market order and the construction of solutions by government monopolies. As Pennington's conclusions nicely summarize, skepticism of limited government is high and fostered by those who are seeking rents from intervention. Thus, ideas that committed libertarians see as obviously absurd need systematic debunking for a broader audience. Pennington, therefore, pretends that he is treating serious arguments and confronts them respectfully.

Pennington divides his exposition into two parts. The first tackles four purportedly important challenges to classical liberalism: (1) "new" (actually 1970s) market-failure arguments such as those by Joseph Stiglitz and George Akerlof; (2) the calls of some philosophers for fostering communal discussion; (3) related concerns over "social capital"; and (4) critiques rooted in equalitarian philosophies. Pennington then turns to three policy issues the welfare state, economic development, and environmental regulation--including discussions of why each of the new interventionist philosophies does not help the case for government action.

Against the market failure argument, Pennington notes that departures from the assumptions of textbook perfect competition do not inevitably imply that governments can fruitfully intervene to improve outcomes. Quite the contrary. He correctly argues that the case against the newer theories becomes stronger when markets are less than perfect. The key departures are absence of perfect information and perfect foresight (or markets to hedge all uncertainties). Pennington recognizes that, in such situations of flying blind, the multiple efforts of private businesses subject to market tests are far more likely to produce good solutions than the single efforts of planners freed from penalty by their ability to tax. Similarly, he criticizes arguments for intervention when success depends on the rise of a network of users as also suffering from unrealistic assumptions about government competence. As a bonus, he correctly dismisses the Richard Thaler-Cass Sunstein idea of libertarian paternalism as another effort to repackage old fallacies about the superior knowledge of "experts."

His second concept of communitarianism denounces individualism for undermining the development of dialogue to generate a consensus on controversial issues. Pennington argues that communitarianism substitutes monopolistic decisions for decentralized ones and imposes high costs of participation on most individuals. He generously ignores the preposterous nature of the concept and is content to argue that the communication can deepen rather than lessen fissures. Issues remain thorny over many millennia because no clear answer is evident. To think otherwise is delusional. Hayek is appropriately cited as presenting the superior view of values emerging spontaneously from numerous individual decisions.

I wondered if Pennington was mischaracterizing those criticized, but a look at journal...