On an alleged contradiction of liberal ideology

A French reader has every reason to fear the worst when he opens a book whose object is the critique of neoliberal reason. We no longer count, in fact, the virtuous denunciations of economic horror, based on a caricatured vision of economic facts and of economics as an academic discipline. Locked in their equations, blinded by their epistemological naivety, economists “ orthodox » would be the ideologues of neoliberalism and the accomplices of the mechanisms of domination.

What a relief, from the first pages of The Illusion of Free Marketswhen the reader realizes that he is not dealing with such a broth ! The book opens with a dedication to Gary Becker, Ronald Coase, Richard Epstein and Richard Posner, the author’s colleagues at the University of Chicago, who embody better than anyone the liberalism and hegemonic pretensions of economics. Beyond the challenge and the irony, this dedication faithfully reflects the spirit of the book: although critical of them, Bernard Harcourt offers an erudite, fine and nuanced reading of economic theory and liberal thinkers. His book is full of fascinating insights on many subjects, such as the grain futures market on the Chicago Stock Exchange, the economic reasoning of the Supreme Court or the economics of the prison complex in the United States. Particularly interesting is the demonstration of a bias hostile to the state in Coase. He bases his theory of the boundary between markets and hierarchical organizations such as businesses on the analysis of transaction costs, a contribution which earned him the Nobel Prize in economics in 1991. But he arbitrarily postulates that transaction costs transaction are negligible when it comes to the question of the respective roles of the State and the market.

It would not be doing justice to Bernard Harcourt’s ambition to limit ourselves to noting the variety and interest of the themes addressed. His book defends a thesis, which should be discussed as such. Its starting point is the observation of a contradiction within liberal ideology between an injunction for the State to withdraw from the economic sphere and an injunction for the State to invest in the repressive sphere. This paradoxical injunction, expressed for example in certain speeches by Ronald Reagan castigating in the same breath statism in economics and the weakness of the State in the face of delinquency, would be the fruit of a long intellectual tradition, going from the Physiocrats to the Chicago School.

Crime according to neoliberals

We have some difficulty following the demonstration. First of all, the suggested symmetry between the economy and crime poses a problem, because it is difficult to identify what the influence, even indirect, of the Chicago School could have been in the penal field.

We would like to believe that the tax cuts of Ronald Reagan and Margaret Thatcher resulted in part from the exhortations of Milton Friedman. But in criminal matters, the novelty introduced by neoliberal authors has more to do with the intellectual framework than with practical prescriptions. Bernard Harcourt emphasizes that the approach to repression by liberal and neoliberal authors is consubstantial with their economic thinking. Thus, for Becker and Posner, if certain activities are criminal, it is not because they violate a moral rule but because they are contrary to efficiency and hinder the functioning of markets ; similarly, they analyze repression in terms of incentives and cost/benefit ratios. But it is difficult to understand the causal link between this somewhat transgressive analytical framework and the repressive turn in American penal policy. Theft, for example, has been condemned and repressed since at least the Code of Hammurabi. How could the fact that Posner and Becker condemn it like everyone before them, but with other words and at the end of exclusively economic reasoning, explain anything? ? Bernard Harcourt, who recognizes that the Chicago School was rather favorable to the legalization of drugs, and therefore, on this point, not very repressive, struggles to reconcile this observation with his general thesis.

Does faith in the market imply the naturalization of the distribution of wealth? ?

For the author, neoliberal ideology in economics consists above all of a naturalization of the distribution of wealth, which leads to hostility towards redistribution policies.

But the link between the defense of the market and the naturalization of the distribution of wealth is far from absolute. While it is true that inegalitarian policies have often been justified by invoking the virtues of the market, in particular by Ronald Reagan and Margaret Thatcher, this congruence is not general. In Europe as in the United States, left-wing parties, committed to redistribution, are often more favorable to market mechanisms than right-wing parties or business circles, for example on free trade issues. or competition.

Furthermore, on a theoretical level, the defense of the free market does not necessarily imply the naturalization of the distribution of wealth. Bernard Harcourt presents the pro-market argument of contemporary economic theory in the following way:

A modern economist might ask whether I dispute the first theorem of welfare economics – that is, that a competitive market equilibrium leads to the efficient allocation of resources (p. 146).

This sentence could lead us to believe that economic theory recommends, in the name of the search for “ efficient allocation », the absence of public interference with the market, and thus justifies the resulting distribution of wealth. But this is not the case. The first theorem of welfare economics is in fact part of a theoretical framework in which “ efficient allocation » does not exist. According to this theorem, there generally exist many competitive market equilibria, all efficient, and all characterized by different distributive properties. Microeconomics orthodox » therefore does not naturalize the distribution of wealth, but separates the question of redistribution from that of the market. It only leads to advocating the choice of redistributive tools that interfere as little as possible with the market. This is how Léon Walras, father of modern microeconomics, who considered himself a socialist, was in favor of the nationalization of land ; and that among the first economists to have proposed mathematical proofs of the theorem cited by Bernard Harcourt were Oskar Lange, theorist of market socialism and vice-president of the State Council of communist Poland in the 1960s, and Kenneth Arrow (Nobel Prize of economics 1972), theorist of social choice favorable to a certain redistribution of wealth. We can therefore regret the omission in The Illusion of Free Markets of the left-liberal tradition, combining adherence to the market and attention to the distribution of wealth. This tradition, which dates back to John Stuart Mill, is however in no way marginal, neither academically nor in terms of broader social influence, at least in English-speaking countries.

Redistribution, penal policy, and beliefs about social mobility

Beyond this criticism, the question posed by the author can be reformulated as follows: why is hostility to redistribution correlated with a preference for a repressive penal policy? ? However, a simple answer seems necessary: ​​it is because these two attitudes refer to the same principle, hostility to the poor, the main beneficiaries of redistribution policies and the main targets of repressive penal policies. If we accept this explanation, no paradox remains. Variations in the policies implemented, in time and space, would be due to fluctuations in factors determining the weight of the poor in the political process. Thus, according to a thesis that has become commonplace, the character of the United States, which is both less redistributive and more repressive, compared to Europe, is due in part to the importance of the racial question and its interaction with the social question. .

This explanation in no way precludes considering that ideas play an important role. On the contrary, numerous studies show that beliefs about the functioning of society are one of the main determinants of individual preferences regarding redistribution: people who think that social determinisms take precedence over individual will and that the poor are poor because they were unlucky, are more in favor of redistribution than people who are convinced that the poor are poor because they are lazy. This regularity is observed both at the individual level and in international comparisons and could be one of the causes of American exceptionalism. Now this observation seems sufficient to account for the correlation noted by Harcourt: if we think that the poor have not been lucky, it is logical to want both a developed welfare state and indulgence for the poor. apple thieves ; and vice versa if we think that the poor are above all lazy. It is not certain that the great fresco of the history of ideas retraced in the work better explains the observed correlation.

Since Ockham’s Razor, we have accepted that simple explanations are better than complicated explanations. In this light, it is difficult to adhere to Bernard Harcourt’s thesis. But its beautiful construction is the occasion for developments so varied and so interesting that we come, as we read, to forget its inadequacy for the resolution of a paradox which is not really one.