Political Failure by Agreement: Learning Liberalism and the Welfare State (New Thinking in Political Economy)

151 Pages·2008·0.49 MB·English

by  Gerhard Wegner

Political Failure by Agreement
NEW THINKING IN POLITICAL ECONOMY
Series Editor:Peter J.Boettke,George Mason University,USA
New Thinking in Political Economy aims to encourage scholarship in the
intersection of the disciplines of politics,philosophy and economics.It has the
ambitious purpose of reinvigorating political economy as a progressive force for
understanding social and economic change.
The series is an important forum for the publication of new work analysing the
social world from a multidisciplinary perspective.With increased specialization
(and professionalization) within universities,interdisciplinary work has become
increasingly uncommon.Indeed,during the 20th century,the process of
disciplinary specialization reduced the intersection between economics,
philosophy and politics and impoverished our understanding of society.Modern
economics in particular has become increasingly mathematical and largely ignores
the role of institutions and the contribution of moral philosophy and politics.
New Thinking in Political Economy will stimulate new work that combines
technical knowledge provided by the ‘dismal science’and the wisdom gleaned
from the serious study of the ‘worldly philosophy’.The series will reinvigorate our
understanding of the social world by encouraging a multidisciplinary approach to
the challenges confronting society in the new century.
Recent titles in the series include:
Constitutions,Markets and Law
Recent Experiences in Transition Economies
Edited by Stefan Voigt and Hans-Jürgen Wagener
Austrian Economics and the Political Economy of Freedom
Richard M.Ebeling
Anarchy,State and Public Choice
Edited by Edward Stringham
Humane Economics
Essays in Honor of Don Lavoie
Edited by Jack High
Public Choice and the Challenges of Democracy
Edited by José Casas Pardo and Pedro Schwartz
Fiscal Sociology and the Theory of Public Finance
An Exploratory Essay
Richard E.Wagner
Institutional Competition
Edited by Andreas Bergh and RolfHöijer
Political Failure by Agreement
Learning Liberalism and the Welfare State
Gerhard Wegner
Political Failure by
Agreement
Learning Liberalism and the Welfare State
Gerhard Wegner
Professor of Economics,Erfurt University,Germany
NEW THINKING IN POLITICAL ECONOMY
Edward Elgar
Cheltenham,UK • Northampton,MA,USA
© Gerhard Wegner 2008
All rights reserved.No part of this publication may be reproduced,stored in
a retrieval system or transmitted in any form or by any means,electronic,
mechanical or photocopying,recording,or otherwise without the prior
permission of the publisher.
Published by
Edward Elgar Publishing Limited
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Cheltenham
Glos GL50 1UA
UK
Edward Elgar Publishing,Inc.
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Massachusetts 01060
USA
A catalogue record for this book
is available from the British Library
Library ofCongress Cataloguing in Publication Data
Library of Congress Control Number:2008926584
ISBN:978 1 84720 734 0
Printed and bound in Great Britain by MPG Books Ltd,Bodmin,Cornwall
To Astrid

Contents
Preface viii
1 Preferences for the welfare state as a challenge for economic
liberalism 1
2 The liberal model of market order:the evolutionary view 25
3 Preferences versus choice in politics:a conception of feasible
democratic politics 52
4 The underestimation of political opportunity costs 77
5 Learning liberalism in the welfare state:reviewing economic
liberalism 103
References 128
Index 135
vii
Preface
The following book makes an attempt to rethink economic liberalism from
the perspective of political liberalism.It thus contributes to contemporary
liberal thought and deals with an issue which lies between economics and
political theory.The main parts of the book were written during my one-
year research stay as a fellow at the interdisciplinary Max Weber Institute
in Erfurt where Imet with colleagues from sociology, political science,
history,religious studies and philosophy.I am indebted to the Max Weber
Institute and its director,Professor Hans Joas,for having this opportunity
as well as for the stimulating atmosphere at the Institute.
Chapters of this book have been presented to several workshops
and conferences, among them research workshops at George Mason
University, Fairfax (Virginia, US), Freiburg University (Germany),
Andrassy University, Budapest (Hungary), the economics department at
Kassel University (Germany),and the workshop on Contemporary Issues
of Evolutionary Economics,St Gallen (Switzerland).For discussions and
comments I owe thanks to Peter Boettke,Winfried Brugger,Kurt Dopfer,
Wolfram Elsner, Gangolf Hübinger, Daniel Klein, Marco Lehmann-
Waffenschmidt,Peter Leeson,Stefan Okruch,Stephan Panther,Reinhard
Penz, Ingo Pies, Ringa Raudla, Wolfgang Reinhard, Viktor Vanberg,
Richard Wagner,Ulrich Witt and Michael Wohlgemuth.
I am indebted to Wolfgang Kerber, Pavel Pelikan, Helge Peukert and
Sebastian Schäfer who read the whole manuscript and made numerous
comments and suggestions.Discussions with Michael Schefczyk were very
helpful in taking account of philosophical aspects which are relevant to a
theme which transgresses the boundary between economics and political
theory.A large proportion of my thanks goes to the staff of Edward Elgar
Publishing Ltd,in particular to Alexandra O’Connell and David Fairclough
who have been most professional,efficient and understandng throughout
the entire process of preparing the manuscript for publication.I am most
indebted to Mark Peacock who was much involved in the making of this
book;he carefully read earlier versions and made many comments and sug-
gestions for presenting the arguments as concisely as possible. Of course,
all remaining errors are mine.
viii
1. Preferences for the welfare state as a
challenge for economic liberalism
1.1 INTRODUCTION
The last quarter of the twentieth century witnessed an amazing renewal
of economic liberalism.From the viewpoint of economic history as well
as the history of economic ideas this renaissance is remarkable,because
economic liberalism had survived for decades only in the archives of out-
dated political concepts. Many similar and sometimes rival conceptions
of economic liberalism co-exist in theory and politics,so that a clear-cut
definition of what makes up economic liberalism cannot be given at the
outset.In Chapter 2,I present an evolutionary concept of economic lib-
eralism and delimit it from equilibrium theory. For a first orientation,
however, let us take economic liberalism as a conception which seeks to
minimize the role of the state as to society,including markets.All advo-
cates of economic liberalism seek to foster market development which
requires economic liberty, whereas the state has to guarantee economic
rights such as property rights,the right of abode,the freedom to choose
and free trade.Other than anarchists which are constantly at loggerheads
with the state,liberals accept that a social entity such as the state should
exist and contributes to our well-being in society.Beyond a protective role
of the state,however,economic liberals are sceptical about furnishing the
state with ambitious tasks; instead they seek to bound further govern-
mental intervention to a restrictive concept of market failure.Thelatter
excludes far-reaching redistribution policies (but can include minimum
welfare aid for the poor), as it avoids an extensive provision of public
goods as well as of public regulations; however, competition policy in
order to protect unrestricted competition still belongs to the proper task
of the state1. In general, economic liberals think that the state has to
protect the economic aspects of individual liberty but should desist from
setting autonomous,that is politically defined,goals as to resource allo-
cation and income distribution. Above all, economic liberalism takes a
deeper look at the feasible possibilities which government can make use
of in reality instead of gauging markets against the ideal performance of
governments.
1