What can Libertarians Learn from Foucault?

 

Before reading Mark Pennington’s recent book, Foucault and Liberal Political Economy: Power, Knowledge, and Freedom, it would not have occurred to me that libertarians could learn anything from the social theories of Michel Foucault. Pennington has persuaded me that some beliefs associated with Foucault, and postmodernism more generally, are not devoid of merit. As will be discussed below, however, the beliefs that he identifies as postmodern differ somewhat from the collection of beliefs that I have hitherto associated with postmodernism.

Pennington claims that liberals who are concerned about over-government can learn from Foucault about “multiple sources and potential forms of this ‘over-government’ in modern societies and how these threats to freedom have been neglected by, and in some cases resulted from, the dominant strands in liberal thought”.

The author aims “to enunciate the elements of a postmodern liberalism, and to show how this perspective might engage in a productive conversation with Foucault in ways that expose the illiberalism of contemporary societies and the dominant forms of social science and political philosophy that contribute to this state of affairs”.

Before considering Pennington’s claims about what liberals can learn from Foucault and the potential for liberals to engage productively with his ideas, I need to clarify how Pennington is able to argue that some of Foucault’s views are worthy of consideration and what Pennington means by “postmodern liberalism”.

Foucault’s views

 The main problem I have with the postmodernist movement is its disrespect for reason, truth and knowledge. Stephen Hicks suggests that Foucault’s views illustrate the direction and tone of the postmodern intellectual world:

“Michel Foucault has identified the major targets: “All my analyses are against the idea of universal necessities in human existence.” Such necessities must be swept aside as baggage from the past: “It is meaningless to speak in the name of—or against—Reason, Truth, or Knowledge”.” (The sources of the quoted passages are cited in Hicks, 2004.)

Hicks explains that Foucault reduces knowledge to an expression of social power and urges that we play the brutal power politics game on behalf of the traditionally disempowered.

Pennington recognizes that Foucault has often been accused of undercutting the basis of his own critical analysis:

“If all knowledge is reflective of an arbitrary ‘will to truth’, then what of Foucault’s own truth claims?” 

More specifically:

“If all truth claims are understood as merely a way of exercising power over others, then how are people to know which if any of the ‘intolerable’ practices they find themselves in are worth challenging or resisting, let alone what might replace them.”

However, Pennington observes that there are many Foucaults, “reflected in the shifting emphases, styles of analysis and reinterpretations of his own words”:    

“Towards the end of his life … notably in essays such as ‘What Is Enlightenment?’, Foucault softened the power/knowledge coupling, adopting a stance that does not deny that there are better and worse forms of argument or that there are some more or less valid forms of knowledge; rather, he emphasises the importance of uncertainty, of keeping all truth claims under scrutiny, and of being aware of the routinised social processes that might block that very scrutiny.”

If postmodernism is characterized by the idea that truth claims merely reflect the exercise of social power, perhaps it could be said that towards the end of his life, Foucault’s views became somewhat less postmodern.

 Postmodern liberalism

In outlining the elements of “postmodern liberalism” Pennington notes:

“This ‘postmodern’ liberalism has not previously been coherently articulated, but strands of it are detectable in the writings of F. A Hayek, those of Deirdre McCloskey, and elements of the contemporary Austrian school of economics, as well as in the context of political philosophy apart from Hayek in the works of Michael Oakeshott, Gerald Gaus, and Chandran Kukathas.”

I have considerable knowledge of the views of some of those authors and great respect for all of them. I am not comfortable with their views being labelled as postmodern, even though some of them might not object to that label.

Pennington seems to me to be distancing “postmodern liberalism” from postmodernism when he acknowledges that it is possible to assess “the comparative plausibility of competing narrative explanations” and “social scientific truth claims”.

In his concluding chapter Pennington notes that the elements of “postmodern liberalism” include, among other things, a “philosophy of social science sceptical of socio-economic positivism and the efforts of conscious control it fosters”.

It seems to me that Pennington’s philosophy of social science could appropriately be labelled “unpretentious liberalism”. It stands apart from the pretence of knowledge and scientism associated with socio-economic positivism, without endorsing postmodernism’s disrespect for reason, truth and knowledge.

I hope the book will attract many readers who identify as postmodernists and that they will be captivated by the concept of postmodern liberalism. However, those who (like me) are allergic to postmodernism, may find the book easier to read if they substitute the words “unpretentious liberalism” whenever they see “postmodernism liberalism”.

Should libertarians attempt to influence culture?

Before considering what libertarians can learn from Foucault, it seems appropriate to acknowledge that there is nothing new about the idea that libertarians should take an interest in culture.

That is apparent in the consideration of interactions between culture and political institutions in a discussion between Chris Matthew Sciabarra and me entitled, “Should Libertarians be Attempting to Influence Culture?” which published on this blog in September 2024. The discussion began by considering John Stuart Mill’s concerns about the “tyranny of the prevailing opinion and feeling” and moved from there to considering Sciabarra’s interpretation of Ayn Rand’s view of power relationships. Sciabarra presented a Tri-level Model of Power Relations which was first derived from his reconstruction of Ayn Rand’s critical analyses of social problems, outlined in Part Three of Ayn Rand: The Russian Radical (Sciabarra, 2013).

In introducing his discussion of Rand’s view of power relationships, Chris Sciabarra commented:

“Winton suggests that Enlightenment humanism has been preoccupied with reason and reality, while postmodernism has been preoccupied with the use of power. Hence, it is startling that Rand, who most certainly placed herself in the reason and reality camp, also emerged with a critique of power relations.”

The question under discussion provoked responses from several libertarians and classical liberals. The response of Douglass Rasmussen, joint author of Norms of Liberty (Rasmussen and Den Uyl, 2005) is pertinent to this essay:

“Is there not a difference between saying libertarianism qua political philosophy should attempt to change culture and saying that a libertarian concerned in advancing libertarianism should attempt to change culture? The former concerns what the political/legal order should do, and the latter concerns what individuals should do.”

As I see it, attempting to understand the consequences for liberty and individual flourishing of interactions between culture, markets, social movements and government regulation does not obviate or preclude attempts to define the nature of a political/legal order that can ensure that individuals can flourish in different ways without colliding.

Foucault’s liberalism

 From my perspective, one of the most interesting aspects of Foucault’s philosophy, as discussed by Pennington, is his account of discourses as a kind of spontaneous order phenomenon.  Foucault challenges the role of individual or collective agency in the operation of power regimes. Power works through chainlike or network effects. As people adopt certain discourses they influence the actions of others.

Power does not emanate from a single point in a network. It emerges from diverse and at time contradictory attempts by actors to assert their place in society. There is no identifiable author of power relations. As Pennington puts it:

“The discourses and disciplines producing people’s patterns of thought, positionality and interests are largely unintended consequences of the multiple attempts to affect the conduct of others.”

 Thus, while power relations may appear to have a coherent structure, there is no single purpose, intention, or meaning that underlies that structure.

States of domination arise when a set of discourses align or crystalize with each other and with the juridical power of the state. Scientific discourses can pose a problem where people come to be classified relative to various norms (e.g. as deviant, perverted, insane) and subjected to discipline (which may include social punishments). In addition, bio-power operates through interventions to change social, economic or environmental conditions in the name of improving population health or providing security.

Pennington suggests that “it is with Foucault’s concept of bio-power and especially its economic manifestations where the most significant possibilities for a dialogue between the Foucauldian and postmodern liberal perspectives lies”. Late in Foucault’s career he “seems to favour an environment that preserves a ‘pluralism of rationalities’ so that people might remain alert to the possibility of multiple ways of their being governed and not being frozen into a particular classificatory grid and the roles and positions it creates”.

In my view, Foucault’s decentred account of power relations is often more plausible than theories which reduce the exercise of power to holding of positions in political office. A decentred account is consistent with the conclusion of my recent series of essays on political entrepreneurship. Even though it is possible to identify the policies adopted in some countries with the ideologies of authoritarian political leaders, I suggest:

“The problem of ensuring adoption of government policies that more consistently advance economic and personal freedom cannot be reduced to the question of how to elect better political entrepreneurs to national leadership positions. Institutional change is a complex process involving social movements, media organizations, and interactions between individual citizens, as well as local and national politics.”

I concur with Pennington that Foucault’s view of power relations provides support for an unpretentious liberalism which is deeply skeptical of economic and philosophical approaches which presuppose that the welfare of the population can be secured by a form of expert rule.

In Part II of his book, Pennington uses his theoretical lens to examine complex networks of institutional, physical, and administrative mechanisms and knowledge structures associated with social justice, public health, ecological sustainability, and crime and punishment. He critically examines various overlapping systems of power - some focused on managing populations and others focused on guiding individuals. (In this paragraph I have relied on Claude, Anthropic's AI assistant, to help translate the technical Foucauldian phrasing in Pennington’s summary – words including “dispositifs”, “bio-political” and “pastoral” - into plainer English.)

These systems share three features: (1) an excessive faith that social and economic life can be understood and controlled with scientific precision, (2) a belief that some central “steering” intelligence can identify and fix deviations from expected patterns, and (3) a bureaucratic, top-down way of handling risk. The author demonstrates that these features tend to shrink the space in which individuals can act freely.

Conclusion

So, what can libertarians learn from Foucault? Pennington's answer, as I read it, is not that libertarians should adopt postmodernism's skepticism of reason and truth - that skepticism, taken to its logical end, undercuts the very possibility of arguing for freedom over domination. Rather, what is valuable in Foucault is his decentred account of power: the recognition that domination need not flow from a single source or a deliberate design, but can emerge from the unintended convergence of discourses, institutions, and expert classifications. This is a lesson that liberals have sometimes neglected, having focused their concern about over-government on the formal power of the state while overlooking the more diffuse mechanisms in social justice, public health, ecological policy, and criminal justice that narrow the space for individuals to govern their own lives.

What Pennington calls postmodern liberalism – I prefer to call it "unpretentious liberalism" - captures what is worth taking from this encounter: a liberalism skeptical of the pretence of expert knowledge and socio-economic positivism, without embracing postmodernism's disrespect for reason and truth. Pennington's Foucault, particularly the later Foucault of "What Is Enlightenment?", is compatible with this project because he does not deny that some truth claims are better than others - he simply insists that we remain alert to the ways power can masquerade as expertise, and that we preserve a plurality of ways of being governed rather than being frozen into a single classificatory grid. That, it seems to me, is a genuinely liberal insight, however unfamiliar its Foucauldian packaging may be to libertarians who have, like me, generally kept their distance from postmodern thought.

References

Hicks, Stephen R. C., Explaining Postmodernism (Scholargy Publishing, 2004).

Pennington, Mark, Foucault and Liberal Political Economy: Power, Knowledge, and Freedom (Oxford University Press, 2025).

Rasmussen, Douglas B., and Den Uyl, Douglas J, Norms of Liberty (Pennsylvania State University Press, 2005).

Sciabarra, Chris Matthew, Ayn Rand: The Russian Radical, Second Edition (Pennsylvania State University Press, 2013).

Can reliable international comparisons of human flourishing be made using subjective survey data?

 

The idea that human flourishing is the proper measure of a good society goes back to Aristotle, but modern attempts to compare flourishing internationally using subjective survey data raise difficult questions. That is illustrated in the scatter chart shown above - which compares the degree of human flourishing in different countries as measured by the new Global Flourishing Study (GFS) with average life evaluation data for those countries using the methodology of the World Happiness Report (WHR). The GFS flourishing index is based on surveys covering various aspects of human flourishing, while the WHR data derives from the Cantril Ladder approach: a single question asking people to rate their lives on a scale from 0 to 10, with 0 representing the worst possible life and 10 representing the best possible life.

One would expect people who give a relatively low rating to their lives under the WHR approach to be assessed as having a relatively low degree of flourishing under the GFS approach, and vice versa for those who give their lives a relatively high rating. Surprisingly, the chart suggests little correlation between the two indexes. People in Tanzania, Egypt and Kenya, for example, have lower average life evaluation ratings than people in Sweden, the U.S. and Australia, yet are assessed under GFS methodology to have higher average levels of flourishing.

This divergence raises three questions which the following sections of this essay address:

• Does the methodology of the GFS incorporate more reliable standards for international comparisons than the WHR/Cantril approach?
• Is the GFS approach to measuring human flourishing consistent with Aristotelian ideas about the nature of flourishing?
• Do composite indexes provide a more reliable basis for international comparisons of opportunities to flourish?

Reliability of GFS Methodology

The Global Flourishing Study includes over 200,000 survey participants in 22 countries. The countries were selected to maximize coverage of the world’s population and to ensure geographic, cultural and religious diversity. It is a longitudinal panel study with intended annual survey data collection for 5 years. The domains of flourishing covered in the study encompass health, happiness, meaning, character, relationships and financial security.

More confidence can be placed on analyses using subjective data for individual countries than on cross-country comparisons because the former pose fewer problems in interpretation of survey questions. (Recent trends in indicators of subjective wellbeing in some wealthy countries are suggesting that young people are experiencing greater difficulty flourishing in those countries. I strongly support research directed toward improving understanding of why this is occurring and have made a personal contribution to this work.)

My main concern in this essay is with excessive reliance on subjective data in making international comparisons. The authors of the GFS note that caution is needed in interpreting cross-national differences (VanderWeele, 2025, p.647) but that has not prevented attention being drawn to  country rankings.

The scatter charts shown below suggest that at a national level there is more correlation between GFS flourishing and “happiness” and “life satisfaction” indicators than between GFS flourishing and WHR life evaluation. Nevertheless, the GFS index suggests that people in some countries are flourishing despite relatively low average scores for happiness and life satisfaction.

 

The happiness question is: “In general, how happy or unhappy do you usually feel?” The life satisfaction question: “Overall, how satisfied are you with life as a whole these days?” There has been extensive research related to the question of what standard of comparison people use in responding to such questions. Some research has suggested that people compare their current state to an adaptation level — a running average of past experience when asked to rate their happiness or life satisfaction. A large body of work suggests that relative income often matters as much as or more than absolute income for self-reports on wellbeing. Cross-cultural research has found that the implicit comparison standard vary by culture. Moreover, seemingly trivial contextual factors can dramatically shift happiness and life satisfaction reports.

In some ways, the GFS is more susceptible to standard of comparison problems than a simple life satisfaction or happiness survey:

• Self-rated health is known to be heavily reference dependent. People assess their health relative to age peers, to their own past health, or to an idealized standard. Which reference point dominates varies by culture and age.
• Questions relating to meaning and purpose are especially vulnerable to context effects, because "meaning" is a highly abstract judgment with no obvious natural metric. Whatever has been made salient by preceding questions — religious identity, family, work — is likely to dominate the response.
• Questions about honesty, generosity, self-control and so on invite comparison to either an ideal standard or a perceived social norm. Those standards can diverge sharply.

The Cantril ladder approach used in the WHR was designed to be self-anchoring to address some of those problems. By asking respondents to define "best possible life" and "worst possible life" for themselves, this approach sidesteps the problem of imposing a culturally specific conception of flourishing.

However, the perceptions that respondents have of the best possible and worst possible life depend on the reference group they use as a basis for comparison. That would not pose a problem if there is broad agreement among people throughout the world on what constitutes the best possible and worst possible life. Perhaps such broad agreement exists, but I am not aware of definitive research findings about that.

Aristotelian perspectives

Modern researchers who seek to quantify the extent to which people are flourishing often refer to Aristotle as a source of inspiration for their focus on a broad concept of human flourishing rather than on happiness as an emotional state. That raises the question of whether the GFS approach is consistent with Aristotelian perspectives.

The GFS view of human flourishing as multi-dimensional is certainly consistent with Aristotle’s approach. The domains identified in the overview of the GFS seem to be broadly consistent with Aristotle’s understanding of the basic goods of a flourishing human (VanderWeele, 2025).

However, from an Aristotelian perspective, it is disappointing that the study does not acknowledge the central importance of practical wisdom (phronesis) to individual flourishing. Practical wisdom is the intelligent management of one’s life with a view to attaining the goods necessary to one’s own flourishing. The exercise of practical wisdom is so intimately related to actualization of unique potentialities in the context of available opportunities that it makes sense to view flourishing as synonymous with “the exercise of one’s own practical wisdom” (Den Uyl and Rasmussen, 2016, p. 33). 

Some research associated with the GFS has focused on mastery which is assessed by asking: “How often do you feel very capable in most things you do in life?” (Kim, 2025). There is some overlap between mastery and practical wisdom: the exercise of practical wisdom involves more than theoretical knowledge – it requires development of skills necessary to navigate real circumstances toward genuine flourishing. The mastery concept captures something of this efficacy dimension — the sense that one can actually direct one's life rather than being at the mercy of circumstances.

An important difference between mastery and practical wisdom is evident in the measurement of mastery in the GFS. Self-reported mastery ranges from 90% of the population in Mexico to 39% in Japan. Do such divergent responses reflect differences in the exercise of practical wisdom or differences in the incidence of hubris and modesty in different populations? There is no way of knowing. Responses to the mastery question capture a subjective sense of control which may have little to do with wisdom. Genuinely wise people with accurate perception of their own limitations do not necessarily score highly in their responses to the mastery question.

My point is that the exercise of practical wisdom – an activity integral to human flourishing – defies measurement using subjective survey data. There would be no point in including survey questions about the exercise of practical wisdom because the perceptions people have about the quality of decisions they make is often a poor guide to actual decision quality. A person of deficient character or limited understanding may feel entirely satisfied with their choices while lacking the practical wisdom required to make good choices.

Comparing opportunities using composite indexes

In deciding what to measure, it seems to me to be particularly important to understand the purposes for which measurements are being made. The overview of the GFS states:

“What we measure shapes what we discuss, what we know, what we aim for and the policies put in place to achieve those aims. We hope that the GFS itself, and the understandings that arise from it, will shift discussion and policy toward the promotion of flourishing” (VanderWeele, 2025, p.647).

That may be true, but it may also be a recipe for futile or counterproductive government interventions.

It seems to me that the central importance of practical wisdom to individual flourishing provides a strong reason to be modest about the ability of governments to promote human flourishing. The most governments can do is to influence opportunities available. The way individuals respond to those opportunities rests in their own hands.

 It is important to recognize that governments can have a profound impact on the opportunities for human flourishing. One of the most important contributions they can make is to reduce the negative impacts of their policies.

In Freedom, Progress, and Human Flourishing, I identified five basic goods of a flourishing human:

·        Wise and well-informed self-direction

·        Health and longevity

·        Positive relationships

·        Living in harmony with nature

·        Psychological well-being (Bates, 2021).

I noted that it is possible to teach people about the virtues of wise and well-informed self-direction, but it is doubtful that anyone has ever learned to exercise much practical wisdom in the management of their lives without having to accept responsibility for the choices they make. From a public policy perspective, it makes more sense to focus on the opportunities of people to exercise self-direction than to attempt to measure the quality of choices that they make. That is why I focused on objective measures of liberty in discussing opportunities for self-direction (Bates, 2021, pp. 65-6).

In considering opportunities for health and longevity, I argued that objective data on healthy life expectancy is a better indicator than self-reported health of differing prospects for individuals a long and healthy life in different countries (Bates, 2021, pp. 67-8).

Subjective data on levels of trust were suggested to measure differing opportunities for people to have positive relationships with others (Bates, 2021, pp. 68-9).

I discussed the complex relationships between economic growth and opportunities to live in harmony with nature (Bates, 2021, pp. 70-73).

Subjective data (WHR life evaluation) was used to indicate differing opportunities for people to enjoy psychological wellbeing (Bates, 2021, pp. 74-5).

Other researchers have also seen merit in using a mixture of subjective and objective indicators in making international comparisons of opportunities to flourish. The OECD’s Better Life Index is an example of a composite index that incorporates both objective and subjective components.

Conclusion

The scatter chart that opens this essay poses a genuine puzzle: why do country rankings of the Global Flourishing Study and World Happiness Report diverge so sharply? This essay has argued that the divergence reflects real limitations in both instruments rather than a straightforward vindication of either. Subjective survey data is susceptible to comparison-basis problems — the implicit standards people use when evaluating their lives vary by culture, context, and the framing of preceding questions — and these problems are considerably more serious for international comparisons than for within-country research. The Cantril ladder's self-anchoring design offers some protection against the imposition of culturally specific conceptions of flourishing, and its results have reasonable face validity when set alongside objective indicators of living standards and liberty. But whether people in different countries anchor the ladder's endpoints in comparable ways remains an open empirical question.

The more fundamental difficulty is philosophical. Both the GFS and the WHR treat subjective self-assessment as the primary evidence of flourishing. Aristotle, whose conception of eudaimonia inspired modern flourishing research, would have been skeptical of this. Flourishing in the Aristotelian sense is not simply a matter of feeling satisfied with one's life; it requires the exercise of practical wisdom — the intelligent, well-informed management of one's life in pursuit of genuine goods. People's perceptions of the quality of their choices are often unreliable guides to whether they are actually exercising such wisdom. This is not a limitation that better survey design can overcome; it reflects something important about the nature of flourishing itself.

These considerations point toward a more modest and pluralistic approach to international comparisons. Objective indicators — of liberty, healthy life expectancy, trust, and material security — can identify the opportunities available to people in different countries to lead flourishing lives. Subjective data retains value, particularly for tracking trends within countries over time. What neither approach can do is measure the quality of the choices individuals make within the opportunities available to them. That, in the end, is for individuals themselves to determine — which is precisely why the central policy implication of an Aristotelian perspective is not the promotion of flourishing by governments, but the protection and expansion of the conditions under which people can flourish for themselves.

References

Bates, Winton Russell, Freedom, Progress, and Human Flourishing (Hamilton Books, 2021).

Den Uyl, Douglas J. and Douglas B. Rasmussen, The Perfectionist Turn (Edinburgh University Press, 2016).

Kim, Eric S. et. al. “Mapping demographic variations in sense of mastery across the world a cross-national analysis of 22 countries in the global flourishing study”, Scientific Reports, 15 (2025).

Lomas, T. et. al. “Exploring associations of three evaluative subjective wellbeing measures (Cantril's ladder, life satisfaction, happiness) with 15 childhood and demographic factors across 22 countries”, Scientific Reports, 16, (2026).

VanderWeele, T. J. et. al. “The Global Flourishing Study: Study profile and initial results on flourishing”, Nature Mental Health, 3(6) (2025) pp. 636–653.

What was wrong with the Washington Consensus?

 

Just as I was reading the final chapters of William Easterly’s book, Violent Saviours: The West, the Rest, and Capitalism Without Consent, the United States government abducted the president of Venezuela to stand trial on drug charges in New York. I was pleased to see Nicolás Maduro facing justice, even if for the wrong reasons, but at the time of writing it remains to be seen whether the U.S. actions will advance the economic and personal freedom of Venezuelans.

 In the light of recent developments, Easterly’s conclusion seem to me to be excessively optimistic. He states:

“Adam Smith’s prophesied movement of “nations into some sort of respect for the rights of one another” had been partially fulfilled. The relation of the West to the Rest, previously based on coercion, was now based mainly on consent.”

Under the presidency of Donald Trump, the U.S. seems to me to be behaving like a colonial power. President Trump makes no secret of the fact that he is more interested in control of additional territory, oil, and other resources than in promoting respect for human rights, free trade, and the liberal international order.

Apologists for President Trump can claim, with some justification, that big powers have always swung their weight around in their own interests despite their rhetoric supporting the liberal international order. Nevertheless, public support for international norms of behaviour has hitherto signaled a willingness to be held to account publicly for breach of those norms.

 Easterly qualifies his statement that the relation of the West and the Rest is now based mainly on consent:

“The trend toward freedom is neither inexorable nor irreversible. As of this writing, new threats to freedom have emerged with proposed increases in US tariffs and possible restrictions on foreign students. It’s a little premature to declare the attainment of a liberal paradise.”

With the benefit of observation of recent events, however, it is difficult to escape the conclusion that the world is currently moving rapidly away from the ideal of relations between nations being based on consent rather than coercion. It is possible, nevertheless, that oppressed people in some countries will manage to achieve more economic and personal freedom over the next few years. The best we can hope for is that before too long Washington will once again embrace the ideal that relations between nations should be based on consent rather than coercion.

Before I discuss Easterly’s view of the Washington Consensus, I will briefly outline what Violent Saviours is about.

The West’s conflicted view of the Rest

Violent Saviours offers a historical account of the conflict between the duelling visions that have influenced the conduct of Western nations toward the rest of the world since the 17^th and 18^th centuries. On the one hand, there are the liberal ideas of consent, self-determination, and equality that make possible positive-sum gains from commerce between groups and individuals. On the other hand, there are the opposing illiberal ideas of coercion, paternalism and racism that yielded a negative sum world of conquest.

Adam Smith was a leading advocate of liberal ideas and a critic of many aspects of colonialism. However, some well-intentioned Enlightenment philosophers (e.g. Condorcet) offered support for the “Development Right of Conquest”. Condorcet sought to justify conquest as offering the hope of eventually “civilizing” the locals.

Over the period from 1776 to 1865, the liberals were mainly on the losing side. They were unable to prevent the West’s adoption of illiberal policies such as colonial conquest and population removal (in countries such as the U.S, and Australia). However, liberals had some victories during that period; most notably, they were able to bring about abolition of the slave trade and of slavery in the United States.

Easterly suggests that over the period from 1865 to 1945 most economists abandoned liberal morality: “Commerce expands but without moral constraints on plunder”. The regression of freedom culminated in World War II, during which liberalism had to fight for its survival.

The period since 1945 has seen the partial victory of liberal ideas with the end of colonialism and a surge in commerce which has partially restored agency to people in the former colonies. Easterly notes that some economists – notably Milton Friedman, P. T. Bauer, and Amartya Sen – revived the idea of individual freedom as “an end in itself”.

It is possible to quibble with some aspects of that account, but I think the important point to focus on is the current state of the conflict between the duelling visions. Easterly writes:

“Yet the legacy of the past is still here. While obviously not equating modern development efforts with slavery, genocide, and colonialism, the question remains of what violations of consent today in the name of progress should be out of bounds.”

That provides the context in which I would like to consider the Washington Consensus.

 The Washington Consensus

The Washington Consensus was the term John Williamson, an economist, invented in 1989 to describe the set of policy reforms that the US Treasury, the World Bank and the IMF believed would be good for Latin American countries. The ten propositions of the Washington Consensus combined fiscal discipline with selective deregulation. They were broadly pro-market but did not entail a vastly diminished role for government. As an advocate of a greater measure of economic freedom than required by the ten points in the Washington Consensus, I recall being bemused to see opponents equate it with “neoliberalism” and “market fundamentalism”. John Williamson had a different reaction. As he discussed in the paper from which I obtained the epigraph, he was concerned that the term was often being used to refer to a more radical pro-market view than he had intended.

The policy ideas in the Washington Consensus were certainly applicable beyond Latin American countries and were not confined to economists in Washington DC. Those ideas were widely accepted by economists with expertise in economic policy in many different countries. I think they are still widely accepted by economists today.

As I was reading Easterly’s discussion of the Washington Consensus, the thought crossed my mind that the era in which it held sway was actually the high point in economic development policy as advocated by the World Bank. The Washington consensus seemed to show more recognition of the importance of economic freedom than subsequent policy approaches emerging from Washington.

One of the problems that Easterly mentions is that many observers thought that pro-market reforms were only desirable if they produced immediate economic gains. The reforms led to anti-globalization protests because they didn’t have an immediate positive impact on economic growth and were often associated with worsening of poverty. As time went on, however, “there was more evidence of growth turnarounds and poverty reduction correlated with movements away from extreme state control”.

As I was reading this, I tried to recollect what I had written in the 1990s about the adjustment process following an expansion of economic freedom. I wrote about some aspects of that question in an article entitled “The New Zealand Model of Economic Reform: A Review” (published in: Agenda: A Journal of Policy Analysis and Reform, Vol. 4, No. 3 (1997), ANU Press). My work suggested that the lack of clear evidence of economic benefits in some countries that had undertaken economic reforms in the 1980s could be attributed partly to the time required for new policy directions to become embedded and for adjustment to occur: 

“Profound changes in behaviour, including changes in the willingness of individuals to learn new skills and business practices, are required as people respond to the incentives that policy reforms provide.  It takes time even for the most innovative firms and individuals to accept that new market incentives are likely to be sustained and to develop and implement new strategies.  Widespread adoption requires sufficient time for these new strategies to become demonstrably successful.”

I am pleased that I wrote that even though I missed an important point that Easterly makes. He suggests that the emphasis “on material results alone – on both sides of the debate – neglected Sen’s and others’ arguments for freedom as an end in itself”.

I don’t see freedom as an “end in itself” – freedom is necessary because human flourishing is an individualized and self-directed process. What I think Easterly means is that institutional freedom would be no less desirable if individuals chose to use it ways that made no contribution to economic growth e.g. by increasing the amount of time they spent on leisure activities.

Easterly also suggests that the manner in which foreign governments were encouraged to adopt Washington Consensus polices was problematic:

“Low and middle-income countries could get badly needed loans from the World Bank and IMF only if they agreed to reforms decreed by Bank and Fund staff. The fatal combination of foreign advisors with some coercion would keep discrediting promarket recommendations made by the World Bank and International Monetary Fund in the 1990s, especially for Africa, Latin America, and Russia.”

A few pages on, however, the author notes that “the association of liberal reforms with a Washington-imposed Consensus did not turn out to be fatal”. He follows that observation with a long list of “homegrown reformers” who have pursued pro-market reforms. (I have reproduced the list here.)

Unfortunately, Easterly’s list of reformers does not include Javier Milei, president of Argentina. It was probably compiled too soon for that to be possible.

Now that I have mentioned Javier Milei it is worth noting that the U.S. government offered a $20 billion bailout for Argentina prior to the country’s recent legislative elections. The offer was apparently made with strings attached — namely, that the funds would be available only if Milei’s party won the election.

It seems to me that if the U.S. president were to promote a general policy of assisting those low-income countries whose political leaders enthusiastically expand economic and personal freedom, he might be worthy of the Nobel Peace Prize.   

Conclusion

William Easterly’s book, Violent Saviours, offers an insightful account of the conflict between liberal and coercive views of economic development since the 17^th and 18^th centuries. He suggests that the legacy of the past is still with us because development economists and policy makers are still confronted by the question of what violations of consent should be out of bounds.

That provided the context in which I considered Easterly’s views of what was wrong with the Washinton Consensus – the moderately pro-market economic policies advocated by the U.S. Treasury, the World Bank, and the IMF during the 1990s. Easterly is clearly sympathetic to espousal of pro-market policies. However, he makes a strong case that such policies should be advocated to promote economic freedom rather than to promote “material results alone”.

The view that Easterly presents is consistent with the idea that liberty is desirable because it provides opportunities for individuals to flourish in the manner they choose.

Do you live in harmony with your daimon?

 

Some readers will be wondering what the question means. What is this daimon? How does it relate to eudaimonia? How can you identify your daimon?

Your daimon

In his book, Personal Destinies, David L Norton explains that your daimon is your innate potentiality – a unique “ideal of perfection”. Every person has this innate potentiality as well as an empirical actuality. Self-actualization is the process of discovering your daimon and living in harmony with it.

Norton suggests that people begin to discover their daimon during adolescence. He argues that autonomous self-awareness first occurs in the form of one’s awareness of being misidentified by other people. (That is clear in a passage quoted in the preceding essay on this blog.) Adolescence is a period of exploration and experiment when mistakes are inevitable. Exploration and experiment are part of the process by which individuals may discover their daimon and obtain the maturity to choose to live in harmony with it – to live an integral life.

Integrity is the consummate virtue. It is “living one’s own truth”. An integral life follows from choosing “wholeheartedly” the self one shall strive to become.

Eudaimonia

I have been accustomed to thinking of eudaimonia in terms of the good life, or self-actualization. As indicated in the passage quoted above, however, Norton draws attention to the distinct feeling of eudaimonia that constitutes its intrinsic reward. He describes that feeling as “being where one wants to be, doing what one wants to do”, as well as the feeling of being where one must be, and wholeheartedly doing what one must do. (pp 216, 222). The feeling of eudaimonia signals that the present activity of the individual is in harmony with his daimon. (p 5).

By contrast, the dysdaimonic individual is impelled to two different directions at the one time:

“The dysdaimonic individual is perpetually distracted, being only in a part of himself where you find him while part of himself is somewhere else, his ‘here’ and ‘there’ being not continuous but contradictory.” (p 221)

Norton suggests that eudaimonia is fully present whenever a person is living in truth to himself or herself. Eudaimonia is as much present for the individual who has just set foot upon his path, as for the accomplished genius of self-actualization. I particularly like this sentence:

“It would make good sense to say that to set foot upon one’s path is as good as arriving at the end, provided we recognize that a condition of being on one’s path is to be engaged at walking”. (p 239)

Norton’s book begins with a quotation from Carl Jung, who speaks of the daimon as an “inner voice” that has determined the direction of his life. Norton recognises that we may be apprehensive that “an ear turned towards our inwardness will detect at most only meaningless murmurings”. Many people who read the book will no doubt have a desire to listen to their daimon but might still have some difficulty in hearing its voice, amid all the meaningless inner murmurings that are seeking their attention.

How can you identify your daimon?

As a philosopher, David Norton could not have gone much further than he has in this book in helping readers to identify and follow their personal daimons. Anyone wishing to proceed further might find some contributions from positive psychology to be of assistance. In what follows, I briefly mention some approaches that I think are helpful.

Two relevant approaches which I discussed briefly in Freedom, Progress, and Human Flourishing involve identifying personal values and character strengths. Stephen Hayes developed Acceptance and Commitment Therapy (ACT) to help people to identify the personal values that they want to guide them in important aspects of their lives. Russ Harris, a therapist who has written extensively about ACT, has written a book, The Happiness Trap, which I reviewed here. Harris’ book is highly relevant to some of the issues discussed by David Norton.

Martin Seligman and Christopher Petersen identified 24 character strengths that they view as the routes by which virtues can be achieved. People can obtain useful information about themselves by responding to a questionnaire at the VIA Institute of Character, and having the responses fed back in summary form.

At a more personal level, I should mention the help I have obtained from the “inner game” books written by Tim Gallwey, a sports and business coach. Gallwey’s books (described here) are pertinent because they deal with performance problems that arise when an individual becomes confused by inner voices that conflict with his or her authentic inner voice. Gallwey suggests many techniques to help people to maintain focused attention on the task at hand, avoid self-doubt, and exercise free and conscious choice when that is appropriate. People are helped to discover their true identity as they master this “inner game”. My podcast episode, entitled “Tim Gallwey, my inner game guru”, can be found here.

Conclusions

David Norton’s book, Personal Destinies, provides an insightful account of the nature of eudaimonia. He explains it as a distinct feeling as well as the condition of actualizing one’s innate potentiality.

I have suggested some contributions from positive psychology that I think are helpful in complementing the approach adopted in this book.

Would a good society seek to maximize a social welfare function?

 This article is about my personal experience in attempting to understand social welfare, the concept of a good society, and my role as an economist involved in the processes of social choice. I decided to write about this topic after writing an article for Savvy Street on the related topic, “Can social planning enhance individual flourishing?”

When economists talk about maximizing social welfare, they are referring to a concept that appears to have something to do with the well-being of people. However, the concept is best viewed as a signaling device to suggest that the social planner claims to have obtained insights about society from studying an abstract mathematical model. Such signaling is not helpful to consideration of the merits of policy proposals.

Maximizing social welfare can encompass policies that would enlarge the economic pie (national product) so that there is potential for everyone to be given a larger slice. In that case, it might be reasonable to argue that the policy would receive widespread support among citizens. A good society - one that is good for the people who live in it – could be expected to adopt such policies. However, claims about pursuing social welfare objectives make such policies no more attractive than if they are advocated to simply expand opportunities for individual flourishing.

Maximizing social welfare can also encompass policies to redistribute the economic pie in a manner that advocates believe will somehow enhance the collective well-being of citizens.  When maximizing social welfare is said to require redistribution of the cake, some citizens will be advantaged at the expense of others. It is possible for some policies of this nature to receive widespread support (e.g. provision of a basic social safety net) but that is less likely when extensive redistribution is proposed to equalize the utility that different individuals obtain at the margin from additional income.

Whose welfare function should we maximize?

The idea of social welfare maximization implies the existence of a social welfare function reflecting insights about determinants of collective well-being and expressing the “general will’ of the people. It was over 50 years ago that I began to realize that this idea is highly problematic. My libertarian friends might find this hard to believe, but it happened while I was studying welfare economics.

An article by Francis M Bator influenced me greatly, although perhaps not in the way the author intended. As I was reading Bator’s article - ‘The Simple Analytics of Welfare Maximization, The American Economic Review, 17(1) March 1957 - I remember feeling that this was an object of great beauty. I suppose the article seemed beautiful for the same reasons that abstract art can seem beautiful. Bator provides a geometric presentation of the derivation of a production possibilities curve, then proceeds to derivation of the utility possibility frontier, which he then crowns with a social welfare function, as shown in the diagram above.

Bator’s description of that diagram left a lasting impression on me. He tells us that BB represents the grand utility possibilities frontier, showing at each point the maximum utility for person X given any feasible level of utility for person Y, and vice versa. He then proceeds to explain the “bliss point”, Ω, in the following words:

“To designate a single best configuration we must be given a Bergson-Samuelson social welfare function that denotes the ethic that is to “count” or whose implications we wish to study. Such a function – it could be yours, or mine, or Mossadegh’s, though his is likely to be non-transitive – is intrinsically ascientific.”

What Bator meant by ascientific is that the function involves ethical valuations. However, the point that has stuck in my mind is that despite the heroic assumptions Bator was making in constructing his beautiful geometric edifice, he did not try to pretend that it could be crowned with a social welfare function aggregating the preferences of all citizens. The function depicted “could be yours, or mine, of Mossadegh’s”. (Mohammad Mosaddegh was an Iranian prime minister who held office from 1951 until 1953, when his government was overthrown - apparently in a coup orchestrated by M16 and the CIA.)

Is it possible to make sense of the diagram? 

As I look at the diagram now, the idea of choosing between the utility levels of different people seems problematic. It would also be problematic to some modern utilitarians whose social welfare function is defined simply in terms of maximizing average life satisfaction (making the implicit ethical judgement that everyone deserves to have the same life satisfaction). In that case, if the axes measure the life satisfaction of X and Y, the bliss point would be defined by the intersection of the possibility frontier and a 45⁰ line drawn from the origin. The 45⁰ line would represent all points where X and Y have equal life satisfaction – X and Y would each have maximum life satisfaction at the bliss point.

However, I reject that modern utilitarian view. It seems to me to reflect an inadequate understanding of the determinants of individual flourishing. As argued in Freedom, Progress, and Human Flourishing, even though average life satisfaction may be a reasonable indicator of the average psychological well-being of large groups of people, psychological well-being is just one of the basic goods of a flourishing human. In my experience, when people are encouraged to offer more than perfunctory responses to questions about how they are faring, they tend to talk about a combination of different things such as their aspirations and the choices they have made, their health, and their personal relationships. Satisfaction is relevant, but does not encompass all relevant aspects of human flourishing.

To make sense of the choices represented in the social welfare function depicted, I would need to replace “utility” with “opportunity to flourish”. Even then, I would need good reasons to make an ethical judgement about whether X and Y deserve to have their opportunity to flourish enhanced or restricted.

What are the implications for social choice?

While Bator’s description of the social welfare function let the cat out of the bag for me, I remember reading about Kenneth Arrow’s impossibility theorem at about the same time. I think the main lesson I took away was that the processes of government must inevitably be somewhat dictatorial. That makes it important to have constitutions that protect liberty and electoral processes that are capable of kicking tyrants out of office.

While studying welfare economics, I also took a course in public choice in which I had my first exposure to The Calculus of Consent, by James M Buchanan and Gordon Tulloch. That book and other writings by Buchanan have had a profound impact on my views about the good society and the role of economists.

Buchanan and Tulloch noted that when individuals are considering constitutional rules that they expect to be in place for a long time, they are uncertain as to what their own interests will be in any of the whole chain of later collective choices made according to those rules. Such uncertainty may enable people to set aside their current economic interests in making constitutional choices. One implication is that individuals will tend to choose somewhat more restrictive rules for social choice-making for areas of potential political activity that could involve violation of liberty.

Buchanan and Tulloch link liberty directly to the concept of a good society:

“The acceptance of the right of the individual to do as he desires so long as his action does not infringe on the freedom of other individuals to do likewise must be a characteristic trait in any “good” society. The precept “Love thy neighbor, but also let him alone when he desires to be let alone” may, in one sense, be said to be the overriding ethical principle for Western liberal society.” (p 217).

 Buchanan later warned that the norms that underlie democratic institutions are under threat when politics is allowed to become little more than a ‘commons’ through which competing coalitions seek mutual exploitation.  (For further discussion of this please see Chapter 6 of Freedom, Progress, and HumanFlourishing).

What should economists do?

Economists who advise on public policy often view themselves as social planners who are advising benevolent despots. They are frequently disappointed to find that those whom they advise give higher priority to political and personal goals than to publicly stated economic objectives, or lack the political power to implement recommendations.  

James Buchanan suggested that economists should adopt a contractarian approach, with a focus on the consequences of rules and, in particular, on the question of what rules of the game individuals might accept voluntarily as participants in an authentic constitutional convention. In providing an example of this approach, Buchanan suggested that such a convention would be unlikely to endorse rules of the game which allow majorities in a single generation to impose public debt burdens on subsequent generations of taxpayers. (Nobel prize lecture).

My career

The focus of my career in public policy advice was partly contractarian. For most of my public service career I had the good fortune to work in agencies of the Australian government (predecessors of the Productivity Commission) which undertook research and published reports on the economic implications of changing the rules of the game for economic development. The focus of much of this work was assessing effects of barriers to international trade and other forms of industry assistance.

I note that my career was only partially contractarian because the agencies were required to make recommendations to the government according to specific terms of reference for individual inquiries and more general guidelines. The specific terms of reference were sometimes designed to ensure that governments received politically palatable recommendations, but the research and policy analysis published in inquiry reports, and in annual reports, informed policy-making processes in ways that led eventually to adoption of rules of the game more favourable to free trade.

The advisory agencies were given general guidelines including having “to have regard to the desire of the Australian Government …  to improve and promote the well-being of the people” and to “improve the efficiency with which the community’s productive resources are used”. I do not believe that the collectivism reflected in the reference to people and privately owned capital as “the community’s productive resources” had one iota of influence on the research and policy analyses conducted by the agencies.

I have endeavored to maintain a focus on the implications of different “rules of the game” in the public policy aspects of my subsequent consulting career and my writing on freedom and flourishing on this blog and in my books. There have been some lapses, but I hereby forgive myself 😄 . It has not always been easy to avoid falling into the trap of viewing oneself as a social planner advising a benevolent despot. 

Why should economists practice humanomics?

 

Adam Smith practiced humanomics. It came naturally to him. The famous pioneer of economic science did not need to pretend that humans have been programmed to maximize utility in order to develop his argument that economic specialization stems from a propensity in human nature to “truck, barter, and exchange”.

The word, humanomics, was coined by Bart Wilson, an experimental economist, and is explained in the book, Humanomics, Moral Sentiments, and the Wealth of Nations for the Twenty-First Century, which he co-authored with Nobel winner, Vernon Smith. In that book, humanomics refers to the very human problem of simultaneously living in the personal social world (which is the context which Adam Smith had in mind when writing Moral Sentiments) and the impersonal economic world (which is the focus of Wealth of Nations).

Some important aspects of human behavior cannot be adequately explained if we adopt the assumption, still common in much economic analysis, that individual human behavior is characterized by narrow self-interest. Vernon Smith and Bart Wilson found in their experimental work with people playing economic games that while self-interested utility maximization could explain individual behavior in simulated market contexts, it could not do so in social exchange contexts. In playing two-person trust games, people tend to be more other-regarding than most modern economists assume. I take that to mean that most people are sufficiently civilized and self-regarding to behave with integrity towards others – they see virtue in being trustworthy rather than opportunistic.

Deirdre McCloskey advances the argument for humanomics further in her recent book, Bettering Humanomics. She writes:

“A big part of our human behavior is thinking and talking about human action, not merely solipsistic and thoughtless reaction to, say, a budget constraint. Human action … is the exercise of free will, so typical of humans. It is in fact the free will about which theologians argue. Humanomics therefore goes beyond the artificially narrowed evidence of a silent, solitary, reactive, positivistic, predestined, observational behaviorism.” (p 5)

McCloskey argues that economists should engage in more philosophical reflection about what a speaking species does. The behavioral paradigm of stimulus and response does not adequately explain much of human behavior. Humans often think about the meaning of events before responding to them, and they often consciously explore the options that are available.

Innovation is an example of an economic activity that cannot be adequately understood within a behavioral paradigm that does not allow for thinking and talking. In this context, McCloskey mentions the important contribution of Israel Kirzner in pointing out that real discoveries cannot be pursued methodically – or they would be known before they are known. Innovation requires entrepreneurial alertness. McCloskey adds that a discovery “requires sweet talk to be brought to fruition”:

“An idea is merely and idea until it has been brought into the conversation of humankind”.

McCloskey presents a strong argument that humanomics is needed to explain the great enrichment – the massive improvements in standard of living that have occurred in many countries over the last 200 years. Those who have some familiarity with her trilogy of books on economic history – that should include everyone who is interested in the reasons why the people who live in some countries tend to be wealthier than those who live elsewhere - will not be surprised that she argues that ethics and rhetoric are the “killer app” explaining the great enrichment. She argues that a novel liberty and dignity for ordinary people, including the innovating bourgeoisie, explains the great enrichment.

For present purposes, the important point is that for economists to understand the economic growth process, with its massive implications for human flourishing, they need some knowledge of ethics and rhetoric – ideas in letters and literature that are studied in the humanities. McCloskey argues that if economists consider themselves to be serious scientists, they should use all relevant evidence that they can get their hands on. She makes the point thus:

“A future economics should … use the available scientific logic and evidence, all of it—experimental, simulative, introspective, questionnaire, graphical, categorical, statistical, literary, historical, psychological, sociological, political, aesthetic, ethical.” (p 66)

Many economists spend much of their time on “sweet talk” without being aware of it. I spent most of my working life trying to tell people that incentives matter and that they need to consider whether current institutions – the rules of the game of society – provide appropriate incentives. For example, I am fond of pointing out that if the rules of the game reward rent-seeking – individuals or groups seeking to have governments provide them with assistance at others’ expense - then potential beneficiaries will tend to spend more time rent-seeking and less time engaged in productive activities.

Economists engage in that kind of activity – labelled by some as preaching – because they think that ideas matter and that interests do not always prevail in determining government policies. In my view, people who are trying to obtain greater recognition of the role of institutions and incentives are walking in the footsteps of Adam Smith.

McCloskey might suggest that people like me should consider whether we give too much attention to the role of formal institutions – constitutions, laws, and regulations – and too little attention to ethics and ideology. In discussing the great enrichment she suggests:

“The important “institutions” were ideas, words, rhetoric, ideology. And these did change on the eve of the Great Enrichment”.

The only problem I have with McCloskey’s exposition of humanomics is her dismissal of happiness studies and behavioral economics. Her negative views on these areas of research sit oddly with her argument that economists should consider all available evidence. I agree that many people who are engaged in such research are paternalistic behavioralists, seeking to advise governments how to make people happier. However, I don’t think that provides sufficient reason to suggest that the findings of such research are no relevance to individuals who are looking for information to help themselves to flourish.

In my discussion of the findings of happiness research and behavioral economics in Chapter 7 of my book, Freedom, Progress, and Human Flourishing, I have tried to adopt a contractarian approach. That is the approach adopted by Robert Sugden, a self-confessed behavioral economist, and an admirer of the contractarianism of James Buchanan, in his book The Community of Advantage. Sugden notes that contractarian recommendations are “addressed to individuals as directors of their own lives, advising individuals how to pursue their own interests”.

I concur with the view of James Buchanan that the heartland of economics is considering human behavior in market relationships and other voluntaristic exchange processes. However, I can see no reason why anyone should consider Philip Wicksteed, or any other economist, who offers practical advice on avoiding common mistakes in decision-making, to be stepping beyond the realm of humanomics.    

When economists step outside their comfort zone of voluntaristic exchange processes, they certainly need to remember to take their bullshit detectors with them. That certainly applies in considering the findings of happiness studies and behavioral economics. It also applies in considering literary contributions, such as a book I read (and commented on here) about the significance for our understanding of happiness of Samuel Richardson’s 18^th century novel, Pamela.

Conclusions

Economists should practice humanomics because they can’t expect to be able to understand human behavior unless they do. Humans do not always behave as self-interested maximizers. It makes no sense to assume that human action always occurs at a subconscious level as an automatic response to stimuli. Individuals often think about the meaning of events, consider their options, and talk to others, before responding. Self-direction is integral to human flourishing.

In seeking explanations for human behavior, economists should not confine themselves to a focus on institutions and incentives. They should be open to considering all relevant information that they can get their hands on, including information on ethics, ideology, and happiness ratings.