Should media have a duty of care to discourage political polarization?

 

This question passed my mind as I was reading Steven Pinker’s book, When Everyone Knows That Everyone Knows … Common Knowledge and the Science of Harmony, Hypocrisy and Outrage, 2025.

The question was prompted, in particular, by a statement by the Australian Prime Minister, Anthony Albanese, as reported in The Australian, at a recent UN function in New York. Mr Albanese tied his government’s proposed new digital duty of care laws to “misinformation, disinformation and increased polarisation”, saying digital services were “having an impact on our entire society and how it functions”. In subsequent media appearances, he appeared to walk away from that statement, returning to the message that the proposed laws are primarily about "giving people control" over algorithms used by social media companies.

Mr Albanese has not allayed my concerns that the proposed laws have potential to enable a future government to impose a form of political censorship. I will briefly consider some of the concerns that others have raised on that score before turning to the question of what light Pinker’s book sheds on the role of social media in political polarization and the motives for political censorship.

Proposed duty of care laws

The exposure draft of the Online Safety Amendment (Digital Duty of Care) Bill 2026 indicates that its aim is to ensure a “safe online environment”, a standard that is defined primarily in terms of content. In his submission on the exposure draft, Andrew Bushnell of the Institute of Public Affairs notes that some of the harms listed in the exposure draft require subjective interpretation. More importantly, he notes that the proposed law gives the federal government “almost limitless power to expand the range of harms covered by the safe online environment obligation”.

An indication of the kinds of speech that the federal government might regard as harmful is illustrated by the attempt to remove an X post protesting against the formation of a queer club for children as young as 8 in a Victorian school (discussed here). The author of the post argued that children of that age are too young to be exposed to gender ideology. The eSafety Commissioner sought to have the post removed by sending a complaint alert to X. In this instance, the author of the post was able to conduct a successful legal appeal. I presume that one of the aims of the proposed law is to remove the possibility of future legal appeals of that kind. The proposed law is certainly intended to give the government greater legal power to suppress controversial views.

Pinker on social media’s role in polarization

Pinker begins the relevant discussion by referring to Jonathan Haidt’s 2022 article in The Atlantic entitled, “Why the Past 10 Years of American Life Have Been Uniquely Stupid”. Haidt blamed the “virality generators” – the Like, Share, and Retweet buttons – of the social media platforms for making it easy for anonymous ignoramuses to signal their moral superiority and tribal loyalty at low cost to themselves.

Pinker builds on Haidt’s explanation by suggesting that “virality does not just exponentiate the number of viewers”, it also “creates a sense of common knowledge”. What he means by common knowledge is knowledge that A knows that B knows, and B knows that A knows and so on. That meaning of common knowledge is illustrated in the image shown above, which has been copied from Pinker’s book. It differs from the usage of the term in ordinary English to refer to facts that are widely known, irrespective of any individual’s knowledge of who knows them.

Social media platforms generate common knowledge within online communities of people who have similar interests. The common knowledge generated within those groups can become norms that hold the groups together. When members of groups express doubts about matters that have become common knowledge, they are punished by other group members – just as members of religious sects are punished when they depart from accepted dogma.

Pinker observes:

“Twenty-first-century America has become polarized into political sects, each functioning as a quasi-religious community unified by its own commonly held but not easily verified beliefs.”

The examples of polarized thinking that Pinker provides are well known. Rather than spell them out here, I ask readers to imagine a political party led by Chicken Little. Mr Little has a vast number of dedicated followers on social media who share his belief that the sky is falling. Every raindrop that falls is interpreted as confirmation that the sky is falling. Attempts to persuade party members to consider evidence that the sky is not falling are largely unsuccessful because members and their leader are bound together by their common knowledge that the sky is falling.

Mr Little could be on either the conservative or the progressive side of politics. Opponents of his views consider that the growth in number of Mr Little’s followers is a threat to social cohesion. Some argue that his views should be suppressed.

Pinker on the motives for censorship

Pinker writes:

“Freedom of speech is protected in all democracies. Yet the repression of controversial ideas is no longer a hallmark of theocracies and dictatorships but increasingly a fixture of universities, the very institutions most committed to exploring ideas.”

The veracity of the first sentence of that paragraph is dubious. For example, Australia’s constitution has no free speech guarantee - only implied freedom of political communication.

Pinker has good reasons to focus on universities because protection of freedom of speech is central to their role in the search for truth. However, much of what he writes in Chapter 8, “The Cancelling Instinct” is also relevant to the exercise of free speech in social media.

The chapter opens with a list of 17 questions raised by serious scholars, scientists and writers that have caused them to be censored, punished, fired, threatened, harassed, demonized, libelled, and in some cases physically assaulted. That list begins with the question: “Do women, on average, have a different profile of aptitudes and emotions than men?”

Pinker suggests the threat to freedom of speech emerges from two features of human psychology:

• People hold many factual beliefs not because they have been shown to be true, but because they are felt to uphold a moral order.
• The upholding of a moral order takes place in the arena of common knowledge.

In respect of the first point, laudable moral principles lurk behind the 17 questions mentioned above. The censors fail to acknowledge that the questions seek empirical information that is compatible with the moral values they wish to protect. Even if it is true, for example that groups of people differ in their average traits, it would still be unfair to discriminate against individuals for that reason.

Why are censors so prone to blur the distinction between fact and value? One of the reasons given is that people tend to engineer their bundle of beliefs towards “winning arguments” rather than “laying out logical entailments”. For example, it is easier to persuade people to oppose capital punishment by bundling the belief that it is inherently immoral with the belief that it is not an effective deterrent to murder.

Pinker suggests that despite their training in making conceptual distinctions, academics are not immune to the tendency to defend factual claims that make their moral positions more compelling. Added to this, there is the complication that the postmodern current in the humanities denies that there is any such thing as objective truth.

The threat to freedom of speech also arises because the upholding of a moral order takes place in the arena of common knowledge. Pinker writes:

“What terrifies the censors and cancelers, it appears, is not that a dangerous idea might be thought, or even expressed, but that it might become common knowledge.”

For example, a member of the speech police might not be particularly upset if they thought that they were the sole recipient of an email containing a “dangerous” idea, but be outraged if it was apparent that the idea had been communicated simultaneously to a large number of people.  Pinker notes that the metaphor, “deplatforming”, is telling “because being on a platform, visible to all, is what allows a speaker to generate common knowledge”.

Misinformation and disinformation

The cancellation and deplatforming that takes place within universities interacts with social media in interesting ways. Scientists and other scholars are often able to publicize their views on social media even though university colleagues and politicians have alleged those views to be misinformed. In some instances, the censorious actions of their university colleagues seems to have attracted additional attention to the views of controversial scholars, e.g. Bjorn Lomborg, perhaps assisting their views to become more influential.

There is, of course, a substantial amount of misinformation and disinformation published in electronic form in pursuit of objectives that are Antisemitic, Islamophobic, racist, sexist, homophobic, transphobic or designed to denigrate other community groups. It is easy to agree that promotion of such views should be condemned but it is not clear what role government should play in seeking to combat misinformation and disinformation beyond prohibition of incitement to violence and protection of children.

Media proprietors may have a moral responsibility to prevent their platforms being used to inflame polarization, but that does not justify government attempts to impose content standards. By suppressing discussion of controversial social and political issues, Australia’s proposed new duty of care laws may well impose harms on the community that far exceed the harms that these laws will prevent.

Are there no policies worth retaining to reduce greenhouse gas emissions in Australia?

 This is a guest post by Geoff Edwards.

Tasmania-raised, Geoff has held economist positions at the Productivity Commission, La Trobe and Melbourne Universities, the Australian Treasury and the Bureau of Agricultural Economics. His research has focused on public policy for energy, water, agriculture and industry. Geoff's research has been published in The Economic Record, The American Economic Review, The Australian Journal of Agricultural and Resource Economics, The American Journal of Agricultural Economics, Australian Quarterly and elsewhere, including “Freedom and Flourishing”. (Geoff has previously published here about gas price policies.) 

In this post, Geoff discusses one of the policies announced by Angus Taylor, leader of the Opposition, in his recent budget reply speech in the Australian parliament.

The Opposition leader's budget reply often serves as an opportunity for the Opposition to present the narrative that it proposes to take to the next election. Angus Taylor’s recent budget reply speech has special significance. Since this was his first budget reply speech, it provided an opportunity for Taylor to point out the shortcomings of the Government’s economic policies and to propose a radically different approach. The political context surrounding Angus Taylor's budget reply speech added urgency, as the Liberal-National Party coalition faces an existential crisis, with competition from Teal Independents, on its left flank, and more intense competition from One Nation, on its right flank.

The Government’s budget, the fifth delivered by Jim Chalmers, seeks to address chronically low productivity growth and perceived generational inequity with policies that are anticipated to result in a higher public debt burden to be serviced by future generations. Taylor outlined a platform centred on "generational tax reform" through indexing income tax brackets to inflation (the "tax back guarantee"), cutting net overseas migration, and restricting certain welfare services to Australian citizens only. As Geoff notes below, Taylor also foreshadowed a radical shift away from policies to reduce greenhouse gas emissions.

Geoff Edwards writes:

Opposition leader Angus Taylor said a government he led would stop targeting net zero greenhouse emissions. It would increase use of fossil fuels, running coal-fired power generators "as long and as hard as possible". Mr Taylor wants "cheap energy". He blamed  the renewables push and the energy bureaucracy for high energy prices. The reality is that the impact of high world prices for oil, gas and coal on electricity costs are also relevant. 

There is a certain irony in Mr Taylor's rejection of net zero 2050. It was he as Energy and Climate Minister with then  Prime Minister Scott Morrison who, in October 2021, first announced Australia's commitment to net zero. Subsequently, in opposition, the Liberal Party followed its smaller coalition partner, the Nationals, in walking away from net zero 2050.

Australia generates about one per cent of global greenhouse emissions. It cannot  influence climate perceptibly, domestically or globally. But a majority of Aussies according to surveys see it responsible for doing its bit to reduce carbon dioxide and other greenhouse emissions, so the atmosphere is more conducive to good living conditions for humans and other species. And I want my grandkids to grow up in an Australia that has policies and a culture that take seriously caring for the global commons that is the atmosphere.

Yes, remove subsidies on solar electricity, household batteries and EVs—-though I don't see that reducing electricity prices. And credit to Mr Taylor for the rational initiative of removing the ban on nuclear energy in Australia, so long as any investments in nuclear are made through unsubsidised, technology-neutral competitive processes.

But the Safeguard Mechanism, a de facto tax on carbon emissions, attacked by the Opposition leader, is the right way to go. It is a price directly on the pollution that harms the habitat of humans and other living things. 

Under the Safeguard Mechanism, the country's largest industrial firms have a baseline level of carbon dioxide equivalent emissions they can make without penalty. The baseline is reduced each year. Emissions in excess of the baseline need to be offset by purchasing approved carbon credit units; these are accredited emission reductions made in such ways as soil carbon sequestration, vegetation management and energy efficiency gains.

Yes, the Safeguard Mechanism increases prices a small amount; appropriate for efficient pricing when producers are made to pay a real cost. The Productivity Commission and others, focusing on efficiency in the energy sector and beyond, and on cost-effectiveness in reducing emissions, recommend extending the Safeguard Mechanism so disincentives to pollute the atmosphere are experienced by more of the polluters.  It is especially incongruous that individual electricity generating facilities are not subject to an emissions tax. 

 

Geoff Edwards

Kew, Vic.

Part VII: What kind of political entrepreneurship is required?

 This essay is one of a series exploring the topic: What impact does political entrepreneurship have on freedom and flourishing? The series commenced with a Preface which provides a synopsis of the series and explains why I think it is important to obtain a better understanding of political entrepreneurship.

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Can strong political leadership bring about institutional change leading to greater economic and personal freedom?  That idea is easy to challenge. It recalls the oft quoted passage by Lord Acton:

“Power tends to corrupt and absolute power corrupts absolutely. Great men are almost always bad men, even when they exercise influence and not authority: still more when you superadd the tendency or the certainty of corruption by authority” (Acton 1887). 

Yet, powerful leadership has attractions to many citizens. I don’t think the question of whether strong political leadership could be consistent with greater economic and personal freedom should be dismissed out of hand.

Restoring order

The attraction of strong leadership is most understandable in chaotic situations where social order has broken down and lives, liberty and property are threatened by groups that have resorted to violence to pursue nefarious ends. Under such circumstances there may be grounds to hope that a strong leader will be able to restore order and protect the rights of individuals.

As Vincent Ostrom pointed out, the ubiquity of coercion means that order and organization in human societies depends upon a Faustian bargain involving use of organized force (Ostrom 1997, p.121). As explained by Paul Aligica and Peter Boettke:

“The implication is that social order and its institutional dynamics are perceived as shaped by and operating under the shadow of the ongoing tension between the threat of chaos and the threat of tyranny” (Aligica and Boettke 2009, p.61).

Benevolent despotism

Some of the best advice for despots who wish to promote freedom and flourishing was provided by Lao Tzu:

“Govern the state by being straight forward; wage war by being crafty; but win the empire by not being meddlesome” (Tzu 1963, LVII p.64).

Aristotle’s politics is somewhat more challenging to libertarians, but Fred D. Miller makes a strong case that it is not anachronistic to attribute to Aristotle a concept of individual rights and support for a moderate degree of liberalism. (Miller 1995, pp.373-378).

Robert Faulkner observes that Aristotle ranks greatness of soul as the "crown" needed to perfect all the virtues, including justice. He writes:

 “Aristotle calls greatness of soul a kosmos. It is an ornament of good character that is also an exalting order: an ordering heightened by an awareness of the grand activities such a soul calls for and is owed” (Faulkner 2007, loc. 250/3375). 

According to Faulkner:

“Aristotle's diagnosis comes to this: the great-souled man is at once drawn above humanity and drawn to humanity. He exhibits his superiority by aiding his fellows, and yet his wish is less to aid them than to avoid being or appearing dependent on them” (Faulkner 2007, loc. 565/3375).

Faulkner suggests that while Nicomachean Ethics seems to imply that greatness of the soul is a desirable attribute of political leaders, Aristotle moderates that view elsewhere in his writings. In Ethics, Aristotle suggests that greatness, especially great power, is overrated: “it is possible for one who is not a ruler of land and sea to perform noble action” (Faulkner 2007, loc. 692/3375).

In more recent times, Max Weber’s argument that effective leaders must have charisma may be relevant in considering the potential role of leaders in restoring liberty. Weber argued that effective leaders must have a charismatic form of authority because that is the only form of authority capable of overcoming the constraints of organisation, legality and tradition:

“Devotion to the charisma of the prophet, or the leader in war, or to the great demagogue in the ecclesia or in parliament, means that the leader is personally recognized as the innerly 'called' leader of men. Men do not obey him by virtue of tradition or statute, but because they believe in him” (Weber 1946, p.79).

Weber argued that charismatic authority is required for leaders to be effective in their struggle against the impersonal forces of bureaucratization. It tends to appear in moments of crisis, when the leader performs a ‘miracle’ for a group that feels otherwise impotent and deeply threatened. Xavier Márquez suggests that Weber's conception of charismatic authority allows some demagogues to play a genuinely democratic role in modern societies when viewed through contemporary theories of representation (Márquez 2024).

Thus far, the discussion suggests that it is not possible to rule out the possibility that a benevolent despot could promote freedom and flourishing if he or she wished to establish supportive institutions and had appropriate leadership qualities. However, that seems unlikely to be a frequent occurrence.

 Does autocracy support economic freedom?

The point was made earlier in this series (Part II) that it is easier to identify individual political leaders who have contributed to low or falling freedom levels than those who have contributed to high or rising freedom levels. That is because political entrepreneurship tends to be less focused on individual leaders in countries where governments have greater regard for individual liberty. 

Nevertheless, the idea that autocrats have sometimes helped produce better outcomes may not be entirely fanciful. There may be some substance lying behind folklore that attributes improvements in economic freedom to autocrats such as Lee Kuan Yew in Singapore, Park Chung Hee in South Korea, Chiang Kai-shek in Taiwan and Augusto Pinochet in Chile.

However, even if it can be shown that in some instances autocrats have fostered greater economic freedom, and that this has been followed by improvements in personal freedom, it does not necessarily follow that a period of autocracy was necessary or justified. People in the countries concerned are better placed than foreign observers to make judgements about the use of force by autocrats in particular circumstances, but the idea that autocrats are more likely to make positive contributions to economic growth than democratic leaders does not stand up to scrutiny. William Easterly tested the proposition by relating economic growth outcomes to the periods during which autocratic and other leaders were in office. He found that “leaders matter very little” (Easterly 2013, pp. 308-26).

There is also strong empirical evidence that democracy, and the personal freedom associated with it, is compatible with high levels of economic freedom.

Which democracies are supporting economic freedom?

Vincent Geloso and Alex Tabarrok have assembled evidence that democracy and economic freedom are highly correlated. Except for Singapore and Hong Kong there are no jurisdictions with high levels of economic freedom that are not also democracies (Geloso and Tabarrok 2025, p.116). Countries which have experienced the greatest democratization (Peru, Taiwan, Portugal, Spain, and Greece) have also experienced improvements in economic freedom. There have also been substantial improvements in economic freedom in the countries of Eastern Europe which experienced democratization following the collapse of communism in 1989 (Geloso and Tabarrok 2025, pp. 125-8). Geloso and Tabarrok provide some strong arguments to explain the correlation between democracy and economic freedom that they observe.

It seems to me, however, that none of the explanations offered for the observed correlation between democracy and economic freedom provide grounds to allay concerns, discussed in the preceding essay, about the future of economic freedom in the long-standing democracies.

Economic freedom levels are beginning to slip in some of the long-standing democracies. While many of the newer democracies have been experiencing increased dynamism, the increasing entanglement of government, industry and community organisations in the long-standing democracies has been associated with a decline in dynamism.

There is not much evidence that either the progressive or conservative sides of politics in the long-standing democracies are currently offering policies to advance economic freedom. The progressive side of politics is tending to pursue social and environmental agendas without regard for their impact on economic freedom, or growth in productivity or incomes. The conservative side of politics is tending to pursue economic nationalist agendas without regard for their impact on economic freedom, or growth in productivity of incomes.

Experience suggests that substantial political support for economic freedom will return only after economic crises threaten to cause widespread misery. That raises the issue of what kind of political entrepreneurship might help to make economic freedom more secure in the long-established democracies.

Learning from previous reform experience

Some prominent political leaders in democracies have been able to pursue reforms directed toward expansion of economic freedom. During the 1980s, Ronald Reagan pursued such reforms in the USA, as Margaret Thatcher did in Britain. The reforms currently being pursued by Javier Milei in Argentina seem to be similarly motivated, but at the time of writing it is too soon to judge how highly Milei’s reforms will rate in terms of broad libertarian criteria. The economic problems confronting the United States and Britain in the 1970s and 80s provided the context in which political leaders could initiate substantial changes in the direction of economic and social policies. That is even more true of the economic circumstances in Argentina prior to Milei’s election.

The reform efforts by Reagan and Thatcher can be viewed as examples of heroic leadership which increased economic freedom. However, heroic leadership of that kind is not solely the prerogative of presidents and prime ministers. Similar reform efforts in New Zealand and Australia were led by government ministers responsible for economic policy, Roger Douglas and Paul Keating respectively, with prime ministers adopting a facilitating role.

Political leaders can rarely claim to be the authors of their reform strategies. Policy development that has led to greater economic freedom has drawn heavily on the ideas of prominent academics including Milton Friedman and Friedrich Hayek, on policy analysis in think tanks and on contributions of a few journalists who understand the issues.

In some instances, advisers within government bureaucracies have also played an important role in policy development. Roger Kerr, who held the position of Executive Director of the New Zealand Business Roundtable following a career in the New Zealand Treasury, provided a highly relevant comment about the need for advisors to focus their advice on their fields of expertise rather than on politics:

“Economists of all people should be conscious that the performance of bureaucrats in trying to pick winners and losers in the policy-advice market is likely to be as unimpressive as in the industrial domain – and for much the same reasons, namely lack of information and incentives. Perceived policy constraints are not always immutable. They can be shifted by reasoned analysis and well-constructed strategies for policy change, developed by interaction between political managers and technical advisers. Second-guessing political reactions can lead to narrowing of policy options and does less than justice, in recent New Zealand circumstances at least, to the intelligence of a number of politicians, on both sides of the political fence, who have been more aware of the gravity of New Zealand’s economic problems and prepared to tell the story like it is than many of their advising bureaucrats” (Kerr 1987, pp. 144-45).

Alf Rattigan is a prime example of a public servant who played a major innovative role in driving economic reforms in Australia.  Rattigan was chairman of Australia’s Tariff Board from 1963 to 1974 when it was replaced by the Industries Assistance Commission (IAC). He stayed on as chairman of the IAC until 1976, when he retired with ill health. Rattigan used his influence in those positions to play a pivotal role in terminating Australia’s long history of industry protection, which in turn, helped open Australia to the global forces that drove further market-based economic reforms. In a lecture presented in 2016, Paul Kelly, Editor-at-Large for The Australian and Australia’s most scholarly journalist, outlined the main elements that contributed to the success of Rattigan’s reform efforts (Kelly 2016). One element of Rattigan’s success was his integrity in taking seriously his legal responsibility as chairman of an independent statutory authority, in the face of opposition from the government of the day which believed that he should “accept the overall tariff policy of the government as given” and work within that framework. Another element was the ability of his professional staff to draw upon the methodology for measurement of effective rates of protection developed by Professor Max Corden. A small group of economically literate journalists played a crucial role in giving publicity to analyses demonstrating the costs of protection. Some groups, including farmers and miners, recognized that their members were disadvantaged by high levels of protection provided to the manufacturing sector and formed a free trade lobby. David Trebeck, an influential figure in the National Farmers Federation, said: “We fired the ‘bullets’ made by the IAC.” More politicians because advocates of free trade and political leaders eventually showed leadership by recognizing that “good policy is good politics”.

Unfortunately, looking back today on the economic reform efforts of the 1980s and 90s, it is apparent that the important reforms in the rules of the game made at that time have not become deeply entrenched. Political leaders obtained sufficient electoral support to implement market-friendly policies, but there does not seem to be much evidence that members of the public improved their understanding of the benefits of free markets in any of the countries in which reforms were undertaken.

Mass movements

The problem of ensuring adoption of government policies that more consistently advance economic and personal freedom is not merely a question of how to elect political entrepreneurs with their hearts in the right place to national leadership positions. Experience has shown that the longevity of reforms cannot be guaranteed even when they are supported by a strong coalition of interest groups and result in more favourable economic opportunities for a large majority of the population.

In recent years, centre-left and centre-right governments which have followed policies that are broadly consistent with relatively high levels of economic and personal freedom have become vulnerable to competition from populist political entrepreneurs who prophesy catastrophic environmental and social consequences if their radical policy proposals are not followed. Populist policy innovators on the left and right sides of politics tend to promote vastly different fears, and to offer vastly different policies. However, one common feature of those populist policy innovators is their attempt to exploit a systematic anti-market bias among electors.

The pertinent question is how the anti-market bias of public opinion can be reduced. History suggests that this has occurred to some extent in the past via complex processes involving, among other things, political entrepreneurship in social movements. For example, Joel Mokyr notes that the move toward free trade in Britain in the first half of the 19^th century involved the influence of post-Smithian political economy, the growing political power of the new industrial elite, and debates about income distribution and food supply. He writes:

“The careers of Victorian free-traders such as Richard Cobden and John Bright and the liberal Tories of the post-1815 era represent the kind of mixture of economic interests and liberal ideology that eventually secured victory for free trade” (Mokyr 2009, p. 153).

Mikayla Novak has noted the importance of entrepreneurship in propelling social movements to extend the effective domain of freedom. In that context she notes that “people such as William Lloyd Garrison, Emmeline Pankhurst, Mohandas Gandhi, Martin Luther King Jr., Lech Walesa, and Nelson Mandela” played an important role in “opposing unsatisfactory institutions and situations” although they, themselves, were not necessarily classical liberals by orientation” (Novak 2021, p. 45).

Is it possible that at some time in the future a broad social movement promoting classical liberal views could become sufficiently influential to ensure that children are offered as much tuition about the spontaneous order of the free market as they are currently offered about the workings of ecological systems in the natural environment? If that ever happens it will occur because of the actions of individuals.  As Edward W. Younkins has suggested, the task of building a free society depends on individual advocates of liberty who are “dedicated to preserving and strengthening the ideological and moral foundations of a free society”. Younkins notes that it is especially through the “numerous interactions with individuals” during their everyday lives that advocates of liberty can “transmit the freedom philosophy to the general public” (Younkins 2011, pp. 168-69).

Please see the final part of this series: Summary and Conclusions

References

Acton, Lord (John Emerich Edward Dalberg-Acton) Acton-Creighton Correspondence (1887) Acton-Creighton Correspondence | Online Library of Liberty

Aligica, Paul Dragos and Peter J. Boettke, Challenging Institutional Analysis and Development: The Bloomington School (Routledge, 2009).

Easterly, William, The Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor (Basic Books, 2013).

Faulkner, Robert, The Case for Greatness: Honorable Ambition and Its Critics (Yale University Press, 2007).

Geloso, Vincent and Alex Tabarrok. “Two Peas in a Pod: Democracy and Capitalism”, in Scott C. Miller and Sidney M. Milkis (eds.) Can Democracy and Capitalism be Reconciled (Oxford University Press, 2025).

Kelly, Paul., “Economic Reform: A lost cause or merely in eclipse”, Alf Rattigan Lecture (The Australian and New Zealand School of Government, 2016).

Kerr, Roger, “Ideas, Interests, Experience and the Economic Adviser”, World Economy, 10, no. 2 (1987) pp. 131-54.

Márquez, Xavier, “Max Weber, demagogy and charismatic representation”, European Journal of Political Theory (2024).

Miller, Fred D., Nature, Justice, and Rights in Aristotle’s Politics (Clarendon Press, 1995).

Mokyr, Joel, The Enlightened Economy: An Economic History of Britain 1700 – 1850 (Yale University Press, 2009).

Novak, Mikayla, Freedom in Contention: Social Movements and Liberal Political Economy (Lexington Books, 2021).

Ostrom, Vincent., The Meaning of Democracy and the Vulnerability of Democracies (The University of Michigan Press, 1997).

Tzu, Lao., Tao Te Ching, D.C. Lau translation (Penguin Books, 1963).

Weber, Max, “Politics as a Vocation”, in From Max Weber: Essays in Sociology, edited and translated by H.H. Gerth and C. Wright Mills (New York: Oxford University Press, 1946).

Younkins, Edward W. Flourishing and Happiness in a Free Society, Towards a synthesis of Aristotelianism, Austrian Economics, and Ayn Rand’s Objectivism (University Press of America, 2011).

Part IV: What incentives are political entrepreneurs faced with?

This essay is one of a series exploring the topic: What impact does political entrepreneurship have on freedom and flourishing? The series commenced with a Preface which provides a synopsis of the series and explains why I think it is important to obtain a better understanding of political entrepreneurship.

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The most obvious difference between economic and political entrepreneurship is that the former is largely about creating wealth and the latter is largely about obtaining political power. It is possible, of course, for individuals to seek political power to enhance their own wealth or that of a nation, but I will leave to the following essay a discussion of the differing motives that political entrepreneurs may have for obtaining power.

This essay focuses on the choices that political entrepreneurs are faced with in considering how to obtain power, given the peculiarities of politics as a form of business. I will briefly outline the nature of these peculiarities before considering the incentives they create for political entrepreneurship.

Peculiarities of political activities

The most important peculiarities of political activities arise from differences between voting and other choices, differences between triadic and dyadic relationships, and differences in deal-making in public and private sectors.

Differences between voting and other choices

It has often been observed that when people vote they have less incentive to make well-informed choices than in the other decisions that they make. Joseph Schumpeter argued that a typical citizen who makes rational decisions in daily life at home and in business “drops down to a lower level of mental performance as soon as he enters the political field” (Schumpeter 2011, pp.261-62). He argued that citizens are prone to “irrational prejudice and impulse” in political matters and that this makes them particularly vulnerable to influence by interest groups (Schumpeter 2011, pp.262-64). As I have noted elsewhere, Schumpeter developed those views before the public choice literature enabled concepts such as rational ignorance and rational irrationality to be explored more fully (Bates 2021, pp.114-116). 

Bryan Caplan points out that for an individual voter, the cost of clinging to irrational political beliefs is negligible because there is a miniscule probability that one vote will be decisive in changing the result of an election. Caplan suggests that although citizens often talk about voting options as if they were ordering dinner from a menu, their actions tell a different tale: “They expect to be served the same meal no matter what they order” (Caplan 2007, p. 132). Few individuals take the trouble to assess relevant evidence before they form strong opinions on political issues. They have no incentive to do so. If they cling to irrational beliefs about items on a dinner menu they may experience adverse consequences because of their choices, but when they vote there is no direct connection between the individual elector’s choice and the outcome obtained.

The absence of a direct connection between individual choice and outcome, Richard Wagner argues, is the reason sentiment tends to play a larger role, relative to reason, in political competition (Wagner 2016, p.158). He notes Vilfredo Pareto’s view that ideological articulation can even induce people to support measures that they might have opposed in a market setting. Voters generally embrace policies that enable them to feel good about themselves (Wagner 2016, p.198).

Caplan has assembled evidence that widely held beliefs among the public show a systematic anti-market and anti-foreign bias (Caplan 2007, pp. 30-39, 146).

Competition for leadership

Joseph Schumpeter viewed democracy, as actually practiced, as a competition for leadership. He ended up defining democracy as “that institutional arrangement for arriving at political decisions in which individuals acquire the power to decide by means of a competitive struggle for the people’s vote” (Schumpeter 2011, p.269). That view of democracy has become increasingly relevant as party leaders have come to dominate legislatures, and decisions are increasingly made by executive order and other forms of regulation that are primarily under executive control.

Triadic versus dyadic relationships

Wagner argues that the main difference between political entrepreneurship and market entrepreneurship has to do with the difference between dyadic and triadic relationships. Dyadic relationships involve two people; triadic relationships involve three. Wagner observes that market relationships can be reduced mostly to a set of dyadic relationships where both parties benefit. Political catallactics “typically requires a set of triadic relationships” where two people exchange mutual support and a third is forced to provide financial support. (Wagner 2016, p. 122).

Use of the word “typically” is appropriate in the context of government activities but is less appropriate in a broader context, if political catallactics encompasses voluntary activity that doesn’t involve government. For example, whenever a group of people band together to buy a service that is of mutual benefit, it seems to me that they are engaging in a dyadic political activity.

It also seems inappropriate to label much of the political entrepreneurship that occurs at the local government level as triadic. The group of people who are using the service in that context may not differ much from the group who are paying for it. As discussed by Paul Aligica and Peter Boettke, in a context where people can exercise both voice and exit, “public” entrepreneurship can lead not only to better services at lower cost but also new and better forms of organization (Aligica and Boettke 2009, p.48).

Wagner illustrates the nature of triadic relationships by reference to decisions that are made about which roads to repair and which channels to dredge when roads and harbours are publicly owned. In that situation a triadic relationship is involved because the agencies responsible for road repair and dredging do not receive revenues directly from sales to the public. Those who benefit from the activities concerned have an incentive to undertake costly action, e.g., making donations to political parties to improve their positions in the queues (Wagner 2016,pp. 214-30).

Making deals

Wagner argues that little substantive work is accomplished through elections and political campaigns. He observes that while puffery is an understandable part of market competition, “electoral competition is mostly about puffery” (Wagner 2016, p.197).

The substantive work of policy choice takes place “outside electoral politics and entails the interactive elements necessary for constructing and maintaining deals” (Wagner 2016, p.198). He suggests a parliamentary assembly can be viewed as an “investment bank” because it is “a hub for making deals” involving selection and funding of projects (Wagner 2016, p.232). Wagner observes:

“Entrepreneurs are thus competing among themselves to seize the future. Successful entrepreneurship offers both fame and fortune” (Wagner 2016, p.279).

One important difference between the deal-making of political entrepreneurs and economic entrepreneurs is that the success of the latter can be measured by profit, which is usually a reliable indicator that the product meets consumers’ expectations. There is no similar indicator to enable political entrepreneurs to be held to account for the failure of policies to meet their purported objectives, let alone for any broader negative impacts on opportunities for human flourishing.

 Implications for entrepreneurial choices

Power-seeking political entrepreneurs have an obvious incentive to pander to the misconceptions and irrational preferences of voters by offering populist policies that are more closely aligned to those preferences. In my opinion, the response of some political entrepreneurs (from both conservative and progressive sides of politics) to reinforce false narratives is posing an increasing threat to economic freedom and prosperity in democracies. For example, a myth about the “hollowing out of American manufacturing” is currently supporting restrictions on economic freedom in the United States through imposition of higher import barriers. Phil Gramm and Donald Boudreaux have thoroughly debunked that false narrative (Gramm and Boudreaux 2025, pp.81-117).

There is also an incentive for political entrepreneurs to advance policies which increase the extent to which economic activity becomes subject to triadic relationships. The aim of such policies is to deliver benefits to politically powerful interest groups at the expense of consumers and taxpayers.

Observations about the prevalence of triadic relationships in politics bring to mind the definition of democracy as “two wolves and a lamb voting on what to have for lunch” (sometimes attributed to Benjamin Franklin without any supporting citation).

It is sometimes possible for political entrepreneurs to take advantage of triadic relationships and the willingness of voters to cling to irrational beliefs to pursue objectives that voters would not otherwise support. Wagner provides an outline of the process in his description of electoral competition:

“Within the triadic relationships associated with electoral competition … a political entrepreneur can construct a supporting coalition by crafting a transactional structure that entails gainers and losers, while at the same time generating a supporting ideological cover that softens and conceals the redistributive character of the transaction” (Wagner 2016, p.196).

The conceptual framework developed by Sharun Mukand and Dani Rodrik illustrates how such deceptive conduct can occur. Within that framework, political entrepreneurs discover identity and policy ‘memes’ (narratives, cues, framing) that shift beliefs about how the world works or a person’s beliefs about their identity and interests. Worldview politics and identity politics can complement and reinforce each other. In some instances, political entrepreneurs may induce a lobby group to push a particular policy because it has shaped their understanding of where their interests lie, rather than because the group has a vested interest in that policy (Mukand and Rodrik 2018).

The framework developed by Valentina Ausserladscheider also emphasizes that the strategies of political entrepreneurs are not determined solely by voters’ ideological positions. Innovative political entrepreneurs don’t offer the same policies as their competitors. They advance their political ambitions by focusing on niches in the marketplace of ideas that established parties do not satisfy, and on winning support by emphasizing the problem-solving capacities of their ideas. For example, the entrepreneurial strategy of “far-right parties” is linked to their “nationalist and nativist core ideology”, leading to policies such as immigration restrictions that are claimed to solve a range of problems. (Ausserladscheider 2022).

Ausserladscheider uses that framework to consider reasons for the political success of Jörg Haider, the leader of the Austrian Freedom Party, during the 1990s. Haider’s approach, based on a mix of authoritarian policies and policies to promote greater economic freedom, was particularly successful during a time of economic turmoil and uncertainty.

Political entrepreneurs seeking fame and fortune seem to be particularly attracted to deal making which expands public funding and regulation of infrastructure provision. The lack of clear measures of success in deal making in the political arena also makes also makes it easier for shysters and purveyors of inferior products to operate successfully in that arena.

This discussion of the incentives of political entrepreneurs to exploit voter misconceptions, promote triadic relationships, engage in deceptive conduct and participate in uneconomic deal making might cause some readers to wonder why democratic political systems have been as resilient as they have been. How is it that economic and political catastrophes have so far been largely averted in liberal democracies, given that political entrepreneurs have obvious incentives to engage in behaviour that could be expected to “kill the goose that lays the golden eggs”?

An obvious answer to that question is that political entrepreneurs often meet resistance when they seek to exploit the peculiarities of politics discussed above. Caplan has noted that established political leaders and parties have an incentive to think twice before caving in to popular misconceptions about the desirability of policies such as tariff protection because this poses the risk that they may become scapegoats for poor economic performance (Caplan 2007, pp.159-60). When voters have faith in political leaders, that allows leaders who are somewhat well-intentioned and less irrational some slack to circumvent their supporter’s misconceptions (Caplan 2007, p.181).

Mancur Olson provided an explanation by reference to the importance of encompassing political groups in a two-party system of government. He asserts that the leader of a party “whose clients comprise half or more of the society naturally is concerned about the efficiency and welfare of the society as a whole, particularly in comparison with lobbies for special-interest groups and congressmen accountable only to small districts” (Olson 1982, p.51). Party leaders certainly have an incentive to constrain deal-making that they consider is likely to have adverse impacts the party’s electoral prospects.

The next essay in this series, focuses on political entrepreneurship that occurs in liberal democracies in pursuit of economic and social objectives that have broad community support. It suggests that information constraints pose a challenge to successful pursuit of such objectives.

The adverse economic consequences of political entrepreneurship that seeks to exploit the peculiarities of politics as a form of business can also lead eventually to emergence of political entrepreneurs who propose reforms which aim to restore free markets. The scope for that to happen is explored in later essays in this series.

References

Aligica, Paul Dragos and Peter J. Boettke, Challenging Institutional Analysis and Development: The Bloomington School (Routledge, 2009).

Ausserladscheider, Valentina, “The Haider Phenomenon and the Rise of Austrian Neoliberalism,” in Culture, Sociality, and Morality : New Applications of Mainline Political Economy edited by Paul Dragos Aligica, Ginny Seung Choi, and Virgil Henry Storr (Rowman & Littlefield, 2022).

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

Caplan, Bryan. The Myth of the Rational Voter (Princeton University Press, 2007).

Gramm, Phil, and Donald J. Boudreaux, The Triumph of Economic Freedom: Debunking the Seven Great Myths of American Capitalism (Rowman & Littlefield, 2025).

Mukand, Sharun and Dani Rodrik, “The Political Economy of Ideas: On Ideas Versus Interests in Policymaking” NBER Working Paper No. 24467 (2018).

Olson, Mancur, The Rise and Decline of Nations (Yale University Press: 1982).

Schumpeter, Joseph. Capitalism, Socialism and Democracy, Second Edition (Martino Publishing, 2011).

Wagner, Richard E., Politics as a Peculiar Business: Insights from a Theory of Entangled Political Economy (Edward Elgar, 2016). 

Was British colonial government as bad as modern critics would have us believe?

 

Nigel Biggar acknowledges that British colonialism contained evils and injustices, but he judges it to have been much better than its modern critics would have us believe.

Biggar directs the McDonald Centre for Theology, Ethics, and Public Life at Oxford University. His aim in writing his recently published book, Colonialism: A MoralReckoning, was to provide a moral evaluation of British colonialism, rather than a history of it.

 As indicated in the passage quoted above, Biggar argues that many of the modern critics of British colonialism have an unscrupulous indifference to historical truth. He suggests that the controversy over empire is really about the present, rather than about the past. The real target of today’s anti-colonialists is “the Anglo-American liberal world order that has prevailed since 1945”. They denigrate the historical record of “the West” in order to corrode faith in it. He writes:

“What is at stake is not merely the pedantic truth about yesterday, but the self-perception and self-confidence of the British today, and the way they conduct themselves in the world tomorrow.”

Everyone who has regard for human rights, rule of law, and democracy should encourage British people to continue to be forthright in their advocacy of these ideals.

The focus of criticism

Biggar documents why modern critics of British colonialism are unfair in claiming that it was characterised by racism. He highlights three main examples:

The critics emphasize British links to the slave trade in the 17^th and 18^th centuries, but overlook the leading role that the British government played in ending slavery in the 19^th century.

The critics emphasize instances of appalling racial prejudice but ignore policies that were driven by the conviction of the basic human equality of the members of all races.

Some critics slanderously equate the actions of British colonial authorities with those of the Nazis by claiming that they were engaged in genocide. They don’t acknowledge the efforts of colonial authorities to protect native peoples from harmful encounters with settlers.

Benefits of British colonialism

Biggar also documents many benefits of British colonialism. One of the points he makes is that it “brought up three of the most prosperous and liberal states now on earth – Canada, Australia, and New Zealand”. My friends in the United States can take comfort from the fact that the American revolution served to educate the British about the desirability of allowing those former colonies to govern themselves.

More generally, British colonialism promoted free trade, created peace in the colonies, developed public infrastructure, made foreign investment attractive, disseminated modern agricultural methods, disseminated medical knowledge, and “provided a civil service and judiciary that was generally and extraordinarily incorrupt”.

I will focus here on the quality of the civil service and judiciary.

Quality of governance

As a classical liberal, I am inclined to the view that less governance is better than more, and that governance imposed by foreigners is particularly obnoxious. Could it have been possible for the quality of governance offered by the British to have been better than the alternatives on offer during the colonial periods?

That seems likely to have been the case in many instances. Biggar notes that many local rulers in India wanted the British to secure power to obtain advantage over their rivals - they preferred British rule to indigenous alternatives including ongoing local wars. It is not obvious that any real-world alternatives to British colonialism in Australia and New Zealand (e.g. colonization by another European power) would have provided greater protection to indigenous peoples. In the absence of British colonialism in Africa, it is likely that the slave trade would have persisted to a greater extent, aided by the expansion of militant Islam, and internecine wars that were an ongoing source of slaves.

It is not difficult to understand why people working for British colonial administrations in the 19^th and 20^th centuries developed a reputation for being largely incorruptible. It is even possible for me – a person who subscribes to the private interest theory of regulation - to understand that when organisations develop a culture that is strongly opposed to corrupt behaviour, individual members tend to obtain a great deal of satisfaction – a sense of mission - from upholding that culture.

Biggar notes:

“Back in the closing decade of the eighteenth century, Lord Cornwallis’ insistence that officials in the East India Company should live on their salaries, give up private trading and resist bribes ‘helped to create a civil service that became widely regarded as incorruptible and just, one that even Indian nationalist newspapers would later regard as ‘absolutely above suspicion’ and ‘the high water mark of morality in the public service of the country’, and as beyond being ‘bribed to do anything.”

Biggar devotes quite a few pages of his book to quoting subjects of colonial rule who were full of praise for British colonial rulers. He also notes that in the 1950s several million Chinese voted with their feet to leave the communist Chinese mainland and live under British colonial rule in Hong Kong.

Conclusion

The modern critics of British colonialism have no reason to be concerned that it is about to make a comeback. Their reason for seeking to denigrate it is to undermine the ongoing efforts of people in Britain, and some of its former colonies, to promote the ideals of a liberal world order. Nigel Biggar’s book makes an excellent contribution to public discussion of the issues by pointing out that many of the critics have an unscrupulous indifference to historical truth.

Does stakeholder capitalism contribute to human flourishing?

 

Many people reading this are likely to view the use of stakeholder terminology by business leaders as little more than a public relations tool. That is certainly how I have viewed it in the past. If you are a business owner, or executive, who wants to encourage employees, suppliers, customers, and community members to feel loyalty to your business, it makes sense to acknowledge that they may also have a stake in seeing it prosper. And it does no harm to remind governments of their stake in the prosperity of your business via its contributions to tax revenue.

However, I have recently come to associate stakeholder terminology with stakeholder capitalism. That ideology has close links to the concept of corporate social responsibility (CSR) and the increased tendency of businesses to seek rewards from governments for pursuit of environmental and social goals (ESG). Reading about stakeholder capitalism has added to my previously expressed concerns that such interactions between business and governments are leading liberal democracies more deeply into a corporatist quagmire.

Stakeholder capitalism

Michael Rectenwald’s book, The Great Reset and the Struggle for Liberty, has persuaded me that in advocating stakeholder capitalism, Klaus Schwab, the founder of the World Economic Forum (WEF), has in mind a corpus of ideas and policies that are fundamentally opposed to free markets and classical liberalism. Moreover, the WEF may have sufficient influence among powerful elites to eliminate the already dwindling influence that classical liberalism has been having on public policy.

Rectenwald’s book was written in response to a book by Klaus Schwab and Thierry Malleret entitled Covid-19: The Great Reset, which was published in 2020. Rectenwald draws attention to the open espousal of policies opposed to free markets in that book. Schwab and Malleret welcomed the possibility that governments might take advantage of the pandemic “to permanently increase their role”, and eliminate classical liberalism, which they refer to as neoliberalism. They write:

“COVID-19 is likely to sound the death knell of neoliberalism, a corpus of ideas and policies that can loosely be defined as favouring competition over solidarity, creative destruction over government intervention and economic growth over social welfare. For a number of years, the neoliberal doctrine has been on the wane, with many commentators, business leaders and policy-makers increasingly denouncing its “market fetishism”, but COVID-19 brought the coup de grâce.”

They go on to predict:

“Shareholder value will become a secondary consideration, bringing to the fore the primacy of stakeholder capitalism.”

Klaus Schwab has been advocating stakeholder capitalism for over 50 years, and has been influential in having that concept endorsed at international meetings of powerful people from business and government. The first Davos Manifesto, signed in 1973 states:

“The purpose of professional management is to serve clients, shareholders, workers and employees, as well as societies, and to harmonize the different interests of the stakeholders.”

The 2020 Davos Manifesto is titled: “The Universal Purpose of a Company in the Fourth Industrial Revolution”. It includes similar sentiments to the 1973 Manifesto, but goes on to state, among other things:

“B. A company is more than an economic unit generating wealth. It fulfils human and societal objectives as part of the broader social system. Performance must be measured not only on the return to shareholders, but also on how it achieves its environmental, social and good governance objectives. Executive remuneration should reflect stakeholder responsibility.”

Some CEOs would welcome a long muddled list of performance objectives because it offers them the opportunity to “do their own thing” and provide ready-made excuses for poor performance. Others would prefer to see governments pursue social and environmental objectives by more efficient mechanisms, and to have their own performance judged according to more tangible benefits to shareholders. How does the WEF propose to encourage compliance with its Manifesto?

The WEF’s ESG Index

The WEF published a report in 2020 setting out metrics for measuring company performance with regard to ESG goals. The title of the report is  Measuring Stakeholder Capitalism: Towards Common Metrics and Consistent Reporting of Sustainable Value Creation.

A mechanism for grading companies in terms of their environmental, social, and governance practices and plans might be thought to offer useful information to investors and consumers who concerned about the environmental and social impacts of their decisions. However, Rectenwald points out that it also has potential implications for interactions between business and government:

“Woke planners wield the Environmental, Social, and Governance (ESG) Index to reward the in-group and to squeeze non-woke players out of business.”

Ideological reach

In a recent Newsweek article, Jon Schweppe asks, Why did corporations go ‘woke’? His response, in brief, is that “this is part ideology, part price of admittance to an elite club, and part protection racket – doing everything one can to avoid upsetting the mob”.

Rectenwald’s book suggests to me that the WEF should come to mind following any mention of “ideology” and “an elite club” in this context. The corporate partners of the WEF include over 1000 of the world's largest business organisations. The annual meeting of the WEF in Davos is an invitation-only event but is widely reported in the media. Many notable political leaders, journalists etc. have been members of the Forum of Young Global Leaders, which is reserved for people under 40 years of age who show promise of global leadership. In addition, the WEF’s Global Shapers movement, a training camp for young change-makers (under 30 years old) has over 10, 000 active members.

Implications

Rectenwald points out that because ESG is “an impressionistic, qualitative, metric” it exposes business leaders and companies to the whims of woke arbiters. He cites the recent experience of Elon Musk who has been unfairly besmirched because he may have benefited from an emerald mine owned by his father in South Africa during the apartheid era. He sums up:

“In today’s political economy, satisfying shareholders, employees, and customers to earn profits has become less important for corporations than ingratiating the woke cartel and the governments that support it.”

Rectenwald’s book goes on to discuss possible implications for individual liberty of potential innovations such as an individual carbon footprint tracker, but in this essay I want to stick with the implications of stakeholder capitalism.

The Hayek quote at the beginning of the essay suggests another important implication of stakeholder capitalism. The quoted passage is from Law, Legislation, and Liberty (v3, p 82). The context of the quote is a paragraph in which Hayek is responding to the idea that large corporations should be required to consider the public or social interest. He suggests that “as long as the large corporation has the one overriding duty of administering the resources under its control as trustee for its shareholders its hands are largely tied; and it will have no arbitrary power to benefit this or that particular interest”. The paragraph ends by suggesting that obliging large corporations to consider the public interest gives them uncontrollable power that “would inevitably be made the subject of increasing public control”.

There is also reason for concern that obliging corporate managers to adhere to ESG will make them less accountable for productivity performance of enterprises because it will be difficult for company boards to assess the veracity of claims that performance has been adversely affected by ESG. Wokeness can be expected to provide a cover for inefficiency.

I acknowledge that stakeholder capitalism may have some positive implications for human flourishing, that should be offset against the negative implications discussed above. For example, in my book Freedom, Progress, and HumanFlourishing, I note that the difficulty that governments have been experiencing in agreeing upon concerted international action to combat climate change was ameliorated by the actions of business organisations in planning for a carbon free future.

Nevertheless, as I also argue in that book, there is more reason to be concerned about the implications of declining productivity growth than about climate change. By further reducing productivity growth, stakeholder capitalism seems likely to cause a great deal of economic misery.

Unfortunately, major economic crises will probably need to be endured before political leaders inspired by classical liberalism emerge once again to implement the public policy reforms that are needed to restore free markets.