The Dissident
POLITICS AND CULTURE FROM NEW PERSPECTIVES
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DISSIDENT No. 1


POLITICS AND DEMOCRACY


A New Kind of Empire

The Thoughtless Orthodoxy

Globalization vs. Capitalism

The Real Roots of Islamic Extremism

What Explains Rwandan Mass Rape?

They Don't Hate the USA in the Former USSR

BOOKS + IDEAS

+ PROVOCATIONS


Theory Gets a Reality Check: The Philosophy, Economics, and Politics They Don’t Teach at Harvard

Vanishing Voters—A Blessing in Disguise?

What Conservative Bias?

The Hidden Side of Capitalism

J'ACCUSE


The Rise of the "Neoconservatives"


ARCHIVE


DISSIDENT No. 2

DISSIDENT No. 3


ideas
Theory Gets a Reality Check:
Philosophy, Economics, and Politics as if Verisimilitude Mattered

BY JEFFREY FRIEDMAN

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1. BEYOND THE LEFT/RIGHT DIVIDE

What little left-wing philosophy right-wing students know usually comes from the pen of John Rawls, whose A Theory of Justice, published in 1971, is taught in most introductory political theory courses. And what little right-wing philosophy left-wing students know usually comes courtesy of a rebuttal to Rawls — Anarchy, State, and Utopia — that was published three years later by Robert Nozick.

In 2002 both Rawls and Nozick died. In 2003 it is time to kill off the traditional left/right roles they have played in political philosophy. Rawls is usually said to have provided a philosophical rationale for what another leading philosopher recently called “the progressive, liberal welfare state.” This philosopher was expressing the standard view of Rawls — a view shared by Nozick. According to this view, Rawls’s book called for the “redistribution of wealth to achieve a substantially more egalitarian society” than is possible under capitalism. There's no doubt that Rawls agreed with this left-wing interpretation of his “difference principle.”


Robert Nozick
The difference principle holds that income inequality is permissible only when it improves the lot of the poorest people in a society. Therefore, according to the standard view, the difference principle necessarily means that governments should redistribute wealth in order to improve the lot of the poorest. So Rawls’s philosophy justifies, at the very least, a welfare state, if not outright socialism.

However, the standard interpretation of the difference principle is mistaken — even though it is a view that was shared not only by Nozick and later commentators, but by Rawls. Rawls the man was not necessarily the best interpreter of Rawls the philosopher.

Rawls’s philosophy holds that whichever economic structure works to the benefit of the poorest is the structure that would be chosen by people who were unbiased by an awareness of their own fate in such an economy. Fearing that they might end up poor, they would choose the type of economy that that would do the most for the poor. But which type of economy would this be?

No philosopher, qua philosopher, can answer that question. An answer would require expert knowledge about the real-world effects on poverty of different economic systems. Rawls the man thought that his theory justified government redistribution of capitalists’ wealth, but this was just his personal opinion. Rawls the philosopher can provide no answer to the question, any more than any other philosopher can.
John Rawls

Answering Rawls’s question in a more-than-opinionated way requires an excursion into economics (Part 2, below). But because contemporary economic scholarship is so unrealistic, answering Rawls’s question will also require stripping away the absurdly simplistic assumptions of contemporary economics — and then turning from the then-realistic economics to realistic political science (Part 3, below).

WHY WOULD ANYONE BECOME A FREE-MARKETEER?

Ironically, Rawls’s opponent, Nozick, was much more knowledgeable about both economics and political science than Rawls — yet Nozick’s case for capitalism makes no use of this knowledge.

Nozick started out on the Left — in the 1960s, he was a member of Students for a Democratic Society (SDS) — and only became a libertarian in grad school, when a friend told him about arguments against the feasibility of socialism that had been made by an Austrian economist, Ludwig von Mises, in the 1920s. Hearing about those arguments led Nozick to do something that is rarely done: he took “the other side’s” ideas seriously enough to actually read them. As a result of his reading, Nozick switched sides. He became a freemarketeer. However, Nozick, too, was a philosopher, and his eventual reply to Rawls makes no use of “feasibility arguments.” Appropriately for a philosopher, Nozick tried to rebut Rawls on conceptual grounds. Therefore he did not draw attention to the “practical” type of argument that had transformed him into a freemarketeer.

Nozick found those “feasibility” arguments in books such as Mises’s Socialism; Peter L. Berger’s The Capitalist Revolution; Walter Williams’s The State against Blacks; Deepak Lal’s The Poverty of Development Economics; Thomas Sowell’s Markets and Minorities; and Peter T. Bauer’s Equality, the Third World, and Economic Delusion. This is the type of reading Nozick did in grad school; some of the books he read are now out of print, so for the sake of example, I’ve listed some that were published later. The books’ titles convey the political and economic, not philosophical, focus of Nozick’s reading.

Such books persuaded Nozick that only a few hundred years ago, almost everyone was as poor as residents of the Third World still are; that capitalism made the First World rich; and that the economics of capitalism are too counter-intuitive to be understood by most voters, who tend to favor every government interference with capitalism that any politician can think of — except, in some cases, taxes that come out of the voters’ own pockets. As a result — authors such as Mises, Hazlitt, Berger, Williams, and Bauer claimed — government intervention in the economy, which is designed to achieve Rawls’s goal — helping the poor — unintentionally ends up hurting them.

Were Nozick not a philosopher, he might have elaborated on such claims himself. “The best way to help the most impoverished,” Nozick might have asserted, “would be to turn capitalism loose.” But to make this assertion, Nozick would have had to address issues that are matters of economic and political fact, not philosophical conjecture.

Nozick does not even begin to give the case for capitalism. Ironically, Rawls — contrary to what both he and Nozick thought — does.

2 . THE ECONOMICS THEY DON’T TEACH AT HARVARD

Martin Feldstein’s introductory course in economics is the only class listed in the voluminous Harvard catalogue that has its own organized opposition. Protesters hand students walking into Feldstein’s classroom leaflets protesting what they are about to be taught.

Part of the reason is that Feldstein is a conservative who headed the Council of Economic Advisors under Ronald Reagan. Enough said — especially for the avowedly socialist students who hand out the leaflets. But are the protests just another instance of political correctness run amok? It it merely a case of students who are outraged to hear a challenge to the notion, endorsed by all of their non-economist professors, that capitalism (along with imperialism, racism, and sexism) is the root of all evil?

In large part, the ongoing anti-Feldstein movement is just that. But the protesters also have a legitimate complaint: that Feldstein, like the vast majority of economists, uses a “model” of the economy that is patently unrealistic.

CAN ADAM SMITH’S ARGUMENT FOR CAPITALISM BE REALISTIC?

In Feldstein’s quite standard “neoclassical” model of the economy, everyone is motivated by self-interest. Consumers self-interestedly pay the lowest price possible for whatever they buy, after comparing the various goods for sale against their own hierarchically ranked desires. Similarly, in the pursuit of profit, producers compete with each other to provide consumers with exactly what they want, and will thus pay for. Selfish competition among producers channels their self-interest toward serving selfish consumers’ desires. As Adam Smith put it in The Wealth of Nations, “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.” Economists such as Feldstein take Smith’s generalization and run with it — too far.

Although they are usually careful to note that their model is an abstraction from reality, in practice they treat the abstraction and reality as interchangeable. Only by assuming that in reality people are always selfishly motivated — and only by adding the further assumptions that self-interested entrepreneurs have perfect knowledge of what self-interested consumers want; and that self-interested consumers have perfect knowledge of what selfinterested entrepreneurs have to offer — can economists diagram, in the form of supply and demand curves, the Smithian transformation of self-serving behavior into behavior that serves others. These diagrams are required if calculus is to be applied to economics. And calculus is required if economics is to acquire the appearance of precision: at the intersection of its supply and demand curves is the perfect price for a product.

The assumptions of universal self-interestedness and perfect knowledge, then, are needed in order to turn economics into mathematics. So, even after noting the ahistorical, unrealistic aspect of the assumptions necessary to generate supply and demand curves, economists continue to deploy those assumptions. And this practice justifies protests such as those launched at Harvard. For if the economists’ assumptions are unrealistic, the appearance of precision they produce is an illusion.

If all capitalism had going for it is that it allows the convergence of mythical supply and demand curves upon the perfect price for each good and each service, capitalism would have little going for it indeed — at least for residents of the real world. The protesters themselves go too far, however, in their repudiation of capitalism. The fact that most economists have taken a turn toward mathematicized mythology does not entail that all of the economists’ conclusions are unsound.

Consider what would happen to economics if its unrealistic assumptions were discarded.

First let’s drop the assumption that entrepreneurs have perfect knowledge of consumers’ “demand curves.” Ask yourself: as a consumer, isn’t it true that you often don’t know what you desire until you stumble across it? And aren’t your “preferences,” far from being fixed (let alone both fixed and known to entrepreneurs), often plastic enough to be shaped by all sorts of environmental influences, such as advertising and fashion?

I edit a scholarly journal, Critical Review. Even though it is a nonprofit entity, I try to maximize (within reason) the revenues that subscriptions bring in, such that I need to rely on philanthropists to make up as small a portion of the budget as possible. (Note to philanthropists: your help is still needed anyway!) In setting Critical Review’s subscription price each year, however, I can only guess what would happen to total revenue if its price were higher (or lower) by 1 or 2 or 5 or 10 dollars. Nor could I ever do more than guess, no matter how sophisticated my “market research,” for the following reason. Until potential subscribers are faced — in a real, historical time and place — with the possibility of actually subscribing to Critical Review, they themselves won’t know what price they would be willing to pay for it (if any) under those specific circumstances, even if I could ask them in advance to hypothesize about their own future behavior.

The concept of a demand curve is a fiction with limited usefulness. In guessing the optimal price to charge for the product I am selling, I am, in effect, guessing at the shape of the demand curve for it. But the notion that this curve is knowable beyond guesswork is worse than useless. It is flat-out wrong, and any benefit that defenders of free markets accrue from the appearance of certainty conferred by that notion is gained under false pretenses. Next, let us discard the reverse assumption: that consumers have perfect knowledge of what businesses want to sell them. Do even the most conscientious shoppers — those, for example, who study Consumer Reports— really know what they’re buying before they buy it, let alone what better deal they might have gotten elsewhere? In an uncertain world — the real world — the answer is No.

Advertising can be helpful, because it can alert consumers to the goods that are for sale. Until a potential subscriber learns about Critical Review via some form of advertising, a subscription to it cannot possibly be a “preference” that could be ranked against her other desires — let alone could it be a preference in the shape of a non-hypothetical demand curve that is knowable to me. An ad for Critical Review in next week’s New York Review of Books might alert a potential subscriber to the possibility of subscribing; but only at that real historical moment, some time next week, might the potential subscriber become an actual one.

Still, even the tsunami of commercials to which we are daily subjected is not sufficient — even if all the commercials were accurate! — to address one of the main elements of the human condition: human ignorance. Our lives are too short, our brains are too small, and our experiences are too restricted for us to be truly expert in more than a few subjects, if that many; and considering the nearly infinite array of things we might want to buy, it is impossible for us to be expert consumers, since that would require us to be almost literally omniscient. So the assumption of perfect consumer knowledge of supply must be jettisoned, along with the assumption of perfect entrepreneurial knowledge of demand.

Finally — contrary to Adam Smith — we should drop the self-interest assumption.

On the consumer side of the equation, self-interest is no more universal than omniscience is. A parent’s gifts to her children; an art-lover’s bid for a painting that she thinks embodies aesthetic perfection; a scholar’s purchase of a book that promises to reveal facts hitherto unknown — are these acts of self-interest? Actions motivated by love, beauty, or the pursuit of truth can be put under the rubric of “self-interest” — but only if we follow contemporary economists in defining that term so broadly that every possible human activity counts. And this is to render the term meaningless.

Likewise with the entrepreneurs’ side of the equation. Some entrepreneurship is accidental, rather than being driven by the deliberate pursuit of profit. And some entrepreneurship is peripheral to other aims and therefore may, unpredictably, be subordinated to those aims. The founder of Apple Computer didn’t tinker with electronics in order to become a billionaire. He was simply a wonk having fun. Likewise, many people do their jobs not primarily for the remuneration they receive, but to serve a political cause; or for the love of what they are doing; or for the love of someone to whom they donate their earnings — or for the love of beauty, or the love of truth. Self-interest does not begin to capture what goes on in real-world markets unless self-interest is an empty tautology.

Having rejected the assumptions of perfect knowledge and financial self-interest, our destruction of Feldsteinian economics is complete. What remains is a model of markets that are imperfect, at best. Real-world market prices can only coincidentally reflect the intersection of perfect supply and demand curves, because what is for sale (supply) is not perfectly known to consumers, and what consumers will buy (demand) is not perfectly known to entrepreneurs. Moreover, price itself may sometimes be “no object” either to consumers or to those who produce what they consume. Producers and consumers may participate in market exchanges for reasons that escape the net of “self-interest.”

Because of imperfect knowledge and unpredictable motives, producers and consumers alike can make mistakes, and these errors sometimes prove disastrous. There are advertisements that gain no subscribers, and there are advertisements that gain subscribers by misleading rather than informing. There are entrepreneurs and investors who guess incorrectly about their customers’ “demand curves” and go broke. And there are people — i.e., virtually everyone, to one degree or another — who lack the resources to reach all, or even most, of their goals. In the world of real markets, there are no guarantees of desirable outcomes.

EXODUS

Now we can take a preliminary stab at the question of whether capitalism stands condemned by a theory of justice such as that embodied in Rawls’s “difference principle.”

The answer offered by a realistic form of economics may seem initially to be Yes. Realistically, capitalism displays neither equality nor fairness — because real-world conditions are neither equal nor fair. Some people in the real world are born unfairly handicapped, or impoverished, or to unloving or incompetent parents. As a result, they may have little or nothing to sell that others are willing to buy. Others are luckier at first: they do well in the genetic lottery. But later on they endure bad fortune because, in retrospect, they made mistakes.

Conversely, some people are lucky enough to be born with talents that are so highly valued by others that those others — consumers — are willing to pay huge sums for the fruits of their labor. Nozick invoked against Rawls the example of Wilt Chamberlain, the Michael Jordan of the 1960s. “Wilt the Stilt” was such a phenomenal basketball player that people were willing to pay him millions of dollars (in the aggregate) to watch him play. Nozick argued that Chamberlain should be allowed to profit from his height, his grace, and his superior court-vision. But these gifts were the result of his genetic good fortune. Even the legendary discipline of a Michael Jordan is, arguably, the product of his luck in having parents who instilled in him an unparalleled competitive drive and an astonishing work ethic. Moreover, it is happenstance that in the era in which Chamberlain and Jordan were born, the ability to sink a basket is valued by so many people. In the Middle Ages, that ability would have been useless, and those born with it might have ended up paupers.

Nor are real markets guarantors of truth, or beauty, or happiness. In pursuit of all such aims, people will very likely err. Almost as rarely do people realize beforehand what will make them happy as they can predict with whom they will fall in love. For the same reason — our pervasive ignorance — we don’t know beauty or truth until we see it, and even then we may be mistaken. How could it be otherwise? We can know happiness only after we find it. We can appreciate as beautiful only what we have experienced. We can accept as true only propositions that our reason, working with the evidence of which we are aware, has convinced us are accurate. We cannot experience alternative lives, we cannot assess what we have not yet seen, and we cannot weigh evidence of which we are unaware. Given the limits of our minds and of our time and our contact with the world, our conceptions of truth, beauty, and happiness may well be wrong (although we have no choice but to think that what we currently find beautiful or true or fulfilling really is beautiful or true or fulfilling).

The limitations of real-world human beings are reflected in the limitations of real-world markets. Given these imperfections, can anything be said in favor of capitalism?

Consider what is left once we’ve subtracted the mythology that makes the standard model of economics so mathematically elegant, so susceptible to chalkboard diagrams, and so vulnerable to legitimate student complaint. We are left only with what Albert O. Hirschmann famously labeled “exit.”

Exit is the ability of consumers — and producers — to leave (and conversely to enter into) any “deal” with each other that they find attractive, for any reason — or for no reason at all.

Consumer Exit is a consumer’s ability to purchase any goods or services that are for sale — at least those goods or services he knows about and can afford to buy. (That, of course, is the sticking point, and we’ll address it as soon as possible.) Purchases may be made for bad reasons — they may be mistakes. But consumer Exit also includes the ability to decline to repeat a given purchase; and that ability, we shall find, is essential.

Producer Exit occurs when consumers want to buy something that no producer thinks she can afford to sell them — even if she is mistaken in that belief. Consumer “demand,” because it is not discrete and knowable, may go undetected by potential suppliers; or a potential supplier may guess accurately at consumer demand, but, even if motivated by the potential for profit, be unable to infer a way to meet the demand with the means at her disposal. She may then Exit from producing that potential product — whether knowingly or out of ignorance.

If consumers themselves don’t know that they’d like to buy a potential product because it does not yet exist, or because it exists but has not been brought to their limited attention; or if consumers are aware of a product and want it, but lack the means to buy it at the price offered; then producers, failing to make money, may Exit from those potential “deals” by offering other goods, at prices they are able to charge and that (they guess) consumers may be willing, and able, to pay.

According to this Exit model of markets, entrepreneurs may overlook opportunities to make a profit, because of their ignorance of consumer desires. Alternatively, entrepreneurs may produce things that it turns out too few consumers want at that price; and if enough consumers exit from the opportunity to buy the product, the seller of the product will go out of business. Sometimes, however, an entrepreneur will be fortunate enough to hit on a product that is a success with consumers. From that fortuitous intersection of an imperfectly known supply with an imperfectly known demand, the producer may make a profit — a profit that she may not even have been pursuing.

From such fortuitous operations of Exit have come the flood of material wealth created ever since capitalism was (itself fortuitously) unleashed on the world by early modern Europeans. As long as participants in capitalism can keep consuming and producing whatever they are willing and able to produce and consume — and can exit from producing or consuming whatever they find unappealing to produce or consume — people may fortuitously discover ways of satisfying each other’s desires. Just as Adam Smith argued, then, people can provide for each other’s wants — or at least for those wants they can afford to pay to satisfy — even if they are selfish and have no interest in providing for each other.

But contrary to the implication economists have drawn from Smith, the mutual want-satisfaction of real-world capitalism would not require that people always are selfish; let alone that, in the pursuit of self-interest, they have perfect knowledge of what others want and of how to satisfy those “demands.” For capitalism to work in the real world, people need neither want nor know what the standard model assumes that they know and want. Acting from any conceivable motive, and without necessarily having any (accurate) idea of what they are doing, people under pure, laissez-faire capitalism would be impelled, as it were, to satisfy each other’s wants — simply because if a consumer buys a product that turns out to be distasteful or not worth the price, he could Exit by not buying it again. If a producer offered a product from which enough consumers exited, she would go out of business. But afterwards, or in the meantime, she — or someone else to whom the resources previously under her control flowed as she lost money — might hit on a better way to satisfy actual consumer “demand.”

UTOPIA, STATE, AND ANARCHY

We do not, of course, live under laissez-faire capitalism. What is usually called “capitalism” has as little resemblance to laissez faire as Stalinism had to Marx’s communist utopia. But does this mean that laissez-faire capitalism is as utopian as communism?

I don’t think so. The fact that something does not exist — and has not existed — doesn’t mean that it could not, or should not, exist. Unreality does not equal unrealism; an ideal is not necessarily a utopia. That Marxism has never existed no more counts against it, in principle, than the fact that laissez-faire capitalism has never existed counts against it. (There is an argument for the “impossibility” of communism; I will say a little more about it in due course. For now, it suffices to note that it is the argument Mises made in the 1920s, which Nozick read in the 1960s. But while Mises’s argument predicts the failure of real-world attempts to implement Marxism, it does not rely on the failure of a workable Marxism to exist thus far. Were it to have done so, Mises’s would have conflated the question of whether communism can exist with the question of whether it does.)

A more difficult problem that also, in the end, turns out to be a red herring is that even the scope in which laissez-faire capitalism could exist is anything but universal. There are public goods such as large-scale military defense — goods that are public because there is “no exit” from them. And because Exit itself requires a coercively enforced, un-Exitable legal framework, there will always be politically produced boundaries governing even the freest of markets. These considerations may prompt the reader to put implicit scare quotes around the phrase laissez-faire capitalism. I will refrain from using explicit scare quotes, however — and not just for the sake of easier reading. The fact that laissez-faire capitalism would necessarily be incomplete and legally enforced does not drain the phrase of all meaning.

Just as we should distinguish between the hyper-regulated “capitalism” of the contemporary world and the farless (or “-differently”) regulated capitalism that would maximize Exit, we should distinguish between the departures from “laissez faire” that have been imposed by the contingencies of real-world of politics, such as minimum- wage laws; and the departures that are logically necessary, such as the need for a legal framework. The logically necessary framework that maximizes Exit is precisely what we are evaluating, in effect, when we ask whether “laissez faire” is desirable. That is the question that the rest of part 2 will try to answer. But the fact that the real world of politics has contingently imposed Exitblocking legal regulations is a different matter, and one that should be a topic of scrutiny in its own right — see Part 3. And as long as we do not imagine that “laissez faire” is supposed to mean anarchism, we should not be detained, in considering whether Exit should be maximized or minimized, by the fact that even maximal Exit is not total freedom. In the realm of private goods, the coercive legal framework can allow more Exit or less.

“The maximum imaginable opportunity for Exit” is a working definition of laissez faire, and it is sufficient to allow us to evaluate such questions as whether minimum wages should be imposed, or income redistributed. In short: within “free” markets, the freedom to Exit would not at all be perfect, nor evenly distributed. In the real world of human beings, inequalities are as abundant as ignorance.

Yet even taking into account these caveats — indeed, by focusing on them — a case can be made for maximizing laissez-faire capitalism.

This case begins with the one thing positive that can be derived from the Exit model: it is not very demanding, either of our emotions or of our minds.

Motivationally, Exit-capitalism, “laissez-faire” capitalism, does not require that people be altruistic in order to end up helping each other out. (Nor does it require that they be selfish.) And cognitively, Exit does not require that people be very good at perceiving each other’s wants, or at reasoning about how to satisfy them.

Usually people judge laissez-faire capitalism against the alternatives — socialism, redistribution, or regulation — by focusing on motivational questions. Is laissez faire more realistic about people’s selfishness, and does an alternative to laissez faire demand that people be unrealistically selfless?

That question is not going to be my concern, for once we leave the standard economics model behind, motives can be treated as irrelevant. Motives may vary from person to person, from time to time, and from culture to culture. The Exit model of capitalism makes no assumptions about motives, so we don’t need to speculate about whether there is a universal tendency to egoism or to altruism, or about which motive is likely to prevail in all economies or in all polities.

Here I am taking my cue from the argument against socialism that Nozick learned from Mises. This argument had no more to do with whether socialists make utopian assumptions about people’s selflessness than with whether pure socialism had ever existed. Instead, Mises argued that central planners cannot know what they would need to know about “supply” and “demand” in order to keep an advanced industrial economy functioning — precisely because supply and demand curves do not exist apart from actual, historical purchases.

For the purpose of (relative) brevity, I am going to take it for granted that Mises was right about full-blown socialism; but to find out for yourself how the debate surrounding Mises’s argument played out in the 1930s and beyond, you should consult the paper in which he first made this claim, and the subsequent responses, both of which are available in F. A. Hayek’s Collectivist Economic Planning. For a more contemporary account of the debate, there is Don Lavoie’s The Socialist Calculation Debate Reconsidered.

Having bracketed Mises’s cognitive case against socialism for the sake of argument, however, I want to take a similarly cognitive approach to two remaining alternatives to laissez faire: attempts to regulate capitalism, and attempts to redistribute the wealth that it generates. Can either regulatory or redistributive capitalism (or both) do what Rawls’s theory of justice requires — move people out of poverty — better than can laissez faire? I have suggested that, because the Exit model of capitalism is not very demanding of people’s cognitive capacities (any more than it demands that people be either altruists or egoists), the answer may be No. But a suggestion is not an argument. A real argument (or at least the beginning of one) for the cognitive superiority of laissez faire requires comparing the realities of economics against those of politics.

I say that because whether capitalism is, cognitively, “not very demanding” is a relative question: not very demanding, in comparison to what?

In comparison to the achievement of truth, beauty, or happiness, it may be a very demanding standard indeed. In assuming that, by impelling people to satisfy each other’s wants, Exit-capitalism gives people what they really need, I have gone along with the typical economist’s equation of what people want with what they need — because Rawls does it, too. By enjoining us to alleviate poverty (to the greatest feasible extent), the difference principle calls on us to choose the economic system that maximizes the opportunity of the poor to buy what they want, in pursuit of whatever ends they choose.

To go farther and say that what they want to buy is what they really need is incompatible with recognizing their fallibility. An infallible knowledge of what people should want, however, can be dropped from the Exit model as readily as we have already dropped knowledge of what others (or even we ourselves) really do want. People need not know how best to achieve their aims, or what their true aims should be, if the difference principle is to be fulfilled — because that is irrelevant when we are comparing laissez faire to the alternatives. It is irrelevant, at least, as long as fallible people will be just as plentiful — and just as powerful — under regulatory or redistributive capitalism as under laissez faire. I will briefly take up the question of whether they might be less plentiful in government than in the economy in Part 3.

The ultimate question to which that and all the other subquestions of this essay is directed is: which economic system deals with people’s fallibility about what to want, as well as with their ignorance about what they do want, in a way that can best be expected to help the poor?

REGULATION VS. EXIT

Before we leave economics behind, however, we already have the tools to dispense with one of the two remaining alternatives to laissez faire (having merely bracketed for your further reading the socialist alternative). This alternative is the altruistic regulation of capitalism. What regulation does is block Exit. On that basis, it can be rejected. Allow me to prove that point by developing a little more just what Exit means.

In the Exit model, an entrepreneur may — as in the standard model — be too selfish to care about helping other people satisfy their wants. Or she may want to help others satisfy their wants — but only because, in doing so, she can make money. But, contrary to Adam Smith, she can have any other motive.

Likewise, while it is possible that the entrepreneur knows what consumers want, it is also possible that she doesn’t — even if her intention is to give them want they want, whether out of the goodness of her heart or merely in order to make money. A successful restaurateur may have gone into business for the sheer joy of it. And, if she begins making a profit, she may think her success is due to consumer demand for the type of food she serves, when the actual reason may be that her customers like the ambience of the setting. The customers themselves may be confused about why they like her restaurant — but none of that matters.

All that matters is that if enough customers didn’t like the restaurant, whatever the actual reason may be, and whatever the reason the restaurant was opened, its owner would not make a profit — because her (potential) customers would head for the exits.

Whatever people’s intentions about satisfying each other’s wants, and whatever their level of ignorance about how to satisfy each other’s wants — and whatever infallible people would want — laissez-faire capitalism would tend to select for behavior that does satisfy real people’s actual wants; and it would tend to select against behavior that doesn’t. Regardless of whether the restaurateur is motivated by financial gain, and regardless of whether she consciously understands how to satisfy consumer demand, if she fails to give consumers what they want — prompting them to exit — in the long run, she won’t be able to afford to operate. Even if, in a given case, the long run never arrives, the overall trend of laissez faire would be to weed out enterprises that don’t satisfy consumer wants, and to weed in enterprises that do.

All that capitalism requires, then, for it to achieve some satisfaction of people’s wants (setting aside until Part 3 the comparative question of how much it would satisfy them), is that people be “free” to exit from any exchange they find undesirable. That requirement is what is, in an absolute sense, as undemanding of people’s knowledge, and of their reasoning abilities, as it is of their good will.

When Exit opportunities are maximized, imperfect human participants in real-world capitalism need not think like the omniscient calculators of self-interest who inhabit the standard economic model, yet they may still tend to act like them.

For this to happen, market participants could as well be altruists as they could be rats in a maze — by which I do not mean to equate altruism with animalism. All I am suggesting is that under laissez faire, people would no more need to know what they are doing than they would need to be motivated to do it by self-interest. “The system” would steer them toward meeting each other’s wants as if they were trying to profit by doing so — regardless of their actual motives or their knowledge — as long as the system afforded them Exit opportunities: not opportunities to exit the system, but opportunities to exit a given transaction. Like rats in a maze, market participants need only stick around unthinkingly whenever they run into stimuli they find positive and therefore “want,” and run the other way when they encounter negative stimuli.

As long as they do that, laissez faire would tend to select for behavior that gives them what they want. Without using any of the assumptions of the standard economic model, then, we may nonetheless reach conclusions that are as anti-regulatory as those reached by a Martin Feldstein. For any regulation that interferes with the ability to exit — which is to say, any regulation that interferes with traditional, legally enforced private property “rights” — will hinder the selection process captured in the Exit model. In principle, Exit can occur in the complete absence of conscious knowledge, let alone perfect knowledge; and not only without the benefit of altruism, but without the benefit of selfishness or any other particular motive. The “stimuli” people find “positive” need not be those that make them happy, or even those they think will make them happy. The stimuli may be those that satisfy people’s love of each other, or of beauty, or of truth. Whatever they find themselves wanting will tend to be provided for them — as long as they can pay for it.

That brings us back to Rawls. He would say that Wilt Chamberlain is not entitled to the good luck that enables him to pay for a lot more things than those who aren’t so fortunate. Does that mean, however, that he shouldn’t be treated as if he is entitled to his fortune? Not necessarily. By treating him that way — by vesting him with traditional, “unregulated” private-property rights in “his” talents, regardless of whether or not he is responsible for having them in the first place — we allow him to do what he likes doing (for whatever reason): playing basketball. And we allow his fans to see the basketball games they want to watch. All parties to the transaction feel as if they are better off — or they would exit.

Now they may not actually be better off, in the sense of being closer to whatever ends they are seeking or think they are seeking or should seek. People make mistakes. But if it feels like a mistake, they can exit. And if it feels like it isn’t a mistake, then the transaction may have moved both parties closer to what they seek, which may be something worth seeking. That is exactly what the material progress created by “capitalism” — i.e., by Exit — really is: an upward trajectory in people’s felt ability to accomplish whatever they feel they want to accomplish.

For all the harsh realities built into this “model” of capitalism, it allows us to see how capitalism can do a lot of good, as long as it isn’t regulated beyond the enforcement of traditional private-property rights. Consider the all-too-real plight of someone at the opposite end of the spectrum of good fortune from Wilt Chamberlain — a woman named Mrs. Tratiwoon, who was born in the slums of Jakarta and who barely supports her son by rummaging with him through garbage dumps. Hers is a not-untypical case, reported in the New York Times.

Recently Nike opened a sweatshop nearby. If we are altruistic, our natural inclination may be to impose a regulation banning sweatshops, or at least regulations governing the conditions within them, in order to spare anyone from having to work in degrading conditions. But the New York Times reporters found that in the real world — given the alternatives facing her — Mrs. Tratiwoon considers a job in the sweatshop for her son to be such an improvement over his current situation that securing such a job for him is her highest aspiration. Can anyone blame her?

That is not a rhetorical question. Only if we can blame her — only if we believe that she is mistaken in wanting her son to work in the sweatshop rather than in the garbage dump — would it make sense for us to prevent him from doing so by banning the sweatshop. For if working in the sweatshop did not feel to him (perhaps mistakenly) like an improvement in his condition, then he could exit and go back to the garbage dump. And even if we were to indulge our humanitarian inclination to regulate the working conditions within or the wages paid by sweatshop without banning it, the cost imposed by these regulations might force the sweatshop to close down, and the perhaps-mistaken feeling of improvement in Mrs. Tratiwoon’s son’s standard of living that might be enabled by working there would vanish along with it.

This is the unfortunate tendency of even the most rudimentary regulations on the sweatshop, since by driving up the cost of operating it — by whatever increment — such regulations may make the sweatshop unfeasible to operate, in the judgment of Nike executives. Before demonstrating that we would be mistaken to interfere with Mrs. Tratiwoon’s son’s labor in the sweatshop by banning or otherwise regulating, it, allow me to summarize what is supposed to be realistic about the argument so far.

Even though the Nike executives have no access to a nonexistent “demand curve” for Nikes, the guesswork behind their decision to build factories in Indonesia in the first place seems to have been that inexpensive labor like that of Mrs. Tratiwoon’s son might make Nikes more attractive to consumers in the First World — who might exit from buying them, if they were more expensive than they could be when produced with cheap Indonesian labor. By opening the sweatshop, Philip Knight was acting as if he were a well-behaved participant in Feldstein’s model — even if, in reality, he was not motivated by self-interest; and even though he cannot possibly have had perfect knowledge of consumer demand.

The reason for his “as-if ” behavior is that under unregulated capitalism, the only kind of “deal” Nike can offer both to laborers and consumers is a deal from which both parties can exit. This ensures that laborers will only work for Nike, and that consumers will only buy from it, if they are satisfied by the terms of the deal — satisfied, that is, relative to the alternatives they perceive. Knight can only make enough money to stay in business if, in the long run, he acts as if he were guessing that opening a sweatshop in Jakarta would profit him by satisfying his customers’ “demand” at a price they are willing to pay — and if his guess turns out, fortuitously, to be accurate. If the unregulated sweatshop’s conditions are so poor or its wages are so low that the available workers don’t feel that working there improves their condition relative to the available opportunities, then they can stop working there. This means that despite the injustice of being born into such horrifying circumstances, unregulated capitalism would offer Mrs. Tratiwoon the opportunity to improve the position of the son she loves — or so she thinks. She may be wrong; but does it make sense to stop her, or him, from giving the sweatshop a try?

REGULATION VS. REDISTRIBUTION

One case in which it might make sense to stop her, by banning or otherwise regulating the sweatshop, is if we know better than she does what would make her son better off. Call this the parentalist (aka “paternalist”) reason for interfering with capitalism: it applies only if the deals that would be blocked by the regulation are not, as Nozick put it, “capitalist acts between consenting adults,” but are instead, in effect, capitalist acts between an adult and a child (e.g., Mrs. Tratiwoon’s son), or between two adults who should be treated as children — such that by blocking the deal, the government would be acting like a good parent in guarding a child’s best interests.

For the moment, I am going to register only a weak argument against this case for interference: namely, that it is difficult for us to know other people’s interests better than they themselves do — especially when, as in the example, we have never worked in a garbage dump, or a sweatshop, ourselves. This is a weak objection because it is certainly conceivable that one may know another person’s interests better than he himself does: that is what good parenting is all about. But determining the likelihood, as opposed to the mere possibility, that people in a real-world government will know other real-world people’s interests better than they do requires a comparison of real-world economics against realworld politics. Such a comparison will be one objective of Part 3, below.

Leaving aside the parentalist reason for regulated capitalism, then, the difference principle would seem to advise that we intervene in capitalism only if by doing so, we could somehow enhance rather than block the ability of the poor to exit from deals they don’t like. But what if, instead of blocking his Exit opportunities, we could offer Mrs. Tratiwoon’s son a better opportunity than either the sweatshop or the garbage dump? That is the difference between regulating capitalism and redistributing the wealth it produces. Rather than banning sweatshops or imposing regulations (or boycotts) that may make them less economically viable, why not expand the opportunities available to Mrs. Tratiwoon’s son by simply taxing the Philip Knights of the world and sending the money to Mrs. Tratiwoon’s son (or to his mother), so that he could exit from both the garbage dump and the sweatshop?

Such remedies for poverty have long been proposed by Milton Friedman (no relation). He would abolish all regulations — whether workplace-safety laws or minimum wages or compulsory unionization — that restrict people’s exit options. Instead of regulating capitalism, however, he has proposed the enactment of a negative income tax, meaning that, below the poverty line, one would receive income from the government rather than paying taxes. A similar idea is Friedman’s proposal for school vouchers, under which wealthy taxpayers would subsidize the education of the poor — who would be free to spend the subsidies on whatever school, public or private, that they choose.

Fully judging the feasibility of redistributive measures such as those will mean examining the real world of politics, since it is by means of politics that redistribution might be imposed.

For now, simply notice that the appearance in Jakarta of the factory that might help Mrs. Tratiwoon’s son is not a conjuring trick made possible by “the magic of the market.” There is no legerdemain involved, no mythology. There are not even “laws of supply and demand,” since there are no knowable supply and demand curves. But there are tendencies. Philip Knight may have been motivated to build the factory by altruism, or by what he considers to be the beauty of Nike shoes; and Mrs. Tratiwoon is motivated not by self-interest but by love. And yet, with no Feldsteinian assumptions, the sweatshop did appear, and it may be a good thing, too — for Mrs. Tratiwoon’s son, relative to his previous circumstances. What made the sweatshop appear was capitalism — and it was, in the relevant respects, “unregulated” capitalism.

The process that explains the appearance of the sweatshop — the selection process made possible by the exit option — applies not just to Mrs. Tratiwoon, not just to sweatshops, and not just to the Third World. The prosperity of the First World originated in the Industrial Revolution that generated the original sweatshops. In turn, those sweatshops provoked indignation against capitalism that is akin to our own indignation against sweatshops in the Third World. In the Second World — the world that practiced what used to be called “really existing” socialism — indignation against sweatshops led people to use politics to try to replace capitalism with communism.

Mises offered one prediction of why that project was unlikely to work out very well. But regardless of the explanation for the failure of really existing socialism — perhaps the ideal form, communism, never really was tried — it might have been to the advantage of our own great-grandparents that, in the West, political indignation, whether it should be called “communist” or not, failed to catch up with capitalism in the sweeping form that it did in the Soviet Union, Eastern Europe, Maoist China, and North Korea.

Relatively unregulated capitalism — in the relevant sense (wages and working conditions were unregulated), laissez-faire capitalism — produced the real-world sweatshops in which my own great-grandparents worked when they came from Rumania and Russia to New York City at the beginning of the last century. Prosperity and the promise of freedom from religious persecution drew them here; and it seems possible that the prosperity was due to the abundant economic opportunity — Exit opportunity — that distinguished the New World from the Old. Had labor regulations driven up the cost of employing my great-grandparents, they might have had to go back; or there might not have been the prosperity that lured them here in the first place.

On the other hand, and setting aside persecution on the grounds of their Judaism, it is possible that if the Rumanian or Russian governments, or a world government, had redistributed wealth to my great-grandparents, they wouldn’t have had to choose between the sweatshops of the New World and the even worse working conditions of the Old. Why, then, shouldn’t governments redistribute wealth within a capitalist framework, so that the Exit opportunities of the poor are multiplied; rather than regulating capitalism in ways that restrict people’s exit opportunities?

An answer to that question requires a “model” of politics that is as free of chalkboard assumptions as is our de-Feldsteinized model of economics. And that model will also provide a rejoinder to the parentalist case for regulations.

3. ANSWERING RAWLS’S QUESTION BY STUDYING POLITICS

Before considering the politics of wealth redistribution, let us ask a more mundane political question: How did George W. Bush become the 43rd President of the United States?

The first step occurred in 1999, when Bush became the overwhelming front-runner for the Republican party’s nomination. He reached this status by gaining a critical mass of financial contributions. That helped move a series of prominent Republicans to endorse his candidacy — which brought in even more donations. The combination of money and endorsements Bush had accumulated then persuaded several strong competitors to “exit” from what looked like a hopeless race.

How did Bush secure the donations that started this process? They were prompted by the fact that in early polls — long before Bush had even formally declared his candidacy — he seemed to be the overwhelming favorite among likely Republican primary voters. Donors prefer to give money to candidates who are likely to win.

Why, then, did Bush lead in the early polling? A Zogby survey of likely Republican primary voters taken in April of 1999 showed that with the candidates’ public positions identified but their names withheld, Bush drew the allegiance of only a quarter of the survey respondents. But once the candidates’ names were revealed, “George W. Bush” gained a commanding 47 percent of the respondents — with the second-place candidate, Elizabeth Dole, garnering a mere 17 percent.

Once they knew his name, Republican voters must have favored Bush either because they presumed that the son of a president is likely to make a good president himself; or because they mistakenly thought that “George W. Bush” was actually his father, George H. W. Bush, who had already served as president.

The latter interpretation is suggested by a large body of public-opinion research, which demonstrates that the public is abysmally ignorant of all things political. In 1964, for instance, at the height of the Cold War — after the Cuban Missile Crisis, in which the world was almost incinerated when Russia tried to place nuclear missiles off the coast of Florida — 62 percent of the U.S. public failed to realize that Russia was not a member of NATO. Twenty-five years later, 43 percent of the public did not know what a recession is. In the same year, 71 percent could not identify their U.S. Representative. In 1979, 76 percent could not explain the First Amendment (in even the vaguest way).

The examples could be multiplied almost endlessly, and they may add up to the most consistent finding in social science: the public is unfathomably underinformed about politics.

Nor is political ignorance confined to Americans. On the day I write these words (March 9, 2003), the following stories appeared side by side in the New York Times: First, David Rohde reports that in Iraq, college students who are survivors of Saddam Hussein’s 1988 poison- gas attack on the Kurdish stronghold of Halabja are convinced — by what they read and by what they see on TV — that the United States was somehow behind the attack, because America is (they have been told), and long has been, at war with the world’s Muslims — apparently unaware of the U.S. defense of Muslims in Kosovo. For like reasons, Kurdish students also erroneously believe that thousands of civilians were killed by the U.S. invasion of Afghanistan. And many of them think that “Osama bin Laden may be a CIA agent and that a majority of members of the United States Congress are Jews.” (Gallup polls conducted throughout the Middle East after September 11 found such views to be very widely shared.)

On the same page, Nina Bernstein reports from Berlin that the dominant opinion among German college students is that the Allied firebombing of Dresden during World War II was an act of wanton cruelty, rather than one motivated (whether justifiably or not) by the military campaign to defeat Adolf Hitler. The students’ opinion, which they appear to derive from an endless stream of anti-American propaganda in the contemporary German media — some of it imported from America, such as Michael Moore’s “Bowling for Columbine” — makes the students receptive to theories that are as wild as those believed by many Kurdish students: that President Bush was actually behind the September 11 attacks, for instance; and that the U.S. moon landings of the 1960s and 70s were hoaxes.

“THE FOG OF WAR”

Are the German and Kurdish students uniquely prone to political misjudgments? Hardly. I invite you to step with me onto highly controversial ground, by stepping back from your convictions about the recent war.

My aim is to challenge your beliefs, not to coddle them. Under the assumption that most of my readers will have opposed the war, therefore, I will dwell on the defects of one of the most prominent antiwar arguments, instead of the lapses in reasoning made by proponents of the war. It should be evident, then, that my aim is not to address whether the war was justified. I intend only to illustrate a larger point about human reasoning in politics by focusing on one of the most common reasons given for opposing the war, leaving aside many other arguments for the war, some of which were far more defensible. The antiwar reason on which I will focus is summarized in the slogan “No Blood for Oil.”

I will stipulate for the sake of argument that the protesters who used this slogan were accurate in their assessment of what Bush’s motives were. My question is why they cared about his motives to begin with. They seemed to assume that the measure of a good policy, or of a just war, is its motive, not its good or its just effects. Conceding, for the sake of argument, that Bush was indeed motivated by a lust for Iraqi oil, is it inconceivable that a just war could be fought for unjust reasons?

Even if Bush cared nothing for the oppression of the Iraqi people; or for the possibility that Saddam Hussein would acquire, or sell to terrorists, weapons of mass destruction (WMD) — so what? If the war turned out to have the effect of liberating the Iraqis from a police state, under which, according to Amnesty International and Human Rights Watch, hundreds of thousands of Iraqis had “disappeared”; or if the war turned out to have the effect of keeping Saddam Hussein, or his pathological sons, from killing tens or hundreds of thousands of people by deploying weapons of mass destruction against a major Israeli or American city — then of what relevance are the motives of the warmakers?

Good results can come from bad motives. (And if the results I have just outlined might have been achieved by the war, then had protests stopped the war, bad results might have come from the protesters’ good intentions.) But there seemed to be very little recognition of that possibility among the protesters with whom I spoke. Their preoccupation with the president’s (presumptively) evil motives amounted to sidestepping the possible justifications for the war by means of an ad hominem argument.

Judging from my conversations with students, one reason for their preoccupation with motives is that they were simply unaware of the recent history of Iraq. They were too young to remember that, at the end of the first Gulf War, the retreating Iraqi army left behind so much evidence of Saddam Hussein’s WMD-development programs that in response, the United Nations — not the United States — imposed drastic economic sanctions, and an intrusive inspections regime, on Iraq. In the years that followed, UN inspectors uncovered even more evidence: government laboratories devoted to refining uranium into weapons-grade plutonium; shells and missiles modified to carry weapons of mass destruction; and vast quantities of weaponized anthrax and mustard gas, as well as the components of VX gas and botulinum toxin.

In 1998, following these discoveries, Iraq expelled the UN inspectors, who were readmitted last year only after the United States had begun assembling an army on Iraq’s borders. In the interim, however, high-ranking Iraqi scientists and officials — including Saddam Hussein’s sonin- law, Lt. Gen. Hussein Kamel (who later returned to Iraq and was executed, along with his family) — escaped from Iraq and made known (in the pages of such publications as the New Yorker) the fact that, even while the inspectors had been in Iraq, the Iraqi government had become adept at continuing its WMD research by using both hidden and mobile facilities.

Had the protesters been aware of these facts, would it have been so obvious to them that the rationales offered by President Bush (and Prime Minister Blair) for invading Iraq must be lies, such that their motives for lying, rather than the possibly good reasons for a war, became paramount?

The antiwar protesters who chanted “No Blood for Oil” weren’t any more foolish, stupid, or delusional than their German and Kurdish peers; or the millions of antiwar protesters around the world; or the Republican voters who apparently confused George W. Bush with George H. W. Bush. But they, like all of us, were underinformed about “the facts.”

Apparently failing to grasp that it was not the former president who was running in 2000, Republican voters favored “Bush.” Apparently not knowing that there may in fact be defensible reasons for an invasion of Iraq, many protesters assumed that Bush acted out of indefensible ones. And apparently not thinking through the possibility that a good action might, in fact, stem from a bad motive, many of the same protesters became fixated on the president’s motives. The credo of The Dissident seems applicable to the rallying cry “No Blood for Oil”: “The opponent” — in this case, Bush — “has always to be explained, and the last explanation that we ever look for is that he sees a different set of facts.”

The difficulty in accurately perceiving the facts is graphically evident during what is known as “the fog of war.” But misperceptions of the world do not occur only during the confusion of the battlefield. They can strike when deliberating about whether to engage in military conflict in the first place — or when deliberating about anything else. The fog of war is just an especially compelling reminder of the fog of politics; which is, in turn, a subcategory of the fog of life. In all of these arenas, we do not just need to know “the facts.” Knowing all of the facts — getting what NBC News calls “the complete picture” — would be both impossible (we are not gods) and pointless. The facts we perceive and retain are determined by our conceptions of what is important, and those conceptions are determined by both our ends and by the means we think necessary to achieve them. In determining the most rational means to an end, we need to be able to predict the consequences that various means would produce. Such predictions require that we know how facts interact with each other. So we need theories, however implicit, about which causes will have which effects. From theories about the interaction of facts will stem different understandings of which facts are relevant; and, often, different understandings of which facts are true.

OUR PRIMITIVE REASONING

Yet in arriving at knowledge of the facts of politics, and knowledge of which theories about the facts are true, our limited powers of concentration, our limited experience, and the limited amount of time we can devote to learning about the political world all run smack against the enormous complexity of that world. In the confrontation between our minds and the world of politics, human fallibility becomes especially pronounced.

For example, Walter Lippmann wrote,

there are few big issues in public life where cause and effect are obvious at once....It is not surprising that the commonest form of reasoning is the intuitive post hoc ergo propter hoc. The more untrained a mind, the more readily it works out a theory that two things that catch its attention at the same time are causally related.

In confirmation of Lippmann’s conjecture, publicopinion research has found that, far from basing their electoral decisions on valid reasoning about relevant facts, most people vote in accordance with their perception of such elusive phenomena as “the nature of the times”: if the voter’s country is prosperous, for instance, then the incumbent party must be responsible, and therefore that party warrants re-election — even if, in fact, the incumbent party’s policies have nothing to do with the prosperity.

But nature-of-the-times reasoning is hardly blameworthy. Given the complexity of a modern economy, how can anyone, at least anyone without an Economics Ph.D. — or, given the argument of Part 2, maybe even with an Economics Ph.D. — know what is really responsible for prosperity or recession? How, in short, can one know which economic theory is true? In the face of such complexity, we fall back on intuitively plausible but logically invalid forms of reasoning. If times are good (or bad), the incumbent party must be responsible, post hoc ergo propter hoc. Just as invalid, but just as natural, is the protesters’ argumentum ad hominem.

Both post-hoc-ergo-propter-hoc and ad-hominem arguments are non sequiturs. It does not follow from the temporal sequence of two factors that one caused the other; correlation is not causation. And it does not follow from somebody’s (putatively) malevolent motives for doing something that that thing should not be done.

But enough Latin. My point is that given our ignorance about the political world, lapses in reasoning about it are commonplace. More worrisome — because it suggests that such lapses are our default option — is the fact that intuitively they seem justified, no matter how logically fallacious they really are.

A discrepancy between our intuitions and the world of political facts is not surprising. Our hunter-gatherer ancestors, living for hundreds of thousands of years on the knife-edge of subsistence, evolved to make decisions in a relatively simple and personalistic context.

But once the Neolithic revolution created a surplus of food that made vast, impersonal civilizations possible, our genetic evolution stopped: the agricultural surplus made possible not only civilization, but the sustenance of those who otherwise would have died off before reproducing. In the relatively brief period of 6000 years since the emergence of “civilization,” would it not be remarkable if we had somehow adapted our minds to reason clearly about the facts of ever-more-complicated forms of society?

It seems improbable. As Alfred North Whitehead put it: it is a profoundly erroneous truism, repeated by all the copy-books and by eminent people when they are making speeches, that we should cultivate the habit of thinking what we are doing. The precise opposite is the case. Civilization advances by extending the number of important operations which we can perform without thinking about them.

In hunter-gatherer societies, each individual’s power over the others is visible as the immediate cause of such effects as life or death, misery or ecstasy. When each individual’s actions directly affect the others’ lives, post hoc may well imply propter hoc. Moreover, in such intimate circumstances, the discernment of motives assumes paramount importance — ad hominem. In post- Neolithic civilizations, however, millions or billions of people affect each other in ways that are, by and large, unseen. In such societies, therefore, cause and effect are too indirect to untangle with ease; causes may have nothing at all to do with motives; and motives are, in any event, well-nigh impossible to discern, given the anonymous nature of our connection with the overwhelming majority of the people whose actions affect us.

THE FALSE GOD OF EXPERTISE

Lippmann’s reference to “the untrained mind” may suggest that intensive logical training, and intensive training in the complexities of modern civilization, can combat the tendency to make political mistakes. And to some extent, they can. But our propensity to reason poorly and without adequate information in the political realm is not a prescription for replacing democracy with rule by welltrained experts (although that was the prescription to which Lippmann was inclined). The fact that experts disagree with each other is enough to remind us that they, too, are human, and therefore that their powers of perception and reasoning are limited.

In the natural sciences, experts can overcome the human tendency toward fallacious reasoning; and toward the selective perception and retention of facts; and, as well, toward defensively closed minds — even if this transcendence of the all-too-human occurs only through the process of cohort replacement described by Thomas Kuhn in The Structure of Scientific Revolutions. When the closed-minded adherents of the previous theoretical paradigm die off, “anomalous” evidence derived from controlled experiments, which falsifies their paradigm, can be assimilated by a new cohort of experts, and the fallacious reasoning that fended off the threat the anomalies posed to the old paradigm can be exposed.

In that way, the philosopher Karl Popper’s falsification- based scientific ideal is embodied in real-world natural science, even though it is a rare scientist who tries to falsify his own theory, let alone displaying other traits of a truly open mind. In the social sciences, however, there is precious little real progress, and few would be so foolish as to claim that the orthodoxies of the moment in any given discipline are anything but fads. The reason for the faddishness of social science is that unlike in natural science, in social science it is impossible to conduct controlled experiments that would falsify the received wisdom. A modern economy, for example, is sufficiently complicated that when there is a recession, evidence can be adduced to support virtually any theory about its causes. Moreover, the use of statistical comparisons of different recessions, as a proxy for laboratory experimentation, is only as good as the groundless assumption that there are universal laws of society — and only as good as the further assumption that those laws express themselves in statistically tractable form.

None of this is to say that there is no social-scientific truth, or even that it cannot be discovered. It is to say, however, that discovering it demands an inhuman detachment from paradigmatic beliefs, and an inhuman commitment to rigorous reasoning. These ideals may be attainable, but their attainment by any given social scientist, let alone by social science as a whole, is unlikely.

Meanwhile, what determines the conventional wisdom at any given moment in a particular social science is the very thing — human nature — that natural science manages to overcome, by means of the Kuhnian simulacrum of Popper’s open-minded ideal. A given social scientist’s theoretical paradigm can typically be accounted for by the ideas she has absorbed from her culture, especially her undergraduate and graduate education.

Her research will be directed toward topics that spin out the logic — however illogical it may be — of that culture. In this respect, the situation is the same in social science as in natural science. The difference between the two arises from the fact that without the ability to conduct controlled experiments, social-scientific paradigm shifts, which seem so momentous to those undertaking them and to those who subsequently learn about them, are — without a single historical exception of which I am aware, except the advent of evolutionary psychology — actually instances of what Freud dubbed “the narcissism of small differences.”

Marx, for example, took from classical economics the assumptions that individuals pursue financial self-interest, and that individuals infallibly infer what course of action will best achieve that interest. Therefore, according to classical economics, whatever individuals do is functional in that it serves to further their ends. The “revolutionary advance” Marx made was to redefine the self-interested subject as collective rather than individual.

The members of the proletariat would intuit from the exploitative conditions of its labor that communism would be the means to the end of its self-interest; and, after having overthrown capitalism, the proletariat would infer the allocation of labor and resources that would meet everyone’s needs. Both class consciousness and consciousness of how to administer a communist society, being functional to the interests of the proletariat, would essentially be self-evident to its members. Durkheim went a step further, positing that “society” as a whole somehow knows its needs and creates institutions that meet them. In this way he accounted for a noteworthy fact: the omnipresence of regulatory states in nineteenth-century capitalist societies. Since (he assumed, without argument) “any fact of a vital nature...cannot survive if it does not serve a purpose or correspond to some need,” the regulatory state must be in some way necessary. Durkheim therefore explained the regulatory state by means of an assumption with which we are, 110 years later, still thoroughly imbued: the assumption that modern capitalism must be in need of correction by the modern state.

Foucault, who is widely thought to be another great iconoclast, simply updated Marx to account for the failure of a genuine proletarian revolution to occur. The resulting theory might be called “dysfunctionalism.” Whatever institutions exist — “carceral” bureaucracies, for example — must, Foucault assumed, serve the oppressive interests of the ruling class. Is it fair for me to claim that Foucault’s theory is assumed rather than proved? Yes: Foucault narrates the transition from one hegemonic “discourse” to another without providing evidence of conscious intervention, each successive discourse somehow managing to prop up a new politicoeconomic order without any actual human beings conceptualizing the nefarious needs of the successive ruling classes. In the absence of evidence that oppression was instituted to serve class interests, Foucault’s casual references to the functionality of carceral society for “the bourgeoisie” must be credited solely to his unexamined assumptions. Although he was a profound observer of the subtleties of interpersonal coercion, Foucault was not at his best when it came to explaining human action in particular times and places — which is to say, all human action — even though, as an historian, human action in particular times and places was Foucault’s field of “expertise.”

Like his functionalist predecessors, Foucault failed to take seriously the ideas — the theories about reality — that may move human beings to act. When Foucault does occasionally eschew the passive voice and discuss the reasoning of real people who act in the political realm, such as Jeremy Bentham and other prison reformers, he quotes them selectively enough that he downplays their humanitarian and indeed radical aims, since those contradict his premise that self-interest-serving discourses, not theorizing human beings (such as Foucault himself), move the world.

Durkheim, similarly, did not entertain the possibility that the regulatory state might have been caused not by some automatic “societal” adjustment to self-evident social needs, but by the actions of people who believed, even if only at the level of assumption, the theory that such a state was necessary (as did Durkheim). Likewise, in Marx’s case it turned out that the proletariat never did recognize its supposed class interest in overthrowing capitalism. The only so-called communist revolutions to occur were coups d’état carried out in agricultural rather than industrial societies by revolutionary vanguards moved to action by theories derived from Karl Marx, not by a direct apprehension of proletarian interests. Again, having attained power, it turned out that it was no more self-evident how to plan the allocation of resources so as to meet everyone’s needs than Ludwig von Mises — the Austrian economist whose work prompted Robert Nozick’s switch from Left to Right — had predicted it would be.

And in the case of the classical economists, it turns out that individuals often have mistaken theories about the direction of their interests and about the best means of satisfying them, leading to regretted consumer purchases, bankrupted investors, and shuttered factories. The logical error of functionalism is precisely to reason post hoc, ergo propter hoc. If, a` la Foucault, in modern societies workers are well disciplined, then (Foucault assumes) it is not due to a contingent chain of cultural causation such as the one described in Max Weber’s must be due to the emergence of a disciplinary discourse that necessarily coincides with the economic interests of the bourgeoisie.

If, a` la Durkheim, we live under regulatory states, it cannot be (Durkheim assumes) because people demanded regulations that they thought were necessary — the better, they believed, to meet social needs by preventing such scandals as sweatshops (not to beat a dead horse, but sweatshops seem to be the theme of this issue of The Dissident). Instead, the regulatory state must be a mysterious manifestation of “social needs” directly apprehended by “society.” The correlation of two facts is mistaken for the causation of one by the other — and in the case of Durkheim (like the cases of Marx and Foucault), the presumed cause (social needs) of the effect (the regulatory state) is understood in a way that overlooks the possibility that the ideas that may really have caused the effect may themselves, far from having been mere recognitions of the self-evident, have stemmed from a theory that confused a partial solution to the problem of poverty (sweatshops) with the cause of the problem (which might actually have been not the lack of regulation, but the scarcity and uneven distribution of resources — including the talents that consumers happen to value in a given time and place).

Finally, if, a` la Smith, we observe the satisfaction of wants by (what Marx would call) capitalists, the cause must be the unerring coincidence of consumer satisfaction with capitalists’ direct apprehension of consumer “demand,” motivated by capitalists’ self-interest, and devoid of the need for theoretical guesswork about what actual consumers want.

While some social scientists have noted the logical defects of functionalism, and others have pointed to the resulting errors in the interpretation of facts that have been produced by the likes of Smith, Marx, Durkheim, and Foucault, most have not. If we consider the spectrum of opinion represented by contemporary social-scientific expertise, ranging from Martin Feldstein on the Right to Marxists and Foucauldians on the Left, it is apparent that functionalism is alive and well (which is not to suggest that there are not other, equally erroneous social-scientific theories that are alive and well).

On the other hand, little social science that is both nontrivial and rigorously demonstrated has been forthcoming in the two centuries in which modern societies have been studied; and what profound discoveries have been made — for example, the discovery of public ignorance about most things political — have lain dormant. Considering that the work of such giants as Weber, Pareto, and Mises occurred early in the twentieth century and has been largely forgotten, even as half a dozen fads have poured sour old wine like functionalism into fashionable new bottles, “regress” might be better than “progress” to describe the direction of social science.

Given the track record of the social sciences, how can the real social-scientific experts — the ones who are right — be distinguished from the frauds?

An electorate capable of answering this question correctly would itself have to be more expert than the putative experts — in which case it would have no need for “expert” advice in the first place. Short of vox populi, vox dei, however, the experts upon whom the public relies are at least as likely to be wrong as to be right, just by virtue of the odds — and that is assuming that only two expert opinions are possible, and that there is an even chance that one of them is right. The real world trying to understand that world consists of imperfect human beings. When not relying on simplistic theories of cause and effect, or on the natural human propensity to use motives as a proxy for validity, how can people detect which experts are worth listening to?

It is in the nature of ignorance that even when we are aware of it in a vague way, we cannot pinpoint exactly what it is (not just the field, but the information from that field) that we should know but don’t. If we knew what we didn’t know, we would already know it. By the same token, we cannot tell which experts are right, or we wouldn’t need their help. We can only infer their rightness by means of such heuristics as doctoral degrees, universities attended, pedantry, eloquence, and wit. That these proxies for true expertise are pathetically inadequate should be evident from considering the great intelligence and flair, the extremely pedantic absorption in the doctrines of their mentors, and the unsurpassed educational pedigrees of the “experts” who have developed and embraced such fallacious theories as functionalism.

It may be objected that evolutionary psychology itself gives a functionalist account of people’s cognitive capacities. But all functionalisms are not created equal. Unlike the types of functionalism I have criticized, evolutionary psychology posits a mechanism — natural selection through inadvertent “competition” between individuals with slightly varying genes — that explains the survival of traits that would have been functional in a hunter-gatherer context (but not so functional in a civilizational context).

While Marx’s and Durkheim’s views were influenced by the Hegelian and Darwinian versions of historical evolution, Marx and Durkheim provided no substitute for the Hegelian Spirit or for Darwinian natural selection as a mechanism that would screen out dysfunctional perceptions of where the interests of a class or of a society lay. Evolutionary psychology, however, requires no substitute for the mechanism of natural selection, since evolutionary psychology is based on evidence that our cognitive and emotional equipment is as genetically inherited as the color of our eyes. Evolutionary psychology is a theory, and it is a functionalist theory, but it does not seem to be either inadequate or poorly reasoned.

EXIT VS. VOICE

In Part 2, I argued that the complexities of the real world render unrealistic the economists’ assumptions of predictable supply and demand and predictably motivated suppliers and demanders. So the problem, complexity, to which I am attributing political ignorance is very similar to the problem facing real-world economic decision makers.

But in making economic decisions, insufficiently informed people, prone to errors in reasoning, have one advantage that they usually lack in politics. In making economic decisions for themselves — as opposed to evaluating theories about the economy (or the civilization) as a whole — people don’t need to be well informed, and they don’t need to think about things clearly. All they need to do is react to positive or negative stimuli, with no more of an accurate grasp of what they are doing, or of why, than is possessed by rats in a maze.

Politics produces positive and negative stimuli, too. But in our political behavior, unlike our economic behavior, we cannot simply leave the negative stimuli behind, by means of Exit: unless we physically emigrate from the political jurisdiction in which we live — as my Rumanian and Russian great-grandparents did — the only way to address a negative political situation is to exercise the feeble power that Albert Hirschman contrasted against Exit: Voice. Voice requires us not merely to react to stimuli, but to think through the cause of a negative stimulus so as to infer what policies would correct the problem. In a passage of his Capitalism, Socialism, and Democracy that is politically incorrect at too many levels to analyze, Joseph Schumpeter put the contrast between Exit and Voice as succinctly as possible.

Comparing the blandishments of advertisers to those of politicians, he wrote that “the picture of the prettiest girl that ever lived will prove powerless in the long run to maintain the sales of a bad cigarette.” What Schumpeter meant is that no cigarette advertisement, however alluring, can overcome the negative stimulus of a cigarette that tastes bad. That stimulus that will tend to lead the disillusioned smoker to exit, by switching brands — as long as there are other brands to which the smoker can switch, and that she can afford to buy.

But, Schumpeter continued, “there is no equally effective safeguard in the case of political decisions. Many decisions of fateful importance are of a nature that makes it impossible for the public to experiment with them at its leisure and at moderate cost. Even if that is possible, however, judgment is as a rule not so easy to arrive at as it is in the case of the cigarette, because effects are less easy to interpret.”

Schumpeter is making two points. First, in politics, information about the negative (or positive) consequences of our actions usually requires second-hand reporting, or mediation, before decision makers perceive it. Second, in making political decisions, not only the information we perceive, but our view of what information is needed and of how best to interpret it, must be mediated by theories of the sort that would disentangle the various possible chains of causation that occur when controlled experiment is impossible.

If a cigarette tastes bad, the smoker doesn’t need “the complete picture,” and he doesn’t need NBC News to give it to him. Relatively speaking, the bad sensation is immediate: it is direct feedback from a private decision, something that is rarely available from public decisions. By contrast, our inability to “experiment at leisure” with public policies means that although societal effects can be as invisible as prions, neither the professional social scientist nor the member of the public (whom Voice places in the position of amateur social scientist) can perform tests that would establish which policies would have desirable effects.

Even in the relatively simple world of foreign policy, where at least the motives of one’s battlefield opponents matter, and where outcomes are relatively clear (war or peace? victory or defeat?), it is impossible to determine the cause of those outcomes with scientific precision. This is because one cannot, say, perform an experiment to determine whether a victory in a particular war was due to high military spending, high morale, good strategy, superior technology, some or all of the above, or none of the above. The same is true, only more so, of economic policy. Is a recession the result of the adoption of a president’s tax cuts, or of the failure of Congress to enact even larger tax cuts, or of Federal Reserve policy, or of fear of terrorism? No experiments can test which of these scenarios are “counterfactual” and which one of them is factual.

But in Exiting from the bad cigarette, the smoker needn’t concern himself with any counterfactual except one that is susceptible to experiment: will Brand B taste better than Brand A? As a result, once the smoker senses his distaste, he need not produce any theory, intuitively plausible or not, about why the cigarette tastes bad to him. All he has to do is try to find a better-tasting brand. Indeed, even an “expert” cigarette manufacturer may not be able to produce a sound theory about what makes for a good-tasting cigarette — which is why she may end up going broke.

As long as we can exit from a bad-“tasting” deal, we can be ignorant about the cause of that bad taste — blissfully ignorant. Not only don’t we need a sound theory about causation; we don’t need any (consciously held) theory at all. Exit is an error-correction mechanism that spares us the need to arrive at a sound theory about our error. Direct feedback substitutes for theorizing about indirect causation. But in politics we must theorize, at least implicitly, about what has gone wrong, because feedback such as military defeat or a recession requires interpretation if we are to know its causes — and correct them.

Exit tends to select for good decisions because, unlike the standard economic model, its starting point is human fallibility, not human omniscience. When either consumers or entrepreneurs, as fallible human beings, rely on unwarranted logical leaps or misinformation, or both, they can correct their mistakes through Exit without even being aware of what they are doing, let alone of what mistake they had committed.

In politics, unfortunately, ignorance is hardly blissful, for using Voice requires that we “see life steadily and see it whole” — as Lippmann put it. We must consciously understand, in all its complexity, the world that government policies are designed to affect. If we fail, and if the policies in question do not fortuitously produce positive consequences, there is no feasible corrective: the social world is too complicated to offer the kind of feedback that would enable us to distinguish good from bad theories about the source of negative feedback, even when — in the extreme instance — the feedback itself is unambiguously negative; for example, during the Great Depression. Even when it is clear that something has gone wrong, it is far from clear what that something is and therefore how to fix it. But our primitive reasoning may persuade us that the answer is obvious.

If the government produced Schumpeter’s bad-tasting cigarette, smokers would have to choose from among the theories advanced by various politicians about what had gone wrong. Different political parties might compete for votes by calling for a change in the tobacco, or the rolling paper, or the other ingredients, or the conditions in the factory: each of these intuitively “obvious” solutions, a politician might promise, would surely put a stop to the awful taste. Such is the world of Voice. In the world of Exit, cigarette consumers need not think about such things, and cigarette manufacturers may be incorrect in what they think about them — like our restaurateur. The ability to leave behind the bad taste, none the wiser as to its true cause, will tend, over time, to select for better-tasting products.

ENDS VS. MEANS

If you are starting to agree with my pessimism about our ability to see the political world steadily and see it whole, the next step is to recognize that your agreement would make you a member of a very small (albeit perhaps misguided!) intellectual elite. Most of your peers, indeed most human beings — including those who may actually be helped by, say, sweatshops — have never heard of Exit, and they tend to assume that social problems have political solutions. Nor do they have time to read several thousand words of close reasoning that argues to the contrary.

So their impulse, the intuitive impulse, is to ban or otherwise regulate sweatshops. Focusing on the visible evil, poverty (at least once the media have brought it to their attention), and perhaps imagining the greed of the sweatshop owner, or assuming that whatever evils they observe are attributable to “corporations” or a vaguely defined “capitalism,” they perversely do not consider the possible indirect effect of regulating capitalism: consigning Mrs. Tratiwoon’s son to the garbage dump.

The preponderance of such faulty reasoning in politics would seem to establish a presumptive case against regulatory Voice, as long as the regulations enacted through Voice are not promulgated by a government that is superhumanly expert about means, or Platonically expert about ends.

Since, at the moment, everyone in the world seems to be clamoring not for Platonic guardianship, but for democracy, I will restrict myself to considering the likely results of democratic regulation.

In a democracy, the people being regulated, in their capacity as consumers, entrepreneurs, or workers, are the same ones who would approve the regulations in their capacity as voters. Thus, I can think of no plausible reason why the regulations they voted for would be likelier to aim at the true Good, whatever it is, than would the activity the regulations are designed to hinder. So my earlier, weak case against parentalism — based on the unfamiliarity of regulators, as a group, with the particular circumstances of those being regulated — now becomes strong.

On the one hand, the regulators may aim at bad ends; if they at least had an asymmetrical advantage over the people who are the objects of regulation on that score, the regulators’ ignorance about the regulatees’ individual circumstances might have been outweighed by the regulators’ superior knowledge of the Good. And on the other hand, when it comes to regulating the actions people take as means to their ends, there is an asymmetry in favor of the regulatees — even when they are (in principle) the same people as the regulators. In using Voice to block Exit, we, the people need an understanding of the causal interactions between facts about society as a whole, not just knowledge of the particular facts relevant to our individual lives, that we seem ill equipped to achieve. In relying on the Exit that would be blocked by regulatory Voice, however, we require no such grasp of the world’s complexity — although, clearly, our Exit-based decisions (such as whether or not to smoke to begin with) will not be infallible.

Neither individual-level nor social-level complexity can be taken into account, except in an abstract way, by Voice. Regulations that take account of it in the concrete way that account should be taken of it — regulations that grasp the particularity of the facts of the regulatees’ lives, and the causal connections between the facts of the social world — would require omniscient regulators.

WORKING OUR WAY BACK TO RAWLS

Now we can turn, at last, to consider the other alternative to laissez-faire capitalism: Milton Friedman’s answer to the Rawlsian question — not regulating capitalism, which would diminish people’s choices; but redistributing the wealth that capitalism produces, so that nobody would face the Hobson’s choice between a garbage dump and a sweatshop.

Economics has come up with no reason to oppose all redistribution. Sometimes — given a certain set of motives, and a high enough tax to finance the redistribution of wealth — redistribution may discourage enterprise or encourage dependency. But in other cases it will not. And even if it does, if that is the only way to prevent starvation, it is surely a price worth paying. However, the ubiquity of political ignorance does provide a reason to be at least very dubious about the prospects for beneficial (Rawlsian) redistribution. This reason has both a logical and an historical dimension.

Logically, if we open the political door to redistributive taxation, how do we close it to intuitively appealing but counterproductive regulations such as those deployed against sweatshops? If people could “see the unseen” clearly enough to endorse only political intervention in markets that increases exit opportunities rather than diminishing them, then they might draw the line at redistribution that gives the poor more options, ruling out regulations — and forms of wealth redistribution — that close options off. But seeing the unseen, or rather imagining it clearly, is improbable. I have relied on the example of Mrs. Tratiwoon’s son to illustrate a particular unseen effect of well-motivated public policy.

But the difficulty — given our propensity to see the world too brusquely to notice the difference between “George W. Bush” and “George H. W. Bush,” let alone to notice the difference between a good reason and a bad one — is precisely in noticing all of the unseen facts, and all of their unseen causes, clearly enough to solve problems through Voice rather than aggravating them. The undisputed findings of public ignorance suggest, I have argued, that human beings cannot achieve such feats of attentiveness and concentration. If so, then they cannot be expected to draw the line between beneficial and harmful exercises of Voice.

The historical record bears out this pessimism. Regulation has widely been preferred to wealth redistribution; and wealth redistribution has tended to flow from the poor to the rich.

In the United States, this perverse redistributive flow takes the form of mortgage subsidies; interstate highway construction, which eases access to the suburbs; Social Security benefits skewed to wealthy retirees; a panoply of national and international loans, credits, and direct subsidies to businesses; and the always-growing list of “middle- class entitlements.” And even when “we,” and other polities of the First World, try to reach out to the Third World in an Exit-enhancing manner through foreign aid, it tends to be diverted from the poor to their corrupt rulers. Clearly that is more than I can demonstrate here. (I recommend the work of Peter T. Bauer.) But if you doubt that exit-stifling forms of redistribution, and regulation, have proven to be overwhelmingly popular in country after country, ask yourself why Milton Friedman’s proposal for school vouchers has been adopted virtually nowhere.

An economist of the Feldstein school might explain that fact with the theory that rich and middle-class people don’t like paying the taxes that would fund downward wealth redistribution; and there is some truth to that view. But a more charitable explanation (which happens to be borne out by survey research) is cognitive, not motivational.

If the intuitive response to a problem is to have the government “do something” about it, then the most obvious thing to do is ban it, regulate it, or have the government otherwise administer a solution to it. Consider not only the anti-sweatshop and anti-globalization move-37 ments, but the clamor for a federal takeover of airport security after September 11 — as if there is something magical about the government provision of airport security that would have spared us from the imperfections of its real-world market provision.

Regulatory initiatives, which by nature allow no Exit, are, as a rule, inconvenient and unresponsive to those they “serve” (witness the new airport security measures). And they rarely solve the problem they are supposed to address — often spawning new problems in the meantime. One example, from among thousands, will suffice.

Wage controls imposed by the U.S. government during World War II allowed an exception: businesses could offer employee medical insurance as a tax-free fringe benefit. (Who could object to that, intuitively?) This benefit encouraged medical treatment without regard to cost, so cost began spiralling out of control. The creation of Medicare — in practice, an upward-wealth-distribution program that had been motivated by a perfectly understandable concern for the health of the elderly — only worsened the problem. Eventually, rising costs led insurance companies to exert pressure on their customers to join HMOs, which bureaucratically carry out the mandate to clamp down on costs, often regardless of good medical practice. In response to the poor service HMOs provide — viewed by most people, who are unaware of the historical background, as market failures rather than government failures — new regulations are now being imposed that require certain kinds of coverage, such as patients’ bills of rights, which add further cost pressure to the now only nominally private health-care system.

At no point in this spiral of regulation did many people take seriously the possibility that repealing previous regulations rather than adding new ones might be more effective. That would have required too much knowledge of distant facts, and too close attention to the sequence of cause and effect. Instead we have relied on a string of easy legislative “solutions” that have made matters worse.

If I may return to vouchers for a moment: consider what has taken their place, in the name of education reform. Voters who recognize that inner-city public education is a disaster have to endorse one theory or another about what must be the problem (class size too large; fundamentals not taught; not enough money; not enough standardized tests; passive principals; undereducated teachers...). That is the nature of politics: we are required (in effect) to Voice one theory or another about what has gone wrong. The possibility that the reasons for poor education could vary from one school to another, and the even more troubling possibility that we are ill equipped to understand those reasons, cannot be accommodated when politics is the only way to address failing schools — that is, when the choice of redistributing wealth downward, as vouchers would do, must operate within the confines of public, and therefore uniformly regulated, schools from which there is no Exit. There is no Exit from public choice itself; that is what makes public choices political, and problematic.

The reason to “privatize” education is that it would spare us from the cognitive demands imposed by such choices. Parents could simply exit from bad schools, rather than needing to become education experts who understand what makes the schools bad — whether an inadequate pedagogy, or incompetent personnel, or a maldistribution of parents’ income. But the merits of Exit seem too counterintuitive for the parents themselves, in their capacity as voters, to grasp; so the redistributive alternative to more regulation, vouchers, goes unchosen by the political process.

In the 300 years in which politics has raced to catch up with capitalism, exit-blocking regulation and government provision have won out over exit-enhancing redistribution and unregulated provision, because regulation and government provision are intuitively appealing solutions to social problems — even if, upon reflection, they are counterproductive. Reflection is what people don’t do well.

The effect of Friedman’s proposals would be to allow us to “exit” from the demagogic nostrums that are the products of Voice, given the limitations of human cognition. But, in the din of politics, Friedman’s voice has gone unheeded — for the very reason that it should have been heard.

Friedman might chafe at the notion, but he is a better Rawlsian than Rawls. In a more reasonable, more humane — but less human — political world, wealth redistribution of the sort embodied in Friedman’s proposals could be undertaken without opening the door to the intuitively appealing but impoverishing policies that are the coin of the modern political realm. Such a world would require, however, that people somehow make the rather difficult epistemological comparison between Exit and Voice that I have set forth in this article. But if you have read this far, a lot has been asked of you. Is it realistic to ask that of a majority of people in the world — people who have lives to lead and who, unlike you, are not students with (apparently!) time to kill?

If there is an alternative to pondering the complicated social world for as abnormally long as you have just been asked to do, an alternative that spares people the need to be well informed and to reason clearly about abstract and indirect causal connections, wouldn’t it be wiser to favor that alternative than to put our faith in voters who barely know anything about the social world at all?

BEYOND FREEDOM, TO DIGNITY

It may seem that in making such small demands on people, we would indeed be reducing them to rats in a maze. Have I presented a realistic view of human capacities, one that does not make inhuman demands of us — or have I presented an indictment of people as being, in effect, subhuman? Are we not taught that the essence of humanity is freedom, and that the ultimate expression of freedom is self-government?

It is true that I have presented a perspective that is pessimistic about our capacity for intelligent self-government at the collective level. Even at the individual level, I have suggested, we tend to do better when we don’t have to “see life steadily and see it whole.” But a role remains for the use of our minds. The feedback we get directly, through our senses, need not be heeded: it is up to us to judge, based on our conception of the Good, whether a good-tasting cigarette is a good thing to buy. If our proper end is happiness (which may be presupposed by the part of my argument that relies on the evaluation of the direct feedback provided by, say, a bad-tasting cigarette; I’m not sure about that), we must balance short-term against long-term pleasure (assuming that happiness has a hedonic component). It is true that such balancing takes us into the realm of “experts” — such as experts on lung cancer — whose expertise we are badly equipped to judge. But even here, the situation is better than it would be if we turned such decisions over to medically expert regulators. For unregulated individuals often have the option (when alternative treatments are not blocked) of becoming expert enough themselves, on the few questions that are germane to their particular circumstances, to determine whether the conventional wisdom among the well-pedigreed “experts” (who would surely, by virtue of their prestigious pedigrees, run a medical-regulation bureaucracy) is sound, or reflects the outdated paradigms the experts learned in med school decades ago.

When “civilization” frees us from the task of trying to consciously govern every aspect of our own and other lives, we can focus our limited cognitive abilities on governing the peculiarities of our own situation.

There is, then, a role for reason in the prospect of individual self-government that follows from my argument. It is, however, a role that is restricted to the area where it is likeliest that it will be suited, given the limitations of our reason: the private realm, which most closely resembles our hunter-gatherer past. The mania for extending rational deliberation to the collective level is an Intellectuals’ Conceit, and one propagated in particular by intellectuals who have no familiarity with the research on public ignorance.

In light of that research, many of the worst problems of our world take on a new dimension; and intuitively appealing solutions such as subsidies and tariff protection for vulnerable “American” workers (vulnerable to Third- World competition), labor regulations, and wage minima take on a sinister aspect if we think through the effects they will likely have on people who only occasionally become visible to us by means of mass-media personalization, people the nature of whose plight may be equally invisible even to themselves: people such as Mrs. Tratiwoon’s son (whose name we don’t even know), who, had well-intended regulations or boycotts kept Nike from building a nearby factory, might never have realized that exit out of poverty was being blocked by American students with the best motives in the world. From his perspective, the perspective of the poorest of the poor — from Rawls’s perspective — the noblest thing compassionate students can do is not demonstrate against Nike, but buy its awful shoes so as to give that boy a better job than his current position in the garbage dump. But what could be more counterintuitive than that?

Freedom of counteraction, freedom to Exit, may not seem as dignified as freely willed self-government based on a mutually respectful, attentive, informed, and rational deliberation. But such deliberation is, at the very best, an extreme rarity in the real world of politics: the proverbial exception that proves the rule. In assessing that claim, think not of teach-ins or affinity groups or lectures by iconic professors, where everyone in the room essentially agrees with each other; think of the purpose of politics, which is to resolve conflicts. (Which is to say: think of propagandism, appeals to ideology, appeals to the lowest common denominator, appeals to motives, appeals to personality, nationalistic appeals, appeals to deranged reasoning; and most of all, think not of respect, but of appeals to contempt for “the other side.”)

Is it better to equate dignity with a standard of conduct of which human beings are essentially incapable? Or should we not instead allow that a dignified life is attainable outside of a cognitive and psychological utopia? I believe that we do more for the cause of human dignity by giving Mrs. Tratiwoon’s son a job, even in conditions we would find degrading, than we do by consigning him to the garbage dump because in our exercise of Voice, such indirect consequences of our well-motivated protests tend to be invisible.

Democracy is, as Winston Churchill famously pointed out, the worst political system except all the others. But to the extent that capitalism offers an alternative to all “political” systems, including democracy — and, therefore, an alternative to the excessive cognitive demands that politics makes on us — we should embrace that alternative eagerly. When there are Exit-friendly alternatives such as capitalism, we might be advised to tolerate as little “political” interference with them as possible — perhaps not even for purposes of redistribution to the poor, since in the real world that opens the door to measures that only hurt the poor, without actually redistributing anything to many of them.

We might, in other words, be advised by the real world of politics to accept the real world of economics, in all the enormity of its unfairness, as the best we can do to achieve Rawls’s goal — as long as we then do whatever we can to unleash as much unregulated capitalism as possible, allowing the poor to exit from their misery in the same way our great-grandparents did. Unregulated capitalism would pull the poor out of poverty, just as Rawls the philosopher recommends. But it would do so more slowly than would happen in the ideal world of the economist — or in the ideal world that Rawls the man assumed was possible.

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Jeffrey Friedman, the editor of Critical Review and of The Rational-Choice Controversy: Economic Models of Politics Reconsidered (Yale University Press), teaches political philosophy and social-science methodology at Barnard College.

 

 

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