IREF - Institute for Research in Economic and Fiscal issues
Fiscal competition and economic freedom
Event coming up: Enrico Colombatto will intervene at the CISEPS Seminar in defence of free-market, on January 30th, 2014 in Milan. Here is reproduced the abstract of Enrico Colombatto’s talk.
When the so-called subprime crisis reached its zenith at the beginning of 2009, economists admitted -albeit some of them only grundgingly - that optimally-designed regulations were not that optimal, after all, and swiftly suggested proposals for institutional reforms: new restrictions on individual behavior and enhanced discretionary powers of the policy-makers, nationally and internationally. Different schools of thought varied in the details.
Yet, all the basic "lessons" drawn from the crisis have seemed to share a belief in some underlying social contract that legitimizes coercion for the sake of the common good. Such contract would need no confirmation, but its scope should be extended and made more credible.
By contrast, we argue that free market economics is first and foremost the denial of a social contract characterized by compulsory solidarity and social rationality, and that the foundations of free-market thinking originate from moral philosophy, rather than from political expediency.
In other words, free-market supporters believe that state intervention and other forms of centrally-defined common good are objectionable because they violate a principle of justice, not because they violate a criterion of social welfare maximization.
Likewise, free-market ideas do not deserve recognition because they perform well. We do not deny that respect for the free-market values - freedom from coercion, private property and freedom of contract - might alos produce efficient outcomes and prosperity. We insist, however, on the fact that efficiency and economic performance are not the core argument in support of the free-market vision; and that a free-market approach built on consequentialism or wishful thinking will falter whenever a crisis strikes, and necessarily force its advocates to acquiesce to some version of the third way.