The “Missing Element” of Economics Amidst Crisis - The Library of Liberty and Economics

27 May 2020 - We should not ignore those non-profit maximizing actions that ultimately still require – and arguably enhance – the institution of a market economy as a vital perquisite for human flourishing.

Garreth Bloor
Homo-economicus is the presumption for analyzing much of human behaviour in the economic realm: “[T]he characterization of man in some economic theories as a rational person who pursues wealth for his own self-interest,” explains author Richard Wilson, drawing on a widespread definition. “The assumption that all humans behave in this manner has been a fundamental premise for many economic theories.” In times of crisis, how we assess the motivations of free people within markets as a social institution matters.

George Gilder, in defense of open markets, argues it is always better to speak of free people, rather than free markets – opening the door to an affirmation of the human as an economic agent that goes beyond mere profit maximization. The affirmation provides a bulwark against state, crony, and managerial capitalism by ordering economic freedom to more than mere utility or efficiency justifications for policy and interventions (which frequently occur at the expense of other human freedoms).

In his book Redeeming Economics, John D. Mueller argues for rediscovering the missing element of economics: gift giving. In reference to Mueller, Joseph Lawler of the American Spectator asserts “Mueller provides a number of examples of problems modern economics cannot fully resolve, namely, any situation in which someone acts out of love, as opposed to self-interest”.

The role of profit as a source of information in a complex world is not underplayed. Rather, how individuals respond to those price signals provides an added dimension. By daily experience we know reactions to price signals in purchasing decisions can be guided by non-economic objectives; buying for someone else’s benefit can be considered a market-based decision with a non-economic end goal.

In the midst of COVID-19, a huge social good could be involved through “gift-giving” in the solidarity of people with each other; freely, in a system of liberty, respecting markets as a social institution facilitating and enhancing doing good.

Headlines of mad panic buying are sometimes easier to come by than ways employers, neighbours, and community members band together and do their bit. Individuals are volunteering to shop for the elderly, support is being provided to assist those in need and companies are making services available for which they would ordinarily charge – such as removing paywalls for COVID-19 news updates.

Social capital keeps societies together. Social distancing measures, for a start, rely more on people’s individual decisions than government mandates.

F.A. Hayek was a social theorist, as well as an economist. The historic definition of social justice, so often appropriated to the domain of government action today, concerns how we relate to each other, with serious scholarship emerging after the Black Death that hit Europe. Social justice has concerned relations of individuals toward each other and personal actions taken in respect of the needs of others, within – but not reserved to – family life, commerce, civil society, and communities. As Sam Gregg points out, social justice is expressed as a concern or responsibility of every individual, not exclusively the state on behalf of individuals.

Liberty matters for the realization of effective responsiveness to challenges. How we conceptualize the human person – the key protagonist – matters, too.

Economic liberty is a vital component of liberty itself, but so-called free market capitalism, without free people, fall drastically short.

Increasingly data out of China is questioned, based on the detention and expulsion of journalists. Neither do lockdown measures enacted account for the prospect of a second wave according to Bloomberg’s analysis. Furthermore, the lack of liberty – in this case applied to press freedom – has been cited as a cause of “thousands of fatalities” from COVID-19. Peking University academic He Weifang argues as much in a hand-written letter smuggled out of China to avoid media censorship online, as reported by Jan Cai at the South China Morning Post. A Washington Post opinion piece asserts “[t]he virus must be forever linked to the regime that facilitated it”. Without irony, the first potential vaccines went to human trials in China with private sector innovation from a Hong Kong listed firm. On currently available prospective treatments, David Henderson argues safe drugs should not be kept of the market today.

EconLib contributor Pierre Lemieux points out the risks of vague “we as a society” rhetoric that does not clearly define “we” and “society” in clear terms. A clearer presupposition is the individual, with a richer definition of his or her ability for collaboration and heroism beyond the narrowly confined of homo-economicus.

Freedom matters, perhaps more than ever. Upholding a vision of free people, of which free markets are both a consequence and a mediating institution for social cooperation, provide for a richer vision of the human person than merely homo-economicus, while avoiding the Vacuity of the Political “We“. And that matters for our analysis at a time where heavy demands rest on governments to respond. In times of crisis, a narrow definition of homo-economicus may have analytical limits. Those limits can underplay what is truly possible in the realm of freely undertaken human cooperation. We should not ignore those non-profit maximizing actions that ultimately still require – and arguably enhance – the institution of a market economy as a vital perquisite for human flourishing.

Garreth Bloor is a vice president of the IRR, the oldest classical liberal think tank in South Africa. He served as a former executive politician in the country and is the founder of a venture capital firm. Bloor currently resides in Toronto.