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Wednesday, November 15, 2017

Cosmopolitanism Is the Answer

We are one another’s equals. There should be no confusion on this point.

My answers to our current challenges are simple ones. Let’s begin at the beginning — which for the liberal is basic human equality. We are one another’s equals. There should be no confusion on this point. And if you are an advocate of liberalism and you find yourself “standing” (metaphorically or literally) alongside anyone asserting the superiority of one group over another you should know you are in the wrong crowd and you need to move in opposition quickly to leave no doubt in their or others’ minds.  

Liberalism is liberal. It is an emancipation philosophy and a joyous celebration of the creative energy of diverse peoples near and far. The liberal order is about a framework of rules that cultivates that creativity, and encourages the mutually beneficial interaction with others of great social distance, overcoming such issues as language, ethnicity, race, religion, and geography.  

We are one another’s equals. There should be no confusion on this point. 

Bumping and Bargaining

At a foundation level, no one is privileged over any other in recognition of our basic humanity.

As the great practical philosophical teacher in my life — my Mom — Elinor Boettke, used to like to say “people are people,” that is who we are, we just have to let each other live, and that is that.We are fallible but capable human choosers, and we exist and interact with each in a very imperfect world.  

No one of us, let alone any group of us, has access to the truth from the Almighty Above, yet we are entrusted to find rules that will enable us to live better together than we ever would in isolation. We bump into each other and we bargain with one another to try to ease the pain of bumping or avoid the bumping in the future. But, we must recognize that despite our basic human equality, we argue and we don’t naturally agree with one another about how we live our lives.

So in our bumping and bargaining with one another, it is critical to keep in mind that we will soon face severe limits on what we can agree on.  In particular, we have little hope of coming to an agreement among dispersed and diverse individuals and groups over a scale of values, of ultimate ends that man should pursue.

As Hayek put it in The Road to Serfdom (1944, 101):

The essential point for us is that no such complete ethical code exists. The attempt to direct all economic activity according to a single plan would raise innumerable questions to which the answer could be provided only by a moral rule, but to which existing morals have no answer and where there exists no agreed view on what ought to be done.”

This is one of the reasons why the Progressive establishment’s idea of a benevolent and omniscient social planner with a stable social welfare function would easily direct public policy toward the “general welfare” is a nonsensical approach to political economy, as James Buchanan effectively argued throughout his career from his very first critique in 1949 of the “fiscal brain.”2

Yet public economics in the tradition of Paul Samuelson and Richard Musgrave continued — and continues — as if this Hayek and Buchanan challenge was never made. And, I should add, as if Kenneth Arrow had never demonstrated the impossibility of a democratic procedure for the establishment of a stable social welfare function. “We can rely on voluntary agreement,” Hayek put it, “to guide the action of the state only so long as it is confined to spheres where agreement exists” (1944, 103).

So if we rule out as impossible an all-inclusive scale of values on which we can agree, rather than seeking agreement on the ends to be pursued, our discussion will be limited to a discussion of the means by which a diversity of ends can be pursued within society. We can, in essence, agree to disagree on ultimate ends, but agree about the way we can acceptably engage with one another in disagreement. We are, after all, one another’s equals, and each of us must be accorded the dignity and respect as capable architects of our own lives.

The liberal virtues of respect, honesty, openness, and toleration all entail a commitment to a way of relating to one another, not necessarily a commitment to agree with one another about sacred beliefs or lifestyle choices, or what commodities we desire, or what occupation we want to pursue.

Philosophy Matters

True liberal radicalism is about the framework within which we interact, and I want to suggest that the most critical aspect of a viable framework for liberal society is that it can balance contestation at all levels of governance with the necessity of organizing collective action so as to address troubling issues that cannot be adequately addressed through individual action.3

Let me unpack that sentence. The first task in thinking through the viable framework is to determine what problems demand collective action and what problems can be addressed by alternative forms of decision making.  

One of the great insights of Buchanan’s theory of public finance was that any theory of public finance, whether classical liberal, progressive elite, or socialist planner had to posit a basic political philosophy for no other reason than public finance is premised on some answer to the question of the appropriate scale and, more importantly, scope of governmental action.

In other words, a public finance theorist can either work explicitly with the political philosophy they work with, or they can work implicitly with it, but they cannot work without a political philosophy.  

It is political philosophy that tells them that government is responsible for a host of public goods in the interest of the general welfare.  

We don’t need the federal government to decide how to collect our garbage.

There is no purely technical answer to that question. Once the answer is given as to what government should do, then a positive political and economic analysis can ensue, but efforts to provide a technical economic answer to this should question is merely normative philosophy masquerading as positive political economy, and scientific economics will only advance when we stop the masquerading and explicitly acknowledge this political philosophical point Buchanan raised.  

This point is as relevant for today’s discussion as it was at the time he first made this argument during the heyday of the development of so-called “scientific” welfare economics. That same Samuelson-Musgrave style public finance and welfare economics structure is still what one can see in most modern public finance, and discussions of such hot-button normative issues as income inequality and the Pigovian tax scheme to carbon emissions.

Scale and Scope

Questions of the scale of government are not invariant with respect to questions of scope. As Keynes once remarked, you cannot make a fat man skinny by tightening his belt. Scope is about the range of responsibilities of government, scale is about the size of the governmental unit. The growth of government discussed in the previous section is primarily targeted at scope, but that in turn is reflected in scale.4

Questions of scope are philosophical as well as practical. But though philosophical, there is an institutional component due to the very fact that even wishful thinking must be operationalized in practice, and that requires institutions and organizations. 

The delineated scope of authority for the different units of government should match the externality the collective action is intended to address. Again, putting this in the most common-sense way, we don’t need the federal government to decide how to collect our garbage, and we probably shouldn’t expect the local mayor to figure out how to design a defense system against a nuclear attack.

Assuming we have solved these two structural problems of government — general rules to which we agree on how we relate to one another in our interactions as neighbors, and the delineated scope of responsibility and authority between local, state, and federal governments — we still have the problem of learning how to match citizen demand, expressions of voter preferences, and governmental policies and services.

We have to postulate some mechanism for learning within the liberal order of politics that corresponds to the process that was identified within the marketplace. How do we get a sort of learning liberalism within this general structure?

In the marketplace, the learning is guided by prices and disciplined by profit and loss accounting, but it is fueled by the rivalrous competitive process where one can be sure that if A doesn’t adjust their behavior to learn from previous missed opportunity to realize the gains from trade or they realize the gains from innovation, then B will gladly step in to take their place. Can we get such contestation in the political process?  The true radical liberal has always been frustrated.

It’s not just a matter of contested elections, but contestation throughout the governmental process of service production and distribution. We cannot answer these questions without addressing the supply and demand of public goods, and thus the political process within democratic society.

Obviously, the frustrations with the establishment elite are deep-seated for the true liberal radical just as they are for the populist on the left or the right. The status quo is neither desirable nor sustainable. The diagnosis of the reasons why the establishment elite has failed differ between the liberal and the populist, but the critique of expert rule is an area of overlap.

Territorial Monopolies

The liberal project has a history that stretches back centuries, and the true radical liberal has always been frustrated. Constitutional constraints bend when they are meant to pinch, especially in times of war.

Delineated authority and responsibility is violated all the time, and not always due to the unwarranted of the federal into the affairs of the local, but in response to the state elected official strategically interacting with duly elected officials from other states to form a political cartel to benefit local interest groups at the expense of the general population.

Hayek asked his audience in 1949 to allow themselves to be Utopian, and I think that is correct. We need to envision a liberal system that respects the general rules of engagement, but structures an intense and constant competition between governmental units.  

Bruno Frey (2001) presented a vision of government without territorial monopoly. His idea of overlapping competing jurisdictions may be one such idea of how to cultivate a learning liberalism. Work by Edward Stringham (2015) provides another vision, and Peter Leeson (2014) yet another.  

What is common among all of these is that they make no recourse to axiomatic deductions from some non-aggression axiom. They instead offer arguments and evidence related to the operation of institutions and, in particular, the processes by which self-governance performs not only better than you think, but in many instances better than any reasonable approximation for how traditional government would perform in the circumstances described.

Just as Hayek throughout his career proposed a series of institutional suggestions to bind the monetary authority from engaging in the manipulation of money and credit, only to be met with frustration as his suggested method proved ineffective against the governmental habit.5 Perhaps then in the supply and demand of governmental goods and services, the governmental habit as well is a source of instability, inefficiency, injustice, and thus frustration.  

If so, the reconstruction of the liberal project in the 21st century may need to turn to utopian visions as laid out by writers I have mentioned.  

A humane liberalism, as well as a robust and resilient liberalism, may find its operationalizability in an institutional structure of overlapping competing jurisdictions, and in a public discourse that respects the limits of agreement on ultimate values, but insists on a general framework that exhibits neither discrimination nor dominion.


  1. These words were spoken from the time I was growing up in NJ right outside of Elizabeth and Newark, NJ and with grandparents not far from Asbury Park, NJ and in the context of riots that nearly destroyed those cities for generations, and as a teenager in the 1970s as sexual preference issues became hot-button topics among some extended family members, and later on in the 1990s and 2000s in discussing interracial and single-sex marriage and also reproductive freedom rights among women.  People are people, you have to let them live.  Pretty common sense.  Elinor Boettke (January 1, 1926-August 10, 2017).
  2. See Buchanan, “A Pure Theory of Government Finance” (1949); also see Richard Wagner’s James M. Buchanan and Liberal Political Economy: A Rational Reconstruction (2017) for a brilliant discussion of how this paper laid the groundwork for much of Buchanan’s subsequent contributions to the field of political economy.
  3. The troubling issues are the social ills that plague human interactions, such as poverty, ignorance, squalor.  But the trouble issue in designing the framework is the potential for the powerful to exert their influence over the powerless and establishing rules that provide them with a permanent advantage.  So both “within any system” and “about any system” of governance we face trade-offs of eliciting agreement and curbing political externalities.  If our liberal system of government is to institutionalize our basic human equality in our ways of relating, then it must be designed so that neither discrimination nor dominion is permitted.  Various classic works in the analytical tradition of political economy from a liberal perspective have tackled different aspects of these puzzles starting, of course, with Hayek’s The Constitution of Liberty (1960), Buchanan and Tullock’s The Calculus of Consent (1962), Ostrom’s The Meaning of Democracy and the Vulnerabilities of Democracies (1997), and Munger’s Choosing in Groups (2015).
  4. And central to the argument is that this expansion of scale and scope has pushed politics in the democratic west beyond the limits of agreement, and that this explains both the dysfunctions and the disillusionment.
  5. Adam Smith in The Wealth of Nations argued that governments ancient as well as modern all resorted to the “juggling trick” when faced with the prospect of fiscal discipline. The trick entails a cycle of deficits, debt and then debasement. Smith warned that a default would be more honorable and least harmful, but that instead governments all will turn to juggling.  So if we take Smith’s metaphor for the moment, if you want to stop juggling you might tie the jugglers hands, you might take the balls away from the juggler, or you might cut off his arms.  If you find the juggler can still juggle with his hands tied behind his back, you might take away the balls. But if you find out that even though you took aways the balls he is juggling, he finds away to get them back again, then you might advocate not just tying, or even taking the balls away, but cutting off his arms so that he can never juggle again.  This last step is the most drastic, but it also might be necessary if the goal is to eliminate the juggling trick. 

Excerpt from a paper prepared for the special meeting of the Mont Pelerin Society in Stockholm, Sweden, November 3-5, 2017.

  • Peter Boettke is a Professor of Economics and Philosophy at George Mason University and director of the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center. He is a member of the FEE Faculty Network.