The need for classical liberalism

1
The need forclassical liberalism

• Europe and Liberty
• Leuven, July 2007

2
The society we live in

• The growing role of the state
• Who is to be blamed for what is going wrong?
• Pragmatism and the third way

3
The growing role of the state
4
The role of regulation

• 9 350 laws
• 127 500 decrees
• The book of laws of the National assembly had 433
  pages in 1973 and 3 721 pages in 2004
• The Law of August 13, 2004 on freedom and
  responsibility at the local level of government
  had 231 pages and 203 articles.
• The law of August 9, 2004 on public health policy
  has 218 pages and 158 articles
• 37 471 amendments were presented for a single
  session of the Parliament. Their number has
  tripled between 1990 and 2004
• In 2004, The General Code Governing Local
  Governmental Jurisdictions (Code Général des
  Collectivités locales) has been modified by 120
  texts of law, including 4 organic laws (those
  are laws which are placed between the
  constitution and a regular law. They concern
  the organization of state power.), 77 laws, 19
  articles of budget law and 19 decrees
  (ordonnances)

5
Who is to be blamed for what goes wrong?

• Jo Stiglitz
• Europe is now dominated by social democrat
  governments which prefer ambition and regulation
  to laissez-faire and resignation  (Jean Sautter,
  French ministry of commerce, Le Dauphiné,
  September 2001)
• Globalization a plane without pilote (Dexxias
  CEO)

6
What needs to be done pragmatic third way

• Liberalism is an approach to economic problems
  which need to be supplemented
• Market failures need to be corrected
• Conflict between justice and efficiency need to
  be solved

7
Is it so?

• Public choice stressing States failures
• No  Nirvana  approach (Demsetz)

8
Liberalism is more than that

• Who should have what kind of power ?
•  the liberalism problem 
• How do I go about answering that question?
• Efficiency (market vs.state failures)
• Moral ( rights )
• From Economics to Political economy

9
The (classical) liberal approach

• Friedman
• Hayek
• Mises
• Bastiat
• Say
• Smith
• Locke
• Late scholastic

10
Hayek Law, Legislation and Liberty

• There exists different types of orders
• Physei (nature) vs. Nomo (convention)
• Taxis (organization) vs. Cosmos (spontaneous
  orders)

11
Spontaneous order

• Some social orders are the unintended
  consequences of human actions
• Smiths invisible hand
• Examples Paris gets fed, language, money, Law

12
Spontaneous order is conditioned by the emergence
of rules of just conduct

• The fingers of the invisible hand
• Property rules
• Contract rules
• Tort rules

13
Spontaneous order vs. Organization

• Its nature Not designed, no goal, abstract,
  complex
• Its rules  negatives  (? creativity), evolve
  spontaneously
• Evaluation more or less just, leads to progress

• Its nature designed, goal oriented, concrete,
  low complexity
• Its rules  positive  (commands), decided by
  the hierarchy
• More or less efficient

14
Spontaneous order an important but
counterintuitive idea

• The movement of the progressive societies has
  hitherto been a movement from Status to Contract
  (Henry Maine, Ancient Law)
• civilization comes from the fact that we all
  benefit from knowledge we dont have. (F.A.
  Hayek, Law, Legislation and Liberty)
• We can reach greater complexity (and wealth) when
  we gave up the idea of organizing interactions
• Globalization IS as a plane without pilot and
  thats why it works

15
How spontaneous orders and organizations interact

• A spontaneous order cannot be  regulated 
• A spontaneous order can be protected
• The statesman who should attempt to direct
  private people in what manner they ought to
  employ their capitals, would not only load
  himself with a most unnecessary attention, but
  assume an authority which could safely be trusted
  to no council and senate whatever, and which
  would nowhere be so dangerous as in the hands of
  a man who had folly and presumption enough to
  fancy himself to exercise it. (Adam Smith)

16
The cognitive requirements of each of the three
possible ways

• Socialism I know better
• Liberalism I know that I dont know
• Third way I know WHAT I dont know (the
  knowledge axiom)

17
Conclusion

• Liberalism is not an economic theory, or even an
  economic program
• Liberalism is about (negative) rights (and
  therefore responsibility)
• Liberalism is based on a certain idea of human
  being
• Liberalism proved to work well (the economist
  can explain why and the historian confirm)
• There is no fundamental difference between a
  socialist and a third way economy in terms of
  allocation of power
• Failure to understand liberalism puts us on a
  slippery slope toward socialism