Race, Liberalism, and Economics

Pragmatism, Liberalism, and Economic Policy

Pragmatism, Liberalism, and Economic Policy David Colander Debates about esoteric topics in history often are conducted because they have importance in setting a context for modem policy debates. The Carlyle -Mill debate discussed in the first part of this book seems to fit that mold. It is important for the modem policy debate about what set of policies is most appropriate to deal with race-associated problems that our society is experiencing. This chapter concerns that modem debate and the contributions that economic reasoning has for that debate. Arguments about race, economics, and policy can quickly become complicated . Since the points I want to make with this chapter are simple and do not, I believe, depend on deep philosophical issues, I will reduce the multifaceted debate about race and economics to a simple two-sided debate between classical liberals and modem liberals. On the Right is the Chicago-school, laissez-faire approach to race, which supporters like to classify as a classical liberal approach. The classical liberal side argues that the best policy is one relying on market forces, with the government doing as little as possible, avoiding affirmative action and other programs designed directly with race in mind. On the Left is the modem liberal approach, favoring government intervention. The modem liberal side argues that we need government-designed programs to redress the inequities of the past; it supports affirmative action and race-centered activist programs.I In this debate, an overwhelming majority of blacks support the modem liberal position. In fact, a black classical liberal is likely to find himself or 259 260 RACE. LIBERALISM. AND ECONOMICS herself a pariah in the black policy community. The historical argument laid out by Levy and Peart in this volume addresses this phenomenon. They argue that, historically, the problack moral high ground belongs to the Chicago liberal position; it was classical liberal economists and laissezfaire advocates who opposed slavery, because they saw blacks and whites as equals. Levy and Peart also suggest that the true predecessors of the modemday liberals' interventionist approach are not classical liberals but paternalists . Paternalism supported not only slavery but also treating blacks as less than human. The implicit suggestion of the work of Levy and Peart is that by allowing identity, such as racial identity, into the policy equation, as must be done to design any policy with specific elements favoring one group or another, one is forced to view one group as less than equal and another group as more than equal. Once one does so, one is likely to slide down a slippery slope of racism and blame. The logical continuation of this line of reasoning is that, given the history that Levy and Peart recount, blacks should be much more receptive than they are to laissez-faire positions and to Chicago economics generally. The work of Levy and Peart is an invitation for blacks to come to Chicago. In this chapter, I present three simple arguments. The first argument is that blacks and modem liberals should be more open to Chicago-type policy approaches than they currently are, but not for the reasons that Levy and Peart give. My second argument is that an important reason why modem liberals and blacks have such a difficult time accepting Chicago policies is the Chicago style of argumentation for their policies. My third argument is that a pragmatic, rather than theoretical, argument for markets, which recognizes the tragic nature of most questions about race, can lead to imaginative and achievable policy initiatives that can gamer more black support for market-based solutions than can the arguments Levy and Peart present. Why Blacks and Modern Liberals Should Consider Chicago-Style Arguments Noneconomists often see the purpose of economic theory as providing support for the market and for laissez-faire policy. If that was the initial intent of some economists (from my study of history, it was not), it certainly is not how it turned out. Theoretical analyses of markets have Pragmatism. liberalism. and Economic Policy 261 shown how fragile normative arguments for markets are. They have shown that, based on economic theory, there is nothing necessarily fair about market outcomes and that efficiency arguments for markets are based on highly restrictive assumptions that are never met in the real world. Since real-world markets are inundated with externalities and market imperfections that make them far from ideal (even in a very limited, Pareto-optimal sense...