The London Libertarian

The London Libertarian

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Commentary and debate on politics, economics and culture from a libertarian perspective. To Libertarian Alliance Website >

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unintended consequences

EconomicsPosted by Jan Lester Mon, April 07, 2014 14:55:45

unintended consequences To the extent that the *liberty and *welfare of people concern us, it is an error either to *criticize or to praise any kind of social activity because of the intentions of the parties involved. It is irrelevant to suggest that ‘businessmen are only interested in *profit’ or that ‘*politicians are trying to improve *society’, even if these *stereotypes were universally true. What matters for practical purposes are the *consequences of people’s actions, and these often involve unintended consequences. The analysis of unintended consequences explains how businesses are almost bound to increase social welfare while *politics is almost bound to reduce it, and reduce liberty too. This is one of the most important general insights of classical *liberals and thus also one of the most important general criticisms of anti-*market *statism. The failure to grasp that intentions do not matter is the pons asinorum of all social theory. See *invisible hand.

An early version of this insight was (in)famously expressed by the great cynic Bernard de Mandeville (1670-1733), notably in his The Fable of the Bees: or, Private Vices, Publick Benefits, 1714. However, we might agree with Adam Smith (1723-1790) that *self-interest that benefits oneself and others is therefore better seen as a virtue after all. Self-interest only becomes a vice when it *harms one’s own interests or *proactively imposes on others. We might also agree with Adam Smith, and against de Mandeville, that politicians are not needed to guide the self-interest to the beneficial results. Canadian arch-*‘liberal’ J. K. Galbraith (1908-2006) attempted to parody de Mandeville’s insight with his own expression: “private affluence, public squalor”. He apparently failed to realize that this invites the, correct, inference that we can change all the squalor into affluence by privatizing (better, *depoliticizing) what is in *‘public’ (really, *state) ownership.

See *moral hazard; *perverse incentives.

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