Reviving the Invisible Hand

That is Deepak Lal’s new book, the subtitle is The Case for Classical Liberalism in the Twenty-First Century.  I rarely call myself a classical liberal, for fear the title has become musty and for realization that the feasible set today is quite different from that faced by Cobden and Bright.  That aside, here is what I think classical liberalism should become for the 21st century.

1. The welfare state is not going away.  But it is imperative that we avoid Western  European levels of taxation through the explosion of Medicare liabilities.  Don’t forget that the United States is a — should I say the — generator of global public goods par excellence.  Going down the path of France or Sweden would mean disaster.

2. What recipes lead to both strong markets and decent governance?  The not-yet-developed countries of the world all face this problem.  Simply deregulating does not itself solve the governance problem, as we have discovered many times in the last fifteen years.  Our understanding here is backward but much is at stake.

3. We face a variety of critical issues involving decentralization: how to deal with pandemics, natural disasters, or terrorists with nuclear weapons, to name but a few.  None of these are areas for laissez-faire.  Yet for all the squawking about the need for government, most of the real solutions "on the ground" will emphasize voluntary action and the private sector.  When faced with these problems, how can we do better rather than worse?  Note the close connection between this problem and #2; for instance in Indonesia the government won’t allow transparent communication about the nature of the avian flu problem.

Overrated classical liberal ideas are privatization (sometimes useful, but it often replicates old problems in a new regulatory guise) and abolishing foreign aid.

Your take, Alex?  Other classical liberal bloggers?

For Lal’s vision, well…you have to read his book.  You can start with the book’s web page and sample chapter here.


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