Extras: Peter Boettke on Don Lavoie and Central Planning, Part 2
April 6, 2023
"Lavoie advocates that we turn the core insight of public choice on its head. Human action in the market sphere isn’t separate from politics but is imbued with the same value-rich interpersonal discourse that permeates all social activities (and could form the building blocks for radically liberal self-governance). People are people, even in the market."
"Lavoie advocates that we turn the core insight of public choice on its head. Human action in the market sphere isn’t separate from politics but is imbued with the same value-rich interpersonal discourse that permeates all social activities (and could form the building blocks for radically liberal self-governance). People are people, even in the market."
This is part two of a two-part series. Read Part 1 here.
Peter Boettke discussed the work and influence of Don Lavoie with host Juliette Sellgren in a recent Great Antidote podcast. Lavoie’s work emphasized two problems facing collective action: the knowledge problem and the power problem. I wrote about Lavoie’s contributions to understanding the knowledge problem in an earlier “extra”. More ambiguous in the conversation was how Lavoie approached the “power problem”.
Peter Boettke discussed the work and influence of Don Lavoie with host Juliette Sellgren in a recent Great Antidote podcast. Lavoie’s work emphasized two problems facing collective action: the knowledge problem and the power problem. I wrote about Lavoie’s contributions to understanding the knowledge problem in an earlier “extra”. More ambiguous in the conversation was how Lavoie approached the “power problem”.
Boettke describes the power problem at its most basic:
It's when I can't solve the knowledge problem that I turn to the power principle to solve the problem, which is ultimately reward my friends and punish my enemies. And so I end up concentrating power in the hands of a few in order to reward and penalize.
Boettke expands on the problems with using politics to solve economic problems, outlining the contributions of public choice economics to understanding both market and government failure and his belief that libertarians squandered an opportunity for persuasion after the fall of communism.
Politics is downstream from culture. So what you want to do is be creative and clever in the cultural zeitgeist… [but instead libertarians] went into politics to try to implement libertarian-type policy.
We [libertarians] stopped being creative…we became more focused on day-to-day politics. Politics is very transitory. It's driven by votes and minimum winning coalitions. So you end up with strange bedfellows. You try to work with people, but those are people that you might not want to be standing next to. I think that a lot of the issues that happened with libertarianism and conservatism that have been indicted, a lot of it was just because we were involved in politics rather than sticking to our principles and our hope to construct a workable utopia.
Lavoie believed this was the inevitable outcome of pursuing radical liberalism through the power principle. In chapter 7 of his book, National Economic Planning: What is Left?, Lavoie argues that belief in the practical possibility of central planning took off during the mobilization of national economies during the First World War. While planners may have pointed to theorists like Karl Marx and Friedrich Engels or Oskar Lange and Abba Lerner, Lavoie argues that really existing national economic planning had its roots in the wartime governments of David Lloyd George and Woodrow Wilson. (National Economic Planning p. 222)
Lavoie argues that Vladimir Lenin tried to implement Marx’s prescription that markets must be done away with entirely under the comprehensive economic planning of the War Communism period, completely replacing the market mechanism with the power principle. It was an utter disaster.
Economic planning since has been noncomprehensive, even under the Soviet Union, and drew heavily from what had been proven possible by wartime mobilization. “The practice of planning”, says Lavoie, “is nothing but the militarization of the economy.” (National Economic Planning, p. 230)
Lavoie argues that the turn to feudal and military theories of organization to bring markets under conscious control hollowed out the soul of the political left, leaving them as reactionary as the political right. Liberal progress and emancipation are inimical to the imposed order of feudal and militaristic thinking.
In his interview with Sellgren, Boettke gives the impression that libertarians, in joining political forces with conservatives to pursue government policy changes, experienced a similar hollowing out. The supplanting of radical liberalism by reactionary politics among parts of the libertarian movement fits neatly, with the benefit of hindsight, with Lavoie’s criticism.
Lavoie and Boettke also propose ways forward. Boettke’s “Sticking to our principles and our hope to construct a workable utopia” brings to mind F.A. Hayek:
"We must make the building of a free society once more an intellectual adventure, a deed of courage. What we lack is a liberal Utopia…which is not too severely practical and which does not confine itself to what appears today as politically possible…Unless we can make the philosophic foundations of a free society once more a living intellectual issue, and its implementation a task which challenges the ingenuity and imagination of our livliest minds, the prospects of freedom are indeed dark. But if we can regain that belief in power of ideas which was the mark of liberalism at its best, the battle is not lost." (F.A. Hayek, The Intellectuals and Socialism, 1945)
Lavoie saw in the revolutions of the 20th century the power of ideology to motivate people to push forward sweeping social change. (National Economic Planning, p. 233) Adam Smith makes a similar claim in The Theory of Moral Sentiments. Smith observed that ambition is not the only route by which someone might be motivated to join political life. They could also be motivated by a spirit of system that delights in pursuing something one might call a “workable utopia”:
“All constitutions of government…are valued only in proportion as they tend to promote the happiness of those who live under them. This is their sole use and end. From a certain spirit of system, however, from a certain love of art and contrivance, we sometimes seem to value the means more than the end…
In this context, Smith gives examples of two kinds of inactivity that a utopian ideal can motivate: inactivity caused by a lack of personal ambition and inactivity caused by indifference to the good of society.
Would you awaken the industry of the man who seems almost dead to ambition, it will often be to no purpose to describe to him the happiness of the rich and the great…you must describe to him the conveniency and arrangement of the different apartments in their palaces; you must explain to him the propriety of their equipages, and point out to him the number, the order, and the different offices of all their attendants. If any thing is capable of making impression upon him, this will…
In the same manner, if you would implant public virtue in the breast of him who seems heedless of the interest of his country, it will often be to no purpose to tell him, what superior advantages the subjects of a well-governed state enjoy…You will be more likely to persuade, if you describe the great system of public police which procures these advantages, if you explain the connexions and dependencies of its several parts, their mutual subordination to one another, and their general subserviency to the happiness of the society; if you show how this system might be introduced into his own country, what it is that hinders it from taking place there at present, how those obstructions might be removed, and all the several wheels of the machine of government be made to move with more harmony and smoothness, without grating upon one another, or mutually retarding one another’s motions. It is scarce possible that a man should listen to a discourse of this kind, and not feel himself animated to some degree of public spirit.” (TMS, IV.i.11, emphasis mine)
This is the reason that Lavoie saw hope for radical liberalism. He thought the problem with the 20th century’s revolutions was not the pursuit of a political utopia, but the underlying principles that were pursued. The revolutions,
“have generally striven to drive the current oppressors out of power, only to replace them with new rulers. If an ideology is found, however, that can transcend this mere replacement of rulers, aiming instead at a society without need for rule of some of its members by others, but in which, in some sense, the people can democratically rule themselves, then the triumph might be secured.” (National Economic Planning p. 233)
Lavoie went further. In his article, Democracy, Markets, and the Legal Order: Notes on the Nature of Politics in a Radically Liberal Society, Lavoie rejects the assumption that politics and markets are necessarily in tension. He demands his reader take very little about our politics for granted.
It wasn’t naive, says Lavoie, for emerging eastern European democracies to be excited about both markets and democracy. There could be something legitimately exciting about democracy considered as an open, public political culture through which “human beings engage in direct discourse with one another about their mutual rights and responsibilities” (p.112). This takes place in all spheres of public life—not just in public-spirited organizations and civic associations, but also in our personal and commercial lives.
In a way, Lavoie advocates that we turn the core insight of public choice on its head. Human action in the market sphere isn’t separate from politics but is imbued with the same value-rich interpersonal discourse that permeates all social activities (and could form the building blocks for radically liberal self-governance). People are people, even in the market.
Agree with Lavoie’s vision of democracy or not, it springs from the kind of hopeful creativity that Boettke claims those who believe in self-governance should be pursuing.
Maybe paradoxically, Lavoie’s utopian vision doesn’t require we wholly remake the world, all at once. It can't—respect for every individual and principled refusal to impose our will on them means that change has to come from persuasion. We could move towards it incrementally. An ideal of openness in our politics also creates space for the crucial work of participating meaningfully under imperfect, or even fundamentally unjust, governments.
If we set aside political culture and instead rely on power to pursue a better world, says Lavoie, we'll be as doomed by the power problem as central planners have always been doomed by the knowledge problem.
Want more from AdamSmithWorks?
Janet Bufton's Great Antidote Extras: Peter Boettke on Don Lavoie and Central Planning, Part 1
Christy Lynn's A Skeptic's Guide to the Perfect Commonwealth
Sabine El-Chidiac's Smith, Hume, and the Factionalist Fray
Activity: The Rule of Law and government officials
From EconLib?
Peter Boettke's Reflections on Science and Society (discusses Lavoie)
Sarah Skwire's Socialist Fantasies
Steven Horwitz's The Five (okay, ten) Essential Books in Austrian Economics (#5c)
Nathan Goodman's 20 Books to Read in Your 20's (includes Lavoie at #18)
Rosolino Candela's The Collapse of the Soviet Union and the Continued Relevance of Ludwig von Mises
Angus Burgin on Hayek, Friedman, and the Great Persuasion at EconTalk
The Reading Room?
Hans Eicholz's Acton on Doing History: To Judge or Understand from the Reading Room at the Online Library of Liberty
Dennis C. Rasmussen's Thomas Jefferson’s Last-Minute Flip-Flop on the Future of American Democracy from the Reading Room at the Online Library of Liberty