Economic Policy in a Liberal Democracy,
by Richard E. Wagner (1996)
In Economic Policy in a Liberal Democracy, Richard E. Wagner offers an approach to welfare economics and economic policy appropriate for a classically liberal society.
Professor Wagner explains how welfare economics has been unable to fulfil the aspirations of its advocates because it assumes that the consequences of policy measures are sufficiently knowable to achieve specific and intended outcomes. The standard vision of the corrective state, where the state intervenes to repair economic failures and to achieve beneficial consequences, is revealed to be incoherent because the state lacks the competence to influence economic outcomes.
Once the full complexity of the economy is recognized, policy measures are shown to generate a plethora of unintended consequences. What emerges instead is a focus on policy for creating and maintaining a constitutional framework that maintains and supports the liberal order in which people organize their activities.
Tyler Cowen, George Mason University, Public Choice Volume 93, Nos. 1-2, 208-210 (1997)
"Wagner provides an excellent critique of standard welfare economics, and outlines an alternative classical approach to economic policy."
Bruce Yandle, Clemson University, Constitutional Political Economy Vol. 8, No. 1, 93-95 (1997)
"Richard Wagner's ..., Intelligence, Fate and Good Government begins with the Federalist challenge -- how to generate order among a free people given the inevitability of government? Wagner uses demand theory, production theory, and welfare economics to illustrate how the omission from these theories of critical assumptions about the market process can lead the policy analyst/ technician astray. Wagner explains the knowledge problem and how scarcity of knowledge may be a greater constraint on attaining efficiency through government than through markets. Turning to constitutional economics, Wagner offers different visions of government, reaching from one that reserves to itself all rights to one that is minimal and protects an extended order. Staying with his assertion that government is inevitable, Wagner explores how some government actions, even those involving ownership and pricing, can support markets, while others that may appear to be less interventionist can weaken or even destroy the basis for true market action. Wagner leaves the reader with a discussion of the instability inherent in mixed economies and of how any reliance on the presumed collective will of the people will lead to an ongoing struggle among special-interest groups that brushes against the dim prospect of a tyranny of the majority."
John Rogers, Agenda Vol. 4, No. 4, pp. 508-510 (1997)
"...The unyielding pressures of public choice in a democracy explain some of the support for 'politics in the small'. In his essay 'Economic Policy in a Liberal Democracy', Richard Wagner argues that a liberal society must reject 'the principle of the mixed economy that has become to second-nature in the post-war period in the Western democracies' (p. 6). However, this is not going to emerge spontaneously from the electorate: if anything, the popular demand for democracies to be authoritarian, which Alexis de Tocqueville identified in the mid-19th century, seems stronger than ever. As the four authors in this collection see it, the key problem is a lack of intellectual leadership from liberal academics and policy- makers. ...
How then is government to be constrained? Wagner argues for constitutional rules requiring economic policy to be conducted in accordance with the 'central principles of a liberal society' (p. 49). Yet Wagner himself appears to believe that these principles could allow government to legislate for mandatory health insurance, to raise taxes, or to impose tariffs. Furthermore, even a decent constitution that sets our properly to constrain government could be rendered meaningless over time. As Epstein (1985) showed, from the 1937 West Coast Hotel v. Parrish case, the US Supreme Court began upholding almost every economic regulation and taking of property, even though the US Constitution was predicated on a division of powers and a system of checks and balances. ..."