David Gordon of the Mises blog has reviewed a book – Peter Ubel’s “Free Market Madness: Why Human Nature Is At Odds With Economics — And Why It Matters.” Gordon writes-
Ubel, a physician trained in economics and psychology, uses behavioral economics to advocate restrictions on the free market. The market, he thinks, has its place: he quotes Adam Smith on the benefits of the division of labor and enthusiastically agrees. But market fanatics have gone too far. They defend the shocking contention that people should be free to choose as they wish, so long as they do not use or threaten force against others. Accordingly, these misguided people defend an unlimited free market: in it, the choice of consumers determines what will be produced.
Ubel agrees, at least to a large extent, that the market does exactly this. (Like most economists except Austrians, he makes an exception for public goods and externalities, but his attack on the free market in this book lies elsewhere.) But he dissents from the view that this justifies the free market. It would do so only if people chose rationally in their self-interest, and this by no means always holds true.
Science, Ubel tells us, has demonstrated people’s irrationality beyond reasonable doubt. Ubel’s tale here has three principal heroes: the psychologists Daniel Kahneman and Amos Tversky, who performed pioneering experiments that show how unreasonably people decide, and the economist Richard Thaler, who developed similar ideas and brought the work of these psychologists to the attention of the economics profession. Their research explodes market fundamentalism
How does it do so? For one thing, our heroes say, people often make mistakes in reasoning. If people reason wrongly, how can they hope to get what they really want?
Regardless of its causes, though, obesity unquestionably poses health risks to many people, and Ubel wants to bring in the state to rectify matters. If you object to him that people ought to be free to decide how much to eat, or whether to smoke, for themselves, he will answer that their choices, marred by cognitive mistakes, cannot be considered the outcome of rationally self-interested deliberation. This contention, I have endeavored to show, he has failed to prove.
But he also says something else. Why, he asks, should one exalt freedom as the supreme political virtue? Must not freedom be balanced against other components of the good life? Ubel invokes Aristotle, who
viewed one of the major functions of society as being to create an environment that develops virtuous actions in its citizens. We could do worse than to follow his advice. (p. 224)
Ubel for once is right. In order to decide on correct social policy, one must posses a sound philosophy of ethics and politics, one that will consider how various goods can be achieved. Despite this bow to philosophy, though, Ubel shows no awareness that state paternalism is a controversial issue. For him, once we know that a choice has bad results, we can at once legitimately ask what the state can do to improve matters. To think otherwise makes a fetish of freedom; and he quite readily describes his proposals as paternalist.
This is a dangerous – very dangerous – position to take, and is a classic “positive liberty” position (S.E.P) – claiming that people are not “really free.” And that society or government should adopt paternalism and become a “nanny state” to guide people. From the Stanford Encyclopedia of Philosophy article-
[B]erlin, himself a liberal and writing during the cold war, was clearly moved by the way in which the apparently noble ideal of freedom as self-mastery or self-realization had been twisted and distorted by the totalitarian dictators of the twentieth century — most notably those of the Soviet Union — so as to claim that they, rather than the liberal West, were the true champions of freedom. The slippery slope towards this paradoxical conclusion begins, according to Berlin, with the idea of a divided self. To illustrate: the smoker in our story provides a clear example of a divided self, for she is both a self that desires to get to an appointment and a self that desires to get to the tobacconists, and these two desires are in conflict. We can now enrich this story in a plausible way by adding that one of these selves — the keeper of appointments — is superior to the other: the self that is a keeper of appointments is thus a ‘higher’ self, and the self that is a smoker is a ‘lower’ self. The higher self is the rational, reflecting self, the self that is capable of moral action and of taking responsibility for what she does. This is the true self, for rational reflection and moral responsibility are the features of humans that mark them off from other animals. The lower self, on the other hand, is the self of the passions, of unreflecting desires and irrational impulses. One is free, then, when one’s higher, rational self is in control and one is not a slave to one’s passions or to one’s merely empirical self. The next step down the slippery slope consists in pointing out that some individuals are more rational than others, and can therefore know best what is in their and others’ rational interests. This allows them to say that by forcing people less rational than themselves to do the rational thing and thus to realize their true selves, they are in fact liberating them from their merely empirical desires. Occasionally, Berlin says, the defender of positive freedom will take an additional step that consists in conceiving of the self as wider than the individual and as represented by an organic social whole — “a tribe, a race, a church, a state, the great society of the living and the dead and the yet unborn”. The true interests of the individual are to be identified with the interests of this whole, and individuals can and should be coerced into fulfilling these interests, for they would not resist coercion if they were as rational and wise as their coercers. “Once I take this view”, Berlin says, “I am in a position to ignore the actual wishes of men or societies, to bully, oppress, torture in the name, and on behalf, of their ‘real’ selves, in the secure knowledge that whatever is the true goal of man … must be identical with his freedom” (Berlin 1969, pp. 132-33). (all emphasis mine)
The idea of positive “liberty” is crazy, and so are its proponents – negative liberty is the way to go – the absence of coercion. To the Ubels of the world (his book is after all an attack on capitalism first), Ludwig von Mises had this to say-
If one rejects laissez faire [capitalism] on account of man’s fallibility and moral weakness, one must for the same reason also reject every kind of government action.
One more thing – Aristotle is not the final word on ethics or politics; for example, in his Politics, he presents a (n unconvincing) defense of slavery.