The Big Myth: Fictions of Free Market Fundamentalism


Cover of The Big Myth: How American Business Taught us to Loathe Government and Love the Free Market by Naomi Oreskes and Erik M. Conway

According to the American Economic Association:

Economics can be defined in a few different ways. It’s the study of scarcity, the study of how people use resources and respond to incentives, or the study of decision-making. It often involves topics like wealth and finance, but it’s not all about money. Economics is a broad discipline that helps us understand historical trends, interpret today’s headlines, and make predictions about the coming years.

If that’s how professional economists define their field, a question should arise in your mind: what does economics have to do with human freedom? To understand human freedom, other fields of study seem to be more relevant: philosophy, sociology, political science, or even history. In their new book, Naomi Oreskes and Erik M. Conway, The Big Myth: How American Business Taught Us to Loathe Government and Love the Free Market (read an excerpt here), tell us why Americans tend to think that “freedom” is best addressed by economics. As the title indicates, it is the result of over a century of mythmaking funded by businesses, corporations, and very, very wealthy people. It is the Big Myth.*

The book is a critique of the extensive public relations campaign that “market fundamentalists” have been conducting in the United States for over a century. Oreskes and Conway have nothing against markets and give credit to them where credit is due. The difference between them and the “market fundamentalists” they critique is that:

Contemporary conservatives, libertarians, and market fundamentalists are not really defending capitalism, even if they think they are. They are defending a certain idea of capitalism, a vision of growth and innovation by unfettered markets where government just gets out of the way. (p. 13)

The idea of the perfect, unfettered market, however, existed, “precisely never. There has never been a time in human history when markets met these conditions, and there is no reason to think that such conditions could ever exist” (p. 418). Nonetheless, the utopian vision of a “free market” has been invoked time and time again against any kind of governmental oversight or regulation of businesses.

Market fundamentalists can only advocate for unfettered markets by ignoring the role government has always played in capitalism. For example, free market fundamentalists make much of what they call the “Great Enrichment:” the great growth in wealth beginning in the 19th century. I’ve pointed out in this space before how slavery, not libertarian “freedom” was responsible for a great deal of that wealth (see here and here). Oreskes and Conway point out that much of the geographic expansion that fed the “Great Enrichment” came from the displacement of American Indians (pp. 172-85, 226). The idea that European settlers could simply take the land of indigenous Americans comes from John Locke’s idea of “property rights” and has been endorsed recently by conservative pundit, Jonah Goldberg. No market fundamentalist idea is every truly dead.

Oreskes and Conway also document the rise of industrial technology, the “American System of Manufactures” which allowed interchangeable parts in machinery through the development of machine tools. This technological revolution allowed for the mass production of goods on a scale never before possible. The revolution in industry resulted from the federal government’s investment in the problem: “It took nearly fifty years–what would have been an inconceivable period of research and development for a private corporation in the nineteenth century (or today for that matter)–but once it was achieved, it revolutionized manufacturing” (p. 124). When confronted with well-documented histories of governmental involvement with the creation of wealth and advancing capitalism, market fundamentalists like Milton Friedman, just ignore it, or worse, lie about it (p. 275). The market fundamentalists create a fictional past to suit their ideological predispositions and, more importantly, the ideological demands of those paying them.

Details on page two.

*Full disclosure: Erik Conway and I are graduates from the same PhD program and had the same advisor. He’s a friend. Oreskes and Conway flattered me with a brief mention in the acknowledgments for a tiny bit of help finding some hard-to-locate publications. I have admired and taught their previous book, Merchants of Doubt: How a Handful of Scientists Obscured the Truth on Issues from Tobacco Smoke to Global Warming as well as the related documentary. Additionally, I have used Oreskes’s book, Why Trust Science? as a text in my “Science and Public Policy” class since its release a few years ago.

Hayek Versus Hayek


It turns out I have more thoughts on Andrew Koppelman’s new book, Burning Down the House. In my previous post, I dealt with Hayek and racism. Here I focus on Koppeman’s claim that a sharp distinction can be drawn between the crude and radical libertarianism of Murray Rothbard and the sophisticated and moderate libertarian libertarianism of F.A. Hayek. It was Rothbard’s fanatical opposition to any version of the welfare state or regulatory control of businesses that libertarians are embracing today, Koppelman claims. By abandoning such absolutist claims and embracing Hayekian balanced approach to governance, libertarianism can be a useful guide for our future. Koppelman is correct that a clear distinction can be drawn between Rothbard and Hayek but errs in thinking Hayekian thought is not responsible for the libertarian embrace of current policies that Koppelman deplores. I show that Koppelman misunderstands the argumentative strategies employed by today’s libertarians to oppose reasonable regulations on business and the expansion of the welfare state. These strategies are better described as Hayek’s than Rothbard’s. Also, I show that Koppelman’s main intellectual opponent is Hayek himself, who consistently opposed policies that Koppelman claims Hayek’s logic should endorse.

To begin, I will explore Hayek’s argumentative strategy for evaluating a given governmental action.

Frontpiece of Cato's Letters, Vol. 1
The Cato Institute, named after Cato’s Letters was founded by Rothbard and Koch in 1977

For Hayek, Koppelman argues, state action could be justified through cost/benefit analysis: does the proposed action’s benefits outweigh the cost? If so, the action is justified, if not the action is not justified. But that description, which reduces Hayek to the kind of everyday cost/benefit analysis that every policymaker presumably employs in some form and misses what makes a particular calculation “Hayekian.”

What makes a cost-benefit analysis Hayekian is that Hayek demanded that state intervention in the economy shouldered very strong probative obligations “Hayek’s view did not entail minimum government. It rather imposed strict conditions on intervention in the economy” p. 15). For Hayek, the market enjoyed a strong presumption of efficiency and, in order to justify State action, the government should shoulder a quite heavy burden of proof to show that the benefits of taking action outweigh the costs imposed. The state may act in “market failure can be shown.” (p. 177). Koppelman argues that Hayek, read properly, allowed for reasonable regulation of economic activity in order to protect the public good and a welfare state provided those measures met very stringent evidentiary requirements showing them to provide net benefits to society. For Hayek, that could include things like a guaranteed minimum income to provide for basic human needs. These reasonable measures are viewed as anti-libertarian by today’s libertarian right, who are committed to Rothbard’s dogmatic views of private property which forbids such measures. For Rothbardian thinkers, taxation is always theft, state action is always coercive, and the market will always provide for human needs better than the government–views Hayek rejected according to Koppelman. Koppelman concludes, “Hayek’s reasoning thus yields a moderate, pro-capitalism, pro-free trade philosophy that embraces the modern regulatory and welfare state so long as it does its job properly’ (p. 71).

Well, now. Before we all go jumping into bed together, let’s ask ourselves a basic question: do Hayek’s views provide the guidance necessary to actually govern in the way that Koppelman claims it did in the past and should in the future? If the question of state action turns on how much evidence is required to overcome the presumption the market enjoys, for Hayekians, that means the evidence needs to be very good and there needs to be a lot of it. But who makes the determination that the evidence is sufficient? How is the evidence gathered and weighted? What counts as a “cost” or a “benefit?” Those are the kind of questions that need answers before a political theory can guide policy.

More importantly, since there is a strong presumption against state action in Hayek’s formulation, those opposing regulations or a welfare state do not need to “win” any particular argument about such actions. They merely need to set the burden of proof high enough such that it is difficult, or perhaps impossible to meet, as Richard Gaskins has shown. Schematically, the argument looks like this:

  • Make the opposing advocate shoulder the burden of proof.
  • Set the standards for meeting the burden of proof very high.
  • Claim that the opposing advocate has not met the burden of proof either by claiming the available evidence does not meet the burden of proof OR that the available evidence does shows the costs outweigh the benefits.

In fact, this is precisely the strategy employed by the“neo-Hayekians” who are homed at “intellectually serious policy-wonk institutions such as George Mason University and the Cato Institute” (p. 110) to forestall the kind of “modern regulatory and welfare state” Koppelman claims they should be embracing.

Go on to Page Two