EFFICIENCY IS NOT THE ONLY GOAL.

That's long been a Cold Spring Shops theme.

On the one hand, in the political economy of public policy, efficiency is a goal, but not the only goal.  On the other hand, there is a potted version of the Welfare Economics Paradigm that equates market failure with a case for government intervention.  Short form: any failure of a market to allocate resources efficiently produces incentives to harvest the efficiency gains.  That requires adaptation, something that subsumes values and spiritual dimensions as special cases, not as rhetorical trumps.  It also requires more systematic thinking on the part of economists.

Thus, particularly when the scholar's thoughts turn to policy implications, the economist qua economist has to be circumspect.  "One of the first principles we seek to instill in our students is that economics is useful in understanding why people do what they do, but must be used with caution as a way of making public policy."  Neglect that, and risk exposing people to more tyranny and poverty.  Pay attention to that, and your advice might be beneficial to policymakers.

Now that the academic year is over, the scholars have opportunities to turn their attention to scholarship.  Donald "Cafe Hayek" Boudreaux sees an opportunity for that circumspection.  "On the Efficiency and Morality of Free Markets."  His argument is instructive.  Put simply, there might be an efficient way to ... balance conflicting goals.

The implication seems to be that at least some defenders — mostly economists — of free markets are interested in “economic efficiency for its own sake,” while thoughtful conservatives understand that well-rounded individuals in healthy societies pursue goals beyond “just the efficient.” Yet in fact, all classical liberals who endorse free markets also endorse, no less than do conservatives, the seeking of the good, the beautiful, and the true. And no serious economist who champions free markets has ever advocated efficiency for its own sake or at the expense of the good, the beautiful, and the true. The reason is simple: “efficiency for its own sake” is meaningless.

Efficiency describes a relationship between means and ends. Efficiency says nothing whatsoever about the contents of the ends. If you want to drive this morning from Philadelphia to New York in the shortest period of time, a well-functioning GPS navigator will show you the appropriate route, one that would likely include a long stretch on I-95. If, in fact, there’s no alternative route that you could drive that would get you to New York more quickly, then the route displayed by your GPS device is efficient given your goal. But if your goal is instead to take in some beautiful scenery along the way, subject to getting to New York before nightfall, then the most-efficient route will be one that keeps you off of I-95 and in your automobile for several hours more than you’d spend if you took the fastest route.

To act efficiently is simply to act in that way that best enables you to achieve your goal, whatever that goal might be. And because you have many goals, to achieve a goal efficiently leaves you with as many as possible resources — money, time, energy — left over to pursue your other goals, whatever they might be.

It's an interesting argument, in that he might be suggesting policy makers who impose restrictions on the behavior of citizens or subjects are fostering inefficiency per se, in that stipulating goals is the same thing as imposing constraints, which is to say, reducing the size of the choice set, or other goals to be pursued.

There is, in short, no way to identify an efficient course of action independently of the actor’s goals. Yet once acceptable goals are specified, along with alternative, available means of pursuing them, there can be no objection to choosing the efficient course. Legitimate objections might well be made to the goals. Goals might be justly classified as ill-advised or even immoral. But given any set of acceptable goals, it’s foolish to warn against pursuing them efficiently. And it is literally illogical to insist that some degree of efficiency in pursuit of these given goals should be sacrificed in order to achieve some other objective or to better promote some other outcome, for to so insist would be to treat the stipulated set of goals, not as given, but as changeable.

When we liberal economists praise the market for its efficiency, we praise nothing more — or less — than what we believe to be the free market’s singular success (although, of course, not perfection) at enabling people to achieve as many as possible of their peaceful goals. When we protest against government interventions such as protective tariffs, we ultimately do so not because these interventions result in lower real GDP or wages. Rather, we protest because some individuals’ ability to pursue their peaceful goals is artificially restricted in order to artificially enhance other individuals’ ability to pursue goals – which, in effect, means that the government uses its coercive power to conscript some individuals to serve the ends of other individuals. Because there’s no reason to think that such coerced engagements are mutually beneficial – indeed, because there’s every reason to think that such coerced engagements are “negative sum” – the classical-liberal economist concludes that, insofar as the goal of economic policy is maximum possible material welfare for everyone, interventions such as protectionism are inefficient because these interventions prevent the achievement of that goal.

It might be, as he digs into his thesis, that he's invoking a slippery slope.

Reasonable people can and do disagree about what are and aren’t acceptable goals. Among the virtues – so says the classical liberal – of the free market is that it minimizes the role of coercion in settling such disputes. Aware of his and everyone else’s intellectual puniness, the classical liberal is never certain enough of the merits of his own particular concrete values to believe that these should be imposed on others. He is content to allow other adults to pursue goals that he finds questionable or unattractive as long as these pursuits involve no violation of anyone else’s equal freedom to pursue their goals.

In this way, it might be said, classical liberalism is morally too ‘thin.’ It imposes no moral code beyond keeping your hands to yourself and your promises to others. It tolerates activities that many wise and good people correctly understand to be self-destructive. But first, we can never really be certain that an activity that appears to be without merit won’t eventually prove to be advantageous for society. Second and more importantly, the hard fact that different people have different substantive conceptions of the Good and the Bad means that the moment we call on government to enforce, or even just to give preference to, our preferred ‘thick’ moral code, we effectively grant permission to those whose ideas of morality differ from ours to impose on us their own ‘thick’ moral code if and when the government falls into their hands — as we would be wise to assume it eventually will.

Conservatives should be among the first to recognize that the struggle for political power when the state enforces concrete moral codes is destined to lead either to tyranny or to society-shredding violence.

Perhaps that sort of conflict is inevitable, as the creation of an institution with a monopoly on violence is going to tempt people who would like those powers for their own purposes to seek control over that institution, even if by only the slimmest of majorities.  (See the 21st century election cycles in these United States.)  Best, he suggest, that those monopoly powers be enumerated and constrained.

The classical liberal is neither a bloodless promoter of efficiency for efficiency’s sake nor a citizen who’s morally indifferent or apathetic. Quite the contrary. The classical liberal recognizes that morality is utterly indispensable. But he or she believes that beyond preventing coercion and fraud, the government has no business imposing any concrete moral code. The government can be trusted to possess neither the knowledge nor the consistently excellent motivation that would be required for it to successfully impose ‘the’ appropriate moral code. The business of choosing and enforcing moral codes belongs to the people, to free individuals who talk to and reason with each other, who set and follow examples, who learn from their mistakes, and who compromise with one other.

Of course there’s no guarantee that the particular set of concrete moral rules that emerges in the free, liberal society will be the best set, however defined. There’s not even a guarantee that the free, liberal society will never embrace a concrete morality that damns its denizens to degradation and both spiritual and political enslavement. Of course this terrible fate could happen. But, says the classical liberal, humanity’s chances of avoiding the worst moral arrangements and derangements – and of getting along tolerably well with a tolerably good moral code – are without a doubt highest if morality is left to free individuals and not imposed by the state.

It might be that in the absence of such constraint, which is to say those 21st century election cycles, degradations and derangements are the inevitable outcome.  Yes, and they're the kind of thing you'd see in the punishment cycles of a grim strategy equilibrium, which is to say, once you get there, getting out is hard.