What criterion should we use to evaluate political theories and the institutions they advocate? In my book Robust Political Economy, I argue that it is the criterion of ‘robustness’. Institutions that meet this criterion are those best placed to cope with fundamental constraints that arise from the human condition. The most important constraints are those of limited rationality (the Hayekian ‘knowledge problem’) and the recognition that human beings respond, at least to a limited degree, to incentives. Judged against these constraints all human institutions are likely to ‘fail’, but some institutions may be better placed than others to withstand the stresses and strains wrought by the human condition.
In my first post for Pileus back in December 2010, I developed this argument to show how the problem of ‘systemic failure’ in markets though real, is often less pronounced than the problem of ‘systemic failure’ in politics and government regulation: click here My book extends this analysis to other examples of ‘market failure’ theorising in contemporary economics, but also applies the same framework to critique moral/ethical objections to classical liberalism derived from communitarian and egalitarian political theory. I claim that both economic and moral critics of classical liberalism lack a robust account of how their favoured institutions can cope with the ‘knowledge problem’ and the ‘incentive problem’ better than the classical liberal alternative. I then apply the core arguments in the context of debates on the welfare state, international development, and environmental protection.
The subject matter of the book reflects contemporary currents in political economy/philosophy which are attempting to define the character of political ‘idealism’. There has been an excellent discussion recently of ‘ideal’ versus ‘non-ideal’ political theory over at Bleeding Heart Libertarians. I see ‘Robust Political Economy’ not so much as a ‘non-ideal’ theory, but as setting out a framework that focuses on the constraints that must be recognised by a ‘realistic idealism’. I hope you like it, even if you disagree with it.
The video link above provides a short extract from my speech at the US launch of the book held at the Cato Institute last month, which covers my critique of market failure economics and Stiglitz in particular.For the full speech which also includes my critique of communitarian and egalitarian theory, see here .