The following longer piece is designed to bring light rather than heat to the on-going debates regarding free market institutions versus government.

We hear quite a bit about the battles between conservatives (the American equivalent of classical liberals) and liberals (the American equivalent of Modern Liberals or Social Democrats).  This is especially true regarding their differing economic philosophies—or at least thinking about economics.  The conservatives accuse liberals of wanting to destroy the economy while the liberals claim that conservatives favor the so-called 1% and don’t care about the 99%.  The rhetoric is often cast in terms of pro-capitalist versus anti-capitalist systems.  The conservatives believe capitalism (defined properly) is best while the liberals believe it is deeply flawed and needs to be reined in if not overthrown.[1]

I am going to suggest that the current debate is really not about different intentions but rather about different visions of the best solution to the various economic problems that they perceive.   To put it another way, the real issue is means and not ends in economic arguments.  I am going to first assert that most policy wonks, theorists, political philosophers and scientists, economists and individuals in general want the following to result from any economic policies or systems: (1)  increased and increasing well-being, measured not just in material but also in psychic  terms; (2) increased and increasing prosperity for all, measured in terms of average real income; and (3) ideally, a level of well-being and prosperity that are more than at merely subsistence levels, but raise people out of poverty and the danger of poverty and place them at minimum in a position of relative comfort.  Regarding the third goal, some wish to achieve this one by invoking equality of outcome as the ultimate end.

Let us assume then two things before going further.  First poverty will never be eradicated.  This is unfortunate, but a simple fact that cannot be denied.  We can and ought to “work” toward the goal of eradication, but here at least, we should admit that it is not realistic at present at least.  Secondly, let us assume that absolute equality of outcome of any economic policy or system is not possible, or necessarily desirable.  Richard Epstein in recent article entitled “In Praise of Income Inequality” makes the case that true Pareto optimal improvement cannot be achieved in a world in which everyone has exactly the same income or resources.[2] 

Now to the main argument.  The most important assumption that has to be made first is that no attempt to design economic policy or an overall economic system is perfect.  What do I mean?  Not to be merely utilitarian, I mean that all costs, psychic or material, and all benefits, likewise, must be taken into account.  The policy or system that achieves the highest net benefit to a society is the one we ought all to choose if we are all rational (an assumption in itself I realize).  In fact, I could go further to invoke the Pareto principle myself and to argue that we want to choose not only the outcome that satisfies that principle—that no one be made worse off and at least one person be made better off—but the outcome that gives the best Pareto result, if we have to choose between to such policies or systems.[3]  And I will say that I believe in good faith that my ideological opponents want the same.  I do also.  For both sides, this is both an economic and a moral issue.

The difference is not then in what they or I want to result, but in what we believe will result with regard to the two alternatives of capitalism and “interventionism.”  If I can convince the liberals of today that capitalism does indeed produce better results, then perhaps they will be willing to come over to my way of thinking.  However, I do face a significant challenge.  Many people hold ideological principles not merely as a matter of intellectual analysis, but for deeper, less rational and more emotive reasons.  Can I reach them?  I believe it is possible to reach both the intellectual liberals and the emotional liberals.  Obviously intellectual liberals can be reached with careful empirical and historical evidence of the benefits of capitalism for all, not just a few industrialists.  Moreover, they can resonate with convincing moral arguments for the superiority of a capitalist system.  As for the emotive liberals, the key here is stories of real success for real people.  These are not just concocted stories but genuine success stories which have resulted from capitalism at work, especially in contrast to the stories of the very same people living under non-capitalist regimes. And there are two other categories of liberals, both extremely difficult to convince.  One category is politicians, not all, but those who are liberal for the sake of gaining and keeping power and prestige.  I suppose one must appeal to their self-interest without ethical or moral compromise.  The other I call radicals.  These include anti-capitalist radicals, environmental radicals, feminist radicals, anti- and post-colonials, race radicals and others.  They are so utopian that unless they are “converted” in some sort of Damascus Road experience, they rarely are convinced.[4] 

Am I arguing that capitalism is perfect?  By no means.  It, like any man-made institutional arrangement, is imperfect.  It has its great benefits and problems.  But I am arguing that is better by far than the alternatives, both in terms of efficiency and morality.  I also readily admit that there is always a legitimate place for state intervention.  It is first vitally necessary to even make capitalism work at all.  It is also necessary to make capitalism work in such a way that everyone is able to avail themselves of the opportunities presented.  With the appropriate “rules of the game” no individual would be legally or politically prevented from vigorous entrepreneurship or self-fulfillment.  A strong rule of law is essential to establish and protect property rights and contracts, not to mention to prevent and punish fraud, duress, and like behavior.  Moreover, government also plays a legitimate role in addressing monopoly, providing genuine public goods and dealing with negative external effects. 

Admitting the imperfection of capitalism and what it needs from government to work well, I am ready to assert that this system and policies consistent with this system  are best for the achievement of the goals I listed above.  The task is to show the skeptics that what I argue is in fact true.  This requires well-grounded and methodologically sound empirical and historical evidence as well as logical and appealing economic and moral arguments.

One more point to make on the morality of capitalism.  I hope to write more about this later, but for now I will say that I have implicitly included the moral case for capitalism in this piece.  To be clear, I believe we can make a strong moral case for it.  I believe in fact that it is morally superior to the more left-leaning alternatives.  But it is imperative that we as supporters of capitalism make that argument and make it in a defensible way.  I don’t expect to convince anyone by simplistic arguments and hollow rhetoric.  The case has to be made on a sound theological and philosophical footing and has to be able to convince Christians and also non-Christians. 

To my ideological—not personal—opponents, I ask only that you give capitalism a hearing and at the same time look at your own position as objectively as possible.