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A Textbook Case

Jedediah Purdy is a legal academic probably best known for his work in environmental law, and his just-published Two Cheers for Politics (Basic Books, 2022) shows his wide knowledge of political philosophy. But a central argument of the book is a textbook case of a fallacy to which Ludwig von Mises was keen to call our attention.

Purdy says that “rule by equals is the keystone of democracy. The core question of politics is who has the power to make a shared world. The democratic answer is that the people who live with those choices should control them and that majorities are the best stand-in for the whole people” (p. 12). The power and influence of rich people threatens democracy, and for that reason, an essential aspect of democracy is keeping this group under strict control. “Democracy’s moral authority starts from the principle that we should shape our interdependence in a way that gives equal weight to everyone who lives with the outcome and, in class societies, gives decisive weight to middling people or the poor, cutting back domination of politics by the wealthy” (p. 127).

I don’t propose to criticize this notion of democracy here—for that task readers can consult Hans Hoppe’s Democracy: The God That Failed—but rather to identify an assumption that underlies Purdy’s application of his notion of democracy to economics. This assumption is that the principles of economics leave substantial leeway for democracy to improve the lives of the poor and middle class beyond what can be achieved on the free market. If, for example, the democratic majority decides that workers should have higher than market wages, the way to secure this goal is ready at hand. Minimum wage laws and other measures will raise wages  without ill-effects, except perhaps for greedy capitalists deprived of their ill-gotten gains at the workers’ expense.

Purdy makes evident his commitment to this assumption in his contrast between the free-market approach to the Great Depression and the views of Franklin Roosevelt and W.E.B. Du Bois. Roosevelt in 1937 said that the

country needed … “to find through government the instrument of our united purpose to solve for the individual the ever-rising problems of a complex civilization. Repeated efforts at their solution without the aid of government had left us baffled and bewildered … we must find practical controls over blind economic forces and blindly selfish men.” … Markets produced devastating crises. (quoted on p. 124)

Readers familiar with Austrian business cycle theory do not need me to tell them that the free market did not produce the 1929 depression. To the contrary, the expansionist policy of the Fed induced the crisis, and the interventions by Herbert Hoover and FDR prolonged and exacerbated it. (Murray Rothbard’s America’s Great Depression is the definitive work on this.) In this connection, it is significant that Purdy is quoting from Roosevelt’s second inaugural address, given in 1937, when the free market can hardly be blamed for the failure of the New Deal programs in place since 1933 to extricate America from economic disaster. Suppose, though, that contrary to fact, the free market did produce devastating crises. It would not follow that the programs favored by the “democratic majority” could do better.

Could they in fact do so? Purdy deems it unnecessary to investigate this question. He cites W.E.B. Du Bois, who thought

that the role of government was to shape an economic order for its citizens. Du Bois called his version of democratic political economy abolition-democracy. As he put it, “two theories of the future of America clashed and blended just after the Civil War” and persisted thereafter: “The one was abolition-democracy based on freedom, intelligence, and power for all men; the other was industry for private profit, directed by an autocracy determined at any price to amass wealth and power.” (p. 125)

Du Bois assumes without argument that “abolition-democracy” can do better than the free market; but surely one needs to investigate economic theory to discover this, and there is no reason to think he knew anything about it, despite his eminence in history and sociology.

Purdy’s unquestioning faith in the power of the democratic will exhibits a fallacy that Mises discusses at some length: the unsupported belief that economic laws do not impose strict limits on what policy makers can achieve. Writing in Human Action about price control, Mises says,

It is the tenets of these interventionists that we have to examine. The problem is whether it is possible for the police power to attain the ends it wants to attain by fixing prices, wage rates, and interest rates at a height different from what the unhampered market would have determined. It is beyond doubt that a strong and resolute government has the power to decree such maximum or minimum rates and to take revenge upon the disobedient. But the question is whether or not the authority can attain those ends which it wants to attain by resorting to such decrees.

Mises’s point can readily be extended to other interventionist measures of the sort Purdy favors.

Purdy’s reply to this is obvious. He would say that the views of Mises and Hayek, far from being purely scientific, are ideological rationalizations for control of society by the rich and powerful. In order to show this, though, Purdy would need to show what is wrong with the criticisms of intervention these economists make, criticisms that do not rest on “value judgments” that they hold but on value-free arguments. Purdy never undertakes an analysis of these arguments, and, if he is qualified to do this, he does not vouchsafe to readers the evidence for his competence in economics. Does he think that the validity of economic law is among the subjects that people may through democratic voting decide? He ascribes to the democratic will the words of God, according to the prophet Isaiah. “The Lord of hosts hath sworn, saying, Surely as I have thought, so shall it come to pass; and as I have purposed, so shall it stand” (Isaiah 14:24).