Economic Theory

Note to academics: disagree with economic liberalism all you want, but quit the straw-manning

Why are academics so fond of misrepresenting economic liberalism?

Take the recent New Statesman article co-written by Adrian Pabst, a highly respected political theorist at the University of Kent, and the writer and researcher Ron Ivey. The authors are, of course, perfectly entitled to tear into what they call “market fundamentalism” – but in doing so they punch below the belt. (I should add that I believe the piece to be out of character as far as Pabst is concerned. I have very much enjoyed debating with him and he kindly appointed me as a Senior Research Fellow in the Centre for Federal Studies which he directs at the University of Kent. I am tackling the article here and not the man. I do not know Ron Ivey.)

A response to their piece is important because it raises questions that are at the heart of debates between the left and those who believe in a free society. Indeed, if Pabst and Ivey had done weeks of research, they could not have found a better way to illustrate how misguided the left’s attacks often are.

For example, they write that:

“The chief promoters of market fundamentalism such as the Austrian economist Friedrich Hayek…Building on the body of liberal political thought by Thomas Hobbes, John Locke and John Stuart Mill, market fundamentalists reduced humans to “homo economicus”, a rational, selfish animal in search of happiness in the pleasures of cheap consumer goods and wealth accumulation.” 

This caricature of Hayek is ridiculous. For example, in The Constitution of Liberty, JS Mill is certainly cited – but often critically. On the other hand, Alexis de Tocqueville, Edmund Burke and Lord Acton are three of the most widely referenced authors in that book, and many of the principles which Hayek develops arise from their thinking.

Moreover, homo economicus is explicitly not the model of Austrian school economists. In Human Action Ludwig Von Mises describes homo economicus as: “a phantom of a spurious armchair philosophy. No man is exclusively motivated by the desire to become as rich as possible; many are not at all influenced by this mean craving”.

Adrian Pabst and Ron Ivey would have been slightly closer to the mark if they had used the term “self-interest” rather than selfishness – though even this would have misrepresented the position of Austrian economists such as Hayek.

It is worth noting, as Pabst is an important contributor to the literature on Christian social thought, that in his Nobel Prize lecture Hayek praised the late scholastic thinkers who, in many ways, formed the bridge between the thinking of St Thomas Aquinas and the modern interpretation of the natural law tradition in Rerum novarum, the first major modern social teaching document of the Catholic ChurchIndeed, some Austrian school academics, such as Jesus Huerta De Soto, trace the roots of that school – of which Hayek is the most famous member – to those late scholastic thinkers.

Though Hayek opposes the central planning of economic and social life because he believes it to be impossible, and is in favour of a common law legal system enforced through courts, rather than detailed prescriptive regulation of economic life developed in and enforced through regulatory bureaus, his economic thinking does not even come close to Pabst’s and Ivey’s description.

Hayek’s last book, The Fatal Conceit, is partly a defence of tradition, including religion, in the evolution of successful societal orders. Indeed, Hayek’s main field of study was the role of the individual in society, though he did not believe in the central planning and direct organisation of society by the state. As he wrote in Individual and Economic Order:

“This fact should by itself be sufficient to refute the silliest of the common misunderstandings: the belief that individualism postulates (or bases its arguments on the assumption of) the existence of isolated or self-contained individuals, instead of starting from men whose whole nature and character is determined by their existence in society. If that were true, it would indeed have nothing to contribute to our understanding of society.”

It is important to remember too that the height of economic liberalism in late 19th century Britain was also the height of the development of friendly societies, mutual building societies, mutual insurance companies and other vehicles for fraternity and collective action such as professions and trades unions, though the latter were given legal privileges and evolved into destructive organisations that promoted class conflict.

The essence of a free economy is not selfishness or unchecked individualism, but the development of a complex social order of economic co-operation which cannot be planned by any set of individuals such as those in government. It relies on individual action, but it is deeply social. It does not pre-suppose particular values or virtues that Pabst, as a Christian, would regard as important, but the social order will not thrive without them. It certainly does not assume selfishness or a materialistic view of wealth accumulation.

So why is it that haystacks of strawmen are built by esteemed academics when entering these kind of debates? Why do they put their own case well, but use arguments against others that simply do not make sense?

Perhaps these misconceptions come from the tendency of political theorists to over-categorise in the process of imitating the methods of the physical sciences. Over-categorisation is rather like the error of over-aggregation which Austrians are quick to criticise in economics. It simplifies. Sometimes, simplification can help, but it can often lead to error.

It is important that academics properly engage with thoughts and ideas, for doing so can lead to synthesis. In this case, it may be that there is more in Hayek with which Pabst agrees than he realises. There will still be plenty with which he disagrees, but both perspectives might be enriched by dialogue based on a fair representation of the other.


This article was first published on CapX.


Philip Booth is Senior Academic Fellow at the Institute of Economic Affairs. He is also Director of the Vinson Centre and Professor of Economics at the University of Buckingham and Professor of Finance, Public Policy and Ethics at St. Mary’s University, Twickenham. He also holds the position of (interim) Director of Catholic Mission at St. Mary’s having previously been Director of Research and Public Engagement and Dean of the Faculty of Education, Humanities and Social Sciences. From 2002-2016, Philip was Academic and Research Director (previously, Editorial and Programme Director) at the IEA. From 2002-2015 he was Professor of Insurance and Risk Management at Cass Business School. He is a Senior Research Fellow in the Centre for Federal Studies at the University of Kent and Adjunct Professor in the School of Law, University of Notre Dame, Australia. Previously, Philip Booth worked for the Bank of England as an adviser on financial stability issues and he was also Associate Dean of Cass Business School and held various other academic positions at City University. He has written widely, including a number of books, on investment, finance, social insurance and pensions as well as on the relationship between Catholic social teaching and economics. He is Deputy Editor of Economic Affairs. Philip is a Fellow of the Royal Statistical Society, a Fellow of the Institute of Actuaries and an honorary member of the Society of Actuaries of Poland. He has previously worked in the investment department of Axa Equity and Law and was been involved in a number of projects to help develop actuarial professions and actuarial, finance and investment professional teaching programmes in Central and Eastern Europe. Philip has a BA in Economics from the University of Durham and a PhD from City University.

1 thought on “Note to academics: disagree with economic liberalism all you want, but quit the straw-manning”

  1. Posted 25/04/2021 at 18:08 | Permalink

    Sure, critiques of market fundamentalism might be shallow and strawmen if market fundamentalism is entirely Hayekian, but it isn’t right? Market liberalism (or neoliberalism) has evolved, been twisted if you will, and can hardly be considered Austrian at all anymore, if it ever was. Criticisms of market fundamentalism that target issues like ‘homo economicus’ might be strawmen if market liberalism comprised the full and entire summation of every thinker who has influenced the phenomenon’s thoughts; obviously this is not the case, as there are methodological and ideological contradictions between Hayek, Friedmann, Gary Becker and Sowell. The Austrian term of ‘praxeology’, which is pretty important for Austrian economists is distinctly absent from debates about neoliberalism/market fundamentalism purely because it isn’t a part of it. Given this, then, what these critics target is not Hayek and Mises in their entirety, nor Friedmann and Chicago economists in their totality, but the sociological phenomenon that takes aspects of ideas from all of the above.

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