Economic Theory

‘Pragmatic centrism’: a dodgy ideology

The socialist left, the libertarian right and the pragmatic centre

I was delighted to hear Theresa May attacking the ‘libertarian right’ (alongside the ‘socialist left’) in her Party Conference speech, because her attack demonstrates, once again, how seriously above our weight we are punching. Bryan Caplan once said:

“The self-conscious libertarian population is, to belabor the obvious, extremely small and politically unsuccessful. Serious libertarianism is so rare that very few surveys of political identity even bother to include a libertarian response option.”[1]

Contrast this to the socialist left, i.e. the Corbynistas. They may not be on course to win a General Election, but they are clearly a mass movement, which can easily fill town squares and conference halls up and down the country, not to mention their dominance of social media and university campuses. Being named alongside them, as the main enemies against which the Prime Minister defines her government, is fantastic publicity for us.

But let’s have a look at the ‘pragmatic centrism’ Mrs May was flirting with. What is ‘centrism’, in the sphere of economic policy? According to self-styled pragmatic centrist, the ideological landscape looks about like this:

On the one hand, we have people – let’s call them the libertarian right – who believe that free markets always work perfectly, and that government intervention is always and everywhere a bad thing. On the other hand, we have people – let’s call them the socialist left – who believe that government intervention always works perfectly, and that capitalism is always and everywhere a bad thing. Those two camps are mirror images of each other. Both have equally simplistic, equally unsophisticated understandings of the world. Both believe that they, and only they, are always right, and both are incapable of considering, let alone comprehending, an alternative point of view.

But in between, we have the pragmatic centrists. These people have an infinitely richer, more nuanced and well-rounded understanding of the world. They realise that the world is not just black and white – oh no, it’s so much more complicated than that! No one side is completely wrong, or completely right – the truth is ‘somewhere in between’. Centrist have no need for ideological templates. Templates, they believe, are for simple minds; they are there to provide comfort and an illusory sense of certainty.

So much for the centrist self-perception. Of course, everybody believes that they are ‘just stating the facts’; everybody believes that their own views are ‘just plain common sense’, and everybody believes that it’s the other guy who is ‘blinded by ideology’. Declaring yourself ‘pragmatic’ and ‘ideology-free’ (“let’s just focus on what works!”) is therefore not particularly original.

But more importantly, the assumption that the truth must always be ‘somewhere in between’, about equidistant from two or more ‘extremes’, is itself a template – and not a particularly reliable one. I know that to a centrist, this is the most low-brow, boorish thing one could possibly say, but: sometimes one side really is completely wrong about a subject, and another side really is completely right.

Reasonable extremists

Economists do not agree on very much, but there are some things on which the vast majority of them, from across the ideological and methodological spectrum – Keynesians, monetarists, Austrians, you name it – do agree. They do so because some findings are so robust that they have been replicated by study after study after study, which brings us as close to ‘certainty’ as we can realistically hope to get in this area. These include the findings that price controls (natural monopolies aside) and protectionist measures cause more harm than good, to name just two. Economists’ rejection of these interventions is not ‘balanced’ or ‘nuanced’. An economists would not say “Protectionism is sometimes good, and sometimes bad, it depends on the specifics” – no; they would say “Protectionism is bad”, period. Nor would they say “price controls are a good thing when used in moderation, but a bad thing when used in excess, the challenge is to find the sweet spot” – no; they would say “Price controls are bad”, period.

Interestingly, the areas in which the consensus among economists is strongest are also the areas in which economists are farthest away from public opinion. If the ‘centre ground’ is the part of the idea spectrum where most people stand, then almost all economists are ‘extremists’ on some issues. A position can be demonstrably empirically correct whilst, at the same time, being an extremist fringe position. If you oppose rent controls, you only have 6.6% of the population on your side. Oh, and over nine out of ten economists, and virtually every paper ever written on the subject.

I get your point. It’s just that it’s wrong

If the left loves virtue-signalling, centrists love sophistication-signalling. Their premise is that people who take an unbalanced view on something only do so because they fail to understand the other side(s), and that centrists, by being equidistant, automatically demonstrate an understanding of all sides. This is not true either. To stick to the above examples – the reason why economists reject price controls and protectionism is not that they do not understand where supporters of these measures are coming from. Of course they do: supporters believe that price controls lower consumer prices, and that protectionism saves jobs. You can understand a position perfectly well, and still reject it lock, stock and barrel. (Conversely, a phrase like “it’s complicated, I can see a case for both sides”, can also be a lazy cop-out.)

In fact, I would love to see an ‘ideological Turing Test’, in which people from the libertarian right have to pretend to be socialists in front of a socialist audience, to be centrists in front of a centrist audience, and the same vice versa, in all combination. (Something like this has been done for conservatives and ‘liberals’ in the American sense, and it showed that the former understand the latter much better than vice versa.) I am convinced that, by and large, the libertarian right understands the socialist left quite well, and that that understanding is not mutual. I am less sure where centrists would come out. Maybe in their favourite place: somewhere in between.

The libertarian right and ‘the good that government can do’

In the above, I have, of course, cherry-picked economic policy areas that are exceptionally well understood, which is not the norm in economics. In a lot of areas, you can find solid evidence for two or more conflicting positions. But contrary to the centrists’ claim, the anti-statism of the ‘libertarian right’ does not depend on the absolutist notion that government action is always and everywhere a bad thing. It makes more sense to think about it in the following way:

Suppose you run a small company. You have an employee who has proven, time and again, to be untrustworthy and unreliable. Whenever given half the chance, they abuse their position to further their own ends, at the expense of your company. Let’s also assume that you cannot get rid of that employee. What would you do? Presumably, you would give them only a limited range of responsibilities, and even within that remit, you would define their tasks in a prescriptive, inflexible way.

Almost certainly, this arrangement will sometimes lead to suboptimal outcomes. Remember, as per assumption, the person is not a complete crook, they are just generally untrustworthy and unreliable. So there will be situations in which the constraints you have set will prevent that person from doing things that would have benefitted your company. The problem, however, is that you cannot identify these instances in advance, and even if you could in theory, you cannot monitor that person all the time, and vary the scope of their responsibilities every ten minutes. You have to work out a general set of rules that makes sense most of the time, and which, to the best of your knowledge, works better than any alternative set of rules.

It is, admittedly, a clumsy metaphor, but this hypothetical untrustworthy employee is more or less how the ‘libertarian right’ sees government. We do not claim that government never gets anything right. We just do not believe that you can easily identify and cherry-pick the instances in which it does. We have to find a set of general rules and constraints that works overall, acknowledging that this will sometimes prevent the government from doing good.

Let’s take industrial policy, an area in which Theresa May has made it amply clear she wants to see a more muscular state. We know from past experience that this is generally a bad idea. The government cannot know what the growth sectors of the future will be, and even if it could, the whole approach lends itself too easily to industry capture and favouritism. However, we also know that if you specifically look for them, you can find examples of successful industrial policy projects. It is therefore easy to denounce opponents of industrial policy as ‘ideologues’. It is equally easy for centrists to distance themselves from the many past industrial policy failures:[2] “We never claimed that all industrial policy is good”, they can say, “we just said that we have to be pragmatic about it. It’s not all good, but it’s not all bad either. The truth is somewhere in between. The world is more complex than that.”

It is indeed. But that is an argument for a small and tightly limited government, not for a large government with huge discretionary powers. And no – not for ‘something in between’ either.


[1] Caplan does not use an overly purist definition of libertarianism. He merely refers to people who are “in the same philosophical ballpark as Milton Friedman”.

[2] This is, of course, exactly what Theresa May did in her speech, implicitly disavowing the industrial policies of the 1970s: “It’s not about picking winners, propping up failing industries, or bringing old companies back from the dead. It’s about identifying the industries that are of strategic value to our economy and supporting and promoting them”.

Head of Political Economy

Dr Kristian Niemietz is the IEA's Head of Political Economy. Kristian studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). He also studied Political Economy at King's College London, graduating in 2013 with a PhD. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and taught Economics at King's College London. He is the author of the books "Socialism: The Failed Idea That Never Dies" (2019), "Universal Healthcare Without The NHS" (2016), "Redefining The Poverty Debate" (2012) and "A New Understanding of Poverty" (2011).

1 thought on “‘Pragmatic centrism’: a dodgy ideology”

  1. Posted 11/10/2016 at 09:21 | Permalink

    The Government has resuscitated the idea of sponsoring an Industrial Strategy by including these two words in the title for its newly created Department for Business, Energy and Industrial Strategy.

    To avoid repeating mistakes of the past, a modern Industrial Strategy should make sure that there is a clear separation of roles between the State and its favourite partner for the provision of public services, the Private Sector. This is especially applicable to the relationship between the Ministry of Defence and defence equipment manufacturers.

    As the Buyer, it is the job of MoD to set the Requirement whilst as Sellers, defence equipment manufacturers come-up with the fully engineered Technical Solution, plus its associated Support Assets which will satisfy the Requirement – within the context of a multiple-phase winner-takes-all, loser-gets-nothing competition.

    That is to say, Contractors raise invoices in respect of work completed and MoD pays against them, using taxpayers’ money. To put it another way:

    (a) MoD is in the Public Sector bound by the terms of a departmental objectives document agreed with the Treasury based on demanding performance targets, at the same time as being obliged to submit to external auditors like the National Audit Office, not to mention cross-examination and ridicule in public, by Select Committees of the House of Commons.

    (b) Contractors are for-profit organisations in the Private Sector set-up in business to sell goods, services and labour at the prevailing market rate, in the face of competition from other Contractors – at the same time as being lent on heavily by Shareholders to deliver ever increasing dividend returns. They are completely reliant on MoD’s equipment budget for their continued existence.

    So, contrary to the proposition that some people beholden to industry interests are advancing about collaborative working and/or cosy partnerships, there can be no alternative type of relationship between MoD and defence equipment manufacturers other than the conventional, no nonsense, Buyer/Seller relationship – at arm’s length, based upon a legally binding contract.

    That is to say, a straightforward, uncomplicated relationship between a willing Buyer and a willing Seller.
    @JagPatel3 on twitter

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