## 1. Explicating A Challenging Term



For many years, the term "neoliberalism" has been in
search of a referent. Is neoliberalism an ideology that fetishizes the
market? Or is it a political program aimed at establishing the rule of
the capitalist class? Is neoliberalism the enemy of the state? Or does
it favor the state to sustain the conditions for competitive markets?
Rajesh Venugopal (2015: 166) has argued that neoliberalism



> 
> 
> is now widely acknowledged in the literature as a controversial,
> incoherent, and crisis-ridden term, even by many of its most
> influential deployers,
> 
> 
> 



such as Michel Foucault (2004 [2010]). Venugopal's assessment
was arguably apt just ten years ago.



But several recent book-length treatments of neoliberalism (Burgin
2012; Biebricher 2018; Slobodian 2018; Whyte 2019) have helped give
form to an arguably inchoate political concept. As Quinn Slobodian
argues,



> 
> 
> in the last decade, extraordinary efforts have been made to
> historicize neoliberalism and its prescriptions for global governance,
> and to transform the "political swearword" or
> "anti-liberal slogan" into a subject of rigorous archival
> research. (2018: 3)
> 
> 
> 



Along similar lines, Thomas Biebricher (2018: 8-9) argues that
neoliberalism no longer faces greater analytic hurdles than other
political positions like conservatism or socialism.



In light of this recent historical work, we are now in a position to
understand neoliberalism as a distinctive political theory.
Neoliberalism holds that a society's political and economic
institutions should be robustly liberal and capitalist, but
supplemented by a constitutionally limited democracy and a modest
welfare state. Neoliberals endorse liberal rights and the free-market
economy to protect freedom and promote economic prosperity.
Neoliberals are broadly democratic, but stress the limitations of
democracy as much as its necessity. And while neoliberals typically
think government should provide social insurance and public goods,
they are skeptical of the regulatory state, extensive government
spending, and government-led countercyclical policy. Thus,
neoliberalism is no mere economic doctrine. According to Biebricher,
neoliberalism



> 
> 
> explicitly addresses the noneconomic preconditions of functioning
> markets and the interactive effects between markets and their
> surroundings. (2018: 27)
> 
> 
> 



And neoliberals share



> 
> 
> the problem of how to identify the factors indispensable to the
> maintenance of functioning markets. (2018: 26)
> 
> 
> 



Slobodian argues that all neoliberals



> 
> 
> saw the intellectual project as finding the right state and the right
> law to serve the market order. (2018: 87)
> 
> 
> 



Neoliberals thereby offer unique institutional prescriptions on
distinctive grounds. Importantly, then, neoliberalism as a
philosophical doctrine is not an attempt to suffuse institutions with
the idea of human agents as *homo economicus*, (Brown 2019).
Instead, following Jessica Whyte (2019: 8), neoliberalism has a
normative dimension that goes beyond the economic, since neoliberals
believed



> 
> 
> that a functioning competitive market required an adequate moral and
> legal foundation,
> 
> 
> 



such that the arguments for neoliberal institutions involved an appeal
to normative principles (2019: 14, 233).



We can helpfully explicate neoliberalism by examining the political
concepts, principles, and policies shared by three twentieth century
political economists: F. A. Hayek, Milton Friedman, and James
Buchanan. While they were trained as economists, all three wrote in
political theory, and Hayek and Buchanan did so extensively.
Identifying the common themes in their work provides an accurate and
illuminating picture of neoliberalism as a philosophical doctrine.



These figures were selected in response to the aforementioned
historical research on neoliberalism. Biebricher (2018: 2) identifies
all three figures as neoliberals, though he also counts Europe-focused
"ordoliberals", specifically Walter Eucken, Wilhelm
Ropke, and Alexander Rustow, as neoliberals. Slobodian (2018:
268) identifies Friedman, Hayek, and Buchanan as neoliberals, though
he also includes the arguably libertarian Ludwig von
 Mises,[1]
 and a long litany of ordoliberals; he also focuses his analysis on
what he calls "Geneva school neoliberalism", where a great
deal of neoliberal thought about global institutions was
 focused.[2]
 Whyte (2019: 31) focuses more on Hayek and Friedman than Buchanan,
but she includes them in a larger cast of characters. So, while Hayek,
Friedman, and Buchanan are not the only neoliberals, they are central
to the new historical analysis. And by focusing on their thought, we
not only ease the burden of analysis, but provide space to focus on
neoliberal ideas as crafted by their most reflective and insightful
proponents. Further, other neoliberals said much less about their
philosophical commitments, so we have less material to work with.
Perhaps the relative silence of other neoliberals makes it harder to
justify using Hayek, Friedman, and Buchanan to represent them, but
their shared political alliances and policies demonstrate substantial
 overlap.[3]



This entry's approach to defining neoliberalism differs from
that of Biebricher, Slobodian, Whyte, and Brown (Brown 2019) in much
the same way as political theorists and philosophers differ from
historians, and indeed how philosophers differ from political
theorists. Neoliberalism can be understood as a somewhat static
doctrine to provide a basis for evaluation, and that can later serve
to explicate variations on the view. It is perhaps more natural to
treat neoliberalism as a dynamic system of ideas, as historians do,
and even some political theorists. Nonetheless, a review of Hayek,
Friedman, and Buchanan reveals a sufficiently static doctrine to count
as a kind of political philosophy.



The use of the term "neoliberalism" in this entry does not
fit all uses of the term. Thus, the goal is less to explain what
"neoliberalism" *really means* in all its uses, but
rather to proffer a meaning based on three criteria. First, the term
"neoliberalism" should be used to denote a fairly coherent
set of positions. Second, it should be used to capture the views of
those figures most often associated with the position. Finally, we
should focus on capturing the most serious and even-handed uses of the
term, such as by academic historians, rather than more popular and
pejorative uses of "neoliberalism". This essay's
account of the meaning of the term satisfies all three criteria. It
identifies a coherent doctrine understood in light of the views of its
proponents, and its use of the term overlaps with the more careful
uses of the term by recent academic historians. We pursue all three
aims by locating common commitments in the thought of Hayek, Friedman,
and Buchanan.


## 2. Inadequate Descriptions



If we want to understand neoliberalism in terms of the ideas of those
commonly associated with it, and usages proposed by historians, we
should understand neoliberalism as a doctrine about how politics and
the economy should be organized. It is not a theory of justice or
legitimacy. Rather, neoliberals appeal to a plurality of moral
considerations to justify their preferred institutions. We should also
avoid defining neoliberalism as fitting within any of the following
four categories. Neoliberalism should therefore not be identified as
(SS2.1) an ethos or conception of the good life, (SS2.2) a
school of thought within utilitarianism, (SS2.3) a version of
libertarianism, or (SS2.4) an ideal theory.


### 2.1 Neoliberalism as Ethos



Many think that neoliberal societies put profit ahead of other central
values. David Harvey, for instance, argues that



> 
> 
> neoliberalism values market exchange as "an ethic in itself,
> capable of acting as a guide to all human action, and substituting for
> all previously held ethical beliefs". (2005: 3)
> 
> 
> 



George Monbiot insists that neoliberalism



> 
> 
> sees competition as the defining characteristic of human relations. It
> redefines citizens as consumers. (2016)
> 
> 
> 



Brown (2019) agrees. Some say that neoliberalism is an ideology where
everyone is supposed to focus on economic prosperity or economic
growth. Others say that neoliberalism is an ethos of the firm that
rejects corporate social responsibility, instead recommending that
firms focus solely on their bottom lines (Steger & Roy 2010:
13).



But neoliberals instead advance a view about the design of social
institutions, and not a particular ethos of social life. In fact, they
have rather little to say about how to live the good life. Instead,
neoliberals argue that their defense of capitalism does not
necessitate profit seeking as a way of life and that markets do not
produce people with such an ethos. It is true that they think certain
attitudes and values, such as an excessive focus on social justice,
equality of outcomes, hostility to all pursuit of profit, can
undermine the foundations of a free society. But that does not imply
that they embrace a consumerist ethos.



To illustrate, consider Friedman. Friedman holds that part of the case
for freedom is that we don't know what persons ought to value
because no one really knows what the good life consists in; a free
society is good because it allows people to experiment with different
forms of life to answer those questions for themselves (Friedman 1987
[2017: 185]). And while Friedman (1962a [2002: 133]) proclaimed that
corporations' first duty is to maximize profits for their
shareholders and that public policy should ensure that the
maximization of profit works to the benefit of all, even he does not
advocate a particular account of what persons ought to value.



Hayek and Buchanan are even clearer in denying that the good life
consists in economic ends like wealth maximization. Buchanan (1991:
343) emphasizes personal ethical responsibility, adhering to social
norms forbidding debt (1987: 456, 461), and following
"moral-ethical rules or norms for behavior" (1999: 451).
Hayek thinks social life in a free society requires that people follow
an array of rules and norms that have nothing to do with profit
seeking, since many of these rules are below our conscious thought
(Hayek 1973). Surprisingly, both Hayek (1988: 135-142) and G.
Brennan and Buchanan (1985: 150) even think that free societies needed
people prepared to act based on fundamentally *religious*
impulses.



Admittedly, Friedman and Buchanan use *homo economicus* to
understand much of human behavior. But Buchanan (Brennan and Buchanan
1981: 81) understands *homo economicus* broadly; it could be
"seen to maximize almost anything at all", and so has no
inherent commitment to, say, wealth maximization.


### 2.2 Neoliberalism as a School of Thought within Utilitarianism



Some theorists claim that "classical liberalism", a term
often used to refer to our three neoliberals, is fundamentally
utilitarian in its understanding of the basis for social order
(Freeman 2011:
 25).[4]
 However, Buchanan (1975) is an avowed contractarian and rejects
utilitarianism because it requires aggregating personal values in ways
Buchanan thinks impossible or inappropriate. While many characterize
Friedman (1974a [2017: 72]) as a utilitarian, he says that "I
myself have never accepted utilitarianism". Friedman's
defense of the free market as maximizing utility was never meant to
imply that people lacked basic rights that might forbid utility
maximization in some cases. Friedman focuses on utility-based
considerations because he thinks they have universal appeal. Hayek
(1988: 69) not only rejects utilitarianism, he rejects the broader
class of consequentialist theories of social order: he rejects any
demand for justification where morality is grounded in its production
of some particular goal, like happiness. Hayek (1978: 132) is better
described as a contractarian.


### 2.3 Neoliberalism as Libertarianism



Neoliberals are much friendlier to the nation-state than libertarians.
Second, libertarians often argue for institutional structures directly
from a moral theory and a theory of justice, an approach taken by
Robert Nozick (1974). In contrast, neoliberals seldom appeal to
fleshed out theories of justice, such as a theory of natural rights,
even if they appeal to the language of justice at various point. To
focus on the case of natural rights theories of justice, Buchanan does
not believe in them. He begins his treatise on political philosophy,
*The Limits of Liberty*, with the insistence that there is no
morality beyond what we agree to (Buchanan 1975: 1). Hayek barely
comments on natural rights, and Friedman discusses them primarily
rhetorically. This is not to say that neoliberals reject deontic
constraints on the use of state power. Hayek and Buchanan's
contractarianisms forbid pursuing liberty and prosperity in ways that
all cannot agree to. Neoliberals instead focus on the
consequence-based arguments for liberalism without adopting
consequentialism. They simply rationalize liberalism in part based on
the claim that liberalism has good consequences.



One is on better ground arguing that neoliberalism is a twentieth
century revival of classical liberal ideas in response to certain
unique twentieth century challenges. Neoliberalism arose in the late
1940s as a response to three twentieth century ideologies that
advocated large states: communism (as the most prominent form of
socialism), fascism, and social democracy. Neoliberals sought to
confine state power to a range of functions much more limited than
that undertaken by extensive states of these three varieties.
Hayek's work on informational systems was a response to
communist central planning. Friedman's monetarism was a response
to Keynesian macroeconomic policy. And Buchanan's public-choice
research program was a response to the economics of general
equilibrium and market failure economics.


### 2.4 Neoliberalism as Ideal Theory



Philosophers have come to understand ideal theory in a number of ways,
but we can follow John Rawls's (1971 [1999: 7-8,
215-6, 308-9]) understanding of ideal theory as describing
the best social and political order in light of certain high-minded
accounts of human capacities, behavior, and natural circumstances, in
particular a preparedness to comply with institutions that embody the
correct conception of justice. Ideal theories of justice provide
accounts of the "realistic utopia" that citizens should
strive for, a society where everyone acts as justice demands by fully
complying with just institutional rules (Rawls 2001: 4, 13).



Neoliberals reject both elements of political theorizing. First, they
tend to reject theorizing about an ideal. This is because neoliberals
are often skeptical about our ability acquire moral knowledge; there
is an epistemic barrier to knowing what is truly right and good.
Again, Friedman repeatedly says that the case for a free society is
that we don't know "what sin is" and Hayek argues
that, given the limitations of our knowledge,



> 
> 
> It is at least doubtful whether at this stage a detailed blueprint of
> a desirable internal order of society would be of much use--or
> whether anyone is competent to furnish it. (1944 [2007: 237])
> 
> 
> 



Hayek does not think that political philosophers invent societies;
rather, neoliberals do not think they're in a position to
describe how an ideal society would function.



Now, importantly, Buchanan (1975: 91-106) is a philosophical
anarchist: "The ideal society is anarchy, in which no one man or
group of men coerces another". And Friedman (1974a [2017: 87])
thinks that it is "desirable to have a vision of the
ideal" and seems to embrace libertarianism as that ideal.
Further, he may think that many of his favored welfare-state policies
would not be part of an ideal social order. Yet both Friedman and
Buchanan think attempts to reach the ideal could backfire and so
political economy should focus making marginal improvements to
institutions. In this way, neoliberals sometimes have political
ideals, but it is not central to their politico-economic doctrine,
that is, to what they actually advocate.



Second, Hayek (1944 [2007: 157-170]), Friedman (1962b [2017:
23]), and Buchanan (Buchanan and Tullock 1962) all deny that we should
assume that people will tend to comply with what justice and the law
requires. People *go wrong*, especially when they have too much
power. As Friedman (1962b [2017: 23]) says, "the liberal
conceives of men as imperfect beings" and assumes that
organizing society is as much about "preventing
'bad' people from doing harm" as it is about helping
others do good. Buchanan's project is to theorize politics
"without romance" and deny the feasibility of a
contractarian agreement on principles of justice. If anything,
compliance is an endogenous variable in their models of social order,
where different sets of social rules will produce different levels of
compliance and are to be chosen in part on that basis. In brief,
*compliance is never taken for granted*. Their non-ideal theory
is also associated with their opposition to socialisms of all kinds:
socialism is irresponsible ideal theory whose purported feasibility
rests entirely on the illicit assumption that human nature can be
modified to make persons more rational and altruistic. Society will
not work as socialists predict.


## 3. Liberalism



Hayek, Friedman, and Buchanan see themselves first and foremost as
defenders of individual freedom and the freedom of small groups such
as the family. Liberty is usually construed negatively, as when Hayek
says that liberty is when "coercion of some by others is reduced
as much as possible in society" (1960 [2011: 11]). Coercion
occurs



> 
> 
> when one man's actions are made to serve another man's
> will, not for his own but for the other's purpose. (1960 [2011:
> 133])
> 
> 
> 



We keep coercive power in check by defining a private sphere of
individual activity and limiting state power (Caldwell 2004: 289).
Friedman thinks similarly. His liberalism is understood as the embrace
of



> 
> 
> a government that is limited primarily to preserving a legal structure
> that allows people to cooperate voluntarily in the marketplace, and
> whose power is dispersed. (Butler 1985: 22)
> 
> 
> 



For Friedman, Liberals



> 
> 
> take the freedom of the individual, or perhaps the family, as our
> ultimate goal in judging social arrangements. (Friedman 1962b [2017:
> 22])
> 
> 
> 



And more directly: "I define freedom as the absence of coercion
of one person by another" (1987 [2017: 185]).



Neoliberals do not always embrace negative conceptions of liberty
alone. Hayek's (1960 [2011: 11]) conception of freedom can be
interpreted as republican, as the view that one is free when she is
free from arbitrary interference, since Hayek repeatedly worries about
government engaging in arbitrary controls that prevent people from
developing long-term plans. This partly explains his insistence that a
society can be free only when it is governed by the rule of law, since
while law typically coercively interferes, it interferes in a
non-arbitrary, predictable fashion (1960 [2011: 21, 153]). While
Buchanan does not share Hayek's republican sympathies, he too
agrees that general rules make liberty possible. Critically, none of
these three thinkers embrace a moralized conception of freedom where
freedom is the condition of a person whose rights are respected, in
contrast to libertarians like Nozick (1974).



One remarkably strong emphasis among neoliberals, especially Hayek, is
the importance of the rule of law. All persons have a right to be
treated as equals by the legal, administrative, and political
institutions in their society. No one is to be favored according to
their degree of social influence or social power or inherited status.
When people are not protected by the rule of law, their freedoms are
intolerably restricted because they can be arbitrarily interfered with
and cannot predict how they will fare in the future. This means they
cannot make unimpeded use of the liberties that they currently
possess. Neoliberals wield the rule of law against those who favor
more extensive states, including both social-democratic liberals and
socialists, on the grounds that extensive administrative states must
violate the rule of law to engage in their characteristic activities.
Hayek argues that absolutism arises from "powerful, centralized
administrative machinery" whose professional administrative
class becomes "the main rulers of the people" (1960 [2011:
193]). Large bureaucracies invariably interfere, and in an arbitrary
fashion. This dangerous logic of bureaucracy was a fundamental feature
of Buchanan's research program, and the rule of law is his
solution, too. For these reasons, neoliberals believe equal treatment
before the law is a central procedural liberty that persons possess
not only in court but whenever they are subject to state coercion.
Neoliberals embrace limited government in part because they believe
that equal treatment before the law can be achieved only by limiting
government and embracing capitalist economic liberties like freedom of
contract, since both institutional practices allow others to follow
general rules and avoid seeking approval from an arbitrary authority
(1960 [2011: 205, 230]).



The most common rationale for freedom in Hayek and Friedman is
"ignorance--we cannot be sure we are right" (Friedman
1987 [2017: 185]). As we have seen, while Friedman says he favors
"a free society because my basic value is freedom itself",
he nonetheless asks, "How do I justify that preference? ...
If I really knew what sin is, I could not justify it" (1987
[2017: 185]). Similarly, Hayek says that the case for individual
freedom



> 
> 
> rests chiefly on the recognition of the inevitable ignorance of all of
> us concerning a great many of the factors on which the achievement of
> our ends and welfare depends. (1960 [2011: 29]; Caldwell 2004:
> 347)
> 
> 
> 



And even: "If we knew how freedom would be used the case for it
would disappear" (Hayek 1960 [2011: 31]). The purpose of
individual freedom is to enable each person to



> 
> 
> make the fullest use of his knowledge, especially of his concrete and
> often unique knowledge of the particular circumstances of time and
> place. (1960 [2011: 156-7])
> 
> 
> 



Friedman focuses on ignorance of moral facts, while Hayek focuses on
moral ignorance, as well as ignorance about how to organize
people's lives, but either way, ignorance is the chief
justification for freedom.



A certain kind of epistemic humility, particularly humility about how
to organize society and what the consequences of our preferred
policies will be, is essential to neoliberal thought. However, as we
have seen, sometimes neoliberals adopt a broader skepticism that casts
our grasp of moral facts into doubt. We ought to see epistemic
humility about a wide range of non-normative social facts as an
essential feature of neoliberal doctrine, whereas humility about moral
facts is less central to understanding what neoliberalism is. Thus,
neoliberalism can be formulated apart from this broader form of moral
skepticism.



Neoliberals also stress that freedom allows people with different ends
to cooperate and create peace (Hayek 1978: 111-136). This is an
important theme for Buchanan (1975). As a contractarian, he thinks
that the goal of agreement on constitutional rules is to end the
Hobbesian state of war and secure enough peace to establish mutual
gains from exchange. Thus, a second rationale for extensive negative
liberties is that they are instrumental for cooperation and peace.



Neoliberals obviously embrace strong rights to private property,
rights that apply not only to goods and services for one's own
consumption but to capital as well (Hayek 1988: 35; 1973: 107). The
rationale for private property rights is similar to the general case
for liberal liberties that we have already discussed. Hayek (1988: 35;
1973: 107; 1960 [2011: 35]) and Friedman (1962a [2002: 8-9]) in
particular argue that we can't fully distinguish economic from
other liberties even conceptually. They both famously argue that
political and economic freedom cannot be separated in practice either.
That is part of the point of *Capitalism and Freedom* and
arguably the central point of *The Road to Serfdom*. Buchanan
(1993: 230) and Hayek (1960 [2011: 141]) also stress that private
property rights allow persons to make plans, in part because private
property enables people to save money and thereby become less
dependent on employers and bureaucrats. Private property is further
thought to be "an essential condition for the prevention of
coercion" and the wide dispersal of power (Hayek 1960 [2011:
140]). Freedom of contract is embraced for similar reasons. And to
respect these rights, a society will have to embrace capitalism, since
the exercise of these rights inexorably yield capitalist economic
arrangements, where capital is held by both capital owners and
workers.


## 4. Capitalism



We can understand capitalism as an economic system where the range of
goods and services on offer is governed in accord with a strong right
to private property and a system in which prices are set by private
organizations. People are free to exchange goods and services under
whatever terms they contract for, with few restrictions. Neoliberals
share this understanding, even if they do not always defend capitalism
by name.



In defending capitalism, neoliberals focus on defeating two foes:
socialism and Keynesianism, which they typically consider as offering
the most influential alternatives to their preferred institutions.
Socialism, at least the form of socialism targeted by neoliberals, is
an economic system where capital is socially owned, typically by
government, and the capital stock is produced, organized, and its
outputs distributed by the central government that is, where the
economy is centrally planned. Neoliberals attack Marxist socialism in
the strongest terms, but Marxists are not their sole targets. Hayek is
keen to refute the twentieth century socialist Oskar Lange (1936), who
adopted some aspects of neoclassical economics. Neoliberals also
targeted democratic socialism; for example, Hayek (1944 [2007:
163-4]) targeted Fabian socialists in *The Road to
Serfdom*.



The neoliberal case against socialism is based on three concerns:
inefficiency, conflict, and power. Socialism is inefficient, generates
social conflict, and concentrates power in dangerous ways. Let's
begin with inefficiency, the familiar argument that socialist
economies impoverish society vis-a-vis
 capitalism.[5]
 Hayek's early claim to fame was his role in what is called the
socialist calculation debate, which concerned how socialist planners
can plan the production and distribution of capital goods without the
use of a price system. Socialists argued that planners should be able
to plan by collecting preference and production information from
citizens. Ludwig von Mises (1922 [1936/1951]) began the debate by
arguing that, without a price system, the information required to plan
the economy did not exist. Without a price system, there is no
information for planners to collect and compute. Oskar Lange (1936)
replied that socialist managers of firms could mimic market prices.
Hayek (1945) disagreed with Lange; even if the information required to
plan the economy existed, it would be too hard to collect and
impossible to compute before the relevant information changed. The
problem is that the information required to plan the economy is not
*given* to anyone. For Hayek, we can plan the economy



> 
> 
> *if* we possess all the relevant information, *if* we
> can start out from a given system of preferences, and *if* we
> command complete knowledge of available means.
> 
> 
> 



But that is "emphatically *not* the economic problem
which society faces" (1945: 519). Instead,



> 
> 
> the "data" from which the economic calculus starts are
> never for the whole society "given" to a single mind which
> could work out the implications and can never be so given.
> 
> 
> 



In contrast, the market economy can make use of this information
through the price system. The price system can draw on each
person's local and often tacit knowledge to effectively produce
goods and services without collecting that information in one place.
The "marvel" of the market is that, when some raw material
is scarce,



> 
> 
> tens of thousands of people whose identity could not be ascertained by
> months of investigations, are made to use the material or its products
> more sparingly,
> 
> 
> 



and this occurs



> 
> 
> without an order being issued, without more than perhaps a handful of
> people knowing the cause. (1945: 527)
> 
> 
> 



Hayek's analysis of how minds process information (Caldwell
2004: 261-285) and how commercial society, and systems of
cultural and moral rules, evolve is perhaps the principal focus of his
work (2004: 286-321). Friedman (2000 [2012: 234]) and Buchanan
(1969: 87-8) agree with Hayek's
 analysis.[6]



Neoliberals appeal to a range of considerations to justify the market
besides informational arguments, such as the creativity of the market
mechanism and its capacity to raise living standards. Eamonn Butler
(1985: 22) points out that Friedman's case for capitalism, as
developed in *Capitalism and Freedom*, is based on



> 
> 
> the diversity, rapid adjustment, innovation and experimentation found
> in the market.
> 
> 
> 



In *Free to Choose,* Friedman argues that, when the state
attempts to centrally plan, ordinary citizens "have a low
standard of living" (Friedman & Friedman: 54-5). The
market, on the other hand, has "the remarkable power of raising
material standards quicker than any other" system, while
preserving freedom (Butler 1985: 197). Hayek (1978: 67) emphasizes
that capitalism preserves competition, which he sees not as a means of
reaching a market-clearing price but as a "discovery
procedure" for generating new ideas and innovations. Buchanan
tends to focus on the argument that markets provide people with better
incentives than those faced by government officials. Because



> 
> 
> politicians and bureaucrats are seen as ordinary persons much like the
> rest of us, (Buchanan 1979: B4 [1984: 20])
> 
> 
> 



they lack the motivation to even *try* to implement a socialist
plan. Instead, they will use their power over the economy at least
partly for selfish ends, which would undermine the effectiveness of
socialist government, even if all the informational problems could be
solved.



The next set of arguments against socialism is that socialism creates
needless conflict. Hayek writes that socialism



> 
> 
> presupposes a much more complete agreement in the relative importance
> of different social ends than actually exists
> 
> 
> 



and that, as a result,



> 
> 
> the planning authority must impose upon the people the detailed code
> of values that is lacking. (1997: 193; also see 1944 [2007: 109,
> 166])
> 
> 
> 



Friedman argues similarly in saying that



> 
> 
> the wider the range of activities covered by the market, the fewer are
> the issues on which explicitly political decisions are required and
> hence on which it is necessary to achieve agreement. (1962a [2002:
> 24])
> 
> 
> 



Markets allow people who disagree to benefit one another despite
having different values. Socialism, in contrast, requires a central
plan, and so must impose controversial and sectarian values and ends
on everyone. To solve these conflicts and impose a central plan,
socialist governments must concentrate political power.



Socialism excessively concentrates power in other ways, too.
Socialists have often argued that capitalist economic power can be
reined in by transferring the means of production to society, but
Hayek (1944 [2007: 165]) replies that socialism does not
"extinguish power", it just concentrates power in one
place. Friedman (1955 [2017: 4]) agrees, arguing that "political
power by its nature tends to be concentrated" whereas economic
power "can be highly deconcentrated if it is organized by means
of an impersonal market". The danger of concentrating power in
political institutions is that "government is more subject to
concentrated interest groups", whereas markets are altered by
the "diffuse pressure of millions of individual
consumers". Similarly, while governments promote monopolies,
"the market breaks them down" (Butler 1985: 223). An
advantage of markets is that people can refuse to engage in exchange,
whereas under socialism everyone is caught up in a power struggle.
Additionally, Hayek (1978: 99) argues that under socialism, political
power determines the social position of individuals and groups, an
ironic result of a doctrine whose aim is to diffuse power. Buchanan
(1993: 246) agrees, though for somewhat different reasons.



Neoliberals do not defend capitalism on the ground that it gives
people what they deserve. Friedman and Buchanan do not make such
arguments, and Hayek argues *against* such claims. Hayek (1978:
70) repeatedly says that there's no particular merit in market
outcomes, and so one cannot say that market income is just or unjust.
Hayek, Friedman, and Buchanan understand that market outcomes are
often arbitrary from a moral point of view. Markets make some
undeserving persons rich and some deserving persons poor.



As noted, Keynesianism is neoliberalism's other great foe. Let
us understand Keynesianism as a series of policy proposals aimed at
correcting purported market failures at the macroeconomic level, and
especially as the use of deficit-financed spending to manage the
business cycle and stimulate the economy. These policies were inspired
by John Maynard Keynes (1935 [1965: 2011]), even if he did not always
consistently adopt
 them.[7]



All three thinkers take great pains to answer Keynesian arguments for
government intervention. Hayek's (1941 [2007]) arguments concern
how government spending and the monetary authority's actions
affect the structure of capital goods across the economy. Contra
Keynes's (1935 [1965: 37-45]) comfort with statistical
aggregates in the *General Theory*, Hayek (1941 [2007])
contends that relying on simple economic aggregates obscures how
capital and investment are structured across the economy. Hayek also
thinks the premier cause of recessions is policy that makes bank
credit too easy, which leads to malinvestment that has to be
liquidated in a bust. Importantly Hayek's critique of Keynes was
not influential in the latter half of the twentieth century.
Friedman's and Buchanan's ideas, especially
Friedman's, carried more weight.



Friedman and Buchanan are concerned about Keynesian claims that
recessions are due to declines in aggregate demand and can only be
addressed with heavy helpings of debt-financed fiscal stimulus (even
though Keynes himself was not always a fan of debt-financed
countercyclical policy). Friedman (1959) developed the doctrine of
monetarism, which holds that inflation is always and everywhere a
monetary phenomenon. Inflation and the business cycle can be
controlled by monetary policy and so do not require a fiscal response.
With his co-author, Anna Schwartz, Friedman (Friedman & Schwartz
1963) argues that the Great Depression was due not to a fall in
aggregate demand but was instead caused by the Federal Reserve System,
ironically created to manage recessions, because the Fed allowed the
monetary base to collapse. Had the Fed ensured the growth of the
monetary supply, the Great Depression could have been avoided. This is
central to the case for the market because the Great Depression was
widely blamed on capitalism. If the Depression was a
*government* failure, the result of monetary mismanagement,
then the Depression provides no basis for rejecting
capitalism--and may even provide reason to embrace it.



The central policy response, for Friedman (1959), is to shift the
management of the business cycle from Congress to the Federal Reserve
and lock the Federal Reserve into a monetary expansion rule to prevent
it from making major mistakes. Monetary-policy makers are simply not
knowledgeable enough to use monetary policy to manage the business
cycle. Instead, they should be bound to a rule that would lead to
gentle inflation, which would both avoid hyperinflation and prevent
cyclical unemployment by mitigating the dislocations caused by sticky
nominal wages, contra Keynes (1935 [1965: 231-7]). Focusing
exclusively on growing the monetary base would also prevent a collapse
in the money supply and thereby avoid some kinds of recession.



Buchanan's critique of Keynes differs from Friedman's,
though their critiques are mutually reinforcing. Buchanan (1987, 1999)
thinks that even if Keynes's diagnosis of recessions is correct,
his cure cannot work well so long as governments are staffed with
real-world people. Many politicians and government officials are more
concerned about benefiting themselves and special interest groups than
about promoting the common good. So, when a government engages in
debt-financed economic stimulus, the money is more likely to be
directed to politicians' favored groups than to the places the
stimulus money is most needed. A central difficulty for Keynesian
fiscal policy is the pervasive risk of government failure caused by
the actions of often self-interested economic actors, a consistent
theme of *The Calculus of Consent* (Buchanan & Tullock
1962). Likewise, once people develop a taste for direct transfers,
they will make it hard to shrink the deficit when the recession is
over, leading to long-term debt and lower economic prosperity and
growth.


## 5. Democracy



Neoliberals embrace democracy. More specifically, they endorse equal
rights to vote and participate in elections, and they support
parliamentary democracy as the means of enacting legislation. Hayek
says,



> 
> 
> I profoundly believe in the basic principles of democracy as the only
> effective method which we have yet discovered of making peaceful
> change possible, (1979: xiii)
> 
> 
> 



and he claims to be concerned about disillusionment with democracy
"as a desirable method of government". For Hayek, the
market system must be "embedded in a set of social
institutions" if it is to work, and that includes a
"democratic polity subject to the rule of law" (Caldwell
2004: 348). The point of *The Road to Serfdom* is to argue that
liberal democratic socialism is unstable and that socialism must cease
to be democratic or cease being socialism. So any attempt to plan the
economy would not only destroy liberal rights; it would inevitably
destroy democracy.



Hayek's case for democracy tends to be instrumentalist, as he
argues that



> 
> 
> the true value of democracy is to serve as a sanitary precaution
> protecting us against an abuse of power. It enables us to get rid of a
> government and try to replace it by a better one. (1979: 137)
> 
> 
> 



It is also "one of the most important safeguards of
freedom" (1979: 5). And yet Hayek thinks recognizing that
persons are equals requires not only equality before the law but
"the demand that all men should also have the same share in
making the law" even if democracy is a "means rather than
an end" that needs limits (1960 [2011: 103, 107-8]).



This commitment was shared by members of the Mont Pelerin Society,
which Hayek organized. Angus Burgin argues that



> 
> 
> An assumed relationship between free markets and democratic politics
> pervaded the society's discussions throughout its first decade
> of existence and provided a foundational premise for many of the
> members' contributions to its debates. (2012: 117)
> 
> 
> 



Friedman routinely defends free markets on the ground that they
contribute to political freedom and democracy; both freedoms are
"inseparable" (Butler 1985: 207). Friedman (1962a [2002:
9]) often says that he knows of



> 
> 
> no example in time or place of a society that has been marked by a
> large measure of political freedom, and that has not also used
> something comparable to a free market to organize the bulk of economic
> activity.
> 
> 
> 



So, he appears to think that democracy is a great good, but we are led
to guess the reasons why. One could argue that Friedman's case
for democracy is largely that it protects liberty and allows a bad
government to be peacefully replaced. But there is little in his
corpus that speaks to this question one way or another.



Buchanan is the most democratic of the three. He agrees that democracy
is essential for social peace and prosperity, but he emphasizes that
political equality requires government to be based on the consent of
the people. Democracy is an extension of his individualism:



> 
> 
> The approach must be democratic, which in this sense is merely a
> variant of the definitional norm for individualism. Each man counts
> for one, and that is that. (Buchanan 1975: 2).
> 
> 
> 



While Buchanan insists on *unanimous* consent for
constitutional rules (strikingly, among non-ideal persons), he thinks
that constitutions may allow for decision-making rules weaker than
unanimity, such as majority rule. It is true that Buchanan (Buchanan
and Tullock 1962: 85-96) argues that legislative rules should be
supermajoritarian rather than majoritarian, but that is still an
embrace of democracy, especially when undergirded by the consent of
the people as a whole.



However, unlike many classical and contemporary democratic theorists,
neoliberals do not see democracy as involving a social ethos or
national culture, nor do they see democracy as an expression of
freedom in itself. As Hayek (1979: 5) notes, "democracy itself
is not freedom". Friedman insists that freedom is to be
understood negatively, such that the political process is understood
as restricting freedom and perhaps protecting it, but not as embodying
it. Buchanan also criticizes what he regarded as an essentially
"romantic" view of democracy according to which the will
of the people is expressed in the actions of a democratic
government.



Notably, neoliberals spend far more time arguing for limits on
democracy than arguing for democracy itself. This is partly because,
since fascism was defeated, the goodness of democracy has been taken
for granted by both neoliberals and their interlocutors. Hayek,
Friedman, and Buchanan instead focus on criticizing
"unlimited" democracy. Hayek (1944 [2007: 111-2]) is
worried that an unlimited democracy could undermine the rule of law
and create tyranny. The powers of any "temporary majority"
have to be limited, he says (1960 [2011: 106]). Unlimited power is
"the fatal defect of the prevailing form of democracy" and
is based on the erroneous premise that all law "emanate[s] from
legislatures" (1979: 3-4). Another problem for unlimited
democracy is that democratic assemblies will take on more power that
they can wield effectively and so will be forced to



> 
> 
> hand [authority] over to the administrators charged with the
> achievement of particular goals. (1960 [2011: 116])
> 
> 
> 



In an unlimited democracy



> 
> 
> the holders of discretionary powers are forced to use them, whether
> they wish it or not, to favour particular groups on whose swing-vote
> their powers depend. (1979: 139)
> 
> 
> 



The point of the third volume of *Law, Legislation, and
Liberty* was arguably to restore faith in democracy by defending
limitations upon it.



Friedman (1962b [2017: 26]) echoes many of these points, stressing
that political freedom is just "the absence of coercion of a man
by his fellow men" and that the fundamental threat to freedom
"is the power to coerce" whether that power be in the
hands of a dictator or of "a momentary majority". Friedman
also worries that democracy will tend to lead to regulation,
inefficiency, and control if we have "bureaucratic
democracy" rather than "participatory
 democracy".[8]



Buchanan's (1962: 131-146) rationale for constitutional
constraints on democracy is richer and more perceptive than
Hayek's or Friedman's. His contract theory is devoted to
arguing that simple majority rule can lead to a variety of problems,
most centrally the risks of shifting coalitions of voters or
legislators redistributing wealth away from one another, leading to
Pareto-inferior outcomes for all. Another problem with unlimited
democracy is that



> 
> 
> even under the most favorable conditions the operation of the
> democratic process may generate budgetary excesses. Democracy may
> become its own Leviathan unless constitutional limits are imposed and
> enforced. (Buchanan 1975: 204-5)
> 
> 
> 



Limitations on democracy are also required by political equality
itself, since the "tyranny of the majority" is a threat to
the minority's equal rights, and can be especially dangerous
"because it feeds on the idealistic illusion that participation
is all that matters (Buchanan 1993: 259). Consequently, Buchanan
(1999: 75-88) advocates exit mechanisms, such as federalist
arrangements, that allow people to escape excessive democracy.



Four caveats before the section ends: First, despite their concerns
about unlimited democracy, neoliberals want to protect democratic
rights. One problem they have with expansive states is that large
states reduce the effectiveness of each person's vote. This is
because large governments cannot balance their many tasks and cannot
secure agreement on top priorities. The result, Hayek argues, will be
democratic instability, leading to dictatorship. In contrast to more
egalitarian liberals, neoliberals do not attempt to engineer the
democratic process through democratic deliberation. They instead hope
to protect democratic rights by adopting constitutional constraints
later in the democratic process, for example by restricting the power
to legislate. Second, while neoliberals support restrictions on
democracy, they strongly favor decentralizing of political power and
ensuring that power is held by all and they are committed to
protections from governmental and corporate predation and domination.
As Friedman notes,



> 
> 
> Business corporations are not a defense of free enterprise. On the
> contrary, they are one of the chief sources of danger. (Burgin 2012:
> 202)
> 
> 
> 



They simply disagree with egalitarian liberals about how to ensure
this institutionally. As noted above, neoliberals stress designing
institutions so that corrupt and domineering institutions cannot form,
within or outside government, such as using markets. But they also
appeal to constitutional mechanisms like supermajority rules (Buchanan
& Tullock 1962) and federalism (Feld 2014) to limit oppression and
corruption. Thus, neoliberals are deeply concerned that people be
protected from excessive political control, but they do not emphasize
public deliberation is central to securing those ends. We might say
they prefer "exit" mechanisms over "voice"
mechanisms for restraining the use of political power (Hirschman
1970). Third, neoliberals are not alone in advocating constitutional
limits on democracy, even though most democratic theorists on the left
place fewer limitations on democracy than neoliberals do.



Finally, historians of political thought have drawn attention to the
fact that the neoliberals discussed here were sometimes associated
with the dictatorship of Augusto Pinochet in Chile. But Buchanan
(Farrant & Tarko 2018) and Friedman (Burgin 2012: 205) have at
best a scant connection with that regime and were critical of it.
Unfortunately, Hayek is another story. Hayek had a partial theory of
"transitional dictatorship" that allowed a liberal
dictator to avoid socialist outcomes and transition a society into a
liberal democracy, and this helps explain some favorable remarks he
made on behalf of the Pinochet regime (Farrant, McPhail, & Berger
2012; Biebricher 2018: 142-7; Slobodian 2018: 277).
Hayek's support for the regime does not undermine the democratic
commitments of neoliberals, but Hayek was arguably too suspicious of
democracy. We can see the dangers in sharply separating liberalism
from democracy, which tempts one to choose liberal dictatorship over
democratic socialism.


## 6. The Welfare State



Neoliberals support modest taxation, the redistribution of wealth, the
provision of public goods, and the implementation of social insurance,
embracing a state somewhat more expansive than one where government
protects people from foreign powers and domestic criminals, produces
public goods, and provides limited services for the poor. For
instance, Hayek (Caldwell 2004: 291), Friedman (Butler 1985: 206), and
Buchanan (1975: 35-52) favor government provision of public
goods because markets will under-produce public goods, and so
government should act even if it will sometimes fail (Butler 1985:
206).



Of course, neoliberals are skeptical of government regulation, largely
because they think regulatory bodies tend to be turned from good
purposes to bad ones (2007: 93). This is a consistent theme of
Friedman's (1962a [2002: 137-160]) work, especially in his
criticisms of occupational licensure. And the analysis of rent-seeking
is one of Buchanan's main ideas, shared by his long-time
co-author Gordon Tullock. Large bureaucracies turn too much power over
to administrators, power that practically begs to be misused by
special interests (Butler 1983: 209). And, of course, neoliberals all
oppose Keynesian fiscal policy, especially debt-financed stimulus
(Buchanan 1987: 456; Butler 1985: 186). But these concerns are
consistent with embracing the welfare state.



Hayek is quite friendly to various government interventions. In
*The* *Road to Serfdom*, Hayek (1944 [2007]) defends
countercyclical monetary policy, government construction of
transportation infrastructure, social insurance for natural disasters,
government health insurance, a basic minimum income, and strict
regulations with respect to working hours, health and safety on the
job, poisons, deforestation, harmful agricultural methods, noise,
smoke, and the prices of goods and services that are natural
monopolies (1944 [2007: 22, 43-4, 133-5, 217]; Burgin
2012: 90-1). Similarly, *The Constitution of Liberty*
says government should prevent of depressions and provide pensions,
medical care, and money for education in the form of vouchers (1960
[2011: 264, 276, 286, 294, 379]). Hayek repeatedly stresses that
the



> 
> 
> old formulae of laissez faire or non-intervention do not provide us
> with an adequate criterion for distinguishing between what is and what
> is not admissible in a free system. (1960 [2011: 231]; also see Hayek
> 1944 [2007: 71]; 1973: 62; 1979: 41)
> 
> 
> 



Hayek even supports a basic income:



> 
> 
> ... the assurance of a certain minimum income for everyone
> ... appears not only to be a wholly legitimate protection against
> a risk common to all, but a necessary part of the Great Society in
> which the individual no longer has specific claims on the members of
> the particular small groups into which he was born. (1979: 55)
> 
> 
> 



While Hayek's use of the term "legitimate" is
imprecise and may only somewhat overlap with the use of the term in
contemporary political philosophy, he apparently thinks that
governments are morally required to engage in welfare-state measures.
Governments should pursue poverty relief not only because it is
beneficial but because it is the right thing to do. Hayek worries that
social safety nets can get out of control, but he supports them anyway
(Caldwell 2004: 291).



While Friedman is the most libertarian of the three (Burgin 2012:
213), he never advocates abolishing the redistribution of wealth for
some purposes, claiming that government ought to "relieve acute
misery and distress" (Friedman 1951 [2012: 7]). Government
should



> 
> 
> protect members of the community who cannot be regarded as
> "responsible" individuals, principally children and the
> insane. (Butler 1985: 206)
> 
> 
> 



And again,



> 
> 
> Government relief of poverty, the liberal will support and welcome,
> primarily on the explicitly paternalistic ground of taking care of the
> irresponsible. (Friedman 1974b [2012: 23])
> 
> 
> 



One of his most famous policy proposals is a negative income tax,
where the poor would receive cash transfers if their incomes were low
enough, financed by positive income taxes on the rich and middle class
(Friedman 1962a [2002: 191-4]). Friedman (1960 [2002:
191-2]) thought this policy was legitimate to reduce poverty
because pure private charity may invite free-riding. He (1962a [2002:
85-107]) is also the inventor of the school-voucher policy, and
he (1974b [2012: 20]) supported compulsory education so long as
government does not control the
 schools.[9]
 Friedman worried that the welfare state would be too bureaucratic and
authoritarian, however, which is why he favored replacing most
welfare-state programs with cash transfers.



Two more points about Friedman on poverty relief. First, Friedman
thinks that



> 
> 
> [t]here are no natural rules and definitions of property. There is
> ultimately an essentially arbitrary element to where we draw the line.
> (1974a [2017: 86])
> 
> 
> 



This is a point usually stressed by critics of libertarianism on the
ground that property rights are conventional, not natural, and so
cannot morally prohibit redistribution (Murphy & Nagel 2002). This
passage suggests that Friedman's political philosophy does not
include a natural right of private property as an impediment to
redistribution. Second, Friedman sees his defense of the welfare state
as a part of his non-ideal theory, not his ideal. He supports vouchers
and the negative income tax



> 
> 
> not because these are necessarily part of my ideal utopia[n] society
> but because they seem to me the most effective steps, given where we
> are, in moving toward where we want to go. (Burgin 2012: 175)
> 
> 
> 



In fact, Friedman (1974a [2017: 79]) has sympathies with anarchism,
though he thinks it is not "a feasible social structure".
This is consistent describing neoliberalism as a non-ideal theory.
While in ideal theory, Friedman is a libertarian, or at least more
libertarian than most other neoliberals, his non-ideal theory is
neoliberalism.



Buchanan is both the hardest to pin down on the welfare state and the
most egalitarian. He has virtually nothing to say about government
poverty relief. Buchanan's contractarianism nonetheless embraces
some redistribution, as he thinks his social contract would yield
*unanimous* agreement on having a "productive"
state, which provides many tax-financed goods, and could also provide
social insurance (Buchanan 1975: 124). Buchanan also defends a
principle of equal opportunity, which he thinks requires a 100 percent
inheritance tax that would prevent the formation of an aristocracy.
Presumably this principle could justify other forms of
redistribution.



Neoliberals stridently reject one of the most common rationales for
the welfare state, namely pursuing an egalitarian conception of social
justice. Hayek is clearest on this point, given his total rejection of
the very idea of social justice, which he understands, somewhat
peculiarly, as a set of moral principles that govern the
justifiability of specific distributions of economic resources, though
not moral principles that govern the functioning of an economic system
as a whole. Hayek (1978: 78) thinks that the idea of social justice is
confused in that justice cannot be applied to specific market outcomes
because they are not the result of direct, conscious choices. Social
justice is an incoherent idea, much like the idea of a "moral
stone". Hayek thinks it imperative that the state not be used to
achieve a precise income distribution (Caldwell 2004: 350):



> 
> 
> any policy aiming directly at a substantive ideal of distributive
> justice must lead to the destruction of the Rule of Law. (1944 [2007:
> 79])
> 
> 
> 



Yet Hayek has an idiosyncratic understanding of social justice. He
thinks it requires the that certain specific economic outcomes be
imposed, rather than that a society's moral, legal, and
political rules work to the advantage of all. Hayek *supports*
the latter requirement. Hayek says that the "most desirable
order of society" is



> 
> 
> one which we would choose if we knew that our initial position in it
> would be decided purely by chance (such as the fact of our being born
> into a particular family). (1978: 132)
> 
> 
> 



If Hayek sounds like Rawls, it is no coincidence. Hayek's
reading of Rawls's earlier papers (not *A Theory of
Justice*) led him to believe he had no quarrel with Rawls, for
Rawls



> 
> 
> acknowledges that the task of selecting specific systems of
> distributions of desired things as just must be abandoned. (1978:
>  100)[10]
> 
> 
> 



Thus, Hayek seems to share Rawls's *concept* of social
justice, though not his *conception* of it. And this concept of
social justice is compatible with liberty. The pursuit of social
justice only implies the destruction of the rule of law if our
conception of social justice requires us to tinker with particular
economic outcomes (Hayek 1960 [2011: 85]). These points are by now
well-understood by Hayek's defenders (Tomasi 2012:
142-150).



Buchanan and Friedman are less focused on rejecting social justice,
but their positions resemble Hayek's. Buchanan's
contractarianism leads him to hold that a society's
distributions are fair if they are the product of rules that all agree
to, and otherwise not, so if pursuing distributive justice means
breaking the constitutional rules that we have agreed to, it is
problematic. But social contracts may have redistributive rules. If
people agree to redistributive rules, then redistribution is
justified. In this way, Buchanan is closer to Rawls than Hayek is.



Friedman has much less to say about social justice. He mostly stresses
that only some kinds of equality are desirable. Friedman (1980 [2017:
144]) often says, for instance, that we should only seek equality of
opportunity, not equality of outcome (Butler 1985: 218). But he also
feels the need to argue that markets do not have an inherent tendency
to produce very unequal outcomes. Friedman (1955 [2017: 14]) says
that



> 
> 
> the way to reduce inequality ... is not by the misleading
> palliative of sharing the wealth but by improving the workings of the
> market, strengthening competition, and widening opportunities for
> individuals to make the most of their own qualities.
> 
> 
> 



Differences in economic power do not argue for a redistributive state
but for more capitalism:



> 
> 
> The virtue of free enterprise capitalism is that it sets one
> businessman against another and is thus the most effective device for
> control. (1974a [2017: 84])
> 
> 
> 



Free markets undermine monopoly economic power, whereas government
generates it (Butler 1985: 210).


## 7. Criticisms of Neoliberalism



This section covers criticisms of neoliberalism, but it leaves out a
great many of them. The reason for this is that many of the most
well-known criticisms of neoliberalism are simply criticisms of
capitalism as such. Accordingly, this section focuses on criticisms
aimed directly at neoliberalism.


### 7.1 Ethos Criticisms



Many criticize neoliberalism for structuring society around the
market, commodifying market relations, and in general manipulating
people into serving the ends of what is best for commerce or economic
production. In this way, neoliberalism builds society around a cash
nexus. But unlike full capitalism, neoliberalism does so in a covert
way that takes serious scholarly work to demonstrate. Neoliberalism
*itself* is not an ethos, as noted above, but neoliberalism
might be seen to give rise to an excessively capitalist/transactional
relationship between persons. While she rejects this characterization
of neoliberalism, Jessica Whyte argues that it is often characterized
as



> 
> 
> an amoral economic ideology that subordinates all values to an
> economic rationality, (2019: 19)
> 
> 
> 



following a number of others, like Wendy Brown (2015). Here the
analysis draws heavily on Foucault (2010) where neoliberalism is said
to reduce practical rationality to economic considerations, where



> 
> 
> there is no difference between the infraction of the highway code and
> a premeditated murder. (2015: 253-4)
> 
> 
> 



Indeed, one might make the more worrisome argument that neoliberalism
leads not so much to selfish attitudes but towards bigoted,
hierarchical, and traditional ones (Brown 2019: 7, 37).


### 7.2 Inequality



One central concern about neoliberalism is that, even if it boosts
economic growth, it also increases economic inequality, which is
problematic in several ways. Two kinds of inequality criticisms are
generally offered. The more well-known are the empirical criticisms
that neoliberal regimes lead to dangerous inequalities just from the
data, such as Thomas Piketty's book, *Capital* (2014),
which holds that economic inequality is growing and is a threat to
democracy, much as Martin Gilens's (2014) work on inequality and
the responsiveness of democratic policy-making to the richest 10%.



The other kind of critique of inequality under neoliberalism is
derived from Rawls's work. As is well-known, Rawls rejected
welfare-state capitalism and a more robust form of capitalism which he
called the system of natural liberty on the grounds that they do not
satisfy Rawls's two principles of justice (Rawls 2001;
O'Neill and Williamson 2014). Rawls argued that even
welfare-state capitalism cannot protect the value of political liberty
or realize its priority (Rawls 1993 [2005]) because it allows for the
accumulation of capital in too few hands, which leads to economic
domination of politics, and shuts many people out of the goods of
owning and operating at least some of the capital they need to enjoy
the worth of their constitutional liberties.



Another kind of inequality that has been raised as a concern for
neoliberal societies is the imbalance of political power within the
firm between bosses and workers. Elizabeth Anderson (2019) has argued,
for instance, that this is a form of tyrannical "private
government" and that the institutions defended by neoliberals
(though she does not use this term) are insufficient to equalize the
freedoms of capitalists and workers.


### 7.3 Undermining Democracy



A very common criticism of neoliberalism is that it undermines
democracy. This might be because high economic inequality undermines
democracy, as Martin Gilens (2014) argues in *Affluence and
Influence* and defended by Larry Bartels (2008 [2016]). Another
way in which neoliberalism could undermine democracy is by
prioritizing the protection of classical liberal economic liberties,
like the right to private property. These can lead to restrictions on
the ability of democratic citizens to choose to redistribute wealth.
This problem is especially acute given Hayek's favorable view of
the Pinochet regime in Chile. Hayek hoped that Chile would become a
democracy, but he believed that the Pinochet coup had allowed Chile to
dodge the bullet of democratic socialism as advocated by Salvador
Allende, Pinochet's predecessor. There is a tension between the
liberalism and the democratic commitments within neoliberalism that in
practice tends to mean that democracy suffers.


### 7.4. Economic Irrationality



Neoliberal regimes rely heavily on market mechanisms, and neoliberals
claim that markets are efficient or at least highly economically
productive (neoliberals disagree about how to characterize and explain
market productivity and efficiency). But behavioral economists
(Kahneman 2013; Ariely 2010) have identified various biases in human
reasoning that undermine the *homo economicus* model that
neoliberals are said to use to model and predict economic development
(though as shown above, neoliberals have a subtler relationship with
*homo economicus*). See entry on
 bounded rationality.


### 7.5 Keynesian Rebuttals



Neoliberalism, as noted, arose in part in response to the dominance of
Keynesian macro-economic policy. But Keynesians, most notably Paul
Krugman (2012), have struck back by arguing that neoliberal criticisms
of Keynesian policy fail. This is especially true because neoliberals
often claimed that fiscal policy is ineffective stimulus
vis-a-vis monetary stimulus. During the Great Recession,
Krugman argued that the Federal Reserve had lowered interest rates so
much that further monetary stimulus would fail, and so fiscal policy
had to intervene.



Many of the criticisms of neoliberal regimes engaging in
"austerity" during the Great Recession are based in an
underlying Keynesian model, as the critics of government spending cuts
during the Great Recession were often based on the idea that they hurt
the economic prospects of the poor, whereas according to neoliberals,
shrinking government spending during a recession is not harmful to the
poor for a variety of reasons. See entry on
 philosophy of economics.


### 7.6 Trickle-Down Economics



One common charge against neoliberalism is its false promise of
"trickle-down" benefits of economic growth to the poor
from the rich (Quiggin 2012). Strictly speaking, trickle-down
economics is not a genuine school of economic thought, nor would
Hayek, Friedman, or Buchanan have accepted that description of their
views. They did argue that all would benefit from the prosperity
brought about through the free market, but this was not necessarily
because the rich would benefit first. Hayek (1960 [2011]) argued that
there is a kind of trickle-down effect for the prices of goods and
services, where luxuries for the rich become commonalities for the
poor because manufacturers figure out how to lower prices to broaden
market penetration over time. And indeed, it is standard in mainstream
economics to hold that as businesses accumulate capital, they can
afford to pay their workers more and so can bid workers away from
other companies. That process often involves increasing wages, so more
capital in the hands of the rich *can* lead to higher wages for
the poor through fairly ordinary causal channels. All the same, many
neoliberal officials promised gains for the poor that did not often
materialize.


### 7.7 Libertarian Criticisms



Neoliberalism and libertarianism are distinct, if related views. And
in some respects, the neoliberals were libertarian under some
conditions. Indeed, Buchanan thought anarchy was the morally best
regime, even if it was infeasible in practice. But it is still common
for libertarians to criticize more moderate libertarians for allowing
any redistribution of wealth, such as Murray Rothbard (1973, 1982
[2002]), Robert Nozick (1974), or for prioritizing democracy over more
epistocratic or elite-leaning forms of political decision-making, such
as Jason Brennan (2016).


### 7.8 Colonialist Criticisms



It is common in some circles to argue that neoliberal regimes are
colonialist in character, though in an unusually direct way. The
thought is that neoliberalism was adopted by regimes in the Anglophone
world and in much of Western Europe, and that this formed an
international elite consensus about how economies around the world
should be run. This led to a "Washington Consensus" that
caused policy interventions that interfered with the democratic
governance of developing nations, increased inequality, and made the
poor worse off. For comprehensive discussion, see Whyte (2019:
chapters 3-5).


### 7.9 Populist/Nationalist Criticisms



It is increasingly common for right-wing populists to criticize
neoliberal policy on the grounds that it emphasizes free trade and
free immigration lead to a range of deleterious consequences, from the
shrinking of the industrial base of rich democratic countries like the
United States, such as that advanced by Patrick Deneen (2019). A
stronger form of this concern is that allowing immigrants from
different cultures to acquire citizenship within a country will harm
or degrade the culture and politics of that country.


### 7.10 Feminist Criticisms



Some, like Nancy Fraser (2017), worry that neoliberalism has co-opted
feminism by making the feminist ideal into one that serves as a kind
of false market-based meritocracy, where the aim of feminism is, for
instance, that woman who has well-paying career, and at its highest
ideal, female entrepreneurship and becoming CEOs of a company. This
left feminism unable to attend to the needs and interests of women who
neoliberalism has harmed. See entry on
 feminist perspectives on globalization.


### 7.11 Remaining Criticisms



Neoliberalism is subject to other objections, but many resemble
problems for other liberal democratic theories, such as the conflict
between liberal rights (however understood) and democracy--the
"procedure-substance" dispute in the deliberative
democracy literature, as well as how any sufficiently liberal approach
to associational freedom takes the freedom of marginalized groups
seriously given the prospect for local oppression. Neoliberals have
diverse conceptions of freedom, though typically negative, with all
the standard criticisms those views invite. And, then, to the extent
that neoliberalism like Hayek and Buchanan adopt a contractarian
framework for justifying institutions, their defenses will inherit all
the difficulties with contractarianism.


## 8. Summary



This entry is not meant to determine the one true meaning of
"neoliberalism", but rather to illuminate neoliberalism as
a coherent philosophical doctrine embraced by figures commonly called
neoliberals. The entry also prioritizes more even-handed and less
pejorative uses of the term in recent historical research. This is not
to discount more historical and dynamic understandings of
neoliberalism. They contain insight. But the goal of this entry has
been to characterize neoliberalism as a philosophical position. If we
do so, we can understand neoliberalism as a politico-economic doctrine
that embraces robust liberal capitalism, constitutional democracy, and
a modest welfare
 state.[11]