Ethical Tasks in a Free Market Economy According to Classical and Neo-Liberal Economists

Abstract

In this paper I challenge the implicit (and sometimes explicit) claim of Adam Smith that the free market is a natural system which would emerge on its own if governments did not interfere. I argue instead that the free market is a tenuous human institution which needs support and protection. I build my claim upon Adam Smith's open avowal that property rights are necessary for the free market and upon the neo-liberal demand that governments must intervene in order to maintain the competitive nature of the free market so as to guarantee its efficiency. Hegel incorporates both claims that property rights and economic efficiency are necessary. For Hegel both are necessary for achieving freedom. I then point out that defending the above two claims with the philosophical argument that they contribute to freedom implies that both property rights and economic efficiency must not be allowed to undermine freedom. This provides the philosophical foundation for minimal welfare measures: society must make it possible for all to acquire the property necessary for exercising freedom or to enjoy the fruits of socially enforced efficiency. Hegel thereby teaches us that a philosophical reflection upon the writings of Adam Smith and the doctrines of neo-liberalism provide an argument in favor of some form of welfare state. Borrowing from Hegel, I then point out that any welfare state contradicts a basic principle of the free market: no one gets something for nothing. For this reason, I believe that alleviating poverty in a free market system is always going to be a tenuous affair.