How to “Run the Economy” Is a Loaded Question

I will let my readers separate the grain from the chaff—and there is both—in the piece of a Wall Street Journal columnist who spent a few months as a journalist in residence at the University of Chicago’s business school (James Mackintosh, “What I Learned About ‘Woke’ Capital and Milton Friedman at the University of Chicago,” June 9, 2023). I will instead focus on two sentences that reveal a methodology which naturally leads to a preference for some sort of regimented society:

Sure, it is true that free markets are the best way to run an economy that is fully competitive, has no unpriced side effects, or “externalities,” such as carbon emissions, and where contracts cover every eventuality. Unfortunately, these conditions aren’t met.

If your starting question is what’s the best way to run the economy, you are most likely not to discover that an auto-regulated economy, an economy “run” by nobody, is the most efficient and just. Similarly, if you start with the question “what is the best way to run religion (in society)” or “what is the best way to run marriage” or “what is the best way to run trade,” you will likely not even consider laissez-faire, that is, to let each individual make his own choices. You will see “an economy” as an organization to be managed by some individual or group of individuals.

The distinction between an organization and a spontaneous order is emphasized in Friedrich Hayek’s Law, Legislation, and Liberty (notably the first volume). The idea that only unanimously accepted rules can serve as the institutional basis of a society (and an economy) is defended from a different viewpoint by James Buchanan (see his Why I, Too, Am Not a Conservative and, with Geoffrey Brennan, The Reason of Rules). I am pretty sure that my criticism of the WSJ column above would also be accepted by Milton Friedman: he did not either look at society and the economy from the perspective of a philosopher-king.