The Attack on Classical Economics
The early progressive attack on natural rights and limited government amounted to a charge of dogmatism, that is, a zealous attachment to the false idea of natural rights, the social contract, and government as an artificial creation aimed at securing natural rights. Progressives argued instead that government pre-exists men and is not an artificial creation of men. They levelled that same charge of dogmatism at classical economics, which is the economic expression of natural rights and limited government. Progressives claimed that classical economics is a rigidly deductive economic system premised on one central ideal: that self-interest can be harnessed as a reliable impetus to economic prosperity. From that one premise, Ely argued, classical economists then blindly deduced a range of dogmatic economic commandments and prohibitions. For example, they insisted that wages and prices must be governed by the law of supply and demand, that no impediments be raised to privately arrived at contracts, and that private property gained by the use of this system must be respected and defended as justly and properly acquired. The free market was presented as necessary and natural because it respects everyone’s right to self-seeking actions, and because self-seeking actions were seen as reliable and productive guides to economic activity.
Progressives instead argued against both the premise that self-interest is a proper starting point for an economic system and the rigidly deductive method that, in their view, propagates this erroneous premise in the face of damaging economic consequences. As Henry Adams put it: “It is not true that, when a man advances his own interests or what he believes to be his own interests, he thereby necessarily advances the interests of society.” In other words, self-interest is not consistent with the common good. In his more progressive years, the political economist John Bates Clark argued that the conception of the self-interested man that forms the unit of analysis of classical economics is a mistake: “The assumed man is too mechanical and too selfish to correspond with the reality; he is actuated altogether too little by higher psychological forces.” Clark warned that the free market call of “‘[e]very man for himself’ is the principle of disorganization and chaos.”
With respect to free-market prescriptions, Progressives held that economic systems must be judged on the basis of their results, particularly the results for the most vulnerable members of society. And on that count, they argued that the free market was a failure. They wanted a more flexible economic system that would proceed empirically and which could be adjusted and planned by the government so as to produce more widely distributed benefits. Ely called this approach to economics the “look and see” method. Progressives argued for an economic system based, not on self-interest and competition, but rather on social obligation and cooperation. In their economic decisions, men should consciously seek the good of all and not just their self-interest. Progressives seized on one of the most powerful arguments against the free market: that the self-interest at the root of the free market has too strong a tendency to degenerate into selfishness. In short, Progressives argued that the moral core of the free market was deeply immoral.
In our day, Ely’s particular approach to economics continues to comprise a part of the progressive understanding of economics. As such, Progressives embrace government planning (for example, in health care) and continue to be skeptical of attempts by economists to harness self-interest in the service of individual and national prosperity. They work toward social obligation and cooperation by, in general, compelling distribution of income at the cost of voluntary, free-market methods of increasing wealth and economic security.
As an alternative to limited government, natural rights, and free markets, the early Progressives proposed their own systematic approach: social science, a discipline that includes economics, and which would replace the individual self-interest of the free market with an explicit orientation on the part of economic planners toward their vision of the common good, which they understood as the greatest possible flourishing of each individual. Progressives promised that social science would yield genuine knowledge of human affairs along the lines of the more traditional and very successful “hard” sciences. That knowledge would be gained empirically, following the scientific method, and not assumed dogmatically, as was allegedly the case with natural rights and classical economics.
Rather than following abstract principles or being guided by experience built up over centuries, Progressives sought to make the world anew. Just as with the natural sciences, the practitioners and leaders of social science would be scientific experts. These experts would replace the allegedly chaotic, unplanned, and unjust workings of the free market with rational, scientific, neutral, impartial, and just management of the economy. Such experts could be established in bureaucracies that in their very mission would be aimed at public-spiritedness and the common good of society. They could correct alleged abuses, such as worker exploitation and an unjust distribution of wealth. These experts would free us from the distractions, injustices, incompetence, partisanship, and paralysis of traditional democratic politics.
There would still be some room for democratic politics within this new system. Elected leaders would identify problems, authorize and fund bureaucratic solutions, and hold bureaucrats accountable. But the implementation of economic policy would be carried out by bureaucrats. The prominent progressive intellectual Herbert Croly made an especially powerful case for this reform. He outlined the basic structure of the new government:
In order to understand the function which the administration ought to perform in a social democracy a sharp distinction must be drawn between the administration and the executive.… [The executive’s] primary business is organizing a temporary majority of the electorate, and of carrying its will into legal effect.
By contrast, administrative “officials do not in theory exert any influence upon the policy of the government. These are professional servants, whose business it is to contrive the means necessary to execute existing laws and to carry out any policy which has been decided upon by a departmental chief or by the cabinet.” No human problem would be beyond the bailiwick of these expert administrators. In particular, the economy stood to be regulated in detail by such experts, initially by modest intrusions such as Progressive Era industrial commissions, later by an array of federal and state agencies spawned by the New Deal and the Great Society.
In our day, progressivism and the apparatus it created to govern America informs much of the nation’s political agenda, often in opposition to proponents of limited government. Inspired by progressivism and unconstrained by a belief in natural rights, Congress today routinely passes laws without regard to any constitutional grounding in its limited Article I, Section 8 enumerated powers. It has also delegated a portion of its legislative authority to administrative state agencies. Congress permits these bureaucracies to pass binding regulations, each of which has the power of the law. Though they are subject to congressional oversight, bureaucrats are free from direct democratic accountability. Moreover, their powers often encompass two or more of the branches of government, in apparent violation of the separation of powers. Though the early Progressives are rarely cited by contemporary progressives, in their departures from the Founders’ constitutional norms, both Congress (in delegating its power) and the administrative state (in its rule without democratic control) have helped to fulfill the political intention of the early Progressives.
Despite some important political victories, today’s progressives have prematurely claimed intellectual victory. Though contemporary progressives believe that the theory of natural rights has been refuted, a small-but-vigorous intellectual cohort has argued for its return. Contemporary defenders of natural rights make the philosophic and moral argument that property belongs by nature to the person who creates it—and not to the government that merely protects it. And they also argue that a larger, progressive government crowds out the free market by competing for resources, because government is funded by wealth extracted from free-market producers. Moreover, they point out that administrative state lawmaking qualifies and harms self-government because bureaucrats are not directly answerable to the voters.
Critics of progressivism also call for a more nuanced understanding of the morality of self-interest in economics. Progressives have routinely blurred the difference between rational self-interest and selfishness. The former is compatible with justice to oneself and one’s loved ones—and it is also compatible with justice to others. Besides not necessarily being of any harm to others, self-interest is the source from which citizens generate the wealth needed for generosity to others, without which charity is little more than a good intention. Perhaps most importantly, rational self-interest leads to a great deal of voluntary and peaceful cooperation with others, which causes otherwise self-seeking men to become habituated to serving others in the course of serving themselves. By contrast with rational self-interest, selfishness is narrow, cramped, and asocial. It is either indifferent to others or understands itself as serving the self specifically to the exclusion of or in opposition to others. Rational self-interest need not degenerate into selfishness, although any thoughtful person would readily acknowledge that that is a perpetual risk of rational self-interest.
With respect to narrow considerations of economic efficacy, rational self-interest has been the source of the greatest outpouring of wealth in human history. Not the immiseration of the poor—but rather their elevation to unheard of wealth—has been the main story of American rational self-interest in economics. This impressive practical outcome is simultaneously a great moral victory for the free market in the struggle against poverty.