Classical Liberalism

OVERVIEW

●it is about the foundation of classical liberalism which mainly focuses on freedom, limited government intervention and free markets.

KEY POINTS:

■It promotes individualism for it is the believe that an individual should have the right to pursue its own interest.

■It states that market efficiency can be achieved in free markets for they believe that supply and demand is the key determinant of price

*efficient resource allocation

■The Role of the government is very minimal in order to protect property rights and maintain order that allows the market to move or function without interference.

KEY POINTS FROM THE BOOK:

■Classical liberalism envisions the aggregation of the Autonomous individuals seeking to pursue their private interests.

■ideally, social interactions consist of all individuals voluntarily exchange with the others and have a freedom to the arbitrary exercise of power

Expanded Keypoints and Information about Chapter 3: Classical Liberal Perspective

1. Architects of Classical Liberalism:

■Thomas Hobbes (1588-1679):

a. Social Contract Theory: People agree to give up some freedoms for a strong government to maintain order and protect them from harm.

b. State of Nature: A hypothetical condition where life is solitary, poor, nasty, brutish, and short without government.

■John Locke (1632-1704):

a. Natural Rights: Individuals are born with inalienable rights to life, liberty, and property.

b. Limited Government: Government's role is to protect individual rights and not infringe upon them.

c. Consent of the Governed: Government's legitimacy comes from the consent of the people.

■Adam Smith (1723-1790):

a. Invisible Hand: Market forces guide economic activity towards efficiency, without the need for government intervention.

b. Division of Labor: Specialization leads to increased productivity and economic growth.

c. Free Trade: Unrestricted trade benefits all nations involved.

■Thomas Malthus (1766-1834):

a. Population Growth: Population growth tends to outpace food production, leading to poverty and misery.

b. Tragedy of the Commons: Overuse of common resources can lead to their depletion.

■Friedrich A. Hayek (1899-1992):

a. Spontaneous Order: Complex social systems emerge from the interactions of individuals, without central planning.

b. Knowledge Problem: Central planners cannot possess all the information needed to make efficient economic decisions.

c. Rule of Law: A predictable and stable legal framework is essential for economic prosperity.

■Robert Nozick (1938-):

a. Entitlement Theory: Justice is achieved when individuals have acquired property through just means (e.g., labor, purchase, gift).

b. Minimal State: Government's role is limited to protecting individual rights and enforcing contracts.

c. Night-Watchman State: A metaphor for a government that only provides basic security and protection.

2. Principles of Classical Liberalism:

■Human Nature:

* **Rationality:** Individuals are capable of making informed and self-interested choices.

* **Self-Interest:** Individuals pursue their own well-being.

■Society:

* **Voluntary Exchange:** Individuals engage in mutually beneficial transactions.

* **Spontaneous Order:** Social institutions and norms emerge organically.

■Government:

* **Limited Government:** Government's role is to protect individual rights and enforce contracts.

* **Rule of Law:** A predictable and fair legal system.

* **Separation of Powers:** Dividing government into legislative, executive, and judicial branches.

■Morality:

* **Individualism:** Morality is based on individual choices and beliefs.

* **Tolerance:** Respect for different beliefs and opinions.

■Freedom:

* **Negative Freedom:** Freedom from interference by others.

* **Positive Freedom:** The ability to realize one's potential.

■Authority:

* **Legitimacy:** Authority is justified by the consent of the governed.

* **Limited Government:** Authority is constrained by the rule of law.

■Equality:

* **Equal Rights:** Individuals are entitled to equal treatment under the law.

* **Equal Opportunities:** Individuals have equal chances to succeed.

■Justice:

* **Procedural Justice:** Fair procedures and processes.

* **Substantive Justice:** Fair outcomes.

■Efficiency:

* **Market Efficiency:** Free markets allocate resources efficiently.

* **Economic Growth:** Economic growth is a desirable goal.

3. Classical Liberalism Today:

■Neo-Austrian Economics:

* **Market Dynamics:** Focus on the dynamic nature of markets and the role of entrepreneurship.

* **Knowledge Problem:** Emphasizes the decentralized nature of knowledge and the limitations of central planning.

■Public Choice Theory:

* **Self-Interest:** Analyzes political behavior through the lens of self-interest.

* **Rent-Seeking:** Examines how individuals and groups seek to benefit from government policies.

■New Classical Economics:

* **Rational Expectations:** Individuals form expectations about the future based on available information.

* **Policy Ineffectiveness:** Government policies may have limited or even negative effects on the economy.

4. An assessment of classical liberalism:

■Strengths:

* Promotes individual liberty, economic growth, and limited government.

* Emphasizes the importance of free markets and competition.

* Provides a framework for analyzing political and economic issues.

■Weaknesses:

* May not adequately address issues of inequality, social welfare, and market failures.

* Can be overly optimistic about the self-regulating nature of markets.

* May neglect the role of government in promoting social justice and addressing collective action problems.