Though not all scholars agree on the meaning of the term,“neoliberalism” is now generally thought to label thephilosophical view that a society’s political and economicinstitutions should be robustly liberal and capitalist, butsupplemented by a constitutionally limited democracy and a modestwelfare state. Recent work on neoliberalism, thus understood, showsthis to be a coherent and distinctive political philosophy. This entryexplicates neoliberalism by examining the political concepts,principles, and policies shared by F. A. Hayek, Milton Friedman, andJames Buchanan, all of whom play leading roles in the new historicalresearch on neoliberalism, and all of whom wrote in politicalphilosophy as well as political economy. Identifying common themes intheir work provides an illuminating picture of neoliberalism as acoherent political doctrine.

After outlining some inadequate characterizations of neoliberalism,this entry critically discusses neoliberal attitudes towardsliberalism, capitalism, democracy, and the welfare state, and endswith a discussion of common criticisms.

• 1. Explicating A Challenging Term
• 2. Inadequate Descriptions
  • 2.1 Neoliberalism as Ethos
  • 2.2 Neoliberalism as a School of Thought within Utilitarianism
  • 2.3 Neoliberalism as Libertarianism
  • 2.4 Neoliberalism as Ideal Theory
• 3. Liberalism
• 4. Capitalism
• 5. Democracy
• 6. The Welfare State
• 7. Criticisms of Neoliberalism
  • 7.1 Ethos Criticisms
  • 7.2 Inequality
  • 7.3 Undermining Democracy
  • 7.4. Economic Irrationality
  • 7.5 Keynesian Rebuttals
  • 7.6 Trickle-Down Economics
  • 7.7 Libertarian Criticisms
  • 7.8 Colonialist Criticisms
  • 7.9 Populist/Nationalist Criticisms
  • 7.10 Feminist Criticisms
  • 7.11 Remaining Criticisms
• 8. Summary
• Bibliography
• Academic Tools
• Other Internet Resources
• Related Entries

1. Explicating A Challenging Term

For many years, the term “neoliberalism” has been insearch of a referent. Is neoliberalism an ideology that fetishizes themarket? Or is it a political program aimed at establishing the rule ofthe capitalist class? Is neoliberalism the enemy of the state? Or doesit 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 mostinfluential deployers,

such as Michel Foucault (2004 [2010]). Venugopal’s assessmentwas arguably apt just ten years ago.

But several recent book-length treatments of neoliberalism (Burgin2012; Biebricher 2018; Slobodian 2018; Whyte 2019) have helped giveform to an arguably inchoate political concept. As Quinn Slobodianargues,

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

Along similar lines, Thomas Biebricher (2018: 8–9) argues thatneoliberalism no longer faces greater analytic hurdles than otherpolitical positions like conservatism or socialism.

In light of this recent historical work, we are now in a position tounderstand neoliberalism as a distinctive political theory.Neoliberalism holds that a society’s political and economicinstitutions should be robustly liberal and capitalist, butsupplemented by a constitutionally limited democracy and a modestwelfare state. Neoliberals endorse liberal rights and the free-marketeconomy to protect freedom and promote economic prosperity.Neoliberals are broadly democratic, but stress the limitations ofdemocracy as much as its necessity. And while neoliberals typicallythink government should provide social insurance and public goods,they are skeptical of the regulatory state, extensive governmentspending, and government-led countercyclical policy. Thus,neoliberalism is no mere economic doctrine. According to Biebricher,neoliberalism

explicitly addresses the noneconomic preconditions of functioningmarkets and the interactive effects between markets and theirsurroundings. (2018: 27)

And neoliberals share

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

Slobodian argues that all neoliberals

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

Neoliberals thereby offer unique institutional prescriptions ondistinctive grounds. Importantly, then, neoliberalism as aphilosophical doctrine is not an attempt to suffuse institutions withthe idea of human agents ashomo economicus, (Brown 2019).Instead, following Jessica Whyte (2019: 8), neoliberalism has anormative dimension that goes beyond the economic, since neoliberalsbelieved

that a functioning competitive market required an adequate moral andlegal foundation,

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

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

These figures were selected in response to the aforementionedhistorical research on neoliberalism. Biebricher (2018: 2) identifiesall three figures as neoliberals, though he also counts Europe-focused“ordoliberals”, specifically Walter Eucken, WilhelmRöpke, and Alexander Rustow, as neoliberals. Slobodian (2018:268) identifies Friedman, Hayek, and Buchanan as neoliberals, thoughhe also includes the arguably libertarian Ludwig von Mises,^[1] and a long litany of ordoliberals; he also focuses his analysis onwhat he calls “Geneva school neoliberalism”, where a greatdeal 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 centralto the new historical analysis. And by focusing on their thought, wenot only ease the burden of analysis, but provide space to focus onneoliberal ideas as crafted by their most reflective and insightfulproponents. Further, other neoliberals said much less about theirphilosophical commitments, so we have less material to work with.Perhaps the relative silence of other neoliberals makes it harder tojustify using Hayek, Friedman, and Buchanan to represent them, buttheir shared political alliances and policies demonstrate substantial overlap.^[3]

This entry’s approach to defining neoliberalism differs fromthat of Biebricher, Slobodian, Whyte, and Brown (Brown 2019) in muchthe same way as political theorists and philosophers differ fromhistorians, and indeed how philosophers differ from politicaltheorists. Neoliberalism can be understood as a somewhat staticdoctrine to provide a basis for evaluation, and that can later serveto explicate variations on the view. It is perhaps more natural totreat 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 countas a kind of political philosophy.

The use of the term “neoliberalism” in this entry does notfit all uses of the term. Thus, the goal is less to explain what“neoliberalism”really means in all its uses, butrather to proffer a meaning based on three criteria. First, the term“neoliberalism” should be used to denote a fairly coherentset of positions. Second, it should be used to capture the views ofthose figures most often associated with the position. Finally, weshould focus on capturing the most serious and even-handed uses of theterm, such as by academic historians, rather than more popular andpejorative uses of “neoliberalism”. This essay’saccount of the meaning of the term satisfies all three criteria. Itidentifies a coherent doctrine understood in light of the views of itsproponents, and its use of the term overlaps with the more carefuluses of the term by recent academic historians. We pursue all threeaims 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 thosecommonly associated with it, and usages proposed by historians, weshould understand neoliberalism as a doctrine about how politics andthe economy should be organized. It is not a theory of justice orlegitimacy. Rather, neoliberals appeal to a plurality of moralconsiderations to justify their preferred institutions. We should alsoavoid defining neoliberalism as fitting within any of the followingfour categories. Neoliberalism should therefore not be identified as(§2.1) an ethos or conception of the good life, (§2.2) aschool of thought within utilitarianism, (§2.3) a version oflibertarianism, or (§2.4) an ideal theory.

2.1 Neoliberalism as Ethos

Many think that neoliberal societies put profit ahead of other centralvalues. 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 forall previously held ethical beliefs”. (2005: 3)

George Monbiot insists that neoliberalism

sees competition as the defining characteristic of human relations. Itredefines citizens as consumers. (2016)

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

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

To illustrate, consider Friedman. Friedman holds that part of the casefor freedom is that we don’t know what persons ought to valuebecause no one really knows what the good life consists in; a freesociety is good because it allows people to experiment with differentforms of life to answer those questions for themselves (Friedman 1987[2017: 185]). And while Friedman (1962a [2002: 133]) proclaimed thatcorporations’ first duty is to maximize profits for theirshareholders and that public policy should ensure that themaximization of profit works to the benefit of all, even he does notadvocate a particular account of what persons ought to value.

Hayek and Buchanan are even clearer in denying that the good lifeconsists in economic ends like wealth maximization. Buchanan (1991:343) emphasizes personal ethical responsibility, adhering to socialnorms 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 followan array of rules and norms that have nothing to do with profitseeking, 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 neededpeople prepared to act based on fundamentallyreligiousimpulses.

Admittedly, Friedman and Buchanan usehomo economicus tounderstand much of human behavior. But Buchanan (Brennan and Buchanan1981: 81) understandshomo economicus broadly; it could be“seen to maximize almost anything at all”, and so has noinherent commitment to, say, wealth maximization.

2.2 Neoliberalism as a School of Thought within Utilitarianism

Some theorists claim that “classical liberalism”, a termoften used to refer to our three neoliberals, is fundamentallyutilitarian in its understanding of the basis for social order(Freeman 2011: 25).^[4] However, Buchanan (1975) is an avowed contractarian and rejectsutilitarianism because it requires aggregating personal values in waysBuchanan thinks impossible or inappropriate. While many characterizeFriedman (1974a [2017: 72]) as a utilitarian, he says that “Imyself have never accepted utilitarianism”. Friedman’sdefense of the free market as maximizing utility was never meant toimply that people lacked basic rights that might forbid utilitymaximization in some cases. Friedman focuses on utility-basedconsiderations because he thinks they have universal appeal. Hayek(1988: 69) not only rejects utilitarianism, he rejects the broaderclass of consequentialist theories of social order: he rejects anydemand for justification where morality is grounded in its productionof some particular goal, like happiness. Hayek (1978: 132) is betterdescribed 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 directlyfrom a moral theory and a theory of justice, an approach taken byRobert Nozick (1974). In contrast, neoliberals seldom appeal tofleshed out theories of justice, such as a theory of natural rights,even if they appeal to the language of justice at various point. Tofocus on the case of natural rights theories of justice, Buchanan doesnot believe in them. He begins his treatise on political philosophy,The Limits of Liberty, with the insistence that there is nomorality beyond what we agree to (Buchanan 1975: 1). Hayek barelycomments on natural rights, and Friedman discusses them primarilyrhetorically. This is not to say that neoliberals reject deonticconstraints on the use of state power. Hayek and Buchanan’scontractarianisms forbid pursuing liberty and prosperity in ways thatall cannot agree to. Neoliberals instead focus on theconsequence-based arguments for liberalism without adoptingconsequentialism. They simply rationalize liberalism in part based onthe claim that liberalism has good consequences.

One is on better ground arguing that neoliberalism is a twentiethcentury revival of classical liberal ideas in response to certainunique twentieth century challenges. Neoliberalism arose in the late1940s as a response to three twentieth century ideologies thatadvocated large states: communism (as the most prominent form ofsocialism), fascism, and social democracy. Neoliberals sought toconfine state power to a range of functions much more limited thanthat undertaken by extensive states of these three varieties.Hayek’s work on informational systems was a response tocommunist central planning. Friedman’s monetarism was a responseto Keynesian macroeconomic policy. And Buchanan’s public-choiceresearch program was a response to the economics of generalequilibrium 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 describingthe best social and political order in light of certain high-mindedaccounts of human capacities, behavior, and natural circumstances, inparticular a preparedness to comply with institutions that embody thecorrect conception of justice. Ideal theories of justice provideaccounts of the “realistic utopia” that citizens shouldstrive for, a society where everyone acts as justice demands by fullycomplying with just institutional rules (Rawls 2001: 4, 13).

Neoliberals reject both elements of political theorizing. First, theytend to reject theorizing about an ideal. This is because neoliberalsare often skeptical about our ability acquire moral knowledge; thereis an epistemic barrier to knowing what is truly right and good.Again, Friedman repeatedly says that the case for a free society isthat we don’t know “what sin is” and Hayek arguesthat, given the limitations of our knowledge,

It is at least doubtful whether at this stage a detailed blueprint ofa desirable internal order of society would be of much use—orwhether 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 todescribe how an ideal society would function.

Now, importantly, Buchanan (1975: 91–106) is a philosophicalanarchist: “The ideal society is anarchy, in which no one man orgroup of men coerces another”. And Friedman (1974a [2017: 87])thinks that it is “desirable to have a vision of theideal” and seems to embrace libertarianism as that ideal.Further, he may think that many of his favored welfare-state policieswould not be part of an ideal social order. Yet both Friedman andBuchanan think attempts to reach the ideal could backfire and sopolitical economy should focus making marginal improvements toinstitutions. In this way, neoliberals sometimes have politicalideals, 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 shouldassume that people will tend to comply with what justice and the lawrequires. Peoplego wrong, especially when they have too muchpower. As Friedman (1962b [2017: 23]) says, “the liberalconceives of men as imperfect beings” and assumes thatorganizing society is as much about “preventing‘bad’ people from doing harm” as it is about helpingothers do good. Buchanan’s project is to theorize politics“without romance” and deny the feasibility of acontractarian 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 ofcompliance and are to be chosen in part on that basis. In brief,compliance is never taken for granted. Their non-ideal theoryis also associated with their opposition to socialisms of all kinds:socialism is irresponsible ideal theory whose purported feasibilityrests entirely on the illicit assumption that human nature can bemodified to make persons more rational and altruistic. Society willnot work as socialists predict.

3. Liberalism

Hayek, Friedman, and Buchanan see themselves first and foremost asdefenders of individual freedom and the freedom of small groups suchas the family. Liberty is usually construed negatively, as when Hayeksays that liberty is when “coercion of some by others is reducedas much as possible in society” (1960 [2011: 11]). Coercionoccurs

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

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

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

For Friedman, Liberals

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

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

Neoliberals do not always embrace negative conceptions of libertyalone. Hayek’s (1960 [2011: 11]) conception of freedom can beinterpreted as republican, as the view that one is free when she isfree from arbitrary interference, since Hayek repeatedly worries aboutgovernment engaging in arbitrary controls that prevent people fromdeveloping long-term plans. This partly explains his insistence that asociety can be free only when it is governed by the rule of law, sincewhile law typically coercively interferes, it interferes in anon-arbitrary, predictable fashion (1960 [2011: 21, 153]). WhileBuchanan does not share Hayek’s republican sympathies, he tooagrees that general rules make liberty possible. Critically, none ofthese three thinkers embrace a moralized conception of freedom wherefreedom is the condition of a person whose rights are respected, incontrast to libertarians like Nozick (1974).

One remarkably strong emphasis among neoliberals, especially Hayek, isthe importance of the rule of law. All persons have a right to betreated as equals by the legal, administrative, and politicalinstitutions in their society. No one is to be favored according totheir degree of social influence or social power or inherited status.When people are not protected by the rule of law, their freedoms areintolerably restricted because they can be arbitrarily interfered withand cannot predict how they will fare in the future. This means theycannot make unimpeded use of the liberties that they currentlypossess. Neoliberals wield the rule of law against those who favormore extensive states, including both social-democratic liberals andsocialists, on the grounds that extensive administrative states mustviolate the rule of law to engage in their characteristic activities.Hayek argues that absolutism arises from “powerful, centralizedadministrative machinery” whose professional administrativeclass becomes “the main rulers of the people” (1960 [2011:193]). Large bureaucracies invariably interfere, and in an arbitraryfashion. This dangerous logic of bureaucracy was a fundamental featureof Buchanan’s research program, and the rule of law is hissolution, too. For these reasons, neoliberals believe equal treatmentbefore the law is a central procedural liberty that persons possessnot only in court but whenever they are subject to state coercion.Neoliberals embrace limited government in part because they believethat equal treatment before the law can be achieved only by limitinggovernment and embracing capitalist economic liberties like freedom ofcontract, since both institutional practices allow others to followgeneral 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” (Friedman1987 [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 individualfreedom

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

And even: “If we knew how freedom would be used the case for itwould disappear” (Hayek 1960 [2011: 31]). The purpose ofindividual freedom is to enable each person to

make the fullest use of his knowledge, especially of his concrete andoften unique knowledge of the particular circumstances of time andplace. (1960 [2011: 156–7])

Friedman focuses on ignorance of moral facts, while Hayek focuses onmoral ignorance, as well as ignorance about how to organizepeople’s lives, but either way, ignorance is the chiefjustification for freedom.

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

Neoliberals also stress that freedom allows people with different endsto cooperate and create peace (Hayek 1978: 111–136). This is animportant theme for Buchanan (1975). As a contractarian, he thinksthat the goal of agreement on constitutional rules is to end theHobbesian state of war and secure enough peace to establish mutualgains from exchange. Thus, a second rationale for extensive negativeliberties 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 ownconsumption but to capital as well (Hayek 1988: 35; 1973: 107). Therationale for private property rights is similar to the general casefor liberal liberties that we have already discussed. Hayek (1988: 35;1973: 107; 1960 [2011: 35]) and Friedman (1962a [2002: 8–9]) inparticular argue that we can’t fully distinguish economic fromother liberties even conceptually. They both famously argue thatpolitical and economic freedom cannot be separated in practice either.That is part of the point ofCapitalism and Freedom andarguably the central point ofThe Road to Serfdom. Buchanan(1993: 230) and Hayek (1960 [2011: 141]) also stress that privateproperty rights allow persons to make plans, in part because privateproperty enables people to save money and thereby become lessdependent on employers and bureaucrats. Private property is furtherthought to be “an essential condition for the prevention ofcoercion” and the wide dispersal of power (Hayek 1960 [2011:140]). Freedom of contract is embraced for similar reasons. And torespect these rights, a society will have to embrace capitalism, sincethe exercise of these rights inexorably yield capitalist economicarrangements, where capital is held by both capital owners andworkers.

4. Capitalism

We can understand capitalism as an economic system where the range ofgoods and services on offer is governed in accord with a strong rightto private property and a system in which prices are set by privateorganizations. People are free to exchange goods and services underwhatever terms they contract for, with few restrictions. Neoliberalsshare this understanding, even if they do not always defend capitalismby name.

In defending capitalism, neoliberals focus on defeating two foes:socialism and Keynesianism, which they typically consider as offeringthe most influential alternatives to their preferred institutions.Socialism, at least the form of socialism targeted by neoliberals, isan economic system where capital is socially owned, typically bygovernment, and the capital stock is produced, organized, and itsoutputs distributed by the central government that is, where theeconomy is centrally planned. Neoliberals attack Marxist socialism inthe strongest terms, but Marxists are not their sole targets. Hayek iskeen to refute the twentieth century socialist Oskar Lange (1936), whoadopted some aspects of neoclassical economics. Neoliberals alsotargeted democratic socialism; for example, Hayek (1944 [2007:163–4]) targeted Fabian socialists inThe Road toSerfdom.

The neoliberal case against socialism is based on three concerns:inefficiency, conflict, and power. Socialism is inefficient, generatessocial conflict, and concentrates power in dangerous ways. Let’sbegin with inefficiency, the familiar argument that socialisteconomies impoverish society vis-à-vis capitalism.^[5] Hayek’s early claim to fame was his role in what is called thesocialist calculation debate, which concerned how socialist plannerscan plan the production and distribution of capital goods without theuse of a price system. Socialists argued that planners should be ableto plan by collecting preference and production information fromcitizens. Ludwig von Mises (1922 [1936/1951]) began the debate byarguing that, without a price system, the information required to planthe economy did not exist. Without a price system, there is noinformation 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 toplan the economy existed, it would be too hard to collect andimpossible to compute before the relevant information changed. Theproblem is that the information required to plan the economy is notgiven to anyone. For Hayek, we can plan the economy

if we possess all the relevant information,if wecan start out from a given system of preferences, andif wecommand complete knowledge of available means.

But that is “emphaticallynot the economic problemwhich society faces” (1945: 519). Instead,

the “data” from which the economic calculus starts arenever for the whole society “given” to a single mind whichcould work out the implications and can never be so given.

In contrast, the market economy can make use of this informationthrough the price system. The price system can draw on eachperson’s local and often tacit knowledge to effectively producegoods and services without collecting that information in one place.The “marvel” of the market is that, when some raw materialis scarce,

tens of thousands of people whose identity could not be ascertained bymonths of investigations, are made to use the material or its productsmore sparingly,

and this occurs

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

Hayek’s analysis of how minds process information (Caldwell2004: 261–285) and how commercial society, and systems ofcultural and moral rules, evolve is perhaps the principal focus of hiswork (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 marketbesides informational arguments, such as the creativity of the marketmechanism and its capacity to raise living standards. Eamonn Butler(1985: 22) points out that Friedman’s case for capitalism, asdeveloped inCapitalism and Freedom, is based on

the diversity, rapid adjustment, innovation and experimentation foundin the market.

InFree to Choose, Friedman argues that, when the stateattempts to centrally plan, ordinary citizens “have a lowstandard of living” (Friedman & Friedman: 54–5). Themarket, on the other hand, has “the remarkable power of raisingmaterial standards quicker than any other” system, whilepreserving freedom (Butler 1985: 197). Hayek (1978: 67) emphasizesthat capitalism preserves competition, which he sees not as a means ofreaching a market-clearing price but as a “discoveryprocedure” for generating new ideas and innovations. Buchanantends to focus on the argument that markets provide people with betterincentives than those faced by government officials. Because

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

they lack the motivation to eventry to implement a socialistplan. Instead, they will use their power over the economy at leastpartly for selfish ends, which would undermine the effectiveness ofsocialist government, even if all the informational problems could besolved.

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

presupposes a much more complete agreement in the relative importanceof different social ends than actually exists

and that, as a result,

the planning authority must impose upon the people the detailed codeof 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 arethe issues on which explicitly political decisions are required andhence on which it is necessary to achieve agreement. (1962a [2002:24])

Markets allow people who disagree to benefit one another despitehaving different values. Socialism, in contrast, requires a centralplan, and so must impose controversial and sectarian values and endson 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 bereined in by transferring the means of production to society, butHayek (1944 [2007: 165]) replies that socialism does not“extinguish power”, it just concentrates power in oneplace. Friedman (1955 [2017: 4]) agrees, arguing that “politicalpower by its nature tends to be concentrated” whereas economicpower “can be highly deconcentrated if it is organized by meansof an impersonal market”. The danger of concentrating power inpolitical institutions is that “government is more subject toconcentrated interest groups”, whereas markets are altered bythe “diffuse pressure of millions of individualconsumers”. Similarly, while governments promote monopolies,“the market breaks them down” (Butler 1985: 223). Anadvantage 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, politicalpower determines the social position of individuals and groups, anironic 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 givespeople what they deserve. Friedman and Buchanan do not make sucharguments, and Hayek arguesagainst such claims. Hayek (1978:70) repeatedly says that there’s no particular merit in marketoutcomes, and so one cannot say that market income is just or unjust.Hayek, Friedman, and Buchanan understand that market outcomes areoften arbitrary from a moral point of view. Markets make someundeserving persons rich and some deserving persons poor.

As noted, Keynesianism is neoliberalism’s other great foe. Letus understand Keynesianism as a series of policy proposals aimed atcorrecting purported market failures at the macroeconomic level, andespecially as the use of deficit-financed spending to manage thebusiness cycle and stimulate the economy. These policies were inspiredby John Maynard Keynes (1935 [1965: 2011]), even if he did not alwaysconsistently adopt them.^[7]

All three thinkers take great pains to answer Keynesian arguments forgovernment intervention. Hayek’s (1941 [2007]) arguments concernhow government spending and the monetary authority’s actionsaffect the structure of capital goods across the economy. ContraKeynes’s (1935 [1965: 37–45]) comfort with statisticalaggregates in theGeneral Theory, Hayek (1941 [2007])contends that relying on simple economic aggregates obscures howcapital and investment are structured across the economy. Hayek alsothinks the premier cause of recessions is policy that makes bankcredit too easy, which leads to malinvestment that has to beliquidated in a bust. Importantly Hayek’s critique of Keynes wasnot influential in the latter half of the twentieth century.Friedman’s and Buchanan’s ideas, especiallyFriedman’s, carried more weight.

Friedman and Buchanan are concerned about Keynesian claims thatrecessions are due to declines in aggregate demand and can only beaddressed with heavy helpings of debt-financed fiscal stimulus (eventhough Keynes himself was not always a fan of debt-financedcountercyclical policy). Friedman (1959) developed the doctrine ofmonetarism, which holds that inflation is always and everywhere amonetary phenomenon. Inflation and the business cycle can becontrolled by monetary policy and so do not require a fiscal response.With his co-author, Anna Schwartz, Friedman (Friedman & Schwartz1963) argues that the Great Depression was due not to a fall inaggregate demand but was instead caused by the Federal Reserve System,ironically created to manage recessions, because the Fed allowed themonetary base to collapse. Had the Fed ensured the growth of themonetary supply, the Great Depression could have been avoided. This iscentral to the case for the market because the Great Depression waswidely blamed on capitalism. If the Depression was agovernment failure, the result of monetary mismanagement,then the Depression provides no basis for rejectingcapitalism—and may even provide reason to embrace it.

The central policy response, for Friedman (1959), is to shift themanagement of the business cycle from Congress to the Federal Reserveand lock the Federal Reserve into a monetary expansion rule to preventit from making major mistakes. Monetary-policy makers are simply notknowledgeable enough to use monetary policy to manage the businesscycle. Instead, they should be bound to a rule that would lead togentle inflation, which would both avoid hyperinflation and preventcyclical unemployment by mitigating the dislocations caused by stickynominal wages, contra Keynes (1935 [1965: 231–7]). Focusingexclusively on growing the monetary base would also prevent a collapsein 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 withreal-world people. Many politicians and government officials are moreconcerned about benefiting themselves and special interest groups thanabout promoting the common good. So, when a government engages indebt-financed economic stimulus, the money is more likely to bedirected to politicians’ favored groups than to the places thestimulus money is most needed. A central difficulty for Keynesianfiscal policy is the pervasive risk of government failure caused bythe actions of often self-interested economic actors, a consistenttheme ofThe Calculus of Consent (Buchanan & Tullock1962). Likewise, once people develop a taste for direct transfers,they will make it hard to shrink the deficit when the recession isover, leading to long-term debt and lower economic prosperity andgrowth.

5. Democracy

Neoliberals embrace democracy. More specifically, they endorse equalrights to vote and participate in elections, and they supportparliamentary democracy as the means of enacting legislation. Hayeksays,

I profoundly believe in the basic principles of democracy as the onlyeffective method which we have yet discovered of making peacefulchange possible, (1979: xiii)

and he claims to be concerned about disillusionment with democracy“as a desirable method of government”. For Hayek, themarket system must be “embedded in a set of socialinstitutions” if it is to work, and that includes a“democratic polity subject to the rule of law” (Caldwell2004: 348). The point ofThe Road to Serfdom is to argue thatliberal democratic socialism is unstable and that socialism must ceaseto be democratic or cease being socialism. So any attempt to plan theeconomy would not only destroy liberal rights; it would inevitablydestroy democracy.

Hayek’s case for democracy tends to be instrumentalist, as heargues that

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

It is also “one of the most important safeguards offreedom” (1979: 5). And yet Hayek thinks recognizing thatpersons are equals requires not only equality before the law but“the demand that all men should also have the same share inmaking the law” even if democracy is a “means rather thanan 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 politicspervaded the society’s discussions throughout its first decadeof existence and provided a foundational premise for many of themembers’ contributions to its debates. (2012: 117)

Friedman routinely defends free markets on the ground that theycontribute 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 alarge measure of political freedom, and that has not also usedsomething comparable to a free market to organize the bulk of economicactivity.

So, he appears to think that democracy is a great good, but we are ledto guess the reasons why. One could argue that Friedman’s casefor democracy is largely that it protects liberty and allows a badgovernment to be peacefully replaced. But there is little in hiscorpus that speaks to this question one way or another.

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

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

While Buchanan insists onunanimous consent forconstitutional rules (strikingly, among non-ideal persons), he thinksthat constitutions may allow for decision-making rules weaker thanunanimity, such as majority rule. It is true that Buchanan (Buchananand Tullock 1962: 85–96) argues that legislative rules should besupermajoritarian rather than majoritarian, but that is still anembrace of democracy, especially when undergirded by the consent ofthe people as a whole.

However, unlike many classical and contemporary democratic theorists,neoliberals do not see democracy as involving a social ethos ornational culture, nor do they see democracy as an expression offreedom in itself. As Hayek (1979: 5) notes, “democracy itselfis not freedom”. Friedman insists that freedom is to beunderstood negatively, such that the political process is understoodas restricting freedom and perhaps protecting it, but not as embodyingit. Buchanan also criticizes what he regarded as an essentially“romantic” view of democracy according to which the willof the people is expressed in the actions of a democraticgovernment.

Notably, neoliberals spend far more time arguing for limits ondemocracy than arguing for democracy itself. This is partly because,since fascism was defeated, the goodness of democracy has been takenfor granted by both neoliberals and their interlocutors. Hayek,Friedman, and Buchanan instead focus on criticizing“unlimited” democracy. Hayek (1944 [2007: 111–2]) isworried that an unlimited democracy could undermine the rule of lawand 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” andis based on the erroneous premise that all law “emanate[s] fromlegislatures” (1979: 3–4). Another problem for unlimiteddemocracy is that democratic assemblies will take on more power thatthey can wield effectively and so will be forced to

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

In an unlimited democracy

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

The point of the third volume ofLaw, Legislation, andLiberty was arguably to restore faith in democracy by defendinglimitations upon it.

Friedman (1962b [2017: 26]) echoes many of these points, stressingthat political freedom is just “the absence of coercion of a manby his fellow men” and that the fundamental threat to freedom“is the power to coerce” whether that power be in thehands of a dictator or of “a momentary majority”. Friedmanalso worries that democracy will tend to lead to regulation,inefficiency, and control if we have “bureaucraticdemocracy” rather than “participatory democracy”.^[8]

Buchanan’s (1962: 131–146) rationale for constitutionalconstraints on democracy is richer and more perceptive thanHayek’s or Friedman’s. His contract theory is devoted toarguing that simple majority rule can lead to a variety of problems,most centrally the risks of shifting coalitions of voters orlegislators redistributing wealth away from one another, leading toPareto-inferior outcomes for all. Another problem with unlimiteddemocracy is that

even under the most favorable conditions the operation of thedemocratic process may generate budgetary excesses. Democracy maybecome its own Leviathan unless constitutional limits are imposed andenforced. (Buchanan 1975: 204–5)

Limitations on democracy are also required by political equalityitself, since the “tyranny of the majority” is a threat tothe minority’s equal rights, and can be especially dangerous“because it feeds on the idealistic illusion that participationis all that matters (Buchanan 1993: 259). Consequently, Buchanan(1999: 75–88) advocates exit mechanisms, such as federalistarrangements, that allow people to escape excessive democracy.

Four caveats before the section ends: First, despite their concernsabout unlimited democracy, neoliberals want to protect democraticrights. One problem they have with expansive states is that largestates reduce the effectiveness of each person’s vote. This isbecause large governments cannot balance their many tasks and cannotsecure agreement on top priorities. The result, Hayek argues, will bedemocratic instability, leading to dictatorship. In contrast to moreegalitarian liberals, neoliberals do not attempt to engineer thedemocratic process through democratic deliberation. They instead hopeto protect democratic rights by adopting constitutional constraintslater in the democratic process, for example by restricting the powerto legislate. Second, while neoliberals support restrictions ondemocracy, they strongly favor decentralizing of political power andensuring that power is held by all and they are committed toprotections from governmental and corporate predation and domination.As Friedman notes,

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

They simply disagree with egalitarian liberals about how to ensurethis institutionally. As noted above, neoliberals stress designinginstitutions so that corrupt and domineering institutions cannot form,within or outside government, such as using markets. But they alsoappeal to constitutional mechanisms like supermajority rules (Buchanan& Tullock 1962) and federalism (Feld 2014) to limit oppression andcorruption. Thus, neoliberals are deeply concerned that people beprotected from excessive political control, but they do not emphasizepublic deliberation is central to securing those ends. We might saythey prefer “exit” mechanisms over “voice”mechanisms for restraining the use of political power (Hirschman1970). Third, neoliberals are not alone in advocating constitutionallimits on democracy, even though most democratic theorists on the leftplace fewer limitations on democracy than neoliberals do.

Finally, historians of political thought have drawn attention to thefact that the neoliberals discussed here were sometimes associatedwith the dictatorship of Augusto Pinochet in Chile. But Buchanan(Farrant & Tarko 2018) and Friedman (Burgin 2012: 205) have atbest 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 liberaldictator to avoid socialist outcomes and transition a society into aliberal democracy, and this helps explain some favorable remarks hemade on behalf of the Pinochet regime (Farrant, McPhail, & Berger2012; Biebricher 2018: 142–7; Slobodian 2018: 277).Hayek’s support for the regime does not undermine the democraticcommitments of neoliberals, but Hayek was arguably too suspicious ofdemocracy. We can see the dangers in sharply separating liberalismfrom democracy, which tempts one to choose liberal dictatorship overdemocratic socialism.

6. The Welfare State

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

Of course, neoliberals are skeptical of government regulation, largelybecause they think regulatory bodies tend to be turned from goodpurposes to bad ones (2007: 93). This is a consistent theme ofFriedman’s (1962a [2002: 137–160]) work, especially in hiscriticisms of occupational licensure. And the analysis of rent-seekingis one of Buchanan’s main ideas, shared by his long-timeco-author Gordon Tullock. Large bureaucracies turn too much power overto administrators, power that practically begs to be misused byspecial interests (Butler 1983: 209). And, of course, neoliberals alloppose Keynesian fiscal policy, especially debt-financed stimulus(Buchanan 1987: 456; Butler 1985: 186). But these concerns areconsistent with embracing the welfare state.

Hayek is quite friendly to various government interventions. InTheRoad to Serfdom, Hayek (1944 [2007]) defendscountercyclical monetary policy, government construction oftransportation infrastructure, social insurance for natural disasters,government health insurance, a basic minimum income, and strictregulations with respect to working hours, health and safety on thejob, poisons, deforestation, harmful agricultural methods, noise,smoke, and the prices of goods and services that are naturalmonopolies (1944 [2007: 22, 43–4, 133–5, 217]; Burgin2012: 90–1). Similarly,The Constitution of Libertysays 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 thatthe

old formulae of laissez faire or non-intervention do not provide uswith an adequate criterion for distinguishing between what is and whatis not admissible in a free system. (1960 [2011: 231]; also see Hayek1944 [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 againsta risk common to all, but a necessary part of the Great Society inwhich the individual no longer has specific claims on the members ofthe particular small groups into which he was born. (1979: 55)

While Hayek’s use of the term “legitimate” isimprecise and may only somewhat overlap with the use of the term incontemporary political philosophy, he apparently thinks thatgovernments are morally required to engage in welfare-state measures.Governments should pursue poverty relief not only because it isbeneficial but because it is the right thing to do. Hayek worries thatsocial 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 forsome purposes, claiming that government ought to “relieve acutemisery and distress” (Friedman 1951 [2012: 7]). Governmentshould

protect members of the community who cannot be regarded as“responsible” individuals, principally children and theinsane. (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 theirresponsible. (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 lowenough, 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 povertybecause pure private charity may invite free-riding. He (1962a [2002:85–107]) is also the inventor of the school-voucher policy, andhe (1974b [2012: 20]) supported compulsory education so long asgovernment does not control the schools.^[9] Friedman worried that the welfare state would be too bureaucratic andauthoritarian, however, which is why he favored replacing mostwelfare-state programs with cash transfers.

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

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

This is a point usually stressed by critics of libertarianism on theground that property rights are conventional, not natural, and socannot morally prohibit redistribution (Murphy & Nagel 2002). Thispassage suggests that Friedman’s political philosophy does notinclude a natural right of private property as an impediment toredistribution. Second, Friedman sees his defense of the welfare stateas a part of his non-ideal theory, not his ideal. He supports vouchersand the negative income tax

not because these are necessarily part of my ideal utopia[n] societybut because they seem to me the most effective steps, given where weare, 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 morelibertarian than most other neoliberals, his non-ideal theory isneoliberalism.

Buchanan is both the hardest to pin down on the welfare state and themost egalitarian. He has virtually nothing to say about governmentpoverty relief. Buchanan’s contractarianism nonetheless embracessome redistribution, as he thinks his social contract would yieldunanimous agreement on having a “productive”state, which provides many tax-financed goods, and could also providesocial insurance (Buchanan 1975: 124). Buchanan also defends aprinciple of equal opportunity, which he thinks requires a 100 percentinheritance tax that would prevent the formation of an aristocracy.Presumably this principle could justify other forms ofredistribution.

Neoliberals stridently reject one of the most common rationales forthe welfare state, namely pursuing an egalitarian conception of socialjustice. Hayek is clearest on this point, given his total rejection ofthe very idea of social justice, which he understands, somewhatpeculiarly, as a set of moral principles that govern thejustifiability of specific distributions of economic resources, thoughnot moral principles that govern the functioning of an economic systemas a whole. Hayek (1978: 78) thinks that the idea of social justice isconfused in that justice cannot be applied to specific market outcomesbecause they are not the result of direct, conscious choices. Socialjustice is an incoherent idea, much like the idea of a “moralstone”. Hayek thinks it imperative that the state not be used toachieve a precise income distribution (Caldwell 2004: 350):

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

Yet Hayek has an idiosyncratic understanding of social justice. Hethinks it requires the that certain specific economic outcomes beimposed, rather than that a society’s moral, legal, andpolitical rules work to the advantage of all. Hayeksupportsthe latter requirement. Hayek says that the “most desirableorder of society” is

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

If Hayek sounds like Rawls, it is no coincidence. Hayek’sreading of Rawls’s earlier papers (notA Theory ofJustice) led him to believe he had no quarrel with Rawls, forRawls

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

Thus, Hayek seems to share Rawls’sconcept of socialjustice, though not hisconception of it. And this concept ofsocial justice is compatible with liberty. The pursuit of socialjustice only implies the destruction of the rule of law if ourconception of social justice requires us to tinker with particulareconomic outcomes (Hayek 1960 [2011: 85]). These points are by nowwell-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’scontractarianism leads him to hold that a society’sdistributions are fair if they are the product of rules that all agreeto, and otherwise not, so if pursuing distributive justice meansbreaking the constitutional rules that we have agreed to, it isproblematic. But social contracts may have redistributive rules. Ifpeople agree to redistributive rules, then redistribution isjustified. In this way, Buchanan is closer to Rawls than Hayek is.

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

the way to reduce inequality … is not by the misleadingpalliative of sharing the wealth but by improving the workings of themarket, strengthening competition, and widening opportunities forindividuals to make the most of their own qualities.

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

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

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

7. Criticisms of Neoliberalism

This section covers criticisms of neoliberalism, but it leaves out agreat many of them. The reason for this is that many of the mostwell-known criticisms of neoliberalism are simply criticisms ofcapitalism as such. Accordingly, this section focuses on criticismsaimed directly at neoliberalism.

7.1 Ethos Criticisms

Many criticize neoliberalism for structuring society around themarket, commodifying market relations, and in general manipulatingpeople into serving the ends of what is best for commerce or economicproduction. In this way, neoliberalism builds society around a cashnexus. But unlike full capitalism, neoliberalism does so in a covertway that takes serious scholarly work to demonstrate. Neoliberalismitself is not an ethos, as noted above, but neoliberalismmight be seen to give rise to an excessively capitalist/transactionalrelationship between persons. While she rejects this characterizationof neoliberalism, Jessica Whyte argues that it is often characterizedas

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

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

there is no difference between the infraction of the highway code anda premeditated murder. (2015: 253–4)

Indeed, one might make the more worrisome argument that neoliberalismleads 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 boostseconomic growth, it also increases economic inequality, which isproblematic in several ways. Two kinds of inequality criticisms aregenerally offered. The more well-known are the empirical criticismsthat neoliberal regimes lead to dangerous inequalities just from thedata, such as Thomas Piketty’s book,Capital (2014),which holds that economic inequality is growing and is a threat todemocracy, much as Martin Gilens’s (2014) work on inequality andthe responsiveness of democratic policy-making to the richest 10%.

The other kind of critique of inequality under neoliberalism isderived from Rawls’s work. As is well-known, Rawls rejectedwelfare-state capitalism and a more robust form of capitalism which hecalled the system of natural liberty on the grounds that they do notsatisfy Rawls’s two principles of justice (Rawls 2001;O’Neill and Williamson 2014). Rawls argued that evenwelfare-state capitalism cannot protect the value of political libertyor realize its priority (Rawls 1993 [2005]) because it allows for theaccumulation of capital in too few hands, which leads to economicdomination of politics, and shuts many people out of the goods ofowning and operating at least some of the capital they need to enjoythe worth of their constitutional liberties.

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

7.3 Undermining Democracy

A very common criticism of neoliberalism is that it underminesdemocracy. This might be because high economic inequality underminesdemocracy, as Martin Gilens (2014) argues inAffluence andInfluence and defended by Larry Bartels (2008 [2016]). Anotherway in which neoliberalism could undermine democracy is byprioritizing the protection of classical liberal economic liberties,like the right to private property. These can lead to restrictions onthe ability of democratic citizens to choose to redistribute wealth.This problem is especially acute given Hayek’s favorable view ofthe Pinochet regime in Chile. Hayek hoped that Chile would become ademocracy, but he believed that the Pinochet coup had allowed Chile tododge the bullet of democratic socialism as advocated by SalvadorAllende, Pinochet’s predecessor. There is a tension between theliberalism and the democratic commitments within neoliberalism that inpractice tends to mean that democracy suffers.

7.4. Economic Irrationality

Neoliberal regimes rely heavily on market mechanisms, and neoliberalsclaim that markets are efficient or at least highly economicallyproductive (neoliberals disagree about how to characterize and explainmarket productivity and efficiency). But behavioral economists(Kahneman 2013; Ariely 2010) have identified various biases in humanreasoning that undermine thehomo economicus model thatneoliberals are said to use to model and predict economic development(though as shown above, neoliberals have a subtler relationship withhomo economicus). See entry onbounded rationality.

7.5 Keynesian Rebuttals

Neoliberalism, as noted, arose in part in response to the dominance ofKeynesian macro-economic policy. But Keynesians, most notably PaulKrugman (2012), have struck back by arguing that neoliberal criticismsof Keynesian policy fail. This is especially true because neoliberalsoften claimed that fiscal policy is ineffective stimulusvis-à-vis monetary stimulus. During the Great Recession,Krugman argued that the Federal Reserve had lowered interest rates somuch that further monetary stimulus would fail, and so fiscal policyhad to intervene.

Many of the criticisms of neoliberal regimes engaging in“austerity” during the Great Recession are based in anunderlying Keynesian model, as the critics of government spending cutsduring the Great Recession were often based on the idea that they hurtthe economic prospects of the poor, whereas according to neoliberals,shrinking government spending during a recession is not harmful to thepoor for a variety of reasons. See entry onphilosophy 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 poorfrom the rich (Quiggin 2012). Strictly speaking, trickle-downeconomics is not a genuine school of economic thought, nor wouldHayek, Friedman, or Buchanan have accepted that description of theirviews. They did argue that all would benefit from the prosperitybrought about through the free market, but this was not necessarilybecause the rich would benefit first. Hayek (1960 [2011]) argued thatthere is a kind of trickle-down effect for the prices of goods andservices, where luxuries for the rich become commonalities for thepoor because manufacturers figure out how to lower prices to broadenmarket penetration over time. And indeed, it is standard in mainstreameconomics to hold that as businesses accumulate capital, they canafford to pay their workers more and so can bid workers away fromother companies. That process often involves increasing wages, so morecapital in the hands of the richcan lead to higher wages forthe poor through fairly ordinary causal channels. All the same, manyneoliberal officials promised gains for the poor that did not oftenmaterialize.

7.7 Libertarian Criticisms

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

7.8 Colonialist Criticisms

It is common in some circles to argue that neoliberal regimes arecolonialist in character, though in an unusually direct way. Thethought is that neoliberalism was adopted by regimes in the Anglophoneworld and in much of Western Europe, and that this formed aninternational elite consensus about how economies around the worldshould be run. This led to a “Washington Consensus” thatcaused policy interventions that interfered with the democraticgovernance of developing nations, increased inequality, and made thepoor 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 criticizeneoliberal policy on the grounds that it emphasizes free trade andfree immigration lead to a range of deleterious consequences, from theshrinking of the industrial base of rich democratic countries like theUnited States, such as that advanced by Patrick Deneen (2019). Astronger form of this concern is that allowing immigrants fromdifferent cultures to acquire citizenship within a country will harmor degrade the culture and politics of that country.

7.10 Feminist Criticisms

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

7.11 Remaining Criticisms

Neoliberalism is subject to other objections, but many resembleproblems for other liberal democratic theories, such as the conflictbetween liberal rights (however understood) and democracy—the“procedure-substance” dispute in the deliberativedemocracy literature, as well as how any sufficiently liberal approachto associational freedom takes the freedom of marginalized groupsseriously given the prospect for local oppression. Neoliberals havediverse conceptions of freedom, though typically negative, with allthe standard criticisms those views invite. And, then, to the extentthat neoliberalism like Hayek and Buchanan adopt a contractarianframework for justifying institutions, their defenses will inherit allthe difficulties with contractarianism.

8. Summary

This entry is not meant to determine the one true meaning of“neoliberalism”, but rather to illuminate neoliberalism asa coherent philosophical doctrine embraced by figures commonly calledneoliberals. The entry also prioritizes more even-handed and lesspejorative uses of the term in recent historical research. This is notto discount more historical and dynamic understandings ofneoliberalism. They contain insight. But the goal of this entry hasbeen to characterize neoliberalism as a philosophical position. If wedo so, we can understand neoliberalism as a politico-economic doctrinethat embraces robust liberal capitalism, constitutional democracy, anda modest welfare state.^[11]

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