Seminar 1: Introduction (12 January)

The first seminar aims to introduce the concept of market, examine the evolution of markets, and draw attention to a variety of disciplinary perspectives for the study of markets. The goal is to acquire the basic understanding of the subject, its importance, as well as the benefits and possible shortcomings of different approaches to the study of markets.


‘Markets’, Stanford Encyclopedia of Philosophy (
(This entry will not be discussed in the seminar, but it offers a handy synthesis of some of the major issues and an extended bibliography.)

Jeffrey A. Frieden, ‘The Modern Capitalist World Economy: A Historical Overview’ in Dennis C. Mueller (ed), The Oxford Handbook of Capitalism (OUP, 2012) (available on-line from the EUI library catalogue)

Bernard E. Harcourt The Illusion of Free Markets chapters 1 and 6 (supplied)

Further Reading
For an interesting exchange on Harcourt’s book, see: James Q. Whitman, The Free Market and the Prison, 125 Harv. L. Rev. 1212 (2012) and Harcourt’s response available online at the Harvard Law Review, here:

Don Slater and Fran Tonkiss Market Society: Markets and Modern Social Theory (Polity, 2001) ch 1 (‘The Emergence of Market Society’)

Fred Block ‘Contesting Markets All the Way Down’ 68 Journal of Australian Political Economy 27 (2011)

11 comments on “Seminar 1: Introduction (12 January)

  1. Fabrizio says:

    I am concerned about how to accommodate the following claims on the desirability of perfect competition:
    (1) perfect competition is Pareto efficient (more accurately, it leads to Pareto optimal results)
    (2) perfect competition maximizes societal welfare (wealth maximization)
    (3) competition among firms assures that production is efficient and tailored on what users want, and prices are kept in line with costs

    It seems that (1) compared to (2) and (3) is overinclusive because also a monopoly is Pareto efficient. But a monopoly violates (2) because of the dead-weight loss and (3) because of the circumstance that the firm is not a price-taker and therefore prices are not in line with costs.

    Regarding the overinclusiveness, a situation S2 is Pareto superior to a situation S1 if in S2 no one is made worse off and at least one is made better off. If there is no S2 satisficing this condition, S1 is Pareto optimal. Consider the offer to make an exchange and assume that there are no externalities. If the offeree accepts, they move to S2, if he rejects they remain in S1. In the former, the exchange is Pareto superior, in the latter the status quo (S1) is Pareto optimal. This analysis works regardless of any claim on societal welfare, dead-weight loss and prices. It should therefore be concluded that (1) is correct, but that it cannot provide a reason for preferring competition to monopoly.

    (2) is problematic because what societal welfare is, how perfect competition maximizes it, what the relation between welfare and wealth is, why distribution would be normatively irrelevant, are all questions that one would need to find an answer to in order to commit to (2) as the reason for preferring perfect competition.

    (3) states that competition is good for three concurring reasons: i. it drives firms to be efficient in their internal organization (productive efficiency); ii. it drives firms to produce what consumers want, which under the assumption of consumer Olympic procedural rationality, it is also what is in their best interest; iii. it drives prices down. All these three reasons make consumers better off: i. and iii. minimizes prices while ii. promises that what is produced satisfies the rational preferences of consumers. In sum, (3) leads to optimal consumption

    • giorgiomonti says:

      Not clear how this relates to the readings.
      what you label as (1) comes close to the first theorem of welfare economics. as such it is not clear how you can make the argument that a monopoly can yield a Pareto improvement, The example of a good not being bought in a competitive market does not follow because in the theorem the good woudl either be bought or not produced if it was known nobody wanted it.

      The problem you have with (2) can be eliminated by identifying a way of measuring welfare (what Harcourt is looking into in parts) and the diistributional concerns are valid but this is not the task of wefare economics.

      • Fabrizio says:

        Dear professor Monti, thank you for your reply.
        My comment relates to the readings because these propositions are taken from the readings. Since this is a class on markets, the impression that in the introductory readings the normativity issue is unclear seems not to be off-topic.

        Regarding (1) I confess I do not understand and probably need to study more. I agree perfect competition leads to Pareto optimality. My problem is that a good bought from a monopolist firm is a Pareto improvement and therefore both perfect competition and monopoly satisfy the Pareto criterion. Therefore, I cannot find in (1) a reason to prefer competition to monopoly. Maybe the reason in somewhere in the assumptions that make the background of (1). But if so, (1) needs to modified to make the assumption explicit.

        Regarding (2) and (3). What if the way to measure welfare is, as suggested by (3), that only consumer welfare counts on the market, as long as it is rational for the seller to produce and sell (otherwise there would be no market)? In this case you have the distributive concern built in the definition of welfare. And welfare economics starts to look like competition law and consumer contract law, which share distributive concerns in favour of consumers.

  2. Elias says:

    I personally appreciated the two chapters of Bernard E. Harcourt’s book. Harcourt eloquently describes the intellectual genealogy and naturalization of the idea established by the Physiocrats as well as by Adam Smith of the market as natural economic order as „scientific truth“, normative criterion and mode of governmentality in the field of economics, political economy and regulation. Moreover, he convincingly describes that today’s markets are in the same way as markets three centuries ago subject to a dense net of regulation. However, whereas the later are today conceived as „overregulated“, the former are paradoxically perceived as “free markets”.

    However, Harcourt’s analysis suffers from some shortcomings.
    First, it is not very clear to me in what respect Harcourt’s analysis differs from Foucault’s attempted deconstruction of the (neo-)liberal economic theory as form of gouvernmentality in „La Naissance de la biopolitique“. Moreover, the insight that the functioning of „free“ markets necessitates a high degree of regulation and certain legal framework is not new. On the contrary, the German Ordoliberals (for instance described by Foucault in „Naissance de la biopolitique“) stressed the importance of a legal and regulatory framework which enables the well-functioning of competitive markets.

    Furthermore, I am not convinced by Harcourt’s claim that it is impossible to differentiate between the forms of regulation and the degree of „economic freedom“ of the wheat markets in the 18th century and today’s markets. Unfortunately, Harcourt omits to analyse the different regulatory styles and intensity of market regulation (for instance: direct price regulation vs. access regulation) and the different degrees of economic freedom of the market participants in the historic examples of the wheat market and today’s markets.

    In addition, Hartcourt’s link between the intellectual naturalization of the liberal concept of „natural order“ of free markets and the phenomenon of “neoliberal penalty” gives rise to certain contradictions. Harcourt underlines on the one hand, that today’s free markets are subject to a very intensive degree of governmental regulation which is comparable to that of 18th century markets. On the other hand, he affirms that due to the presumption in favour of free markets as „natural order“, the focus of governmental regulation shifted from the economic sphere to the non-economic sphere of human behaviour. This second affirmation of regulatory shift implies a decrease of governmental intervention in the economic sphere and conflicts with Harcourt’s first thesis that today’s market regulation is not less intense and interventionist than historic forms of economic regulation.

    Lastly, – even if it might seem a bit naïve – I am not convinced by Harcourt’s description of the dominance of neoliberal penalty in our current legal systems. It is not true, that human behaviour is criminally sanctioned only due to its social costs and “market avoidance”. On the contrary, it is rather sanctioned due to its conflict with certain historically and culturally constructed social and moral values (This does not exclude that certain economic factors influence these values). For instance, we do not simply condemn and prosecute last week’s terrorist attacks in Paris, because the perpetrators avoided “the market of ideas” in order to defend their political opinions and thus caused high social cost, but because their behaviour conflicts with certain non-economic social values.

    • giorgiomonti says:

      Many good points, atpage 47 howveer Harcourt tries to extricate the project from Foucault, esp the Bioipolitics book you cite.

      I agree w/ you that the regulatory styles may be different between the early grain market and today’s grain market, but there are also several similariteis: there is lots of health and safety egislation and lots of consumer law in the examples given about the French markets. Note also the vital importance that grain played then & probably still does, so he has picked a market where there may be more at stake than if he had picked other commodities.

      I also found a tension between the insight that all markets are regulated, and the subsequent claim that the domain of the state is outside the market sphere.

  3. What I found most exciting about the Harcourt chapters was precisely what was missing from the Frieden piece. But, at least in what we read, what was most interesting to me is still missing.

    Frieden is completely ambivalent–even naïve–in his approach in relation to the questions of what characterizes markets, and especially what differentiates capitalism from other modes of organization. Certainly, as an overview of the diversity of practices, engagements and forms of organization that are generally collected under the same ‘capitalist’ label, Frieden’s survey is a potentially useful starting point. But by constructing a narrative which simultaneously adopts orthodox characterizations of the causal linkages between different historical moments, and uncritically applies current labels in describing changes in categories of practice, Frieden not only flirts with perpetuating a Eurocentric, teleological account (one which occludes the moments of expropriation that necessarily preceded much of the exchange he places central to his account), but also suggests a historical determinacy which makes “explanation” impossible: if things happened the only way they could have happened, then history just is, and there is nothing to explain.

    Beyond Harcourt’s particular thesis about the role of market naturalization in the development of the US penal system (which I don’t feel I can judge without reading more of the book), what was refreshing about his approach was his refocusing of attention, away from simply tracing of changes in economic form, and toward the ways in which particular conceptual structures interact with the ongoing evolution of (economic) practices. His introduction, especially, lays out a useful set of tools for thinking through the ways in which discursive practices can pull together different conceptual resources over time even while maintaining rhetorical stability (i.e. the same terminology of ‘the market’ means different things over time, and conceptual structure has an impact on what it means, in practice). More importantly, it provides a window through which to see the relationship between the nitty-gritty of legal rules and the high-level rules through which those rules are justified, challenged and reformed.

    What’s missing from Harcourt, at least in the chapter that we read, is enough care and attention tot he micro-processes which determine the relative success and failure of alternative discursive developments in the real world. The juxtaposition of the 17th century French bread rules with the Chicago Wheat was a powerful example of the point that he was trying to make about the indeterminacy of high-level labels and rhetoric (markets versus state, discipline versus free exchange) in their connection to actual practices. But his parallel genealogies in chapter 6 linking Quesnay to Posner and Becker left open the degree to which either of their ideas are operative in the real world generally and in the United States in particular. More importantly, those genealogies left open and unexplored the question of why those particular ideas got taken up, why they became connected to certain practices instead of alternative frames; in ignoring the contingency of the neoliberal ascendance in thinking the market, he risked repeating the problematic determinacy in Frieden’s more superficial account.

    • giorgiomonti says:

      Two points on yoru critique of Frieden: (1) I think the ‘darker’ moments of expropriation are hinted at, he isn’t totally blind to the sources of wealth necessary for the degrees of growth he notes; (2) I agree that there isn’t much sophistication on the transitions from one historical moment to the next. Crises apparently just recur, no explanation given. However it might be harsh to ask for more in the space given.

      On your critique of Harcourt: perhaps that gap is just not part of the research question he framed, see eg page 46 where the question seems to be about what role the concepts play in policy making. The extent to which these phrases have traction in contemporary policy-making is shown in later chapters, and also in his book review response.

  4. stavros says:

    In this post I will touch upon certain potential shortcomings of the Economic Analysis of Law. The Economic Analysis of Law (“EAL”) seeks to apply economics in order to describe and understand the law, and prescribe legal content. According to the EAL applying economics is tantamount to (i) assuming that individuals are rational agents that aim at maximizing their utility, while the latter is defined pursuant to their given preferences, and (ii) investigating market and non-market legal phenomena under this assumption (Posner, Frontiers of Legal Theory). Thus, it could be argued that the EAL applies the tools of microeconomic theory and especially neoclassical economics to the analysis of legal rules and institutions. However, I will argue that the EAL (a) is grounded on an economic theory that requires significant adjustments or refinements to grasp the modern economic reality, (b) is an unsatisfactory theory of law, and (c) is subjected to the physiocratic fallacy as Harcourt has shown.

    (a) A core element of the EAL is that it envisions persons as utility maximizers. However, by embracing the neoclassical view of the individuals as wealth-maximizers, the EAL ignores important dimensions of human motivation. In particular, the Walrasian model sees individuals as masters of their desires, able by force of will alone to select from the undifferentiated mass of objects those that satisfy their preferences. So, for the neoclassical view, consumers know with certainty what they want. Nonetheless, it could be argued that “once the basic needs are satisfied, everyone is subjected to intense desires, yet she may not know precisely for what. The subject thus looks to that other person to inform her of what she should desire” (Girard, Deceit Desire and the Novel: Self and other in Literary Structure). This mimetic dimension affects consumer behavior in a way inconceivable by neoclassical economics. Taking into account the mimetic hypothesis implies that game theory and strategic rationality should be employed in order to explain individual’s conduct in the market, while neoclassical parametric rationality has become an obsolete analytical tool.

    Furthermore, Orlean (the Empire of Value, 2011) argues that the neoclassical theory of value is defective. The neoclassical theory of value contends that an objective substance of the commodities, utility, is what triggers commercial transactions. “The sum of total of all things on which a price can be set, because they are scarce, constitutes the social wealth”(Walras, Elements of Political Economy). So, scarcity refers to the scarce utility of the commodities and utility is what confers value to the objects. Exchange exists because there is value, while value is a distinctive quality of tradable commodities. Contrary to the above, Orlean submits that the market value is an autonomous phenomenon that cannot be reduced to any preexisting substance such as utility or labor. The neoclassical theory of value captures a significant part of the market relationships: the idea that the value is objectively determined. However, it does not grasp the role of monetary transactions in creating value. To put it differently, the objectivity of the value exists but within the market exchange; it is not a natural, ahistorical fact but an expression of a particular market economy. Thus, to the extent that EAL is interwoven with neoclassical economics it uses certain economic tools for understanding not only market but also non-makret conduct, while at the same time these tools have proven to be unable to fully explain markets and their functions. If that is true, a legal theory based on a social theory of economic behavior could be more beneficial than EAL, which is grounded on the standard quantitative theory.

    (b) Becker’s model offers an intriguing guide for deciding the best enforcement policy and the proper sanctions for achieving the optimal deterrence effect of criminal law provided that all criminals are rational agents engaging in utility calculations. In the same line, Posner defines crime as market by-passing: criminal acts are punished because they are inefficient or because they infringe the laws of the respective free market. However, under this approach, as even Posner recognizes, it is difficult to explain why voluntary exchanges of valuable goods (narcotics, weapons, prostitution) should be criminalized. In other words, the theoretical commitments of EAL make it unable to respond to the question what should be criminalized and why. To my understanding this occurs because, the EAL adopts exclusively a utilitarian rationale concerning criminal punishment (i.e. punishment deters potential criminal as long as the costs outweigh the benefits). At the same time it ignores any functional (i.e. criminal law as a form of social control), deontic (i.e. crime is a negation of the moral order which should be negated; or a sanction punishes a moral wrong, so it is good in itself) or freedom-based (i.e. punishing presupposes that we are free and morally accountable) rationale of criminalization. Committed to a certain kind of moral subjectivism it seeks to avoid any non-utilitarian moral justification of criminal law.

    However, the problem with the EAL as a theory of law is wider. It could be argued that EAL does not fully grasp the notion of legal obligation or that it understands it from an external point of view. According to a more plausible legal theory, to obey the law is not merely conforming to the law; it is to comply with the law, to be guided by it. A purely coercive order can oblige, but never obligate, a person to comply. To be obligated by the law means to accept legal rules as standards of conduct and adopt “the internal point of view” (Hart, the Concept of Law). Thus, Hart’s account of the law conceptualizes it as a normative social practice, which is able to guide human behavior and give rise to practical reasons for action. On the contrary, the EAL reflects a conception of the law very similar to Austin’s account of the law as “commands backed by threats”. So it offers a model according to which the cost of an illegal behavior is tantamount to the possibility of applying the relevant sanction supplemented with the costs of litigation and discounted by the probability of detection. However, this model has not been proven empirically (i.e. as far as I am concerned there has not been any empirical study demonstrating that all law abiding citizens or criminals obey or infringe the law respectively after engaging in utility calculations) and it ignores the normativity of the law.

    In this regard, it could be maintained that the EAL does not explain the authority of the law. The problem of law’s authority is connected to the problem of individual’s moral autonomy. Since moral autonomy implies that each person has a duty to act on the basis of her own moral assessment of right and wrong, it is necessary, from a normative point of view, to justify the authority of the law. A plausible response to this problem could be Raz’s Normal Justification Thesis (Raz, the Morality of Freedom): “the normal way to establish that a person has authority over another person involves showing that the alleged subject is likely better to comply with reasons which apply to him (other than the alleged authoritative directives) if he accepts the directives of the alleged authority as authoritatively binding and tries to follow them, rather than by trying to follow the reasons which apply to him directly.” Hence authoritative directives are content-dependent, exclusive and pre-emptive reasons for action. Consequently, the EAL may instruct us when it is efficient to obey the law and indicate what it is required for the law to become efficient, but it remains silent when it comes to the question what legitimizes the authority of the law.

    (c) One methodological problem of EAL is what could be called as the “physiocratic fallacy”. This means that the EAL presupposes a naturalistic account of human beings and market order, which is developed regardless of the economic and legal phenomena. Specifically, the EAL is based on the anthropological assumption that humans behave as wealth maximizers. They are free to define the good as they like (freedom of choice/preferences) and then they use rationality in order to attain the good (fulfill their preferences). Likewise, it perceives the free market as the natural state of affairs (free markets consist in voluntary exchanges amongst rational agents, and they are self-regulated and self sustaining). Hence, every state intervention is external and it is justified as long as it addresses market failures (occasions where the market cannot be efficient based on their own devices).

    In this regard, Harcourt’s analysis helps us understand why the naturalization of the market and the individual is conceptually wrong and lead to the physiocratic fallacy. Harcourt demonstrates in an illuminating way that the word “free” includes a specific institutional design and does not refer to a natural state of affairs. In other words, Harcourt argues that the physiocratic fallacy elicits a misleading interpretation of the first fundamental theorem of welfare economics: under the physiocratic fallacy the claim that perfect competition leads to an efficient allocation of resources is interpreted as “free markets are Pareto or Kaldor-Hicks efficient”. Moreover, he demonstrates why it is wrong to separate the domain of the state and the domain of the market. This is an important starting point; instead of asking whether markets are free or not, a better question to ask is how should the state intervene so as to make the market efficient (or just and fair, I could add).

    Nonetheless, Harcourt’s approach is not that novel (see for example, Duncan Kennedy, Stakes of Law, or Hale and Foucault) and it lacks certain analytical power (as Whitman highlights). Specifically, Harcourt does not offer any guidance for evaluating different market structures and different kinds of state intervention. For instance, in Lacey’s terms, is a liberal market economy more efficient that a coordinated market economy? Is an open market society preferable in comparison to a centrally planned economy or an economy that fosters national champions via protectionism? Consequently, what lacks from Harcourt’s analysis is a framework enabling us to assess what is the best mix of state and market, openness and closure. In this respect, I find some merit in Whitman’s critique against Harcourt (especially pp 1229-1233), yet I think Whitman underestimates Harcourt’s main contribution: he helps us ask and frame the right question: how should the state intervene so as to make the market efficient, just and fair. Again, the EAL avoids this question and sticks to the response given by the Coasean theorem.

    With regards to this question, Frieden offers a historical argument in favour of the Bretton Woods System: an open market economic order, which avoids protectionism and currency volatility. This model combines national economic management and international economic integration and has proven to be successful (e.g. GDP per capita grew by more that 2.9% a year from 1950 to 1973). To my perception, the key feature responsible for the success of the Bretton Woods System is gradualism: the system was built on the basis that governments should be committed to economic integration and in parallel be able to manage according to their needs the welfare state. Nonetheless, Frieden seems to underplay the role of protectionism and overestimate the importance of open market for growth and prosperity. Ha-Joon Chang (Bad Samaritans, 2007) has shown that free trade was often imposed rather chosen by weaker countries and that developed and developing countries became successful economies via a strategic integration with the world economy rather than via unconditional liberalization.

  5. Alice says:

    Frieden stresses that over time the main drivers of capitalism remain international exchanges and innovation. The challenges that capitalist governments have always faced are the tension between government intervention and freedom on markets, and balancing national macroeconomic management and international integration.
    The rise of democracy and social rights has strengthened these tensions, due to a decrease of economic policies’ flexibility. The most powerful economic policy tools are prices and wages, this is why an austerity policy touch primarily poor and middle class people. However, democracy and social rights guaranty that these people are represented and that their rights are protected.
    Today, European governments are clearly dealing with this tension between democracy, social rights and economic policies’ flexibility. The two first values are still often undermined in management of crisis.

  6. Florian says:

    I wholeheartedly enjoyed the summary of the historical and philosophical developements regarding the concept of markets.

    Most of all, I found the chapters by Harcourt and his subsequent reply very important, as he manages to get people to question preconceived ideas, concepts and terms that we use everyday, often without thinking too much about them, why we use them or what they mean in any given context. Granted, it is not sure where this ultimately leaves academia or society, as we need language to communicate and every word, phrase or concept will have some kind of preconceived notion attached to it based on our development, education and experiences.
    Still, without going into developmental psychology here, I think this can show that it is important to show that phrases and words/terms that we use everyday didn’t necessarily always have the same meaning and our education and material that we read can influence our conception of these concepts such as ‘markets’. Harcourt show this in a unique and ambitious multi-disciplinary way.

    On another point, in “On the American Paradox of Laissez Faire and Mass Incarceration” he replies to Whitman regarding his critique. While Whitman makes some good and obvious remarks, I think in his reply Harcourt is mostly right in that he say that Whitman doesn’t address the problem Harcourt is trying to address, but just attacks him from the position of the ‘standard’ literature that necessarily relies on concepts such as ‘market’ and ‘free trade’ to exist. What he however fails to grasp is that Harcourt doesn’t say that all literature or research using these terms is of no use, but simply that we should not always put too much trust in the term itself.
    One additional, possible minor critique to Harcourt in “On the American Paradox of Laissez Faire and Mass Incarceration” when he describes the perceived difference between the ‘hands off’ approach to market regulation and heavy handed penal ‘regulation’ with “In contrast to others who also study what has been called “neoliberal penality”�— this paradox of a supposed hands-off government and a massive prison apparatus — I argue that the symbiotic relationship preceded the 1970s and is inscribed in early liberal thought. I resist Loí¯c Wacquant’s suggestion that “the expansive penal state is the distinct creation of neoliberalism, and not an inheritance from or resurgence of classic liberalism.””
    In this case I think it would be hard to quantify/analyze in any meaningful way in how far the ‘market’ for punishment that exists in the US prison system today measures up compared to penal/prison systems during the classical era.
    Apart from these, analytical problems this “inscription in early liberal thought” could still be attributed to other factors, such as the moral judgments enshrined by early puritans and later protestants, where the individual lost most or all of its rights as soon as it was found guilty of a crime. While this moral concept exists frequently, compared to Europe for example it is most pervasive in the US.
    Furthermore, drawing from other readings and reading the quote by Loic Wacquant just as it is quoted – even if the expansive penal state is not found to be a creation of neoliberalism as such, neoliberalism can still enable the expansive penal state, and the quote can be read in this way. This seems especially plausible as the prison system in the US becomes increasingly privatized or semi-privatized to cut costs. If this is not neoliberalism, replacing on of the bastions of public (criminal) policy by private actors, what is?

  7. Ola Innset says:

    Apologies for my late posting – I am suffering from some jetlag, and have also had difiiculties navigating the LAW departments website to find the reading materials.

    I found the contributions by Frieden and Mueller rather bland and uninspiring, but fortunately quite the opposite was true for the chapters from Bernard Harcourt’s book. His questioning of the basic idea of a “free” market was thoroughly refreshing, and the comparison between the Paris and Chicago grain markets, where the former is usually seen as thoroughly regulated and old fashioned and the latter as the pinnacle of modern free market, brought home is point very nicely. That being said, I also thought Whitman’s review had some good points, as it showed the limitations of the Foucauldian approach and the grand concept of “discipline”. I did find Harcourt’s main point about neoliberal penality somewhat speculative, and what I take away from these readings is mainly the genealogy of the concept of a natural market order.

    On that note: It is correct as Harcourt writes, that Hayek denounced Bentham as a “false liberal”, because he saw him as “smuggling” constructivist and rationalist notions into classcial liberalism. In this respect, Hayek’s concept of spontaneous order rests on a conservative “epistemological modesty” – the idea that there are clear limits to what human beings (apart perhaps from Hayek himself) can actually understand about the world (and even themselves). The market order has arisen spontaenously out of evolution and organic growth – and must not be tinkered with by mere humans. The latter part of this then, Hayek’s political project, crashes spectacularly with the analysis on which it rests. It is as if in 1944 (the year of publication of The Road to Serfdom) the spontaneous order can no longer be trusted and must be defended – this is indeed a constructivist project in itself.This is perhaps the main contradiction of Hayek’s work and indeed of neoliberalism and free market philosophy as such. If the market society is so natural and spontaneous – why must it be defended and expanded?

    Similarily, Hayek, unlike Bentham (and the Chicago School, for that matter), does NOT believe in a rational, self-maximizing agent. Knowledge (which takes on its great importance in economics mainly after Hayek), for Hayek, is always imperfect and not really with the market actors themselves, but somehow IN the market (seen as an information processor, bringing together decentralized knowledge, ref. Mirowski).
    A key difference like this, and also Harcourt’s unmasking of the myth of “free” markets, should have us asking how it can be that both the obviously quite false dichotomy of free market/state regulation, and such diverse philosophical positions as those of Hayek and Friedman can all be mobilized for the same political project. In this respect it seems to me that Harcourts analysis of the Coase theorem as “rendering scientific the basic idea of a natural order” takes us some way. However, we are not quite there yet.

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