Felix Liu

Student No. 211119

I write these words with great hesitation. I love and admire the faculty of Regent College, especially Paul. They have set for me good examples of how to imitate Jesus Christ with their kindness, humility and erudition. I am reluctant to express any fundamental disagreements with him. I feel very sorry for that. However, I am an honest man. Born in a country which then just embarked on an arduous journey of transition to modernity, shocked and stimulated by the tragic event of Tiananmen Square in 1989, I, without any concerns for myself, spent more than 10 years from 1992 to 2004 in studying economics, social theory and political philosophy in order to understand deeply and defend the legitimacy of modernity in its entirety as the least worst institution of modern society. After such intellectual journey coupled with lived experiences of transformation of real life, economic, political and cultural, I has become an Austrian in economic analysis in a large part, an libertarianist in political standpoint and a firm defender of free-market economy and constitutional-democratic polity. Nevertheless, the legitimacy of modernity, which is closely related to the quarrel between ancients and moderns, is the overarching problematic of almost all the branches of humanities and social science far more sophisticated than I can tackle with assurance. Therefore, the statements in the following paragraphs are just provisional as they rightly are. In the next 10 years, perhaps, I have to keep engagement with the theme, especially with arguments and propositions of Radical Orthodoxy Theologians (with John Milbank’s Theology and Social Theory and Graham Ward’s Cities of God in my mind).

1. Discourses of theological politics or political theology always take as point of departure the fall of man. After that, though man has the free will to choose in principle, in fact he is bound to be the slave of depravity. A good Christian may live in Jesus Christ through faith and be justified by grace through faith. However, no one can assert with assurance that he or she could obtain the end of full sanctification during one’s life. An eligible—no matter how you define the word—Christian is better in character than a nonbeliever not because he or she is better than the other person in his or her own right, but because he or she believe in Jesus Christ and is determined to live a life of faith. So I firmly believe there is no exception among human beings to the general rule: Whoever has the power abuse it, and absolute power leads to absolute corruption.

There is another fundamentally significant dimension of human nature, which is often neglected, i.e., the finitude of human being in faculty, capability and knowledge. It is just this aspect that detaches morality from social science, “intentional ethics” from “responsibility ethics” as Max Weber does. Social affaires can never be reduced to moral problems. Just because of the finitude of knowledge and horizon of each individual of any society, even a society of altruists cannot avoid, and must deal with the same fundamental problem of organization of society as any society in history, perhaps at no more ease. For the task of organization of any given society, according to F. A. Hayek, is to a large extent a task of efficiently making use of the particular knowledge bound up with particular time and locations dispersed among different members of the society which exists only as fragments and can never be collected and assembled as a complete whole. Any sound institutions of society emerge and persist just as economical responses to the inevitable ignorance of social members.

The cardinal elements of politics, economics and social theory in general are, therefore, power and knowledge.

2. Given the finitude of human being both in morality and knowledge, we can confidently affirm that any human attempt to build the kingdom of God or utopias alike is doomed and always leads to catastrophe. Before the second coming of Christ, human beings have to be content with the least bad arrangement of societal organization. We especially have to keep in mind that the road to perdition is often paved with flowers of noble wishes. In the second place, no one should be invested with the unilateral power to dominate other people and demand their submission. Negative freedom is most cherished by us only because whoever has the power tend to abuse it, tend to use the means of coercion without consent from the other party to improper use. This is what we mean by the word ‘negative’. The representatives of classical liberalism, Hume, Adam Smith and Kant are always right in this respect.

3. I agree with Leo Strauss that the rupture of modernity took place when the architects in theory of modernity, Machiavelli and Thomas Hobbes, decided to build the institutional arrangement of modern society on low and solid ground. Hobbes justified his undertaking in the opening of his Magnum Opus by dint of making contrast with ancient authors. We do not need to repeat his main points here, and it suffice to note the huge gap between the political blueprints of ancients and the political reality in ancient and medieval ages.

In addition, we must always keep in mind that from the perspective of historical sociology, to put it roughly, the background and social-economic context behind the difference in political ideas between ancients and moderns is a fundamental and inevitable transition in societal organization from diverse, by and large isolated, homogenous communities to interconnected, abstract, grand society. It is absurd for any modern political thinkers to delineate such a blueprint according to which it is obligatory for the sovereign or state to achieve “common good” in the meaning of Aristotle’s for all members of a civil society. Elevation of manhood belongs to private affairs.

4. For the purpose of this paper, I define ‘power’ in light of unilateral dependence of individuals on the privileged part in contrast to voluntary exchange or reciprocity. When one has to count on other party for something of importance that he/she cannot produce or secure by himself/herself and meanwhile has no other alternative(s) to resort to, one becomes the subject of power. Power should be restricted. At root, the most fundamental way of restricting power is through competition, visible or latent. Free emigration and free trade & investment make possible inter-government competition, and therefore contribute greatly to the restraint of state power. Such freedoms are most dangerous enemies that any absolutist state must be eager to abolish. What really matters in any democratic regime is not the election of representatives or the procedure of collective decision in Congress, but the competition for political leadership between different parties. Another important way of restricting political power is through constitutional arrangement, including ‘check and balance’.

People, especially literary intellectuals, always speak of economic power as if monopolistic firm can really exercise ‘power’ towards consumers in the same way as state can. It is absurd and makes no sense at all. In free-market capitalist society, no firm can coerce its consumers by any power backed up by violence, which is usually monopolized by the state. The goods or service provided by monopolistic firm may be indispensable for at least part of its consumers. However, competition from latent competitors exist all the time, every jealous wife or husband knows it clearly well. Hence the methods of measuring the degree of monopoly in the market by statistics recommended in the textbooks of mainstream economics miss the point without any question. And, barriers of entry, seemingly uneasy to overcome for the time being, are always eliminated by unexpected technological innovations; and many industrial ‘empires’, no matter how ‘domineering’ once they were, often collapsed overnight in history of business simply because they failed to meet the needs of its consumers in more efficient way. True power enjoyed by business firms is always created and maintained by state power behind them, for only state can forestall any competition from the privileged by political power backed by violence.

Competitions put limits upon power, and put power on the right track. Modern theory of public choice and constitutional economics tell us cogently that competition in the economic society are much more effective than that in the political realm as long as the sate refrains its hands from intervening business affairs and keeps the market economy unhampered. So, compared with civil society, the state is always more ‘eligible’ to be our enemy and merit our suspicion and vigilance. In a word, the state is much more easily corrupted than the society. However, the other aspect of the problem is that any social order must be predicated on some kind of framework of rights, which is prescribed mainly by system of law and constitutional arrangement. In analyzing social affairs, we had better suppose—I think it is more realistic—that human nature is always constant, hence any change of behavior and patterns of actions should be accounted for by variations of conditions of constraints, which is often occasioned by alterations of government policies and legal framework. Therefore whenever some phenomena of corruption prevail in the civil society, it is not the society itself, but legal preconditions and political foundations to blame. We take the truth as evident.

5. For true liberalist, the analytic dichotomy that is of utmost significance is society v. state, rather than the supposed dichotomy of individual v. collective. Some socialists and republicanists often make fatal error when they easily equate ‘private’ with ‘society’, and ‘public’ with ‘state’, without second thoughts. In fact, in any society that deserves the beautiful adjective “free”, most of public affairs are addressed by civil society through voluntary cooperation among individual members of society. Not state alone ever took actions in the name of public interests. It is especially inexorable for Christians to forget that in the long history of Europe before the rise of modern welfare state, it is Christian church who assumed the responsibility of alleviating poverty and misery for the poor, healing and educating people, etc. The decline of public spirit in civil society does not indicate at all that members of society are getting more egoistic than ever before, but is the inevitable consequence of monopolizing the provision of public goods by modern welfare state. Most theories of public goods fail to rightly argue that while the so-called ‘public goods’ owing their existence to ‘effect of externalities’ determined by some economic-technological parameters may provide the excuse for the establishment of government, the provision of these cervices cannot be monopolized by the state and become entrenched right never enjoyed by private sectors even when the excuse no longer holds water. In fact, the only genuine monopolistic organization that always tends to abuse its coercive power to restrict and expel competition is government.

Let’s get to the fundamental, people always have two alternative means of making a living: they can participate in the division of labor and exchange productions voluntarily with their counterparts, or they can grab money from other’s wallets in the name of protection fees or tax through coercive power without any productive effort. The former is economic means, while the latter is political means. This is, in my opinion, the starting point of analysis of political economy. Therefore we must always put such question to the government that whether the public services it has provided worth the total tax it formerly has collected. Society is always corrupted by the intervening hands of the state of which the insidious and debilitating moral consequence cannot be overemphasized.

6. Just as human language and private law, market society is a typical kind of spontaneous order never designed by any higher intelligence but just as the unintended consequences of everyday interactions of decentralized individual actions of millions in the society within the institutional framework of rights and under the evolving cultural context of certain tradition. Any attempt to reform such social order radically from top down is doomed, as countless disasters in history have demonstrated again and again. Revolution must be confined within political sphere.

The prime principle of economics, as James M. Buchanan emphasized, is nothing other than the principle of spontaneous order. And the main task of economic education should be to help members of society secure a proper understanding of the true foundation of modern civilization, which is based on private property right and division of labor. Economics is such a discipline that attempts to explain how various social phenomena as unintended consequences come out through processes of social interaction, or in a word, make the invisible hand visible. In so doing, economists disclose that economic institutions and organizations, no matter how offensive they seemingly are, in fact emerge and evolve just as efficient means of coping with problems that result from the finitude of human beings, such as ignorance, limited horizon and moral hazard. Never forget, that behind the up front of division of labors, lies the more fundamental division of knowledge (and/or, information) which constitute the main source of transaction cost and risk with which economic and financial institutions are to deal.

The mainstream economics in the tradition of walrasian framework—Marshallians on the margin—suffered much from its methodological formalism and positivism as a result of which the real market processes are abstracted out and clouded by mathematical equations, and therefore cannot serves as the relevant benchmark against which the efficiency of given markets or market system in general is measured and evaluated. It is such fatal shortcomings that misled some renowned economists to imagine the absurd system of “market socialism”. This view applies both to positive and normative wings of mainstream economics. By no means I intend to downplay its analytic value. However, we must be reminded that before we acquired proper understanding of the limits of economic analysis conducted in mainstream economics, we had better not take seriously the concrete policy recommendations deduced from such analysis.

In light of this line of social theory as stated above, the most fundamental concept of economics, of social science in its entirety, is nothing other than Nash Equilibrium. It is not here for me to expound full implications of this notion. I just want to point out, I never take free-market capitalism as the best, for Nash Equilibrium Efficiency often falls below the level of Pareto Optimality Efficiency, even as the second best, owing to the existence of multiple Nash Equilibriums. Therefore, there are always spaces members of society might manage to narrow if in various dilemmas of social cooperation parties involved could uplift their morality and level of trust beyond the confines of the so-called enlightened self-interest. We can do so as members of community or other collective organizations. However, we cannot attempt to achieve such goals through machines of the state, for not only means of coercion are not desirable, but also conditions and situations should be carefully differentiated. What civil society can do voluntarily should never be left to the state. Once again, negative freedom is good simply because coercion cannot be justified.