Economic Right

Holds that intervention distorts how resources are allocated and weakens incentives, so the market's own adjustments generally do better.

What this position argues

The economic right supports markets not because it considers them flawless but because it considers the proposed alternative — government direction — to fail more often. Nobody knows in advance how much should go into which industry or what a fair price would be, and the process by which scattered judgments are aggregated into prices is, on this view, the least bad method available. There is a second argument: once government holds the power to allocate, effort flows into lobbying for that allocation rather than into production. Lower taxes and lighter regulation, the case goes, raise investment and employment, and incomes rise as a result.

Core claims

• Prices aggregate information that is scattered across millions of people; the assumption that a central body can compute the same answer does not hold in practice.
• Lower rates and lighter regulation strengthen the incentive to invest and start businesses, which produces jobs and income.
• The more allocation power government holds, the more resources leak out of production and into lobbying for it.
• Deficits and public debt are a claim on future taxpayers, so spending increases warrant a strict standard.

Characteristic policies

• Lower corporate and income tax rates, with a simpler tax code
• Fewer barriers to market entry, privatization of state enterprises, more competition
• More flexible hiring and dismissal, lighter labour-market regulation
• Targeted rather than universal welfare, with fiscal rules constraining spending

Common criticisms

• Empirical work finds that tax cuts do not reliably translate into investment and may end up in asset prices instead.
• In fields with severe information asymmetry, such as health care and education, markets do not allocate efficiently.
• Deregulation can produce outcomes whose costs fall on society at large, from pollution to financial crises.
• Labour flexibility lowers adjustment costs for firms by transferring that risk onto individuals.

Frequent misreadings

• It is often read as indifference to poverty. Most of this position holds growth to be the most reliable route out of poverty, and objects to the design and targeting of support rather than to support itself.
• It is often read as wanting to abolish regulation altogether. Rules that markets require in order to function — property rights, contract enforcement — are if anything emphasized.

Read these next

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