1. 20.0 Epilogue

2. 20.1 Economics is a single tool in a toolkit for understanding how humankind works A liberal society where markets determine everything is a relatively new phenomenon Making it work is a tricky business While the system is fairly new, human nature has not changed, and this is what drives the system

3. History of economic thought Many philosophers struggled with the issues of unconstrained freedom Hobbes thought this would unleash a no- holds-barred struggle for personal gain - a rent-seeking war – the Hobbesian abyss Early liberal philosophers addressed how to avoid this

4. 20.2 Adam Smith and Commutative Justice Smith said that a society of individual liberty could only be constructive if it was accompanied by commutative justice – fairness in the rules of the game How to accomplish this? French Physiocrats – solution was an enlightened despot who would enforce these standards Smith rejects this

5. Smith ’ s answer- have a set of shared civic values Children should be taught these and receive a quality education They will then become productive citizens These values will emerge by civic discourse and trial and error Government will play a crucial role in developing society

6. Smith understood the destructive power of bad government However, he believe the answer was not to abolish government, but to work as a citizen to ensure government played a constructive role in society ’ s development

7. 20.3 John Stuart Mill and Distributive Justice Smith wrote in the late 1700s By the early 1800s, the Industrial Revolution was in full force Misery of the working class grows Many philosophers concluded that private property and individual freedom was a failure

8. 1848 – Marx and Engels write the Communist Manifesto – providing alternate ideas on ownership and societal structure Done as a response to the misery of workers, it called for an end to the liberal experiment In the same year, J.S. Mill writes

9. Principles of Political Economy He rejects communism, saying that if all goods were distributed equally, people would try to avoid their fair share of work He also points out that the laws of property have advantaged some, making the race not fair to start

10. Marx says the system leads to an unjust outcome, and must be replaced Mill says the system isn ’ t the problem, it is the problem of unjust distribution of the social endowment that is leading to the unjust outcomes Mill says liberal societies can fix that problem

11. Mill says That if people started off more fairly, then the socialists would not view the system as so evil Mill ponders how to make this more just distribution happen He says the whole point of private property is to gain the fruits of your own labor, but to inherit wealth from your parents gives you an unearned advantage

12. Mill ’ s solution- Limit what one can acquire by inheritance The dying can give away all his wealth and property, but not to lavish upon any one person beyond a maximum- to afford “ comfortable independence ” If you want more, you have to work for it

13. 20.4 To have a constructive liberal society, you need Commutative justice – fair rules And Distributive justice – a fair race These concepts are interdependent

14. Jerry ’ s view for achieving this Use passing generational wealth as a “ human capital account ” to nurture the emerging generation by providing high quality health care and high quality public education This will enrich our common civic values

15. 20.5 Why value this experiment? Mill rejected communism not because he didn ’ t think it could work, but because of what he thought it would do to the individual Liberty nurtures our diversity of talents

16. Smith and Mill both agreed that wealth was not the ultimate measure of human achievement Material achievements were only useful in realizing the richness of human life

17. 20.6 Keynes questioned the “ lack of clearness or generality in the premises ” underlying the superstructure of theory One of the maintained assumptions in the story was that initial endowment was a given, and we ’ ve seen how initial endowment issues have had crucial effect on people ’ s views of the liberal experiment

18. However, there is another maintained assumption that is also important to examine We ’ ve assumed that the goal of everyone is to maximize utility If everyone acted that way, we would live in the Hobbesian abyss Smith says a commitment to shared civic values is the force that holds the abyss at bay

19. Duty Smith says it is our duty to be a good citizen All will then benefit if we play by the same constructive rules We are capable of making behavior choices that transcend self-interest

20. Examples Teacher in Arkansas Congressional Medal of Honor winner MLK quote- “ leave a committed life behind ” These things are the glue that hold a liberal society together “ with liberty and justice for all ”

21. Our liberal experiment Still a work in progress Markets can serve us well, but if we depend on them to solve everything, it won ’ t work If we ignore how markets work in the process of making things constructive, that won ’ t work either

22. You now have A very nice tool for understanding a very complex experiment