Mark Pennington: What is wrong with egalitarianism IN THEORY?

I have just been listening to Mark Pennington talking about his book in a podcast. I am no master of the theories of political economy so this is an amateur quick summary and aide memoire.

Pennington is basically trying to defend classical liberalism – including a belief in the market economy- against contemporary attacks on it.

He asserts that any idea for the best political economy a country might adopt should be tested to see how its stand up to two aspects of human beings:

1. Limited rationality –  he seems to include limited knowledge in this phrase

2. Limited benevolence – which seems to include the way incentives influence us.

He then takes three contemporary attacks on classical liberalism to see how they stand up to these tests:

1. Market failure economics. This is the idea that the market often gets things wrong, so governments need to take a major role in putting everything in order. Pennington looks particularly at the work of Joseph Stiglitz who wrote Whither Socialism? Stiglitz’s critique of the market economy apparently accuses it of having transaction costs and the ‘principal-agent problem’ (“when one person or entity (the “agent”) is able to make decisions that impact…another person or entity” Wikipedia here.) Pennington replies that governments themselves have the same problems. He says governments have “the mother of all principal-agent problems”. (I suppose that governments are often making decisions which will not directly affect the ministers and bureaucrats in them). He says that typically those who espouse market failure economics judge the market economy against perfection. They do not judge it against the performance of governments.

The worth of governments should be tested on the basis of human limited rationality. Given that we all have limited rationality and knowledge, the market economy is a better process to establish the best way of doing thing because it allows different things to be tried. But when government imposes its idea of how things should be done, it squashes this experimentation.

2. Communitarianism. This seems to be the idea that the best results come from majority rule. It is argued that individuals often do not know enough to make good decisions but when they are grouped together in a democracy, the wiser view prevails. Pennington says this is a “hopelessly romanticised” view of how democracy actually works. This, too, suffers strongly from the “principal-agent problem” (presumably the majority is in a position to treat the minority badly).  Again, majority rule suppresses the experiments of many people which can result in better answers. It also ignores the way in which the incentives in the market economy can break down prejudices. For example, an employer might find that he can profit by breaking away from a prejudice of other employers not to employ blacks or women. (Implicitly, Communitarianism destroys such incentives by imposing a rule).

3. Egalitarianism – or the drive for equality.  Here he focuses on only one of the authors he mentions in his book, John Rawls. The most famous concept of John Rawls is the “veil of ignorance”. Rawls imagines that we have to choose a system for the world without knowing whether we ourselves would have a high or low position in it. He suggests, I think, that we would choose a system under which we would be in a pretty good position even if we were at the bottom. Mark Pennington criticises Rawls on the basis that he is not accepting limited rationality.  If we were indeed behind this veil, we would not know which system would ultimately work out best for us and for humanity. Recognising our limited knowledge, we would want a system in which different ideas could be tried out.

I think Pennington also criticises the implicit suggestion of Rawls that we would want a welfare state with high levels of distribution. Rawls’ suggestion again comes up against the limited rationality problem: we do not know that a society would benefit from this without actual experience on the other side of the veil of ignorance. It might be that government imposed welfare has drawbacks and, presumably, these might apply even to those at the bottom of society.

I apologise for the undoubted failings of this summary. I seem to have failed to pick up properly on the role of  ’limited benevolence’ very well. The podcast is on the Cato Institute website. It is dense stuff for those of us who are not academics specialising in this area.But it gives a quick introduction to the field. It is probably worth listening to several times to really understand it. Mark Pennington’s book is Robust Political Economy.

I should add that in the second part of his book, he goes on to apply the theory to the areas of poverty, international development and the environment. However he does not talk about this part in his talk.




Posted by James Bartholomew Indexed in Blog, General, Inequality, Poverty and inequality, Recommended reading
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Newly re-published

The newly re-published version of The Welfare State We’re In can be bought (in the UK at least)  from Amazon here. It includes a new introduction on how the situation has  changed in the past decade.

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The Welfare State We’re In now on Kindle

I am delighted to say that The Welfare State We’re In is now available on Kindle here.

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‘The Welfare State We’re In’ to be re-published next month.

I am delighted that The Welfare State We’re In is to be re-published next month. It has been out of print for several years – frustrating since I have known of one university, at least, which wanted to use it alongside its economics course.

I have written a new introduction assessing how things have gone since the book was written.

Getting to re-publication has been, as Tony Blair would say, a journey. The original computer files ready for printing were lost. The book had to be scanned, page by page and re-edited. Authorisation for photos had to be obtained all over again. I wanted the quality of the paper and the size of the format to be as good or better than the original and that costs money.

I am honoured that Biteback wanted to bring it back into print. Some people love the book and some hate it. It is now mentioned in new editions of a vast sociology textbook which sells in hundreds of thousands called, Sociology Themes and Perspectives by Michael Haralambos and Martin Holborn. The summary of the book there is quite fair. The commentary is simply an attack. Still, it is nice that it is considered influential enough to be worth attacking. I know I will never write anything better.

Posted by James Bartholomew Indexed in General
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What do you do about granny?

I have just finished the first draft of the chapter on care for the elderly for my new book. So here is a quiz question: what is the range -  among different European countries – of the percentage of women aged over 65 and without a partner/husband who are living with one of their adult children? When I have asked people this question, they have mostly been totally wrong about both ends of the range. The statistics are indeed extraordinary. Please have a guess. The answer is revealed later on.

The chapter was really difficult to write. First,  the subject is depressing. It is grim to come across figures showing how many people in residential care are clinically depressed and wish they were dead. It is sad to read of the loneliness. Second, it is tough or impossible to come up with a simple answer to fit all situations. There is so much variety in the condition and preferences of people over 65. But it does seem to me that many countries have been too eager to give up the family as a unit which can provide comfort and care to elderly parents. It is strange – but I think is true – that supposedly backward Greece, Portugal, Spain (and Italy) may have been right while  ‘advanced’ Denmark, the Netherlands and Sweden (and the EU which has encouraged institutional care) may have been wrong.

The answer: the range of percentages is from 3% in Denmark to 61% in Portugal (research report dated 2000). Quite an astonishing range, I think. It shows how the behaviour of people is strongly influenced by their welfare states. We should not assume that the cultures of these countries were always different with regard to the elderly. There is reason to believe that all cultures, including the Scandinavian,  used to look after their elderly parents.

Now I am moving on to crime and civil behaviour. I would be grateful for any input or experience from any country about how these things are now or how they have changed in the past 30, 40 or more years.

For example: if you go to public buildings like a post office or hospital in your country, is there a sign warning you not to abuse the staff?

But I would be delighted to hear about any other perceptions you may have about crime or behaviour or, indeed, how the concepts of virtue or duty are doing in your country.

Posted by James Bartholomew Indexed in Behaviour & Crime, Care for the elderly
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A grim description of how regulated ‘care’ works

This is by one of the founders of the charity Community Links. Coming from someone of his background and experience, it is particularly powerful:

Professor Bruce Keogh started work as the new NHS national medical director promising that hospitals would be fined if they failed to provide the best care.

Care driven by fear of punishment? The prospect is discomforting but it isn’t new. Talk to social workers, teachers, probation officers and care workers and you will find that regulations and systems, impersonal transactions and a fear of risk and reprisal shape the culture in which they all work. Public services are reduced to a set of transactions when the real need is for a more personal relationship, for common sense and human kindness.

Now listen to those who use the services and those who do not. For some, family, friends and neighbours are more than adequate but for many they are not – moments of joy go unshared, battles are faced alone. More than a million pensioners enjoy less than 30 minutes’ social contact in any given week, our services must change. And so must our communities.

- See more at:

It would be interesting to know the source of the statistic of a million pensioners with so little human contact. As it happens I have recently been looking at examples in 19th century literature of adult children caring for their elderly parents. There are many examples which even include Sweden. But one famous novel from France is Pere Goriot where the daughters do not care for the father who has given all he could to them. Balzac was apparently accused of imitating King Lear. But of course in both cases, they describe what was shocking to the audiences of the time, not what was normal.

Here is the link to the Robinson blog:

Posted by James Bartholomew Indexed in Care for the elderly, Healthcare and the NHS
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What has Ed Miliband actually proposed in his speech today?

1. Tax on bankers’ bonuses to fund compulsory workfare for long term unemployed for whom 10 out of the 25 hours of work would be training. If the work is not accepted, the workless person would lose benefits.

2. Require parents whose youngest child is three or four to attend Job Centre, have training and learn about job opportunities. But these parents would not be required to seek work. (It sounds as though he is mostly thinking about lone parents.)

3. He would ‘look at’ requiring contractors for central government to pay a ‘living wage’.

4. Give local authorities power to negotiate lower rents paid to ‘social landlords’. The money saved would be used to build more housing.

5. The age at which people retire ‘will have to increase’.

6. “It doesn’t make sense to continue sending a cheque every year for Winter Fuel Allowance to the richest pensioners in the country.”  So presumably he proposes to cut this.

7. Workers should be employed for five years instead of two to qualify for contributory  benefits which should be higher.

8. “Extra” help for older workers who lose their jobs to get back into work.

9. “Examine” ways to recognise the work of mothers looking after young children or people looking after elderly relatives.

10. Three year spending reviews of social security spending and a cap. He referred to long term rises in structural unemployment and housing benefit. No indication of how the cap would work.

11. If in government now, would raise top rate of tax to 50% and use money to improve tax credits for those in work.

This Labour Party package clearly does not represent a serious re-think of welfare and in some cases it would make matters worse. Effectively enforcing a ‘living wage’ for government contractors would be a partial creation of a new, higher minimum wage. This would cause unemployment and increase government costs, making the deficit worse.

The idea of allowing local authorities to negotiate rents with social landlords to reduce rents would seem to have several problems attached to it. By taking the individual out of  negotiating for the accommodation, the local authority would surely reduce the choice of the individual.  Effectively, the local authority would do a deal with big landlords and the individual would be told, ‘if you don’t like it, bad luck’. He or she would have no direct recourse to the landlord. Presumably there would also be a new layer of local authority bureaucracy which would have to both negotiate with landlords and then allocate tenants to them. Has the cost of this extra bureaucracy been taken into account?

Mr Miliband put this in the context of making housing more affordable. He said that the savings made would be put into building more housing – presumably more social housing. The idea that this money would make any significant difference to housing affordability in Britain is patently absurd. Yes, housing affordability is a major problem. This proposal shows he is not taking it seriously.

The ‘workfare’ idea for those who are long-term unemployed is not completely without merit. But the idea that 10 hours out of 25 should be training betrays a failure to have looked in detail at this area. The company that can offer work may not be in the best place to offer training. In any case, in many basic jobs, not much training is really needed. The real need for long term unemployed is often more to do with things like illiteracy, drug habits, lack of confidence and so on.

The reference to a spending cap on welfare benefits is the most bizarre aspect of his speech. How would he ‘cap’ the spending? Would there be cuts? If not cuts, then what? He seems to want to get the credit for controlling spending on social security without doing the hard part of telling us how he would do it.

Some of his ideas would actually increase spending – the living wage, higher contributory benefits and workfare.

It just does not add up.

The full speech is here:

Posted by James Bartholomew Indexed in Housing, Politics, Reform, Unemployment, Welfare benefits
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The Pope and a ‘fair wage’ in Bangladesh

It is sad to see the Pope enter into the political and economic arena. He does not understand the issues and therefore has made wholly misguided remarks which are dangerous for the people of Bangladesh and other very poor countries.

According to the BBC,

The Pope said he had been shocked by reports that some of the labourers had been paid just 38 euros ($50) a month.

“Today in the world this slavery is being committed against something beautiful that God has given us – the capacity to create, to work, to have dignity,” the Pope said at a private Mass.

“Not paying a fair wage, not giving a job because you are only looking at balance sheets, only looking to make a profit, that goes against God,” he was quoted as saying by Vatican radio.

His reaction is typical of people who have not understood the reality of the situation in Bangladesh and other extremely poor countries. Yes, of course it is shocking to those of us who come from relatively prosperous countries -and even most countries in South America are prosperous compared to Bangladesh -to hear of people being paid so very little. It appals us. He says it is not ‘fair’. But he does not appear to have thought about why it has come about in Bangladesh but no such low wages exist in Hong Kong, Singapore, Switzerland, America, Germany and so on. Nor does he prescribe any solution.

The BBC, in ‘The World Tonight’ on Radio 4, quoted someone saying that the wages were ‘unacceptable’ and the line of questioning  regarding the EU and Primark included the suggestion that we should not accept products of factories with such low wages.

This idea is terrifyingly wrong, misguided and potentially harmful to some of the poorest people on earth. As far as I am aware, the workers there because the jobs  were the best that they could get. That means that if they did not have those jobs, they would be even poorer. So by taking away your custom from Primark, you would make poor people poorer -the very opposite of what you want.

What does the Pope intend to do about it or think that others should do about it? Perhaps raise wages in Bangladesh by law? That would only create inflation would would quickly negate the rise in wages. You cannot dictate prosperity. If you could dictate, the whole world would be prosperous.

What about if we only buy from Bangladesh factories that pay a ‘fair wage’ – say ten times the actual wage? What would be the result? The result would be that garment manufacturers would source their goods from much more efficient factories and suppliers in much better organised countries where the wages may be similar but the other elements of production are better. Bangladesh would lose the one current reason why buyers go there -the low cost of labour. Bangladesh would lose the business. Again, the result would be that  seriously poor people would be poorer.  It would be horrible and cruel.

The way that I have seen countries all over the far east improve their wealth and get out of poverty has been through successfully building up capitalist enterprises. That is what happened in Hong Kong and Singapore and, to a good but less spectacular extent, Thailand, Malaysia and the Philippines. They built up businesses at the low, cheap end. Then, they moved up a level and started doing more sophisticated businesses. Wages kept on rising, year by year, decade by decade. In none of these countries did it happen overnight -just as it did not happen overnight in Germany, the USA and Britain in previous generations. It takes time. The more efficient the government and the more impartial and efficient the legal framework, the better. It has worked. All these countries have, to a great or somewhat lesser extent, risen out of poverty through capitalism.

So why not Bangladesh at the same time? Because it followed a largely socialist path and has been riddled with corruption for much of its short life. So its people have remained poverty-stricken.

What we can do for Bangladesh is to help their capitalist industries grow. We can buy from them with enthusiasm and thus give them jobs. We can encourage the people and government of Bangladesh to give capitalism every chance which includes having a non-corrupt government which is open to trade and keeps taxes low. The government should welcome foreign businesses with 100% ownership. Local ownership of businesses doesn’t matter. Local ownership will come with time as it did elsewhere.  What matters is investment, profits and thus rapid economic development. It is the only way out of poverty. It is vitally important that we support the rise out of poverty rather than undermining it as some of this misguided responses would do.

It would be such a breakthrough if the churches of the world understood these things and spread this message.



Posted by James Bartholomew Indexed in General, Politics, Poverty and inequality
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My meeting with Lady Thatcher and how it helped lead to the book I am now writing


Below is the account I wrote (with the comments received) just after my unexpected meeting with Lady Thatcher. Partly as a result of that meeting, I am now working on a book in which I am describing the impact of welfare states around the world and suggesting which countries have found the best answers to the problems of welfare.

May 2006

Much to my surprise, I found myself being introduced to Lady Thatcher this afternoon. I was the Institute of Economic Affairs for a lunchtime talk on productivity in the NHS. Afterwards there was a reception for Vaclav Klaus. Lady Thatcher arrived to see and talk to him. After that, she was introduced around the other guests, including myself.

John Blundell, the director of the IEA encouraged me to tell her about The Welfare State We’re In, which I did. I told her that the book argues that we would be better off if the previous welfare systems had been allowed to develop instead of being replaced by the welfare state.
She announced, “You must suggest an alternative. If you say the welfare state is no good, you must suggest an alternative.”
I have agonised about this before in a previous entry on this website. I said to her that it would be a big job, requiring a lot of research and I doubted people would want to read my particular blueprint. She was having none of that, saying words to the effect: “If you can’t think of a good way of communicating it, then you must find a way of communicating it.”
I felt like a junior minister being given his instructions. I could see the logic of what she said – all too clearly. Politically, it must be right.
But there are so many problems associated with doing it. The research would cost a great deal of time and money in order to arrive at conclusions worth hearing. Any ideal solution would probably be politically impossible. Any politically possible solution would probably be riddled with faults. I think. But perhaps the great Lady T is right, as so many time before. Of course there are problems, but perhaps I should go ahead anyway.
John Blundell got a copy of the book and I signed it and gave it to her. I said, “Shall I give it to your chauffeur to take?”
She replied, “I am a grocer’s daughter.” She somehow implied that she understood the importance of advertising and announced, “I will carry it.” So I now am delighted to have a picture, not only of myself talking with Lady T but of her carrying The Welfare State We’re In. What a woman!

  1. Lest we forget what Thatcher did (8.2)
  2. Instructions to American Servicemen in Britain, 1942 (7.4)
  3. Charity did not always help even the ‘deserving’ poor. (6.1)
  4. The Thatcher years by Norman Tebbitt and others (5.4)
  5. Customer Reviews on the Amazon website (5.4)
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10 Responses to Baroness Thatcher gives me my instructions

  1. Congratulations!
    As for the proposal, don’t let yourself influenced by contemporary political concerns and particulars. Try to write a book about the best welfare system you can think of… if it’s really good, sooner or later it will be pheasable.
    I’d rather read something great but not suitable for a particular administration than something too specific about particular circumstances.

  2. Well, what about considering Charles Murray’s new book from a UK perspective? He offers a way out of welfare (though not big governemnt) for America by payments to every citizen without considering need. That might be a place to start, even if you want to reject his ‘Plan’.

  3. I think your caution wiser than Mrs Thatcher’s enthusiasm. The story TWSWI tells so well is that of unintended consequences from good intentions. That would apply in full force to any blueprint drawn from the book just as much as it does to the 45-51 government. In most respects I think the closing chapters of your book say all that can be said – that the mistake of the left was to nationalise welfare, not to mismanage it afterwards, and that form of pre-’45 welfare wasn’t really given its chance in the favourable economic conditions of the post-war boom. What the modern equivalents are is hard to say – because they will be made by individuals in their own modern contexts – and blueprints aren’t necessarily going to have any influence on that, beneficial or otherwise.

  4. JT says:

    If Mrs T enjoys the book, why not put a proposal to her, setting out the funding, timescale, research facilities, etc. you imagine will be needed to bring your paper to fruition.
    Surely she has contacts with some pretty rich backers who might be interested in sponsoring you, if all else fails..?

  5. Tim says:

    I am with Lady T on this.
    If you consider the fact that a welfare replacement may not NEED a detailed blueprint, then we has a chance. Why not detailed? Because it would be formed and created to a large extent from individual and voluntary energy and thus self-renewing and evolving.
    To me the biggest challenge is not deciding where we will end up, but migrating from where we are now, to wean people off the State teat. Now THAT needs a detailed blueprint.
    When you decide what we MUST do, then there is no option but to go ahead and do it.
    I am tempted to augment my Roger’s Manifesto (linked) to incorporate migration plans.

  6. John East says:

    It must have been a great moment meeting Lady T. I share your pessimism concerning your chances of chaging things, but I’m sure that her advisors were equally pessimistic when she grabbed the UK by the scruff of its neck and put it back on its feet again.

    Go for it.

    Write a sequel outlining the way forwards. You may not succeed in changing the world, but the royalties might go some way to easing your disappointment.

  7. Not PC says:

    Author meets Thatcher

    The author of The Welfare State We’re In confessed to nervousness when being introduced recently to Margaret Thatcher. Says James Batholemew of the meeting:

  8. Simon Cranshaw says:

    I greatly enjoyed your book and was pleased to Lady Thatcher also appreciated it. However I was surprised by your comment regarding an alternative that “it would be a big job, requiring a lot of research.” In the book you often describe how services were as well or even better provided by the market and private enterprise before the introduction of state control. Isn’t the idea then that we don’t replace the Welfare State with an alternative but instead simply reduce state involvemnet and leave these services to be provided by the market?

  9. Serf says:

    If people like yourself, do not set out some kind of alternative, then the politicians have noone from whom to take a lead.
    I found your book very convincing and I’m sure another would take the argument much further.

  10. There is a genuine problem in that the welfare state has crowded out alternatives, and created dependants who will resist any changes. However, you might be interested in my Social Policy Bond idea. Essentially it would mean that government defines the broad welfare goals it wants to achieve: these would probably be safety-net type measures of education, health, and poverty. Then it would issue on the open market non-interest bearing bonds redeemable for a fixed sum once the objectives had been achieved. Bondholders would have incentives to achieve social (and environmental) goals efficiently, and to explore diverse, adaptive approaches. Human ingenity and self-interest would be channelled into public benefit. I would happily collaborate with you on this if you are interested.

Posted by James Bartholomew Indexed in Blog, Reform, Work on the new book
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Lest we forget what Maggie achieved

In France, children are taught that the Battle of Trafalgar was inconclusive and that the British admiral was killed. In Britain, of course, we are told something rather different, that it was one of our greatest naval triumphs.
History is not just a series of facts but an interpretation of them. Quite often there is considerable disagreement. [A new book called ] Margaret Thatcher’s Revolution is a cavalry charge by loyalists in the battle over how her time in office should be seen. It is a bold assertion that the Iron Lady made Britain a better place than it was before.
Yes, she had her flops.
State education probably got worse. Reforms of the NHS were not fundamental enough. Only too late did she seriously turn her attention to the problems caused by welfare benefits. And her impact on the family was not good. During her time, the proportion of children living with two natural and married parents fell from 83 to 68 per cent.
But by bringing together in one place all the things she did, this collection of essays rams home the astonishing scope of what she did achieve. Council tenants were enabled to buy their homes, foreign exchange control was abolished, many state-owned industries including British Telecom and British Airways were privatised, the top tax rate was slashed from 83% to 40%, new laws were created so that landlords could get their property back from tenants (which gave rise to the boom in buy- to-let), foreign students were charged for comimg to British universities, trade unions ceased to be major political forces, the European Union reluctantly gave Britain a big annual rebate, pensioners were given tax relief for health insurance, government spending fell from 45 per cent of the economy to 39 per cent and so on. The list is too long to give in full.

As a result, Britain was transformed from being the sick man of Europe to the fastest growing of its major countries. Labour politicians are currently riding the wave of economic success which Margaret Thatcher started in the face of their angry opposition.
It was not only the official opposition that she had to fight. Lord Tebbit, in his essay, describes how Lady Thatcher was a radical up against a large number of upper class patricians in her own party who generally accepted the kind of Britain created by Labour since the war. Her victory over Edward Heath for the leadership was a ‘corporals’ coup’. This conflict between different sides of the party – the ‘accepters’ and the free market radicals – is still going on in the current leadership contest.
The book reminds us what terrific battle she had to go through to make such a difference. She was often going utterly against the consensus, and quite rightly. William Hague tells how he only narrowly squeaked into parliament through a by-election in 1989. He had lost thousands of votes because water privatisation had been so unpopular. He went to Margaret Thatcher and told her – rather recklessly perhaps – that he had met no voter in favour of this policy.
Many politicians would have expressed regret about this. But not her. William Hague reports: “Margaret Thatcher left me in no doubt that the fault of this lay with the voters than than the policy, an insight which was indeed borne out as the privatised industry succeeded and controversy evaporated over subsequent years”.
This was not just another politician just trying to please everybody. She was a woman with a mission to make her country a better place. Thatcher’s rule was an amazing story. For my money, this is a book that sets the record straight. Every Tory should have a copy. It reminds us all what she did and what is still to be done. It stiffens the sinews.
[Unedited version of a review of Margaret Thatcher's Revolution which has essays by Norman Tebbit, William Hague, Christopher Booker, Terence Kealey, Dennis O'Keeffe, James Tooley and James Stanfield, Patricia Morgan, David Marsland and others. The review appeared in yesterday's Mail on Sunday. The book can be obtained on Amazon here or by clicking on any of the links to books on sale in the left column and then searching for 'Margaret Thatcher's Revolution']

This is a re-issue of a post first made in 2005.

Posted by James Bartholomew Indexed in Politics
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