Coaservatism

Conservatives need a new idea of freedom for a new political world

Anglo-Saxon conservatism’s life force is the idea of freedom. For the past forty years, the dominant interpretation of freedom has been the free market. Inspired by the theorems of neoclassical economics, conservatives have defended the freedom of individuals and firms to trade goods and services. Policy implications were drawn accordingly. Conservatives privatized state-owned firms, deregulated markets, and lowered taxes — at least, that was the ideal. A free society meant a free economy.

Ten years ago, these ideas seemed to have conquered the world. Now, success has sown the seeds of failure. A pro-market elite confronts a crowd of angry populists, who are ungrateful for the benefits of the free market, and who reject the economic gains of international trade and migration. And while right-wing politicians have been quick to claim the populist vote — brazenly like Donald Trump, or woodenly like Theresa May — conservative intellectuals have no clue what to say to these people.

Boston, Lincolnshire: Brexit capital.1945 and today. The town is the least integrated in the UK (Policy Exchange), and has the highest murder rate.

This is bad. If we cannot offer this large portion of the public an inspiring and coherent world view which speaks to their concerns, then they will buy the incoherent ideas offered by demagogues: policies that sound good, but fail in the long run.

Problems of free-marketism

Like love affairs, ideological movements start in fire and end in mud. Free market conservatism has been stuck in the mud for some time. The process of implementing the vision has revealed four problems which limit its impact.

First, the neoclassical economic theorems which justify the free market only work in limited conditions. They show that the free market leads to “efficient” outcomes, making everyone as well off as they can be without harming someone else. But they fail when there are externalities – effects of market exchanges on third parties, like when my new car pollutes my neighbours’ air, or my clever kid boosts the brainpower of others in his private school. Since externalities are everywhere, this needs a solution, and economists typically think first of state taxes and regulation. Many mainstream economists have no problem with taxation of, say, 50% of GDP. The exceptions to market efficiency blunt the Thatcherite knife.

The original context matters here. The neoclassical theorems were part of an argument with socialists who believed that, while state command and control might lead to political tyranny, it was the only way to implement fair and efficient economic outcomes. “Yes,” said economists armed with the theorems, “socialism would be justified, but it just so happens that we can get efficient and fair outcomes purely from the market mechanism, maybe with a bit of redistribution to start with.” But since it didn’t just so happen, the argument for state control survived.

Second, markets give people what they want, not what they need. For a long period it seemed reasonable to treat the two as identical, or at least to respect people’s wants as an expression of their “consumer sovereignty”. By now there is a pile of evidence that people’s wants are not their needs, even in their own judgment. We eat and drink too much, exercise and save too little, and we know it. This gives a whole new justification to fiddle with the free market in the name of “libertarian paternalism”. The boundary between libertarian paternalism, and paternalism proper, is fuzzy and permeable. Unsurprisingly, for governments, the libertarian version is a gateway drug to the harder stuff.

Third, the low-hanging fruit have been picked. In the US and UK at least, there are few examples left of public companies that should be private – no more British Leylands or AT&Ts. Policies like public-private partnerships, procurement auctions, heavy regulation of privatized utilities have muddied the state/private distinction. There is little appetite left for radical change. The crusading spirit of the 1980s has gone. One symptom is the use of “austerity” by recent Tory governments as a justification for spending cuts, out of sad necessity. Rolling back the state is no longer an avowable goal. In the battle of ideas, this plays into the enemy’s hands.

Fourth and fundamentally, there are just so many things that private purchasing decisions in the marketplace cannot provide. Children’s education; rehabilitating offenders; the social groups that provide many of the basic joys of life, like friendship and shared achievement…. If the market can’t handle them, then Thatcherite conservatism has no alternative to state provision. Both Left and Right like to use the word “community” at this point, but absent a clear idea of what community is, this leads to content-free waffle.

A different idea of freedom

We can find a new way to understand freedom and community in the 1960s writings of another economist, Ronald Coase. Coase’s article “The Problem of Social Cost”, which helped win him a Nobel, challenged the simplistic idea that public goods must always be provided by the state. He gives the example of a farmer who lives next to a rancher. Every year, the rancher’s cattle break into the farmer’s field and cause $500 of damage. A fence could be built to stop this. Should the state impose rules making the rancher liable for the crop damage? Standard economic theory says yes. That will make the rancher “internalize” the cost to the farmer’s crops. If the fence costs less than $500, the rancher will build it. This is the socially optimal outcome.

Coase replies: think what will happen if the state doesn’t impose liability. The farmer will then face a $500 loss. Again, if the fence costs less than $500, he will pay for it himself. The outcome is just the same: the fence gets built, only if it is economically worthwhile to do so. Laws only affect who bears the cost. In a Coasean world, government intervention doesn’t fix social problems: it just shifts money around. Laisser-faire works, even when there are externalities.

The key assumption that lets this happen is that the farmer can talk to the rancher and sign a contract that both parties abide by. More generally, so long as any group of people can communicate among themselves and make an enforceable agreement, they can always be trusted to do what is best for them – providing public goods, fixing externalities, or agreeing to coordinate on the best course of action. This idea is called the Coase Theorem, though unlike the abstruse proofs of market efficiency, it is written in plain English.

The rub is whether people can communicate. It’s easy to imagine farmers and ranchers solving their problems (and real world studies show that they do¹). Harder to see everybody in a big city contracting not to drop litter. Coase himself said “I am not a Coasean”: his point was that efficiency depended crucially on which groups could negotiate with each other.

But the building blocks for a Coasean society are already here. In the 1980s, communication could only be face-to-face, in pairs over a landline, or a one-way television transmission from the centres of power and influence. Today, anybody can form a Whatsapp group, a Facebook page or a Subreddit, to discuss any issue, from fixing the potholes in the street to replacing the current Prime Minister.

We aren’t limited to talk either. If you think there’s a gap in the market for a new computer game, or for a flowerbed on the local roundabout, you can raise money by crowdfunding. If enough cash is forthcoming, the project goes ahead; otherwise, backers get refunded. Active crowdfunding appeals in my city include Children’s A&E, an animal sanctuary, a soup kitchen, and a community-owned mustard factory. A wide range of tools exist, from online petitions to peer lending, helping people to come together and solve their problems from below.

Free market conservatism thinks that people can solve their problems, without the state, by buying solutions from entrepreneurial firms. Coasean conservatism thinks that people can solve their problems, without the state, by coming to agreement amongst themselves. Both of these visions need the state to get out of the way. But free marketeers tend to replace monolithic state provision with carefully designed and regulated “markets”, where a few chosen firms compete to provide a product that the rules have specified in advance. Too often, competition is weak, innovation is non-existent, and large profits go into firms’ pockets.

Take education. The “academy” concept introduced by New Labour, in which schools are freed to run their own budgets, is classic free market conservatism. What schools teach is mandated from above, but making their own budget decisions is supposed to let them provide it more efficiently. The result is that head teachers try to cut costs, hit their targets, and pocket the surplus.

“Free schools,” an idea pushed by Michael Gove, are Coasean. The vision is that anyone can start a school: hard-nosed business people, concerned parents, religious bodies, or pillars of the local community. There are minimal restrictions on the curriculum. If there’s a demand, any group can come together to fill it.

A free country

The Coaservative vision of freedom is a free country.

In a free country, people can come together and solve their problems without the state. The state does not try to force them into a single institutional framework. It does not favour a “manageable” set of institutional forms. It treats the charitable trust, the church group or the private partnership no differently from the public limited company.

Freedom includes the freedom to create new institutional forms. The absence of coercion is the only bound that should be set. The communications revolution will create new, undreamt-of ways for people to work together.

Free communication is a key prerequisite for the Coase Theorem. The present establishment was born in the days of centralized communication, and fears the disruptive potential of social media — rightly. Coasean conservatives should embrace this new world. Globally, autocrats see new communication technology as a tool to sow chaos. But in the long run, they are much more threatened by it than we are. The same new technologies that enable social efficiency can help people to collaborate for political change.

In the US, conservatism has always been a movement. In the UK it is just the name of a party. But parties are only one institutional form in the service of ideals. They are not sacred. New parties have shaken up politics everywhere. Conservatism, the movement, gathers strength when different social groups realise their shared interest in taming the overbearing state and the private interests that drink from its teat.

Coasean conservatism puts nation before state. A nation is a conversation, or rather, many on-going conversations. Groups may agree effectively on what benefits them, but often, a group’s choices affect those beyond its boundaries — the problem of externalities again. When people from many different groups can get on well enough to work together, they can reach efficient agreements at this higher level. The highest level is the nation. At best, nations encompass all the groups within the whole political system. Then, almost all externalities can be internalized (the exception is issues like climate change, that require truly global cooperation). So, the best state is the nation-state.

In particular, when social groups can act together as a nation, they can control and rein in the state’s overweening power. When social groups are too different to work together, the state is forced to step in, resolve disputes and keep order. Then the state controls the nation. Coaservatism is nationalist, because it understands that only nations can preserve freedom. This kind of nationalism comes endorsed by the great classical liberal himself, John Stuart Mill:

“Free institutions are next to impossible in a country made up of different nationalities. Among a people without fellow-feeling… the united public opinion necessary to the working of representative government can not exist.”²

Now we see how a Coasean perspective can speak to the populists. Free market utopians, and practical statesmen trying to boost their tax revenues, both favour free migration. But the desire to control immigration is not a primitive impulse standing in the way of efficient markets. It is a need to preserve social ties that enable efficient cooperation among ordinary people.

This kind of nationalism requires tolerance, bridge-building and collective action between diverse groups. It is not an exclusive nationalism where one group bosses the others about, but also not the pallid nationalism of state-sponsored civics lessons like the Living in the UK test.

The vision of the free market and individual choice was inspiring to people struggling under monolithic state bureaucracies. But eventually, people want more than a choice of products; the free market vision was always narrow, and now it has grown tired. The struggle for freedom this century will be waged by and for peoples, as it was in the 19th century.

Coaservative policies

Communities must be free, like individuals, to decide how to live. In America, freedom has never been just about individuals: it was also the freedom of Quakers and Mormons, hippie communes and Amish Gemeinden.

Communities must be free to raise their children. Fifty years of educational failure show that the state does not know best in this area. The fact that it pays for education does not entitle it to decide education’s content: that money came from parents in the first place.

We have to share a nation together. This causes tension if different communities have different values. Rather than imposing the state-led view of national values, we should impose our values at the border, by letting people in who are culturally similar. The people, not state officials should decide who gets citizenship. In Switzerland this happens at canton level, which fits a basic Coasean rule: the people negotiating a choice should be the people affected by it. There is no more basic decision for any club than who will be a member. If that should not be decided democratically, what should?

Control at the borders pays for freedom inside. When we don’t pay this price, we get messes like the Birmingham schools scandal, where Muslim parents have marched to stop their children being taught acceptance of gay people. Disagreements of this kind are too deep to resolve by public debate. Instead they are fudged by uneasy, unacknowledged compromise. The liberal sex education will stop, but somebody will tick a box that says it is taking place.

Free speech matters for Coasean efficiency. From some angles, political correctness can seem like a weird side issue. It’s not. If people are afraid to say what they truly think and want, then debate is skewed. There are legitimate reasons to care about immigration and cultural identity. Today, academics write 800-page books about them.³ For many years, saying so was intolerable, and the end result was Donald Trump. People who are disregarded by intellectual elites will return the favour.

Deregulation beats tax-cutting. Taxes should not be too high, but too often tax cuts are just handouts to supporters, or paid for by borrowing, i.e. by our grandchildren. Politicians gonna politician, but there’s no reason for conservative intellectuals to provide figleaves for this behaviour. Over-regulation, on the other hand, affects not just business but all forms of getting together. That’s why my choir has to have a Health and Safety policy.

Coaseans delegate. New Labour introduced the “community plan” by which towns and villages were asked to choose where their nationally-allocated share of new housing should be built (to fulfil housing demand caused by large-scale immigration and family breakdown, two more results of the centre’s policies). Here’s a better idea: we in our town are entitled to decide how many houses we want. If someone wants more, they can make us an offer. This idea is unlikely to be popular with Conservative Central Office, so long as it is run off payments from property companies. As the Marxists say, power is never given away, only taken. Local parties should lead the fight against the centre’s demands — whatever party is running the centre.

Enough with the pseudomarkets. If markets are the only way to get economic efficiency, then of course we need markets in everything, even if they are obviously fake “markets” like those for safe, rehabilitatory prisons or helping unemployed people into work. You can tell a pseudomarket as follows: the government decides who wins. This leaves no room for innovation, which is the whole point of capitalism in the first place. There is the old story of the Soviet chandelier factory. Planners, aware of the need to incentivize production, decided to pay by weight. It worked. Total production weight of chandeliers increased. Only the chandeliers tended to fall from the ceiling. Laugh, but we run our education system this way. The alternative is that we transfer control to the people involved, and let them get on with it. So long as there is genuine choice — kids can leave a bad school, if a good school will take them — we’ll get efficiency without chandeliers.

Risks

As ex-Scientologists will tell you, communities can be oppressive. They can force children into moulds, exclude outsiders, or suppress innovation. They can also be develop into cults, where crazy beliefs like QAnon run unchallenged. These worries exercise the present-day elite. Fair enough. Political philosophies are not mathematical theorems, but judgment calls about competing risks. Coaservatives judge that most social groups are enabling, not oppressive. Two basic principles will mitigate the risk. First, adults must be free to leave their group and find a better one. Second, groups may not violate basic standards of decency that the nation agrees on. Both of these principles are easier to implement when different communities are not too different. Deep differences make it harder to move, and argue, across community boundaries.

Building Coaservatism

The first task of conservatives is to build a conservative movement: a rich and diverse ecology of groups, unified by a broad vision rather than a specific programme. The US has this. Britain doesn’t. This is the single most important task that conservative individuals need to take on. Freedom-loving idealists should be building an organization, not trying to get elected, and preferably in Lincolnshire, not London.

The diversity is important but so is the shared vision. We can see from our opponents what happens when the vision dies. Since the demise of socialism, the Labour party no longer has a coherent motivating idea. As a result, it spent several years under Corbyn, in hock to what left-wing intellectuals call a “popular front”, that is, a wide range of loons. A popular front is an alliance where x ignores that y wants to destroy the traditional family, y forgets that x is an anti-Semite, and both must put up with z, who is a vegan. What binds them together is the quest for power. In the long run, ordinary people see this.

This is not just a problem on the left. Donald Trump built a new coalition to get elected in 2016. He lost in 2020 because enough voters thought his only goal was the prosperity of Donald Trump. Time will tell whether 2016 was a flash in the pan, or whether there will be a realignment of Western democratic politics around a new set of ideas. This will also depend on the ability of conservative intellectuals to make a coherent case for a new vision of freedom — the Coaservative vision.

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1. E.g. Elinor Ostrom’s Governing the Commons, Robert Ellickson’s Order Without Law or James Acheson’s The Lobster Gangs of Maine.

2. Mill, Considerations On Representative Government. A large literature in modern political science supports this claim. See e.g. Easterly and Levine “Africa's growth tragedy: policies and ethnic divisions” or Alesina et al. “Public goods and ethnic divisions”.

3. Eric Kaufmann, Whiteshift.