Daddy Knows Best?

by Gene Callahan

Does economics have to assume that Daddy (or anyone else) knows what’s best form himself? I’m reading Dan Klein’s Libertarian Essays, in which he asserts “that the individual knows best in matters that concern her alone” is “one of the most basic precepts of economics.”

That assertion seems to me to be mistaken. As I see it, all that economics need assume to explain, say, market prices, is that the individual, if left free to do so, will choose based on what she thinks is best for her, regardless of whether or not anyone knows better. Now, if you want to reach a laissez-faire policy conclusion, then you might want to assume that “the individual knows best.” But that would be a political assumption, not an economic one. (And one need not even make it to reach libertarian conclusions: You might think, for instance, “Man oh man is Gene a dumbass who doesn’t know what’s best for himself — but I’ve no right to stop his foolishness by force.”)

8 thoughts on “Daddy Knows Best?

  1. Well, it is a definitional thing. “Best” is defined by the person to whom the property belongs. What we prefer is always “best” for us, by definition. To say otherwise is to abandon the subjective theory of value, is it not?

    Why in the world should a third party’s preferences be taken as an objective measure of what is best for you, rather than another subjective valuation by another actor?

  2. Who know’s best is actually a moot point. We are all capable of error. The critical point that provides both the practical and the moral basis of libertarianism, is that nobody has as much incentive as I do to make good decisions for me. Not even my Mum, let alone my city councillors, or my State reps and most definitely not some sanctimonious fool in our nation’s capital.

  3. “Well, it is a definitional thing. “Best” is defined by the person to whom the property belongs. What we prefer is always “best” for us, by definition. To say otherwise is to abandon the subjective theory of value, is it not?”

    No, not in the least. See Roderick Long’s work on this topic, but for a brief summary: Mises erred in turning the fact that prices are determined by subjective evaluation into an ontological theory of value, i.e., that simply is just subjective. Menger, who saw this more clearly, recognized that things could be given a false valuation, but that that false valuation would still determine their market price.

  4. I think it’s true that the individual may not know best, often does not know best, what is best for himself or herself. And yet, I think liberalism tends to improve the decisions made regarding each of us personally. If you are free you can shop for your advisors. In this regard, the advantage of liberalism consists in the increased probability, relative to available alternatives such as central control, that the individual will be guided, in the different aspects of his life, by persons enjoying a comparative advantage in providing such guidance.

  5. Gene,

    I agree that subjectivist price theory doesn’t stand or fall on the truth of Klein’s statement. However, there is a lot of free market economics tied up with this notion.

    E.g. Milton Friedman talking about why it’s bad for government to spend money on your behalf, because they don’t watch costs and given how much they spend, there’s not much quality.

    In any event, shouldn’t you have titled your post “Mommy Knows Best?” Dan went out of his way to not be patriarchal, as well as non-paternalistic.

  6. Bob,

    If you agree with my statement above, as Gene did, then I think you get all the political implications you need from the mistaken assertion without the mistake. I think my statement is just a clarification. I think Gene was probably always thinking along such lines and probably the same for Dan Klein. It’s point worth clarifying IMHO, but I doubt there’s much real disagreement among liberals on this point.

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