Judith Marquand - Why we lost sight of the ‘public interest’

Posted: 16/12/11

In the 1960s and 70s, when I was a young economist in the British Government Economic Service, the concept of 'the public interest' used to enter explicitly into our policy discussions. We were often unsure what it was in any particular case and certainly much less aware than we would be today of ways in which we might try to ascertain it, but we were in no doubt at all that the business of government at every level was to arrange matters - institutions, laws, taxes and expenditures - in such a way that the public interest was pursued.

We were also sure that the pursuit of the public interest required collective action by a congeries of institutions which could reasonably claim to represent their stakeholders.

All this vanished in the 1980s. The myth became widely accepted that all would be for the best in the best of all possible worlds if 'rational' actors were set free to pursue their self-interested ends. Of course, those who benefitted most from this policy were the loudest in its praise.

The reasons for the widespread acceptance of this myth are complex. Partly, they arose from the failure of the institutions of the 1970s to cope with a world where fixed exchange rates had been abandoned. Partly, they arose from a persistent, skilful campaign by the nascent neo-liberals to persuade policy-makers that theirs was the only answer to the apparent policy impasse. These reasons need to be clearly understood if the mindset of the last 30 years is to be changed. But what has been in no doubt at all since 2008 is that it is a mindset which leads to economic, social and environmental disaster.

There are three crucially important propositions which the neo-liberal 'business as usual' world fails to take into account:

- Human beings are social animals, collaborative as well as competitive;
- Intended actions frequently have unintended consequences;
- Markets operate only according to the rules which people set for them.

The first of these propositions has the corollary that any policy based on the assumption that people always behave like ‘economic man' builds on a cynical, demeaning view of human nature which cannot understand that altruism and co-operation are as natural as competition.

The second warns against hubris, like the belief of oil companies that there will never be human error leading to major oil spills, or the belief of financial institutions that a 1 in 1000 risk will never happen, or the tendency to ignore the long-term costs of destroying the rainforest by focussing on short-term financial gains.

The third tells us that markets operate within legal frameworks, according to institutional structures and customary behaviours, and that there is no a priori reason why less regulation should be preferred to more, or private management or ownership to that by public or collaborative bodies. It depends on the particular people, their particular beliefs, the particular circumstances and the particular regulations.

In time of peace, the courses of political and economic action have rarely been narrower than those which are open today. There is all the more reason to move towards ways of ascertaining the 'public interest' in particular cases, so that it, rather than financial gain, can become the touchstone by which potential policies are appraised.

I suggest that my three propositions provide a starting point. As a next stage, I am starting to examine the types of decision criteria to which they lead, with reference to a few particular cases.

Judith Marquand is Associate Fellow in the Oxford Centre for the Environment, Ethics, and Society at Mansfield College, University of Oxford

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