Licence to be Bad Summary

Jonathan Aldred

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In "Licence to be Bad," Jonathan Aldred explores the ideological battle between two prominent economic philosophies that emerged in the aftermath of World War II: Keynesianism, championed by John Maynard Keynes, and free-market fundamentalism represented by Friedrich Hayek and his followers at the Mont Pèlerin Society. Set against the backdrop of post-war recovery, the book examines how these diverging viewpoints not only shaped economic policy but also reflected profound insights into human behavior and cooperation.

The narrative begins with a historical account of Europe's devastation after the war and the contrasting approaches to revive its economies. Keynes advocates for substantial government intervention via public spending to stimulate growth, while Hayek and his associates argue for minimal government involvement, asserting that the free market should inherently guide economic activities. This ideological schism cultivated the rise of the Chicago School of economics, which promoted deregulation and a hands-off approach that later influenced critical economic policies like Reaganomics and Thatcherism in the 1980s.

Aldred critiques the long-standing belief in the self-serving nature of human beings as oft articulated by game theory, particularly through the Prisoner’s Dilemma, which posits that individuals will act in their self-interest when faced with decisions. He challenges this notion by presenting counterexamples where cooperation and collective action led to better societal outcomes, arguing that many economic theories misinterpret human nature and behavior. The book posits that economic models, while influential, often fail to capture the complexities of real-world interactions and decisions.

Further discussion delves into various applications of economic theory, highlighting the negative consequences of policies rooted in misconceptions of behavior. Aldred points to historical failures, such as the 2007 financial crisis and ineffective incentives intended to reduce unemployment or environmental degradation. The author argues that governmental and market failures arise when policymakers rely on flawed assumptions about human motivations, like the free-rider problem, which leads to apathy towards collective action, notably evident in responses to climate change.

In addition to critiquing established economic theories, Aldred references the Coase Theorem, asserting that transaction costs and the complexities of real-world situations are often overlooked in favor of simplistic economic reasoning. He highlights that viewing humans purely through an economic lens can lead to misguided policies that fail to consider moral and ethical dimensions of decision-making.

Central to Aldred’s argument is the idea that human cooperation and altruism hold the potential to address the pressing challenges facing society. He reflects on the implications of persistent inequality and how contemporary economics often misrepresents the realities of wealth distribution, advocating for a paradigm that recognizes the value of social welfare and communal efforts rather than hyper-individualism.

Ultimately, "Licence to be Bad" serves as both a critique of mainstream economic thought and a call to recognize the intrinsic value of collaboration and empathy. Aldred champions a reimagining of economic frameworks that prioritize human relationships and collective action, suggesting that these elements are essential for a sustainable and equitable future. Through his exploration of these themes, Aldred offers readers a vital perspective on the necessity for an economic approach that serves humanity rather than restricts it, emphasizing the power of community in overcoming societal obstacles.