en. Elizabeth Warren’s politics seem like a tangle of contradictions. She wants free markets, but also wants to tax billionaires’ capital. Her enemies on the right claim that she is a socialist, but Warren describes herself as “capitalist to my bones.”
Warren’s politics are so confusing because we have forgotten that a pro-capitalist left is even possible. For a long time, political debate in the United States has been a fight between conservatives and libertarians on the right, who favored the market, and socialists and liberals on the left, who favored the government.
It has been clear since 2016 that the traditional coalition of the right was breaking up. Conservatives such as U.S. President Donald Trump are no fans of open trade and free markets, and even favor social protections so long as they benefit their white supporters. Now, the left is changing too.
Warren is reviving a pro-market left that has been neglected for decades, by drawing on a surprising resource: public choice economics. This economic theory is reviled by many on the left, who have claimed that it is a Koch-funded intellectual conspiracy designed to destroy democracy. Yet there is a left version of public choice economics too, associated with thinkers such as the late Mancur Olson. Like Olson, Warren is not a socialist but a left-wing capitalist, who wants to use public choice ideas to cleanse both markets and the state of their corruption.
Public choice economics has big influence and a bad name. It is a school of economic thought that has at different times been associated with scholars at the University of Rochester, Virginia Tech, and George Mason University. Public choice came into being in fervent opposition to the mainstream of economics, which was dominated by scholars such as Paul Samuelson.
Samuelson, in his famous and influential textbooks, saw a clear role for government in regulating markets. Public choice scholars vehemently disagreed. For political and theoretical reasons, they instead saw government as a fountain of corruption. Public choice economists argued that government regulations were the product of special interest groups that had “captured” the power of the state, to cripple rivals and squeeze money from citizens and consumers. Regulations were not made in the public interest, but instead were designed to bilk ordinary citizens.
Perhaps the most influential version of public choice was known as law and economics. For decades, conservative foundations supported seminars that taught judges and legal academics the principles of public choice economics. Attendees were taught that harsh sentences would deter future crime, that government regulation should be treated with profound skepticism, and that antitrust enforcement had worse consequences than the monopolies it was supposed to correct. As statistical research by Elliott Ash, Daniel L. Chen, and Suresh Naidu has shown, these seminars played a crucial role in shifting American courts to the right.
Warren was one of the young legal academics who attended these seminars, and was largely convinced by the arguments. Her early work on bankruptcy law started from public choice principles, and displayed a deep skepticism of intervention.
The conventional story is that as Warren moved from the right to the left, she abandoned the public choice way of thinking about the world, in favor of a more traditional left-wing radicalism. A more accurate take might be that she didn’t abandon public choice, but instead remained committed to its free-market ideals, while reversing some of its valences. Her work as an academic was aimed at combating special interests, showing how the financial industry had shaped bankruptcy reforms so that they boosted lenders’ profits at borrowers’ expense. Notably, she applied public choice theory to explain some aspects of public choice, showing how financial interests had funded scholarly centers which provided a patina of genteel respectability to industry’s preferred positions.
Now, Warren wants to to wash away the filth that has built up over decades to clog the workings of American capitalism. Financial rules that have been designed by lobbyists need to be torn up. Vast inequalities of wealth, which provide the rich with disproportionate political and economic power, need to be reversed. Intellectual property rules, which make it so that farmers no longer really own the seeds they sow or the machinery they use to plant them, need to be abolished. For Warren, the problem with modern American capitalism is that it is not nearly capitalist enough. It has been captured by special interests, which are strangling competition.