Economic Policy and the Theory of the State

Abstract

The view that the society is simply a collection of individuals has always held considerable attraction for the ‘liberal’ tradition in political philosophy (see Section A, Chapter 1). And yet, this liberal view has never been at ease in explaining the economic relation between the Society and the State. A collection of individuals comprising the society must exist as a notion which is logically as well as historically prior to the existence of the State. In this sense, a society should be able to function independently of the State. Therefore, it should also be possible to envisage economic interactions among individuals without assigning any definite role to the State. Indeed, this theoretical possibility has never ceased to excite the imagination of the liberal tradition in economics. Even today, it is evidenced by the preoccupation of many conservative and liberal economists with (Walrasian) models of ‘general equilibrium’ which propose to examine the consequences of economic interaction among individual agents, relegating as far as possible to the background the economic role of the State.