1. Liberalism in a Post-9/11 World Peter J. Boettke Constitutional Economics Econ 828/Fall 2005 12 December

2. After Communism, Then What? End of History Thesis  Democracy and Free Market Our Troubled Times  Under-development and transitional political economy  Illiberalism by democratic means  Critique of modernity and the terrorist threat

3. Social Philosophy, Economics, and Political Economy Social Philosophical Discussions of Justice, Equality, and Efficiency --- what ends should be pursued? Economic Science – ends as given, analysis limited to the examination of the effectiveness of chosen means with respect to achieving given ends Political Economy --- Rules and Strategies; cannot answer social philosophical discussions responsibly without paying due diligence to the knowledge available through economic science

4. Political Economy as a value- relevant discipline is only possible to the extent that economics is understood as providing value-free information. Economics and the Devil’s Test Rhetorical strategy for advancing discourse

5. Islamic Economic Ideas and Structures Basic Ideas  Ban on Interest  Wealth Tax  Expectation of Honesty and Altruism in Economic Transactions Modern Developments  Why No Corporate Law development? Islamic nationalism and Islamic fundamentalism Stunted development of economic organization  Inheritance rules and partnership rules

6. Terrorism in Western Society Use of modern technology to inflict harm – turn our instruments of progress into weapons of destruction Use of civilians (e.g., passengers) and the targeting of civilians and symbols of modern society Suicide missions by individuals who blended easily within modern society and who had significant opportunity costs Difficult to stop terrorism if individuals are willing to pay the ultimate price and can strike anytime and anywhere

7. Purpose In the post-9/11 world, is there a role for liberalism?  At first glance it would appear that there is little role for liberalism Increased government involvement in a wide range of activities  War on terror, Patriot Act, etc. Explore the economics of the war on terror and reconstruction efforts

8. The War on Terror: Terrorism and Rational Deterrence Demand Quantity Price PHPH PLPL QHQH QLQL Becker, crime and punishment model and the purpose of negative sanctions  Increase probability of detection  Increase penalty of being caught

9. What if the demand curve is inelastic? Becker, Murphy and Grossman’s analysis of the drug war  It is important to consider the price elasticity of the good being analyzed  Terrorists willing to pay the ultimate price With an inelastic demand curve, raising the “price” of terrorism will be relatively ineffective. Implication: emphasis must be on shifting the entire demand curve, not just moving along the demand curve. Demand Quantity Price QLQL QHQH PHPH PLPL

10. The Economics of Reconstruction Disconnect between the know what and the know how. We explore the array of constraints – both indigenous and exogenous – that prevent governments from exporting democracy at gunpoint.

11. What About Liberal Values? “The great rule of conduct for us, in regard to foreign nations, is, in extending our commercial relations, to have with them as little political connection as possible. So far as we have already formed engagements, let them be fulfilled with perfect good faith. Here let us stop. It is our true policy to steer clear of permanent alliances with any portion of the foreign world.”--- George Washington “They who would give up an essential liberty for temporary security, deserve neither liberty or security.”--- Benjamin Franklin

12. Liberalism by Liberal Means Principled Non-Interventionism  George Washington’s farewell address  Bastiat -- "When goods don't cross borders, soldiers will.“ Free trade as a way to explore peaceful interaction Free trade as a way to bring an enemy into friendship  Cowen’s idea of cultural gains from exchange  Robert Pape’s Dying to Win thesis