The idea of liberty is rooted in human nature. Liberty is the recognition that every person is at once alike and different from every other person. The personal space that all people wish to create for themselves marks their differences from the others they share the society with. The nature of this space changes with time over the lifetime of human beings.
The desire to act on personal preferences is inalienable. While acting on them, the social need to permit others to act on their own is civility. The purpose of the law is to ensure that this happens. Social preference is largely an illusion created by space and time, of similar people sharing the same geographic space.
Liberty, however, is different from economic liberty. Economic liberty is the material capacity to act on one’s inalienable liberty to realize those preferences in the way they live. Because material capacity is finite and is dependent on exhaustible resources, the negotiation between individuals over the allocation of these resources for each to realize their liberty constitutes economic liberty. Economic liberty, unlike liberty, is not a right with the exception of the basic common humanity that connects all human beings such as clean air, water, food and the necessary shelter and health.
Yet, economic policy, since the advent of Keynesianism, has encroached into the realm of the freedom of individual economic actions to realize their dynamic individual preferences which vary over space and time. The reason for this Keynesian encroachment is the belief that social good, the society being defined either as a culture or a nation state or both, is more important than individual good. The end of laissez-faire meant the beginning of statism and ethnocentrism: culture and state as the reason for governance and government, contrary to the course of human history. The desire for homogeneity is genocidal and self-destructive.
Economic policy can hold powerful sway over such governance because the economic interests of similar people residing in one geographic area can be seen as being common and collective and those group preferences can overcome any individual differences, forcing individuals to compromise for the idea of the common good. This can go on only until many individuals will have to compromise their aspirations for a common good with which they can no longer associate. The ensuing tumult changes the group preferences.
Still, they remain group preferences. Liberty does not result until the individual is freed from the requirement of association with one group or the other without feeling conscious of how the rest of the group members would feel if they expressed their preferences. Such a society would be culturally fundamentally different from any other society constrained by some aggregated social preferences.
Equity demands that economic interaction maximize the capacity of all individuals in a society to have the same opportunity to realize their liberty. Once, given the opportunity, it is incumbent upon the individuals whether they can do so. Technology plays a significant role in organizing the economic processes to make that happen, catering to the dynamically changing preference profiles of individuals who feel socially at liberty to express them, within the constraints of civility, basic decency and in a manner that is harmless to individual physical and psychological well-being.
Economic research in theory and policy lately has been unduly focused on influencing the preferences of people to behave in a manner that maximizes social welfare or the public good. Not on providing them with the capacity to maximize their ability to realize their preferences in their self-interest, for self-interest is as much about seeking self-fulfillment as it is about self-responsibility. If many did so, the enhanced social welfare would be a natural consequence.
The disservice of Keynesianism to the society by manipulating and directing individual preferences toward some ex ante determined social good is undermining economic liberty.