Two trajectories of democratic capitalism in the post-war Chicago school: Frank Knight versus Aaron Director

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The Chicago school of economics has long emphasised the efficiency of decision makers in a competitive economic order in comparison to those in a democratic political order. The purpose of our article is to show that this emphasis emerged from two different re-conceptualisations of liberal democracy by Chicago economists during the post-war period The first was Frank H. Knight's enquiry into whether rational norms for intelligent democratic action provided the means to avoid the failures of liberalism that had become so apparent through the upheavals of the first several decades of the twentieth century. The second came from Aaron Director, who concluded instead that democratic action was inherently irrational and disputatious, and that the efficiency of actions undertaken with the context of the competitive order was to be preferred. Knight argued that an appreciation for competition must be accompanied by recognition of the equally fundamental roles of democratic discussion and ethics, whilst Director asserted the fundamental role of competition in the economic realm and its import for freedom.

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Cambridge Journal of Economics