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This article considers the contributions of Ralph Hawtrey to monetary theory and macroeconomics, focusing on his monetary business cycle theory and his monetary explanation of the Great Depression. Unlike Milton Friedman's US-centred explanation of the Great Depression, Hawtrey's was focused on the international gold standard that collapsed with the outset of World War I and the attempt to restore it. Hawtrey urged that, after restoration of the gold standard, increased monetary demand for gold be restrained to prevent gold appreciation and deflation. But deliberate French gold accumulation in 1928 and interest-rate increases by the Federal Reserve, led to the ruinous deflation foreseen by Hawtrey. The article then critically evaluates recent discussions of Hawtrey's contributions in books by Hetzel (2023) and Mattei (2022).

Three characteristics of developed twenty-first century countries are high levels of state capacity, democracy, and economic freedom. This article compares countries that lack one of the characteristics with countries that have more even levels of institutional development. Countries which lack democracy use other means to secure political legitimacy, and those without strong states are geographically concentrated in Latin America and eastern Europe. Those without liberalised economic institutions are an idiosyncratic group that have unconventional historical paths. These findings speak to the prospects for development outside the liberal democratic path, the nature of development in the absence of a state, and unexplored determinants of economic freedom.

The Berlin and Lewis epigraphs draw out the moral psychology of paternalism. The paternalist, enlightened as he is, sees past your empirical shell and into the true essence of your being. Setting aside the protestations of the shell that you mistake for yourself, he steers you towards the good. The steering might involve violence, but that is a small price to pay in the grand scheme of things. Nobody enjoys being flogged for heresy; but eliciting conversion is worth the pain. The convicted paternalist persists in his drive to serve the good with the approval of his own conscience.

The liberal tradition rejects paternalism and exalts the dignity and freedom of the individual person. We have been gifted by our Creator with the inalienable rights to life, liberty, and the pursuit of happiness, Thomas Jefferson asserted. Each should be free, Adam Smith said, to pursue his interest in his own way. The question of the good is too discursive, in most cases, to warrant violence against those with differing opinions. And in any event, we ought to presumptively respect human freedom and agency per se, regardless of whether someone follows a life path that we approve.

The liberal rejection of paternalism notwithstanding, a new species of paternalism has in recent decades reared its head in the West. This new paternalism has come forth on the wings of inferences from laboratory experiments and surveys, in cognitive psychology and behavioral economics, about the extent of human rationality. Evidence, it is claimed, has accumulated that we human beings are consistently poor reasoners: we are “predictably irrational” (Ariely, 2010). Instead of properly calculating probabilities when assessing risks and making decisions, it has been discovered that we rely on a range of mental short cuts or heuristics. The heuristics work sometimes, but they systematically lead us to make avoidable mistakes in, for example, financial decisions (Tversky & Kahneman, 1974). We “think fast” when apparently we should be “thinking slow” (Kahneman, 2011). Irrationalities are said to abound in other areas, too. The salience of the present, for example, leads us to overestimate the benefits of present pleasures and underestimate the pain of future costs (Laibson, 1997; Read & van Leeuwen, 1998). Our ‘present bias’ erodes our self-control and subverts our goals. We save too little, smoke too much, and repeatedly renege on our New Year's resolutions.

Each of us predictably fails to pursue the good as we ourselves understand it. And we do so across a wide set of domains.

The new paternalism proposes to use knowledge of our decision-making processes to steer us towards what we ourselves judge to be good. Part of the steering involves the regulation of ‘choice architecture’. This refers to the framing of choice options in a situation to render certain options salient to the chooser, and