With the collapse of the centrally controlled economies and the authoritarian governments of Eastern Europe and the former Soviet republics, political leaders are, with appreciable public support, espousing “liberal” economic and political transformations–the reinstitution of markets, the securing of civil and political rights, and the establishment of representative governments. But those supporting reform have many aims, and the liberalism to which they look for political guidance is not an unambiguous doctrine.

In this essay, I shall be concerned to explore what light, if any, is cast on practical problems facing liberal reformers in Eastern Europe by an examination of some abstract problems concerning the foundations of liberalism and the relations between liberalism and economic theory. I have my doubts about the practical relevance of this philosophical inquiry. Liberal reformers in Eastern Europe and the former Soviet republics have so few humane and nontotalitarian alternatives that the question of which are the most faithful to liberalism may be moot. But I shall nevertheless indulge in the luxury of thinking about the foundations of liberalism and about how a liberal should appraise forms of economic organization. I shall argue that liberalism is not committed to assessing policies by their impact on individual preferences and that despite the many affinities between liberalism and contemporary economic theory, liberals should be wary of welfare economics. There is a good liberal argument for markets, but there are also good reasons for liberals to be concerned to regulate and limit markets.