The two "third ways" of capitalism: macroeconomic versus microeconomic regulation. A critical view

From the 1930s and 1940s, the main industrial economies explored a "third way" between laissez-faire capitalism and collectivist central planning. In this sense, the "third way" represented a continuum of experiments between two opposite banks: on the one hand macroeconomic regulation of Keynesian type; on the other microeconomic regulation of social market economy (Soziale Marktwirtschaft). The theoretical foundation of social market economy is anti-Keynesian. In this approach, market failures depend on weak competition. In this case, the state intervenes by means of various kinds of incentives with no, or little public expenditure. In Keynesian approaches underemployment equilibria justify state interventions by means of public investments though leaving to the private sector both allocative choices and the related risks. The paper argues, contrary to the premises, that the social market economy, by reintroducing microeconomics solutions based upon bureaucratic rules, violates the main individual liberties, even affecting consumer's choices. The Keynesian welfare state on the contrary follows the liberal tradition of the rule of law, and of the primacy of the civil rights of citizens. The paper discusses the economic and social implications of these two "third ways".