New Book Review: “Libertarianism Without Inequality”

The December issue of Reason magazine carries my review of Libertarianism Without Inequality by Michael Otsuka. When it’s available online, I’ll post a link to it.

16 Responses to “New Book Review: “Libertarianism Without Inequality””

  1. Jude Blanchette

    I was with one of my friends the other night who works at the Center for American Progress (the new liberal think tank). We were speaking about the conservative movement when he said that we (I’m always lumped together with conservatives) should purge the movement of the “kooks” who believe in “inequality.” I responded that, well, I’m for inequality. I certainly don’t want everyone to sing like I do–that would be like listening to Regis Philbin’s new album all day. Yet he was speaking (as they usually do) of economic inequality. In the course of our ensuing discussion, I began to wonder, do I support inequality per se, or do I support the institutions that happen to bring about inequality? I recognize that equality will exist in a free society and that government should play no part in eradicating this inequality, but that’s a different thing from supporting it, philosophically speaking. Any thoughts?

  2. Paul Bogdanor

    Hello Tom: I checked the December issue of Reason on an academic database, but your review wasn’t there. I’m greatly looking forward to reading it, since Otsuka was responsible for one of the most disgraceful ad hominem remarks ever published in a peer-reviewed philosophy journal: “Libertarians… are interested in more than the right to be altruistic. They are also interested in the right to line their own pockets” (“Self-Ownership and Equality: A Lockean Reconciliation,” Philosophy and Public Affairs, 27:1, Winter 1998, p91). Doubtless Hayek, Nozick and other libertarian billionaires would have been much enlightened by this intriguing insight into their motivations. How would we react to a comparable comment to the effect that “welfare-statists… are interested in more than the right to be selfish. They are also interested in the right to steal other people’s savings”? And what are the odds that such a remark would make it into the pages of Philosophy and Public Affairs?

  3. Chris Baylor

    I attended your talk on globalization at Harvard University two years ago. You mentioned that American businesses open up shop in other countries in the following percentages:

    First world: 80%
    Second world: 18%
    THird World: 2%

    Do you remember where you found these figures?

  4. Tom G. Palmer

    Interesting comments and questions. Jude and Chris raise most interesting questions and Paul points out a common treatment of libertarian ideas in the academy. (I should add that the other form that takes is that the only libertarian they usually ever read is Robert Nozick; after misconstruing one of his arguments to create a straw man they swat it down and then claim a triumph.)

    So, for Chris, here is what was in a survey on globalisation in The Economist, September 27, 2001:

    “[M]ost outward foreign direct investment (FDI) from rich countries goes not to poor countries at all, but to other rich countries. In the late 1990s, roughly 80% of the stock of America’s outward FDI was in Canada, Japan and Western Europe, and nearly all of the rest was in middle-income developing countries such as Brazil, Mexico, Indonesia and Thailand. The poorest developing countries accounted for 1% of America’s outward FDI (see table 1). Capital is hardly flooding to the world’s poorest countries–more’s the pity, from their point of view.” The accompanying table (Sources: Edward N. Graham, Institute for International Economics; The Economist) showed “Where the money goes: America’s stock of direct investment overseas”:
    High-income countries $982.9 billion 81%
    Middle-income countries $218.1 billion 18.0%
    Low-income countries $12.2 billion 1.0%
    All countries $1,213.1 billion 100.0%

    You can find more recent data on foreign direct investment from the online tables at (e.g., the paper by John H. Dunning at$File/DUNNING+1.PDF)

    Jude’s question is very appealing as a problem to exercise the mind. I don’t favor inequality per se. Not many people would. But the idea of equality and inequality is complex, as Aristotle noted in the Politics; for people to be treated equally, likes should be treated alike and unlikes unlike. True liberals favor equal treatment before the law and have a firm foundation in distributive justice: each person gets to exercise control over one and only one life. Given such equality, different circumstances, natural endowments, effort, and luck will certainly generate unequal outcomes. (That’s also true when people are not treated equally and when the state is empowered to allocate wealth and determine incomes; inequality is, frankly, unavoidable, as a look at any socialist state will show.) To use the legal system to generate equal outcomes may require unequal treatment, for example, so that one just trades off one kind of equality for another. A very good treatment of the arguments surrounding income “redistribution” can be found in Bertrand de Jouvenel’s brilliant little book “The Ethics of Redistribution” (

    Paul’s questions are rhetorical, of course, and well put. I recall during discussions about my dissertation at Oxford (where Paul and I met) being told very clearly that it was perfectly fine to assert that socialism equals or generates equality without any backup at all, but to assert that socialism does *not* equal equality would require by itself an entire dissertation and would then be unacceptable because it would rest on merely contingent empirical claims. In academic political theory, socialism is just another word for good. To deny that is good is simply to show that one is bad. Q.E.F.D.

  5. Jude Blanchette

    Dr. Palmer: Thanks for your response. However, something still nags at me. You write that you “don’t favor inequality per se.” You then go on to defend an institutional order (equal treatment before the law) which brings about inequality (due to luck, effort, natural endowment) and then state that “inequality isÃ?Â?Ã?¢Ã?¢?Ã?¬Ã?Â?Ã?¦unavoidable.” Let me pose the original question again: why, then, don’t you say that you support inequality?

    Put another way, when I attend a baseball game, it would be proper to say that I support the idea of one team beating the other (unless the loosing team is the Red Sox). Because I support the institution and its rules, I support the natural outcome of its process (run or victory inequality).

    To make another analogy: free traders support the idea of creative destruction. You don’t hear them say ‘I like progress; I just wish we didn’t have those darn job losses.’ They support the actual destruction of jobs, markets and sectors. They understand that it’s all a necessary part of the whole process. In regards to inequality, while we may find specific cases of inequality offensive (just like we would sympathize with the guy who lost his factory job because of trade with China), I don’t see how the idea of inequality can be anything but good. Again, philosophically speaking.

  6. Tom G. Palmer

    Jude has reformulated his question in a more pointed way. The topic deserves more than a few lines on a blog comment section, but let me take a stab at it.

    First, the *concept* of equality is fairly clear, but it’s necessary to specify what *conception* of equality one is employing. One conception of equal treatment would entail that two children get the exact same treatment by their parents, in terms of food, attention, time, medicine, etc. But, if one child is very sick and the other very healthy, that kind of equal treatment would mean that the sick child would die. Another conception of equal treatment would mean that they get the medicines and care necessary for equal chances of survival and flourishing, so that the sick child gets more medicine and care (an unequal share) but, had the situations been reversed, the ratio of medicine and care would have been reversed.

    When I said that inequality is inevitable, I meant under any social situation, not just under free markets. Free markets don’t “generate inequality,” they just generate one sort of inequality. Socialism generates another. Under socialism some have unequal rights and powers over others (in order to be able to rearrange the property arrangements that would be unjust if allowed to persist), and so you get inequality of power in order to combat inequality of wealth. Moreover, human nature being what it is, it’s pretty common for people to use their unequal shares of power to get unequal shares of stuff, too. Some people desire power only for its own sake, some for the sake of the stuff it can get, and most for both reasons. The experience of actually existing socialism is an experience of remarkable inequality; party members got and get a lot more stuff than non-party members, so their holdings were and are unequal.

    If I favor markets, it’s not because I favor the particular snapshot of inequality that exists at any instant of time, even though that is the outcome of a market process. I favor the process of exchange, not this or that unpredictable outcome. Anyway, no pattern is likely to persist under free markets for long, anyway.

    For a remarkably insightful treatment of the issue of the “distribution of wealth” in a market economy, see the essay “The Market Economy and the Distribution of Wealth” in Ludwig M. Lachmann, *Capital, Expectations, and the Market Process*, ed. by Walter E. Grinder (Kansas City: Sheed Andrews and McMeel, Inc. 1977) []

    Lachmann distinguishes between “ownership…a legal concept” and “wealth…an economic concept” and shows that,

    “The market process is thus seen to be a leveling process. In a market economy a process of redistribution of wealth is taking place all the time before which those outwardly similar processes which modern politicans are in the habit of instituting, pale into comparative insignificance…” (p. 313)

  7. Thank you again for humoring an amateur. Not to belabor the point, but to clarify, I was speaking of “inequality” only in regard to income distribution. Perhaps I had not made this point clear enough in my previous post. Given that, you’re correct: free markets only generate one type on inequality (a point made by de Jouvenel in the book you cited above).

    I won’t tie your blog up anymore with this argument, but I would like to make a few last points:

    1) To quote Mises, “Inequality of wealth and income is an essential feature of the market economy. It is the implement that makes the consumers supreme in giving them the power to force all those engaged in production to comply with their orders. It forces all those engaged in production to the utmost exertion in the service of the consumers. It makes competition work. He who best serves the consumers profits most and accumulates riches.”

    He seems to be making absolutely clear that income inequality isn’t an unfortunate by-product of the market process; it’s a necessary feature of it. Now I don’t mean to quote Mises as the bible here, but I think his point valid.

    2) You speak of the market process always changing the distribution of wealth. In that sense, Lachmann’s point about “leveling” is persuasive. However, we seem to be speaking of two different issues; should there be a stagnant inequality of wealth on the one hand, and should there be an inequality at all. I agree that the virtue of the market process is that it makes the former impossible. But that still skirts the issue of whether there should be income inequality at all. While the pattern of held-wealth is constantly in flux, income inequality will always exist in a market society. My original question was, should it exist, not will it exist.

  8. Tom G. Palmer

    Yes, I think that Mises is right in writing that, but that is still consistent with a kind of complex equality, in which the one who works harder gets more. But what about, then, the inequality that accrues to simple luck in the distribution of natural talents? I will never make as much money as a brilliant basketball player, even if I work harder, because he has an unearned natural talent.

    My point was about the unequal “distribution” of income. If you try to get rid of it through state redistribution you will just get it back through another means. It’s ultimately ineradicable. Now, it may (and observably does) go up and down and vary from one place to another. For example, there is more income inequality in the U.S. than in western Europe. We could eliminate an awful lot of that by not allowing immigrants (oops! I hope that Lew Rockwell doesn’t get wind of that argument), who typically enter the U.S. with comparatively little income-producing ability (i.e., they’re poor) but who do better than they did in their countries of orgin and who then catch up with (and often surpass) native born Americans after a decade of hard work and saving. Reducing income inequality within the U.S. would simply mean increasing it across the world. Income inequality will never be eliminated, especially in those states that make it their official goal. (Can you imagine a country with inequality of wealth and income greater than that in the most extreme communist state on the planet, North Korea?)

    Moreover, inequality of wealth and income is an outcome of processes of human interaction (whether market exchange or political coercion), but no particular arrangement is predictable. In general, of course, one can say that people who work hard and save tend to have more wealth and income than those who don’t (although there are problems of comparing forms of income: someone who lives on the edge of a beautiful lake in Alaska may have little monetary wealth and income, and accordingly pay less tax, but might not want to trade that life for the life of a highly paid bond trader in Manhattan, who has more monetary income and pays much more tax) and people with lots of natural talents and lots of ambition also tend to have more wealth and income. But there are people with talents who work hard but who don’t get as much wealth and income as people who are just lucky, and luck isn’t predictable. Being in the right place at the right time isn’t praiseworthy, so I don’t applaud the outcome, but I wouldn’t want to eliminate the differential that the lucky person got, partly because of respect for stability of property, partly because I don’t want to empower some class of people to make such distinctions (power corrupts and they’ll likely use that power to get a bigger share for themselves, anyway), and partly because I don’t want to eliminate incentives to achieve by foresight what others get by luck. But I do not agree with those who argue that all the particular and unpredictable unequal outcomes of market processes are to be applauded; it’s the pursuit of them through production and voluntary exchange that is laudable, and such processes — like all processes of human interaction — generate inequalities. Much of that inequality is neither laudable nor even regrettable.

  9. Jude:

    He [Mises] seems to be making absolutely clear that income inequality isn’t an unfortunate by-product of the market process; it’s a necessary feature of it. Now I don’t mean to quote Mises as the bible here, but I think his point valid.


    Mises is saying –

    If customers are to be supreme (ends) then inequality of wealth and income must exist (means).

    Which is different from saying –

    If inequality of wealth and income is to be achieved (ends) then customers must be supreme (means). You can have inequality of wealth and income without customers being supreme.

    One could say then –

    Inequality is only good to the extent that customers are allowed to be supreme.

  10. Brian Radzinsky

    Inequality in terms of wealth doesn’t mean total poverty necessarily. It just means that there are those who are less advantaged. Of course unless we were striving for some sort of Rawlsian sense of necessary inequality that maximizes benefits to the least advantaged. But total equality of opportunity, which is best acheived in a system that only imposes rules that prevent an intrinsic hierarchial system of access, is different from economic equality.

    It generally holds that liberty and equality are mutally exclusive ideals, because equality in terms of real wealth or holding is only acheived when there is an artificial system imposed that punishes ingenuity by redistributing rightly gained assets, thus quashing the freedom to theoretically excel without bound.

  11. I’ve just noticed that Paul Bogdanor has written above that “Otsuka was responsible for one of the most disgraceful ad hominem remarks ever published in a peer-reviewed philosophy journal”.

    Then he quotes the offending remark: “Libertarians… are interested in more than the right to be altruistic. They are also interested in the right to line their own pockets.”

    By “right to line [i.e., fill] their own pockets” I meant they were interested in the right to acquire wealth by means of market transactions, where this right is unconstrained by egalitarian principles. That much is clear from the context of the remark. Nozick defends such a right by means of his famous Wilt Chamberlain argument.

    I think a minimally charitable reader would have managed not to have read what I said as a “disgraceful ad hominem remark”, let alone “one of the most disgraceful ad hominem remarks ever published in a peer-reviewed philosophy journal”.