Anyone who’d like to post problems or questions about my reviews this month in National Review (Cass Sunstein’s The Second Bill of Rights) or Reason (Michael Otsuka’s Libertarianism Without Inequality), both of which deal with issues of distributive justice (welfare rights and the like), is welcome to post them here. I’ll do my best to write something useful; others may wish to shed some light on the issues, as well. (The latter generated some discussion below.)
Regarding Reason review of “Libertarianism Without Inequality”
Great review! You have quite an ability to take a book whose excerpts alone make my eyes gloss over (i.e. “Ã?Â?Ã?¢Ã?¢?Ã?¬Ã?Â?Ã?¦where ‘betterment’ is to be measured in terms of welfare understood as the ‘satisfaction of the self-interested preferences that the individual would have after ideal deliberation while thinking clearly with full pertinent information regarding those preferences.'” Whew!!!), make it understandable, and then refute the key premises in a way that’s readable and easy to retain.
One question though: Could you elaborate on your statement that Otsuka “fails to distinguish between wealth and value, which are economic concepts, and property, which is a legal concept. Legal institutions can reassign property titles, but if property is constantly, chaotically, and unpredictably reassigned, it’s not ‘property’ at all; it has no legal security.”
This is the first time I can remember reading these concepts defined as such. I’ve always though that your property is your property. A government confiscating it and reassigning it doesn’t make it any less your property, it simply means they are not recognizing that which is yours.
Any further reading you could suggest on the topic? Or does this come down to an argument about whether rights are natural or conventional?
Tom–I thought you did a wonderful job in your article “John Locke Lite”. I would also like to preface my comments with a note that I never read the book you review, and after reading it have no desire to. However, reading your review lead me to two important thoughts regarding the subject matter.
I think a discussion of eqality and wealth distribution is long overdue in libertarian circles. What makes Otsuka so bizarre is his focus on redistribution. How would free-markets effect the distribution of wealth, this is a question that should be dealt with nevertheless. How would the market distribution of wealth be effected if roads and airports (not to mention business in general)weren’t subsidized? Is subsidization a significant factor in wealth accumulation? Furthermore, what about the (less academically popular) ideas that are more plausibly left-libertarian–such as Henry George’s idea of a single tax on land value? One can make a strong free-market case that landlords soak up the benefits of economic progress. Some people have made similar claims about the banking industry, but I’m not sure what to make of that. I think we should talk more about ideas such as economic distribution. At least we can make a case some of the wealth disparity is due to subsidy. We need to appeal to people with conserns that are different than ours without selling out. Furthermore, it may not be a bad idea to start thinking of free-market wealth distribution criticisms of Capitalism as we conceive of it–I am thinking particularly of the criticisms of Henry George and Benjamin Tucker.
A second point I would like regards the discussion at the end of the article. It is about the idea of consentual governments that are under one larger non-consentual governments. I think you make short shrift of the idea. While I am not sure of the claims of Otsuka, it reminded me of an article I read by the libertarian thinker John Hasnas, “Reflections on the Minimal State”. In it he proposes a somewhat similar idea. The gist is that if we want a really minimalist state we should start with a lower levil of the defense agencies proposed by a number of anarco-capitalists such as David Friedman and Murray Rothbard. However, in order to make sure that the problems conceived by minarchists, he suggested a non-voluntary government to have authority over them. This government would be extremely limited to dealing with the problems that minarchist suggest may keep these agencies from operating properly–public goods and antitrust between the defense agencies. Then if these problems don’t arise, as anarchists argue, the larger non-consentual government would have nothing to do. However, if they do arise, we would be protected. This is not precisely what Otsuka had in mind, but it is an interesting idea, as far as the minarchist v. anarco-capitalist debate goes, and may have some plausability–if we could ever get to that point.
[NOTE: An earlier version of this answer was a bit garbled, due to my inept use of the “cut and paste feature,” such that some text was repeated. I’ve taken out the repetition.]
Thanks for the nice remarks and for the interesting problems.
First, to Peter’s queries about wealth and property. It might help to think of it through a concrete example first. Let’s say that I own a business that repairs computers; it’s my property. Mr. X offers to buy the business from me for $500,000 and I accept the offer. A part of the reason that he wants to pay me $500,000 is because my firm has a lot of name recognition in the area and a reputation for fast and reliable service. If all he were buying were the little shop I have and the tools, office equipment, and so forth, he could buy that for $300,000. That means that $200,000 of the value of my firm, of the wealth that I own, is due to something in which I don’t have any property rights: my reputation for fast and reliable service and the fact that lots of people think of my firm when they think of getting their computers repaired. Name recognition and good reputation are forms of wealth, because they yield income streams. But they’re not property; I don’t own them, such that if someone else were to compete with me and displace my firm as the best known and most reputable, I could take him to court for violating my property rights. (Well, in the crazy world of antitrust law, I could, although not quite on those grounds, but that’s a different matter.)
The law can regulate property; it can protect it, fail to protect it, or violate it. It can redistribute property. But it can’t redistribute wealth directly. If the way that we know how much wealth I have is because there is a market, and if markets rest on well defined, legally secure, transferable property rights (“defined, defended, and divestible”), then if property no longer is well defined, legally secure, or transferable, then there is no longer a market. In the absence of a market, then, it becomes very difficult to compare wealth, since there is no longer any common metric (money prices) to see how wealth has gone up or down. (Remember that in the example above I sold my firm for $500,000 because Mr. X offered me that much and it was the highest bid I received; in the absence of such bids, I’d have no way to know the value of my firm.)
So my property is my property, but I could have property that wasn’t very valuable and wealth of great value that wasn’t property. Now, the two are clearly related, but they’re not the same thing. We wouldn’t expend scarce resources to define, defend, and transfer property titles to things that had no value. But the way that I know whether the value of my wealth has gone up or down (certainly in the way that Otsuka and others want to know it) is because I can trade it on markets. It’s a distinction between an economic concept (wealth) and a legal concept (property), rather than between two alternative foundations of the legal concept (natural or conventional).
A good item to read on this matter would be a wonderful essay, that is, alas, a bit hard to find these days. (You might have to make a quick trip to the library.) It was published by Ludwig Lachmann in 1956; the title is “The Market Economy and the Distribution of Wealth” and it appeared first in a book titled “On Freedom and Free Enterprise: Essays in Honor of Ludwig von Mises,” ed. by Mary Sennholz (New York: D. Van Nostrand, 1956) and it was reprinted in a volume of Lachmann’s essays edited by Walter E. Grinder: Ludwig M. Lachmann, “Capital, Expectations, and the Market Process: Essays on the Theory of the Market Economy” (Kansas City: Sheed Andrews and McMeel, Inc., 1977).
Another very good essay that sheds light on the issue is by Israel Kirzner, “The Nature of Profits: Some Economic Insights and Their Ethical Implications,” which appeared in Robin Cowan and Mario Rizzo, eds., “Profits and Morality” (Chicago: Univeristy of Chicago Press, 1995).
The problems that Mike poses are challenging in different ways. I’ve never been that sympathetic to the Georgist approach, but I do think that a case can be made that a tax on land value (rather than improvements) would be less disruptive than other forms of income, sales, or property taxes. (Fred Foldvary of Santa Clara University has argued this within a libertarian framework: see http://www.foldvary.net/publications.html ).
As to whether current wealth differentials are due to subsidies, the answer has to be “some of them are.” Would there be greater or lesser overall inequality of wealth without them? I don’t know. Some firms and entrepreneurs that would do better in a market are quashed by protectionism, which is a subsidy for currently established producers. Others are regulated or taxed out of existence. Such actions are unjust, but it’s not clear that they increase or decrease overall inequality.
But let’s move to the issue of whether pointing out that at least some great wealth is the result of theft would make libertarianism more attractive to people concerned about inequalities of wealth per se. I’m not so sure. First, is there so much inequality within, say, the USA that we should be shocked at it? Again, I’m not so sure. The health care that I can receive isn’t that much different from what Bill Gates could buy, if you compare that to the differentials that most societies have seen. His MRI would not be that much different from the one that I had recently. (Granted, I shopped around and I paid less because I was willing to get the rather claustrophobic “enclosed MRI” rather than the “open MRI,” but such differences are pretty small compared to the difference that you’d see if you compared treatment in a small Mexican village with that available to a plutocrat or PRI official in Mexico City, or the difference between what African “leaders” get when they jet off to Switzerland or France and what their suffering people get.) Second, much of the difference in measurable income equality in the U.S.A compared to western Europe is due to the fact that the U.S. accepts so many more low-income immigrants than does western Europe. They skew the distribution in their early years, as they acquire skills, acculturation, and other forms of capital. We could diminish the measurable income inequalities if we were to keep out immigrants, as they do more diligently in western European welfare states, but that would hardly be good for those low income earners who would now earn even less, back in their impoverished home countries, than they would have earned in the U.S. My general sense is that most people who get very upset by income inequality are also strongly opposed to immigration and want people to be controlled in their movements. (See the astonishingly illiberal proposals by the egalitarian extremist Brian Barry, who wants to forbid people to move in search of better conditions or higher incomes, e.g., in his essay “The Quest for Consistency: A Skeptical View,” in the book he co-edited with Robert E. Goodin, “Free Movement: Ethical Issues in the Transnational Migration of People and of Money” [University Park: Pennsylvania State University Press, 1992].)
On the issue of voluntary institutions of law and defense, it’s worth pointing out that we already have substantially voluntary, non-state provision of justice. (You can find a very useful treatment of some of the issues here: http://mason.gmu.edu/~atabarro/PublicvsPrivate.pdf .)There are more private security guards than state-employed police. Bounty hunters, who have a very much undeserved bad reputation, capture more fugitives than do the state-employed police, and they use less force in doing so. (Every time there is a bad apple, such as people who use violence and then falsely claim after the fact that they were “bounty hunters,” it makes news; it doesn’t make news when they make a quiet arrest without violence and return the miscreant to the justice system.) The bail bondsman is a private, non-state actor who puts up the bail to secure the appearance of a charged person before the court. If the charged person skips, the bail bondsman loses the money, so the latter has incentives to bring the former back. But as a private person, he is liable for any damage he does the charged person, as are his agents (the bounty hunters). So they have plenty of incentives to use minimal force and to treat the charged person as a person, not as a piece of meat or a wild animal. State-employed police face very different incentives; they get paid regardless of whether they actually catch anyone and they are not (generally) personally liable if they use force and harm the charged person. So we’re already substantially where John Hasnas wants us to be (if I have understood him correctly). It’s just a question of allowing more such voluntary provision of justice. What you need to do is to limit the state-employed police to actually protecting people, rather than victimizing them, as so often happens today, through enforcement of victimless crime laws. None of that has anything to do with Michael Otsuka’s proposal, however, since he’s not interested in voluntary organizations to enforce justice, i.e. protection of life, liberty, and estate, but rather in strange allegedly “consensual” arrangements to enforce what would otherwise be victimless crimes. The problem is that all such arrangements would use or consume wealth, and wealth has to be redistributed constantly to be fair, so there would have to be a very coercive, very intrusive, and very powerful non-consensual state that would continually rearrange the distribution of wealth. There’s nothing particularly consensual about any of what he describes, no obvious efficiency gains, no increase in liberty, and nothing attractive to anyone other than an intellectual who evidently has too much time on hands.
I have some further thoughts about the equality issues. Perhaps my thoughts are not about strict equality per se. Often we libertarians come accross as a wealthy white mens movement. In part I think that has to do with how we focus and frame our ideas. It is not so much that there is shocking inequality in our society, but that we ignore the concerns about other people. Medical care is a great issue. Many people are concerned about the costs of medical care. However, it seems to me that rather little free-market ink is spilled on discussing how the cost of medical care is influenced by regulation. We are often put on the defensive by fighting welfare-state plans to alter the medical system that we look like apologists for the status quo. We need to work more on convincing people that the problem is state regulation. We need to be more convincing that the free-market is not the problem, and that the managerial state is. Will this convince hard core leftists? Probably not. Will this appeal to many people who don’t have much money and pay high medical bills? Possibly.
I’m not shocked by inequality. However, I do beleive that state regulation and economic redistribution is more of a tool that helps wealthy people and hurts poor people. The problem is that libertarians have the reputation of being wealthy. And in a way that is true. I think that the only way to change that is to take the position that the state does not redistribute from top to bottom but from bottom to top. The message of libertarianism does not have to be just for people who do well or those upwardly mobile. But until we focus more on the concerns of those who aren’t, we won’t be sympathetic to people who aren’t. Furthermore, we will not be sympathetic to those who have even a mild interest in those who aren’t.
As to the Georgist issue, I am curious as to why you aren’t sympathetic to his approach. I have been reading up on this and it does seem plausable that gains to the economy become eaten up in the increasing price of land. Do you think that it is plausable that an improving economy helps the land owning class more than any other class? This would mean that the gains to the economy of tax cutting don’t work their way throughout the economy but acrue more to land owners.