The prologue is here, part I is here, and part II is here. This post focuses on the redistribution of income and wealth, specifically, its counterproductive effects and its roots in class warfare and “liberal” arrogance.
In a libertarian regime, everyone is entitled to negative rights: the free enjoyment of one’s own life, liberty, and property as long as one does no harm to others. With negative rights there is no taking from anyone else, except to underwrite those state functions (justice and defense) that protect negative rights. (An extreme libertarian — i.e., anarcho-capitalist — would say that the functions of justice and defense can be provided through voluntary contractual relationships.)
Positive rights, on the other hand, are assigned selectively by a regime that takes from some and gives to others. How much the “donees” receive from the “donors” depends only on the dictates of those who create and enforce postive rights, namely, paternalists (usually “liberals”) and power-seeking politicians.
Joe Miller (Bellum et Mores) is a liberal who supports positive rights:
…I still hold on to one core insight of liberalism: respect for autonomy means more than just non-interference. I can have all sorts of freedoms from various things, but those freedoms don’t mean a damn thing if I’m too cold/sick/hungry/stupid/isolated to exercise them. And I remain convinced that, at least for right now, the only way to ensure that everyone has the shelter, medicine, food, education, and access needed to enjoy his/her freedom is through some form of redistribution. Insisting that you redistribute part of your wealth is no more a violation of your autonomy than is insisting that you refrain from hitting me in the nose. Both hitting me in the nose and refusing to help those too poor to exercise their freedoms are violations of autonomy.
(I addressed the argument about autonomy in parts I and II.)
Believers in positive rights seek “cosmic justice” (though they may not realize it). What is cosmic justice? I like this example from Thomas Sowell’s speech, “The Quest for Cosmic Justice“:
A fight in which both boxers observe the Marquis of Queensberry rules would be a fair fight, according to traditional standards of fairness, irrespective of whether the contestants were of equal skill, strength, experience or other factors likely to affect the outcome– and irrespective of whether that outcome was a hard-fought draw or a completely one-sided beating.
This would not, however, be a fair fight within the framework of those seeking “social justice,” if the competing fighters came into the ring with very different prospects of success — especially if these differences were due to factors beyond their control….
In a sense, proponents of “social justice” are unduly modest. What they are seeking to correct are not merely the deficiencies of society, but of the cosmos. What they call social justice encompasses far more than any given society is causally responsible for. Crusaders for social justice seek to correct not merely the sins of man but the oversights of God or the accidents of history. What they are really seeking is a universe tailor-made to their vision of equality. They are seeking cosmic justice.
In an earlier post, “Rights and Cosmic Justice,” I wrote:
Those who seek cosmic justice are not content to allow individuals to accomplish what they can, given their genes, their acquired traits, their parents’ wealth (or lack of it), where they were born, when they live, and so on. Rather, those who seek cosmic justice cling to the Rawlsian notion that no one “deserves” better “luck” than anyone else. But “deserves” and “luck” are emotive, value-laden terms. Those terms suggest that there is some kind of great lottery in the sky, in which each of us participates, and that some of us hold winning tickets — which equally “deserving” others might just have well held, were it not for “luck.”
That is not what happens, of course. Humankind simply is varied in its genetic composition, personality traits, accumulated wealth, geographical distribution, etc. Consider a person who is born in the United States of brilliant, wealthy parents — and who inherits their brilliance, cultivates his inheritance (mental and monetary), and goes on to live a life of accomplishment and wealth, while doing no harm and great good to others. Such a person is neither “lucky” nor less “deserving” than anyone else. He merely is who he is, and he does what he does. There is no question of desert or luck.
As Anthony de Jasay writes in “Risk, Value, and Externality,”
Stripped of rhetoric, an act of social justice (a) deliberately increases the relative share . . . of the worse-off in total income, and (b) in achieving (a) it redresses part or all of an injustice. . . . This implies that some people being worse off than others is an injustice and that it must be redressed. However, redress can only be effected at the expense of the better-off; but it is not evident that they have committed the injustice in the first place. Consequently, nor is it clear why the better-off should be under an obligation to redress it….
There is the view, acknowledged by de Jasay, that the better-off are better off merely because of luck. But, as he points out,
Nature never stops throwing good luck at some and bad luck at others, no sooner are [social] injustices redressed than some people are again better off than others. An economy of voluntary exchanges is inherently inegalitarian….Striving for social justice, then, turns out to be a ceaseless combat against luck, a striving for the unattainable, sterilized economy that has built-in mechanisms….for offsetting the misdeeds of Nature.
Most seekers of cosmic justice simply claim that they want only what is “fair” for those who “deserve better.” They overlook or simply choose to ignore the evidence that the quest for cosmic justice harms those whom it is intended to benefit. I address that matter in the section “Does Redistribution Work?.”
Then there are those who claim that redistribution can be made to work because it is possible to calibrate well-being across individuals, thereby maximizing “social welfare.” I address that claim in the section “The Roots of Redistribution: Class Warfare and Arrogance.”
DOES REDISTRIBUTION WORK?
The redistribution of income (and thus of wealth) is an integral function of the regulatory-welfare state (i.e., big government). Redistribution not only harms those who are taxed for that purpose but it also does not lastingly help its intended beneficiaries. In fact, it works to their detriment in the long run.
Liberals are unable to grasp that reality because they, more than most Americans, suffer from economic ignorance. Because of economic ignorance, liberals are unable to grasp the subtle, corrosive effects of big government on those things that drive economic progress: invention, innovation, entrepreneurship, the saving that funds those activities, and the hard work that enables the rest.
We Americans are far better off materially than our antecedents of a century ago — but very few of us (especially liberals) understand how much better off we would in the absence of big government. In this post, for example, I assessed how much worse off Americans will be a generation hence because of big government. The bottom line:
- Had the economy continued to grow at the rate of 1790-1907 (the era of laissez-faire, more or less), real GDP in 2035 would be $107 trillion (in year 2000 dollars).
- If the economy continues to grow at the rate of 1970-2005 (the era of entrenched big government), real GDP in 2035 will be $27 trillion (in year 2000 dollars).
- Thus the average American will “enjoy” about one-fourth the real output that would be his absent big government.
- And more than 50 percent of that greatly diminished output will be taxed to support the state’s regulatory mechanisms and the growing numbers of persons (especially the elderly) who have become dependent on the state.
In sum, redistribution does not work. As part of liberalism’s “package deal” (tax, regulate, spend, and elect) it harms those whom it is supposed to help by undermining economic growth and thus depriving the “cold/sick/hungry/stupid/isolated” of jobs and (for those who simply cannot support themselves) vast amounts of voluntary charity.
The astute reader will have noticed that I have not mentioned programs that are designed to favor particular groups. The most intrusive and controversial of such programs is affirmative action, which is simply an indirect form of redistribution. All I need say about affirmative action I have said here, here, here, here, and here. The bottom line: Affirmative action costs us dearly.
The astute reader will have noticed, also, that I have not mentioned the issue of dependency on the welfare state. There is little to say but this: A guarantee of income (or income-in-kind benefits) for not working is a disincentive to better one’s self through work. Dependency on the welfare state is — and has been — so well recognized as a real and destructive force that even Bill Clinton signed welfare reform into law (the Personal Responsibility and Work Opportunity Reconciliation Act of 1996). And that law has worked.
THE ROOTS OF REDISTRIBUTION: CLASS WARFARE AND ARROGANCE
Liberals wage class warfare on behalf of the “cold/sick/hungry/stupid/isolated” and any “oppressed” or “disadvantaged” group (i.e., one that is not white, male, employed without benefit of affirmative action, law-abiding, and heterosexual). It is a wonder that Jews remain, for the most part, in the liberal camp, but that habitual tendency may arise from liberal guilt (see below).
Liberal politicians are abetted in their cause by the votes that they attract from those groups on whose behalf they wage class warfare. Liberals and their constituencies, for the most part, do not understand the undesirable economic consequences of redistribution. There are many, of course, who simply choose not to understand — choosing class warfare over reason.
It is strange that liberals can claim to believe in the benefits of intellectual liberty (the competition of ideas) but not in the benefits of economic liberty. Liberals’ token adherence to intellectual liberty often is hypocritical. (Consider campus speech codes, for example.) In any event:
- Liberals prize talk (especially when it is their kind of talk). But talk is cheap. Economic achievement requires action, not talk. The liberal imagination cannot value that which it does not understand.
- Rich liberals either don’t understand how they came to be rich (if they did so on their own) and/or they feel guilty about their wealth. They are therefore quite willing to infringe the autonomy of others (through taxation) in the service of their ignorance and their consciences.
- Liberals, who claim to prize autonomy, are nevertheless quite willing to tell others how to lead their lives. Witness the decades of regulation and taxation imposed upon Americans by “compassionate” liberals.
- Liberals are quite willing to decide precisely who is deserving of “compassion” and who is not. That is, they (and only they) are fit to decide where to draw the dividing lines between those who are “too cold/sick/hungry/stupid/isolated” and those who are not.
In other words, liberals are strong believers in positive rights and, therefore, dispensers of cosmic justice. It is liberals who empower the state to dictate the redistribution of income, even though redistribution is a violation of the very autonomy that liberals claim to value. Liberals are willing and ready to draw arbitrary lines between those who (in their view) deserve more income and those who deserve less of it. And liberals are more than willing and ready to use the power of the state to enforce their arbitrariness.
By the same token, liberals are unwilling to allow free institutions to determine who fares well and who fares poorly. And their unwillingness to do so undermines the ability of those free institutions to enable the “cold/sick/hungry/stupid/isolated” to better their lot by their own efforts, and to care for those who are unable to do so.
Some proponents of positive rights (e.g., Joe Miller) nevertheless defend their position by asserting that they are not drawing arbitrary lines between those who deserve more and those who deserve less. For it is possible (according to Joe, among others) to make valid interpersonal comparisons of utility (hereafter interpersonal utility comparisons, or IUCs). The implication is that the ability to make valid IUCs enables someone (them? bureaucrats? politicians?) to make valid judgments about how to redistribute income so as to foster the maximization of a social welfare function (SWF), that is, to exact cosmic justice. (Joe does not refer to the SWF, but there is no point in making IUCs unless it is for the purpose of increasing the value of the SWF.)
The validity of the SWF, then, depends on these assumptions:
- It is possible to make interpersonal utility comparisons (IUCs), that is, to determine whether and when it hurts X less than it benefits Y when the state takes a dollar from X and gives it to Y.
- Having done that, the seekers of cosmic justice are able to conclude that the Xs should be forced to give certain amounts of their income to the Ys.
- Making the Xs worse off doesn’t, in the longer run, also make the Ys worse off than they would have been absent redistribution. (This critical assumption is flat wrong, as discussed above.)
All of this is arrogant moonshine. Yes, one may safely assume that Y will be made happier if you give him more money or the things that money can buy. So what? Almost everyone is happier with more money or the things it can buy. (I except the exceptional: monks and the like.) And those who don’t want the money or the things it can buy can make themselves happier by giving it away.
What one cannot know and can never measure is how much happier more money makes Y and how much less happy less money makes X. Some proponents of IUCs point to the possibility of measuring brain activity, as if such measurement could or should be made — and made in “real time” — and as if such measurements could somehow be quantified. We know that brains differ in systematic ways (as between men and women, for instance), and we know a lot about the ways in which they are different, but we do not know (and cannot know) precisely how much happier or less happy a person is made — or would be made — by a change in his income or wealth. Happiness is a feeling. It varies from person to person, and for a particular person it varies from moment to moment and day to day, even for a given stimulus. (For more about the impossibility of making IUCs, see these posts by Glen Whitman of Agoraphilia. For more about measuring happiness, see these posts by Arnold Kling of EconLog.)
One answer to such objections is that an individual’s utility must diminish at the margin. (After all, diminishing marginal utility, DMU, is a key postulate of microeconomic theory.) Therefore, the Xs of the world must be “sated” by having “so much” money, whereas the Ys remain relatively “unsated.”
If that were true, why would Bill Gates, Warren Buffet, and partners in Wall Street investment banks (not to mention most of you who are reading this) seek to make more money and amass more wealth? Perhaps the likes of Gates and Buffet do so because they want to engage in philanthropy on a grand scale. But their happiness is being served by making others happy through philanthropy; the wealthier they are, the happier they can make others and themselves.*
Most of us, I suspect, simply become happier as we accrue wealth because. But how much wealth is “enough” for one person? I cannot answer that question for you; you cannot answer it for me. (I may have a DMU for automobiles, cashew nuts, and movies, but not for wealth, in and of itself.) And that’s the bottom line: However much we humans may have in common, each of is happy (or unhappy) in his own way and for his own peculiar reasons.
In any event, even if individual utilities (states of happiness) could be measured, there is no such thing as the social welfare function: X’s and Y’s utilities are not interchangeable. Taking income from X makes X less happy. Giving some of X’s income to Y may make Y happier (in the short run), but it does not make X happier. It is the height of arrogance for anyone — liberal, fascist, communist, or whatever — to assert that making X less happy is worth it if it makes Y happier.
There is a liberal urge to exact cosmic justice through positive rights — primarily redistribution in various forms. But redistribution harms those whom it is intended to help because it curtails economic growth and discourages work.
The urge to exact cosmic justice arises from arrogance, that is, from a penchant for dictating economic outcomes (and social relationships) that cannot be justified by pseudo-scientific appeals to IUCs and the SWF.
If there is anything unjust or unfair in this world, it is the effort to exact cosmic justice. Robert Nozick put it this way in Anarchy, State, and Utopia:
We are not in the position of children who have been given portions of pie by someone who now makes last-minute adjustments to rectify careless cutting. There is no central distribution, no person or group entitled to control all the resources, jointly deciding how they are to be doled out. What each person gets, he gets from others who give to him in exchange for something, or as a gift. In a free society, diverse persons control different resources, and new holdings arise out of the voluntary exchanges and actions of persons. (Quoted by Gregory Mankiw in “Fair Taxes? Depends on What You Mean by Fair,” The New York Times, July 15, 2007.)
The urge to exact cosmic justice is more than harmful and arrogant. It is futile, as I will explain in part IV.
Other related posts:
Why Class Warfare Is Bad for Everyone
Fighting Myths with Facts
Debunking More Myths of Income Inequality
Socialist Calculation and the Turing Test
The Social Welfare Function
Taxes, Charitable Giving, and Republicanism
Ten Commandments of Economics
More Commandments of Economics
On Income Inequality
The Causes of Economic Growth
The Last(?) Word about Income Inequality
Democrats: The Anti-People People
Median Household Income and Bad Government
* I want to underscore the essential difference between government-enforced charity and voluntary charity. Government-enforced charity may make liberals happier, and it may make Ys happier (in the short run), but it does not make Xs happier (except for liberal Xs who actually enjoy paying taxes as well as controlling others’ lives). Acts of voluntary charity, on the other hand, make the donors happier. That such acts (might) also make the donees happier is incidental.
It may seem that I am arguing for a position known as psychological egoism (PE), which Joe Miller summarizes (here) thusly: “PE maintains that, as a matter of fact, all human beings are always selfish.” Joe goes on to argue that PE is a false concept. He proffers altruism as the alternative; that is, people actually do unselfish things, things that make them worse off. I will not revisit all of the arguments pro and con PE and altruism, there is plenty of food for thought in Joe’s post, my first comment on the post, and this paper by Keith Burgess-Jackson.
I come down here:
There is no essential difference between altruism, defined properly, and the pursuit of self-interest, even if that pursuit does not “seem” altruistic. In fact, the common belief that there is a difference between altruism and the pursuit of self-interest is one cause of (excuse for) purportedly compassionate but actually destructive government intervention in human affairs.
The implication of calling another person’s act a “sacrifice” [i.e., altruistic] is that someone can get into that person’s mind and determine whether the act was a gain or a loss for the person. I say that someone must be able to get into the person’s mind because I don’t know how else you one determines whether or not an act is altruistic unless (a) one takes the person’s word for it or (b) one assembles a panel of judges, each of whom holds up a card that says “altruistic” or “selfish” upon the completion of an a particular act.
To illustrate my point I resort to the following bits of caricature:
1. Suppose Mother Teresa’s acts of “self-sacrifice” were born of rebellion against parents who wanted her to take over their business empire. That is, suppose Mother Teresa derived great satisfaction in defying her parents, and it is that which drove her to impoverish herself and suffer many hardships. The more she “suffered” the more her parents suffered and the happier she satisified her personal values.
2. Suppose Bill Gates really wanted to become a male version of Mother Teresa but his grandmother — on her deathbed — said “Billy, I want you to make the world safe from the Apple computer.” So, Billy went out and did that, for his grandmother’s sake, even though he really wanted to be the male Mother Teresa. Then he wound up being immensely wealthy, much to his regret. But “Billy” obviously put his affection for or fear of his grandmother above his desire to become a male version of Mother Teresa. He satisfied his personal values.
Now, tell me, who is the altruist, my fictional Mother Teresa or my fictional Bill Gates? You might now say Bill Gates. I would say neither; each acted in accordance with her and his personal values. One might call the real Mother Teresa altruistic because her actions seem altruistic, in the common meaning of the word. But one can’t say (for sure) why she took those actions. Don’s definition of altruism nevertheless requires such knowledge. Suppose the real Mother Teresa acted as she did not only because she wanted to help the poor but also because she sought spiritual satisfaction or salvation. Would that negate her acts? No, her acts would still be her acts, but we would understand them as acts arising from her values. That’s the best we can do absent the ability to read minds.
My argument rests on the proposition that human actions are, by definition, driven by the service of personal values, which come to us in many and mysterious (but not supernatural) ways. As a consequentialist, I prefer to look at results, not motivations. (“The road to hell,” and all that.) I eschew terms like altruism and egoism because they imply that a given result is somehow better if it’s “properly” motivated. A result is a result.
And redistribution yields very bad results, indeed.