Tag: John Rawls

Anthony de Jasay on poverty and inequality

A recent collection of essays in honor of H.S.H. Prince Philipp of Liechtenstein contains Anthony de Jasay’s article ‘Against Poverty and the Misuse of Language that Helps to Perpetuate it.” In this piece, Jasay argues against the “self-evident” view that economic growth comes with undesirable inequalities of wealth and income.

In the first place, he wonders why it should be assumed that inequality is wrong. In a sharp departure from John Rawls, Jasay argues for a presumption of inequality. After all, even the most casual inspection of reality shows differences in genetic heritage, upbringing, and their unequal effects on wealth and income. Since correcting these inequalities involves interference in mutually advantageous social conventions, the burden of proof is on those who advocate such coercive measures.

Jasay identifies John Suart Mill as one of the writers who contributed to a confused way of thinking about this issue by separating “production” and “distribution,” as if these are two distinct events that follow each other in succession.  But as Jasay writes in another article:

Output is distributed while it is produced. Wage earners get some of it as wages in exchange for their efforts; owners of capital get some of it as interest and rent in exchange for past saving. Entrepreneurs get the residual as profit in exchange for organization and risk bearing. By the time the cake is “baked,” it is also sliced and those who played a part in baking it have all got their slices. No distributive decision is missing, left over for “society” to take.

Because human inequality is not a social construct but a fact of existence, attempts to suppress inequality involve costs. Jasay mentions three kinds of costs: enforcement costs (ranging from record-keeping of taxable subjects to tax compliance), foregone capital accumulation due to income redistribution, and worsening of the marginal rate of transformation of effort into net income. This leads Jasay to ask the question whether the poor actually benefit from such redistributive efforts compared to the rise in income that they would enjoy under laissez-faire capitalism.

The ethics of debt default

One of James Buchanan’s most interesting papers is The Ethics of Debt Default (1987), first published in the book Deficits (a collection of public choice articles about public debt and debt financing), edited by James M. Buchanan, Charles Kershaw Rowley, Robert D. Tollison and reprinted in James Buchanan’s Collected Works, Volume 14.

As an individualist contractarian, Buchanan rejects the argument that we have a moral obligation to honor debt obligations that the government has created simply because the modern state is a ‘moral unit’ in the sense of an extended family. He has more sympathy for the conservative argument that government should not default on its debt because we all benefit from a government that honors its commitments. However, Buchanan notes that on a less abstract level of discussion “a collective decision to repudiate the debt need not, in itself, pull down the whole legal-political house of cards, especially if it is accompanied by a change in the rules designed to insure against recurrence of the necessity for repudiation.” As a contractarian, Buchanan can only endorse borrowing  to finance “genuine public capital investments” that also yield benefits to future taxpayers. After all, it would not be fair if the taxpayers that authorized public investments would have to assume the complete burden of the costs when future generations benefit from those investments, too. The situation is different in the case of ordinary public consumption expenses, which mostly accrue to the existing  generation and that push the tax burden to future generations.

In favor of the argument that there is not a persuasive moral argument against debt default in the case of debt-financed ordinary consumption he employs a Rawlsian argument that should persuade modern liberals and progressives as well. Behind a veil of ignorance where people will not know their generational position it would not be rational to endorse debt financing for the sole aim of favoring one generation over another. Or, as Buchanan puts it in welfare economics terms, “there is no multi-period Parato-superior move that can describe a shift to a regime of debt-financed public consumption.” Buchanan even characterizes debt financing for ordinary public consumption “immoral” by such contractarian criteria.

He also discusses the possibility that the risk premium for government bonds (which, in parallel with private borrowing, should be higher for consumption expenditures) attenuates the moral significance of defaulting on the debt. After all, the voluntary payment of the risk premium implies the recognition of the bond holders that such loans may not be paid back.

Buchanan’s contraction framework only allows for a moral obligation to honor debt that was issued for public investment and income-yielding assets. Incidentally, since a significant portion of debt-financing concerns ordinary consumption and special interests, the argument that Buchanan puts forward in this article could also support voting against raising the debt ceiling of the US government.

One could argue that Buchanan’s limited support of honoring debt payments rests on two controversial premisses about public goods and the binding force of hypothetical contracts.

(1) Buchanan’s argument only works if a social contract to produce public goods is necessitated by suboptimal production of public goods in “the state of nature.” But as Anthony de Jasay has so eloquently written, “People who live in states have as a rule never experienced the state of nature and vice versa, and have no practical possibility of moving from the one to the other. It is often a historical anachronism and an anthropological absurdity to suppose such movement. On what grounds, then, do people form hypotheses about the relative merits of state and state of nature?” Furthermore, a Rawlsian contractarian framework cannot apriori assume government production of public goods instead of some variant of ordered anarchy where redistribution is achieved by limiting property rights.

(2) Arguments that derive the legitimacy of  public institutions from hypothetical contracts are intrinsically unfalsifiable. Removing personal, circumstantial and generational elements from the contractarian framework may strengthen “fairness” but at the cost of reducing the possibility to arrive at objective and unambiguous results. As a consequence, hypothetical contractarianism in practice collapses into a situation of a government of experts claiming to know the alleged substance of such agreements, and citizens (understandably) objecting to the contents and terms of these “contracts.”

An alternative approach would be to only honor actual contracts. Such contracts may not be as “impartial” as hypothetical contracts but they have the distinct advantage of permitting objective verification and incorporating evolved conventions concerning person and property. It is doubtful, however, that such a strict contractarian framework can be reconciled with an obligation of all individuals to pay taxes to  “the government” to honor the debt obligations that it made. Moreover, many individuals (or groups of individuals) will have both self-interested and moral reasons to seek default on such debts.

There is therefore no persuasive moral argument why individuals are generally obliged to honor any kind of government debt. Buchanan recognizes that defaulting on the debt may close off prospects for further government financing through borrowing. But to those who believe that government lacks legitimacy, and is a dangerous imposition on the human race, that should be an additional argument in favor of debt default. Defaulting on the debt might also restore the balance of power between generations and provide an incentive to transition to less debt-driven (ans thus more robust) forms of economic interaction.

Arguments that claim that seeking repudiation of the debt will blow up the political and financial system, and produce a net-loss for all, rest on the unrealistic assumption that such views will have absolute instantaneous effects. In reality, it is more likely that as the arguments for debt repudiation will be gradually embraced, financial markets and government operations will gradually adjust as reflected by increased risk premiums and less emphasis on debt-financing of government operations.

Common political fallacies

In Cato Journal, Volume 28, No. 1 (Winter 2008), the independent scholar Anthony de Jasay reviews four common fallacies (as presented in the works of John Stuart Mill, Ronald Dworkin, John Rawls, and Armen Alchian) that many social scientists and political journalists keep repeating without rigorous analysis.

The first fallacy is that production should be governed by the laws of economics, but that distribution needs to be decided by society. As de Jasay points out,

“Output is distributed while it is produced. Wage earners get some of it as wages in exchange for their efforts; owners of capital get some of it as interest and rent in exchange for past saving. Entrepreneurs get the residual as profit in exchange for organization and risk bearing. By the time the cake is “baked,” it is also sliced and those who played a part in baking it have all got their slices. No distributive decision is missing, left over for “society” to take.”

Although these slices can be distributed again by society, this will constitute a secondary redistribution, usually involving coercion.

The second fallacy is that the aim of public policy should not be equality of outcomes, but equality of opportunity. Such “equality at the starting gate” assumes that equality of opportunity and equality of outcome can be separated. But unless opportunities are equalized at the point where acquired advantages are at a minimum (at birth), maximizing equality of opportunity would require stripping away the advantages people have acquired before the starting gate, and continuous intervention in outcomes to equalize opportunities between generations.

The third fallacy is that in a just society individuals must have a right to the greatest possible liberty compatible with the same liberty for all. As de Jasay has pointed out in detail in his writings, the proviso “compatible with the same for others” is meaningless because it is without substance. In its current form it means that I am at liberty to do anything I want (including violence and theft), provided others have the same liberty as well. Clearly, this is not what advocates of this position intended. More troubling to de Jasay is the fact that liberty is presented as a “right”:

“What is deeply worrying about this thoughtless misuse of the word “right” is that it can be straightened out at a single stroke by simply assuming that every feasible act is prohibited unless we are somehow granted a “right” to perform it, in which case it becomes a liberty. It takes a right to lift it out of the universe of prohibitions.”

The fourth fallacy is that society has a right to modify, transfer and revoke property because property rights are granted and defended by “society.” As has been discussed in the first fallacy about production and distribution, redistributing property would be tantamount to ignoring the fact that all who have helped to produce property have already been remunerated in the process. As in the case of a “right to liberty”, the “right to” part is redundant:

“Like all liberties, the kind we call property exists and is exercised within the rules that prohibit certain wrongs (torts). Staying as it does inside the rules, it needs no separate right to exist and be exercised. Nor does it make sense to think of an obligation imposed on all not to do against property what the rules prohibit them from doing anyway.”

Anthony de Jasay: Parrot Talk: The Repetition of Common Fallacies (PDF)

Rights: nonsensical, empirical and hypothetical

If there is one thing that characterizes contemporary political discourse, and contemporary political liberalism in particular, it is the obsession with “rights.” Individual rights are absolute, or “trumps,” that do not permit to be overridden by collective goals, and can only be defeated by another trump. But since every right implies a corresponding obligation (a cost), increasing the number of rights we have also increases the number of obligations. If many of these rights are perceived to be equally important, or to be weighed differently in different circumstances, the scope and depth of collective choice will expand and creation and enforcement of rights will come to reflect the moral and political fashions of the day. Of course, this will largely defeat the trump-like nature that rights were supposed to have in the first place.

The fundamental question is where these “rights” come from in the first place. Rights are supposed to be “self-evident,” can be deduced from God’s will, the logic of reason, or the nature of man, etc. Unfortunately, attempts to find a solid foundation for rights have not been very fruitful, and even philosophers that agree on the same foundation for rights have often derived wildly different conclusions about the nature of those rights. But despite the failure to find objective evidence (either empirical or logical) for the existence of rights, “rights-talk” increasingly dominates public discourse. This is not just confined to modern “egalitarian” liberalism but has been a dominant feature of libertarianism as well, as evidenced by the writings of Ayn Rand, and Murray Rothbard, and the early Robert Nozick.

How do we reconcile the popularity of “rights-talk” with the lack of evidence for the existence of rights? The most obvious explanation is that by presenting an individual preference in the form of a “right” we depersonalize the nature of the claim. The “right” element confers credibility because it evokes truth, not individual preference. This effect is further enhanced by the fact that historically a lot of rights were assumed to be “self-evident” or derived from God’s will. The liberal philosopher Anthony de Jasay notes that the popularity of rights may be explained by its feature of hiding its redistributive nature and costs:

“‘Rights’ survive and crowd ‘goals’ out of circulation even if both convey the same substantive message, because rights-talk cheers and gratifies all who are accorded rights by it, and threatens no one overtly. Goals, on the other hand, unless they are innocuous, usually suggest not only the promise of something beneficial, but also the cost of attaining it, the effort it takes, and sometimes (in the case of visibly redistributive goals) an implication that if some gain by it, others must lose. Rights-as-goals are presumably easier to propagate and fitter to survive in the public consciousness than goals tout court.” (Anothony de Jasay, Choice, Contract, Consent: A Restatement of Liberalism)

Right can exist in an empirical sense when they reflect a contract between individuals to perform or refrain from certain actions. But in this case rights follow from actual agreement. The evidence that such rights exist can be found in a (written) agreement. And the existence of such rights is usually confirmed by both parties because it is advantageous for them to accept the benefits and obligations of the agreement. The situation is different in the case of rights that do not reflect (implicit) agreement by the individuals who have to incur obligations and costs. Anthony de Jasay notes that “a ‘rights-based’ political theory in general, and rights-liberalism in particular, is losing determinacy and self-restraint when it loses sight of where the burden of proof lies.”

The existence of specific rights and obligations are often defended with the argument that they reflect a “social contract,” similar to a contract between two individuals. A major weakness of this line of thinking is, of course, that such a contract has never been agreed to in reality. This would not necessarily present a major obstacle in case the rights involved would be minimal and non-distributive, but most modern rights do not have this characteristic. For example, an agreement to abstain from harming someone can be complied with by doing nothing, but an agreement that says that “every person has a right to food and shelter” comes with far reaching obligations that will not likely generate universal agreement.

Some modern liberal philosophers (such as John Rawls) do not prefer a social contract so “trivial” and claim that more extensive rights can be justified by means of an hypothetical contract in which rights are derived behind a “veil of ignorance” in which individuals are deprived of information about the individuating characteristics of the citizens they represent. This raises the question of what the relationship is (or should be) between such agreements and what actual individuals would agree to in real life. The reason why such hypothetical agreements should create moral (and legal) obligations in real life is that they correspond (or should correspond) to our conception of justice. Unfortunately, such a justification runs into the same problems as the more straightforward derivation of rights earlier; it lacks objective empirical or logical content. So far the only credible attempt to derive rights (or explain their existence) from non-moral premises is found in Hobbesian contractarianism as represented by Thomas Hobbes, David Gauthier and Jan Narveson.

Justice as impartiality

One common answer to the question of what should characterize an acceptable theory of justice is that it should be “impartial.” This is generally understood to mean that a theory of justice should not be tailored to the interests of specific individuals (or groups of individuals). This raises two questions. First, do we have reason to accept such an account of justice? Second, what follows from such an account of justice?

One weakness of presenting justice as impartiality is that it assumes that people stand in need, or recognize the need, to justify their actions to others in a moral framework. But as the philosopher David Gauthier points out, such a need can be treated as

“the secularized residue of the doctrine that persons seek to justify their actions before God. But once that residue is being recognized for what it is, it surely loses all credibility. And so justice as impartiality lacks a plausible view of justification” (David Gauthier, “Mutual Advantage and Impartiality,” in: Impartiality, Neutrality and Justice : Re-Reading Brian Barry’s Justice as Impartiality).

If there is a prospect of reconciling practical reason and justice it needs to be found in the fact that all persons, whatever their values are, will need to choose justice as dictated by practical reason. The best candidate for such a theory of justice is justice as mutual advantage.

The other issue with justice as impartiality is what it would entail. Justice as impartiality is often linked to the view that the arbitrarinesses of nature should not be reflected in the rules of justice. The fact that a person is more talented or better off is not deserved and should be morally irrelevant. But what actually follows from that is that:

“nobody deserves anything at all – neither the fortunate, nor the unfortunate. If justice is served by depriving people of what they came by as the result of morally arbitrary processes, then we must take everything from everyone…” (Jan Narveson, “Egalitarianism: Partial, Counterproductive, and Baseless,” (Ratio, Volume 10, Number 3, December 1997, pp. 280-295 (16).

If the rules of justice are decided in a framework that is impartial, the best guarantee for acceptance and compliance with the substance of those rules is that they reflect mutual advantage, in which no one is made worse off for the benefit of others. This conception of justice does not exclude acts that confer a unilateral benefit on others, but these acts should be left to the choice of individuals and not be enforced through coercion.