Economic Black Magic

In considering his moves from D1 through D2 to D3, Cohen in a childlike manner asks: “at what level is the equality of income and wealth in D1 pitched, and why is it not postulated to be higher, or lower, than whatever that level is?” (99)

An excellent question. In being so caught up with improving society by magically getting from D1 to D3, Cohen fails to ask how an economy actually grows in the first place.

It turns out, through capitalist saving and entrepreneurial profit-seeking endeavors of investing the money saved into longer and more roundabout methods of production.

Discoveries of new technologies play a crucial role, as well.

This dynamics is destroyed when Cohen’s egalitarian vision is implemented. The answer to his question then is that the level of economic development in his “D1” is entirely arbitrary, i.e., can be assumed to be anything, for Cohen’s own disreputable purposes; and this level in the actual society has been achieved entirely via capitalism and permission to people to earn unequal income and to accumulate unequal wealth.

Cohen might try to salvage his argument by saying that D1 is the original position, while D3 is an actual society. In that case, my charge that Cohen has proven too much by creating a perpetual motion machine that would forever improve the economy cannot be sustained.

This move, however, creates a different problem. That equality is preferable to inequality in D1 with its “disembodied somnambulists” does not entail that it is also preferable in D3 with actual people.

Cohen’s Straw Man Libertarian

Cohen considers a “libertarian” who “supports laissez-faire because he believes in equality of opportunity, and he believes in the latter because he thinks it unfair for people’s progress to be differentially impeded and promoted by restrictions and advantages for which they are in no way responsible.” He then dismisses him as not “a very clear thinker.”

Fortunately, he recognizes this creature to be “statistically rare.” (92)

For libertarians do not, like writers of self-help books, stress individual progress: they rather celebrate social progress and individual rights.

The churning of the social hierarchy, such that an individual is faced with mobility, both upward and downward, is scarcely important, other than as a tool of social progress. If out of two men, one must be the boss, and the other, the fool, does it really matter who is who?

What matters is that each man acquires that position in which he can serve society the best, be it indeed the position of manager or the technician.

Individual rights are intimately connected with this vision of a successful society in this way: each person is free to plot and plan, wheel and deal, build and trade, labor and direct production as per the principles of laissez-faire capitalism in order to find such a position.

Thus, Mises points out: “We attack involuntary servitude, not in spite of the fact that it is advantageous to the ‘masters,’ but because we are convinced that, in the last analysis, it hurts the interests of all members of human society, including the ‘masters.'” (Liberalism, 22)

Difference Principle Reimagined

In Ch. 3 Cohen continues to push the idea of Rawlsian ethics as personal morality.

The difference principle (DP) states that deviations from original equality are permitted if they improve the conditions of the worst-off. But if inequality is thus justified, then so is equality. We may assume that in society D2 the more talented earn higher incomes. Why then shouldn’t these high flyers donate all their money to the government to be distributed equally to all, thus bringing about D3? Surely, this would help the worse-off even more.

An objection crops up. If the market is destroyed, then how will we know which jobs are more urgently in demand than others? Without market prices for labor, what shall signal job-seekers to allocate scarce labor to its most important uses? Cohen has a ready reply. The nominal wages will remain at their laissez-faire levels, but everything above the amount due equally to all will be taxed away. Thus, Smith may contract to receive 50K per year, Jones, 80K, and Robinson, 110K. In fact, all three will receive only 20K after taxes. Cohen dares to suggest that “that way of achieving equality seeks to preserve the information function of the market while extinguishing its motivational function.” (122n) Well, the market is not a game. It doesn’t work this way. Again, people act for ends. They work to achieve specific goals in their consumption during their leisure. In their striving, they will ignore completely the nominal wage and look solely at the real wage. Then there is the point of view of the business firm. Why would it offer higher nominal wages if all real wages must be identical? What does it gain by doing that other than an unpaid government-imposed duty to withhold taxes from its employees’ paychecks?

Still, a libertarian might not be able to condemn a society in which the economic regime was laissez-faire capitalism, but where many people voluntarily donated or tithed a large percentage of their wages to the “minimal” government that then distributed the cash so as to equalize as much as possible incomes. Such a society seems implausible, however.

It seems that Cohen has proven too much. If the Rawlsian DP, after Cohen is through with it, does after all require complete equality and with it, complete economic and social collapse, then it must be either jettisoned entirely or seriously reworked. But I have felt that the DP does state an important truth. Let’s see therefore how it can be fixed.

The original and primordial question is, under which system of economic organization are human pursuits of happiness harmonious at least in the longer run? In particular:

  1. How shall an individual find a place in the economic order and “integrate himself into the totality of society,” in Mises’ phrase, where he can render the most valuable service to society?

  2. How to ensure that society, in turn, shall serve each individual increasingly better with time? How to enable and promote economic improvement and creative advance?

  3. How can humans, each with his unique life and plans, avoid getting into each other’s way as they seek their own pleasures?

  4. How to coordinate human productive activities and labors to ensure that within all factories, farms, etc. all novel projects commence only when the complementary factors of production are found and cheerfully snap into place?

It turns out that the answer to all these questions is the same: implement laissez-faire capitalism. It’s not “inequalities” that “should be permitted if they improve the welfare of the worst-off”; rather, freedom to pursue happiness is granted to all if it tends to be in the interest of society as a whole, of the “masses,” with the free individual himself being squarely part of society, such that his welfare counts, too. Call this the freedom principle, FP. It is indeed true that such freedom does not guarantee success in this pursuit. Some people will fail to reach their goals; others will succeed; different people will succeed differently. Considerable inequality will obtain thereupon. But it’s not our focus of concern.

Sufficiently deeply anti-social acts — murder, theft, and so on, are obviously to be repressed. But the liberty to improve one’s own life does not entail any duty of the more talented to sacrifice for the sake of the worst-off. Unhampered capitalism does not suffer from the Cohenian absurdity whereby the best sort of folks that humanity has to offer, who are already spectacularly serving the people via the free market, are allegedly “morally” commanded to give away their wealth or income.

It may be that one reads Mt 19:21, “If you want to be perfect, go, sell your possessions and give to the poor, and you will have treasure in heaven. Then come, follow me,” and, through grace, becomes firmly convinced that this is his vocation. But there is no natural duty to do this.

We show respect to the human nature by allowing people to seek their self-interest but structure the legal system so as to harmonize and coordinate this search. Perhaps we ought to thank God for designing us capable of social cooperation. There is no overarching end to aid only the worst-off at all costs, including by brainwashing people into imagining themselves “just” for slaving away for the sake of the poor. The standard of living of the general public does improve continuously and quickly under laissez faire, but no inappropriate and scandalous sacrifices are required of the more gifted individuals.

We can see that the DP and FP are identical in their first part: the welfare of the masses (which should be the same as Rawls’ worst-off if he is to make sense) is our desideratum. But DP does, and FP does not, entail a perverse second part, namely, that the economic elite are to labor altruistically for the sake of the community. And this is a distinct advantage of FP.

Cohen thinks that elimination of inequalities can be “willed.” If only the more talented were more “moral” in their “daily lives”! I condemn Cohen as morally perverse, and the difference principle as outlined by Rawls as badly thought out.

Raging Against Man

Unless people accept his egalitarian ethos, Cohen writes, “how can they, without a redolence of hypocrisy, celebrate the full realization of their natures as moral persons when they know they are out for the most they can get in the market”? (131)

In this single sentence, Cohen shows himself a depraved man in 4 different ways.

First, he attacks human nature. Man acts is the first axiom of economics and a self-evident first principle. A human being can’t help seeking his happiness, “in the market” or anywhere else. He is not a robot to labor tirelessly for the commune.

Second, a man is not a Homo economicus. The motives of his actions need not be to obtain “the most he can get in the market,” as if he is “greedy” or some such slander. It is a fact that the vast majority of people “prefer life to death, health to sickness, nourishment to starvation, abundance to poverty.” (HA, 154) But the actual ends they seek are enormously varied, and life, health, etc. can be and are sacrificed every day for other ends.

Third, Cohen assumes that only an egalitarian is a “moral person.” I personally think an egalitarian is a disgusting freak, a moral monster, even a madman. What a dreary existence it must be to constantly measure oneself against others, repress one’s own desires, and restrain one’s efforts in order to not be in any way better than they!

Fourth, Cohen thinks that morality is the be-all and end-all of life. Far from it. Moral law justifies one’s relations with other humans and helps to build one’s personality. But once man has been purified, he is freed and told: “Do as you will; enjoy yourself; have fun; have as much fun as you want, in fact, even if it’s far more intense than the feelings of other people.”

I am starting to dislike Cohen thoroughly.

Self-Directed Development of Talents Is Not Morally Arbitrary

Cohen finds a problem with “deliberately exploiting a morally arbitrary advantage.” (154) He is confused. (It’s pathetic, really.) The inborn gifts of the talented may be morally arbitrary, insofar as a man cannot be praised for his moral goodness on their account. But these gifts are not physically arbitrary, and one ought to milk them for all they’re worth in order to obtain narrow happiness, i.e., pleasure, such as indeed economic advantage. Cohen falsely claims that making smart use of one’s assets including natural and social endowments for the sake of enjoying oneself is “unjust.” A man who thereby comes to love his life can be praised and admired for his success.

Another question is what after all is morally relevant. Well, man is both a capitalist with his inborn or acquired human capital and entrepreneur who himself directs his own efforts. Even if his initial cache of capital does not earn him commendation, straightforwardly, successful self-direction and both the resulting dividends (happiness) and capital gains (developing his talents) are praiseworthy. Hence how prudently and courageously one invests his human capital is the essence of intelligent exploitation of “advantages,” however “morally arbitrary,” and itself is highly morally significant.

It may be that differences in talents do not justify unequal incomes. At the very least then they cause unequal incomes in the market economy. Further, that they don’t justify inequalities does not mean that inequalities are unjust. Still less is the government justified in confiscating and expropriating one man’s goods to subsidize another.

Are Inequalities Unjust Even If Agreed to?

Cohen asks:

Why should the fact that it improves the lot of the worst off render an inequality fair? Why is 10, 6, however otherwise superior it may be to 5, 5, more fair than 5, 5, even if the worst off person’s improvement from 5 to 6 compensates for the unfairness of widening the gap? (159)

And again:

Whoever has a veto has it because the initial distribution is endorsed by justice. It does not follow that a unanimously agreed change in that distribution could then not also be endorsed by justice, but what would be the reason for saying that it was? One might think that what unanimity incontrovertibly does is render the inequality that it endorses legitimate, but why just?

How can the principle that unanimity is here said to favor be declared, quite simply, just, given the standard of justice that made the initial distribution a demand of justice? (165)

Well, Rawls’ device of bargaining in the original position is a case of “pure procedural” justice. Whatever is unanimously agreed upon in that situation is declared to be just.

Cohen, on the other hand, has simply defined justice as equality. Of course, in that case, any inequality is ex vi termini unjust.

The initial equal distribution of “wealth” in the original position is a demand not of justice but of logic, since the “free-floating wraiths” there are stripped of any and all identifying characteristics and are unaware of their environment to boot. How else but equally could one distribute anything between such strange creatures?

Cohen goes on:

Why would unanimity not render legitimate even a distribution under which the worst off were worse off than anybody needed to be? (166)

It would render such a distribution both legitimate and just in the Rawlsian sense, but presumably 4, 10 would not be agreed to if 5, 5 was the initial distribution.

Radical Egalitarianism and Pure Procedural Justice

The Cohenian “egalitarian ethos” would not be mutually agreed upon in the original position, constituting as it does enslavement of the better off to the worse off.

Everyone, anticipating their possible incarnation as one of the better off, would veto this proposal.

Hence the Rawlsian method does not establish such an ethos as just.

As a result, Cohen’s argument that the difference principle understood as applying to the political basic structure of society should be extended into the realm of personal morality fails to go through.

Is Autarky the Only Way to Escape Cohen’s Madness?

Suppose Crusoe is alone on his deserted island. He typically catches 5 fishes and gathers 1 pound of berries each day. He consumes whatever he produces, thereby receiving the full product of his labor.

Friday arrives on the island. Immediately, Cohen would presumably argue, Crusoe is duty-bound to give Friday half his income to establish “equality” between them.

Crusoe now receives far less than the full output of his workday. How isn’t Friday, according to the Marxist Cohen, or anyone for that matter, Crusoe’s wicked and unjust exploiter?

Friday is trying to trick Crusoe into giving up his sustenance by appealing to a crazy moral theory. And Cohen is enabling him. For shame.

Nature of “Selfishness”

Cohen believes something quite odd, namely that “selfishness, and, too, our equanimity about it, are precipitates of centuries of capitalist civilization. (First capitalism destroys community. Then its defenders say that material incentives are necessary because communal ones aren’t powerful enough.)” (178-9n)

But “selfishness” is an elemental property of the human will. It “belongs to man to do everything for an end,” St. Thomas states; “the object of the will is the end and the good. Therefore all human actions must be for an end.” (ST, II-I, 1, 1) It is human nature to seek happiness, and happiness is sought in acquiring and enjoying goods that suit each individual’s nature and personality. Cohen is denying people their due, the fulfillment of a capacity that belongs to them by their very essence, and that is unjust. The search for happiness is not an effect of capitalism; it is a process which is best served by capitalism.

It is true further that capitalism de-communizes society, as in frees each individual from social pressures. Far from reversing this process as Cohen apparently desires, we must complete it. “It will require many long years of self-education until the subject can turn himself into the citizen,” says Mises. “A free man must be able to endure it when his fellow men act and live otherwise than he considers proper. He must free himself from the habit, just as soon as something does not please him, of calling for the police.” (Liberalism, 55)

Cursed “Ethos”

Cohen continues: “In the communist ideal labor should be given freely, like noncommercial love (though not, therefore, out of love).” (225) Freely means free of charge, not at the discretion of the giver. The part is parentheses is telling. For there are not one but two ethos for Cohen. The first is the egalitarian ethos (EE) which should permeate all human actions. One must supress his desires for pleasure for the sake of being no better off than anyone else. This ethos is harped on throughout the book. But we can see now that this is not the only ethos of Cohenism. The second one is the ethos of service (EoS). One must struggle mightily out of this “moral inspiration” (192) to serve other people. One is not to labor out of self-interest or love for his fellow man; instead, laboring is a duty, ethos #2. This one, however, is nowhere discussed explicitly.

EE is clearly insufficient, since it does not in and of itself specify where and how hard anyone ought to work, or even whether he should work at all. EoS demands laboring solely to benefit society. Before we proceed, therefore, let Mises provide a sobering reality check:

While the sacrifices an individual worker makes in intensifying his own exertion burden him alone, only an infinitesimal fraction of the produce of his additional exertion benefits himself and improves his own well-being. While the individual worker enjoys completely the pleasures he may reap by yielding to the temptation to carelessness and laziness, the resulting impairment of the social dividend curtails his own share only infinitesimally.

Under such a socialist mode of production all personal incentives which selfishness provides under capitalism are removed, and a premium is put upon laziness and negligence. Whereas in a capitalist society selfishness incites everyone to the utmost diligence, in a socialist society it makes for inertia and laxity.

The socialists may still babble about the miraculous change in human nature that the advent of socialism will effect, and about the substitution of lofty altruism for mean egotism. But they must no longer indulge in fables about the marvelous effects the selfishness of each individual will bring about under socialism. (HA, 677-8)

“Moral inspiration” must mean some desire to promote the good of other people. But such a thing is, as they say, 10% inspiration and 90% perspiration. Even if, as Cohen maintains, it is false that “people never act out of generous or conscientious inspiration, with no prospect or benefit,” (193) it is still false that people always or even as a rule act out of these impulses or that a durable system of economic affairs can be built out of them.

On p. 184 Cohen considers the case of a woman (call her Mary) who prefers (1) being a doctor at $50,000/year to (2) being a gardener at $20,000/year to (3) being a doctor at $20,000/year.

Given EoS without EE, she will choose (1); under EE without EoS, she will choose (2); with both present, she will choose (3).

My judgment is that EoS on its own is entirely otiose and unnecessary, since (1) would be chosen under free markets + inequality, as well; it’s just that Mary’s pursuit of self-interest and the common good will be harmonized through the market process. Furthermore, under unegalitarian laissez-faire capitalism, Mary would still serve society at $50,000 best; it’s just that she would also better serve herself, and she is a part of society. As Mises says, Mary “becomes a social being not in sacrificing her own concerns for the sake of a mythical Moloch, society, but in aiming at an improvement in her own welfare.” (HA, 160) Moreover, she would (justly) get the full product of her labor.

Second, I think that EE is evil and inhuman, even despicable.

However, I grant that if EE and EoS are both somehow adopted by the great majority, the resulting economy, namely egalitarian capitalism, though a lie and ridiculous game, might just work.