Category Archives: A Theory of Justice

Justice demands laissez-faire capitalism.

Rawls and Cohen Revisited

Reading Huemer reminded me of my notes on Rawls and Cohen. Again, if I were behind the veil of ignorance, thinking about what sort of society I'd want to live in, it would occur to me that since I can't influence who I personally will be incarnated as (as rich or poor, healthy or sick, smart or dumb), I would focus on making the overall society as efficient as possible. This means in particular not its "total happiness" at any given moment, but the speed (and acceleration, etc.) at which this total happiness increases with time.

But that society is precisely libertarian laissez-faire capitalism.

Rawls seems to think differently. He'd rather live in a society where the "morally arbitrary" distinctions between persons, such as the quality of their families or IQs are erased. In practice, that would mean that the accidentally better-off shall toil thanklessly for the benefit of the worse-off. Rawls concedes that there can be "incentives" for the more talented so as to elicit the appropriate effort from them which would regretfully cause society to deviate from perfect equality. Cohen asks why, if justice is our ideal, any incentives are necessary. People should work as hard as they can only to give up the fruits of their labors to the poor out of a sense of moral duty. Perhaps we can even have full-featured capitalism, as long as all consumer goods are distributed equally.

In response, I argue that people act for ends. They perceive future pleasures; choose between them; choose between various means to attain these ends, and act with a hope of bettering their lot. "Moral duty" is not in the equation at all. One is never content with merely following the moral law, for a stone or any other inanimate object, too, is perfectly righteous in this sense. One follows the law for the sake of physical or spiritual survival. But he seeks happiness by working to satisfy his various desires and succeed in his pursuits.

In that case, a man must be ruthlessly brainwashed from childhood in order to forget his own ends and work like an automaton only to have his product confiscated. But what if he wakes up from this nightmare and thinks for himself? That's presumably where the "incentives" would come in. What if he, responding to the tax laws, refuses to work? Then he must be enslaved and forced to work under threat of the whip. And what if he tries to run away to free himself? Then he must be killed, lest other slaves mutiny, as well.

We can see that Cohen is a murderer of both mind and body. Hs soul is his own business. But murdering talented people does not benefit the worse off, as Rawls himself acknowledges. Nor does enslaving them, since slave labor is extremely unproductive. Nor, in the final analysis, does treating them as tax-serfs. Up we go in this manner until we reach libertarian unhampered free enterprise system as the pinnacle of human social evolution.

This, I think, is what really follows from Rawls' "original position."

Theory of Justice: Conclusion

Contractarianism is an intriguing approach to ethics, but unlike what Rawls imagines, it still yields laissez-faire capitalism as its political economy and ethics.

Not Even Rawls Would Endorse Envy

Assuming society is not divided into rigid castes and the lack of government fetters and restraints that would prevent some from succeeding in certain ways, a person's destiny is in his own hands. If he fails repeatedly, he may come to feel self-loathing and self-contempt. These feelings are unsurprising. But there are two ways of ameliorating them: one can continue to try to lift himself up or try instead to pull others down.

Rawls mentions a zero-sum society where one person's gain is another's loss. There is no way to lift oneself up without in the process pulling others down. He claims that here justice demands equal distribution of primary goods. Perhaps. Let me make a weaker claim: there is a reason 1) to outlaw competition between members of such a society as producing a net loss for everyone and because of that, 2) to maintain a very rigid social hierarchy. On the one hand, envy would be natural in such a society and could not be constructively dealt with. On the other hand, envious feelings might not arise at all to the extent that each member feels that his place in the scheme of things is assigned to him from birth until death as if by fate and that he is not expected to justify himself anew every day. He resigns himself to the will of the gods. He cannot improve his own position, but neither can he, in the process of trying to improve it, fail. Envy is checked at the source.

The horror of envy is shown in a different scenario: prolonged failure injures my self-respect and sense of self-worth so much that I don't care if I suffer a loss, if only the better-off suffer an even bigger loss. Thus, if Smith and Jones have utilities A = (50, 100), then Smith's envy can be manifested in his desire to obtain B = (40, 70).

Smith can then try to justify his envy by claiming that B is more equal than A and that this equality is in the interest of justice itself. Perhaps Smith is deluded, and his mind is clouded by envy, but I agree with Rawls that Smith's concept of justice must be evaluated on its own merits. Only if his version of egalitarianism is unjust can we condemn him of the sin of envy.

Even Rawls, I think, would judge this type of envy as contrary to the difference principle and to his system as a whole.

Another possibility is simply that Smith wants to loot Jones, to steal money from him, and justifies his crime by saying that the "transfer," whether initiated by Smith personally or through a political process, will make him and his victim more equal which will be just.

Once again, Smith's defense needs to be given careful attention; only if it does not work can we say that Smith is a thief.

Identifying the Worst Off

All deviations from initial equality must benefit the worse- (or worst-) off, according to the "difference principle" outlined by Rawls.

But who are these miserable sons of bitches? We can only find that out by examining an actual society. Let's have a laissez-faire free market operate in some country for a long period of time, say, 100 years. At some point we take a snapshot of the economy. We locate the rich people and call them the "better-off" and the poor people and call them the "worse-off."

Question: does it make sense at that precise moment immediately to invest the government with massive new powers to begin expropriating, confiscating, and transferring wealth and incomes from the better-off to the worse-off?

Obviously, "distributive justice" must occur on the level of social institutions. A poor man who robs a rich man on the street at gunpoint does not by this criminal act demonstrate the workings of the difference principle.

Neither do paroxysms of theft by government seem to have the requisite permanence and generality. The just tax regime must always exist; it can't be turned on and off like a spigot to deliver "justice" to the populace. It seems like mob justice to me.

But in that case, identifying the worse-off becomes problematic. A system that features large numbers of people on government dole will have different people as the worse-off and better-off. For example, let a certain man perceive an opportunity to make a great investment that under freedom would make him a millionaire and one of the better-off; as things actually are, he is deterred from investing by the taxes that preserve the risk of the investment but diminish the reward. By missing this unique chance, he remains poor all his life and thus is one of the worse-off. Another man is born not especially bright but with a great talent for sports. Under taxes, he vegetates on welfare all his life. Under unhampered capitalism, he takes his destiny into his own hands, rises to the top, becomes champion, and earns a lot of money, thereby raising himself into the ranks of the better-off.

It seems therefore, that no "objective" determination can be made of who "won" and who "lost" in the "natural lottery." The people who win and lose will only be revealed once we exit the original position and watch them, empirically, in action, hustling and fighting, scratching and biting. The choice of the principles of justice changes who will be high and who, lowly.

As a result, Rawls is tasked with comparing the utilities of the worse off in different societies, such as in order to actuate the difference principle, interpersonally. I am not 100% sure this point explodes the principle, but it's food for thought.

Original Position Through Economic Stages

The stages of economic development are each characterized by its own key social / ideological innovation.

Thus, the first innovation, the state, puts an end to autarkic total war. The isolated families come together to form a tribe. The state (perhaps exemplified by the entire community) is more powerful than any individual or identifiable subgroup within the tribe, and each is deterred through fear of punishment from inflicting unjust harms on fellow men. Tribal wars persist, but the foundation for peace is laid. Everyone is equal before the "law" and alive, though everyone is still equally a loser mired in abject poverty.

With slavery comes division of productive activities. In our primitive tribe there were no business firms of any sort; there were no economic differences between members at all. Now some men offer to their fellows to work for them as slaves, receiving subsistence -- but still higher than autarkic -- wages, thereby organizing an enterprise to produce something. They also may acquire the ability to capture and guard many unwilling slaves obtained through raids upon neighboring nations. Prisoners of wars between tribes are no longer murdered outright but are enslaved and put to work. Each slave-owner produces different things and trades with other slave-owners. Wealth creation for a few skyrockets.

The problem is that slave labor is deeply unproductive. The third innovation inaugurates the transition to feudalism and serfdom: division of labor. Each serf pays a tax to the tax-lord but is free to specialize and work wherever he pleases and accumulate as much wealth as he can, subject to the taxes. Each worker now has an incentive to be as productive and competent as he can. The great variety of individual talents and natural environments ensures that labor will be minutely divided within firms and factories. The spectacular efficiency of this device brings vastly increased prosperity to many.

(Note that division of productive activities is in between firms; division of labor is within firms. Entrepreneurs do not work but produce by arranging complementary divided factors including workers who do not produce but work.)

Capitalism is marked by the final improvement: freedom of entrepreneurship. With it, all productive and creative forces of society are finally fully unleashed to the enormous benefit of all members who now enjoy fast improvement in their standard of living, whatever (temporary) positions within social cooperation they hold.

This has bearing on Rawls' theory of justice. Once again I wondered, where do the goods to be distributed equally in the original position come from, such that any deviation from this equality shall then be permitted only if it is in the interest of the worse-off?

Perhaps our stage 2, a tribe with a state qualifies. Let's say every week the men venture out to hunt a mammoth whose meat is then divided equally among the households. How should this society evolve?

The answer has been suggested: it should implement the foregoing innovations step by step or even all at once. But each innovation greatly increases the speed at which the standard of living grows for some, and the last one, entrepreneurial capitalism, maximizes this speed for everyone, both worse-off, medium-off, and better-off.

Rawls' fanatical and preposterous interventionism to "correct" capitalism simply is not in the picture according to this interpretation of the choices extant in the original position.

Rawls’ Verbal Legerdemain

It is possible that "democratic equality" is just a fairly meaningless name picked by Rawls for the combination of "equality of fair opportunity" and "difference principle." It might as well be called "blue paperclip."

Then my attempt to defend liberty by contrasting it with first, democracy and second, equality is as seemingly ineffective as trying to argue that liberty is superior both to the color blue and to paperclips.

Very well. See the preceding two posts discussing "Equally open" and "Everyone's advantage."

“Common Sense” Justice Is Not Decisive, Say Rawls

I spoke too soon! In §47, "The Precepts of Justice," Rawls shows himself perfectly well aware that in equilibrium, the market grants to each worker income equal to his marginal productivity, "that is, the net value of the contribution of a unit of labor measured by the sale price of the commodities that it produces. ... This fact explains and gives weight to the precept to each according to his contribution... In this sense, a worker is paid the full value of the results of his labor, no more and no less. Offhand this strikes us as fair. It appeals to a traditional idea of the natural right of property in the fruits of our labor. Therefore to some writers the precept of contribution has seemed satisfactory as a principle of justice."

How does our author demur? I think Rawls would agree that social cooperation under pure free market satisfies the utilitarian demands, but point out that his theory is not utilitarian at all. Perhaps people ought to structure the institutions of the economy on Rawls' principles of justice. Then the allegedly common sense precepts of justice will either be confirmed by his theory (good for them) or rejected by it (no big deal).

Each of these common sense injunctions is "subordinate" and cannot "be plausibly raised to a first principle." In practice, they will be given "different weight" by different systems. "The overall weighting of the many precepts is done by the whole system. Thus the precept of need is left to the transfer branch; it does not serve as a precept of wages at all. To assess the justice of distributive shares, we must note the total working of the background arrangements, the proportion of income and wealth deriving from each branch."

The "branches" are part of Rawls' rather fantastic and incredible design of government: they are given names like the allocation branch, the stabilization branch, and so on, making up an at least 5-horned chimera. For Rawls, there are other concerns beside "to each according to his contribution." Even if this principle is given some weight, other precepts, derived from Rawls' own scheme, will clamor for consideration, as well.

(I don't think the grotesquerie of the "branches" of government and garbled mishmash of Econ 101 and Keynesism follow from Rawls' theory of justice. At this point, he seems to be making stuff up as he goes along, having run out of philosophical things to say.)

Bizarro Justice

I wanted to write a post on how the market distributes income, but after reading Rawls' interventionist phantasmagoria in §43, "Background Institutions for Distributive Justice" in A Theory of Justice, I fear he may be too far gone to be reached by my arguments. Perhaps his followers are not, though. To that end, here it is.

In the free market people are paid according to their marginal productivity, not equally. This has nothing immediately to do with "efficiency" as such; it's just how market allocates income to labor, due allowance being made for 1) entrepreneurial money profit and 2) bargaining abilities of the firm and applicant within narrow limits.

Since the market and its "economic" freedoms are non-negotiable, the initial position is or can be pure free market where the distribution of primary goods occurs according to productivity. (Then we can take a look at egalitarian measures that would adulterate the market and consider the societies / economies generated thereby.) Is productivity irrelevant from the moral point of view? There are two reasons to suggest that it is not.

First, informally and imprecisely, almost all modern production is mass production, so a person who is rich must have created a massive amount of value for other people. We can't compare utilities interpersonally in this case, but something like this can be affirmed. Why then shouldn't one who contributes to society more receive more from society?

Second, a worker deserves his wages, as in it is the most basic justice in buying and selling to get what is mutually agreed upon. How can one therefore be taxed and how can Rawls pay someone for doing no work? In other words, why should low-productivity workers receive any subsidies? Why should they get more than they put into social cooperation? Why should some receive less than they gave and other receive more?

"By their fruit you will recognize them." (Mt 7:16) To do otherwise seems straightforwardly unjust.

Inequality in the Free Market Is Not Unnatural

In any attempt at discovering human natural law, the crucial question is in any given case whether equality or on the contrary inequality is natural.

There is an easy example here of wealth and income. Is Crusoe's wealth and Friday's relative poverty an unnatural and therefore unjust inequality?

No, because there is no relation that holds between their respective net worths or incomes. It's not as if Crusoe gains wealth at the expense of Friday: the richer Crusoe is, the poorer Friday is: WealthF = 100 - WealthC, where 100 is the total "wealth" to be presumably just "found" out there, a zero-sum game.

Crusoe and Friday can in fact cooperate and grow richer together though unequally. Wealth has to be produced, and even if Crusoe is a superior worker, his riches do not come at the expense of Friday. Under free markets men like Crusoe are implicitly conscripted into service of the masses of the representative common man Friday.

Since Crusoe's and Friday's respective prosperities are unrelated by any permanent formula, Friday cannot be distressed or offended that Crusoe has any or particular or unequal or greater than his wealth. Crusoe's net worth has no impact on Friday's net worth.

As a result, since no relation exists between their wealths, no particular relation prevailing at any point is unnatural (or natural for that matter). Thus, wealth inequalities are not unnatural.

Now rename "natural" to "just according to Rawls" and "unnatural" to "unjust." We can see that inequalities in the distribution of primary goods cannot be called unjust in Rawls' (or anyone's) theory.

Superiority of “Natural Liberty” to “Democratic Equality”

1. Liberty vs. democracy. Mises is at his most eloquent when he harps on consumer sovereignty, possibly because his opponents at the time were infatuated with political democracy, at least publicly -- in private, they were socialists who pined to be dictators and "central planners" -- while slighting the free market. Thus, Mises writes:

The consumers determine ultimately not only the prices of the consumers' goods, but no less the prices of all factors of production. They determine the income of every member of the market economy. The consumers, not the entrepreneurs, pay ultimately the wages earned by every worker, the glamorous movie star as well as the charwoman.

With every penny spent the consumers determine the direction of all production processes and the details of the organization of all business activities. This state of affairs has been described by calling the market a democracy in which every penny gives a right to cast a ballot. It would be more correct to say that a democratic constitution is a scheme to assign to the citizens in the conduct of government the same supremacy the market economy gives them in their capacity as consumers.

However, the comparison is imperfect. In the political democracy only the votes cast for the majority candidate or the majority plan are effective in shaping the course of affairs. The votes polled by the minority do not directly influence policies. But on the market no vote is cast in vain. Every penny spent has the power to work upon the production processes. The publishers cater not only to the majority by publishing detective stories, but also to the minority reading lyrical poetry and philosophical tracts. The bakeries bake bread not only for healthy people, but also for the sick on special diets. The decision of a consumer is carried into effect with the full momentum he gives it through his readiness to spend a definite amount of money.

It is true, in the market the various consumers have not the same voting right. The rich cast more votes than the poorer citizens. But this inequality is itself the outcome of a previous voting process. To be rich, in a pure market economy, is the outcome of success in filling best the demands of the consumers. A wealthy man can preserve his wealth only by continuing to serve the consumers in the most efficient way.

Thus the owners of the material factors of production and the entrepreneurs are virtually mandataries or trustees of the consumers, revocably appointed by an election daily repeated. (HA, 271)

We can see that democracy is a pale and withered imitation of the free market.

2. Liberty vs. equality. We have already seen that Rawls himself rejects equality of wealth and incomes as a value potentially to be traded against utility or even as a social ideal to be pursued at all.

Moreover, his equal liberties have a lexicographical priority over welfare. If we include, reasonably, I think, into the list of liberties the right to own means of production and compete in the market, then the social order based on private ownership and laissez-faire economy stands adequately defended against egalitarian sabotage.

We can do so even within Rawls' system, because "the inequality of incomes and wealth is an inherent feature of the market economy. Its elimination would entirely destroy the market economy." (HA, 840) And we have seen that abolition of the market effectively annuls essential individual liberties understood as manifestations and use of property rights.

Finally, any attempt to force equality upon the people slows down economic progress and so is senseless in the long run. If we don't want our children to curse our names, let us make them as rich as the laissez-faire economy permits.