Symposium on Free Market Fairness, Social Justice

Recharting the Map of Social and Political Theory: Where is Government? Where is Conservatism?

[Editor’s Note: This essay is part of a symposium on John Tomasi’s Free Market Fairness. For an introduction to the symposium, click here. For a list of all posts in the symposium, click here.]

Let’s start with my points of agreement with Tomasi’s refreshing Free Market Fairness.  (1) Political justification is broadly contractualist: just principles must be endorsable by those living under them.  (2) They would endorse principles of social justice in the neighborhood of Rawls’s principles of equal basic liberties and fair opportunities, and require that socially instituted inequalities redound to the benefit of all, especially the least advantaged.  (3)  We should try to arrange the rules of economic life such that just outcomes are largely produced as the byproducts of fair, general, impersonal rules of property, contract, taxation, etc., which are applicable to all.  (4) Principles of justice should honor people’s concern for the self-respect they attain through their agency:  that they not only enjoy certain outcomes, but do so through their own activities.   (5) The economy is an important domain of agency.  A just regime should arrange the rules of economic life to ensure a rich set of opportunities for people to engage in market activities according to their preferences, consistent with honoring the self-authorship of others.  (6) This includes the freedom to create, own, and operate private productive enterprises.  Tomasi argues that 4-6 constitute important amendments to, or perhaps distinctive market democratic interpretations of, “high liberal” principles of social justice.  I’ll sign on.

Now for the disagreements.

Tomasi argues that rights to economic liberty should be constitutionalized, with economic regulations subject to a high level of judicial scrutiny.  Considerations of social justice may sometimes override economic freedom—but only if judges approve.  I don’t think this is a sensible way to limit economic regulation.  Consider the contrast between the rights to freedom of religion and freedom of movement.  In political philosophy, both rights are equally fundamental.  Legally, however, virtually no regulations on freedom of religion are permissible, but courts rightly defer to the other branches of government with respect to virtually all general regulations of movement on public roads.  You must signal a turn or a lane change, but a law requiring you to publicize your religious conversion would be unconstitutional.  You must wait for green at a stop light, but a law requiring a waiting period before you could leave or join a church would be struck down.  You can pray as fast as you want, even while drunk, but don’t try driving that way.

Why the difference?  Individual exercises of religious liberty rarely interfere with the religious liberties of others, and have little prospect of inflicting serious harm on others.  By contrast, externalities, asymmetrical information, and other collective action problems are pervasive in movement on public roads.  Unregulated, un-signaled traffic can lead to traffic jams and accidents, impairing everyone’s ability to move around freely, and harming others’ life, health, and property.  Regulations designed to facilitate traffic flow consistent with other interests, such as safety, pollution control, and quiet neighborhoods, are liberty- and welfare-enhancing.  Only extreme restrictions, such as racial pass laws or internal passports, raise constitutional questions.

Externalities, asymmetrical information, and other collective action problems are even more pervasive in economic life.  Countless ways of conducting business reap gains for some while imposing unjust costs on others.  Create a cartel.  Stuff rat feces in sausages.  Engage in insider trading.  Dump toxic waste in rivers.  Market useless medicines.  Withdraw renewable resources at unsustainable rates.  Stuff insurance contracts with obscure loopholes, collect premiums from customers, and then deny their claims.  Fill corporate boards with cronies who reward top managers with huge bonuses even when they fail to meet contracted performance requirements.  Rig the terms of a complex loan to trap financially unsophisticated borrowers into spiraling debt and fees.  Get rating agencies to certify worthless assets as AAA. Use leverage to reap profits from self-generated asset bubbles, sending the global economy into financial collapse when they burst.  Without extensive regulation, markets happily accommodate such negative-value-added business plans.  Tomasi sometimes acknowledges this fact.  But he puts a heavy thumb on the scales against regulation by describing economic activity in general in terms of “self-authorship” and “economic liberty.”  Such descriptions cut no normative ice with respect to destructive or predatory business plans.  Nor should judges, who lack the expertise to assess economic regulations designed to stop such abuses, use such exalted abstractions to strike them down.

Tomasi reserves special opprobrium for labor regulations, as of maximum hours and minimum wages, and disparages workplace democracy.  Regulations of labor contracts, he claims, are forms of paternalistic domination.  They deny individuals’ rights to “personally negotiate” the terms and conditions of their employment, and deny their personal “independence” as self-authoring economic agents. He concedes that in the industrial age such regulations were warranted for vulnerable factory workers, but claims they are obsolete in today’s “personalized” capitalism, which offers work options tailor-made to each individual’s preferences.

Has Tomasi bothered to check on the typical conditions of entry and work in the lowest ranks of WalMart, say, or the farming, meat processing, fast food, nursing home, and domestic cleaning industries, where millions of workers toil in the U.S.?  Such workers would be lucky to get a contract of adhesion, with no terms open for negotiation, but at least with all the terms specified.  What they actually get is arbitrary, authoritarian government, with open-ended terms of subjection.  In the default legal regime of the workplace, employers may comprehensively govern workers’ ends and means, and minutely regulate their bodily motions.  They may dictate what workers can wear.  Until recently, many prohibited their workers from urinating on the job.  Workers have no privacy:  bosses can search their possessions, eavesdrop on phone calls (if they allow phone calls), read their emails, and spy on them in the bathroom.  Workers have no freedom of speech:  bosses can forbid them from complaining, speaking a different language, and talking to fellow workers about unapproved topics.  They can be fired for off-hours activities such as supporting an unapproved political candidate or having a same-sex partner.  No wonder 25% of American workers say their workplace is a dictatorship.

While workers at the top have bargaining power to negotiate freedom from such despotism, those at the bottom have long found this a useless tool.  Many conditions affecting them, such as dust levels, assembly line speeds, and equipment safety, are not subject to individual tailoring.  Others could be individually negotiated, but employers prefer to simply impose terms.  Workers have therefore forged other tools to gain control over their work and off-duty lives:  fair labor laws, labor unions, workplace democracy.  Tomasi bizarrely supposes that they function as paternalistic constraints on workers.  But it was not workers who demanded a 14 hour working day, wages paid in scrip redeemable only at the company store, fines deducted from their paychecks for infractions of work rules, quid pro quo sexual harassment, and the like.[1. For those rare workers who do want such treatment, the response to them is the same as to those who want the freedom to use the public roads for drag racing: they are not entitled, in the name of their personal freedom, to undermine the conditions under which the vast majority of others can enjoy more important freedoms.] Fair labor laws, unions, and workplace democracy have always been about making employers treat workers not as mere instruments, but as individuals with lives of their own to lead.  They have been consummate expressions of workers’ agency.

I’m not arguing that workers intrinsically prefer “meaningful work” in workplace democracy, as social democrats suppose, over maximum pay, which Tomasi prefers.[2. Given the substantial appetite of German workers for a say in management, such preferences may be endogenous to the bundle of rights constitutive of the employment relation in a given country.]  I’m arguing that the case for workplace democracy and other democratic constraints on employers is the same as the case for democracy anywhere:  it’s better for securing the freedom and personal independence of the governed than the authoritarian alternative. Tomasi misrepresents the domain of social possibilities in using rhetoric (“independence,” “personal negotiation”) that suggests that all workers in advanced capitalist economies could operate in effect as self-governed independent contractors.[3. It’s worth noting that the dynamics of capitalism are hostile to self-employment, which tends to decline over time as economies get richer.  Ironically, opportunities for self-employment are higher in social democracies such as Denmark, Sweden, and Germany than in the United States, which Tomasi takes to be closest to his favored regime type of market democracy.] This follows from his curious neglect of the theory of the firm, which studies the boundary between markets and hierarchies.  His market rhetoric effaces that distinction, obscuring nature of the firm as a kind of private government.  Once we see this, we can understand fair labor laws—general constraints on the conditions employers can impose on vulnerable workers—for what they are: limited government.  They are not a departure from but an application of a classical liberal solution to despotism—restraint by the rule of law.

Tomasi’s map of social possibilities confuses government with the state and the capitalist economy with the market.  A more illuminating map would identify government with any organization in which some people systematically issue authoritative commands, backed up by penalties, to others.  It would then distinguish liberal democratic from authoritarian governments, and public governments (states) from private governments such as firms.  Tomasi’s defective social map generates a flawed map of political theories.  He describes market democracy as an icebreaker between two frozen coasts of political theory: libertarians and classical liberals on one side, “high” liberals on the other.  This map omits the conservative coast.  Conservatism, the historic enemy of liberalism, stands for social hierarchy and authoritarianism—arbitrary, discretionary, secret, unaccountable government.  This reality is obscured by the fact that, as F. A. Hayek famously argued, conservatism is more a cast of mind than a set of principles.  It opportunistically grabs any available principles to justify the sort of social order it likes, with the people it likes governing their social inferiors. Since Malthus, many conservatives have appropriated free market, limited government principles from libertarians and classical liberals.  But what they mean by limiting “government” in favor of “markets” and the “private sector” is limiting the power of liberal democratic governments—whether states, labor unions, or workers’ councils—to impose limits on the power of private authoritarian governments such as the firm, the patriarchal family, and the church.

The unprincipled conservative appropriation of the rhetoric of free markets and rugged individualism has muddled libertarian and classical liberal thinking.  Thus we find Tomasi offering reasons to the lower orders that their social superiors do not apply to themselves.  Citing Charles Murray, Tomasi claims that social security survivors’ benefits and welfare safety nets strip meaning from people’s lives by depriving them of the status of but-for causes of their family members’ well-being.  Never mind what homemakers and children might think of this patriarchal reasoning, in which the head of household derives self-esteem from the thought that he is the only thing standing between his family and utter destitution.  Do surgeons think their work is stripped of meaning because if they weren’t attending the ER, another surgeon would have filled in and saved those lives?  Tomasi also thinks social insurance diminishes its recipients’ self-respect by detaching benefits from their agency and making them dependent on others.  Never mind that their social insurance benefits are tied to their contributions as workers, and that individuals properly credit their own agency with outcomes they produce in cooperation with others.  Never mind that Social Security and Medicare are overwhelmingly popular. [4. For a libertarian defense of social insurance on this ground, see Jan Narveson, The Libertarian Idea (Temple University Press, 1988), ch. 18. I defend social insurance herehere, and here.] Why is Tomasi so concerned about workers’ self-esteem being damaged by benefits he sees as detached from their agency that he’d shut down social insurance for their sake, but not about the self-esteem of heirs being damaged by passively inheriting vast estates tax-free?  If respecting agency and hard work are important, why should the tax burden fall on workers rather than heirs?

Market democracy is a fresh, important research program.  At the level of ideal theory, high liberals made a serious error in discounting the importance of private enterprise and economic agency.  Market democracy promises to correct this error.  To move forward, it needs a better map of social possibilities that acknowledges the ubiquity and dangers of market-generated collective action problems and authoritarian private government. And it needs to clean its house of conservative ideas that are antithetical to liberalism.  I wish it well.

  • Kevin Vallier

    Thanks for your comments, Prof. Anderson. I want to raise two related issues (that I will separate into two threads) based on your remark that:

    “Individual exercises of religious liberty rarely interfere with the religious liberties of others, and have little prospect of inflicting serious harm on others.”

    (1) This description of the disanalogy between religious and economic freedom seems contentious. Plenty of people think that religious liberty has significant prospect of inflicting serious harm on others. Christian parents will think that atheist parents inflict a severe harm on their children by raising them not to believe, which they consider dangerous and impious, whereas many atheist parents think that Christian parents inflict a severe harm on their children by raising them to have faith, an attitude that they think is intrinsically irrational. Further, the exercise of religious liberty in public life can have important effects on others, such as conversions. This is not straightforward interference but it seems analogous to the less than straightforward interference involved in exercising many of the economic liberties John defends in FMF, such as some liberties of working. Exercising my “right to work” may affect you less than exercising my right to proselytize to your child, who happens to be walking down the street. I’m not claiming that there is no disanalogy between religious and economic liberties, just that this seems the wrong way to put it.

    • Aeon Skoble

      I know it’s not PC to mention it, but plenty of Muslims seem to find the very existence of non-Muslims a “harm” – not just Jews, Christians, and atheists, but also Muslims of a different denomination.  It’s easy to romanticize small town liberal America, where the Methodist and the Presbyterian happily work and live side by side, but in a lot of the world and for a lot of its history, religious freedom has been understood as a harm.  Of course this is nonsense – but this goes to why economic freedom doesn’t harm either.  My freedom to have a different theology from the next person is not harm causing.  I might have a religion which asks me to act in such a way as to cause harm, e.g., human sacrifice, but in that case it is the killing, not the belief, that causes the harm. Similarly, my freedom to trade thing A for thing B doesn’t cause any harm.  It’s true that if I take a job, that’s one less job for you have, but I haven’t thereby harmed you, since neither of us has a pre-ordained claim on that job.  

      • Yes, the mere existence of non-muslims is an externality to the more extremist muslims.  According to the more mainstream theories of externality (Pigou’s for example), non-muslims should be taxed and the money sent to extremist muslims.

        This absurd example is yet another reason why the Pigovian theories of externality are bunk.

      • Milksteak and Jelly Beans

        “Similarly, my freedom to trade thing A for thing B doesn’t cause any harm. It’s true that if I take a job, that’s one less job for you have, but I haven’t thereby harmed you, since neither of us has a pre-ordained claim on that job.”

        I don’t see why having a pre-ordained claim on some resource is a necessary condition for being harmed by exclusion from it. Before you took the job we both had an opportunity, and once you took it, I no longer have that opportunity. Why is that not a harm? You took away an opportunity from me, and it hurts real bad.

  • Kevin Vallier

    (2) But in some ways the analogy with religious liberty is beside the point. I think part
    of the reason that John doesn’t rest his case for thick economic liberties on an analogy with religious and political liberties is to avoid these complexities. John’s challenge to high liberals rests on a narrower and more secure foundation. He argues from basic economic liberties that high liberals already accept (freedom of occupation and the right to own personal property) to thick economic liberties by means of the conception of the person that ground the agreed-upon basic economic liberties. That is, John argues from a small set of basic economic liberties (justified in the contractualist way) to a larger set (justified in the contractualist way).

    Importantly, you accept that John’s arguments work in kind but not in degree (that’s how I read your (6) anyway). You accept that there are good contractualist reasons to acknowledge that some rights to the ownership of capital can be basic liberties. My question is whether and how you draw the line. In fact, that’s my question for John as well. If John is right, why do we stop where he stops? Similarly, if you agree with John in kind, then why not in degree?
    And, as you know (I include this for the reader) it won’t do to cite nonideal considerations, as the contractualist derivation of basic rights assumes full compliance. John trots out this assumption in his favor, arguing that his ideal regime types rightly assume full compliance in virtue of being derived from a Rawlsian framework. So the fact that capitalists may abuse their basic liberties does not count against them being basic.

  • Jessica Flanigan

    I liked this post very much, and I totally agree about the self-esteem point, that stuck out to me when I read FMF. It is strange that Tomasi takes this route to justify economic freedom, since when is self-esteem the way that rights were justified? I suspect that it’s not all conservative rhetoric though, that Tomasi is also linking self-esteem to Rawls and the moral powers and the idea that we all need enough self-esteem to be co-participants in a democratic society, but if participating in democracy as equals is so important to him, then why not have that at the workplace as well?

  • Here’s a few points for now (there is too much in your post to take issue with in one go).

    I doubt that anyone says that a completely unregulated market would work well, or work at all. But efficient regulation is a problem for which markets throw up solutions. For example, Disneyland has regulations to be followed by its employees as well as regulations to be followed by its customers. Different resorts have different regulations. An advantage of market solutions to regulation is that they are tested: if customers/employees don’t like them, they can go elsewhere. Another advantage is that regulations can be tailored to differing circumstances or to different sets of customers/employees. Government solutions to regulation, on the other hand, are usually ‘one size fits all’ and we are stuck with them, unless we have clout in the political process, which very few of us do. Your emphasis on the benefits of regulation does not take account of the question as to who should regulate.

    Your division between markets and government needs replacing with a threefold split between markets, organisations and government. Organisations are authoritarian as you say. But so long as there is open competition, people have a choice between different organisations, and this fact alone spurs organisations to make their regulation of employees hospitable. Of course, in the absence of competition, things deteriorate. This means that open competition, freer markets, is desirable. Government, on the other hand, does not permit easy exit (sometimes it does not permit exit at all).

    I think it is a mistake to think that a fall in self-employment and a growth of large organisations means a reduction in independence. The reason is that many professionals who work in organisations are effectively independents on a retainer: they are given a free hand to produce broadly specified results within a vaguely specified remit. They do not have anyone telling them exactly what to do and how to do it. Formally, it is an employment relationship; but it is not in substance a ‘master-servant’ relationship.

  • Some further comments.

    Going back to my first point, above: if the roads were privatised, the owners of them would still have traffic regulations, otherwise few people would use them and the road-owner would make little money from his asset.

    Many of your “Externalities, asymmetrical information, and other collective action problems” are actually the result of government failure rather than market failure. If you dump toxic waste in a river owned privately, the owner would prosecute for compensation/clean-up – unless the government has prevented such tort action by a statutory regulation. A cartel would not normally survive in an openly competitive market because of the threat from new entrants as well as the incentive for each member of the cartel to do deals which undermine the agreement. But if government regulation or subsidy prevents an open market, cartels are more likely (and some have even been fostered by government). Resources are less likely to be depleted at unsustainable rates if they are owned by a profit-oriented business: there would be more money to be made over the long term by rationing the supply. But if government won’t privatise the resource, you get the ‘tragedy of the commons.’ And so on.

    I won’t repeat the good points that Jessica has made (though I don’t support her UBI proposal).

    • Gepap

      How is private ownership of a river possible? An individual may own land on the borders of a river, but it is utterly impossible to own the river itself (its flowing water, constantly replaced by different water). The whole point of the river example is that some one who owns property upstream can impose negative externalities on anyone who own property downstream. The question then is what recourse owners downstream would have – in theory you could solve the issue with, as you said, a system of torts courts, but for these courts to work, they must have enforcement power, which at the end means being able to use physical force if necessary against someone found guilty of committing harm on others, and the only way this works is if there is a single body with the authority to use force, something that is generally conceptualized as government. 

      In my opinion you seem to ignore the reality that being able to force someone else not to harm others requires the possibility of the use of force – any system of “justice” requires the possibility of violence against the “unjust”.  Liberterians to me seem to conflate the notion of the public sphere with the monopoly of violence. iI is possible to have multiple localized privately owned monopolies of violence while still having a “public” sphere in which these small despots deal with each other. Think of the ancient Athenian system – each Citizen (non-slave adult male) was free to impose his will upon the inhabitants of their private domain (his household, including the women, children, and slaves) but in the city was a member of the public, having to deal with his other fellow mini-despots. In modern time, many firms are these mini-despots, which is exactly what Prof. Anderson states. If one truly believes in UNIVERSAL human liberty, one must think not only of the Citizens, but of the women, children, and slaves as well, and giving them freedom can only happen if you limit that of the mini-despot. Its a trade-off.

      • Apparently, some rivers or river segments are privately owned in Georgia:

        I doubt that the law has an answer to the upstream-downstream problem; but it is just a matter of working one out, i.e., who has the right to do what. This can be specified, arbitrarily if necessary, and then the various rights can be traded between the parties (existing and prospective owners) to achieve the most efficient distribution of them.

        There are lots of natural resources it is difficult to privatise, mainly because of prohibitive enforcement costs. Improvements in technology can render practicable what was previously impracticable. But we seem to be a long way from being able to privatise the oceans. That’s why fish stocks are being depleted.

        Why do you assume that enforcement of property rights must be by government? That is like Elizabeth assuming all regulation must be by government (though, when regulation fails she seems to blames it on the market). There has been a lot of work done on enforcement without government (David Friedman and Pete Boettke, for example).

        However, whether or not enforcement requires government in the background is neither here nor there for the point I was making. Let us assume a minimal state which enforces laws against force, theft and fraud, provides national defence and enforces contracts. When owners draw up their own regulations for their property, anyone entering or using the property in violation of the regulations is in breach of contract, and the force of the state can be invoked if no other resolution is possible or adequate.

        There are (at least) two notions of ‘the public sphere.’ One is a place open to the public, like a cinema or a public house or a park or a street. Another is a place owned by the government. Why do you assume that all public spaces are government spaces that should therefore be regulated by government?

        Modern firms are not mini-despots. They have no authority over employees that those employees have not agreed to; and employees can leave for another employer or to start up their own business. The authority of the employer is conditional on the employee’s acceptance of it; and it can be terminated by the employee at will. This is not despotism. Why do you assume that all authority must be government authority?

        There is a pattern here, isn’t there? Enforcement means Government enforcement; regulation means Government regulation; public sphere means Government sphere; authority over another means Government over another. Your thinking seems to exhibit a kind of Government-dependency. There are other options.

  • Many of us have argued that the employment conditions of which Anderson justly complains are the products of state intervention, not freed markets.

    •  Right, except that places where regulation is stronger have better working conditions, e.g. Germany.  Places where regulation is weaker have worse working conditions, e.g. the US, etc.

      • Barry_D

         The first rule of hard-core libertarianism is that negative correlation is no problem at all, when asserting causality.

      • Nicholas Weininger

        This is a simplistic misinterpretation of the facts. Both the US and Germany regulate employment very heavily. They do so in different ways, which produce better working conditions for some people and worse working conditions for others. Even the claim that the US is a better approximation to a pure free market than Germany is false: not because it is actually a worse approximation but because the two just aren’t readily comparable. This isn’t a linear space where you can say that one system is 67.3% free market while another is 46.2% so; there are many, many dimensions and the multidimensionality is important.

        Moreover, the kind of deregulation Prof. Long envisages goes so far, in its radicalism, beyond the differences between the US and Germany as to make those differences seem like trivial quibbles. So the differing effects of such trivial quibbles aren’t really relevant to the claim that a radical change would cure the problems that markets are unjustly supposed to cause.

        • Nicholas Weininger

          More directly to the point of Anderson’s arguments, I see the economic abuses she describes as falling into four categories. Some (useless medicines, rat feces in sausages) are fraud, which even hardline minarchists think should be prosecuted. Some (toxic waste in rivers) are environmental externalities. Some (AAA ratings abuse) are actually products of regulation, as Prof. Long says. And some (insider trading) are not actually bad things.

          So at most she’s made a case for the minimal state plus some environmental protection. As a defense of extensive economic regulation this is pretty weak.

  • Sorry this is bitty, but I’ve had only snatches of time available today.

    From what I said above, it should be clear that your argument against Tomasi’s claim (that economic
    liberty should be constitutionalised) is unsound. Your objection is that economic activities require more detailed regulation than we can expect from a constitutional court. That overlooks the fact that market participants supply regulations for activities occurring within their proprietary areas. Where such regulations are offered in competition with providers of similar goods/services, there will be a constant drive to find better regulations, i.e., regulations that are judged better by the consumers of the goods services, as shown by the choices they make in their purchases, with providers altering their regulations (independently of each other) to try to cater to changing consumer demands.

    I don’t like the term ‘self-authorship,’ but it should also be clear that there is no inconsistency between economic liberty and regulation. For example, when a pub (‘bar’ to you) gets a new owner it usually gets a new set of regulations (‘no jeans,’ ‘no throwing glasses at the band,’ ‘no swearing’ (well, perhaps not that one), ‘no sitting on the tables,’ ‘no fighting,’ etc.). The new owner sets the tone of the place, creates an environment which he/she thinks will be enjoyable for a particular range of customers. If some of the old customers don’t like it, they can frequent the pub down the road instead. Some of the regulations may, indeed, be introduced precisely to discourage a particular class of customer. You write as if all regulation comes from government, as if we are all naughty children who will run amok unless politicians put us into metaphorical straightjackets. But government regulations stop economic agents from finding the best regulations for their circumstances, and from changing regulations quickly in response to new circumstances (e.g., fewer customers than usual).

    Even employees who function as subordinates at work, doing largely as they are told, run their own lives outside of work. They are not subordinates in the whole of their lives. And they have the option of being an independent contractor in any case. Why don’t they take it? Primarily, I think, in most cases, because they are risk averse; secondarily because most of them will earn more as an employee (some people take a lower income for the benefit of being their own boss). In some cases, people just like being told what to do; it is easier. In any case, as I indicated in an earlier message, the ‘government’ of the firm is limited where there is open competition: if the regulations are too onerous, intrusive or otherwise uncongenial, the firm will lose good employees to other employers.

    • Barry_D

       “Even employees who function as subordinates at work, doing largely as
      they are told, run their own lives outside of work. They are not
      subordinates in the whole of their lives. And they have the option of
      being an independent contractor in any case. Why don’t they take it?”

      This really just shows that you didn’t comprehend the article.   You’re basically reiterating Tomasi’s argument, without reading what Anderson had to say.

      • It would be helpful if you could explain what you think I do not comprehend and say why it is inconsistent with what I say. Otherwise, you are just making a gesture.

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  • If I had to choose, I’d taker Anderson’s postion over Tomasi’s. But I’d rather not choose -as both seem to give an account of capitalism that is oddly unreal, given the way the that system works in practice. Has anyone been watching the news? Far from encouraging agency, its propensity for instability, promotion of massive inequality, restless pursuit of a surplus at whatever cost to the planet, alienation of workers from labour and from each other and the creation of passive, consumerist pseudo democracies makes it something to be overcome, not promoted.

    • J D

      Chris, it surprises me that one would visit this forum and cite “the news”, a clumsy and superficial presentation of anecdotes, as offering a more accurate account of capitalism than academic work. Could analysis account for things that reporters have not? The series of anecdotes you’ve distilled into complaints may have other interpretations. As you’ve articulated them, the items in your list of capitalism’s problems either beg or confuse the question; all are cliches. 

      Here’s an example: You cite capitalism’s “propensity for instability” as if the matter, in either kind or degree, isn’t in question. It looks like you’ve leapt directly from reports of instability to the  identification of  its cause, totally without argument. Well, is argument required? Perhaps modern economies are so simple that the causes of their instability are self-evident. I wonder aloud, then, why so many books have been written about the recent Financial Crisis. How could Penn have published a book of contrasting accounts of “What Caused the Financial Crisis” when you, equipped with “the news”, already knew.

      • M.R. Orlowski

        Lovely post JD.

  • RickDiMare

    “Tomasi argues that rights to economic liberty should be constitutionalized . . . ”

    Maybe they already are, but the legal system has failed to understand where and why they were constitutionalized. My concern here is that if lawyers keep ignoring the tax and monetary clauses that protect the economic liberty of the individual, we will try to fix something that isn’t broken, and therefore make it worse and more complicated than it already is.

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  • Ray Lopez

    Typical academia argument: references Rawls.  Mistake #1 of many.  What the esteemed savants fail to see is this:  it costs money to have fairness a priori or ahead of the unfair event.  Better to let an unfair event happen first, then deal with it–much cheaper.  In fact, the FAA adopts exactly this “tombstone mentality” when designing for aircraft safety–let the plane crash first, then design a rule or workaround–and guess what, airplanes are the safest form of travel.  Likewise, don’t try and design a 100% fair society, but instead deal with inequalities and externalities as they arise, by litigation or contract or compromise.  In short, Libertarianism is path-dependent.  As for the other points made: you have to counterbalance the fact that as an economy ages, economies of scale favor monopoly and/or large organizations–that includes government–that tends to distort classic ‘free market’ Jeffersonian principals where MR = Price (price takers, no price makers) of millions of farmers.  But at the same time the internet is leveling the playing field and with robots and declining cost of transistors we may get back to Jeffersonian ideals in another 50 years.

    • Damien S.

      You pass over the fact that the FAA does have rules. People aren’t allowed to fly whatever planes they wish, paying fines if they crash; the FAA lays down rules and inspections and will ground planes it thinks are unsafe. That it designs new rules according to new information is simply sensible empiricism. That “safest form of travel” is the result of comprehensive and highly intrusive (in a good way) governmental bureaucracy and regulation.

      • assman35

        And you pass over the fact that the FAA only worked because all the major airlines had very strong interests in promoting safe travel. The whole system worked because the regulators and the regulated had strongly aligned interests. Its a unique model that is difficult to replicate.

  • j_m_h

    “Market democracy” is a very problematic term, perhaps a poor as the old suggesting that dollars in the market are like voting — in a very crude sense that metaphor can work but it obscures too much of the institutional setting within which the action is taking place to make it worthwhile.

    The key problem is understanding where the separation between “market” and “politics/democracy” lie. I think the above terms misleads and ends up suggesting the two can be unified into a common concept.

  • Jeff Moriarty

    Like Jessica Flanigan and Professor Anderson, I was also struck  by — and found problematic — some of Professor Tomasi’s comments about self-respect/self-esteem in FMF. 

    It seems to me that how important the economic liberties are to self-respect (or self-esteem, but I’ll just talk about self-respect), and how damaging social insurance schemes are to self-respect, is an empirical question. Self-respect is a feeling or attitude one has about oneself, perhaps combined with a set of actions consistent with that feeling or attitude (or so I think is a common view). So the question is: what are the determinants of this attitude and these actions? Intuitions may provide a starting point (and I see John relying heavily on these), but can’t be decisive. 

    Take the issue of social insurance and self-respect. We’d want to know: holding as much as possible constant (which is going to be hard to do, of course) do the people of Norway think less of themselves, given their more generous social insurance scheme, than the people of the U.S., given their less generous social insurance scheme?  Or perhaps better: did self-respect of people in the U.S. go down a bit in the 1960’s, when Medicare was introduced (or in the 1930’s, when Social Security got going)?  Will our self-respect go down again in a few years when (and if!) “Obamacare” is fully implemented?

    Professor Anderson notes that these social insurance schemes are popular. Perhaps that’s evidence that they do not undermine self-respect (or perhaps they do and we prefer our self-respect to be undermined!).

    • Should the fact of popularity count for much anyway? People can be, and often are, mistaken en mass. Hitler was highly popular within a few years of coming to power. In the case of welfare schemes, the benefits seem obvious; but the costs are less visible, and many of them are difficult to trace.

  • CPV

    What are the “cultural” reasons that principles 4-6 in the first paragraph are only begrudgingly endorsed, and not proposed,  by “high liberals”

  • Nicholas Weininger

    Anderson argues as if the right of exit were completely useless or irrelevant. But the right of exit is everything. The difference between the most authoritarian employer and the least authoritarian government is that, if you don’t like the employer’s demands or rules, you can walk away from them in peace, and they will not bind you. All you have to do to not be subject to Walmart’s rules is quit working at Walmart.

    Now you may say that some people are not “really” free to walk away because they face starvation if they do. This is occasionally true, though very rarely so in rich countries. But at best this is an argument for a guaranteed minimum income; it cannot possibly be an argument for restricting freedom of contract in employment.

    I do, however, agree that the self-respect/self-esteem argument is probably empirically bogus. But this only illustrates the problem with trying to use egalitarian arguments to defend individualist principles. Welfare dependents and regulation-protected workers probably have plenty of self-respect. Who cares? The value of employers’ individual freedom, as legitimate property owners, to set the terms on which they will contract with others is enough defense in itself. They shouldn’t have to justify themselves to the parasites and mediocrities who would seek to trample their liberty.

    • Damien S.

      “Now you may say that some people are not “really” free to walk away
      because they face starvation if they do. This is occasionally true,
      though very rarely so in rich countries”

      That’s precisely because rich countries have food stamps and other government income support programs!

      “as legitimate property owners”

      Begging a lot of questions there, admittedly ones not raised by the main post.

      • assman35

        I walked away from my job. I know friends without food stamps or other government support programs that did the same.

        The lowest rung jobs are by far the easiest to leave because no one cares. The hard jobs to leave are the ones with career progression because its very frowned upon to interrupt the career progression.

  • CPV

    “Externalities, asymmetrical information, and other collective action
    problems are even more pervasive in economic life.  Countless ways of
    conducting business reap gains for some while imposing unjust costs on
    others.  Create a cartel.  Stuff rat feces in sausages.  Engage in
    insider trading.  Dump toxic waste in rivers.  Market useless
    medicines.  Withdraw renewable resources at unsustainable rates.  Stuff
    insurance contracts with obscure loopholes, collect premiums from
    customers, and then deny their claims.  Fill corporate boards with
    cronies who reward top managers with huge bonuses even when they fail to
    meet contracted performance requirements.”


    “Perverse incentives, bad information, and monopoly power are even more pervasive in the government sphere.   Invade countries for no reason.  Co-opt the educational system and destroy it. Strangle the productive parts of human activity with excessive taxation and regulation. Amplify the power of monied interests through legislation.  Subsidize the burning of food.  Swindle the poor out of their savings and homes via cheap money and no income requirement loans.   Subsidize indolence.  Breed a dependent voting class by paying for babies.  Invest in bankrupt companies run by lobbyists.  Pack the court. Enslave Negroes.  Inter Japanese. Run Gulags.”

    • It seems the author is trying to use the language of libertarians to advocate unlibertarian things, by trying to paint employers as governments.  Shee forgets that employers don’t have coercive power, they can’t go into your home, grab you and stick you into a concrete box.  They make an explicit agreement.

      “Such workers would be lucky to get a contract of adhesion, with no terms open for negotiation, but at least with all the terms specified. “Um, actually what they get is way less bad than that.  The lowest rung workers can leave the job and get a new one (provided someone is willing to hire them, or they start their own) at any time… and they do.  Fast food and other low-end workers have very, very high turnover rates from quitting their jobs.

  • CFV

    My two cents: I think more is need to be said about “conservatism” for a complete typology of social and political theory. There is a variety of conservative thinking. For example, how will you classify the distributism of G. K. Chesterton and Hillaire Belloc?
    They favored social justice, small property and workers-cooperatives along traditional Catholic lines:
    There are some resemblances between this proposal and Rawlsian property-owning democracy, are there?
    Another example. One of the forerunners of the modern welfare state so much praised by progressives (and despised by libertarians) was a conservative politician: Otto von Bismarck.  

  • “While workers at the top have bargaining power to negotiate freedom from such despotism, those at the bottom have long found this a useless tool.  Many conditions affecting them, such as dust levels, assembly line speeds, and equipment safety, are not subject to individual tailoring.  Others could be individually negotiated, but employers prefer to simply impose terms. “Understood. But what happens when either means of production become “publicly” (governmentally) owned, or government is now allowed to dictate the terms that everyone will follow? I suppose it is nice to think that when government owns or controls industry, it will work for the betterment of the least well-off, which seems to be what Anderson is implying (as opposed to when it is privately owned, where employers are just elitist meanies). At very least, assuming that there exists competition in a particular labor market, employees can only be dictated to insofar as they choose not to look for employment elsewhere; when government controls the means of production (or is allowed to dictate terms), employees who don’t like the dictates no longer get to shop for another employer with other terms. 

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  • Emil_mi

    The largest asymmetry is imposed by the fact that the time is not reversible. Your effort now is more valuable than you effort in the future and you are less valuable to a different company than the one that employes you currently. So arguments that you can easily switch jobs if you are not satisfied strike me the wrong way. Please consider a monopoly that any decent free market proponents take for granted: patents – they allow you to force any competitor to take similar products off the market. There is no other way to protect from this kind of theft. You could argue that patent law could arise from the aligned interests of market participants to protect themselves from this kind of risk with a contract that all participants must sign. This kind of implied consent is what defines a law. Notice that the accent is on MUST SIGN – like in the prisoners dilemma, defectors have huge incentives.

  • “Unregulated, un-signaled traffic can lead to traffic jams and accidents, impairing everyone’s ability to move around freely, and harming others’ life, health, and property”
    Hans Monderman might have disagreed. I would say it is perfectly legitimate for government to set rules for roads (hopefully good ones, which may be minimal per Monderman), by virtue of the fact that it owns and operates them. A private firm would “govern” its roads as well.

    As others have mentioned, withdrawing resources is not an example of an externality. If the resource is owned, costs are internalized. Dysfunctional boards/corporate governance may be unfortunate, but I don’t think it qualifies as an externality either. The cost is borne by the firm in question, and if other firms can be less dysfunctional they can reap the benefit (this is supposed to be part of the rationale for private equity firms).

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  • Damien S.

    I liked your piece, Professor Anderson. Also your left2right defenses of social insurance. Don’t have much to add, but kudos!

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  • We talk about “government” as if it is some abstract supernatural power with insight and disinterestedness not possessed by normal human beings. Tragically the truth and history of government has nothing in common with this abstract philosophical ideal. Government is a collection of human beings with the same strengths and weaknesses of the governed.

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  • A. Baker

    The point about regulation of the work place, and its potentially problematic issues of coercion, is well made in the relating of the work environment to the driving environment. But if we agree that regulation is necessary why move to a model with such abstract correlations such as those between the rules of the road and workplace relations. Why not use a system of government enforcement of institutional contracts that relates more readily, assuming that I can make minimal case that we like contracts, and their efficiency.

    The state is equipped to handle and adjudicate in a wide spectrum of contractual obligations on the macro and micro levels. It can handle contracts between corporations all the way down to the level of personal relationships such as marriage. It reasonably follows that it could also handle contractual obligations between employees and employers to the end of protection from coercion in the workplace. Minimal expectations that people are desired to uphold in personal relationships can be transferred to cases in the workplace, so why should they not?

    It should be no news that contracts exist in many facets of life: the workplace, among friends, school, even among family members; so to assume that one between employee and employer – and upheld by the government – is somehow paternalistic out of the gate, is ludicrous (to Tomasi’s point). While there is a great amount of opposition to contracts in the work place there are a number of examples to support the efficacy of such formal agreements, which prompts an inquiry into their inclusion in this sphere as well.

    Contracts are necessary to establish basic operational guidelines in order for certain processes to run smoothly and efficiently. And while currently in the work place the majority of these contracts are only verbal, there is no evidence to support the idea that somehow formalizing and enforcing them would make things necessarily constrictive or inefficient. And before the barrage of comments pointing out the problem of government enforcement and the necessary dilation of the state due to such, blah blah horse crap, even advocates of the minimal state advocate the government’s enforcing of contracts. For it is indicated by the free flowing litigiousness of Americans that people in general can not be left to their own devices to work through conflict productively; there needs to be a greater designated representative to establish appropriate behavior.

    Caplan makes a rather poor example out of dating in his article, “If You Don’t Like It,” to illustrate the silliness of the claim that the employee employer relationship is lopsided. The issue then arrises as Brennan picks up in his article, “If You Want To Keep Dating Me You’d Better Let Me Fuck You,” do we want the state intervening in personal relationships? The answer is that it already does; and in a more intuitive way than highway laws.

    Dating relationships and government enforcement do not seem ideal; that’s obvious. Instead of using personal relationships Caplan could have used the example of marriage to make his argument more practical, particularly on negotiating the terms of termination. Divorce brings up many “grey area” questions that cannot be settled without the state. Questions like who is going to care for the kids and who gets the keys to the car cannot be solved by two angry ex-spouses. This is a far more justifiable comparison due to the fact that in the workplace a lot of similar grey area arises when debating what is justifiable for a party to terminate the contract. Is sexual harassment grounds for immediate firing or legal action? What defines sexual harassment? Marriage and the workplace are both surrounded by comparable grey areas which give a much more ready comparison when transitioning the logic from the former arena to the latter; far greater than traffic laws.

    Now the argument may come to bear that marriage should not be dealt with by the state, or at least no longer dealt with by the state. First, as is the problem with Tomasi’s point about the obsolescence of such rules, as in the workplace’s being reformed, my question is: if the laws would merely be redundant what is the harm? If we can say for certain that no one will ever again be violated in the work place, that somehow the mechanism for coercion or injustice had been disable by modern iterations of capitalism; then I would say no longer are the laws needed. But this is not the case, and if we look to the institution of marriage we see a ready-made example for looking at the problem.

    Much of the first wave of women’s rights was the establishment of the woman’s right to share ownership of domestic property in a marriage. We now have come a long way from that issue, and now women have the right to all sorts of property, including themselves. Should we now take back laws that granted women the right to a share in domestic assets in a marriage? Can we in good conscience say, we have progressed to “gender equality” thus the initial marriage problem is resolved and redundant? No, the law is just as necessary today as it ever was

    The point that I am trying to make is that even if there were minimal laws in regards to employee employer relationships, as simple as some of the minimal protections given to both parties in marriage, we could have a simple method for dealing with questions about work place coercion. And before anyone makes the silly pronouncement, let the businesses that want to do this do this and leave the rest alone, it should be noted that no widespread, competition promoting, minimal standards can be erected in this manner without state intervention. This is due to the fact that It will obviously cost to enact such a standard. And while some ethically minded entities would think this a good idea and try to erect this formalization independent of state mandate, the fact that it will bring an initial financial deficit will cause most to shy away. However, if a state mandate is enacted, it will allow a shift across the board, that will ideally net everyone a zero. Of course the obvious hole in this idea is in regards to anyone who profits from coercing their employees, but that is only a problem if your view is ‘sympatico’ with such violations of liberty.

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