Economics, Social Justice

Libertarian Mungerfesto: Part V–Hayekian Socialism

My apologies for the long delay since Part IV.  I’m finishing a book for Cambridge U Press, and an enormous screw-up in what should have been the final (as I thought) version set me back a long way.  My fault, not theirs, and now it’s fixed.  The book is called “Choosing in Groups,” and it should be out in time for the holidays!  Given how long it’s been, it’s worth giving an outline of what I have tried to argue to date:

Part I:  Directionalists and Destinationists have fundamentally different views of policy and libertarianism. (LINK )

Part II:  Voluntary exchange, euvoluntary exchange, and the argument for “voluntary coercion”  (LINK )

Part III:  What if the exchange setting is not euvoluntary?  (LINK )

Part VI:   The argument for markets:  Even if exchange is not euvoluntary, promoting exchange improves the lot of those who are least well off  (LINK )

So…to confront the problem of finishing.  One of the reasons that Das Kapital spilled over into three volumes is that Marx kept using “proof by forward reference,” making an assertion early on that he promised later to prove decisively.  Only it turned out that when he took up the subject again the “proof” was not yet available.  So Marx made an even more airy claim about how obvious his argument was, and promised to take it up again later.  As the chapters and volumes progressed, things got more mystical and less practical.  I hope to avoid that fate. But that means that much of what will be “finished” is simple assertion.  I have tried to lay the foundations for the arguments in Parts I-IV, but the fact is that all that is left now is to list the conclusions I have reached, not the conclusions that necessarily follow as a logical matter.

More after the jump…

The argument for libertarianism I see the argument for libertarianism as an argument from autonomy, or self-ownership, and a presumption against the initiation of force.  Neither of these arguments is airtight, and many people have pointed out problems with each, which I acknowledge.  Nonetheless. By autonomy I mean both that the individual owns his or her own body, time, and conscience, and that subjective judgments about what is good or bad for oneself deserve a strong presumption of deference.  What I mean is that there is a burden on the state, or any group, or any other person, to satisfy before the presumption in favor of self-ownership and judgments about individual goals can be overturned. In particular, the presumption in favor of self-ownership requires that the state or groups be prevented from using the individual or harming a person for the benefit others, even if the harm is “objectively” slight and the benefit is “objectively” enormous.

Of course, if the person gives his consent to be harmed, that is not only acceptable but morally admirable.  If I give up my seat on a bus to a woman who appears to be 11 months pregnant, no harm is done to my autonomy, provided I do it voluntarily. This presumption in favor of autonomy is simply a feature of liberalism more generally.  As Jerry Gaus puts it, the “fundamental liberal principle” is that “we have liberty to act as we see fit unless reason can be provided for restriction.”  Gaus makes the claim this way:

“1.  A person is under no standing obligation to justify his actions;  2  Interference with, or restriction of, an other’s action requires justification; unjustified interference or restriction is unjust, and so morally wrong.”  (p. 274 from “The Place of Autonomy within Liberalism,” LINK )

Why is autonomy important?  As I have argued it (especially in Part III), if the exchange setting is euvoluntary, then the autonomy of the participants must be respected.  Full stop:  MUST be respected.  Of course, that is an ideal setting, much like the economics profession’s question-begging assumption of “perfect competition,” where commodities are homogenous and there are many identical buyers and sellers.  That is the world of euvoluntarity. By noninitiation of force I mean that there are no revealed truths, no outside authority, and no immutable natural laws except those of physics.  Values come from us, the group of people who consent to be coerced if we violate the agreement.

Note that such an “agreement” cannot be a consent theory of state authority, unless the state is very small and new.  In an ideal setting, no one can be coerced without their prior consent. What if the exchange setting is not euvoluntary?   What is the role of the state then?  One possibility is that the state could take over the functions of voluntary arrangements to secure mutual benefits.  But historically that has not worked very well.  Instead, I think that the state should try to approximate more closely the conditions of euvoluntarity, so that private arrangements can proceed in a more effective way.  The state is thus not a replacement, or alternative, but rather a means of assuring that euvoluntarity is achieved.

That’s important because the core precept of autonomy is that people be held responsible for their own choices.  If the consequences of those choices are good, and create value, then people profit.  If the consequences are harmful, then people suffer losses. The problem is that if exchange settings are not euvoluntary, people cannot be held responsible for their choices, either for good or bad.  That’s why societies fail:  people are prevented from enjoying the benefits, or suffering from the harms, that they participate through their choices in creating.

The Argument for Markets The argument for market organization of human activity has several parts.  They are mutually reinforcing, but each is an important part of claim that decentralized human action can produce an orderly and prosperous society.

1.  Benefits of exchange:  if an exchange is voluntary, then both parties to the exchange are better off.  Resources may be exchanged several times, and “move” quite substantially, either in terms of distance or adaptation to new uses.

2.  Benefits of price signals:  the price system is an emergent order, signaling the relative scarcity and opportunity cost of resources and time.  It is immoral to knowingly use a resource that someone else values more, and in a price system I have both the knowledge and the incentive not to use resources someone else uses more.  (Matt Z makes this argument beautifully in this video, , where people standing in line for a generator have a ranking of use values, but without a price system have neither the knowledge nor incentive to act morally).

3.  Benefits of rewarding innovation while imposing almost all risks on innovators themselves.  Not clear which (if any) innovation will pass the profit test, but new products or production processes that earn profits must produce more value than they use up.  The alternative to profit-seeking, which is rent-seeking led to the huge waste of money on Solyndra.  The state may be good at producing basic research, and materials science.  But it’s bad at making bets on major innovations.  Of course, private markets are really bad at predicting which major innovation will work, also.  The difference is that market innovators have to sell to the citizens.  Rent-seekers just have to sell to the legislature, and the “experts.”  Legislators are spending other peoples’ money, and experts suck ( Tetlock, 2006 ).

Now, none of these three arguments, not even all of them together, mean that all problems of basic research, public goods, and externalities can be solved by decentralized market action.  But a lot of problems of organization, even complex problems, can be solved by markets.  And if you buy the autonomy argument, then people have to be allowed to make their own judgments about whether they are “better off” if they engage in a particular transaction, or if they want to try to invest in a new product.  That’s true even if the transaction  or the investment makes no sense to you, or to the experts; if the exchange setting is euvoluntary, autonomy must be respected. If the exchange setting is not euvoluntary… then we should try to make it euvoluntary, and then respect autonomy.

It’s a mistake to say, “The exchange setting is not euvoluntary, and therefore the state can do better.”  Bill Keech and I just presented a paper at the Public Choice Society meetings that argued that the state will fail, too, and for the same reason, if there are profound collective action or information asymmetry problems (Link: )

For an exchange setting to be euvoluntary, or more broadly for exchange to make sense as a morally justified system, people have to have enough resources to participate in the system, and enough bargaining power to participate in the system as full partners.  Because exchange is, in the ideal setting, a partnership rather than an adversarial relation.  It’s true that two people negotiating an exchange are each trying to get more of the surplus (the difference between the minimum willingness to accept and the maximum willingness to pay).  But the exchange–if it is voluntary–makes both parties to the exchange better off, compared to not making the exchange.  Failing to make the exchange hurts BOTH of partners who failed to consummate the exchange. The problem is that in a market exchange setting, “willingness to pay” is not an abstract concept.  It’s an actual measure of the number of dollars that someone is willing to pay to acquire somethings.

Here’s the problem:  What is the willingness to pay, for a starving man with no money, for a Subway sub with potato chips and a big frosty Coke?  Zero.  Nada.  Nothing. This strikes many people as paradoxical, even immoral, and they are right.  The starving man would benefit enormously from acquiring the sandwich.  But the convention of a market system is that abstract subjective demands are made objective and given force as movers of resources if the “demand” is made effective by having money.  If the man has no money, he doesn’t “want” the sandwich.

Hayekian Socialism The problem is not the inequality of outcomes.  There are other arguments you could make, where severe inequality of outcome is a problem, of course.  One common one is the Walzer-type claim that enormous economic wealth creates concentrations of power, and it is difficult to prevent such concentrations of economic power from metastasizing beyond the market setting (where wealth is arguably legitimate as a source of disproportionate command) into the political “sphere,” where democracy requires more or less equal ability to command.

But I see that possibility as a product of the state having too much power over economic decisions in the first place.  The problem is not money in politics, but rather the expansion of politics into controlling money. The problem, as I see it, is that the starving man with no money actually does want that Subway combo meal.  In fact, he wants it a lot.   A system that doesn’t register that desire or react to it in any way strikes many of our opponents as strange.  In fact, they see it as an RAA, and the argument is over.

I don’t think that has to be true. Still, it makes no sense to require that Subway give him the sandwich, however, because the only reason that Subway exists is to serve the effective demand of consumers.  It passes the “profit test” I talked about in Part IV, because Subway can produce food at a cost below what (many) people are willing and able to pay for it.  By selling those combos at a price above the cost of production, Subway makes its customers better off and is therefore entitled to the profits that are promised to economic firms that create value.

The answer to the problem is what some people have called “Hayekian Socialism.”  Of course, it’s not socialism at all, since there is no state ownership of the means of production.  Instead, Hayek argued that society “should” (for both consequential and moral reasons) have a guaranteed minimum standard of living for its citizens.

There is no reason why in a society which has reached the general level of wealth which ours has attained  the first kind of security should not be guaranteed to all without endangering general freedom. …. [T]here can be no doubt that some minimum of food, shelter, and clothing, sufficient to preserve health and the capacity to work, can be assured to everybody. … Nor is there any reason why the state should not assist the individual in providing for those common hazards of life against which, because of their uncertainty, few individuals can make adequate provision.  

Where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance – where, in short, we deal with genuinely insurable risks – the case for the state’s helping to organize a comprehensive system of social insurance is very strong.

There are many points of detail where those wishing to preserve the competitive system and those wishing to supercede it by something different will disagree on the details of such schemes; and it is possible under the name of social insurance to introduce measures which tend to make competition more or less ineffective. But there is no incompatability in principle between the state’s providing greater security in this way and the preservation of individual freedom.  

To the same category belongs also the increase of security through the state’s rendering assistance to the victims of such ‘acts of God’ as earthquakes and floods. Wherever communal action can mitigate disasters against which the individual can neither attempt to guard himself nor make provision for the consequences, such communal action should undoubtedly be taken.  

There is, finally, the supremely important problem of combating general fluctuations of economic activity and the recurrent waves of large-scale unemployment which accompany them.  This is, of course, one of the gravest and most pressing problems of our time.  (F. A. Hayek, Road to Serfdom, 1944, Pages 148-149)

Of course, people could buy private insurance for the kind of problems Hayek seems to want the state to help guard against.  Nonetheless.  And the guarantee of a certain level of income, and subsidized unemployment compensation, will reduce the incentives to work and to find jobs.  Still.  In spite of those problems, I want the state to ensure that people have choices. There are three programs that I think form the core functions of the state in ensuring a realistic level of euvoluntarity:  (1) Basic income, (2) Public education funding, and (3) Single-payer health insurance.

(1) Basic income.  We already get a “standard deduction” on our income tax returns.  Bill Gates gets it, and the poorest worker gets it (if that worker makes enough money to owe taxes).  “Basic income” is simply a larger standard deduction, with the added provision that it is a tax credit rather than a deduction.  Everyone gets it, everyone.  Even the starving man with no money.  Except that now the starving man has money.  Not a lot of money, perhaps, but a payment equal to the amount required to get him up to the “poverty line.”  For the U.S., that’s about $12,000 per year for an individual, or $1,000 per month. (LINK: )  Everyone would receive $1,000 a month, from Bill Gates down to the starving man at Subway.  For most people, this would simply mean an increase in gross income, and an offsetting increase in taxes, for no net change in disposable income.  But for the very poor, there would be a change. Or would there?  At present, the U.S. spends more than $20,000 per poor person on poverty programs, as I argued in Munger (2011).

Basic Income would replace all of these wasteful, scattershot programs with a cash payment, managed by the IRS using existing databases and infrastructure.  By cutting the payment per person from $20,000 to $11,000, the total tax burden would actually be reduced. Of course, there is a problem.  That $1,000 per month payment is it.  That’s all.  That’s all you get from the state.  Of course, if you get a job, you don’t lose any of the $1,000 per month, so with a little work most people could earn an income that would be well above the poverty line.  A couple would receive $24,000 per year, putting them well above the poverty level of $15,730 for a two-person household.

What if the couple spends their money badly, though?  What if they spend it on stupid things?  The problem with autonomy is that people may make bad choices. My answer is that there are going to have to be some exceptions.  Heroin addicts don’t satisfy condition #3 of the definition of euvoluntarity (non-regret).  We would need medical treatment options that would extend beyond, and possibly replace, Basic Income.  But for most people, most of the time, if the exchange setting is euvoluntary then autonomy must be respected.  Basic Income makes the exchange setting euvoluntary, or at least takes a giant step in that direction. And now the starving guy actually wants that Subway combo meal.  Because he has enough money to make the subjective demand effective through his monthly check.  He may well run out of money, in the sense that he has less than he wants.  But he has some.  Is it “enough”?  That’s a nonsense question.  It could never be enough.  The point is that he now has alternatives, and the fact that he has alternatives means that he makes choices, and he can be held responsible for those choices.

2.  Public Education Funding.   The U.S. system of monopoly public education provision is bizarre.  In many other countries, there are both municipal and “independent” public schools, and also what in effect are voucher programs.  If you believe that equality of opportunity requires that everyone have access to education (and surely it’s hard to disagree), there is still no reason to believe that the state should be only provider of education.  So, again, the solution is to give parents alternatives, choices, with voucher programs and charter schools.  The state may play a crucial role in financing education.  Rich people will always have choices.  Euvoluntarity requires that everyone have choices.  Public funding through charters and vouchers is not a perfect solution, but it goes a long way toward assuring that parents who want something better for their children have a chance of achieving it.

3.  Single-payer health care.   I have argued elsewhere (LINK:   ) that the real reason the U.S. is slumping and can’t get up is health care.  There is no reason to tax employers to pay for health care, other than the peculiarities of our tax system.  And the loss of productivity, and the sense of unfairness that people without health insurance feel, is inconsistent with the goal of a free and responsible society.  Nearly all of our competitor/trading partner nations (Germany, France, Japan, Chile, Sweden) have some form of single-payer, except for the countries (England, Canada) that make the mistake of going all the way to public provision.  Again, public financing and private provision of essential social services is the sweet spot.  Public provision is disastrous.

In Summary So, the reason I’m a “Bleeding Heart” libertarian is that I think that the argument for freeing up market exchange is very powerful, but rests on some assumptions.  We can respect individual autonomy, and grant individuals the power to make their own choices, and we’ll all be better off.  But the assumption of euvoluntarity requires that people actually do have choices.  For people to be rewarded for good choices or held responsible for bad choices, it is necessary that the good choices actually reflect virtue, and character, and hard work, not just luck and privilege.  And the bad choices have to have been made in a context where a good choice was possible, and financially feasible, but the person chose to act viciously and irresponsibly.

I’m not sure that this is what is meant by “social justice.”  What is important is that people have the sense that they are playing what James Buchanan called a “fair game.”  If I work hard, and get an education, I can succeed.  If I fail, I can get another chance.  And if I get sick, I don’t bankrupt my family and mortgage all their future chances at success. As I argued back in Part I, this clearly makes me a directionalist rather than a destinationist.  In terms of ideal theory, I could be an anarchist, but I could also be a socialist.  If we grant certain extreme assumptions about human capacity, behavior, and society, many different systems might work.

  • But in terms of policies that would actually be immediately feasible, and would be incrementally better than our current dog’s breakfast of incoherent “welfare” programs, Basic Income is an improvement.
  • Compared to monopoly public education with an op-out for the wealthy, reducing support for public education, charters and vouchers are an improvement.
  • Compared to the nightmare of Obamacare, single-payer is an improvement, and removes the “insurance tax” that currently shackles the US economy to slow growth rate.

When libertarians try to argue with people on the left, we usually get a “yes, but….” Answer.  The argument for the benefits of euvoluntarity, combined with the three broad programs listed here as a means of approximating euvoluntarity, take us a long way toward a synthesis.

Reference: Munger, Michael.  2011.  “’Basic Income’ is Not an Obligation, But It Might Be a Legitimate Choice,” Basic Income Studies, 6, 2 (December):  1-13.  (LINK: )


UPDATE:  In response to comments, let me note some things.

1.  I had thought it obvious that I was not making a Kantian “deserve” point, but rather a Misesian/Nozickian “entitled” point when it comes to profits.  So I am not trying to reverse my previous rejection of the “whimsical” nature of desert.  Far from it.  What I am proposing is that we use profits and losses as a “Discovery process,” with all that entails in terms of protecting profits, and assessing losses.  Smoothing by taxing profits or covering losses means that the incentives to discover value, avoid harm, and behave responsibly are all obliterated.  This argument is simply a warmed-over claim by Mises, who (unsurprisingly) said it better.

2.  It may be unclear that the nature of the BIG is quite encompassing, in terms of the programs it would have to replace.  No more minimum wage.  No more WIC/unemployment insurance/old age pensions.  All of it.  Gone.  Just the BIG.  Now, one could object that this is implausible, and that “we” would never consent to doing all this whittling down.  Fair enough.  But the proposal for BIG is based on the twin claims that it would be cheaper and ALSO much better for liberty.  Here is an example of that kind of argument, from REASON’s Matt Feeney.

3.   Not least important, BIG would actually help the people “we” are trying to help.  Sorry for the scare quotes, but it’s not clear what “we” thinks these sucky programs are helpful.


    If I were to attempt a detailed technical rebuttal of the single payer proposal I wouls start with Milton Friedman’s well-known (but not apparently to Prof. Munger) description about the four possible ways to spend money:

    There are four ways in which you can spend money. You can spend your own money on yourself. When you do that, why then you really watch out what you’re doing, and you try to get the most for your money. Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I’m not so careful about the content of the present, but I’m very careful about the cost. Then, I can spend somebody else’s money on myself. And if I spend somebody else’s money on myself, then I’m sure going to have a good lunch! Finally, I can spend somebody else’s money on somebody else. And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get. And that’s government. And that’s close to 40% of our national income.

    Fox News interview (May 2004)

    I would then note that right now in the U.S. only 11.4% is spent the first way, which is generally substantially less than in other advanced countries, even those that have universal coverage. I would then note that single payer moves us 100% of the way to no. 4, and that only a fool would think that this could be a good thing. But why should libertarians care about insights from that old-fuddy-duddy Milton: what the hell did he know?

    But I’m not so inclined, because I don’t think Prof. Munger’s proposal goes nearly far enough. Innocent people need many things for a decent life, for example, a roof over their head. And yet. innocent people can get financially harmed, even go bankrupt due to purchasing a home at a bad time. So I demand single payer for homes. Ditto for basic transportation, ditto for education. Let’s not stop at half-measures. Damn, let’s have the courage of our convictions!!

    • judd

      This seems unnecessarily harsh and sarcastic.
      Munger is not saying that single payer is ideal. He’s a free market guy. Rather, he’s saying that single payer is preferable to the corporatist monstrosity that we have today and by single payer he does not mean the Canadian or British systems which, as a Canadian anyway, I would argue is worse but the more limited single payer systems that exist in some European countries.
      Finally, I find it a little funny that you quote Milton Friedman when he strongly favored the sort of safety net institutional arrangements Munger is arguing for in this post. There’s no real philosophical or even empirical divide here I don’t think.


        Sorry, there is no plausible way to read what Munger wrote under #3 as anything other than support for single payer as the best system: “Again, public financing and private provision of essential social services is the sweet spot.” The question isn’t whether single payer is better than ObamaCare or some other country’s centrally planned system. The question, for any “libertarian,” is whether it is better than free market medicine. Do you disagree? What reason does Munger give for opposing free market medicine? I didn’t hear one.

        It is one thing to say, competitive capitalism for all, except public assistance for the destitute, and quite another to say single-payer for one-sixth of the economy. Whatever you want to say about M. Friedman, so far as I know he was not in favor of any single-payer scheme for an entire major industry, let alone 1/6 of the entire economy (other than national defense and law enforcement), for precisely the reasons given in the quote I provided.

        • judd

          I think your interpretation is reasonable. I should say that mine is based on reading another article by Munger in which he clearly states free market medicine would be the ideal but since he did not repeat that claim in this piece I can see why you would read it the way you did. The following is from another blog he writes on

          “A number of people have written to express surprise that I “favor” single payer health insurance. Not sure that’s accurate. I would prefer personal responsibility, and a competitive market in health care. Modeled after the very successful, constantly cheaper, constantly better quality, service in Lasik surgery and other “elective” surgeries. If someone, anyone, would even consider going in that direction, that would be fine.

          Insurance would be for major problems, big surgeries, accidents. You might have an annual deductible of $5k or more. Doctors would advertise prices (yes, PRICES) of standard surgeries.”

          Here’s the link
          Yeah for sure. I love that quote. I just think we libertarians need to very clear that the US health care system, even before Obamacare, was not mostly free market with some distortions but rather one very far off from a free market ideal.

          • MARK_D_FRIEDMAN

            I think we have reached agreement. You are right that Munger provided a link in this post that shows that elsewhere he has advocated free market medicine. And you last paragraph is absolutely correct, which is why I started my first comment by pointing out that only 11.4% of healthcare spending conforms with MF’s first (and preferred) method.
            I may be forgiven for misunderstanding Munger’s view here because his reference to the link you cite

        • Jerome Bigge

          I suppose the “single payer” health care system would resemble Medicare. Which has problems of its own. Including a serious fraud problem. Nor does Medicare resolve the issue of government enforced monopoly. I’d much prefer to “shrink” government, not grow it larger yet.

          • MARK_D_FRIEDMAN


  • dsto

    Thank you for this. I was looking forward to it, and you did not disappoint. Note: in the link at the beginning, by “Part VI” I think you mean “Part IV”

  • Sean II

    “…And if I get sick, I don’t bankrupt my family and mortgage all their future chances at success.”

    One quick point: there are any number of ways to begin that sentence which produces a similar moral intuition. For example:

    “And if my industry gets eliminated by unforeseen technological innovation, I shouldn’t have to bankrupt my family.”

    “And if I sink everything into a basically good idea like Friendster and the public just arbitrarily favors some competitor and ignores my hard work, I shouldn’t have to bankrupt my family.”

    “And if [any bad thing happens I didn’t completely control or deserve] I shouldn’t have to bankrupt my family.”

    Why no provision for all of those people?

    • good_in_theory

      Illness can have a rather more essential effect on one’s ability to earn an income, insofar as it affects one ability to physically perform many tasks, rather than entangling one in a web of artificial and mutable social conventions, like debt and bankruptcy.

      • Sean II

        At best, that forms the basis for an argument that some health care closely related to occupation fitness should be subsidized, and backstopped with disability insurance.

        That doesn’t get you anywhere near the bizarre proposition “only the state should be able to spend health dollars”.

        • good_in_theory

          I’m not aware of any single payer system which prohibits private expenditures on health services, necessary or otherwise. The entitlement to file a claim against a third party payer which will then negotiate one’s payment does not preclude foregoing that entitlement. You’re at liberty to go through the “single payer,” not obligated to do so. The state functions as the bargainer/payer-of-first-resort.

          If there are single payer systems which prohibit non-government bargaining over health services, or proposals which include such a prohibition, do tell.

          • Sean II

            Well, Cuba for starters.

            But even in places where private pay isn’t completely eliminated, it becomes limited to people of means.

            Surely you don’t approve of that?

          • good_in_theory

            Cuba generates millions in revenue every year through health tourism. Privileged Cubans can avail themselves of the private hospitals (e.g. Cira Garcia and CIMEQ). Inability to access private healthcare is a function of resource inequality between individuals (whatever its causes), same as any other private market. The causes of inadequate personal resources to avail oneself of care might be due to state policies, but that’s not the same as being due to state prohibitions.

            The second statement is question begging. Private pay for many health services is limited to people of means with or without a single payer of first resort. Ceteris paribus, redistribution of wealth from top to bottom increases the access of people without means to healthcare, and that’s mostly what “single payer” is, insofar as it’s something of a misnomer for ‘government funded health-care.’ The question remains to what extent such enhancements are diminished, negated, or reversed because ceteris isn’t paribus because redistribution affects economic production.

  • martinbrock

    “Basic income” is simply a larger standard deduction, with the added provision that it is a tax credit rather than a deduction. Everyone gets it, everyone.

    It’s absurd (and Orwellian) to say that Bill Gates “gets the basic income”. His “basic income” is a tiny fraction of his tax payments, which provide the basic income to many other people. Gates’ “basic income” is only a refund of taxes he pays, while other people receive the basic income from his tax payments. If we say that he doesn’t get it while other people get it from him, only our description of the circumstances changes.

    Whether Gates should pay so much tax, or whether he should have so much income to tax, is a separate issue. A huge proportion of Gates’ income is a consequence of rents, like royalties on intellectual property, that many libertarians oppose. Calling this income “a product of Gates’ labor” is also Orwellian. For the most part, Gates didn’t even produce the IP personally (though he’s a little holier than Steve Jobs in this regard). He rather owned shares in a corporation employing people producing it, and this company has cross-licensing agreements with other companies immunizing it from rentiers from whom the employees themselves are not immune.

  • adrianratnapala

    What the hell is “single payer”?

    I Nearly all of our competitor/trading partner nations (Germany, France, Japan, Chile, Sweden) have some form of single-payer, except for the countries (England, Canada) that make the mistake of going all the way to public provision.

    As far as I can tell, the German system is in broad brush the same as Obamacare. Everyone has to buy private insurance standardised by national regulations. This is in some sense payed by my employer — at least my take-home pay seems to have my premiums already taken out.

    Somehow I feel “single-payer” is signaling word used by the tribe to the left of Obama to identify each other. Hatred for it is used similarly on the right. Munger is trying to undermine this by using the word in a right-friendly manner. Good luck with that.

    • Sean II

      Me, I’m taking him at his word and assuming single-payer means monopsony, and that this includes the most morally repugnant aspect of monopsony, which is the use of state coercion to prevent non-approved buyers from interacting with sellers.

      To understand why such coercion is – forget about libertarianism – at odds with minimal human decency, see: Dallas Buyers Club.

    • RandomGermanDude

      Led me shed some light on this. Germany has universal health-care but it is not quite a single-payer system. It goes like this (it actually is a lot more complicated, it is German after all) :

      Employees whose income is below a certain (high) threshold have to buy basic insurance from a selection of insurance providers which are autonomous public-law-institutions. The price is 15% of one’s income. One half is paid by yourself the other half by your employer (though you can argue that employers don’t actually pay since the price enters the wage-calculations of course). There is some competition between those providers regarding additional services (a few years back you also had competition via the price but that got abolished). The basic insurance covers a lot but not everything. For that you can get additional private insurance.

      People that are self-employed, public servants and people that earn more than the threshold have the option of buying all health insurance not only from a public-law-institution but from a private entity. Here you have a very wide selection of options. Basically like any other insurance.

      Prices for certified health services are fixed. When doctors
      treat someone from the state-system there is only one price. When they treat someone with private insurance they are allowed to charge up to 3x the price. There are also some quotas regarding compensation and such. You can now guess for what patients it is easier to get an early appointment. Still doctors generally treat you more-or-less equally (it is of course more complicated than that). But there are also some doctors that only treat patients from the private system.

      While the system has some pretty glaring problems I would say that compared to other countries it fares quite well. Having had both first-hand experience with the US-system and the UK-system I am glad about ours.

      The most libertarian party (which got booted from parliament last elections) wants to reform the system into a more Obamacare-like system (only private insurance providers with mandatory basic insurance. Direct payments for those who can’t afford basic insurance) but that proposal is widely regarded as turbo-capitalistic over here (go figure).

  • “For people to be rewarded for good choices or held responsible for bad
    choices, it is necessary that the good choices actually reflect virtue,
    and character, and hard work, not just luck and privilege. And the bad
    choices have to have been made in a context where a good choice was
    possible, and financially feasible, but the person chose to act
    viciously and irresponsibly.”

    The appeal there is to an eschatological idea of justice according to which rewards (and punishments) are distributed in accord with virtue and vice. Such a system of justice is not humanly possible. Kant recognised that. It was part of his moral argument for the existence of God, i.e., God must exist to see that virtue and vice are rewarded and punished in an afterlife because there is no way of securing that kind of justice down here. Yet Kant also thought that justice, of a different kind, was in principle possible on earth, namely, the justice of right, which obtains when people have their rights respected (not violated). That is, more or less, Nozick’s entitlement view of justice.

    You seemed to recognise in an earlier post (I think it was the one immediately prior to this) that eschatological justice is whimsical. Yet now you return to it as if it deserves serious consideration. What gives?

  • Motivated Cognition

    The idea that people without money face an absence of choices is a cruel one that is both observably false and one that denies their personhood and the validity of the choices that they do make. Opponents of sweatshop labor make this false and inhumane argument all the time.

    • good_in_theory

      A seaman in the middle of a deadly storm has choices. Everyone has choices. One ostensibly has choices under even the most severe varieties of coercion. Turns out the quality of choices available tends to matter.

  • jdkolassa

    I find it funny that I’m reading this while eating a Subway sandwich. (Roast beef, if you must know. Quite delicious.)

    I’m generally in agreement with you, Prof. Munger, which is one reason why I really like your work. I’ve been trending towards this idea of “Hayekian Socialism” for some time now; I think I am probably a “market democrat” in Tomasi’s line of thinking. But I do have a few quibbles.

    I agree with the idea of a basic income in theory, but the problem is that it’s totally unsustainable. There’s no way to afford paying $1,000 a month to every man, woman, and child in America. At 300+ million people that would cost a staggering $3,600,000,000,000 (feel free to check my math). Even if you cut almost all other government programs, this would still be an enormous spending burden (IIRC, today the government spends about $1.5 trillion annually, or a little under half the UBI amount.) So here I suggest an alternative proposal: the negative income tax. That way you’re only spending money on those who truly need the money, and not on the uber-rich; you could save trillions of dollars this way and make the program far more effective.

    Also, I would include a system of tax credits next to the threshold and charitable deductions: three for the basic economic needs (food, clothing, and shelter – which would include mortgages, rent, and utility payments), plus two for the “new economic needs”, healthcare spending and education. No caps, 1-to-1. If that brings someone below the threshold, well then so be it. If that’s the case then they were probably barely making it anyways.

    For #2, I tend towards tax credits more than vouchers. I think it’s a better solution overall and will encourage more people to seek out private alternatives, as well as incentivize providers who can see all that tax free money parents are willing to spend. Not sure vouchers would have the same effect.

    For #3, I’m very skeptical of this. Again, I’m perfectly okay with healthcare tax credits and redoing that part of the tax system (well, I guess in my case basically junking it and replacing it.) I’m not convinced, however, that single-payer is the way to go. Putting government in control of all healthcare funding seems like a bad move, where politicians can pick winners and losers in healthcare. Furthermore, the countries that you cite that have such a system, while having large economies, are not all *that* large, and indeed in the case of France and Japan have serious structural issues. Not sure that’s really a strong case there.

    In general, I think you’re basically right. The question is not the theory, it’s the execution.

  • Suzanne Visser

    you were mentioned on the Basic Income Australia Facebook Page today

  • Bob Waldrop

    This is a very interesting discussion and I like these concepts as a way to finesse the issues talked about herein. At what age does the basic income kick in? 18? Is there any payment for children? A family of two with two kids gets the same as a family of two with 6?

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