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Egalitarian Aggression

15 Thursday Oct 2015

Posted by Nuetzel in Big Government, Equality, Liberty

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Comparative advantage, Dylan Matthews, Egalitarianism, Equality of Opportunity, Inequality, Integrity of the Family, John Rawls, Llewellyn Rockwell Jr., Mises Institute, Redistribution, Robert Nisbet, The Mises Daily, Vox, Wilt Chamberlain Problem

communism Lady liberty in rear view mirror

In what sense is “equality” a rational objective? Can it ever be achieved without aggression? It’s certainly admirable for individuals to treat all others fairly and without bias against personal traits. A society composed of individuals possessing that kind of integrity is one in which “equal opportunity” exists in an intuitive sense. Such a society would yield market outcomes that are free from personal discrimination.

There are many social pitfalls when central authorities attempt to enforce this sort of equality. There will always be minor and even random cases of treatment that someone considers unfair. Any effort to adjudicate such incidents comes at a great resource cost. The potential for moral hazard in pursuing grievances is also strong, and the enforcement authority may well have biases of its own.

Stronger forms of equality are even more difficult to achieve in a free society. There are many barriers to “equality” that most people would regard as natural, like genetics and the integrity of the family. And like family, many other barriers to equality are cultural virtues, such as educational and occupational rewards based on merit. The institution of strong private property rights provides an effective system of incentives that fosters efficient resource allocation, promoting economic growth and human well-being, but it’s rewards will not be distributed equally.

Institutionalized tampering with any of these features for the sake of equality tends to legitimize envy as a cause of social action. And the intrusions require design and enforcement of a system of social “overrides” by a central authority possessing police power. Needless to say, this must involve elements of aggression and tyranny. These overrides introduce significant risks to individual freedom and the functioning of markets, and are likely to cause widespread destruction of welfare. In that sense, forced equality cannot be a rational objective.

These points are developed more fully in “The Menace of Egalitarianism“, a piece by Llewellyn Rockwell Jr. at the Mises Daily blog.

“A libertarian is perfectly at peace with the universal phenomenon of human difference. He does not wish it away, he does not shake his fist at it, he does not pretend not to notice it. It affords him another opportunity to marvel at a miracle of the market: its ability to incorporate just about anyone into the division of labor. … Indeed the division of labor is based on human difference.“

Rockwell goes on to explain the law of comparative advantage, which allows more productive and less productive individuals to profit by specializing in areas for which each has the lowest opportunity cost. And when producers compete for rewards, as Rockwell notes, average consumers (and rich ones and poor ones) are the ultimate beneficiaries.

Outcomes such as the inequality of wealth and income are not only impossible to avoid, they are natural consequences of economic freedom. Several earlier posts on Sacred Cow Chips have dealt with this topic, and can be viewed from the Home page by typing “inequality” into the search box near the top. For his part, Rockwell discusses the “Wilt Chamberlain” problem, whereby private demand to witness great athletic prowess results in a shift towards an unequal distribution of income:

“… the pattern of wealth distribution is disturbed as soon as anyone engages in any exchange at all. Are we to cancel the results of all these exchanges and return everyone’s money to the original owners? Is Chamberlain to be deprived of the money people freely chose to gave [sic] him in exchange for the entertainment he provided?“

The fact that “equality” is seldom well-defined as an actual objective should be met with skepticism. Here’s more Rockwell:

“It is precisely this lack of clarity that makes the idea of equality so advantageous for the state. No one is entirely sure what the principle of equality commits him to. And keeping up with its ever-changing demands is more difficult still. … Equality is a concept that cannot and will not be kept restrained or nailed down.”  

He takes a dismal view of “cultural inequality” and “equality of opportunity” as worthwhile causes for invoking the power of the state. For example, two families in different economic circumstances will generally confer different opportunities to their children. Dylan Matthews at Vox makes the same point in “Equality of Opportunity“, though Matthews’ analysis is weak in several respects. The point here is that there is only so much that can be done to correct for unequal family-related endowments without undermining the integrity of the family (not to mention property rights). This has long been a bone of contention with respect to the design of U.S. welfare programs. But the problem is much deeper:

“In the course of working toward equality, the state expands its power at the expense of other forms of human association, including the family itself. The family has always been the primary obstacle to the egalitarian program. The very fact that parents differ in their knowledge, skill levels, and devotion to their offspring means that children in no two households can ever be raised ‘equally.’

Robert Nisbet, the Columbia University sociologist, openly wondered if [John] Rawls would be honest enough to admit that his system, if followed to its logical conclusion, had to lead to the abolition of the family. ‘I have always found treatment of the family to be an excellent indicator of the degree of zeal and authoritarianism, overt or latent, in a moral philosopher or political theorist,’ Nisbet said.“

And here is Rawls himself expressing doubts, as quoted by Rockwell:

“It seems that when fair opportunity (as it has been defined) is satisfied, the family will lead to unequal chances between individuals. Is the family to be abolished then? Taken by itself and given a certain primacy, the idea of equal opportunity inclines in this direction.“

The quest for “equality” is a creeping force. It infects economic life in a way that makes widespread gains in welfare difficult to achieve, diminishes expectations and fosters social devolution. It also leads to demands for eliminating useful distinctions, which can only be erased though aggression by the state. This forces a convergence toward the least common denominator throughout the culture. I believe the following statement by Rockwell rings true:

“The obsession with equality… undermines every indicator of health we might look for in a civilization. It involves a madness so complete that although it flirts with the destruction of the family…. It leads to the destruction of standards — scholarly, cultural, and behavioral. It is based on assertion rather than evidence, and it attempts to gain ground not through rational argument but by intimidating opponents into silence. There is nothing honorable or admirable about any aspect of the egalitarian program.“

Put Consumers In Charge

25 Wednesday Feb 2015

Posted by Nuetzel in Markets

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Comparative advantage, competition, Consumer Sovereignty, Contrived Scarcity, Free trade, Legalized Restraint of Trade, Markets, Matt Ridley, regulation, rent seeking, Richard Ebeling, Transatlantic Trade and Investment Partnership

Washington

The interests of consumers should always be placed first. That’s what happens in a free market economy, with the consent of competitive producers, and that is how public policy should be crafted.  Too often, however, regulations and the laws on which they are based are  written primarily with producer interests in mind. Don’t be cowed by the appealing names given to pieces of legislation or their ostensible purposes. These may be couched in terms of consumer protections, but more often than not they create barriers to entry, stifle innovation and confer advantages to big players, thus restricting competition. A case in point is occupational licensing, which inflates prices by preventing the entry of innovative and less costly competitors. In this political exchange, consumers gain “protections” that are often of questionable value, especially when incentives for improved service are blunted by the licensing rules.

Consumer primacy is of value in a general sense, as Richard Ebeling explains in “Consumers’ Sovereignty and Natural Vs. Contrived Scarcities“. When consumers are sovereign in their ability to decide for themselves among competing alternatives, including their own personal comparison of value to price, they essentially take charge of the flow of resources into and out of various uses. And they capture a positive gap between value and price as a personal gain in any transaction to which they are (by definition) a voluntary party. At the same time, producers must reckon with real costs, which reflect natural scarcities. But, by virtue of competition, it is in the interests of producers to deliver the best values to consumers at the lowest prices compatible with costs. Here is part of Ebeling’s introduction:

“One of the great myths about the capitalist system is the presumption that businessmen make profits at the expense of the consumers and workers in society. Nothing could be further from the truth. … In the free market, consumers are the sovereign rulers who determine what gets produced, and with what qualities and features. … The ‘captains of industry’ are not the businessmen, but the buying public who steer the directions into which production is taken.”

Ebeling gives a number of good examples demonstrating the ways in which this efficient market process is compromised by the hand of government. Regulations, mandates, licensure, price floors and ceilings, taxes and subsidies all act to distort the normal workings of the market, creating direct and indirect scarcities. The perverse effect is to generate a flow of economic rents to producer interests at the expense of consumers (and taxpayers). And that is why is those same producer interests are often inclined to seek market interventions. The successful rent-seeking effort ends in legally-sanctioned restraint of trade.

An example of contrived scarcity given by Ebeling results from protectionist trade policy, which ostensibly “protects” domestic producers and workers from “cutthroat” foreign competition. The plight of workers seems to be an easy sell to the public, though historically protectionism has inured to the benefit of relatively highly-paid workers, often unionized, who have an interest in restricting competition. Consistent with Ebeling’s point of view, Matt Ridley writes that trade policy should be driven by the benefits to domestic consumers, rather than producers. Ridley focuses on the UK’s interests in negotiating a free trade agreement between the United States and the European Union: the Transatlantic Trade and Investment Partnership. The following thoughts from Ridley should be taken to heart by anyone with an interest in trade policy, and especially those who fancy themselves liberal:

“The argument for free trade is paradoxical and much misunderstood. Free trade benefits consumers because it is the scourge of expensive or monopolistic national suppliers. It benefits both sides: yet it works unilaterally. Your citizens benefit if you let them buy cheap goods from abroad, while foreigners are punished if their government does not reciprocate. This creates more demand for local services and hence more growth and jobs in the importing country. 

Contrary to what most people think, therefore, it is imports that bring the greatest benefit, not exports — which are the price we have to pay to get the imports. At the centre of the debate lies David Ricardo’s beautiful yet counterintuitive idea of comparative advantage — that it will always pay a country (or a person) to import some goods from another, even if the first country or person is better at making everything. Truly free trade cannot be a predatory phenomenon.“

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