World Welfare State or International Economic Freedom?

            In a previous post (http://thinkingabouthumansociety.blogspot.ca/2013/03/issue-analysis-welfare-social-safety-net.html), I came out in favor of a governmentally-provided minimal social safety net for the desperately poor. When I was writing that post, the implicit context was that this policy would apply in a sovereign nation-state in a relatively economically developed part of the world (North America, Europe, some of East Asia). As was recently pointed out to me though, the question remains: what to do about desperately poor people in ‘third-world’ countries? Do they get a minimal social safety net too?

            

            The question is complex because of the fact that there isn’t a single world government, but multiple territorially-bounded governments in the world. One could just recommend that every government apply that policy, but what if they don’t? Then the question becomes: what can the government of the first-world country that I live in do to help desperately poor people in the third world countries?

            

           One option is to get the first world governments in question, with their own taxpayers’ resources of course, to bankroll minimal social safety nets for people in the third-world. There are numerous problems with this solution though, above and beyond the problems of just providing a social safety net nationally. They are:

1.  Administrative Difficulties: Who exactly is going to operate the safety net programs? Will it be the foreign first world government who is funding the program, or will it be the government of the third-world country in question? If the former, the government of the third-world country might protest that allowing foreign governments to administer programs within ‘their jurisdiction’ is a violation of their sovereignty, thus potentially creating international tensions. Also, there would be personnel issues and language/cultural-barrier issues, as the first world government would need to hire all manner of personnel to operate in the third-world country, personnel who might not speak the language well enough or be familiar enough with the country’s culture. If the third world government administers it, how can the first world government ensure that the program is being administered properly? How can they ensure that it is not turning into something that was not intended or ensure that the money isn’t being misappropriated by corrupt officials?

2. The ‘Bad Government’ Trap: As many international charities have found out, it is difficult to make a lasting difference in the living standards of the people they are trying to help if these people live under a government that is corrupt, oppressive, or that generally adopts policies that are not at all conducive to economic development. Most people would probably agree with the adage that it is better to teach a man to fish so that he can support himself in the future than to just give him some fish to eat in the present. But under a terrible government, trying to help people to help themselves is like trying to teach someone to fish in an area where government officials have prohibited fishing. It must be very frustrating trying to help people whose governments, through corruption, oppression, or bad policies, basically prevent those people from using the help to actually better their material conditions in a sustainable way. If first world taxpayers are to be expected to fund a social safety net for the third world, they should at least be assured that the government of the third world country won’t be able to seriously reduce the effectiveness of their help through corruption, oppression, and bad policies. The only real way to assure this though, is for the government of the first world country, or for a world government, to take over the administration of the third world country. Though possible, it seems highly unlikely that this would ever occur, due to the territorial jealousy of every government in the world and because of the memories of 19^th century European imperialism that this would bring up.

3. Magnitude Issues: One of the reasons why, in my previous post linked to above about welfare social safety net policies, I came out in favor of a very minimal safety net was because I assumed that, being applied in a developed country, the cost to the taxpayers wouldn’t actually be that high, and thus it wouldn’t too seriously hamper economic development through the higher taxes it would entail. If first world taxpayers are to be expected to fund a safety net that covers all the impoverished masses of the third world, this assumption has to go straight out the window. Also, because the wage rates and standard of living of the poorest working members of third world societies are substantially lower than those of the poorest working members of first world societies, the standard of living provided by the minimal social safety net would have to be set at a much lower level in the third world country than in first world countries, if the safety net is not to dissuade people who are capable of it from starting to work their way up the employment ladder of their society. If it was set at this much lower level in the third world countries, this would help make the program less costly for first world taxpayers and help minimize the perverse incentive problem. This would make the program more feasible to implement, though the egalitarians of the world would no doubt oppose this ‘unfair treatment’, and would undoubtedly push for a more generous safety net program in the third world.

4. Sympathy Issues: As a general rule, people have more sympathy for others who share things in common with them. In particular, geographical vicinity, cultural similarity, and sharing a language generally results in more sympathy between people than when these things are absent. For a welfare social safety net program, which heavily relies on sympathy for its popularity, getting first world taxpayers to pay for the safety net of people who live halfway across the world, have completely different cultural traditions, and have a completely different language would probably make the program more unpopular than the same program applied on a more local scale. This is not a decisive objection against the program, but it is definitely something to keep in mind when considering the feasibility of the program.

            

           Now, the establishment of a world government or of colonial government could potentially solve the first and second problem, but the third and fourth would remain. Since the establishment of either a world government or a colonial government over a populous third world country is incredibly unlikely, all four problems will probably remain, making a world minimal social safety net, in my view, unfeasible.

            

           If we admit that this idea is unfeasible, what can be done by citizens of first world countries to help the impoverished masses of the third world? Before we answer this question, we need to understand why inhabitants of third world countries are so much poorer than inhabitants of first world countries in the first place. For that, we need to keep in mind a few fundamental principles of international economics:

1. The only way to make real wages (wages in terms of the real resources the money wage can buy, as opposed to the money, or nominal, wage rate alone) go up significantly and sustainably is to increase the average productivity of workers. The more productive the worker, the more they can contribute to the production of an employer, and the more they can contribute, the more (real resources) employers are going to be willing to pay for their services. The major way to increase the productivity of workers is to equip them with more and better capital goods (capital goods including machines, tools, equipment, vehicles, factories, commercial buildings, etc…), and to integrate them in a more sophisticated production structure. In turn, the only way to do this is through saving and capital accumulation, as I talk about briefly in tip #27 here: (http://thinkingabouthumansociety.blogspot.ca/2013/03/how-to-think-about-human-society-tips.html)

2. The more incentive to produce well for the consumers and to save resources for the future, and the more resources that are left in the hands of thrifty, productive people who are skilled at investment for them to save and invest, the more saving, investment, and capital accumulation will occur. Levying high taxes on corporations, the incomes of rich people, and inheritances retards capital accumulation or, if pushed far enough, can result in capital consumption, as I talk about in effects #1 and #3 here: (http://thinkingabouthumansociety.blogspot.ca/2013/03/issue-analysis-higher-taxes-on-wealthy.html)

3. The main reason for significant real wage differentials between different parts of the world is differing amounts of capital available per active worker. Many third world countries have a higher population density than first world countries, meaning more active workers to ‘distribute’ capital to, and they generally have less accumulated capital available within their borders than first world countries do.

4. Luckily for the inhabitants of third world countries, the owners of capital seek to invest capital in locations where, other things equal, there is better land/natural resources available and where, due to a higher supply of active workers, market conditions allow for a lower wage rate to be paid to acquire the services of workers. This latter condition especially is fulfilled by many third world countries, and as long as the governments of these countries aren’t too predatory or disrespectful of the property rights of foreign investors, foreign capitalists will be eager to invest their capital within these countries. This explains the phenomenon of ‘outsourcing’ a lot of manufacturing that is destined to be consumed in the first world to China and India. Even with the extra transportation costs that must be paid, the lower wages prevalent in these countries makes the outsourcing economically rational. The more such foreign capital is invested within these countries, the more the real wages of workers in these countries will go up, as long as their populations do not expand too rapidly.

5. Though land and natural resource sources are immovable, labor is mobile, as long as immigration or migrant labor is permitted. Thus, in the absence of immigration barriers, the laborers from relatively overpopulated countries will tend to be drawn, as long as their psychic attachment to their homeland is not powerful enough, by the allure of higher prevailing real wage rates, to relatively under-populated countries with more capital accumulated within their borders.

            

           With these principles in mind, we can now think of things that could help the working populations of third world countries improve their standards of living. The first is not to place any restrictions on the natural flow of capital from relatively under-populated to relatively overpopulated countries, and for the governments of third world countries to respect the property rights of foreign investors. This will tend to increase the average real wage in these countries, and give them a head-start on further economic development.

            

           The second is to allow people from impoverished, relatively overpopulated and capital-poor countries to immigrate to, or work as migrant laborers in, developed, relatively under-populated and capital-rich countries. This will allow these workers to earn higher real wages and to enjoy a higher standard of living.   

            

           Besides directly helping workers in poorer areas of the world, these policies would also be beneficial to the world’s consumers, taken as a whole, and would increase the general productivity of the world economy. This is because the more capital is allowed to be invested freely in areas with relatively favourable land and labor conditions, the more the international division of labor can be extended and the more efficient it can be made, and thus the more productive the world’s workers and the world economy as a whole can be.

            

           Contrary to Marxist fables, this increased productivity does not just result in higher profits for ‘exploitative’ capitalists, with the living standards of workers and consumers remaining unchanged. In reality, an increase in productivity that begins as a source of exceptionally high profits for the innovative businessmen and capitalists who push for it, soon becomes, due to the imitation of these successful profit-making tactics by other businessmen and capitalists or even the potential threat of such imitation, indispensable means for even keeping up with the competition at all. In a drive for increased market share and competitive advantage, businessmen will use the lower unit costs of production, made possible by the increase in productivity, to lower the market price of the good or service in question. This, in turn, increases the purchasing power of everyone’s income, which means that the same money income can now buy more in terms of real goods. Among other things, this means that every worker gets an automatic real wage increase, even if their money wage rate stays the same or is  lowered by less than the increase in productivity.

            

           Besides this, these more productive arrangements will most likely result in more capital accumulation. This is because if the average productivity of capital goods is increased by them being invested in areas with more favourable land and labor conditions, a greater share of the producers’ (as opposed to the consumers’) output of those capital goods can be devoted to producing additional quantities of capital goods, rather than to just maintaining intact the existing quantity of capital goods or their substitutes. The likely result is real capital accumulation, that can take place even if more monetary saving does not take place, and thus which can take place alongside the increased production of consumers goods mentioned in the preceding paragraph.

            

           It is with these beneficial effects in mind that we can now turn to examining the arguments against the free international flow of capital and the free international movement of labor. The primary economic objection is made on behalf of the workers of the first world, relatively under-populated, capital-rich countries. If more capital is exported from these countries than is imported, or if the supply of labor, due to immigration, is increased faster than capital is accumulated or imported, the money wages of the average worker in these countries will fall.

            

           In response, though such a fall in money wages for first world workers could happen, the increased productivity of free international economic arrangements would result in an increase in the purchasing power of each monetary unit of wage received, as outlined above. It would also result in real capital accumulation, meaning more real capital to go around, meaning a higher real wage for the workers of any areas this additional capital is invested in, as also discussed above. How quickly this rise in general real wages would make up for the possible fall in the money wage rates of first world workers is an empirical question, open only to estimation.

            

           At the end of the day though, the objection is not consistent with the context of this discussion in the first place, which is how best to help the impoverished masses of third world countries. If the goal is to maximize the short-term incomes of first world workers, than neither a world welfare state nor allowing the free flow of capital and labor would be the way to go.

            

           If, however, the goal is to help these impoverished masses, preferably in a way that doesn’t require too much sacrifice on behalf of first world citizens, than the free flow of capital and labor most certainly is the way to go. This policy has the potential not only to help impoverished third world residents without requiring too much first world sacrifice, but to help them while increasing the long-run standards of living of the entire world, including the first world workers who might experience a short-term drop in their real wages. And given that a world welfare state is both unfeasible, as we discussed above, and even if feasible would require actual long-run and short-run sacrifices in living standards on the part of the first world, capitalists and workers alike, to implement, I can only conclude that allowing the free flow of capital and labor is the best solution to the problem of third world poverty. 

             

             

                   

           

             

In Praise of Market Meritocracy

            These days, one often hears people saying that wealth should be ‘distributed fairly’. By this, they usually mean that wealth should be ‘distributed’ more equally to members of society. That is, the notion of a ‘fair distribution of wealth’ is tied to the concept of egalitarianism, which holds that in terms of access to material goods at least, all members of society should receive roughly equal shares.

           

           In this post, in opposition to these ideas, I would like to defend a different conception of a ‘fair distribution’ of wealth: that of market meritocracy. Any meritocratic concept of wealth distribution must necessarily be tied to a notion of wealth that is earned versus wealth that is unearned. This is the case in the concept of market meritocracy, with the added specification that wealth that is earned must be acquired on the open, unhampered, free-market through serving the consumers or by receiving wealth as a gift from those who have acquired it this way. Any wealth that is extracted through the use of coercion, fraud, or through the acquisition of special political privileges is unearned wealth.

           

           Egalitarian conceptions of wealth distribution, because of their very nature, rely on an obliteration of the distinction between wealth that is earned and wealth that is unearned. Earning wealth implies that one has acquired the wealth through a productive effort of some kind. For egalitarians though, one is entitled to wealth merely because of one’s existence and because one allegedly has certain ‘needs’ that must be fulfilled. It would seem too great of a perversion of the word ‘earned’ to say that one has ‘earned’ wealth by being born and by needing it, so the egalitarians just don’t use the word or the idea behind it. For the egalitarian, there is only ‘entitlement’ and ‘obligation’, not ‘earned’ and ‘unearned’. People that are worse off materially or whose productive abilities are below average, for whatever reason, are ‘entitled’ to receive access to additional resources, while people that are better off materially  or whose productive abilities are above average, for whatever reason, are ‘obligated’ to relinquish access to these additional resources and make them available to the poorer people.

           

           By contrast, for proponents of market meritocracy (whom I will refer to as ‘marketists’ from now on), when one has earned the right to access resources (when one has earned money) by serving the consumers on the open market, one is entitled to dispose of those resources as one sees fit. Anyone who seeks to interfere with this entitlement seeks to take away legitimately earned resources from someone. If the taker succeeds, then these resources become his unearned resources, acquired through coercion.

            

           From this, it is clear that egalitarianism and market meritocracy are concepts that cannot be reconciled. To advance the egalitarian ideal, the earned, according to marketist criteria, resources of someone must be taken and given to someone else. Thus, every step towards coercively-imposed egalitarianism is a violation of the marketist ideal.

            

           Here, in order to further flesh out what market meritocracy entails and what its proponents believe, let us address some common objections to market meritocracy:

1. If marketists believe in meritocracy, then why do they tolerate the institution of inheritance, which allows the children of rich people access to more resources and opportunities to acquire more resources than the children of poorer people, irrespective of personal merits or demerits?

Response: Firstly, marketists don’t just believe in ‘meritocracy’, they believe in a particular kind of meritocracy where merit consists of giving the consumers of society what they ask for, in potential competition with others who are trying to do the same, and being rewarded according to how well one succeeds in this endeavour. Marketists, unlike other branches of meritocrats, do not seek to tie material rewards directly to whatever the observer considers to be ‘merits’ or ‘demerits’ of the individual. It doesn’t matter whether one has acquired one’s ability to serve the consumers well through innate personal characteristics, through the advantages (material or otherwise) conferred by one’s parents, through luck, or through pure hard work and dedication. What matters is how well, in the present and with the productive resources one possesses, one is able to give the consumers what they want.

           

           Secondly, marketists don’t focus on whether the recipient of the inheritance has earned it through their own personal merits or not, but on the right of the giver of the inheritance to give it to whomever they want. As noted above, one has a right to freely dispose of the resources one has earned through one’s productive efforts in service to the consumers, as long as in doing so, one does not interfere with the right of others to do the same. This right is merely the right of exercising one’s ownership prerogatives over resources. Someone must hold these rights over resources, and if not the person who has earned them, then who else could be entitled to such rights? It should also be noted that protecting the right of legitimate owners of wealth to transfer their earned resources to their offspring or others gives them a greater incentive to serve the consumers well than there would be in its absence. If they couldn’t give away their resources once they died, then what incentive would they have to continue accumulating wealth and capital through service to the consumers near the end of their lives? They would instead have an incentive to stop serving the consumers and to merely consume the resources they had previously amassed, something that would result in capital consumption and its associated undermining of the productive potential of the economic system.

2. What makes the demands of these ‘consumers’ you speak of the most important determinant of the relative wealth of individuals in society? Richer people enjoy more power as individual consumers than poorer people, thus making this concept undemocratic. Also, the consumers might demand evil, useless, or immoral things, so why should catering to their depravities be a mark of merit?

Response: In order to answer this series of questions, it is important to point out that ‘consumers’ signifies those that are using their resources, previously earned through productive effort in service to the consumers that existed at that time, for their own enjoyment. Thus, the concepts of ‘consumers’ sovereignty’ and of ‘earned resources’ are two sides of the same coin. If one has earned resources through production, one then has the right to consume these resources in the way that one sees fit.

Yes this process is ‘undemocratic’, if democratic is defined by the equal weighting of everyone’s opinion in a decision-making process. Under consumers’ sovereignty, each unit of money representing a certain amount of access to resources has an equal vote in determining the income of market producers, but each person does not because each person has not earned the same amount of resources in production.

Yes this process might result in high incomes going to people who produce things that an onlooker deems to be evil, useless, or immoral, provided that the consumers demand these things. But if we were to give this would-be censor the power to prevent the consumers from using their earned resources to demand certain things from the producers, we would be partially taking away the ownership rights of people who had earned resources through productive effort and giving them to the censor, who certainly did not earn them merely through expressing his disapproval of other people’s choices.

             

3. Even if we were to admit that market meritocracy is good in theory, an unhampered free-market does not produce these results. Just look at the ridiculously large incomes of businessmen and capitalists and the relatively small incomes of the workers who do the real work.

            

           Response: Firstly, we must stress that at no point in history has a totally unhampered free-market operated, and certainly not in the present. Governments and other coercive organizations have always injected violence and fraud, to a greater or lesser degree depending on the time period and geographical region, into the market order, thus partially distorting its distributive results. This must always be kept in mind when bringing up historical or present-day outcomes in theoretical discussions.

            

          Secondly, the fact is that totally free-market or not, businessmen and capitalists perform vitally important functions in the economy. As George Reisman points out, economic theory shows that businessmen and capitalists are the ones responsible for creating, coordinating, and making more efficient the societal division of labor, and they do so through investing capital and pursuing high rates of return or profits with that invested capital. Most strikingly, it is obvious that without businessmen and capitalists, there would be no wage-earning workers as we know them. Wage earners are typically paid either every two weeks or every month, but in most cases the products that they help to produce are not fully sold as final products to the final consumers for money for many years, or even decades for goods such as steel used to build automobile factories that last for 50 years. What happens is that businessmen and capitalists save up money and use it to pay the workers, thus bearing the costs of waiting for the final product to be sold and bearing the uncertainty of whether that product will in fact be sold at profitable prices or not. They are also the ones to decide what specifically to produce and what factors of production to use to produce it, in an attempt to produce a product that will bring in revenues sufficient to cover their costs of production and hopefully net them an additional profit. The better they anticipate and the shrewder they are at using factors of production efficiently, the more profit they will be able to net and the higher their incomes will be.        

           

           Thirdly, one’s productive efforts in service to the consumers are not evaluated as a class but as a marginal unit, and one is rewarded accordingly. As a class, the productive efforts of farmers are so vital to the consumers that without them the consumers couldn’t survive, and thus if they were to be evaluated as a class, might be said to be worth the entire income of consumers. According to this method of evaluation, farmers should receive a very large income, while others should receive little, if anything. But then everyone would just become a farmer and the result would be a relative overproduction of agricultural products and a drastic relative underproduction of everything else. It should be obvious that everyone would be worse off under such an arrangement.

            

           The foregoing discussion points to the vital role of ‘supply’ in determining prices, and through them, in determining producer compensation. On the market, one’s productive efforts are evaluated in marginal terms. If there are 10 000 wheat farmers, the productive efforts of one wheat farmer are evaluated as the difference in output between 9999 wheat farmers producing wheat and 10 000 wheat farmers producing wheat. They are not evaluated as a class of ‘wheat farmers’ and based on hypothetical considerations of what would happen if all the wheat farmers suddenly stopped producing wheat. It follows that if there are more wheat farmers than 10 000, the productive efforts of individual wheat farmers will be evaluated relatively less highly than if there were 10 000. This is due to the law of diminishing marginal utility, which is based on the fact that human actors always use each available unit of a good in the way that provides the most utility. The more available units, the less important (in terms of utility) uses the added (or marginal) units will be put to.

            

           There is nothing un-meritocratic about this way of evaluating productive contributions. The rarer one’s ability to give the consumers something that they want, the more, other things equal, valued will that ability be. This is why hard manual labor needing little intellectual effort is not rewarded very highly on the market. No matter how vital this work is and no matter how physically hard the manual labourers work, the fact is that the capacity to do it is relatively common and thus it is not evaluated very highly in marginal terms. To say that it is the manual laborers who are really responsible for making the product and should receive the bulk of the revenue from the sale of the product not only ignores the vital productive contributions of businessmen and capitalists but also commits the fallacy of thinking in terms of classes rather than in terms of marginal units.

4. Why must there be a stark choice between market meritocracy and egalitarianism? Can’t we just combine the two in a pragmatic way and achieve better results that way?

            

           Response: As I noted above, market meritocracy and egalitarianism are like oil and water, they simply don’t mix. Suggestions to combine the two invariably call for the decision determining how much egalitarianism to impose to be made by an official, governmental body of some sort, usually partly based on the results of periodic democratic elections. But this suggestion actually introduces a third ‘ethic’ for distributing societal wealth: that of government omnipotence. Government is allowed to determine how much of people’s wealth earned on the market to take and who to give this wealth to. They might use this power to enact a more egalitarian distribution of wealth, a less egalitarian distribution of wealth, or a similarly egalitarian distribution of wealth but with different individuals getting different amounts of wealth.

            

           Almost no one would espouse such an ethic because most people have a particular idea of what they think the distribution of societal wealth should be. If the government uses its power to bring it closer to the observer’s ideal distribution, they applaud the government’s efforts. But if the government uses its power to take it further away from the observer’s ideal distribution, the efforts of the government are denounced. Thus, unless one believes that the government is somehow always infallibly wise, or perhaps guided by supernatural forces, the wealth distribution ethic of government omnipotence doesn’t really make much sense.

           

           Having answered these common objections, our final task is to answer the important question: why believe in market meritocracy? One set of reasons are the utilitarian ones. If people are rewarded to the extent that they serve others, and are allowed to freely use their unique abilities, intelligence, and knowledge of specific circumstances in order to serve others, everyone in society is given both the incentives and the means to advance the economic well-being of that society, thus making everyone better off. Another set of reasons have to do with ‘fairness’, which the egalitarians love to emphasize. Isn’t it pre-eminently fair that to the extent that one serves others (as evidenced by the earning of money), one receives the right to be served by others (the possession of money)? Why would it be fairer to break this reciprocity of service and benefits and establish an un-reciprocal system where, regardless how much one serves others, one always receives the same right to be served by others as everyone else? Besides the immediately obvious utilitarian drawbacks of such an ethic (where are the incentives to serve others well in this ethic?), it is not clear why even apart from utilitarian considerations, such a system would be fairer than the marketist system, as egalitarians believe.

Thus, if you agree at all with what I’ve said in this post, I would ask that the next time someone proposes an egalitarian-inspired redistribution of wealth from rich to poor, you object: “Wait a minute sir, unless it is proven otherwise, we should assume that this rich man has earned his wealth by serving other members of society, and in that case, what right have you to take it from him?”

                   

Can Ends Be Rationally Evaluated?

  

           Believers in an objective, rational ethic, such as natural law theorists, think that it is possible for human ends to be evaluated and judged rationally, and that the discipline of ethics is the science tasked with doing so. On the other hand, utilitarians think that only means, not ends, can be rationally evaluated, and can be evaluated solely based on whether they are or are not conducive to the ends chosen by the individual. It doesn’t matter what these ends are, as long as the individual desires to achieve them.

            

           The argument that I will make regarding this issue will be based on the following four premises:

1. We know that everyone’s ultimate end is happiness, defined in the broadest possible sense.

2. We also know that value is to a large extent subjective. Different things make different people happy in different ways and to different extents.

3. We know that subjective tastes and preferences are not held absolutely constant over people’s lifetime though. They are subject to modification by the conscious action of the person; they are not determined absolutely by his genetic code. For instance, if they work at it, most people can eventually develop an enjoyment for fine wine where before they had none, or even start to enjoy what they do for a living though they started out not enjoying it. Consciously delving into an intellectual subject can produce an interest in that subject and an enjoyment for studying that subject, where before there was none.

4. Anyone that wants to be alive in the period designated as the ‘long-run’ must consider long-run as well as short-run effects when evaluating a potential action, if he wants to obtain the greatest amount of lifetime happiness, everyone’s ultimate end.

            

           Based on these premises, the utilitarian and the objective ethicist positions can be partially reconciled by realizing that many ends are also means that can produce either good or bad consequences in the long-run, with a greater or lesser degree of probability of producing those consequences.

            

           As such, we can say that it is objectively better to obtain happiness from proximate ends that also serve as means to other good proximate ends that produce more happiness in later periods, than to obtain the same amount of immediate happiness from proximate ends that eventually result in the production of evils and unhappiness. For example, if one person obtained a certain amount of happiness from the proximate end of eating spinach, while another person obtained the same amount of happiness from the proximate end of eating fried chicken (unrealistically assuming for the moment that happiness can be measured and compared interpersonally), the taste and preference of the first person is objectively better than that of the second person because of the long-run health consequences of satisfying those respective desires for food. If one can actually do it, it would thus be more beneficial to develop a fondness for healthy foods, other things equal, than for unhealthy foods, if one cares about being healthy in the long-run.

            

           The same kind of reasoning applies to actions having a bearing on societal harmony and productivity. Everyone interested in any measure of long-run happiness that is even remotely reliant on material goods is interested in the maintenance of a peaceful and productive social order. As such, if one person obtained a certain amount of happiness from the proximate end of buying consumption goods with money earned through work and trade, while another obtained the same amount of happiness from the proximate end of buying consumption goods with money earned through theft, extortion, and fraud, the taste and preference of the first person is objectively better than that of the second person because of the respective long-run societal consequences of satisfying their desires in these different manners.

            

           The difference between this and the foregoing example is that here we must include in our assessment the risk of a principle of action being universalized, and the effects that this universalization would have on the social order. Every time one member of society engages in an individually beneficial action that has bearings on the rules governing the social order, it becomes more probable that this kind of behavior will become a general kind of behaviour throughout that society. Thus, the first person benefitting himself through work and trade will make it more likely that benefitting oneself through work and trade will become a general societal behaviour, a general principle of action that is conducive to a peaceful and prosperous social order. The second person benefitting himself, in the short run, through theft, extortion, and fraud will make it more likely that benefitting oneself through theft, extortion, and fraud will become a general societal behaviour, a general principle of action that leads to the disintegration of society, war, and poverty. These long-run, probabilistic effects need to be considered when rationally evaluating a course of action. This was obviously not done by any member of the legions of special interest pleaders that so plague modern politics and make everyone, including themselves, worse off because of their contributions to establishing political special interest privilege-seeking as a general (societally harmful) principle of action.

            

           Essentially, the principle for objectively evaluating proximate ends is this: do they harmonize with other, perhaps more long-run, interests of the actor, or do they conflict with these interests? If an individual has the ability to engage in conscious action to modify his tastes and preferences, a capacity which most individuals have with regards to a number of their tastes and preferences, it would be rational for him to try to direct his tastes and preferences towards proximate ends that harmonize with other, long-run proximate ends. By doing so, he can more effectively and consistently pursue the ultimate end of all members of humanity, which is the maximization of happiness, broadly defined.

            

           While ultimately we cannot rationally determine which particular proximate ends make all of humanity ‘truly happy’, because this will differ based on subjective considerations and ‘true happiness’ is a bit of an arbitrary term, we can rationally say that one proximate end is better than another, if they result in the same amount of individual happiness, and that one taste/preference for a kind of proximate end is better than another and ought to be cultivated if possible. This is because most proximate ends also serve either as means to other good proximate ends, or are the cause of negative effects. Having a taste for the former is objectively better than having a taste for the latter, because the former harmonizes with other happiness-producing phenomena, while the latter are disharmonious in that, while perhaps producing short-run happiness, their long-run effect is misery.

            

           Thus, most proximate ends can be rationally compared after all, not in their capacity as ends but in their capacity as means or causes, and since all ends are proximate except for the ultimate end of happiness broadly defined, which is the same for all of mankind, then some of the claims of the believers in an objective, rational ethic are actually pretty justified.

Why 'public' issues don't usually need a governmental response

            A common objection levied against libertarians is that they supposedly fail to realize that there are ‘private’ issues and there are ‘public’ issues, instead thinking everything is a ‘private’ issue, and thus not realizing that when ‘public’ issues are involved, a governmental response is needed. This objection is exemplified in a piece on the Washington Post’s ‘Wonk Blog’ by Mike Konczal where he criticizes the libertarian elements of American Right-Wing conservatism. Konczal follows John Dewey in arguing that whenever an action between two people has consequences “that extend beyond the two directly concerned”, the ‘public’ is involved. Given, according to Dewey: “that they affect the welfare of many others, the act acquires a public capacity”. Konczal finishes the thought by adding that acts which acquire a public capacity need a public (invariably governmental) response. Failure to realize this, he argues, is what makes conservatism and libertarianism flawed ideologies.

           

           Is it really true that libertarians don’t realize that many transactional acts affect the welfare of people outside the transaction? To put it briefly: No, it is absolutely not true. Consider the libertarian argument against heavily taxing rich people. The issue of whether to heavily tax rich people or not, like most issues, has both ‘private’ and ‘public’ features, and the libertarian argument against it deals with both. Thus, when the government taxes rich people heavily, libertarians argue that the rich people are hurt by the coercive taking of their privately-owned resources that they had earned through previous acts of production and exchange. This can be considered the ‘private’ argument against heavily taxing the rich. But the libertarian argument does not end here. For the rest of society, the ‘public’ if you will, are harmed by their government heavily taxing rich people. Heavy taxation of the rich results in less incentives for them to produce well for the consumers, less accumulation of private investment capital which would have raised the standard of living of almost everyone, and results in supporting and re-affirming a general political principle, that of coercive redistributionism, that is not conducive to a free and prosperous society. With these arguments, the libertarian clearly recognizes that the consequences of heavily taxing the rich affect more parties than just the government doing the taxing and the rich people being taxed, they also affect the rest of that society.  

            

           Let us take another example. Imagine all the share holders of WalMart decide to turn all of their superstores into private driving ranges for themselves. Now, a libertarian would argue that they technically have the right to do so, provided that there are no contractual restrictions on such actions, and provided that they are willing to pay the exorbitant price of such an action out of their own pockets and are prepared to lose all of their wealth that they had invested in WalMart. But would a libertarian argue that this action would not affect anyone else in society besides the WalMart shareholders and employees, and thus that this would not be a ‘public’ act (in Dewey’s sense of the term)?  Certainly not, it would quite obviously affect every customer who wished to shop at Wal Mart and all of Wal Mart’s suppliers. Rather, the libertarian would argue that a ‘public’ response in the form of government prohibitions would not be necessary to prevent such a thing from occurring, the ordinary financial self-interest of Wal Mart shareholders would be enough to preclude such an action. For the libertarian, it’s not that no actions have a ‘public’ dimension, in Dewey’s sense of the word. It’s just that it should not be automatically assumed that such actions should be put under government control or regulation. Free-market forces exert their own control through the mechanism of individual, financial self-interest.

            

           Now, more sophisticated ‘public goods’ theorists are bound to object that while free-market forces and the pursuit of financial self-interest work as regulators for the provision of a class of goods known as ‘private goods’, where benefits to others from the good can be translated fairly directly into monetary gain for the producer, it is inadequate for ‘public goods’, goods where a significant portion of the benefits to others cannot be translated into monetary gain for the producer, and hence take the form of ‘positive externalities’. These ‘externalities’ are showered on beneficiaries without them paying for the good, and hence may result in a ‘sub-optimal’ provisioning of the ‘public goods’ in question because their benefits to society are not substantially captured as monetary gains for the producer, and hence they are ignored in his profit and loss calculations. Having the government compel people to contribute to the cost of producing the goods, according to such theorists, could be a way of correcting this problem.

            

           Even this, more sophisticated version of the theory that government should involve itself in the provision of ‘public goods’, has several grave problems with it though. First is the fact that no good is a pure ‘private good’ or a pure ‘public good’. No matter what the action or the good, it is always possible that people outside of the transaction will be affected either positively (positive externalities) or negatively (negative externalities). If Fred decides to buy and wear pink overalls, clothing generally being considered a ‘private good’, others are forced to look at him wear this clothing while walking down the street. If they like the look, they experience positive externalities from Fred’s purchase of the good, if they dislike the look, they experience negative externalities from Fred’s purchase of the good. Now take military protection, generally considered to be a ‘public good’. Is it not possible that a large landowner could buy, with his own funds, tanks and tank operators to defend his land and no one else’s against foreign invaders, thus turning what is usually considered a ‘public good’ into a ‘private good’?  Thus, the line between ‘private good’ and ‘public good’ is not clear at all, thus reducing the categorization’s usefulness of delineating the activities that the free market should direct from the activities that the government should direct.

           

           The second problem with the theory that government must be heavily involved in providing a class of goods known as ‘public goods’ is that if considered carefully, the logic of the theory actually boomerangs back on itself and destroys the theory. In the theory, the government is implicitly assumed to be a ‘good government’, that is, a government that earnestly tries with its activities to advance the lives of its citizens, as opposed to a government that just uses its coercive powers to favour itself and its clique of supporters at the expense of the rest of the population. The former type of government would be interested in solving genuine ‘externalities and public goods problems’, while the latter type of government wouldn’t particularly care about that. But, isn’t the selection and maintenance of a ‘good government’ a prime example of a public good? In a democracy, governments are selected and then scrutinized by the general voting public. But taking the time to really scrutinize and evaluate the activities of governments, and then voting in elections and being vocal about issues in between elections accordingly, takes a lot of effort. This effort, while redounding in some respects to the actor’s direct benefit, mainly takes on the form of positive externalities, because the benefits of having an honest, ‘good government’, spread out all across that society. Given this, according to the public goods and externalities theory, the activity of ‘ensuring that government is good’ will be ‘sub-optimally provisioned’, thus resulting in a ‘sub-optimal production’ of ‘good government’.

            

           What can be done to solve this ‘public goods’ problem? The government can’t be called in to solve it, because the public good is the quality of the government itself! If there is a more powerful level of government above the government in question, the same ‘public goods problem’ applies to the quality of that government! Thus, to call for the government to solve a private-sector ‘public goods problem’ is akin to calling for a voluntary charity to solve the ‘public goods problem’ of not enough people donating to voluntary charities, ie. it doesn’t make much sense.

           

           Let us, however, for the sake of argument, disregard my first two objections and assume that public goods can be clearly delineated from private goods and that the government of the society is somehow always a ‘good government’, genuinely intent on making the lives of its citizens better and having no ulterior motives. There remains a third objection against the theory that governments should solve public goods problems. This is that in trying to solve ‘positive externalities’/’public goods’ problems, the government has no idea what the actual magnitude of these positive externalities are, and if it guesses wrongly, it is highly possible that the government will create negative externalities greater in magnitude than the positive externalities it is trying to solve. Government actions always involve taking resources from one person or use and redirecting them to another person or use. On the taking side, there will always be direct losers, and the larger societal effects of the government taking the resources will be negative, regardless of how beneficial a use the resources are eventually put to by the government. Given that the government cannot measure the magnitude of the positive externalities of the potential actions that it is trying to use force to make happen, they may well end up causing more pain in the form of negative externalities than they create benefit in the form of ensuring that positive externality-generating actions are undertaken.

           

           Let us take an example. Imagine that a government decides that the inhabitants of a certain small town would really benefit from having a highway built from their small town to the nearest major city. Let us assume that the government has no redistributionist aims, and thus decides to tax only the citizens of the small town alone to build the road, taxing citizens they expect will gain more from the highway being built more than the citizens they expect will gain less from the highway being built. Now, how does the government, or anyone else, know that they have, on net, benefitted the populace of the town? Maybe the citizens had more beneficial things to spend their money on had it been left to them to spend freely? Maybe the negative societal effects of taxation on incentives and capital accumulation outweighed the positive effect of having a highway? Because the citizens of the town never clearly demonstrated, in the form of market actions, that they valued having a highway more than other things they could have spent that money on, no one can ever know for sure.

            

           Thus, when confronted with ‘public goods’ or ‘positive externalities’ issues, there are two choices. The first is to essentially play a game of Russian roulette by choosing the governmental option. We must not only hope for the unlikely event that the government will be completely well-intentioned and absent ulterior motives, without proper voter scrutiny, but we must also hope that it will be very good at guessing when it comes to assessing the relative magnitudes of positive externalities issues versus the negative externalities it will create with its interventions.

            

           The second option is to try to find free-market ways of ‘internalizing the externalities’ so that free-market forces and the power of pursuing self-interest can spur the production of ‘public goods’ as effectively as it spurs the production of ‘private goods’. Some previously successful ways that this has been done in the past include: 1. Voluntary collective action (private charities, Turnpike Road Construction in Early America), 2. Packaging and selling the public good by attaching it to a marketable private good (common elements, maintenance, and security in condominium buildings, urban infrastructure of historical St. Louis Private Places and Chicago’s Central Manufacturing District).

Personally, I would prefer in most cases to go with the second option, and not play the extremely dangerous game of letting government coercion dictate production choices, and most libertarians would agree with me. Does this fact mean that other libertarians and I are oblivious to the notion of public goods and externalities? Not in the slightest.

Commentary: The Communitarian Political Thought of Leonardo Bruni

   (Note: I recommend you read the essay on which this commentary is based first: http://thinkingabouthumansociety.blogspot.ca/2013/08/spotlight-communitarian-political.html)         

           The Italian Renaissance, specifically its Florentine manifestation, is a period of history that is, for many good reasons, typically portrayed in a very positive light by historians. Immortal works of art and architecture were produced in this period, and the period featured the (in most cases) salutary revival and adaptation of many branches of ancient Greco-Roman culture. There is a danger, though, that when a period of history is portrayed in a very positive light, that positivity extends to almost all of its productions as well, which can lead to sometimes uncritical praise of the cultural, literary, and political works of the period. I do not intend to make that mistake here, as I will be criticizing in many ways the political thought of Leonardo Bruni that I laid out in my previous post.

            

           I argued in my essay that Leonardo Bruni’s political thought can be characterized predominantly as civic nationalist/communitarian, a form of collectivist political ideology. Any collectivist political ideology has three foundational tasks to accomplish: 1. To define the favoured collective and justify that choice. 2. To explain why the interests of individuals must be subordinated to the supposed ‘interests of the collective’. 3. To explain why the chosen collective has a special moral status, not shared by other, rival, collectives. This is how I structured my descriptive essay about Bruni’s thought, so this is how I will structure my critique of it.

1. Defining the Collective:

            

          Nation-states, ‘social classes’, ethnic groups, religious groups, local geographical groups, these have been some of the favourite collectives that various collectivist political ideologies have been based on. Bruni’s favoured collective can be defined as a cross between a modern nation-state and a local geographical group collective, a supposedly ‘self-sufficient’ group of associated citizens designated as a city, or polis. How coherent is his definition of this collective and his justification for making it supreme in his thought?

            

           As noted in the essay, while claiming that every good city was ‘self-sufficient’, and claiming that Florence and her surrounding countryside were self-sufficient, the fact is that Florence was not self-sufficient, but very dependent on the wider European economy of the time. The wealth of the most prominent citizens of Florence at the time, and the foundation of the city’s political power, was international banking, trading, and wool clothing manufacture for the European economy. Now, if bare self-sufficiency were Bruni’s only criteria, he could have responded that if Florence and her countryside had been forced into autarchy, the inhabitants still would have been able to sustain their lives, though at a lower standard of living. But Bruni also claims that the city can provide its inhabitants, without outside help, with a “good standard of living” and that Florence is self-sufficient not just for “necessities”, but also for “luxuries”. But this is simply not a true statement, an autarchic Florentine regional state would not have enjoyed a “good standard of living” or “luxuries” by any stretch of the imagination, thus Bruni’s claim about Florence is a fictitious one.

            

           Bruni is actually forced to make this fictitious claim about Florence’s economic independence because of the nature of the political ideology he is trying to formulate. If he had recognized that Florence was dependent on a wider European economy for its prosperity, he would have been forced to espouse either imperialism or a more universalistic form of morality. If Bruni had recognized that his civic community was forced to trade with inhabitants from other parts of Europe, either the civic community would have had to conquer and subjugate these other parts of Europe to establish its economic independence, or economic independence as an ideal would have had to be abandoned and a more universalistic code of morality and conduct which facilitated peaceful exchange with these other parts of Europe would have had to be recognized. The British advocates of international free-trade in the 19^th century tried the latter; the government of Nazi Germany tried the former. Bruni, not wishing to discuss either option, made fictitious claims about economic independence instead.

            

          Thus, Bruni’s definition of the supreme collective unit is not logically coherent, based as it is on fictitious claims.

2. Collective over Individuals:

            

            The trickiest (and in my opinion, insurmountable) part of formulating a collectivist ideology is to come up with a reason why the ‘interests’ of the collective (whatever those are…) are more important than the total interests of the individuals who are members of the collective. As illustrated in my essay, Bruni attempts to surmount this dilemma by arguing (by implication, in his historical work) that the civic community and its laws are necessary to protect the individual freedom of citizens from domestic and external aggression. This being the case, in his political works, Bruni asserts that since happiness and life itself are dependent on such civic communities, individuals should revere, fight for, be taxed by, and even die for, their civic communities, their ‘native lands’.

            

           Now, if we were to assume, for the sake of argument, that the arguments of the anarchists are wrong, and that without States enjoying monopolies of the use of coercive force over their territorial turfs, life would be nasty, brutish, and short for individuals, there is something to Bruni’s argument. The problem with his argument is that it involves an intellectual bait-and-switch maneuver. From the plausible assertion that the lives and happiness of individuals depend on them being organized into some kind of political collective, Bruni leaps to the assertion that individuals owe undying loyalty and service to the particular political collective they happen to be living under at the moment. But it is the prime function of organized political collectives (the protection of the life, liberty, and property of citizens in John Locke’s terminology) that Bruni argues is necessary for the happiness of individual citizens, not the existence of any particular political collective. And if this is the case, than the political collective that fulfills that function best should be preferred, in all cases, to political collectives who fulfill that function less well, or who engage in aggression themselves against the life, liberty, and property of their citizens. There is no particular reason why the political collective that fulfills this function best should necessarily be a ‘city’, or even be based out of the ‘native land’ of its citizens. Thus, if for instance an expansionist Duke of Milan, or Holy Roman Emperor, or French King seemed likely to do a better job at fulfilling the main function of political collectives at less cost in taxation for Florentines than the Florentine Republic had been, Bruni’s calls for Florentines to be taxed dry and to die in defense of the Republic would have no logical backing.

            

            Throughout his political works, Bruni is more intent on telling Florentines what they should do for their country, rather than on telling them what their country is doing for them (to use the language of JFK). But this contradicts the nature of the political collective that Bruni himself identifies as a means to the end of individual happiness. It reverses it and implies that the ‘well-being’ of the political collective is really the end to be pursued, and the lives and fortunes of individuals are merely means for the pursuit of this end. But no collectivist, including Bruni, has ever logically established why this should be the case.

3. Favoured Collective over Other Collectives:

            

            Another major problem with collectivist ideologies is that they often call for actions which favour one collective over other collectives. To do so convincingly, they must come up with reasons why their favoured collectives should take precedence over other, competing collectives. Take a common collectivist policy: protectionism. A common argument for protectionism is that Country A should develop certain advanced industries but cannot under the competitive pressure of these same industries which have been established for a long time in Country B. Hence, tariffs barriers should be set in place to prevent the industries of Country B from out-competing the newly-emerging industries of Country A.

If such policies were universalized and adopted by all countries though, then the result would be a duplicate of all the ‘desirable industries’ in every country and a partial disintegration of the productivity-improving international division of labor. Producers would be frustrated at the limited extent of their markets, with most international markets off-limits due to protectionist tariff barriers. In the worst case, frustrated by their inability to exchange for much-needed products of other countries, aggressive imperialistic expansion to ‘solve’ these problems might be resorted to by countries with poorer natural resources (Nazi Germany, in a world that was becoming increasingly protectionist, leaps to mind as a real-world example of this phenomenon). Policies that seem to advance the interests of the thinker’s favoured political collective, if adopted by other political collectives, become spreaders of misery on a large scale. The lack of norms of conduct capable of being effectively universalized becomes a serious problem.

           

            Does Bruni provide a good explanation for why his favoured political collective should take precedence over other political collectives? Besides praising the lineage, the cultural achievements, and the foreign policy record of the Florentine Republic, Bruni offers no real explanation. He basically just assumes that it should be self-evident, especially to Florentines. Parochialism and national chauvinism are not good reasons, in my opinion, for holding tenets of political thought though.

            

           Thus, despite his cultural and literary achievements, skills as an orator, and relatively good tenure as Chancellor of the Florentine Republic, Leonardo Bruni’s political thought is unsatisfactory in many regards. While we may marvel at other products of the Italian Renaissance such as Michelangelo’s exquisite sculptures, Leonardo Bruni’s political thought should not be considered a marvel of that period.