Back To The Basics

(Cross-posted at Heritage)

In the New York Times today, David Brooks has a column in which he describes two theories about the financial crisis: “greed” and “stupidity.” The “greed” theory is not what you might be thinking—it is not the simplistic notion that Wall Street is just full of greedy capitalists that swindle the people out of their money. It is a little bit more sophisticated than that, because it involves the government bailing out the banks. They do this, of course, because politicians earn handsome rewards for it. This theory has some merit.

The second theory, “stupidity” is also more sophisticated than it sounds. Wall Street did not know that it was engaged in such risky behavior. The theory as presented blames the complex financial instruments, but one could as easily blame monetary policy, subsidies, bailouts, or policy uncertainty, for creating this ignorance.

Government certainly had a hand in creating this crisis, yet now these same leaders are attempting to blame free markets, and resurrect socialism. Right before our eyes we are seeing the pattern: even as government spending backfires, we cede more control to it, and the love and faith in politicians grows. Even free market economists forget the basics.

Now more than ever, we need to return to the fundamentals. We need to relearn our Adam Smith, our Frederic Bastiat, the roots of liberalism and the morality of freedom. Only if the people understand these basic principles do we have a chance. Then we can see through the politicians, and not let them take our freedom and control our lives.

Property Rights and Coercion: Institutional Philosophy

A Marxian philosopher who is dating my sister was nice enough to have her forward a Marx reader and a link to an interesting critique of "libertarian parables" (from Arnold Kling at Econlog) which "conflate" coercion by government with coercion by other individuals.

Based on a utilitarian framework, the blogger argues that these kinds of coercion are not the same:

A well-ordered society is governed by the rule of law. This means that there are institutional processes to govern certain classes of action. The outcome of a just institutional process -- whether it be a guilty verdict, or minimum wage legislation -- has a different normative status than the corresponding action of a neighbour who takes it upon himself to unilaterally impose his will on others.

This is a good argument. However, it doesn't resolve the problem, it just kicks it down the road. What is this "normative status?"

True, institutional coercion is different from unilateral coercion; but it may be better or it may be worse: this depends both on what the government coercion achieves and also on how you define "better" and "worse". The institutional takings by the Soviet government were not - I'd argue - better than unilateral theft: they were worse. I haven't proven this in any framework; I could show it with efficiency as the endpoint; I could also try to show it with morality as the endpoint or with the magnitude or quantity of coercion as the endpoint.

What is the difference between coercion by individuals and coercion by government? Is it the organized nature of the latter? Or the equality before the law? Is it a matter of "fairness"? Or is it an efficiency thing? If the framework is utilitarianism, it would be efficiency - however, then only efficient coercion should count for that, and for example, a minimum wage certainly isn't that.

But libertarians who cry "coercion" are usually not taking a utilitarian framework; they are usually arguing "natural rights." So, we need to determine the "ends" and then judge the "means" on that basis.

Organized coercion by government could be said to violate more rights, not fewer. If government consistently violates rights, then one could argue this is "better" in some sense; if fairness not coercion per se, is the measure. Then, of course, "fairness" must be defined.

On the other hand, if government only punishes theft by an individual, then coercion is minimized; while if government punishes individual coercion but then violates rights on its own, then quantity of coercion is increased. So, if quantity of coercion is the measure, government violation is also worse.

The blogger also argues that the freedom from coercion is not enough, because common property implies a freedom to use of said property, and property rights invade this freedom. Hence protection of property and freedom from the takings neglects the freedom of others - and hence in its own way is coercive:

Freedom to use common land and resources is restricted by private property rights, which replaces it with a (particular individual's) freedom to dispose of property, and exclude others from use of it.

This reminds me of that quote I blogged about last week:

If someone is starving in the minimal state, yet in a ‘no-ownership’ world they would have been in a more advantageous position, then they do, in fact, have rights to compensation against all property holders (although not against the state) under the principle of justice in rectification. The Lockean proviso, or rather its historical shadow, would have been violated.

It appears to me as a natural rights argument, not a utilitarian one.

In reality, whomever has made a claim to the property is the rightful owner, whose rights must be protected. If someone buys it (under private property institutions) then he owns it-- there is no "right" to "common property" if someone has purchased it. The only way to claim that "freedom to use" common property has been violated is to invoke natural rights. Otherwise it is just the institutional framework, which either protects private property or it doesn't.

The blogger also slips in a positive freedom based on outcome, which far exceeds the institutional framework setup:

(2) It neglects other kinds of constraints that can impede us, leading to an impoverished conception of "freedom" that fails to track what really matters to us (namely, capability). Negative liberty is fine as far as it goes, but it makes for a rather one-eyed approach to evaluating policy. A better maxim would be to seek to enable people to achieve their goals. Economists (like everyone else) should be concerned with opportunities, not merely interference.

Now he wants to give people a right to certain outcomes. This goes beyond any protection of rights or freedoms (natural or otherwise) and seeks to determine outcomes. However, the assumption, of course, is that government could even get the outcomes desired-- something which is clearly a huge jump. It also has nothing to do with freedom. It may have to do with "welfare" but is has nothing to do with "freedom." And welfare - well that comes with its own bag of worms.