Hayek on Social Welfare

Much more “liberal” than his present-day ideological followers:

[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 super-cede 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.  But, though its solution will require much planning in the good sense, it does not — or at least need not — require that special kind of planning which according to its advocates is to replace the market.

Many economists hope, indeed, that the ultimate remedy may be found in the field of monetary policy, which would involve nothing incompatible even with nineteenth-century liberalism.  Others, it is true, believe that real success can be expected only from the skillful timing of public works undertaken on a very large scale.  This might lead to much more serious restrictions of the competitive sphere, and, in experimenting in this direction, we shall have to carefully watch our step if we are to avoid making all economic activity progressively more dependent on the direction and volume of government expenditure.  But this is neither the only nor, in my opinion, the most promising way of meeting the gravest threat to economic security.

In any case, the very necessary effort to secure protection against these fluctuations do not lead to the kind of planning which constitutes such a threat to our freedom.

—The Road to Serfdom, 148-49


It’s Nice Having Smart Friends…

The best part is when they put up excellent blog posts so all I need to do is tell you to go read them, instead of having to say something intelligent myself.  

First, then, you might want to check out Jordan Ballor’s fine little post on Acton, “It Takes a Village to Raise a Business” in which he cautions conservatives against rejecting too summarily the solidarist view of society asserted in President Obama’s much-maligned speech last week, when he went so far as to say, “If you’ve got a business, you didn’t build that. Somebody else made that happen.”  Ballor reminds us “We all know at some level that we didn’t get where we are on our own, and that we have an ongoing responsibility and dependence on others for our continuing enjoyment of the goods of human existence.”  Ballor thus points us back toward a more authentic conservatism and away from the modern individualist (and thus thoroughly unconservative) variety.

For a more fleshed-out look at what this older conservatism might look like, you couldn’t do much better than Steven Wedgeworth’s recent post at the Calvinist International on “R.L. Dabney’s Theory of Economics.”  Dabney, a Southern Presbyterian stalwart much beloved by modern-day Reformed conservatives for his trenchant and prescient critiques of the agenda of the rising centralized secular state, may shock many of his admirers for his allegiance to pre-capitalist concepts of the role of business in society, the need for government to restrain inequality, the need to restrain luxury spending and usury, etc.

Finally, on a somewhat different note, Lue-Yee Tsang reflects on the contemporary tempest in a teapot over here as to whether Parliament will intervene to advance the women bishops agenda in the Church of England.  While opposing Parliament’s stance on the particular policy, and pronouncing them unfit to govern church affairs so long as they persist in their current godlessness, Lue-Yee nonetheless offers a unapologetic defence of antidisestablishmentarianism (10 points for using that word!) along the lines of Hookerian two-kingdoms theory.

Go, read, be edified.


The Truth about Property Rights

The bestselling (and remarkably, self-taught; he’s a neurosurgeon by profession) investing theorist, William J. Bernstein, recently wrote a book entitled The Birth of Plenty: How the Prosperity of the Modern World was Created.  A common enough theme to write on these days, and at first glance, probably much the same fare as Niall Ferguson’s Civilization: The West and the Rest (which I haven’t read yet) and Rodney Stark’s The Victory of Reason (which I’m sorry to say I have).  And from the book’s description, it would appear to be another paean to the glories of Enlightenment capitalism, arguing that four factors have led to modern prosperity:

  • Property rights, which drive creativity
  • Scientific rationalism, which permits the freedom to innovate without fear of retribution;
  • Capital markets, which provide funding for people to pursue their visions;
  • Transportation/communication, which allows for the effective transfer of ideas and products.

In an intriguing little interview at AdvisorOne, however, Bernstein displays a rare perceptiveness about what these frequently-lauded “property rights” really are, and how they must be maintained:

When people read Birth of Plenty, they assume I’m a libertarian, because of the book’s emphasis on property rights.  But at the end of the day, “property rights” is nothing more and nothing less than the respect that folks with less than you do have for your property, and if there’s too much spread between the rich and poor, that erodes that respect and property rights enforcement costs skyrocket. 

This little statement neatly encapsulates the two points about property rights that I’ve tried to hammer home on this blog before: (1) property rights are rooted in social convention—they exist because society believes they ought to exist, and determines to protect them by custom, and law; (2) property rights exist for the purpose of common welfare, not for their own sake or the sake of individuals only.  Put these two together, and you find that, if property ceases to serve the social good, it ceases to command the respect of society; morality and custom therefore no longer suffice to protect it, since it no longer serves its moral and customary purpose, and the only thing left to protect it is the brute force of legal enforcement.  And it becomes a vicious cycle—as laws and security guards proliferate, people come to think of coercion as the only safeguard of property, so that as long as you can get around the letter of the law, or the enforcement reach of the law, you’re welcome to as much as you can get ahold of.  

Bernstein understands, in other words, what the Torah understood—that redistribution of property is not the abolition of property rights, but the surest means to protect them, and along with them, social welfare and stability generally.  Bernstein goes on, deploring the effects of skyrocketing inequality:

There is no question that economic inequality is killing us; we have the highest rates of obesity, homicide, violent crime, and incarceration in the developed world, things that all covary strongly with inequality.

If there’s one myth that’s more corrosive than any, it’s the notion of “job-killing taxes.”  By that logic, Somalia should be the world’s richest nation, and Sweden and Switzerland the poorest; Massachusetts ought to be our poorest state, and Mississippi the richest.

It’s a brutal fact that in highly productive societies, a lot of income needs to be redistributed. The objective evidence on the subject suggests that marginal tax rates have to be very high — in the range of 70%-80% — before the income effect becomes overwhelmed by the incentive effect; I find it hard to believe that Bill Gates, Larry Page, or Mark Zuckerberg are going to work any less hard if their income tax rate jumps to 45%. 

He also adds some sage words of advice that run very much against the grain of our society’s conventional financial wisdom, and against the self-interest of the investment advising industry.

I’ll forego the 50-cent words and simply say that wealth is not a dollar amount, but rather a ratio measured in years: in other words, how many years’ living expenses you’ve saved.  The person with a million dollars who needs to spend only $50,000 annually is twice as rich as the person who needs $100,000.

If you think that your happiness is tied up in the things you own, then you are both sadly misinformed about human neuropsychology and doomed to be unhappy. Bottom line: keep your expenses down, save like hell, don’t stop until you’re pushing up the daisies, and look for “utility” in the things that really matter: connections with other people, competence in a vocation or avocation, and most importantly, acquiring autonomy over your time and effort, i.e., becoming your own boss.

If you can’t reach those three goals by the time you’re in late middle age, you’re toast.

Needless to say, I’ll certainly be buying the book.


Tetzel on Craigslist: Commodification and the Demise of the Commons

In his incisive and thought-provoking new book, What Money Can’t Buy: The Moral Limits of Markets, renowned political philosopher Michael Sandel invites us to step back and take stock of the results of the rapid expansion of market logic into every area of life that the last generation has witnessed.  Economics has transformed itself from a discipline concerned with the production, exchange, and allocation of material goods and services to a master-science claiming to describe the logic of all human social relations in terms of cost-benefit analyses.  In tandem with this theoretical shift has come the increasing subjection of areas of life once governed by non-market norms to the logic of free exchange driven by supply and demand.  Many today, including (perhaps especially?) many Christians may have difficulty in seeing what is wrong with this trajectory—after all, doesn’t this represent the triumph of free, voluntary social relations over against coercive, top-down ones (for a critique of this gross oversimplification, see here)? 

 Inasmuch as the logic of the market, though, is amoral and nonjudgmental—it doesn’t matter what you want and why as long as you’re willing to pay for it—Christians should be deeply concerned, and should heed Sandel’s call to bring morality back into the picture, asking about the moral consequences of subjecting more and more of our lives to the logic of exchange (especially as Sandel himself does not provide a theological basis for this moral concern).  Accordingly, I want to reflect here on the first set of phenomena he examines, “Jumping the Queue,” from a more explicitly theological standpoint.

 

In his first chapter, Sandel surveys at a variety of cases, around the world, in which the “ethic of the queue”—first come, first served—has been replaced by the “ethic of the market.”  The examples range from the relatively innocuous (the option to pay extra for a “fast track” pass at an amusement park) to the somewhat more troubling (the option for solo drivers to pay extra to use the carpool fast lane in crowded cities) to the downright dirty (lobbyists paying homeless people to stand in line for them overnight so they can be assured a place in Congressional hearings).  

From the standpoint of the Christian ethical tradition, these developments might be described as a “demise of the commons.”  As I have discussed at length on this blog before, the Christian ethical tradition long insisted on the priority of common use over private property.  That didn’t mean that private property was unjustified, but it meant that it did have to be justified.  It wasn’t a self-evident, self-justifying fixture of the natural order.  For the Christian, God has created the world for the use of all his creatures, and above all, for the use of mankind.  Since all men are created equal, the world’s resources are intended to provide equally for the needs of all.  As an institution, then, private property is to be justified on the basis that it can most effectively facilitate the use of the earth to meet the needs of all.  This being the case, any given holder of private property possesses his title on the moral condition that it be used not for his mere private benefit, but for the community at large.  The ongoing commitment to common use may be demonstrated in a private property economy in at least three ways: 1) by the use of private property in such a way that its fruits accrue to the benefits of others—preeminently employees and customers; that is to say, if I am the proud possessor of an apple orchard, I can ensure that the orchard serves common use by paying the apple-pickers a good wage and by selling the produce on to customers at a just price—but not, say, by intentionally allowing half the apples to rot so as to drive up the price of the others and make a better profit; 2) by the redistribution of the profits of private property to society at large, or to the needy—this can occur through taxation, or through voluntary giving to charity, or both; 3) by the preservation of certain areas—whether physical spaces, particular resources or services, or kinds of social relations—from private appropriation, maintaining them as common resources which everyone can use within the constraints of certain rules of fairness (rivers and oceans, for instance, are generally treated this way).  

 A good economy will combine all three.  The second, I would suggest, is the worst, because it does not necessarily challenge the logic of private right—you can do whatever you want with your property, and make as much money as you want, just share a little of your plunder with the rest of us when you’re done, will you?  When voluntary charity is the form of redistribution, the selfish logic can in fact be reinforced, as the giver thinks of himself as a magnanimous benefactor sharing from what is rightfully his alone, rather than someone recognizing the claims of others on the fruits of the earth.  Nonetheless, society today favors the second most of all, whether in its coercive forms (as the left prefers) or its voluntary (as the right prefers), because it is the least intrusive on the logic of private possession.  The third used to be recognized in many ways and institutions throughout society, but these are being steadily eroded.  Sandel’s examples draw particular attention to this phenomenon, particularly notable in the practice of ticket scalping for free public events or services (in China, scalpers wait in line for $2 doctor-appointment tickets, and then sell them to the desperately ill for much higher prices; in New York, free Shakespeare in the Park community theatre tickets are resold on Craigslist for $125).  Deeming such public services inefficient, we increasingly prefer to withdraw them from the sphere of common use and auction them off to the highest bidder.  Perhaps this tendency is an inevitable result of the Lockean logic within which we have long justified private property.  For Locke, private property exists not as a means to common use, but as an extension of our right of self-possession.  We have an inalienable right to ourselves and our own actions; therefore, why not to those things with which we have “mixed” ourselves in the form of our labor?  A free community theatre presents itself as the possession of the whole public, which we are free to come and share in, but which we cannot simply appropriate and make it our own.  But if Locke is right, why not?  My money, as the product of my labor, is the extension of myself, and there is no reason to appropriate to my own exclusive use whatever my money can buy, whether it be the fast lane or a ticket to a papal Mass ($200 on Craigslist for Benedict XVI’s first visit to the States).

 

In embracing this logic, and asking, “Where’s the harm?” Protestants are forgetting their theological heritage.  After all, more than anything else, the Reformation was a rejection of the commodification of religion, the subjection of God’s grace to the logic of exchange and private acquisition.  Late medieval Catholicism, after all, did a booming trade in souls and spiritual benefits.  Indeed, the phenomena of “jumping the queue” which Sandel documents has its precise complement in the indulgence trade which sprung up in the late Middle Ages, and the many other ways by which those willing to pay could speed their souls to heaven—almsgiving, funding private masses, even hiring surrogates to fight in a crusade.  The rich were able to buy a fast-pass to heaven, to “jump the queue” of purgatory.  Why does this trouble us?  Well, the issue of inequality, as I have just hinted, is obviously part of the problem, and Luther’s war against indulgences was motivated in large part by his anger at the oppression of the poor it entailed.  The rich nobleman, with a modest outlay, could pave his golden highway to heaven without great difficulty, while the mass of poor peasants felt shut out of the kingdom, scrimping and saving their meager resources to purchase indulgences.  Sandel, of course, draws attention to the same problem of inequality in the phenomena he looks at.  The queue is the great equalizer.  The richest must wait as long as the poorest to go through security at the airport.  The poorest has just as much opportunity to see Shakespeare in the Park as the richest.  Where the ethic of the queue dominates, income inequality is not a major issue, because the poor man’s lower income does not bar him from access.  He has rights of common use.  But the more the ethic of the queue is replaced with the ethic of the market, the greater the benefits of the rich.

To apply this logic to salvation, as the late medieval Church did, was to utterly corrupt the grace of God.  The Christian faith is not a private possession to be bought and sold.  God is not a marketable commodity.  In response, Luther preached a spiritual economy of free grace, of a great common spiritual possession that we were invited to enter into and share in.  Just as the physical world was created for the common use of mankind, not for the purpose of being parceled off to the highest bidder, so our heavenly inheritance was a shared possession to which we were given a birthright by the grace of Jesus Christ, not a store of merit to be purchased by those who could afford it.  

But as this picture shows, the problem is not just inequality.  Conservatives, indeed, would reject Sandel’s concern about inequality and would defend the onward march of commodification on the basis that we live in a meritocracy, that the rich are rich because they’ve earned it, and the poor are poor because they haven’t.  Everyone has, in principle, an equal chance to get those Shakespeare in the Park tickets even if they cost $125, because everyone has an equal chance to make that money, if they’re just willing to sweat and toil enough for their slice of the pie.  Let’s ignore for now how little this picture resembles reality.  The problem is, as Sandel argues, that more than just inequality is at stake.  Even if everyone had equal opportunity to buy and sell children, for example, doesn’t mean they should.  Some things simply shouldn’t be treated as commodities, because this flies in the face of their proper nature, corrupting the way we view them.  Children are an obvious and extreme example, but perhaps, he suggests, the same concern applies even to community theatre or papal masses.  Some things lose their real value when we try to put an exchange value on them.

Again, the case of Luther’s protest is instructive.  Inequality was not the only problem with the late medieval religious economy.  After all, you didn’t have to be rich.  It was handy to be rich, because then you could get the benefits without working; but if you were poor, you could still get in the fast lane to heaven too—if you worked hard enough: fasting, praying, pilgrimage, deeds of charity, rituals, etc.  Ultimately, the Church could counter, it was a meritocracy, not an aristocracy.  But that was precisely the problem.  Luther understood that this corrupted the whole nature of what was on offer.  The favor of God wasn’t something you worked for, but something you were freely given.  It was something that belonged to you by virtue of being in the family of God—in Christ, we are sons and fellow-heirs, not hired laborers trying to earn our keep.  

 

Perhaps by thinking through the theological implications of how the logic of exchange corrupts our relationship with God, privatizing us into self-interested agents, we may gain insight into how the logic of exchange, when extended beyond its proper boundaries can tend to corrupt our human relationships, substituting the agenda of acquisition for the agenda of participation.  

 

Addendum: An additional thought—lurking behind all this is the question of plenitude vs. scarcity.  That, of course, is the major disanalogy between what Sandel is talking about and what Luther was dealing with.  God’s grace really is infinite, which is why it’s so wrong to treat it as a finite commodity to be apportioned out, whereas Chinese medical appointment tickets are genuinely finite.  Not only do you not have to pay for Jesus, you don’t have to stand in line for him either.  There is no limit on how many people can participate in the common good that is God’ s grace, but there is a limit to how many people can participate in the common good that is Shakespeare in the Park. It is the scarcity of something that convinces economists that it should be apportioned by market mechanisms.  Of course, I think that it is precisely our sense that certain things should not be scarce, should be treated as unlimited goods, that in many cases informs our sense that it is wrong to pay for them.  Is this just self-delusion, trying to pretend that things aren’t scarce when they are?  Or ought we to cultivate such an attitude?  To what extent is the perception of scarcity self-fulfilling?  All such questions I shall merely raise for now, not attempt to answer.


Calvin the Capitalist?

In his Calvin, Geneva, and the Reformation, Ronald Wallace shoots the tired old hypothesis full of holes.  After first surveying Calvin’s teaching on usury, and pointing out just how restrictive his “permission” of it was, he tells us: 

“Though he believed in the necessity of some distinctions remaining, he believed that the appearance of extreme differences in wealth and poverty within a community was inexcusably evil.  His comment on Paul’s ideal that ‘through giving there should be equality’ is illuminating.  ‘Equality’, in Paul’s mind, he thinks means a ‘fair proportioning of our resources that we may, so far as funds allow, help those in difficulties that there may not be some in affluence and others in want’.  The vision given in Christ’s parable of Lazarus in heaven lying at the bosom of Abraham implies that riches do not shut against any man the gate of the Kingdom of Heaven but that it is open alike to all who have either made a sober use of riches, or patiently endured the want of them. 

“Calvin believed that Christ’s command to us to ‘sell your possessions and give alms’ might under certain circumstances demand the giving away of capital as well as current income.  It enjoined that ‘we must not be satisfied with bestowing on the poor what we can easily spare, but that we must not refuse to part with our estates, if their revenue does not supply the wants of the poor.  His meaning is ‘Let your liberality go so far as to lessen your patrimony and dispose of your lands.’ . . . The answer the Lord gives to the greedy who argue too much about their rights to keep their own is, ‘It is indeed thine, but on this condition, that thou share it with the hungry and thirsty, not that thou eat it thyself alone.’ . . . This teaching tends to have more in common with medieval thought than that which lay behind the vigorous growth of Capitalism.”

In short, Calvin appears to have held back to the traditional Christian teaching that private right to property must serve the end of common use, otherwise this “right” degenerated into a wrong against the neighbor, and that the persistence of significant inequality in resources was therefore immoral insofar as it was avoidable.  But it gets even more interesting.  Wallace suggests that Calvin challenged the ethos that is perhaps the chief pillar of capitalism and of modern life, an ethos that few even think to question, so deep is our faith in its benefits—competition:

“It must be noted at this point that Calvin could never have approved of the idea of a competitive society.  Rivalry and struggle of one member with another is impossible within a true Christian body.  No member is living in full health while competing with another.  It is interesting to find how closely on this mater Calvin’s thought comes to that of Kropotkin the anarchist.  In contrast to Hobbes, and to all thinkers who look back to the natural state of man in society as being one of continuous struggle, Kropotkin believed that ‘the law of nature was the law of cooperation, of mutual aid rather than struggle.  Within each species mutual support was the rule. . . .’

“Moreover, Calvin was always warning about the deadly effects of covetousness—an unquenchable and irresistible fire in the soul destructive of all individual and social good.  He called those who extorted cheap labour from the poor, blood-suckers, murderers of a worse type than any street thug.  He was never weary of castigating those who used their financial power to draw money from others to themselves.  He expreses his dismay that when prices were so high wealthy merchants could keep their granaries closed in order to raise the price even higher and thus to cut the throat of poor people’.  Nothing in the commercial world, he believed, could be lawful which was hurtful to other people, and ‘all bargains in which the one party unrighteously strives to make gain by the loss of the other party’ are condemned.  The idea that any form of rivalry in commercial enterprise could help society or tht self-seeking could further the common interest could never have entered his mind.  He believed in restraining rather than in setting free the competitive spirit.  

“The spirit of Calvin has therefore nothing in common with the ‘Spirit of Capitalism’.”

To be sure, so insistently does Wallace press his case here that it seems that he has an anti-capitalist axe of his own to grind.  Nonetheless, most our modern cheery capitalist-cum-Calvinists would do well to consider these points of rivalry between the two creeds.