Markets, Government & Economic Justice

Stephen NathansonProfessor of PhilosophyNortheastern University

President Obama’s Response to Critics of his Economic PoliciesPress Conference, February 2009

“Now, maybe philosophically you just don't think that the federal government should be involved... I happen to disagree with that.”

“Some of the criticisms [of my proposals] really are with the basic idea that government should intervene at all in this moment of crisis. You have some people, very sincere, who philosophically just think the government has no business interfering in the marketplace. And in fact there are several who have suggested that FDR was wrong to intervene back in the New Deal.

They're fighting battles that I thought were resolved a pretty long time ago….”

President Obama’s Appeal to the Opinions of EconomistsPress Conference, February 2002

“Most economists, almost unanimously, recognize that even if philosophically you're… wary of government intervening in the economy, when you have the kind of problem we have right now … government is an important element of introducing some additional demand into the economy.”

Capitalism State Socialism

*Private ownership of property

------------------------*Market system of

production &distribution

------------------------*To each according to

ability to pay + gifts

*Public ownership of property

-----------------------*Planned economy

with public control of production

& distribution -----------------------

*To each according to need (or an equal share)

Recent books on the spectre of socialism•To Save America: Stopping Obama's Secular-Socialist Machine

Newt Gingrich

•Revolt!: How to Defeat Obama and Repeal His Socialist Programs

Dick Morris and Eileen Mcgann

•Radical-in-Chief: Barack Obama and the Untold Story of American Socialism

Stanley Kurtz

Socialism has not worked well as a productive system. Capitalism is more productive and makes people better off.

Fails to reward people for greater effort or contribution.

Governments in socialist systems have too much power and threaten personal liberty.

Is Socialism Bad? Three Criticisms

THE INVISIBLE WELFARE STATETwo student comments on a survey

about capitalism, socialism, and the welfare state

“The answers about capitalism and socialism were given quickly and were almost identical….Each of the respondents had much more difficulty expressing their concept of the welfare state and even expressed difficulty with grasping exactly what a welfare state is.”

“Everyone knew what capitalism is because we live in a capitalist society, but people were unsure what a welfare state is.”

Capitalism Welfare State*Private ownership

of property

------------------------*Market system of production

&Distribution

------------------------*To each according to

ability to pay + gifts

*Primarily private ownership,some public ownership

-----------------------*Market system plus

government distribution of some resources-----------------------

*To each according toability to pay

+ gifts+ guaranteed accessto some resources

The central question

Should the market be the distribution mechanism for all goods?

Or

Should governments distribute some goods to people independently of their ability to pay?

ValueCriterion

Explanation Questions

Maximize utilityDoes the system produce and distribute enough goods to make its members as well off as members of competing systems?

How do we measure well-being?

Rewarddesert

Does the system do justice by distributing goods in accord with what recipients deserve?

What are the criteria of desert? Are there different types of desert?

Promote libertyDoes the system do justice to its members by protecting and promoting their liberty?

Are there different types of liberty?How do we measure the extent of liberty?

Three Criteria for Evaluating Economic SystemsMany defenders of each system invoke these value

Criterion Capitalism Welfare State

Maximize utility

NO

•The tendency toward concentration•The diminishing marginal utility argument for using taxation to “redistribute” some resources.

Yes

•Raises well-being of less well-off people •Allows inequalities as incentives to production

Reward desert

Yes & No

•Limited rewards for individual desert (e.g., effort and contribution) •Ignores human desert•Allows excessive influence of luck on economic well-being (inheritance, family status, economic climate, etc.)

Yes & No

•Limited rewards for individual desert (e.g., effort and contribution) •Recognizes human (unearned) desert by guarantee of some resources•Limits impact of luck

Promote liberty

NO

•Protects negative liberty (freedom from interference), but ignores positive liberty, the ability to do things.•Ignores connection between liberty and economic resources

Yes

•Promotes both positive liberty and negative liberty•Prevents economic and political domination by the economically powerful

Emergency Welfare

State

Opportunity Welfare

State

Comprehensive Welfare

StateMarket system

+ Gov’t protection against

force and fraud +

other life-threatening emergencyconditions

Market system+

Gov’t protection against force, fraud,

andemergency, life-threatening

conditions +

providing education and other

opportunity-generating resources

Market system+

Gov’t protection against force and fraud

+ guaranteed access of

resources required for a decent level of well-being

(i.e., sufficient resources to abolish poverty)

Beyond Capitalism vs. Socialism

Socialized vs. Marketized Sectors

Sectors are parts of systems that handle the production & distribution of particular goods and services.

*Marketized sectors distribute by ability to pay

*Socialized sectors distribute according to need.

Two uncontroversial socialized sectors

Police ProtectionK-12 Education

(Are there others?)

“From each according to their ability,to each according to need.”

The health care debate revisited

Should the distribution of health care be marketized socialized?

Should it be distributed by “ability to pay” or according to need?

Why do we think that police protection and education should be distributed to all, irrespective of ability to pay?

Is health care more like these goods and services?

Or is it more like other consumer items that we think should depend on the ability to pay?

John Hospers Two bad arguments for libertarian capitalism and against the welfare state

Argument #1

1. While governments should protect people against force and fraud, governments should not provide other beneficial goods or services such as income, education, and medical care.

2. It is wrong for governments to provide these goods and services to people because these must be paid for by taxes.

3. Taxing people for these purposes is wrong because it takes their money without their consent and thus violates their property rights.

Argument #2

1.If people are suffering because they are unemployed, it would be wrong for the government to tax me in order to help these people because I did not cause them to be unemployed.

2. People are only obligated to help others when they have caused the other people’s suffering through their own action or negligence.

3. Taxation to help the unemployed is wrong because it forces me to help people whose suffering I am not responsible for.

Anarcho-capitalism

Minimal state capitalism

“Pragmatic” capitalism

Market only,No

Gov’t

Market +

Gov’t that protects against

force and fraud and no more

Police and military protection as non-

market goods

Market +

Gov’t protection against force and fraud

+ limited, other socially

useful activities

Education, e.g., as a non-market good

Anarcho-capitalism

Minimalstate

capitalism

Pragmatic capitalism

Emergency Welfare

State

Opportunity Welfare

State

Comprehensive Welfare

State

MarketSocialism

StateSocialism

Market only,No

Gov’t

Market +

Gov’t that protects against force

and fraud [and no more]

Market +

Gov’t protection

against force and fraud

+ limited, other socially useful

activities

Market +

Gov’t protection

against force and fraud

+ other life-

threatening emergencyconditions

Market +

Gov’t protection

against force, fraudand

emergency, life-threatening conditions

+ providing education

+other

opportunity-generating resources

Market +

Gov’t protection

against force, fraud

+ guaranteed provision of resources

required for a decent level of

well-being

Gov’t –run

market system forproducing

and selling goods

+Gov’t

allocation of roughly

equal share of resources

to all

Gov’t protection

against force +

gov’t control of

production +gov’t

guarantee of a roughly

equal share of resources

to all