Forthcoming Paper on Frank Knight and John Rawls

A few years ago I wrote a paper on Hayek and Rawls (ungated early version here). This, plus teaching a course on libertarianism, led me to the early 20th century University of Chicago economist Frank Knight. One of the points of commonality between Hayek and Rawls is their scepticism about desert as the basis for social institutions. This scepticism owes much to Frank Knight. Rawls cited Knight’s 1923 essay “The Ethics of Competition” in the discussion of desert from A Theory of Justice, and in an earlier essay cited Hayek, who in turn cited Knight. Knight is remembered as one of the founders of Chicago economics, and thus indirectly one of the fathers of free market fundamentalism. He was indeed a teacher / colleague of both Friedrich Hayek and Milton Friedman. Yet Knight was a fierce critic of what he took to be bad, simplistic arguments for laissez-faire, chief among them the view that by distributing income according to marginal product the competitive system rewards the deserving. Knight didn’t deny that marginal productivity explained the distribution of income, he just denied that reward according to marginal product was ethically important, in itself. Hayek and Friedman had essentially the same view. The virtue of reward by marginal product is efficiency, not fairness. It’s surprising, then, to read that neoliberalism teaches that markets reward the deserving. I posted about this earlier, but now I have a paper on the topic forthcoming in PPE. It’s called “Markets, Desert, and Reciprocity,” but its subtitle could be “Knight, Hayek, Friedman, and Rawls (vs. Bell, Nozick, Sandel, etc.)” The final section includes some discussion of the reciprocity objection to proposals for an unconditional basic income.

Neoliberalism

The Guardian has an article by George Monbiot on “Neoliberalism – the ideology at the root of all our problems“, an excerpt from a forthcoming book.  He cites von Mises, Hayek and Friedman as the original neoliberals, which is fair enough given their roles in organizations such as the Mont Pelerin Society. What struck me is his account of the role of ideas of deservingness, or merit, in neoliberalism.

“The market ensures that everyone gets what they deserve. We internalise and reproduce its creeds. The rich persuade themselves that they acquired their wealth through merit, ignoring the advantages – such as education, inheritance and class – that may have helped to secure it. The poor begin to blame themselves for their failures, even when they can do little to change their circumstances. Never mind structural unemployment: if you don’t have a job it’s because you are unenterprising. Never mind the impossible costs of housing: if your credit card is maxed out, you’re feckless and improvident. Never mind that your children no longer have a school playing field: if they get fat, it’s your fault. In a world governed by competition, those who fall behind become defined and self-defined as losers.”

As a description of a popular belief system, this account of neoliberalism may be accurate.  But since Monbiot cites Capitalism and Freedom, let’s take a look at what Friedman says. Continue reading Neoliberalism

Friedman on Capitalism vs. Poverty

In a previous post, I wrote about Hayek’s claim that capitalism reduces economic inequality. Milton Friedman makes the same claim about capitalism and inequality in “Free to Choose.”  This claim was quite plausible in the early 70s, less so today.  There’s an irony here, which is that the data upon which Friedman and Hayek relied to show that capitalism reduced or didn’t exacerbate inequality were taken primarily from the post-war period of strong unions and active government, the very economic phenomena they were trying to curtail.

Anyway, even if they’re wrong about inequality, Hayek and Friedman can still claim that capitalism benefits the poor – the claim taken up recently by so-callled bleeding-heart libertarians such as John Tomasi and Jason Brennan.  Here’s Friedman, from Free to Choose:

The main bit:

“I do not know any exception to the proposition, that if you compare like with like, the freer the system, the better off the ordinary poor people have been.”

Is that true? Continue reading Friedman on Capitalism vs. Poverty

Friedman vs. Knight

This week in my course on liberalism we’re reading Milton Friedman. I’m really enjoying watching the PBS documentary “Free to Choose.” Here is a bit where Friedman discusses gambling, and the benefits of risk-taking:

The corresponding text from the book Free to Choose:

“Still another facet of this complex issue of fairness can be illustrated by considering a game of chance, for example, an evening at baccarat. The people who choose to play may start the evening with equal piles of chips, but as the play progresses, those piles will become unequal. By the end of the evening, some will be big winners, others big losers. In the name of the ideal of equality, should the winners be required to repay the losers? That would take all the fun out of the game. Not even the losers would like that. They might like it for the one evening, but would they come back again to play if they knew that whatever happened, they’d end up exactly where they started?”

Of course one issue is that people choose to visit Las Vegas and play Baccarat; they don’t have a similar choice about whether to play the economic game, in daily life. Also they don’t necessarily start out with equal piles of chips, if children are being raised in private families. In addition, however, people may object to competition itself, to economic life being organized so that they have to compete against others in order to flourish. Milton Friedman’s teacher Frank Knight captured this sentiment in a very nice passage from his essay “The Ethics of Competition”:

“Turning to look for motives attached to production as an activity rather than to the product, the most obvious is its appeal as a competitive game. The desire for wealth takes on more or less of the character of the desire to capture an opponent’s pieces or cards in a game. An ethical criticism of the industrial order must therefore consider it from this point of view. In so far as it is a game, what kind of game is it? There is no doubt that a large amount of radical opposition to the system arises in this connection. The propertyless and ill-paid masses protest not merely against the privations of a low scale of living, but against the terms of what they feel to be an unfair contest in which being defeated by the stacking of the cards against them is perhaps as important to their feelings as the physical significance of the stakes which they lose. In a higher social class, resentment is aroused in the hearts of persons who do not like the game at all, and rebel against being compelled to play it and against being estimated socially and personally on the basis of their successor failure at it.”

That’s from pp.603-4 of the version that’s in the Quarterly Journal of Economics, Vol. 37, No.4, 1923.

Knight was no fan of socialism, but he showed a keen understanding of the sources of opposition to capitalism.

Grad course on “Social Justice and Desert”

Here is the draft course description for a course I’m teaching in Winter 2016:

Social Justice and Desert

One of the standard criticisms of the welfare state is that social provision of income, housing, etc. rewards the imprudent, the irresponsible, the feckless, the lazy – in short, the undeserving. Recent increases in high-end inequality have raised similar questions about whether the market system itself rewards the undeserving; what have the top 1% done to deserve their enormous share of total income and wealth? Are CEOs today really so much more deserving than they were in the 1970s? The association between justice and desert has a long history, and is an important part of common sense thinking. However, the main political theories of the 20th century assign little or no fundamental importance to desert. The classical liberalism of Friedrich Hayek and Milton Friedman, the libertarianism of Robert Nozick, and the egalitarian liberalism of John Rawls – none of these views hold that in order to be just institutions must match shares with individual merit. The purpose of this course is to get a better understanding of this disconnect between theory and common sense. The first part of the course covers the free market critique of the “just deserts” interpretation of marginal productivity, Rawls’s rejection of the common sense position on desert, and the criticisms this rejection led to on the part of people such as Miller, Nozick, and Sandel. The second part of the course examines theories that attempt to accommodate the intuitions about desert that motivated the critique of Rawls and the welfare state without explicitly appealing to desert. So-called luck egalitarians emphasize the importance of responsibility, and of people “paying the costs” of their choices. An interesting alternative is to appeal to the idea of reciprocity, connecting liberal egalitarianism with social democratic thinking from the first part of the twentieth century. The final part of the course will focus on specific issues that present challenges for a theory of justice-as-reciprocity: disability, global justice, and economic incentives.

Reading that over, I see that it might suggest that Rawls was a welfare-state liberal, as if his theory would be satisfied by the formula ‘laissez-faire + enough social provision so that the poor don’t starve and the system remains stable’. Will have to work on that.