Saturday, February 7, 2009

Capitalism with Social Equality: A Powerful Though Experiment Demonstrates Our Moral Obligations

An interesting thought experiment by American philosopher John Rawls demonstrates the morality of a more socialistic version of Capitalism

I've been writing here, at The Personal Financier, for over a year and a half now. My skepticism regarding Capitalism as the best economic system, or lesser evil, should be quite familiar to my regular readers. Still, when at times I offer a more socialistic approach in my posts the comments are not late to follow.

It seems our solid conviction in the morality of Capitalism is deeply rooted in us. While pure Capitalism or the more extreme free market variations might have taken a blow recently, our indisputable belief in unadulterated Capitalism remains unscathed, not without just cause.

Capitalism has proved to be a shining beacon in the darkness of earlier economic approaches and has allowed men and women to fully express their potential. Still, we cannot ignore the destructive side-effects our economic system has on social equality (or inequality) and the erosion of the middle class which is the foundation to any solid economy.

There is no need to elaborate on the destructive force of more extreme versions of capitalism as we are witnessing, first hand, the results of greed which "pure" or unregulated capitalism leads to. Obviously the human factor is to blame and not the system, but shouldn't systems be designed to contain our human flaws?

The intuitive appeal of a more socialistic approach

Imagine a disabled person, say blind or handicapped in some fashion. Would you agree that it is society's moral obligation to support such a person? I'm sure that by support the majority would agree that basic sustenance such as a decent roof over one's head, clothes, food and decent medical care are all very reasonable considering the financial capabilities of our western governments.

To take this discussion one step further, to a more risky area, we have to consider the following arguments which I believe to be true:
1. Not all individuals are created equal.
2. Not all individuals, even if are created equal, have equal opportunity.

The socialistic point of view I wish to discuss is such that will, accordingly:
1. Assure the basic needs of all human beings
2. Strive to create equal opportunity

Obviously I can hear the comments in my head already. Why should the lazy and careless live off my taxes? It is a bit more complicated than that but to put it very clearly and basically:
I believe the state of affair where several "freeloaders" enjoy basic sustenance on "our" expense is preferable to a state of affairs where the unfortunate, of which some are lazy and others have had it bad, are taken care off.

Don't get me wrong, I'm not advocating extreme equality and I believe the relationship between ability, effort and personal gain should be rewarded to make any sort of progress. I would, however, like to make sure the less fortunate are living with minimal dignity.

Before this discussion gets more complicated I'd like to present John Rawls Veil of Ignorance which I believe is a very powerful and intuitive thought experiment that contributes to this discussion greatly.

John Rawls' Veil of Ignorance

John Rawls was a contemporary American philosopher and a leading figure in moral and political philosophy. Much like Jean-Jacques Rousseau and Thomas Hobbes Rawls set out to discuss the "state of nature" or the hypothetical human condition prior to the foundation of the state and the state.

While Thomas Hobbes's state of nature is a savage war of every man against every man Rawls uses a thought experiment to demonstrate his concept of the state of nature.

Rawls suggests that at the state of nature it is reasonable to assume the talented and strong would be able to coerce others (the weak). To overcome this "evolutionary" problem Rawls sets up the "original position" and asks us to put ourselves behind a veil of ignorance which deprives us of any information regarding ourselves and others placing us all in an equal, conscious starting point for the discussion in the social contract which we are all interested in.

Rawls argues that the representative parties in the original position would select two principles of justice (as a result of the veil of ignorance regarding their actual positions):

1. Each citizen is guaranteed a fully adequate scheme of basic liberties, which is compatible with the same scheme of liberties for all others;

Even the most egotistical would like to assure their basic rights, unknowing what their actual position is (talented and strong or weak).

2. Social and economic inequalities must satisfy two conditions:

  • to the greatest benefit of the least advantaged (maximin rule);
  • attached to positions and offices open to all. The reason that the least well off member gets benefited is that it is assumed that under the veil of ignorance, under original position, people will be risk averse. This implies that everyone is afraid of being part of the poor members of society, so the social contract is constructed to help the least well off members (Wikipedia)

And sympathy is what we need…

Rawls thought experiment is powerful. It forces the thinker to consider himself in someone else's shoes and evokes sympathy. And as the song goes: …sympathy is what we need my friends …
I'm anxious to read your great comments.

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Image by: mjecker


Patrick said...

Your post resonates the typical fallacy of believing that Capitalism is inherently an unsympathetic system. Non-profits, NGOs and religious organizations do far more good, far more efficiently, than governments do. Embracing Capitalism does not prevent you from taking care of those in need, rather it places that decision in your hands rather than having it forced on you.

Anonymous said...

"Would you agree that it is society's moral obligation to support such a person?"

Societies don't have moral obligations, only individuals do. And that obligation is to avoid initiating aggression against other individuals no matter what the personal cost, because other people are not your property. That means utilizing the fruits of your own labor, not mine, to help the people who you believe need your aid. If you would violate someone's property to feed your "needy" then in fact you have nothing to offer them but slavery. That you feed your slaves is not admirable, nor is your crime made any less terrible by the fact that you yourself prefer slavery to freedom.

In Rawls' thought experiment I would want a thoroughly principled capitalist system built on an equally-principled foundation of property rights: equitable rights in raw materials, but absolute rights in "created value" resulting from one's labor.

Let me create a thought experiment of my own. Imagine there was no money; imagine there were no durable goods. Imagine that each person had to spend a few hours a day in physical labor to generate immediate sustenance that was required for their health, and, ultimately, for their continued existence. Now imagine a societal economic structure: a middle class consisting of individuals that generate their own sustenance, and a lower class - consisting of the physically disabled, the unlucky and the unthinking - that do not. It is important to you that they be cared for, but there is no durable property of yours or mine that can solve their problem; only ongoing physical labor in sufficient quantity can accomplish that. You and I are both free to contribute that labor if we choose. But if I refuse, are you justified in forcing me to labor for this cause? No. Forcing someone into physical labor for your purposes against their will is simple slavery. And likewise you are not justified in forcing such a thing post facto in our current real-world environment of money and durable goods. But you do. Not content to live and let live, you insist on initiating violence against others, in the name of charity of all things. Since you do not hold individual self-ownership to be inviolate, you take away freedom and security with your left hand while you offer food with your right. The ridiculous thing is that coercive "charity" has proven no better than the charity we see when people are left free to make their own decisions and direct their own labors. So in the end you actually offer....nothing.

"It's not an endlessly expanding list of rights – the "right" to education, the "right" to health care, the "right" to food and housing. That's not freedom, that's dependency. Those aren't rights, those are the rations of slavery – hay and a barn for human cattle." – Alexis De Tocquiville

Dorian Wales said...

Thank you for your comments

@Patrick - Your argument is elegant. I'll use the term "force" although I disagree with it. It is a question of scale - I am quite certain you agree to society enforcing its laws on us. Why not let each decide? Human beings act on incentives and the incentive to consume is much greater than the incentive to take care of those in need in light of the insatiable nature of our desires. I am not advocating a society in which wealth is divided equally, only opportunities.
@ Anonymous – I appreciate your comment and the effort you've invested in it. I apologize if my reply is a little bit all over the place but it's late and I'm tired and I don't usually make the time to reply during the work week.
"Societies don't have moral obligations, only individuals do". I believe that as societies are comprised of individuals so are their moral obligations the sum of the obligations of the individuals.
One cannot disconnect society from the individuals that make it. It is individuals that make the decisions, at the end, but these are based on a certain set of principles which governs that society. This is really less material for the discussion at hand.
"If you would violate someone's property to feed your "needy" then in fact you have nothing to offer them but slavery. In Rawls' thought experiment I would want a thoroughly principled capitalist system built on an equally-principled foundation of property rights: equitable rights in raw materials, but absolute rights in "created value" resulting from one's labor."
By placing "needy" under quotation marks I assume that we do not agree on the "needs" of individuals or their existence. The notion that assuring sustainable equal rights through generations is slavery is quite absurd. And if needs are in question would you consider government support of blind men a sort of slavery? I agree it might be demagogic to compare the blind to the untalented but the reduction gives a clue that somewhere along the way there is just caused to "violate" someone's property.
The notion that "created value" results from one's labor is, at best, naïve. Consider the financial industry as a good recent example. Can you honestly say these individuals are entitled to their phantasmal salaries simply because they earned them and someone was willing to pay them? Failures in the markets are abundant and they should be regulated by an "architect" of sorts. That is the government's role. Assuring equal opportunity and basic rights is at the basis of the government's duties to its citizens.
The case of inheritance stands out even more as one simply had the luck to be born to another who had already "created value". What is his moral right to his inheritance other than as an evolutionary concept (please don't confuse it with the practical need to allow inheritance in order to keep motivation to produce). Warren Buffet had said that inheritance tax is one of the most just taxes possible.
Value is created through the benefits "society" provides. It is never created in a vacuum. I am quite familiar with Ayn Rand's writings and I am well aware my writings may remind those of the self-righteous but I think reading Ayn Rand again, with some perspective into the markets and business world proves that her romantic notions are far from practical or human as communism is.
The thought experiment you offer is interesting but I wonder where it stands on morality. Should your lack of willingness to work an extra hour to feed another human an "unlucky and the unthinking" human result in their death, Is that moral?
"Human cattle" as Alexis De Tocquiville puts it is a term I wouldn't use hastily. What is the justification for an individual life than other than the ability to produce?

Anonymous said...

I agree with you on the inheritance issue. Specifically, if rights in property follow from the investment of labor into raw materials, or from the trade of labor for convertible goods, then those rights are tied to the laborer. As long as they live they can dispose of their gains as they see fit, including trading it or gifting it to others. If traded away, two parties who both had property rights in some goods simply converted those goods to their mutual benefit. But if gifted away, its new "owner" only possesses it via the property rights of the original earner. When that earner dies, the property should be considered un-owned. That creates a bunch of problems for our current society and I don't know of anyone that cares to wrestle with the implications - but the upshot is that I don't complain much about inheritance tax. I don't think it's a just implementation, but neither do I think the heir has normal rights in the property and I assume that such an operation could in principle be justified.

As for the slavery concept, I don't think I was entirely clear. I wasn't saying that charity enslaves the recipient. I am saying that coercive taxation and redistribution of wealth - which is not charity in any moral sense of the word - enslaves the taxed. Although the recipients may not be taxed at all, that is only contingently true based on their economic situation. Their government does not actually believe that they have a right to the fruits of their labor, as proven by its treatment of others. It just forbears to bother the people in their particular category...for the moment.

Anne Wortham made a similar comment when explaining in an interview why she couldn't join the civil rights movement. She was all for minorities being given equal opportunities by the individuals that make up society, but she believe that the government had no right to mandate such equality. She said, "In fact, the state has gone beyond [giving us freedom] to oppressing us in different ways. It has given us all that any just and moral government or liberal state can give to its citizens, and that is equal rights before the law... I don't hold to the view that the state gives rights. It simply acknowledges rights that already exist, and institutionalizes those. If rights are thought of as begin given, then rights become privileges, things that the state doles out to people. Then blacks can claim, 'Look, we are in need of these most, we are behind the most,' et cetera. [Q: So you are opposed to affirmative action?] Yes. [Q: Busing?] Yes. [Q: Employment quotas?} Yes. [Q: On the principle that...] On the principle that to institute such policies requires that the state violate the rights of all its citizens, including those who advocate those policies. [Q: If we say to a young black in the ghetto, 'You're free to get a job,' and there are no jobs, or if we say to a single-parent family in the ghetto, 'You're free to get a house,' but there's no affordable housing, are we not perpetrating a cruel hoax on them?] No, we are being realistic. If we want to be a goal-directed government rather than a government that is based on the rule of law, then fine. But the ideal is that we are a government that wants to respect the rule of law, and if that is the case, then we cannot - at any point ever - justify violating the rights of members of the majority for the sake of the well-being of members of minority groups."

As for the latest financial blow-up, that's sort of a mixed bag. On the one hand there was a great deal of out-and-out fraud taking place. We don't have to allow that. But if someone convinces a company - essentially a body of individuals - to pay them $30 million a year while running the company into the ground through their own stupidity and complacence, then there is nothing wrong with that in the legal sense. It's a terrible thing to see, but it ultimately is no larger a mistake than hiring a janitor that can't keep the bathrooms stocked with paper towels... just larger consequences. If you want to avoid it personally, pay more attention to where you invest your money. The messes created by idiots will always affect you, but you don't control other people - you control yourself.

We probably don't completely agree on needs, but we may not be as far off as you think. Blind people are a good example, and I certainly hope that individuals choose to help them out. However, I do not believe that it is just to force someone to labor on their behalf on pain of incarceration or loss of property. If you want to coerce them within your own rights, then use societal options like shunning, trading restrictions (based on voluntary cooperation from vendors), lack of reciprocal protections, etc., or else encourage them with recognition, trading advantages, reciprocal protections or other socially-available benefits.

A classic case of "need" that I disagree with though is that of the single mother. Simply because, if two or three of these mothers were to share a household and combine their efforts, they would have all the economic advantages of being part of a couple. We have come to our current societal position on this sort of thing because we are so focused on our idea of quality of life. In reality, human happiness has little do with the such circumstances. Our distance from one another, from our neighbors, and from other generations of our own family has brought many negative results along with it. Financial independence is hardly an entirely good thing. It may even be worse than the need to depend heavily on those around us, in the long run.

Anonymous said...

A couple more quick notes:

"Failures in the markets are abundant and they should be regulated by an "architect" of sorts."

The free market is not perfectly efficient. In fact it relies on the pain caused by inefficiency to keep it moving along the path toward efficiency. This is the mechanism by which it turns human nature - with its many dark sides - to good effect. If we remove the pain of inefficiency then we remove the ability of the market to move forward. Examples abound: by restricting usage of the electromagnetic spectrum on the basis that "it would be useless to all due to interference if we left it unregulated" we find ourselves many years behind in the efficient usage of that resource. That monopoly decision ended up in massive infrastructures being built around inefficiently-large portions of the spectrum, even after we knew how to use it much more sparingly. And the profits gained were used to lobby the government not to alter the status quo. The same human nature was at play, but it ended up miring us down rather than moving us forward. If there were no FCC, the spectrum would have spent years as the "wild west", sure. But how much sooner would technology have come that could effectively operate in that environment? Or devices that cooperated with one another to avoid interference? Or something else that we haven't even thought of yet?

My point is that the pain in the market isn't a failure of the free market, but it's normal operation. Stop the pain and you stop the progress. This is what we have always seen with socialist programs, too. They have their advantages, but they begin to stagnate immediately. There is no force of will behind them to keep them relevant or efficient.

Of course much of the pain we do see is actually caused by regulation. If there were no financial regulation whatsoever then people would choose their banks much more carefully, as they did a couple hundred years ago. As it is we just look for the FDIC icon and don't give a rip beyond that. And if our government didn't undercut is private citizens that have money to loan by loaning out "new" money to banks, then those banks would have to pay market rates in order to grow. They would grow at a more sustainable rate, and us little guys would make more money off of them in the meantime.

DennisG said...

The quote near the end of this post says that "Rawls thought experiment is powerful. It forces the thinker to consider himself in someone else's shoes and evokes sympathy."

Perhaps the word "Sympathy" should replace the word "Empathy". Sympathy implies a feeling of pity and sorrow for someone's misfortune, while Empathy connotes the ability to "put oneself in another person's shoes."
As a participant of two mission trips to a third world country, I was distraught by the plight of those I'd come to serve. Based on these experiences, I have to agree that all human beings are entitled to a minimum living standard, and without fear of exploitation. I think one of the major differences between our great country and those of others, is that we are empowered to become whatever it is God intended us to be. Each person is limited only by his own unique intelligence and willingness to do whatever it takes. The one major flaw in Capitalism's structure, as I see it, is that a medical condition, which can strike any one of us at any given time, can destroy a lifetime's worth of effort.