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