“There is all the difference in the world between treating people equally and attempting to make them equal.” ~ F.A. Hayek
With the prospect of a democratic super majority on the horizon public discourse has been once again awash in debate over competing schools of thought regarding the current course and proper role of our government. Some fear the growing and unlimited power of the government in the public sphere as a threat to liberty while, on the other hand, there are many who claim that too many socioeconomic inequalities exist to which strong government intervention and redistribution are necessary in the pursuit for social justice. Unfortunately, however, even though both positions are guided by much broader philosophies that may serve to clarify this conversation, much of the debate has narrowed to a question merely of taxes. Of course, taxes do have their rightful place in the context of this discussion since they are the main mechanism for socialization of wealth but I think it would be even more instructive if we take a step back and look at the main philosophical difference that exists on the proper role of government, especially in the minds of those who shape public policy.
If we could distill political science and economics down to a single main goal it would really be one thing: how to achieve the most efficient allocation of resources to a society. How does a society do this? What if a society becomes inefficient or unfair? How well can a government promote the opposite? These are all questions that must be asked and, as we know, people have very strong opinions on them. But, to re-emphasize the original point, what is the main philosophical difference on how to make sure resources are distributed efficiently, or fairly, within a society? The answer to this can be described through two main schools of economic thought: utilitarianism and the symmetry principle.
Utilitarianism is often understood as the greatest good for the greatest number of people. Since, in economic terms, “good” refers to prosperity or wealth, it is often argued that there is an inefficient allocation of resources when someone has a dramatically higher income than another in society, especially when the latter is severely poor and doesn’t have access to the same resources like health care. The main argument goes like this: one dollar is worth more to the poor than to the rich so by transferring it to the poor the loss to the rich is less than the gain to the poor. Therefore, the net result of the wealth transfer yields a greater good. This is a very sensible argument, especially when advocating the importance of charity because, as we’ll see, its main problems come into effect once the wealth transfer is neither voluntary nor targeted.
The biggest problem with utilitarianism is that it will only work in the short-run for the following reasons: 1) high income earners will work less as their incentive for working is reduced, 2) they will have less income reserved for savings and investment, which is used as financial capital for the economy, and 3) they will often find means of either hiding or removing their wealth from the state and move all or part of their capital to a more tax-friendly environment. The thing to notice is that in each of these three cases a situation arises where the goal of increasing revenue is eventually offset by diminishing returns, unless of course the government takes a greater role in dictating the use of one’s wealth outside of taxes.
A second problem with utilitarianism is the administration costs associated to a government that must attempt to collect as much revenue as it can while simultaneously preventing the previous three scenarios from resulting in ever increasing diminishing returns. Add to that the rising discontent among middle and upper class wage earners for bearing an increasingly disproportionate amount of the public burden and, if push comes to shove, there is a strong historical precedent for the public to fight back.
So what is the alternative to the utilitarian approach then? Well, as the quote from F.A. Hayek says, “there is all the difference in the world between treating people equally and attempting to make them equal.” This leads us to the symmetry principle. As the name suggests, its advocates say that a society allows for an efficient allocation of resources only when there is symmetry between their contributions. If, however, the unique talents or work that a person provides is not rewarded in proportion to their benefit on society, then the results are neither fair nor efficient. Now alone, this may appear to have cruel implications for the handicap, homeless, and elderly but there is another part to it that is crucial. Not only must there exist an economic fairness, a proportion of contribution, but also a fairness of the rules and rights ascribed to the individuals within a society. As Robert Nozick explains in “Anarchy, State, and Utopia”, two main rules should be clear: 1) governments should recognize and protect the rights of an individual and their private property and 2) private property should be given to one another on a voluntary basis. If these two rules are adhered to, then fair outcomes will follow.
Negotiating the balance between the rights of an individual and not attempting to obstruct the free-market forces that allow for the proportionate allocation of resources falls into a discussion of two main categories: 1) differences in what distinguishes a right from a privilege and 2) what is considered proportionate. This, I must admit, is really what the debate is all about.
The question I leave with you today is, will the government become so overwhelmed by its liabilities and demand a burden so great from its future citizens that private property and personal liberty fall from a discussion of the latter category into the former. When that happens, and will if we don’t change our course, our Constitution and the pillars of what made this great nation are collapsed.
