Equality in the enjoyment of life can be achieved only by taxing society – which is to say, increasing net suffering – by an amount that exceeds the amount of suffering it ameliorates. The economic friction imposed by transaction costs alone ensures this result. To it must be added the friction of search costs – the costs associated with finding the resources you want to tax, and the people whose suffering you want to relieve.[1]
This static cost accounting is relatively straightforward. But there are hidden, dynamic costs, that go much deeper, and are much greater.
Optimality – i.e., achievement of the ineradicable minimum of suffering – for society at large is achieved when resources are accurately allocated to their best use, where they will generate the most enjoyment at the least cost in suffering. This will always mean that some projects, some lives, are more favored than others, as being more apt to reality as it actually is, better coordinated within themselves and with other worthy projects, and better ordered toward the Good (it’s no use to have a really well run operation spinning off tons of profit on production of something evil). The reduction of the suffering of the average life requires that some suffer more, or enjoy less, than others.
The projects that must suffer more or enjoy less are those that are inept, or poorly run, or ordered to evil. We want such projects to be starved of resources. The poverty of such projects is a good that society should seek, if it wants to be good – which is to say, if it wants to prosper, or even to survive.
To increase equality in the allocation of resources – by which is generally meant to reduce the differentials in allocations to projects, so that the distribution of suffering in society is clustered more closely to the mean of the distribution – you must decrease optimality. A society that is perfectly “fair” – wherein everyone suffers and enjoys to more or less the same degree – must tend toward its own destruction, because to achieve that perfect fairness it must blind itself to the relative worthiness of projects; and this it can only do by blinding itself to the world, to its own condition, and to the Good. A society that has a pervasive poor fit to reality, is poorly coordinated throughout, and everywhere poorly ordered toward the Good is a society that is very, very poor – much poorer than need be. And the longer a society continues poor, the poorer it will get; for poverty, like prosperity, is a compounding function.
Thus the price of perfect fairness is perfect poverty, and maximal suffering, for everyone. If you want to see what a perfectly fair society looks like at its point of homeostatic equilibrium, look at the Ik:
There is no better or more heartbreaking example of the alienation of the human capacity to love than the story of the Ik tribe of Uganda. Colin Turnbull in his book Mountain People documents how Milton Obote nationalized traditional hunting lands as national park for European tourists, and prevented the Ik from hunting in their traditional hunting grounds. After a couple of generations of starvation conditions, the Ik, originally a cooperative, child loving tribe, became a group of selfish cruel people who don’t trust or help anybody. They would desert children at an early age and one story Turnbull tells is how after abandoning a baby to be eaten by wild animals the animals were hunted an [sic] eaten.
– Claude Steiner
Equality then is an evil project. It aims at the death of sociality per se:
In such condition there is no place for industry, because the fruit thereof is uncertain, and consequently, not culture of the earth, no navigation, nor the use of commodities that may be imported by sea, no commodious building, no instruments of moving and removing such things as require much force, no knowledge of the face of the earth, no account of time, no arts, no letters, no society, and which is worst of all, continual fear and danger of violent death, and the life of man, solitary, poor, nasty, brutish, and short.
– Thomas Hobbes, Leviathan
What then should be done about the poor? They ought surely to be helped, but never so as to subsidize the vices that vitiate their lives: you get more of what you pay for, so if you pay for vice, you’ll get more of it. The poor, then, should be helped only in exchange for their renunciation of any vices that made or kept them poor, and their adoption of such virtues as can improve their chances of prosperity.
Put another way: the organs of society should starve vice of resources, and shower them upon virtue.
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[1] This is a special case in the realm of economics of the general thermodynamic fact that you can’t increase orderliness in one part of the universe without decreasing it commensurately elsewhere, in the process losing some of the transferred order, permanently, to friction or other dissipative processes. An increase of orderliness anywhere entails a cosmic destruction of orderliness. Work devours potential. This indicates first that value in general is a measure of order, and second that there is conservation of value across all economic transactions. That this is so does not mean that the human economy cannot grow in total embodied value – i.e., capital – but that such growth can happen only if funded exogenously – by sunlight, in the penultimate analysis. So long as the sun keeps shining, everyone can indeed keep getting richer, at least in principle. At Pareto optimality, the dead weight loss of potential economic value to dissipation involved in the human rearrangement of matter and incorporation of value in human bodies is minimized. The efficiency realized as a culture approximates to Pareto optimality is an increase in the rate of compounding of human wealth.
That store of value is called “capital” because it has value at all only insofar as it is available for deployment by human intelligence. E.g., a hammer is not a tool at all, except to a person who has some use for it. Capital then is just banked human intelligence, residing nowhere but in human heads: capita. Thus also none of the four classical factors of production – land, labor, capital goods, and entrepreneurship – can be deployed except by entrepreneurship. Entrepreneurship is – as its term explicitly declares – the rearrangement or transport of value from one locus to another, that rearrangement being the fundamental procedure of the growth of social wealth, of the total human capacity for living a good life. Entrepreneurship then – intelligent enterprise in the coordination of human activity – is the form of all capital. When activity is not coordinated by intelligence – literally, by reading off the values implicit in apprehended teloi, and selecting among them – it is nothing more than a disordered sequence of convulsions.
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Central banks do exactly the opposite. They punish thrift and frugality. They punish savings. They punish future time orientation. They punish investment.
On the other hand, they reward debtors at the expense of creditors. They reward governments and bankers (thieves and liars) with newly printed money, transfering wealth away from the thrifty and frugal savers and investers towards those who get the newly printed money first.
Central banks reward the largest banksters who have driven their businesses into the ground, at the expense of the general population, including those who have run their businesses successfully.
When the price of anything is reduced, more is demanded. The price for being a financial deadbeat, for going into debt, for stiffing your creditors, and for destroying your business (so long as it is a large bank) has been drastically reduced.
Whatever is subsidized increases and grows. Whatever is punished decreases and shrinks.
Lord Help Us!!
This is a tad bit more complicated. I used to believe this – I used to be a big Misesian – but now I also accept that critique of capitalism that there is a certain tendency to underpay laborers, and thus to kill demand. Putting it diffferently, in a Distributist micro-capitalism where everybody is an entrepreneur it is not an issue, but in corporate capitalism where one guy can own a factory and a thousand guys work in it, it is often an issue.
So now I accept that a market that is based on wage labor and not, say, on self-employed farmers and artisans, can have a systemic problem of lack of demand, and thus demand-boosting by printing money can be OK to boost demand and reduce the over-saving of employers.
It was difficult to accept this, I used to have a quasi-religious faith in free markets. But I have modified it so: if everybody would be a self-employed artisan and farmer, you could have a perfect free market. But people being employees, wage laborers, so not owning the tools they work with, is a _systemic_ imbalance in a market, and thus needs a systemic political correction.
So basically I added a large helping of Chesterton / Belloc to my Mises and ended up being a cautious, reluctant Keynesian.
I don’t think I’ve ever met anyone who “used to be a big Misesian”. Are you sure you were?
Perhaps I just don’t understand it enough but I don’t see how distributism could work in reality. Basically it seems to be a socialist doctrine. There are problems with wage labor but first, it is not unjust per se so there is no reason why the state should put any limits on it and second, concentration of resources (labor and capital) in one place allows mass production that tends to beat small scale (distributist) production via better prices. In order to maintain distributist ideal the state would have to constantly subsidize family businesses and constrain large scale businesses. I don’t think it is ethical, viable or even desirable.
The question of just wage is interesting. The market provides general answer but there is also important role for government or local authorities to mitigate extreme situations. I am curious how the idea of corporatism would work in reality. If I understand it correctly the corporate body is supposed to keep standards for given branch, help with negotiations between employers and employees, provide education etc. It certainly is a good idea to tie down employers’ and employees’ interests to common good. Question is if it is good for customers and how much would the bureaucracy impede development of that branch or industry. Does anyone know how this worked in countries like Franco’s Spain or Salazar’s Portugal?
Then there is the question of corporate and real persons, their liabilities and ownership which is often about trying to increase profit and reduce risk on the expense of others. There is room for regulating excesses of capitalism here and what is needed are some simple rules, I think. For example government should favor national corporations over global ones, discourage investements overseas, not allow one corporate person to own another etc.
I don’t know how big a problem the lack of demand is but the money-printing solution doesn’t seem to be ethical. I would appreciate more educated opinion but it seems equal to stealing from other people’s savings. Also it runs against certainty and the biggest impact of that is on poor people. It runs against common sense as well, for nobody would normally choose something with constantly and predictably decreasing value as money. This is not to say I am supporter of some metal standard. From economical point of view this question seems too complicated. So perhaps it could be resolved from moral point of view.
More “trips” to the realm of economics from reactionary perspective would be welcome. I believe economic questions are basically moral ones so hopefully this is not a misplaced wish.
Regarding reformed Misesians, your man is Gene Callahan:
http://gene-callahan.blogspot.com/
I strongly recommend him to anyone seeking to find their way out of the fog of anarcho-capitalist and libertarian thinking. He spends alot of time writing for people who think like he used to.
@Gabe Ruth. Thanks for posting the link to Callahan. Although many libertarians and most An-caps are fans of Mises, Mises was not himself either of those things. If you read a bunch of stuff about Mises written by An-caps or libertarians and then decide you don’t like their ideology (for perfectly valid reasons) and continue that into deciding not to like Mises, I would say that you weren’t really a “…big Misesian”.
One of my favorite reactionary ideas is that the concept of equality came from the concept of self-centered liberty. Basically if you see people as means for a common goal, then some are better means, some are worse. But if every person has their own goals, then by definition they are equally suitable means for those individual goals. If everybody is a one man army fighting their own war, then of course everybody is a supreme commander of it. When people band together to fight for a common cause, some will lead, some will follow.
The point is – to justify inequality, one needs to set up and define common goals and then say some people are more suitable means for these goals than others.
One of the basic issues is that neither markets tend to favor virtues, nor governmental institutions. Neither the Wolf of Wall Street types, nor the typical government employee is an epitome of virtue. If anything, the closest thing to an virtue-subsidizing economic setup is self-employed artisans and farmers, embedded in their local community, hence Distributism, but even this by no means surefire. Ultimately, it seems that economics cannot really do it at all – virtues, as MacIntyre put it, should be seen as internal goods and mainly not ways to get external goods.
IMHO the only reasonable thing to do is to 1) at least governments should not subsidize directly the worst vices 2) destructive sociopathic selfishness on markets must be regulated against, or controlled by a very effective system of lawsuits.
This practically means the following: governments should aim their social spending and services at complete families, where at least one parent is working or actively job seeking, and the children attend school, as this can be called a roughly vice-free situation. No support for single parenthood etc. public works, state as the employer of last resort, for those who are not lazy but simply the unemployment situation is bad. Workfare not welfare etc. While regulation should be kept generally limited, transparent and unbureaucratic, but nevertheless the worst kinds of injustice should be tackled. But other than that, other than these two really basic common-sense approaches, it is not really the realm of economics or economic policy to deal with it.
But nor do they disfavor them, either. Not necessarily, anyway, despite how usual it is for them to err. Markets and governments are discursive institutions, and like any such they are vulnerable to noise introduced by the deceptions and errors of their participants.
I find the interaction between a libertarian sort of analysis of free markets and Christianity leads to disturbing results. To summarize it in a highly cartoonish fashion, someone like Mises tells me that free markets are the optimal tool for ensuring the maximum amount of people’s preferences are fulfilled; Christianity tells me that the world is sunken in sin and people’s preferences tend on average towards evil. So either Mises is wrong, or having a market economy is at best morally indifferent in the grand scheme of things, rather than being an advantage relative to a non-market economy. (The abolition of markets does not solve the problem, of course, since it is generally accomplished by merely nationalizing the evil where it was privatized before.)
Both Mises and Christianity are correct. Markets are the optimal tool for fulfilling people’s preferences, *and* people’s preferences are whacked by concupiscence, sin and simple honest error.
Likewise, a hammer is the optimal tool for driving a nail, *and* you can crush your thumb with it. That you can crush your thumb with a hammer doesn’t indicate that you should use a level to drive the nail. If you use a level, you will destroy it, *and* you will increase your chances of crushing your thumb.
Like the hammer, the market won’t prevent you from erring. But it is the best tool for the job. And being the best tool for the job is not morally indifferent – see that word “best” in there? As anyone who knows and loves tools will tell you, using a level to drive a nail is not just stupid, but a disgusting evil, on so many levels. And this is so regardless of the moral character of the project that calls for driving the nail.
Likewise with using the state to do something a market could do better.
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