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What's Hayek Got To Do With It?

Allow me to link to Elizabeth Anderson's much praised Hayekian argument against the notion that you deserve your pre-tax income and note that I don't understand. Specifically, I don't see what Hayek has to do with it. It seems to me that the weight of her argument is being born by the simple point (familiar to readers of John Rawls and, more recently, Matt Miller) that market outcomes, though not unrelated to effort, etc., are vitiated by undeserved luck and random chance. I don't think arguments about people deserving things need to be taken very seriously. It's hard to make out what the concept is supposed to mean in this context. People deserve things relative to a system of social arrangements. If you promise to give me something, then I deserve to get that thing when you promised to give it to me. But abstracted away from any real practices, desert doesn't mean anything. But insofar as you feel like you need an argument about this, I think the argument from luck does about all the work you need.

February 1, 2005 | Permalink

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Jacob Levy has been sited in Yglesias's comments making helpful clarificatory points about Rawls and Hayek. Regarding the Rawls luck argument, of which Matt remains unwisely enamored, may I suggest my August TCS essay, which also gives substance to Jac... [Read More]

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» Elizabeth Anderson on Hayek & the claim "I deserve my pretax income". from TAKING HAYEK SERIOUSLY
Philosopher Elizabeth Anderson -- How Not to Complain About Taxes (III): "I deserve my pretax income". Quotable: Today's post is a tribute to F. A. Hayek. I was going to commend Hayek earlier, for nailing the economic case against comprehensive... [Read More]

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Comments

I think the argument is something along the lines of this:

You cannot both hold that (i) government intervention into the economy is bad because the economy is so unpredictable and random that planned intervention will likely be worse than operation of the marketplace (i.e., Hayek's argument against socialist state planning) and (ii) economically, people are likely to get what they deserve. The two propositions are irreconcilable because they are premised on inconsistent views of the predictability of the economy.

Posted by: alkali | Feb 1, 2005 3:53:16 PM

The point of using Hayek is to get good conservative cover for the argument from luck. Or rather, to get an unimpeachably conservative argument that one's pay reflects something other than one's past performance.

Posted by: Vance Maverick | Feb 1, 2005 3:54:22 PM

Er, correct me if I'm wrong, but the Hayek part of the argument seemed to boil down to something like this...

Say Bob makes $30,000 a year.

And say Jane works much harder than Bob and makes $40,000 a year (in the same occupation). But prices being what they are, there's no way to determine that Jane's extra work was actually worth the extra $10,000. Maybe it was worth $5,000, and luck made up the rest. Or whatever. But no one can know, because that's not what prices or salaries measure. So as you say, putting a finger on what people "deserve" is sort of meaningless.

Oui? Non?

Posted by: Brad Plumer | Feb 1, 2005 3:56:51 PM

Eh, never mind, I side with Vance's explanation.

Posted by: Brad Plumer | Feb 1, 2005 3:57:42 PM

I thought this was a far better argument.

Posted by: mumon | Feb 1, 2005 4:05:21 PM

I think that the point is that the Hayekian justification of the market is purely utilitarian in an overall sense, since the market tells people to keep doing what they're doing if it's judged valuable by the market, and tells them to quit doing what they're doing because it's not valuable (even if it once WAS valuable). So what is done tomorrow will be the right thing in terms of today, but tomorrow there will be a correction if the marked decides so. In this system, also, people who guess right about tomorrow's market will be rewarded, and those who guess wrong punished, to the overall benefit of everyone. But there's no reason why this system is a system of individual justice -- it's just the most efficient way of managing production, and if some people get ripped off without harming anyone else, that's a good thing overall.

Same problem as all the greatest-good-for-the-greatest-number systems. Matt's utilitarian tendencies make him a little oblivious to this kind of thing, I think.

Posted by: John Emerson | Feb 1, 2005 4:10:25 PM

What's all this hubub about Salma Hayek? She's a fine actress and should be left out of this! ;-)

Sorry...this is really an interesting and important discussion. I just thought I'd throw a bit of levity in the middle of all the wonkishness...

Posted by: JT | Feb 1, 2005 4:46:24 PM

What's all this hubub about Salma Hayek? She's a fine actress and should be left out of this! ;-)

Sorry...this is really an interesting and important discussion and I am learning a lot. I just thought I'd throw a bit of levity in the middle of all the wonkishness...

Posted by: JT | Feb 1, 2005 4:47:12 PM

I don't see what Hayek has to do with "deserving"; His arguments have to do with what works, not with justice.

Anyway, talk about proving too much; Ms. Anderson seems to confuse proving that people don't necessarilly "deserve" what they have in a free market, with proving that they necessarilly don't deserve it. True, the market does not distribute according to end-state notions of justice, but it may by sheer coincidence (Or maybe because honesty, and so forth really ARE the best policy on average, in the long run.) in some instances reproduce that end state.

So, even if you do hold to some end state notion of justice, instead of a process conception of justice as we libertarians do, you can't just with a broad brush say, "None of you deserve what you have, so I'm entitled to take it from you, and give it to the people *I* think deserve it!" Justice is individual, and some of those people may, on an individual basis, genuinely deserve what they got.

Posted by: Brett Bellmore | Feb 1, 2005 4:53:26 PM

Ms. Anderson seems to confuse proving that people don't necessarilly "deserve" what they have in a free market, with proving that they necessarilly don't deserve it.

I think Anderson was actually only trying to prove the former, and that's plenty.

Clearly, some people may end up, through random chance or whatever, getting paid exactly the amount that they "deserve." I don't really see what relevance that has to the question of the morality of taxation.

How many of these deserving people are there? Is there some way of telling who they are, so we can let them keep their well-deserved earnings? Or should we just assume that everyone deserves their pre-tax income, since some people might? I'm not sure I get your point here.

Posted by: JakeV | Feb 1, 2005 5:05:27 PM

"Clearly, some people may end up, through random chance or whatever, getting paid exactly the amount that they "deserve." I don't really see what relevance that has to the question of the morality of taxation."

Ok, let me lay it out for you: If you're trying to justify taxation on the basis that people don't deserve what they have, (And that somebody else deserves it more.) it matters very much if some of the people you're proposing to tax DO INDEED deserve what they have. If you're willing to tax THEM, too, you shouldn't be talking about justice in the first place, since you obviously don't care about it yourself.

Liberals generally want to have it both ways; They want to justify redistribution as a matter of justice, while throwing justice out the door when it comes to getting the loot in the first place.

Posted by: Brett Bellmore | Feb 1, 2005 5:21:54 PM

This argument doesn't seem Hayekian at all, since they undermine a central principle of Hayek's work: that the free market is the only way to acheive financially computable results. Toss in some central planning (say, for example, taking away some wages because there's a chance they weren't deserved), and the market becomes more unstable. Of course, people are rational, so they will attempt to stabilise the market by understanding the new dynamic -- the result will be people changing their behavior in unpredicted ways, as they respond not only to the tax, but also to their predictions of how other people will respond to the tax.

But I'm ahead of myself. The point is that like it or not, Hayek wouldn't agree with this reasoning, because it discards a central result of his work.

Posted by: William Tanksley | Feb 1, 2005 5:31:10 PM

"People deserve things relative to a system of social arrangements. ... But abstracted away from any real practices, desert doesn't mean anything." Isn't it the same with ownership. in particular of pretax income? Our money is only worth something because the law says it is; it wouldn't be money, and this patch of land wouldn't be property, were it not for the sovereign and its rule of law, which includes taxation. So if I have a C note in my pocket but I owe a sawbuck to Uncle Sam, I really own only $90 -- a case where possession isn't nine tenths of the law. (Perhaps this is what the lawyers mean when they say a tax is a differnt sort of obligation from a _debt_, fee, or penalty?) Even my ownership of the $90 is more than my possessing it in a pretended state of nature; I can be said to own it only if the courts will uphold my claim to it, the police will try to keep others from taking it from me etc. Possession of pieces of paper may be a wholly natural affair, but they are income only against a background of convention, and whether and how much of them I own depend wholly on the sovereign's conventions in such matters.

Posted by: Dabodius | Feb 1, 2005 5:38:23 PM

And I get flamed when I say that liberals, by and large, simply don't believe in property rights. But that's really what it comes down to: The rationalizations vary, but you don't think the fact that somebody owns something has any bearing, at all, on whether or not you should take it away from them.

Posted by: Brett Bellmore | Feb 1, 2005 6:01:41 PM

Brett, I think you have not taken my point about distinguishing having in one's possession from owning. "It's your money" depends not only on what counts as money but what "your" means. I am not a lwayer, but if I may make a legal analogy: you and I can agree that one of us will supply a quantitlty of crack cocaine to the other for a certain sum of money, shake on it, even draw up a document, but we will not have a _contract_, because there are no contracts contrary to public policy, and distributing crack is so contrary. We would have rather a "nude pact" that is not covered by any protection of law. Just as law defines what you contract, it defines also what you own. I could homestead on the moon, but the Law of Space treaty would preclude me from owning the lunar land I lived on. I can convert my income for a year into currency and stuff my mattress with it, but if I haven't paid my taxes for that year, some of what I'm sleeping on isn't mine. As a liberal, of course I believe in property rights and the rule of law; I just don't believe that the fact that somebody _has_ something like pretax income is the last word on whether they _own_ it. If they do own it, the Fifth Amendment provides they cannot be deprived of their property without due process of law -- but if they have been deprived of it by due process, they don't own it anymore.

Posted by: Dabodius | Feb 1, 2005 6:27:42 PM

No, I understand it; It's liberal SOP for dealing with any right you want to violate, while maintaining the self-image of being intensely devoted to people's liberties: You define them away.

"Sure, I believe in property rights; I just don't think anything I feel like confiscating qualifies as "property"." Whoo, that's really gonna persuade people who aren't already in your corner...

Posted by: Brett Bellmore | Feb 1, 2005 6:39:26 PM

Brett, we just don't think you understand much about the concept of property.

Anyway, what was said. Hayek is just cover, because Rawls is a communist but Thatcher knew her stuff. There's something to it, because Hayek really didn't buy into the pseudo-libertarian desert crap at all.

Posted by: david | Feb 1, 2005 6:42:28 PM

If we are trying to capture each other's positions in wry parodic formulas, Brett, why isn't yours, "Sure, I believe in property eights, and anything I insist on keeping for myself is _my property_!"? (All right, that wasn't as wry as yours.) Take my point about public policy: you may build "your own" atomic bomb, but private property in atomic bombs is contrary to public policy, so it isn't yours after all. You will forfeit "your" bomb without compensation. There is no transcendent or natural fact of the matter about whether you have a right of ownership to something that could be invoked by Ayn Rand chanting "A is A" -- and there would be no institutional fact either except "relative to a system of social arrangements." The system's "real practices" may often count possession as a prima facie reason for ascribing ownership, but law and other conventions still have the last word on what belongs to whom. So it isn't a matter of what someone "feels like confiscating" -- no more than of what someone "feels like keeping or getting" -- but of practices, custom and the rule of law. We aren't natural owners who accidentally find ourselves in a society that regulates its institution of property.

Posted by: Dabodius | Feb 1, 2005 7:17:56 PM

Notes:

1) In the course of one of the discussions of this argument, Hayek notes that he and Rawls agree on the relevant questions. It's possible that he was agreeing with an older version of Rawls' argument than the one he was citing (TJ), and I don't think he understood how much he and Ralws disagreed on some fundamentals-- but on this point there's nothing to distinguish them. Contrary to what Matt seems to think, that doesn't mean that we should just cite Rawls and be done with it-- not only for EA's rhetorical purposes, but also because a) Hayek said it first and b) Hayek developed a more substantial argument-- on this point Rawls' argument derives almost immediately from intuition and collapses almost immediately into the view that it's impossible to deserve anything, ever-- proving too much, and more than Hayek's narrow point about *economic* desert.

2) Hayek did *not* maintain that redistribution as such, or state-sponsored poverty relief or minumum income supports, violated either the requirements of free flow of information in an economy (a la central planning) *or* his strictures against the concept of social justice. Indeed he specifically denied that. The Hayekian critique of planning covers a lot of ground, but it does not coverthe neutral-among-ends payment of income support to the poor.

Posted by: Jacob T. Levy | Feb 1, 2005 7:30:09 PM

The only point Brett Bellmore has managed to make is that we can never set up a system in which we know that the government is taxing every person exactly what they "deserve" to be taxed. That is, justice is imperfect. Big surprise. If he actually proposes (which is unclear) to use this as an argument that the government has no right whatsoever to judge that rich people deserve to pay more tax dollars per year than poor people do -- so that the richest American and the poorest American should both pay exactly the same yearly sum in taxes -- he would be, of course, an idiot. It's exactly like arguing that legal justice is inevitably imperfect and that we should therefore make no attempt to strive towards it whatsoever.

There is no doubt -- despite the fact that we can never do more than roughly estimate "work effort" -- that, even after current taxation and government benefit distribution, rich people in this country make each dollar in their income much more easily than poorer people do. Otherwise, no one would want to be rich. There is therefore no doubt that rich people have higher after-tax, after-benefit incomes because they're luckier in various ways than poorer people, NOT because they're working harder -- and that there is therefore nothing intrinsically immoral about the current level of tranfer of income from the rich to the less rich (unless you propose to redefine elementary human morality itself, in the Ayn Rand tradition). And there is never any danger that we will actually carry income redistribution so far that this ceases to hold, because, long before we reach that point, income redistribution will have reached the point of discouraging useful cleverness among the talented to the point that it harms the total GDP -- at which point the voters will have turned on it (as they regularly do) and installed a government which redistributes less. Christ, do I actually need to explain any of this to an adult?

Posted by: Bruce Moomaw | Feb 1, 2005 8:23:22 PM

The point is that the market as Hayek describes it isn't really about desert at all, and thus can't in itself show who deserves what. What people deserve or not has to be established otherwise.

Liberals do not believe in property rights as an absolute and as a foundation for justice. Agreed.

A second question is Polanyi's: whould people be considered simply as factors in production (property-owners and labor inputs) or do they have value from other points of view.

Since we're talking about Hayek, we should note that his "Road to Serfdom" argument has been refuted by history. Theoretically the high-tax welfare state was going to be just the first step toward dictatorship and bankruptcy, but it didn't happen, and Hayek wrote 60 years ago. For his theory to be true, Sweden would have to be an impoverished, unfree slave society, and it isn't. People who believe that it is are so loony that they should be locked up (Hi, Brett!).

Posted by: John Emerson | Feb 1, 2005 8:35:27 PM

Correction: "Liberals do not believe in property rights as the whole foundation for justice."

Posted by: John Emerson | Feb 1, 2005 8:36:27 PM

"And there is never any danger that we will actually carry income redistribution so far that this ceases to hold, because, long before we reach that point, income redistribution will have reached the point of discouraging useful cleverness among the talented to the point that it harms the total GDP -- at which point the voters will have turned on it (as they regularly do) and installed a government which redistributes less."

Now, THAT is amazingly naive. Sit a hundred people in a circle. Pick each one's pocket of one penny, and hand fifty cents openly to one of them. Repeat 51 times. Congradulations, your own pockets are bulging, AND you've just been reelected! That's how the government really works. Diffuse costs, made as obscure as possible, and blatent, concentrated benefits. So that your clients know exactly who to credit their good fortune to, and your victims can't quite figure out why it's so hard to make ends meet. Even though they're the same people!

Now, if we were all omniscient, objective calculating machines, you might be right.

Posted by: Brett Bellmore | Feb 1, 2005 8:49:46 PM

In the realm of high economic theory -- Kenneth Arrow and all that -- perfect incentives are achieved with perfect insurance. If an economic actor makes a bet, he always wins exactly the expected value. Perfect incentives would obtain when the actor decides whether to bet, as if the outcome would return the expected value.

The market for insurance fails for a well-known reason (adverse selection and moral hazard, which, yes, together constitute a single reason, being essentially the same thing), and in a variety of important circumstances, government, with its power to compel participation in insurance, is able to, at least partly, cure that market failure. That's just orthodox, positive economics.


Conservative "economics" tosses aside this fundamental insight of economics -- that good insurance > IMPROVES < incentives and decision-making. To the extent that they do this, they abandon sound economics for bad ideology.

Posted by: Bruce Wilder | Feb 1, 2005 10:16:25 PM

There is a confusion which runs right through this whole discussion. Justice is not the same thing as desert. I don't deserve to be cheated on by my girlfriend, assuming I love her, treat her well, am faithful and so on. It would be stretching well beyond the normal boundaries of what we think of as justice to say that I am treated unjustly by her cheating on me. Justice implies some kind of right, and compensation if that right is violated. I do not have a right to compensation from my girlfriend if she cheats on me, yet I quite clearly don't deserve to be cheated on (the assumptions above holding). Matt's right, to some extent, about what needs to be true to make desert claims: desert is relative to social practices, so in the case of economic desert, we need an economic system to assess it. Hayek's point, as presented by Anderson, is that desert claims are backward-looking - I don't deserve to be cheated on by my girlfriend because I haven't done anything bad to her in the past - while benefits and costs distributed by the market are not - the market is a system rthe primary function of which is to distribute information - which has nothing to do with the desert-based claims of those in it.

The difference between libertarians and liberals is that libertarians believe in absolute property rights, and liberals in non-absolute property rights. This is not the same thing as libertarians believe in property rights, and liberals don't: take note, Brett, because I haven't seen any liberals running around saying things like 'all property is theft', which is what they would need to be saying not to believe in property rights. Unless you can justify the idea that we have absolute property rights - by pointing to the moral values it would respect and promote - asserting that we do is not an argument. Justice as process is an ambiguous idea as well: criminal trials are processes, and their justice is defined by following the process appropriately, but those processes aim at an end state, the conviction of the guilty and vindication of the innocent. Thus, pointing to the fact of process being important to libertarians and using that to bash liberals because they care about end-states too is not a good idea, unless you can show that there is a particular kind of process which only cares about the process, and not the outcome, which is particularly relevant to justice.

Finally, what Matt interprets as a Rawlsian attack on the market isn't about luck and markets, it's about the inadmissibility of any desert claims to thinking about justice. Rawls's claim is we don't deserve anything, because desert must be based on moral arbitrary factors like genetics and upbringing, and that this would apply to any social system. Thus we need to build up justice from other considerations, like fairness. That's why the theory's called 'justice as fairness'.

Posted by: Rob | Feb 2, 2005 5:47:48 AM

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