Saturday, January 29, 2005
Hoist on their own.... well, you know
A fascinating argument on whether people deserve their pre-tax incomes is making the rounds. (The answer, of course, is "no", but the argument seems novel.)
In essence, Elizabeth Anderson is pointing out that if you believe prices aggregate information about present demand, they cannot simultaneously reward responsible past behavior, unless present demand was known with certainty when people made the decisions that ultimately determined their wages. If, as Hayek argued, the prices in a capitalist system are the unique source of this information; ie, future demand is uncertain at the time people are making the investments that lead to their income (in combination with relative prices), then incomes do not reflect desert only, but also chance. The component of incomes reflecting chance is not deserved, and can be taxed and redistributed justly.
If, to get out of this argument, one claims that people can know with arbitrary certainty future prices, then the information exists to create a socialist planned economy as efficient as a free market.* But of course, people don't know future prices. And therefore future prices, and the incomes that depend on them, are not precise measures of just desert.
I'm curious how Hayekians and other conservatives would respond. I imagine many would make efficiency arguments against redistribution, while implicitly conceding capitalism is unjust; in essence saying that the degree of redistribution describes an efficient-incentives/justice-in-income frontier, and arguing for a corner solution at the free market.
Others may try to salvage a Nozick rebuttal to Anderson's essentially Rawlsian twist on Hayek, but I'm likely to find that unpersuasive.
Some may employ a public choice argument against redistribution, by defending the market as the most just available system, even if they are not terribly just (e.g., intervention on balance lowers justice, as the politically powerful collect rents/divert redistribution to the undeserving).
What other responses am I missing?
*I hasten to note that such a system may not be in any political economic equilibrium, even if this information is available. Why should any planners do the efficient thing, when they can exploit their institutional power to collect rents?
In essence, Elizabeth Anderson is pointing out that if you believe prices aggregate information about present demand, they cannot simultaneously reward responsible past behavior, unless present demand was known with certainty when people made the decisions that ultimately determined their wages. If, as Hayek argued, the prices in a capitalist system are the unique source of this information; ie, future demand is uncertain at the time people are making the investments that lead to their income (in combination with relative prices), then incomes do not reflect desert only, but also chance. The component of incomes reflecting chance is not deserved, and can be taxed and redistributed justly.
If, to get out of this argument, one claims that people can know with arbitrary certainty future prices, then the information exists to create a socialist planned economy as efficient as a free market.* But of course, people don't know future prices. And therefore future prices, and the incomes that depend on them, are not precise measures of just desert.
I'm curious how Hayekians and other conservatives would respond. I imagine many would make efficiency arguments against redistribution, while implicitly conceding capitalism is unjust; in essence saying that the degree of redistribution describes an efficient-incentives/justice-in-income frontier, and arguing for a corner solution at the free market.
Others may try to salvage a Nozick rebuttal to Anderson's essentially Rawlsian twist on Hayek, but I'm likely to find that unpersuasive.
Some may employ a public choice argument against redistribution, by defending the market as the most just available system, even if they are not terribly just (e.g., intervention on balance lowers justice, as the politically powerful collect rents/divert redistribution to the undeserving).
What other responses am I missing?
*I hasten to note that such a system may not be in any political economic equilibrium, even if this information is available. Why should any planners do the efficient thing, when they can exploit their institutional power to collect rents?
