Freedom and Economic Order

by Linda C Raeder

  Social Justice and Freedom

  A politics of redistribution has significant implications for the exercise and preservation of individual freedom. Such implications may be brought to light by exploring the consequences of the politically mandated “wage and price controls” enacted in our hypothetical case involving the professor and basketball. A price control is a legislative or regulatory act that legally establishes the price at which an item must be bought or sold in the market. (A wage is of course a price—the price of labor.) A price control may exist in one of two forms, a so-called “price ceiling” or “price floor.” Price ceilings and price floors legally prohibit prices from rising above or below some politically determined level, respectively. Price controls may be enacted for various reasons, including pursuit of social justice. Some persons, for instance, may regard the relatively low salary earned by a cashier at Walmart as unfair or unjust. They may demand, in the name of social justice, that such low-income workers be guaranteed a so-called “living wage”—a wage rate sufficient to support the worker’s existence. If politicians heed their demand, a price floor may be established by law, more particularly, enactment of so-called “minimum-wage” legislation that prohibits employers from paying any worker less than the legislatively mandated wage. Our example concerning basketball and scholarship entails the imposition of the second form of price control, price ceilings: employers are legally prohibited from paying any basketball player more than the legislatively mandated salary, and consumers are legally prohibited from paying more for a game ticket than the legislatively mandated price.

  All price controls, ceilings or floors, not only impair the functioning of the market process but curtail the exercise of individual freedom. The first violation of freedom in our hypothetical case involves the basketball players, in particular, their so-called freedom of contract. Freedom of contract refers to the ability of individuals to voluntarily negotiate the price at which they are willing to buy or sell a good or service, in this case basketball skills and tickets to basketball games. The legislative cap on basketball salaries restricts such freedom by forcing players to accept less for their skills than they might receive in a voluntary market transaction. The freedom of the organizers of basketball games—their ability to voluntarily purchase such skills at a price they consider worthwhile—is similarly violated; they are prohibited by law from paying more than the legislated price. The cap on basketball salaries is a price control that infringes the freedom of both parties to an employment contract.

  The consumers of basketball also experience a loss of freedom as a consequence of the price ceiling imposed on basketball tickets. No consumer is permitted to pay more for a ticket than the politically mandated price. Such a restriction on price levels may seem advantageous to consumers, preventing ticket prices from rising to exorbitant levels. Such seeming advantage, however, is bought at a high price, the price of freedom. To see this, imagine that a celebrated basketball player comes to town and fans are eager to watch him perform. In a free market, the limited number of available seats (supply) means that the price of available tickets will rise in proportion to consumer demand. The limited supply of tickets will be allocated by the consumers themselves, that is, according to the subjective value each of them imputes to the basketball game. Those who value a ticket more highly will be willing to offer a higher price and will thus receive a ticket; those who place less value on a ticket will not be willing to pay a higher price and withdraw themselves from the market. Supply will equal demand; everyone who wants a ticket and is willing to pay the market price will receive one. In our example, however, the mandated price control legally prohibits ticket prices from rising in accord with consumer demand; the market is not permitted to function. The result is a politically created “shortage” of tickets. Because they must by law be sold at a fixed (below market) price, the tickets quickly sell out; many fans, some of whom may strongly desire to attend the game, will be disappointed. The existing ticket supply is distributed not to those fans who value them most highly but rather those with the good fortune to be first in line (“first come, first served”). The two groups may, but need not, coincide.

  We have seen that the subjective value imputed to a good by a potential buyer is indicated by the price the buyer is willing to pay. In the case under discussion, fans who are willing to pay more to see the celebrated player are forbidden by law to do so, which means that their freedom, their ability voluntarily to act in pursuit of their own values and purposes, is violated. The politically mandated price control narrows the choices available to passionate fans to two undesirables: either buy the ticket at the mandated price or not buy a ticket. Neither option would voluntarily be pursued by fans who intensely desire to see the game. For one thing, their ability to buy the ticket at the controlled price is far from certain; supply is limited and many other fans will have the same objective. The passionate fan is left with no choice but either to stand at the head of the ticket line or do without. The achievement of such a favored position, however, may be difficult or impossible; at the very least, it will be inordinately time-consuming. The die-hard fan does not want to be so inconvenienced nor does he want to do without a ticket. He wants to obtain a ticket quickly and with certainty; in a free market he could achieve that aim by offering more for it than other potential buyers. Such an option, however, is foreclosed by the mandated price controls. The fan is unable to exercise his voluntary choice in pursuit of his personal goals, that is, he is unable to exercise his right to liberty.

  Wage and price controls not only violate the freedom of market participants to buy and sell in accord with their personal values but, as noted, seriously impair the operation of a market economy. First, such controls prohibit the transmission of knowledge to producers regarding actual consumer demand, in this case the demand of basketball fans to players and organizers. The price of a ticket, which in a free market would reflect the true level of demand, is prohibited by law from rising above the mandated price. Thus neither basketball players nor organizers of basketball games have any way of knowing the actual demand for their services. They cannot perform their function—meeting such demand with appropriate supply—with precision because the absence of a freely formed market price prevents them from acquiring the knowledge or information necessary to do so. Second, price controls reduce the incentives required to bring adequate supply to the market. The value that consumers in a market economy place on basketball skills will be reflected in the price they are willing to pay to witness such skills. Ceteris paribus, the higher such subjective value, the higher the ticket price of basketball games; the higher the ticket price, the higher the salary of the basketball players and organizers; the higher the salary, the more incentive individuals have to develop basketball skills and organize basketball games. In a market economy, the supply of basketball players and organizers will thus tend to match demand for their skills. Wage and price controls, however, prevent the price system from fulfilling its essential function—transmitting knowledge of demand and supply spontaneously throughout society. If the salaries of basketball players and the price of basketball tickets are kept by law below the market price, the supply of basketball players and games will eventually decrease; the lower profitability of such enterprises means that fewer individuals will be drawn into their production.

  Advocates of social justice, such as the professor who believes that American consumers place too great a value on basketball, may regard the contraction of the basketball industry as a moral advance. Consumers and producers of basketball may have a very different opinion. Who is right? Who is entitled or competent to decide whether basketball is a worthy activity—the political advocates of social justice who would impose price controls and thus violate the freedom of players, organizers, and consumers of basketball or those members of the general public who enjoy and value basketball? Whose values are to be honored? This is the central question raised by every proposal for social justice.

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sp; Social Justice versus Justice

  The violation of liberty is not the only moral problem that arises from pursuit of social or distributive justice. Such a pursuit raises the further and equally serious problem of the violation of justice as traditionally conceived in Anglo-American society. We have seen that government in a free society possesses few resources of its own; thus redistribution of wealth can only be achieved by transferring the resources of one person or group to another person or group. The morality or justice of redistribution, then, stands or falls on the morality of such action. The issue is again most readily explored by consideration of a concrete example. We begin by assuming the existence of majority political support for a government program to help the “homeless.” The majority of voters regard themselves as altruists who want to help such unfortunate members of society. Legislators respond by proposing a new entitlement program, perhaps proclaiming a positive “right to affordable housing.” The funds to implement the program are to be obtained by raising taxes on individuals whose income is greater than, say, $500,000, a group that is certainly a minority of all taxpayers. Further assume that congressional representatives of this minority group vote against the proposed spending for the homeless, knowing that their constituents will bear the burden of its cost. Assume that the majority, who earn less than $500,000 and will pay no additional taxes, nevertheless carries the day; the program and tax policy become “law.” The moral issue is whether such well-intentioned policy can be squared with justice and morality. The issue, once again, is whether the ends justify the means.

  Proponents of social justice have no difficulty in this regard; they consider such redistribution of wealth the very essence of morality and justice. Such a conclusion rests on several assumptions, implicit and explicit, widely shared by such proponents. They tend to believe, as mentioned, that the existing distribution of wealth and income in society is somehow unjust (recall Marx’s condemnation of the inherent injustice of capitalist distribution). They further tend to believe that wealthier members of society bear special moral obligations to less fortunate members of society. Public policy, they argue, should be concerned with the good of the whole, which includes the homeless. The “wealthy,” who not only can afford increased taxes but also owe a debt to society, should be required to contribute to the common good. The “rich” earned their wealth by means of the established economic system, capitalism, and thus are morally obliged to “give back” to the society that enabled accumulation of their riches. No man is an island. The wealthy capitalists did not “get rich on their own” but were assisted and supported by the wider institutional structure of American society.[108] Thus it is only right that they be made to share their gains, to “share the wealth.”

  Such views are largely of Marxist inspiration, however little contemporary advocates of social justice may recognize that fact. They presuppose the Marxian notion that capitalists (the “wealthy”) have won their profit at the expense of the workers or the poor. The “rich” thus bear a moral duty to restore some of their unjust gains to their rightful owners, the workers whom they have putatively exploited. Such assumptions are rarely explicitly acknowledged but held as more or less self-evident truth by many of Marx’s descendants and fellow travelers. Whether recognized or not, however, they implicitly inform the argument that wealthier members of society bear a unique moral obligation to assist the less fortunate.

  Indeed, proponents of social justice not only imply that the “rich” should fulfill a legislated duty to pay higher taxes without complaint but also in a spirit of love and generosity; they should not only help their fellows in need but want to do so. Those who begrudge such assistance are, quite simply, bad people. Such an assumption, which ignores the crucial moral distinction between coerced legal obligation and voluntary charity, is wedded to the altruistic social morality embraced by socialists and quasi-socialists of all stripes: all good people are altruists and not selfish egoists. To balk at the obligation of helping the homeless by legislative mandate is to display an inferior morality of selfishness and greed, long associated with capitalism by the collectivist Left. The incompatibility of such views with traditional American political morality is clear from the following remark of Thomas Jefferson: “To take from one, because it is thought his own industry and that of his fathers has acquired too much, in order to spare to others, who, or whose fathers, have not exercised equal industry and skill, is to violate arbitrarily the first principle of association, the guarantee to everyone the free exercise of his industry and the fruits acquired by it.”[109]

  From the socialist perspective, the perspective of social morality, on the contrary, redistribution of wealth in service of the homeless and similarly disadvantaged groups is perfectly moral, indeed, a requirement of justice itself—social or distributive justice. The successful propagation of socialistic views over the course of the past century means that many individuals in contemporary society, even those who regard themselves as apolitical, will agree with such a perspective. The homeless themselves will tend to agree that justice is on their side. Proponents of social justice have repeatedly and emphatically demanded legislative enactment of various positive rights or material entitlements over the past century, including the putative “right” to affordable housing. The homeless and beneficiaries of other government entitlements can hardly be blamed for believing they are due such benefits by right. Political leaders, university professors, media pundits, public school teachers, and others have campaigned for decades to convince the American people of their moral entitlement to certain material support by government; to deny them that to which they are morally entitled would be unjust. Moreover, the altruistic majority, who voted for the program but do not themselves bear its cost, will also tend to regard the entitlement program and taxation of the “wealthy” as just. Indeed they can congratulate themselves on their fine moral sensibilities, their acute “social conscience” and concern for the dispossessed, all of which are proven by their electoral support for a program to help the homeless.

  It should be noted that every group supporting social or distributive justice—the activists, politicians, homeless and altruists—assumes the perspective of moral consequentialism. All of them regard justice as determined by the consequences or outcome of action, in this case, better housing for the homeless and more even distribution of wealth. The noble end of better housing for the least among us is believed to justify the means—the extraction of resources from the “wealthy” by means of coercive taxation. Every variant of social or distributive justice is a species of ethical consequentialism.

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  The inherent conflict between modern social justice and traditional Anglo-American justice is most clearly perceived by examining the same hypothetical case from the perspective of traditional justice. Traditional justice, as we recall, is a form of deontological, “in-itself,” or procedural morality. Justice is determined not by the consequences of an act but rather the intrinsic quality of an act itself. Traditional justice is concerned not with the outcome or ends of human action but rather the means employed in pursuit of human goals. In the American context, traditional justice is informed by certain profound and “self-evident” moral convictions: first, individuals possess unalienable (negative) rights to life, liberty, and property, derived from a “Creator” superior to man; second, all individuals should be governed by identical rules (equality under law); and, third, the longstanding conviction, restated by Jefferson in the Declaration of Independence, that just or legitimate government is founded on “consent of the governed.” Redistribution of wealth in the name of social justice (or for any other reason) violates every one of these traditional American moral convictions. On the traditional standard of justice, the taxation of individuals with relatively higher income and the transfer of that income to a third party (the homeless) by means of the political process can only be regarded as unjust, a violation of morality in general and individual rights in particular. However desirable
the end (housing for the homeless), traditional justice denies that it can ever justify the means of political redistribution.

  We have discussed the nature of individual rights as embodied in American founding documents and ideals. Traditional American rights are largely negative rights that prohibit both private citizens and public officials from engaging in certain actions toward the individual right-bearer. As we have seen, for instance, the individual’s right to property morally and legally prohibits all other persons, including persons organized as government, to take the individual’s property without his consent. To do otherwise is theft, universally regarded as morally wrong and also prohibited by law. In the American understanding, such rights are equally the possession of every individual and each individual is to be treated in accordance with the same rules.

  We now apply these criteria of traditional justice to the case under discussion: political redistribution in favor of the homeless. The redistribution of resources from the “wealthy” to the “homeless” involves taking the property of the former group and transferring it to the second. One group is taxed and the other is not; one receives benefits and the other does not. It is clear that the individuals who constitute the respective groups are governed by different rules. Wealthier individuals are treated differently than individuals who find themselves homeless; the former are penalized and the latter rewarded. Such tax and legislative policy clearly violates the traditional principle of equality under law.