Joseph Raz against Friedrich Hayek on the rule of law

 This is the first of three articles on the criticism that Joseph Raz directed against Hayek’s defense of the rule of law. 
It is strange to see an economist (Hayek) stressing the value of the rule of law, and a law professor (Raz) contradicting him. I think that Raz made three mistakes, and they will be the subjects of the three articles. I will sum up their content:

1st. article:  Raz fails to understand Hayek’s main points.

2d. article: Raz strips from the notion of the rule of law  most of the content that belongs to it according to history and to common understanding; and he adds things that do not belong to it.

3d. article: Raz tries to show that the rule of law might be of no value in authoritarian non-Western nations. That doesn’t prove that the rule of law has little value for free Western nations (which are included in Raz’s low estimation of the rule of law). But in fact, Raz’s argument is also wrong concerning non-Western nations.
I have added another article, where I try to explain what I think is the main misunderstanding about Hayek's concept of the rule of law

An economist revives the interest in the rule of law

     A person not acquainted with the ideological map of the XXth century would find it surprising that it was Friedrich Hayek, an economist, who first revived the interest in the notion of the rule of law. He dedicated chapter V of his book The Road to Serfdom (link to a condensed version) to the analysis of the relations between planning and the rule of law. Hayek’s concern about that issue appears again in his other books.

     The notion of the rule of law had been neglected during most part of the XXth century –not without horrible consequences. Hayek rediscovered it and tried to put it back on the ideological map. That was odd enough and tells a lot about that map.
     But it was more surprising still, and more revealing, that it was a prominent law scholar at Oxford, Joseph Raz, who criticized Hayek’s efforts, and also –with just a few derogatory remarks– the great British thinkers that had taught the notion of the rule of law to generations of lawyers and politicians.

Hayek's ideas

     Hayek showed that there is a conflict between planning and the rule of law. He explained why it was possible to reach an agreement about rules, but not about planning at a national scale. When planning is confined to a single industry there may be agreement among capitalists and workers that it would be a fine thing to impose a ban on foreign products. But when the choices are whether to increase the salaries of nurses or of agricultural workers, have better schools or more generators in power plants, “nothing short of a complete system of values in which every want of every person or group has a definite place is necessary to provide an answer” (p. 86). The Soviets and the Nazis tried to impose that system of values.

     Hayek traced the ideas of national-socialism back to the time when they still had not been united by a hyphen. He reviewed the intellectual atmosphere that prevailed before Hitler gained supreme power over Germany. In The Road to Serfdom he showed how socialist thinkers had removed the obstacles for Hitler by sneering at the notion of the rule of law. He provided names and dates. In particular, he analyzed the ideas of Werner Sombart, a Marxist economist that became one of intellectual props of the Nazis. In the Germany of the 30s, the fight between communists and national-socialists was the inevitable and savage struggle for power between different collectivistic parties. However, both had a common enemy, says Hayek, in the bourgeois morality and its respect for limits and principles. Both Communists and Nazis derided laissez-faire as anachronistic

     Certainly Nazism wasn’t a return to the rule of law and free markets. For its millions of supporters, it was an improvement on socialism. It was still planning backed with the full force of the State, but better. Four year plans instead of the Stalinist five year plan. One of the improvements of the Nazis was the result of a lesson they learned from the experiments of the Soviets. Lenin himself had taken notice of the havoc created by the complete collectivization of all enterprises. That is why he provided some room for private ownership in his NEP (New Economic Policy). Lenin vaguely understood that you don’t have to own the shop in order to run it. It is enough (and better) if you just give orders to the owners (the miserable people they still called “owners”). One of the many advantages of that scheme is that when your orders lead to chaos and poverty, you can blame the owners.

     The Nazis extended Lenin’s NEP. They retained nominal owners for industries and shops, but all became executors of the State’s plans. Those capitalists who still clang to the notion that they directed their own enterprises found themselves in jail. For instance, Hugo Junkers, the inventor and entrepreneur that introduced new materials and techniques for the production of aircraft, was forced to give his patent rights to the government, his company was expropriated, and he was arrested. You are the owner, yes, but you must follow the orders, or you will quickly find that ownership has lost all substance. You are there to satisfy the bosses –and to take the blame for their mistakes.

     The Road to Serfdom includes a chapter entitled “Why the worst get on top” that shows how government enforced planning gives authority to people fond of exercising discretionary powers. Hayek shows why they must be discretionary and not subject to permanent rules. The chapter would sound very familiar to anyone who has worked under officials, judges, or bureaucrats who don’t recognize moral limits to their powers –only the power of those above them.

     One of the key distinctions we learn from Hayek is that between rules and orders (or in other words: between laws and commands). He says that rules are like traffic signs that show possible routes, forbid some turns, but don’t tell anyone where to go. In contrast, orders tell you where you have to go today, and tomorrow a new order may tell you to go to some order place. Orders are ad-hoc, they are dictated and replaced “on the merits”, that is: according to the evaluation that some leader or some board makes of individual circumstances.

     Hayek showed that orders were the basis of the command economy of the Soviets and Nazis, and to some extent of the interventionist policies of many Western governments. Still today, many people do not recognize any regulation other than that based on commands. For them, an economy based on general and permanent rules simply lacks order.

     The Road to Serfdom was first published in 1944. It was reprinted many times, and Hayek added new prefaces in 1956 and 1976.

A law professor says Hayek overvalued the rule of law

     In 1977, Joseph Raz, a professor at Oxford specialized in the philosophy of law, wrote and article in which he tried to show that the renewal of interest in the concept of the rule of law was largely unjustified and based on a fallacy. His article was later included in one of Joseph Raz’s books (The Authority of Law. Essays on Law and Morality, published in 1979 and reprinted in 2002. When I cite pages in Raz’s article, I refer to this book).
     Raz’s article was entitled The Rule of Law and its Virtue. The title was somewhat misleading and could have better sum up Raz’s main conclusion by saying: “The Rule of Law and its little Virtue”.

     Raz’s didn’t dispute Hayek’s conceptual and historical account of the notion of the rule of law. On the contrary, he started his article saying that “F.A. Hayek has provided one of the clearest and most powerful formulations of the rule of law” (p. 210). Raz’s line of attack was different: he asserted that there was not much value in the rule of law, and he finished his article saying that “Sacrificing too many social goals on the altar of the rule of law may make the law barren and empty” (p. 229). From the beginning of his article he said that Hayek’s conclusion was a fallacy. That fallacy was in Raz’s opinion “the assumption of its [the rule of law] overriding importance”. He announced that his purpose was to show that Hayek’s conclusions about the value of the rule of law were mistaken (p. 210).

Raz failed to understand Hayek’s book

     Certainly, Hayek never said that adherence to the rule of law overrides in importance any other value. Rather, he said that the attempts of planners (be they do-gooders, tyrants, or a combination of the two) that neglected the rule of law led to poverty and serfdom. Hayek never said that respect for the rule of law was more important than values like freedom and progress. Rather, he said that they come together, and in fact came together in history. The first chapter of The Road to Serfdom is entitled The abandoned road. Respect for the rule of law was a road. A road leading where? To the spectacular advances that Western nations achieved in the XIX century, and to those still in the future. So it is highly misleading to say that Hayek thought that the rule of law overrides any other value. It was the road to them. He never suggested that liberty and progress should be sacrificed on the altar of the rule of law. By abandoning it, one followed The Road to Serfdom. That was plainly clear in the book.

Hayek shows why planners cannot tie themselves to general and permanent rules

     Let’s see how Hayek described the conflict between the rule of law and planning (I will have to cite Hayek at some length in order to show later that Raz misunderstands him): “The planning authority cannot confine itself to providing opportunities for unknown people to make whatever use of them they like. It cannot tie itself down in advance to general and formal rules which prevent arbitrariness. It must provide for the actual needs of people as they arise and then choose deliberately between them. It must constantly decide questions which cannot be answered by formal principles only, and, in making these decisions, it must set up distinctions of merit between the needs of different people as they arise and then choose deliberately between them. It must constantly decide questions which cannot be answered by formal principles only, and, in making these decisions, it must set up distinctions of merit between the needs of different people. When the government has to decide how many pigs are to be raised or how many busses are to be run, which coal mines are to operate, or at what prices shoes are to be sold, these decisions cannot be deduced from formal principles or settled for long periods in advance. They depend inevitably on the circumstances of the moment, and, in making such decisions, it will always be necessary to balance one against the other the interests of various persons and groups. In the end somebody’s views will have to decide whose interests are more important and these views must become part of the law of the land, a new distinction of rank which the coercive apparatus of government imposes upon the people” (page 82, Fiftieth Anniversary Edition).

     The difference between enacting permanent formal rules and taking decisions “on the merits” of ever changing situations can be compared to that “between providing signposts and commanding people which road to take”. Formal rules such as those that describe the requisites of contracts or the consequences of failing to fulfill one’s promises “refer to typical situations into which anyone may agree and in which the existence of such rules will be useful to a great variety of individual purposes. The knowledge that in such situations the state will act in a definite way, or require people to behave in a certain manner, is provided as a means for people to use in making their own plans. Formal rules are thus merely instrumental in the sense that they are expected to be useful to yet unknown people, for purposes for which these people will decide to use them, and in circumstances which cannot be foreseen in detail. In fact, that we do not know their concrete effect, that we do not know what particular ends these rules will further, or which particular people they will assist, that they are merely given the form most likely on the whole to benefit all the people affected by them, is the most important criterion of formal rules in the sense in which we here use this term. They do not involve a choice between particular ends or particular people, because we just cannot know beforehand by whom and in what way they will be used.” (p. 83, I have added emphasis in bold letters for reasons that will be clear later).

     Hayek continues: “In our age, with its passion for conscious control of everything, it may appear paradoxical to claim as a virtue that under one system we shall know less about the particular effect of the measure the state takes…Yet this consideration is in fact the rationale of the great liberal principle of the Rule of Law”. That Raz failed to understand the paradox will be clear later.

     Hayek provides two arguments for the superiority of formal rules. One is economic: “the state should confine itself to establishing rules applying to general types of situations and should allow the individuals freedom In everything which depends on the circumstances of time and place, because only the individuals concerned in each instance can fully know these circumstances and adapt their actions to them. If the individuals are to be able to use their knowledge effectively in making plans, they must be able to predict actions of the state which may affect these plans. But if the actions of the state are to be predictable, they must be determined by rules fixed independently of the concrete circumstances which can be neither foreseen nor taken into account beforehand” (p. 84). That explains why government enforced planning is less productive than free enterprise.

     Hayek presents also a moral and political argument in favor of formal rules. “If the state can exactly foresee the incidence of its actions, it means that it can leave those affected no choice…General rules, genuine laws as distinguished from specific orders, must therefore be intended to operate in circumstances which cannot be foreseen in detail, and, therefore, their effect on particular ends or particular people cannot be known beforehand. It is in this sense alone that it is at all possible for the legislator to be impartial. To be impartial means to have no answer to certain questions –to the kind of questions which, if we have to decide them, we decide by tossing a coin” (pages 84-85). Who is to benefit more from a contract over futures? What industry can make better use of iron? Formal rules have no answers for these questions. And that is both efficient and impartial.

     But in planning the government “must, of necessity, take sides, impose its valuations upon people and, instead of assisting them in the advancement of their own ends, choose the ends for them…the state ceases to be a piece of utilitarian machinery intended to help individuals in the fullest development of their individual personality and becomes a ‘moral’ institution –where ‘moral’ is not used in contrast to immoral but describes an institution which imposes on its members its views on all moral questions whether these views be moral o highly immoral. In this sense the Nazi or any other collectivist state is ‘moral’, while the liberal state is not” (p. 85, emphasis added for reasons that will be clear later).

     Again on the moral argument for formal rules, Hayek says “equality before the law is in conflict, and in fact incompatible, with any activity of the government deliberately aiming at material or substantive equality of different people, and that any policy aiming directly at a substantive ideal of distributive justice must lead to the destruction of the Rule of Law. To produce the same result for different people, it is necessary to treat them differently. To give the same objective opportunities in not to give them the same subjective chance”. That is the different between equality under the law and equality of outcome.

     Hayek admits that “It cannot be denied that the Rule of Law produces economic inequality –all that can be claimed is that this inequality is not designed to affect particular people in a particular way. It is very significant and characteristic that socialists (and Nazis) have always protested against ‘merely’ formal justice, that they have always objected to a law which had no views on how well off particular people ought to be, and that they have always demanded ‘a socialization of the law’”. He says that the legal theorist of National Socialism, Carl Schmitt, was not altogether false when he opposed the liberal Rechstaat (i.e. the Rule of Law) and the ideal of the gerechte Staat (i.e. the just State). Where I live, Argentina, you can fill many libraries with books and articles that still today repeat Carl Schmidt’s words.

Raz's objetion: the same made by Socialists and Nazis

     We must assume that Raz read The Road to Serfdom. But then it is clear that he failed to understand what he read. Let’s see what Raz says against Hayek’s arguments. Raz writes that the rule of law “is not a moral virtue has such” (p. 226). It has only a negative value, it prevents arbitrariness, but adds no positive good. Raz admits that conformity to the rule of law is essential for securing whatever purposes the law is designed to achieve but it “also enables the law to serve bad purposes” (p. 225). It has only the virtue of an instrument; Raz compares it with a sharp knife, which can serve good or bad purposes. What counts are social goals, and they may justify departures from the rule of law. Raz concludes his article saying that we must not “make the law barren and empty” (p. 229).

     Raz repeats the objections of the socialists and Nazis, to which Hayek had already answered, with the difference that Raz uses the language of analytical philosophy instead of Socialist or Nazi rhetoric. He does not even mention Hayek's argument about the impossibility of agreement about plans, says nothing about the conflict with democracy, no reference to Hayek's historical analysis, no comment about Hayek's account of the erosion of the rule of law by socialist thinkers, no observation about Marx, Sombart, Schmidt, Laski,...nobody. Raz approaches the problem as if it had no history and no characters. He just repeats the objection to the rule of law made by socialists and Nazis and thinks that he has found a decisive argument.

     The socialists complained that bourgeois law had only formal value; Raz says that it has only a negative value. Carl Schmitt praised the advantages of the just State over the Rule of Law; Raz tell us not to sacrifice social goals on the altar of the rule of law. The Nazis fought to make the law a tool that would serve the material and moral needs of the Fatherland; Raz says that there is no moral value in the instrument as such, only in the goals it serves.

An instrument to whom?

     Raz misunderstands Hayek in yet another point. Hayek explains that formal rules that recognize general principles in advance can be used for people to make their plans –their own plans. In contrast, when Raz mentions goals and purposes he mostly refers to those of the lawmakers and judges.

     Raz does not deny that stable laws “provide a safe basis for individual planning” (p. 220). But then he seems to forget it and writes that “it is of particular importance to remember (?) that the rule of law is essentially a negative value. It is designed to minimize the harm to freedom and dignity which the law may cause in its pursuit of its goals however laudable these may be” (p. 228, emphasis added). Here we see that he assumes that the goals that the law serves are its goals. Hayek writes about the goals of the man who signs a contract to buy a shop with the idea of starting a company; Raz writes about the State’s goal.

     Again he writes that “The rule of law is essentially a negative value. The law inevitably creates a danger of arbitrary power –the rule of law is designed to minimize the danger created by the law itself…Thus the rule of law is a negative virtue in two senses: conformity to it does not cause good except through avoiding evil and the evil which is avoided is evil which could only have been caused by the law itself” (p. 224). According to that, the only purpose of the rule of law is to prevent the bad deeds of public officials in applying the law. But if there were no laws and officials, there would be no room for arbitrariness.

     Raz assumes that no good is ever done by the rule of law (no small company started with the security provided by a contract), only the prevention of harm from public officials. That a new company has started its life does not count as a good that law made possible, easier, or safer because it was an individual’s decision (not the law imposing its puposes on him) and that does not count.

     Raz confirms his notion about whose purposes laws serve when he writes: “We could divide the purposes a law is intended to serve into two kinds: those which are secured by conformity with the law in itself and those further consequences of conformity with the law or of knowledge of its existence which the law is intended to secure. Thus a law prohibiting racial discrimination in government employment has as its direct purpose the establishment of racial equality in the hiring, promotion, and conditions of service of government employees (since discriminatory action is a breach of law). Its indirect purposes may well be to improve race relations in the country in general, prevent a threat of a strike by some trade unions, or halt the decline in popularity of the government. Conformity to the rule of law does not always facilitate realization of the indirect purposes of the law, but it is essential to the realizations of its direct purposes…Therefore, if the direct purposes of the law are not to be frustrated it must be capable of guiding human behaviour, and the more it conforms to the principles of the rule of law the better it can do so” (p. 225). The law has direct and indirect purposes and it must guide people’s behavior so as to reach them. It is plain that Raz is not talking about people’s goals and plans.

No positive value?

     Raz’s focus on the purposes of the State prevents him from realizing that formal rules allow individuals to be truly moral. Whenever he sees no values imposed on people by the coercive apparatus of the State, he concludes that no value is served. Repeating the objections of the Socialists and Nazis, he fails to see that only true laws, those that have no other purpose than to serve the lawful purposes of individuals, allow individuals to be moral. 

     Should I work more in order to earn more? Or should I parade my misery and that of my children? Should I acquire those skills that people consider useful? Or should I ask the government to force others to pay me for what they don’t want? Should I be concerned about the education of my children? Or should I leave their education to community organizers and teenage gangs? All these are practical questions and also moral questions.

     The Nazis boasted that they had introduced morality into barren and empty laws. Point 19 in the Party’s program demanded “substitution of a German common law in place of the Roman law serving a materialistic world-order”. In fact, Weimar laws had already “advanced” a great deal in that direction. As Hayek acknowledges, in a way that boasting of the Socialists and Nazis was not without basis. A law that says that contracts should be interpreted so as to promote the interests of the nation, or of the working-class, has a moral purpose that a XIXth century code typically lacks. But it is that formal character of the rules that allows individuals to assume responsibility for their own lives. That is the paradox that collectivists of left and right failed to understand.

     Many years later, and in spite of the advantage of having Hayek’s books at his disposal, Joseph Raz repeated the mistake.

Who needs a replacement for Marxism?

This is the last article on the theories defended by Murphy and Nagel in the book The Myth of Ownership

At the end of The Myth of Ownership, Murphy and Nagel put their own ideas in historical context: “In the aftermath of the century during which the Marxist conception of equality played itself out, at enormous cost, the question is whether a different kind of egalitarian social ideal, one no intrinsically incompatible with capitalist economic institutions, can take hold in the Western democracies”.[1] Certainly Marxism has lost a considerable part of the luster it enjoyed for too long. But there is hardly a need for a replacement.

Actually, Marxism played itself out as a theory long before it was tried on people. Its many mistakes had been clearly demonstrated by the Austrian economist Eugene Böhm-Bawerk before the XIX century had come to an end (link to his article on the Marxist system). It was not necessary to try the poison on people. But it was tried. Then again, once it had produced the famines, the massacres, the show trials, the Gulag system of forced labor, it was not necessary to wait for decades till it finally crumbled in a pile of shame, to reach the conclusion that it was dead wrong. It was so from the start to those who suffered under it.

To many of those educated in the universities of the West, at long last, Marxism starts to look slightly less convincing; a bit less obviously true –though a poll conducted in Britain by BBC 4 in 2005, on its audience, gave Marx as the most important philosopher in history, well ahead of the rest. In other countries, large numbers of people adhere to Marx’s theories about exploitation and class struggle, but without caring about the origins of their ideas. In the US, however, the results of a poll similar to the one conducted by the BBC would have been different.

Marx thought that he had found a fundamental economic objection against capitalism. Against a system that was creating wealth and increasing population as never before in history, Marx did not use altruism and moral arguments (as, for instance, John Ruskin did). Marx thought that socialist production would be more efficient and avoid the contradictions he thought he had discovered in capitalism. Since Bohm-Bawerk’s article on the Marxian system, every informed economist knows that Marx had deluded himself –and misguided millions of people. Nevertheless, many economists and philosophers try to succeed where Marx failed: they try to show that capitalism is inefficient and must be corrected by the exercise of political power. They write theses that would prove that they have unearthed inefficiencies in the form of services wanted but not provided, public goods, free riders, natural monopolies, and a host of justifications for increasing intervention. It has become the surest path to a Nobel Prize in economics.

Murphy and Nagel think that their proposals could be accepted even in the US. They say that their theory is compatible with capitalism, or at least with some sort of capitalism. After all, they write “there is no natural or ideal market. There are many different kinds of market system, all equally free, and the choice among them will turn on a range of independent policy judgments”. Here, “independent” means: the decision should be taken independently of the value one may see in having a market system.

But what are the different free markets they have in mind? We must remember that highly praised thinkers would allow considerable latitude in the choice of the different kinds of market system: as said, John Rawls thought it natural to assume that free markets may or may not have private ownership of the means of production.[2] We do not know whether Murphy and Nagel would share Rawls’s view: their words about what must be left in private hands for the system to qualify as free market are vaguer than that of the master. But vagueness about “hindrances” and “conditions” is not a way to reconcile their theory with capitalism. At the very least, we must remember that Murphy and Nagel admit the morality of private property only in the form of a Hegelian minimum.

When we consider compatibilities and contradictions, we must understand that we are not assessing whether capitalism would survive a single day after theories like those of Murphy and Nagel are adopted, or would fall immediately. Of course, if all means of production are taken by the government, the market is killed –and Rawls’s assertion to the contrary will not keep it alive a single second. But there is also a slow death caused by “conditions” and “hindrances” incompatible with freedom. When we say, for instance, that heavy drinking is incompatible with a career in sports, we do not say that a successful sportsman will fail the day after he starts drinking too much. A very gifted individual may overcome some of the worst consequences for some time. But there is nevertheless a contradiction, something that drags him down, and it would be better for the drinker to recognize it as such. To be sure, a mangled market would work, some capital would be accumulated under the worst conditions, and inventiveness would fight bureaucracies for a long time. But, as with the sportsman, things would never be what they could have been.

It is worth noticing that Hegel himself did not suggest that property should be divided between a minimum that deserves full legal protection as a right, and another larger portion that lacks it. There is nothing in Hegel’s justification of property rights that restricts it to some portion of goods. Anyway, it would be of historical interest to discuss whether it is fair to attribute to him that distinction but, of course, it would not settle the question whether it makes sense.

For their part, Murphy and Nagel assume that the distinction is quite obvious, and tell us that the right to do whatever we want with a minimum of personal belongings does not cover “the freedom to engage with minimal hindrance or conditions in significant economic activity of the sort that drives a market economy”.[3] Now, what is capitalism if we take from it the freedom related to the significant activity that drives it? Steve Jobs would have been allowed to drive his car, but not Apple; Cornelius Vanderbilt would have been allowed to do what he wanted with a small boat, but not with his ship company.

Murphy and Nagel trace a line: any encroachment upon the Hegelian minimum would need exceptionally strong justification from the government, but not if it applies to property that is larger than that: “Some forms of personal discretion –including the basic Hegelian right to hold personal property– are at the core of the self, but unimpeded economic freedom is not one of them”.[4] They repeat it: “While the protection of some form of private property is an essential part of human freedom, the overall structure of the system of property rights should be determined largely on other grounds”.[5] That is to say, they are not part of human freedom.

Again we recognize that lack of perspective that we encountered in the discussion about incentives for work. It may be true that personal property like a comfortable house, a good salary paid by a prestigious university, a car, a personal library, and a few other things may be enough to allow a philosopher to pursue happiness. But Henry Bessemer –the inventor of mild steel– needed smelters; and Henry Ford needed production lines; and Robert Noyce –of INTEL– needed semiconductors. A Hegelian minimum would have not been enough for them, and the rest of us is no worse for that.

Certainly, what the debunkers of ownership have in store for capitalism is described in very general words: what is the kind of “hindrance” in the economic decisions of entrepreneurs that the government can impose without need of any strong justification (which would be needed if it affected an undefined Hegelian minimum)? We would not know until it has been imposed. In fact, we cannot expect anything more precise because the decisions that may be necessary to adopt cannot be known in advance, as proper legal rules are and must be. Friedrich Hayek explained long ago that a government that sets about deliberately distributing wealth, taking from some and giving to others, cannot tie itself to rules known in advance.[6] A government that directs its action mostly to the enforcement of general rules leaves to individuals the responsibility of deciding what is best for them according to present and future conditions, as they judge them.  But a government that tries to redistribute wealth must treat people differently, and in order to be effective it must take into account their changing needs. It must decide questions “on the merits”, that is, taking into consideration individual circumstances. It must watch the evolution of the economy, decide who is to get what now, and decide it again next year.

Nothing of that can be asserted in advance. Unless, of course, it is framed in vague words like “fair allocation”, and “reasonable payment” (and “hindrance”), with the usual provisions that “exceptional circumstances” (as judged when they present themselves) may justify distinctions. So, in a way it is not always true that collectivistic politicians and thinkers hide their plans from us in order to avoid resistance. Even if they wanted to be precise about what they will do to us (which is seldom the case) they could not do it.

Capitalism –even of the kind we have, which includes considerable government intervention– will be seriously affected if the theory that guides its course states, like Murphy and Nagel do, that “Evaluation must decide how 'mine' and 'yours' ought to be determined; it cannot start with a set of assumptions about what is mine and what is yours. The right answer will depend on what system best serves the legitimate aims of society with legitimate means an without imposing illegitimate costs”.[7] That evaluation, inevitably, will be left to the government –the legitimate means will be determined in the same way. What is crucial is that to justify or reject the decision –the authors declare– we “cannot appeal, at the fundamental level, to property rights.”[8]

However, we must realize that property rights that are secured against the changes in the “evaluation of what is mine and yours” are a fundamental requisite for capitalism. Murphy and Nagel’s theory is not really compatible with it. Indeed, if such redefinitions of mine and yours were possible, the rule that protects private property in the 5th Amendment of the US Constitution would mean nothing. Nevertheless, professor Waldron writes “The slogan that property is a human right can be deployed only disingenuously to legitimize the massive inequality that we find in modern capitalist countries”.[9]

Murphy and Nagel call the basic tenets of capitalism, “extreme libertarian”,[10] and sometimes, “everyday libertarianism”.[11] This is highly inaccurate. Libertarian-anarchism has never been implemented in the US, and it is not against the remote chance that it would ever be adopted that Murphy and Nagel argue. They reject the usual and general notion of ownership, they call for redistribution of wealth through cash transfers, and they claim that governmental “hindrances” on entrepreneurship do not need strong justification. Their objections apply really to capitalism.

 The tenets of collectivism

As Marxists and Socialists before them, Murphy and Nagel do not see any relevant difference between general rules under which individuals follow different roads (some successfully, some not), and a system that treats individuals differently in order to reduce a gap between their incomes or to achieve some other social goal.

At the end of the day, we are told, both systems are no more than different ways of allocating resources. One of them generates differences of wealth among individuals, the other generates more equality. The main difference lies in the effects. That these effects are the result of free competition or of government’s coercion is an irrelevant detail of no moral significance. After all, if it is true that taxes are imposed on individuals and that they cannot resist them, it is also true that success is imposed on them by luck, social factors, and even genetics. All of that is, in one way or another, external to people.[12]

Moreover, is it not true that coercion is used to prevent and punish robbery? Certainly, welfare payments put money in the pockets of some people after taking it from others –by force if necessary. But policing the streets and punishing criminals makes it possible for money to remain in the pockets of people, who would have been robbed otherwise. It is argued that these are just two ways of using the force of the state. We cannot say that one is substantially different from the other in any respect, apart from the different distribution of wealth that results from them.

Using this strategy, Cass Sunstein rejects the distinction between negative and positive rights. Just to remind the reader: classic rights like ownership and freedom of trade are often called “negative rights” because people exercise them by themselves; laws may protect them against violence and fraud but no law is necessary to exercise them. In contrast, positive rights consist in help that people are entitled to get from the government. Why are they called “positive”? Because their exercise requires, not merely the absence of harm, but a positive transfer of goods and services.

Now we return to Sunstein. There is no essential difference, says he: welfare payments cost money, but so does the justice system. In both cases the government has to spend money.[13] Someone receives help from the government in the form a cash transfer, and another by being defended against robbers and murderers. Of course, the comparison obscures the fact that those who receive cash transfers are also protected against criminals. But if one forgets it, one may be led to think that we just have two different ways of helping different people.

These arguments are seriously presented as a proof that our common understanding of the issues involved rests on mere prejudice. However, even a child recognizes that there is a big difference between begging his mother to carry him in her arms, and walking on his own legs. You may try to convince the child that there is no essential difference, and point out that when he struggled with uncertain steps trying to reach the other side of the room for the first time, mommy was there ready to stop an unruly brother from tripping his legs. You see, there is no real difference, there was help in both cases –there was a condition anyway. If you abandon your childish myths you would realize that being carried or walking yourself are just two different means of locomotion.

A child would not be convinced of that, but an adult might think that he cannot rationally reject the suggestion that ownership is a myth, as it is claimed in books hailed by experts as masterpieces; books brimming with references and lengthy examinations of what people would decide if they were not themselves. The reader of these books might have the vague feeling that there was something wrong somewhere in the arguments, that big and important things have disappeared from his eyes without him knowing how. I have tried to show by what means they disappear.

What Murphy and Nagel dismiss as mere myth, as entirely imaginary, as “morally irrelevant”[14] are some of the basic principles of capitalism. In the past, collectivism used to be forced upon us with the claim that it was historically inevitable. If you wanted to avoid being looked as a hick, you had to acknowledge that property rights and such were myths, part of a superstructure made for the defense of capitalism –which was a contradictory system. Only thick-headed people could delude themselves into thinking that they could answer these arguments.

Today you are told that your attachment to your property is merely a foggy notion that would not resist a thorough philosophical examination. Your resistance is proof of your lack of understanding. Your must avoid to be caught being –in Cass Sunstein words– “comically implausible”. However, again and again, we find that the theories that are hailed as fundamental contributions to our knowledge are really based on reasoning that is shockingly weak. And we find that the “myths” that are to be destroyed are the most fundamental principles that define the modern world. They are those that explain the difference between the age of the Pharaohs and our age.

---

[1] Pages 188-189.

[2] A Theory of Justice, pages 57 and 137. Harvard University Press. Revised Edition 1999. Also in Distributive Justice: Some Addenda, in Collected Papers, page 159. Harvard University Press. Paperback edition 2001.

[3] P. 64.

[4] P. 66.

[5] P. 45.

[6] The Road to Serfdom, Chapter 6.

[7] P. 75.

[8] Same page.

[9] The Right to Private Property, p. 5.

[10] P. 65.

[11] P. 36.

[12] At the base of many justifications of redistribution lies the odd idea –assumed but never discussed– that individuals must not be considered as individuals (defined as such by their qualities and defects and judged according to them), but as ghosts that later on will receive their own personal characteristics. These are not essential or defining of anything, but accidents that ghosts –the true object of political theory– suffer in their transit to this world. Ghosts must be protected from the morally irrelevant accident that makes them individuals.

[13] The Second Bill of Rights, p. 197. In Argentina, Roberto Gargarella, a law scholar who blends Marxism with constitutional law, repeats Sunstein’s arguments to reject the distinction between negative and positive rights: Carta Abierta sobre la Intolerancia, 51 Siglo XXI Editores 2006.

[14] P. 99.

Nagel and Hayek on government and wealth

This is the sixth article on the theories defended by Murphy and Nagel in the book The Myth of Ownership

Government as the creator of wealth

As we have seen with the examples of prominent defenders of capitalism, they have always admitted the importance of institutions and of the rule of law. To be precise, theirs has never been a reluctant admission: it has been one of the main theses of, among others, Friedrich Hayek. However, we must understand that it is one thing to say, as Hayek did, that failure to uphold the rule of law is a serious obstacle for the creation of wealth, and quite another to say that it is governments that create wealth. It is one thing to say that protection against violence and fraud allow individuals to dedicate their efforts to the creation of wealth, and quite another to say that it is that protection that explains why some individuals are richer than others: they must have received more protection than the poor. Murphy and Nagel’s do not try to prove this second thesis. Instead, they suggest that we may take it as roughly true.

Before we go to their argument it is useful mention that their position is different from that of traditional socialism. If you prove, as Marx tried to do, that value comes only from the collective and indistinct labor of workers, leaving nothing to the ownership of machines and enterprises, of inventions and formulas, and individual skills, then it may sound logical for a while to argue that the soviets of workers are entitled to define “who owns what”. This is because they –the workers collectively– produced it. If that is true, ownership is a myth created to rob them of what is theirs collectively.

However, Murphy and Nagel’s focus is not on the worker’s creative power, but on that of the government. They argue as if the prevention of crime and the enforcement of contracts were the cause of the wealth not destroyed by crime, and the creator of the commercial abundance not prevented by fraud. Then they apply the same justification to redistribution, and try to prove that it is needed for efficiency reasons.

They draw momentous conclusions from the fact that governments (sometimes) protect rights. They assert that without government people would return to a state of nature, which Hobbes, they write, “aptly described as a war of all against all. And in such state of affairs, there is little doubt that everyone's level of welfare would be very low and –importantly– roughly equal. We cannot pretend that the differences in ability, personality, and inherited wealth that lead to great inequalities of welfare in an orderly market economy would have the same effect if there were no government to create and protect legal property rights and their value and to facilitate mutually beneficial exchanges”.[1] Already there are many objections to these assertions, but let’s follow the authors’ argument: “If the relevant baseline for the assessment of benefit is the very low level of welfare, roughly the same for everyone, that people would have in the absence of government, then we can use people’s actual levels of welfare, with government in place, as a rough measure of the benefit conveyed to them by government”. 

Rather than a rough measure, that is a false measure. It would mean that Thomas Alva Edison received more benefits from the government than his neighbor, who never invented anything and lived within a modest income. Applying the theory, we would say that, roughly speaking, the government benefited Edison in proportion to his wealth. His neighbor received far less benefits. The proof is as simple as it is false: Edison’s skills and inventiveness would have been wasted if his skull had been crushed in a tribal war in a lawless country. His neighbor, in contrast, would have lost much less in such a situation. What could have he lost of value to him? Maybe just his only house, or merely his life, but nothing more.

Throughout the book, Murphy and Nagel assume that government services benefit the rich more than the poor. Their only attempt at an argument for that fundamental premise of their theses is the one transcribed in the previous paragraph: if a man is richer, he must have received –roughly speaking– more benefits from the government. The argument is an indirect rejection of personal skill, abilities and creativeness. However, we all know by personal experience that skilled and unskilled people produce different results under the same situation, and that includes people who receive the same benefits. If we reject that, we reject the very notion of ability.

The truth is that Edison and his neighbor received more or less the same help from the government –if there was a difference, it was surely accidental and of no importance. After all, they lived in a country that provided equal justice under the law, where no group was entitled to receive special help from the government. That changed only after Edison’s age. Murphy and Nagel’s explanation obscures the difference between the production of wealth and its redistribution: they say, if one man ended up with more than the other, he must have received more from the government.

Following the same line of argument, Cass Sunstein thinks it prudent to remind those who protest against high taxes about the perils of the state of nature[2] –as if the tea parties of the XVIII or of the XXI centuries had ever suggested disbanding the police.

By the way, we must see that it is not true that we would be equal in some sort of “state of nature”. The war of all against all is an unnatural situation, possible only in very special circumstances, as in a city under siege, just before the final onslaught –and even in sieges, the war of all against all is surely a rarity. Even in the most primitive of circumstances there is a tribal chief, and ceremonies, and rules –some of which become obstacles to the creation of wealth. Primitive government must not be confused with less government. Tribal hierarchies are much more oppressive than most modern governments. People are not roughly equal in them, as Murphy and Nagel tell us. It is true that all tribe members are miserable and are the victims of diseases that pose no threat to us. A simple infection in the chief’s mouth may kill him, or pain him for years without relief. But there are big differences, even in poverty. The chief and his family would eat a little more, and this probably would keep them alive just another year. A man that possesses a cow is immensely rich when compared with a man with not a single one. The difference may mean that the poorer man’s only child will not survive the next winter. And there is no bigger difference than that.

---

[1] P. 17.

[2] The second bill of rights, p. 206.