Holmes and Sunstein: the fallacy about The Cost of Rights

     There is an argument that appears in almost all of the many books and articles that academics churn out in support of an enlargement of the welfare state. They tell you that the new entitlements they would like to see established by government and afforded by your taxes aren't really different from traditional individual rights like freedom of speech and private property.

     The argument goes this way: all rights have costs, right? Freedom of speech, for instance, must be protected from attacks by terrorists, and that costs money, right? So happens with public housing, food stamps and the like, right? So you opposition to those entitlements or even new ones is based on prejudice, on the false idea that “traditional” rights cost nothing or are somewhat different from welfare. You are wrong, they all have costs and all require taxes. In fact, all rights are welfare rights. Don't you feel ashamed of sustaining nonsensical prejudices that academics have debunked so many times?

     The issue is no longer merely academic. In the last decade it has percolated into politics and already many leaders in the US Democratic party call for an enlargement of the New Deal of the 1930s. Professor Cass Sunstein, who was appointed Regulation Tzar by Barack Obama in 2009, had five years before published his book “The Second Bill of Rights. FDR's Unfinished Revolution and Why We Need it More than Ever” in which he praised Franklin D. Roosevelt for the introduction of social and economic rights. Nevertheless, as the title of the book itself declares, Sunstein thinks that the welfare revolution must be pushed forward. He had prepared the way to such proposal in a previous book “The Cost of Rights. Why Liberty Depends on Taxes” which he published in 2000 together with professor Stephen Holmes.

     These ideas have their echoes all around the world. Where I live, Argentina, Carlos Nino, a law professor and an adviser to former President Raúl Alfonsin, has tried to counter the opposition to economic and social rights with arguments similar to those of Sunstein and Holmes, to which he added some of his own (link to my two articles on Nino). The new star among Argentine left-wing academics, law professor Roberto Gargarella, is a disciple of both Nino and Sunstein. Gargarella seems to think that, after the prejudice in favor of traditional rights has been debunked so thoroughly, it is enough to point out that “as we all know” all rights have costs.

     To my knowledge, the most extensive exposition of the argument is to be found in two books: Murphy and Nagel's “The Myth of Ownership”, and the already mentioned “The Cost of Rights”. I have dealt with the former in a series of articles (link to the first) and now I intend to do the same with the second. This time it is easier because, although the book includes some secondary arguments, it rests almost entirely on the one about costs. I will do the same, although there are many other objections against a larger welfare system, I will concentrate on the one the authors chose to rest their case.

Opposition to more welfare rights is based on prejudice (is it really?)

     “The Cost of Rights” starts with a description of a fire in Long Island, New York. In august 1995 thousands of firefighters, volunteers, police and even the military fought to extinguish it. Fortunately nobody died and there was little damage to properties. Holmes and Sunstein write that although volunteers helped, public resources made those efforts possible. They assert that the costs were estimated at $ 1.1 million but that they may have been as high as $ 2.9 million.

     Using this case they counter the criticism of those who warn that government has become too big. Here we meet an auxiliary fallacy (soon we will tackle the main one) which is very common in promoters of a larger welfare state. They implicitly assume that those on the other side reject all government services and all taxes. Moreover, professors Holmes and Sunstein are not arguing for the status quo, they want to enlarge the already enormous federal government. So pointing out to the services provided by firefighters does not answer the criticism of the welfare state, nor does it provide a reason for making it bigger.

     The authors themselves must have had some misgivings about that argument so they go to the main one: asserting that all rights are welfare rights. Then, if you oppose government handouts you must oppose firefighters.

     Through the book, the professors declare again and again that all rights are welfare rights. Even traditional rights like freedom of speech are not really that different from food stamps and other government handouts. Why is it so? Well, all of them cost money. Governments have to spend money protecting free speech against those who might try to violently suppress it. Without such protection and that spending, the right to free speech has little value. They add that the same applies to any other right, traditional or new, negative of positive, all cost government's money.

     Stretching things a bit, the authors claim that “A legal right exists, in reality, only when and if it has budgetary costs” (The Cost of Rights, 21, all further references made to it -Google Books version- unless otherwise stated). Then they blame conservatives for being oblivious about “the way that taxes of the whole community are used to protect the property rights of wealthy individuals”. On the same vein, they add that it is plain that “the right to reasonable compensation for property confiscated under the power of eminent domain has substantial budgetary costs” (27).

     Corollary of all that is that “public savings can be achieved just as effectively by tightening standing requirements for civil actions (by curtailing classical rights), as by tightening eligibility requirements for food stamps (by curtailing welfare rights)” (28). These are just two ways of allocating public resources. Then, in an analysis not blurred by prejudice, in a hard-nosed examination of the issue from the angle of costs, the reader of the book should understand that there is not much difference between welfare and classical rights.

The main fallacy

     The main trick in the book is performed in two steps: first by speaking loosely about rights and their protection as if they were the same thing. Secondly: by sweeping under the carpet that money or housing provided as welfare rights are protected by firefighters, police and the courts as any other property but that on top of that, the money or the houses are provided by government by taxing other people.

     Loose reasoning is then essential for the purpose. Holmes and Sunstein won't deny that firefighters would try to save any property, no matter whether it was bought by the owner or received as welfare. But they keep dropping sentences here and there that point to the shocking fact that the property of wealthy individuals is protected by resources that come from taxes paid by the whole community (and the rich have the gall to complain about welfare!).

     Sunstein repeated that strategy in his book “The Second Bill of Rights”. There he first silently assumes that those who complain about welfare ask for a return to a state of nature, and then he points out, for the benefit of those who ignore it, that rich people are protected by policemen and judges. He asks: “In the state of nature ‒freed from the protection of law and government‒ how well would wealthy people fare? (The Second Bill of Rights, 206).

     The trouble with that line of argument is that poor people would fare as badly, or worse. They would be forced by powerful chieftains to pay in kind, to give up part of their harvests no matter how meager they are, they would be killed or enslaved. None of that is speculation, it is a large part of history. Even today, poor people are the first victims of crime, robbed, abused, and -as in Argentina- forced to pay protection money merely to enter and leave the shanty towns where they live. The notion held by some elites, that only rich people are interested and benefited by the rule of law, or ‒as Marx put it‒ that poor people have nothing to lose but their chains, ignores the past as well as the present.

     Once you start thinking that it is wise to view things that way, you may be convinced that it is only fair that if the rich have their pockets protected by police, then the poor must have their pockets supplied with money by government. The fact that welfare implies two different costs -first the handout and then its protection- is then easily forgotten.

     Criticism of entitlements is, and has always been, criticism of that first thing: the handout. It has never been directed against protecting the property rights of anyone, rich or poor.

Was government always such big?

     In his pursuit of enlightening people about their prejudices, Sunstein writes that “it is a huge blunder to suggest, as many do, that for the old-style rights, the government apparatus required is relatively small...To protect the first bill [traditional rights], government must do far more than provide a military. Its apparatus must be very large indeed” (The Second Bill of Rights, 200-201).

     The trouble with Sunstein argument is that government was indeed far smaller before welfare and entitlements started to grow. There is no need to speculate whether government would be smaller, it was smaller. At the beginning of the XXth century the US government spent about 0.2 % of GDP on welfare. To reach the present spending on welfare you will have to multiply that figure more than ten times (US Welfare Spending History).

     Again, for those like Holmes and Sunstein who push to expand welfare even beyond its present level, it is not enough to point out that government spends on courts, the police, etc. That would be enough if they were debating people bent on disbanding all government. Certainly, there are half a dozen scholars in a couple of think tanks that dream of anarcho-capitalism but that is not the point Holmes and Sunstein are trying to counter. Nor are they just suggesting that welfare spending is kept at the present level. They think that the New Deal is an unfinished revolution, that its welfare programs ‒and there was much added since‒ must be expanded.

     One of the many stumbling blocks on the way of such proposal is the usual distinction between negative and positive rights. Traditional rights like free speech are seen as negative ‒not requiring much from government besides respect for freedom‒ while public housing and food stamps are seen as positive ‒i.e. they are provided by government. As we have seen, the professors' main strategy to blur those concepts is to claim that both demand expenditures and to hide that welfare demands two: one to provide housing, money, etc., and another to protect them. The only thing that earned money and government handouts share is the protection, not the provision.

     Certainly, the word “negative” is inaccurate if one thinks about the protection of property, but not if one thinks about the provision of property. Traditional rights are negative in the sense that they are only protected by government action, but not provided by government ‒as entitlements are. One may try a play with words and claim that both food stamps and policing must be called provision, or that both must be called protection. But using only one word does not remove the difference, it only hides it.

     Nevertheless, Holmes and Sunstein try hard to show that the distinction has no basis. They write that “It does not appear anywhere in the Constitution, for one thing. It was wholly unknown to American framers” (39). Any schoolboy should be able to see that the distinction cannot be found in the Constitution because its Bill of Rights acknowledges only traditional negative rights. As the distinction between dogs and cats is nowhere to see in a dog show, the professors would be able to prove that such distinction must arise only from prejudice.

Misconstruing history

     Holmes and Sunstein fight the distinction further by saying that “Private property is not only protected by government agencies, such as the fire department. It is, more generally, a creation of state action. Legislators and judges define the rules of ownership, just as they establish and interpret the regulations governing all of our basic rights” (68)

     That assertion, namely that private property is a creation of the state, goes against the fundamental understanding of individual rights in US history. Even today, in spite of the strenuous efforts of so many academics, most Americans would think that property is a right recognized in the Constitution, and that interpretation and regulation cannot be stretched to the point where rights become just the creation of legislators and judges. Even the Constitution didn't create property, it simply acknowledged a right that existed well before it was enacted. There is no need to enter into a debate about natural law; as a matter of fact and history there were property rights in the US before the Constitution was enacted.

     Perhaps Holmes and Sunstein themselves sense that their view is alien to American history and traditions so they must go far away and long ago for support. The professors go to medieval England, where the feudal order might provide a better basis for their understanding of property rights. They write “To simplify a complex story, William the Conqueror created property rights when he distributed plots of seized lands to the Norman noblemen who had helped him overrun England. Common-law property rights, as enforceable in court, did not descend from high principle but rather rough-hewn in a process of social give-and-take. This historical curiosity fits well with the fact that, as a matter of current legal reality property rights, far from being rigidly fixed, remain subject to considerable renegotiation” (196).

     A simplification may not be necessarily misleading, but the one above points to the exception and silences the rule. William the Conqueror treated the Saxons as a vanquished people with no right to their land. That never became the leading principle of the common law. Soon that force was restrained by rules and judges. When another king tried to play tricks with his people's property he was forced to admit that he had violated his subjects' rights and promised to respect them in Magna Charta.

     Moreover, if the description is wrong about the beginning of common law in medieval England, it is absurd to suggest that a government that takes property from some people and gives it to its followers offers a pattern that is relevant to modern United States ‒or so I hope.

Danegeld theory

     In many parts of “The Cost of Rights” the authors argue as if only the rich were interested in law and order and even in defense against foreign invasion. They write “When those with little or no property are reluctant to fight fiercely against foreign looters and conquerors, the property rights of the rich are of little worth. For prudential reasons alone, property owners have an incentive to prevent the impoverished from feeling alienated from the polity” (199). So we learn that, before welfare, poor people didn't fight foreign invaders. French peasants didn't follow Jean d'Arc and American farmers refused to follow Washington. The professors' mistaken assumption is the same that Vladimir Lenin made when he decided to invade Poland in 1920, that the Polish poor had no interest in defending a country that gave them no public housing and higher education for free. Certainly, the Polish poor didn't agree with that assumption.

     Besides, it is not true that only, or mostly, the rich suffer when their country is invaded. From time immemorial poor people have seen their huts burnt, their wives and daughters raped, and whole villages sent into slavery. Nor is it right to assume that only the rich suffer the attacks of criminals. If anything, poor people need protection against them even more than the rich. I remember a case I saw when I worked for one of the courts in Argentina. A man started a small grocery in a shanty town. He prospered a bit and decided to buy a second-hand saw so as to be able to cut and sell meat. A gang of youngsters learned that the man was about to make a payment in cash and planned a hit. It happened that the shopkeeper's son was a member of the gang, so he told his father, who managed to avoid the attack. The gang killed his son as a traitor. It wasn't only a tragedy for the father, but it deprived the people of the shanty town from the services of a man who had deared to provide them.

     Never mind, Holmes and Sunstein tell us that law determines who must lack resources because it doesn't allow the poor to remedy their situation by violent means (200). As with national defense, welfare must bee seen as a way to gain poor people's cooperation in the fight against crime, from which they might otherwise have taken advantage. To avoid being plundered, the rich then pay the poor through government. That is more or less what in ancient times English people ‒rich and poor‒ paid to vikings to gain peace. Not to be robbed, they paid what was known as “danegeld”, the money paid to pirates to gain their forbearance.

If you protect rights, you favor the rich

     In words that would have made Karl Marx very proud, Holmes and Sunstein tell us that “Like wealth, poverty in America is in important ways a product of political and legal choices. Our law of property ‒which includes rules governing inheritance‒ determines who 'lacks resources'. Without government and law, some of the propertyless would quickly be able to procure considerable resources by private violence or stealth” (200).

     With the help of the authors we discover that law does not treat people equally. The law “determines” that some lack resources. Moreover, the professors add that those who have more resources can take better advantage of the protection and services provided by the state. On that basis they conclude that “This partiality of supposedly impartial rights to those endowed, for whatever reasons, with private resources is troubling” (203).

     But then one wonders why do Holmes and Sunstein apply that reasoning only to the protection of property rights. They might as well point out that laws do not allow a man to satisfy his sexual appetite by raping a woman. Is that equal treatment? Is it not clear that the man should be compensated in some form so has to gain his cooperation, to make him feel that he is “included” by the system, so that his good will is not dependent only on coercion?

     And what about free speech? Laws restrict people from silencing by force those who publish newspaper articles that they don't like. But then, according to the above reasoning, they are not treated equally. The law favors the infidel against the offended follower of the Prophet. At the very least the cooperation of the latter must be paid by taxes collected from the infidels. Otherwise the glaring inequality would remain as a mockery of our laws solemn declarations.

     Of course Holmes and Sunstein wouldn't argue that way when it comes to the laws that forbid rape and the suppression of free speech. But then, it seems that it is done with the laws that forbid robbery and looting because of the underlying assumption that property rights are less satisfactory in moral terms. Nevertheless, that is an assumption that Holmes and Sunstein never make explicit and never attempt to prove. In other words, it is a prejudice against property rights under the guise of a hard-nosed examination of our legal system and its costs.

     Indeed, there is a definite effort of academics and judges to make property a lesser right. American law scholar James W. Ely Jr. has accurately described the push that, starting in the New Deal, tried to make property rights more vague and less protected against government intervention. Early on there were many who fought against that trend. Ely writes “Even during the heyday of post-New Deal liberalism, some jurists criticized the subordination of property rights. In 1958 Learned Hand, a prominent federal circuit court judge, questioned whether there was a principled distinction between personal and property rights. He observed that 'it would have seemed a strange anomaly' to framers of the Fifth Amendment 'to learn that they constituted severer restrictions as to Liberty than Property'. Hand added that here was 'no constitutional basis' for asserting greater judicial supervision over personal freedom than over economic liberty.”

     “Speaking for the Supreme Court, Justice Potter Stewart amplified this view in Lynch v. Household Finance Corp. (1972). Stewart declared 'that the dichotomy between personal liberties and property rights is a false one. Property does not have rights, People have rights'. In language evoking the attitudes of the framers, he further stated, 'In fact, a fundamental interdependence exists between the personal right to liberty and the personal right in property. Neither could have meaning without the other. That rights in property are basic civil rights has long been recognized.' Stewart's linkage of property rights with individual liberty contradicted a major tenet of New Deal constitutionalism...” (Ely, James W. Jr.: The Guardian of Every Other Right. A Constitutional History of Property Rights, Oxford University Press 3^rd edition, 150-151).

     It is no surprise that Cass Sunstein, who has proclaimed himself an admirer of the New Deal and even wants to expand its program, thinks that it is permissible to reason about the safeguard of property rights in ways that would be preposterous if applied to other personal rights.

     That property rights are second rank rights is simply taken for granted by too many academics and judges. And it is revealing that when Argentina's Federal Supreme Court published two online books with what the Court itself sees as its landmark decisions, the judges didn't feel necessary to include cases concerning the safeguard of property ‒which were always included in older listings used when I studied law. In the sections about “Fundamental Rights” we see decisions concerning discrimination, right to information, privacy, right to die, etc. Then we find sections about political rights, labor rights, social rights, cultural rights, right to housing, rights of unions, collective rights, etc. Property is nowhere ‒which is perhaps the best summary of the Court's performance (link1, link2).

Two kinds of welfare, and the perils of clientelism

     As we have seen, Holmes and Sunstein set forth arguments to justify government provided welfare, and ‒in a second step‒ Sunstein has written a book dedicated to arguing for its expansion. I have tried to show that their reasoning is fallacious and that their references to history are inaccurate. Nevertheless one of the oddest things about their arguments is that they omit to take into account one of the most obvious motives why governments expand welfare and entitlements: to get votes.

     And this shows that it is vital to distinguish two kinds of welfare,

1 Public services open to everyone and paid by the whole population

2 Goods given only to some people, and paid mostly by other people

     Everywhere there is a mixture of the two kinds of welfare, certainly, but it is relevant to distinguish them because they have different political effects. Both pose dangers, both tend to increase the power of government over people, but the second form of welfare creates a system of dependency that already engulfs a considerable part of the world. That system has degraded Argentina, my country, from being one of the most prosperous nations on Earth at the beginning of the XXth century, to a failed country a century later, where half of the population live in poverty. From a nation that attracted immigrants from all over the world, to a place that youngsters leave in search of a better future. A people that used to learn from the misakes of other nations is now a disillutioned crowd led by fools who embrace every progressive fad they can find. That decline was eased in no small measure by the clever use of vague words, intellectual confusion, and the distortion of the past. One should never assume that they have no consequences.

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.

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[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.

Murphy, Nagel, Sunstein, and Dworkin on property rights

This is the first in a series of articles that I will post about the attacks, mostly made by American philosophers and law professors, against the notion of ownership, which now they dismiss as if it were a myth

Two celebrated philosophers, Liam Murphy and Thomas Nagel, have dedicated a book to debunking The myth of ownership.[1] Their view is shared by Cass Sunstein, a law scholar and regulation Tsar under the Obama administration, who writes in his book The Second Bill of Rights that “it is comically implausible to find so many people complaining that taxes take some portion of ‘their’ money”.[2] As they see it, taxes do not take anything from people, and to claim the contrary is not simply wrong, but nonsensical. Ronald Dworkin, an influential law scholar, is of the same opinion: he writes, “the usual arguments that supposedly demonstrate that pretax income is ‘my’ money are incoherent”.[3]

It is surprising that these thinkers assume that their verdict about the myth is obvious, and that people’s convictions about private property and taxation can be so easily debunked. More surprisingly still, these American philosophers do not find it necessary to confront their ideas with those that sparked the American revolution. In contrast, at the time of the revolution, even their enemies –the British– made the connection with their own historical struggles for liberty. Speaking in Parliament, Lord Camden declared that in Britain “there is not a blade of grass, which when taxed, was not taxed by the consent of the proprietor”.[4]

Today Americans are taught that the noble Lord was talking nonsense. Not a distant King but their own philosophers and law scholars tell Americans that the link between taxes and ownership is wrong, a crass delusion. Murphy and Nagel write that taxes, even high taxes, do not take anything from our property. Ownership is merely a convention to be defined by law, and it comes into being only by means of laws. Why is that? Answer: because without the protection of the laws, property would soon disappear, or remain precarious. We must be clear: the claim is not simply that governments contribute to the production of goods by building roads and bridges, or keeping courts of justice, police and armed forces. The novelty of the view does not consist merely in the omission of the usual caveat that governments often make the production of goods more difficult, and sometimes impossible (after all, when we discuss government’s contributions to production, are we talking about F.D. Roosevelt, Margaret Thatcher, or Idi Amin?). Leaving the caveat aside, we must understand that the main goal of the theory is to convince us that ownership, what we know as “private property”, is merely a legal convention. We only have a right to what taxes leave to us. How glad would have been the King of England if he could have defeated the American revolutionaries with such simple argument!

As Murphy and Nagel’s book is entirely devoted to debunking the myth of ownership, I will deal mostly with the arguments they present. I will add some reflections about the contributions made by other followers of the same ideas. They are speedily gaining popularity among scholars, and many treat the issue as already settled.

 From the start, we must take notice that Murphy and Nagel often pass freely from the assertion that pre-tax ownership is a myth, to the more direct one that ownership –not just a portion of it– is a myth. And there is much logic in doing so: if governments are free to define and redefine our property rights and tell us that we never really had what they take from us in the form of taxes, then ownership as a whole becomes a myth. The philosophers’ aim is not merely to justify higher taxes but to suggest a new design for property rights.[5]

Of course, with the exception of anarchists, nobody denies that we have to take some dollars from what we have earned in order to pay taxes, as we have to take some dollars to pay for services provided to us, or bread sold to us. But this is not the point. What Murphy, Nagel, and others argue is that we simply have not earned that money. It is in our pockets by mere chance.

Murphy and Nagel have very strong words for the views about taxes and property that prevail in the US. What they decry is not merely (or mainly) the stand of politicians concerning taxes, but the common views among Americans. They write that “When it comes to taxes, at least in the United States, there seems to be a premium on appeals to the selfishness and greed of the voter”.[6] In the same paragraph they tell us that the appeal to the “better angels of our nature –the ones motivated by fairness and impartiality” is risky in the US. They do not mince words when examining the tax policies of Bush’s administration: they do not know whether the arguments against double taxation came from “demagoguery or actual confusion”.[7] A plea for tax-cuts is “disingenuous”.[8]

On the other hand, as we see reading the book’s back cover, The Myth of Ownership has been hailed by law scholars and book reviewers as a fundamental philosophical contribution to the debate about taxes that has been going on for some time in the United States.

According to Murphy and Nagel, ownership is an old illusion, and they want to free their fellow Americans from it. Certainly, they would be ready to grant, but without entering into details, that there is a minimum of personal belongings that individuals have a right to retain. They call it “a Hegelian minimum”, agreeing with the German philosopher that some form of personal property is indeed linked with individual freedom.[9] They acknowledge that “a minimal form of economic freedom is essential to a liberal system: the freedom to do what one wants with it”. However, in their opinion this does not cover “a much larger freedom...to engage with minimal hindrance or conditions in significant economic activity of the sort that drives a market economy”.[10]

Before going further into the authors’ arguments we must remember that the legal limits of property rights are independent of the size and value of the goods involved. We do not have rules for a minimum –Hegelian or any other– , and different rules for bigger possessions. In spite of minor and irrelevant exceptions to the principle, I am as free to spend my modest income as I would be to spend a fortune. Traffic rules are the same for cheap cars and for luxury cars. The owner of a big factory must not dump garbage on his neighbor’s property, and the same applies to the owner of a small apartment. This is the meaning of “equal justice under the law”.

In contrast, it is one of the main tenets of Marxism that those goods that are considered means of production should be treated differently. Though Murphy and Nagel tell us that “significant economic activity of the sort that drives a market economy” is not part of the freedom they would grant to people, they do not seem to suggest that governments should take actual possession of the means of production. They just mention “hindrances” and “conditions” and indicate that they might be more than minimal without any special justification. Even then, in their opinion there would be no conflict with freedom. We must remember that John Rawls –who taught philosophy to Nagel, as well as to a good number of modern philosophers– wrote that government’s ownership of the means of production was compatible with a free market. He never cared to justify that assertion.[11]

Beyond the portion of their goods that the philosophers would leave to people as essential for their freedom, everything else is conventional –“conventional” being a refined way of saying that legal institutions “define who owns what”[12]. That is why Murphy and Nagel find it absurd that so many people think that laws must respect property. Laws define what property is, and who owns it. A figure in plaster cannot contradict its maker, and wish another shape. Then there can be no conflict, only submission. Murphy and Nagel write: “Our own view, as will emerge, is that property rights are conventional, but that there is room in their design and justification for the consideration of other rights and deontological values. 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”.[13]

Incentives for work, not for business

Apart from a Hegelian minimum –left undefined–, Murphy and Nagel would keep some incentives for work. But for that purpose there is no need to let rich people pocket large amounts of money. In fact –they argue– higher taxes for the rich would have two effects, and not just one. Of course, some people would work less if the return is small; but others would try to make up for the loss by working more.[14] Murphy and Nagel cite the opinion of experts who tell us that “nearly all research concludes that male participation and hours worked respond hardly at all to changes in after-tax wages and therefore to marginal tax rates”.[15]

We must realize that the whole question about incentives is misleading. It is a common error –or rather lack of perspective– to think that capitalism is just about material incentives for workers and CEOs. The error underlies a good part of the discussions about capitalism. Nevertheless, we must not forget that taxes often reduce capital itself. Moreover, high and low profits direct capital (not only work) to different pursuits.

The key error is this: capitalism is not a system of carrots and sticks used to encourage work, marginally different from the system of socialism, of sticks and more sticks. Not surprisingly, capitalism is about capital. It means that individuals take decisions about what to produce, where, using what materials, in association with what partners, at what time. It is often pointed out that CEOs would keep working even if their salaries were substantially reduced and if they had no other alternative in the market. Probably they would work harder to compensate, as Murphy and Nagel suggest. That is true: a CEO can be reduced to something very similar to a functionary in a collectivist country –in fact, they have been reduced to that in a number of mixed economies, in the past and in the present. Some of them may feel comfortable in such situation.

However, as Ludwig von Mises has explained, capitalism is not a managerial system, it is an entrepreneurial system.[16] The argument about the effects of higher taxes on work (even as managers) forgets this basic truth. It leaves aside the decisions people (and especially entrepreneurs) make about the goods they own –not merely about the goods they manage for others. Capitalism is about capital and its return, not about bonuses .

CEOs, managers –even workers– can receive bonuses. But unless they also share the losses, pay themselves the expenses, decide what to sell, and when to invest their own capital, they cannot replace entrepreneurs. Of course, if those conditions are met, they would not replace entrepreneurs; they would be entrepreneurs. But bonuses alone do not turn managers into businessmen. On the contrary, they can make managers foolhardy and ready to take unreasonable risks.

 Incentives for work are not the distinguishing mark of capitalism. Actually, mere incentives for work exist even in places where the control of the means of production by the government has been taken to its highest stage. We read that in the prison camps of North Korea, people are kept in semi-starvation conditions, and that the main incentive for work –apart from sticks and other means– is food (the carrot).[17] That is enough for such higher stages of collectivism, but not for capitalism.

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[1] Oxford University Press, 2002. Unless otherwise stated, citations will refer to that book.

[2] The Second Bill of Rights. Basic Books 2004, 201. The subtitle of the book is “FDR’s unfinished revolution and why we need it more than ever”.

[3] Is Democracy Possible Here? Princeton University, Press 2006; p. 125.

[4] Campbell, John: Lives of the Lord Chancellors and Keepers of the Great Seal of England. Vol. 6:  http://www.constitution.org/bcp/camden143.htm

[5] As proof that the goal is larger, see the text cited at the end of the present section.

[6] P. 72.

[7] P. 143.

[8] P. 178.

[9] P. 145.

[10] P. 64.

[11] 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.

[12] P. 189.

[13] P. 45.

[14] P. 69.

[15] P. 137.

[16] Human Action, Vol. 3, pages 303 and 708. Liberty Fund 2007.

[17] David Hawk, The Hidden Gulag. US Committee for Human Rights in North Korea, 2003.