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Home , Ayn Rand, Economic freedom, Murray Rothbard

Chapter 3 The Moral Case for Economic

John Tomasi, PhD

eaders of the Index of Economic goods may be. By protecting economic liberty, are familiar with the political and mate- there is also a sense in which respect other R rial case for economic liberty. There is a people as our moral equals. In particular, when robust positive correlation between the protec- we insist that protect private eco- tion of and the achievement nomic liberty, we insist that those governments of such important goals as material prosperity respect their citizens as responsible authors of and political liberty. As the authors of the 2013 their own lives. Index summarized that year’s findings, “Coun- When people are free, they think of them- tries with higher levels of economic freedom selves as in some sense the central causes of substantially outperform others in economic the particular lives they are leading. It is not growth, per capita incomes, health care, edu- just captains of industry or heroes of cation, protection of the environment, and novels who define themselves through their reduction of ….”1 This can be called the accomplishments in the economic realm. Many institutional case for economic freedom. ordinary people—middle-class parents, single However, if we believe it is important that mothers, entry-level workers, small-scale entre- people everywhere enjoy goods such as decent preneurs in the developing world—become who health care, a clean environment, and rising per they are and express who they hope to be by the capita wages, then, in drawing attention to the personal choices they make regarding work, link between economic freedom and the produc- saving, and spending. These are areas in which tion of these political and material values—that people earn esteem from others and feel a proper is, in making the institutional case for economic pride for things they themselves do. liberty—we are, ipso facto, also making a moral To fully understand the moral importance case for economic freedom. We should defend of economic liberty, we may need to widen the economic liberty not only because such liber- lens through which we view the world. In eco- ties have a proven record of securing political nomic affairs, after all, it is not only the outcome and material benefits, vitally important as those that matters: The process must be considered

59 too. Possessing some particular bundle of mate- liberty to trade in the marketplace, to create rial goods, from this perspective, becomes more things for sale, and to save and invest. It also meaningful if one possesses that bundle because covers the freedom of and groups of one’s own actions and choices. Diminishing to start, run, and close down such personal agency in economic affairs—no matter as factories, shops, farms, and commercial how lofty the social goal—may drain vital blood enterprises of many sorts. from a person’s life. When private economic • The economic liberty of holding concerns are curtailed, people become in some freedom in the realm of private . “This important sense less free. category covers legitimate ways of acquiring and holding productive property, using and MAKING THE PERSONAL CASE FOR developing property for commercial and pro- ECONOMIC LIBERTY ductive purposes, and property transactions None of this is to diminish the importance such as investing, buying, selling, trading and of the institutional case for economic freedom: giving.” Economic are linked to other basic • Finally, there is a range of liberties concerning and liberties, promote the creation of using. “This is the liberty to make use of legiti- social , reduce corruption, mately acquired resources for consumption and mitigate the dangers of concentrated politi- and production.” The liberty of using protects cal power. But in addition to this, individuals the freedom of citizens to buy, use, and con- everywhere have a moral right to be respected as sume natural resources, consumer goods, and causes—or, as I prefer, as responsible authors— services. On the commercial level, this liberty of their own lives. Thus, the personal case for protects production-related consumption private economic liberty is worth making too. (such as deciding which parts to use or which The Index of Economic Freedom sets out and power sources to purchase). On the domestic measures 10 separate areas of economic free- level, it protects a range of personal economic dom, a comprehensive scheme that attends to decision making, including questions about important institutional dimensions of economic what to eat and drink, what to wear, what type liberty. To make the personal case for economic of housing to have, and a wide range of services liberty, we need to cut up the conceptual space one might choose to purchase. a bit differently by focusing on the first-person aspects of economic freedom. To simplify, I will refer to these first-person James Nickel, a prominent philosopher of economic liberties as the liberties of working human rights, distinguishes four (partially over- and owning. lapping) categories of economic liberty, all of Most legal systems include some degree of which protect autonomy of action in economic protection for each of these categories of eco- affairs. Nickel’s four categories are liberties of nomic liberty. However, systems differ dramati- labor, transacting, holding, and using.2 cally in the way they specify the activities that are to be protected in each category. Significant- • Regarding the economic liberty of labor, Nick- ly, systems also differ with respect to the degree el says: “This is the liberty to employ one’s of importance they assign to such protections body and time in productive activity that one when they conflict with other social goals and has chosen or accepted, and under arrange- values.3 ments that one has chosen or accepted.” • The liberty of transacting allows individuals THE CLASSICAL to engage in free economic activity. “This is LIBERAL FRAMEWORK the freedom to manage one’s economic affairs I will be setting out the personal case for eco- at the and household levels and on nomic liberty within a classical liberal frame- larger scales as well.” Transacting involves the work. This is the framework pioneered by radical

60 2014 Index of Economic Freedom English thinkers such as John Lilburne and John recent writers such as , Robert Locke, developed in the American context by Nozick, and Ayn Rand.4 Classical liberals and Founders such as , and defend- libertarians share an appreciation for the great ed in our day by legal scholars such as Richard institutional and personal importance of private Epstein. economic liberty, but while classical liberals see Classical liberals affirm what we might call a economic liberties as being among the weighti- thick conception of economic liberty. They tend est rights, libertarians tend to see property rights to interpret each category of private economic as the weightiest rights of all and even as moral liberty as having a wide scope. Regarding the absolutes. liberties of holding (or “owning”), for example, Thus, unlike the libertarians, classical liberals classical liberals affirm not only the right to accept that even the weightiest economic liber- ownership of (as guaranteed ties can sometimes be curtailed or regulated to even by most socialist systems), but rights to preserve other foundational liberties and some- the private ownership of productive property as times to allow the pursuit of other important well. People should be free to start small busi- social purposes as well. For example, classical nesses, to join in large ventures with oth- liberals would not think the should enforce ers, and generally to establish economic entities contracts that alienate citizens from their other of a great variety of kinds (including, if they wish, basic rights and liberties (for example, an eco- worker-directed cooperatives). nomic contract that required a person to engage Closely connected, classical liberals typi- in some form of religious devotion or to enter cally interpret the economic liberty of labor to into slavery). Second, classical liberals tradition- include a wide freedom of individuals to nego- ally grant that governments have some (albeit tiate personally the terms of their carefully limited) powers of . (including both wage rates and number of hours They also recognize that governments have the to be worked). Classical liberals interpret the power to act to maintain free and competitive economic liberty of transacting to include the markets (for example, by regulating or breaking right of individuals to decide for themselves how up monopolies of scarce resources or by forbid- much to save for retirement, to decide how much ding various forms of collusion and price fixing). to invest in health care, and to make decisions My thesis is that liberties of working and about many other issues of long-term financial owning, interpreted within a wider classical lib- planning. eral framework, have great personal moral . Further, classical liberals see these wide- While this might not surprise regular readers ranging economic liberties as being especially of the Index of Economic Freedom, it is of the weighty compared to other social values. They utmost importance to understand how contro- see economic liberties as having a political sta- versial this idea is and that it is controversial not tus comparable to that of the other traditional just within moribund pockets of Marxists and liberal rights and liberties, such as liberties of socialists, but also across wide swaths of people speech and association. But classical liberals do living in (and voting in) the contemporary liberal not treat economic liberties as moral absolutes of the West. or as in any way more basic than the other - Far from being a lofty , the idea of living damental rights and liberties. While important, in a world in which there exist big and growing such liberties do not trump every other social businesses, where workers typically negotiate concern. the terms of their own employment, and where This last feature distinguishes classical lib- individuals are largely responsible for saving for eralism from a closely related but importantly their own retirement or for making their own distinct tradition that we might call libertari- arrangements for medical care is seen by many anism. By libertarians, I am thinking of histori- people as living in a world of injustice, exploita- cal figures such as and more tion, and vulnerability that can be corrected only

Chapter 3 61 by an extensive system of governmental regula- save or spend the income one earns—are other- tions and the erection of expansive -funded regarding and thus not aspects of liberty prop- social service programs. Thus, many people erly understood. In Mill’s succinct formulation, reject the personal case for economic liberty. “trade is a social act.”6 Thus, trade is a domain Further, many of our fellow citizens also subject to social control and rather reject the personal case for economic liberty on than being a domain of protected liberty. what they believe to be moral grounds. If a world This is a surprisingly weak argument from of personal economic liberty is said to be unjust a philosopher of Mill’s caliber. After all, speech and exploitative, then many people will rally and assembly are acts that affect others, and in against those liberties when they hear the moral that sense, they appear to be just as “social” as call. To understand this perspective and how trade.7 So it seems we must look deeper to under- powerfully it shapes the view of many people stand why Mill denigrates the personal impor- within Western democracies, it is important to tance of economic liberty in this way. examine its historical roots. Mill’s moral and political rests ultimately on a perfectionist ideal of the per- CRITICS OF ECONOMIC LIBERTY: son. Mill sees individuality as capturing some- MILL, KEYNES, AND RAWLS thing close to the moral of personhood. , writing in the mid-1800s, While a self-proclaimed utilitarian, Mill empha- was one of the first thinkers in the liberal tradi- sizes that he means “utility in the largest sense, tion to raise doubts about the moral importance grounded on the permanent interests of man as a of economic liberty. Earlier classical liberals, progressive being.”8 Chief among those interests such as James Madison and , is that of developing a life plan to suit one’s char- had seen economic liberty as fully on a par with acter. By creating such a plan, people express the civil and political rights of individuals: the their distinctive sense of what is valuable and right to a fair trial, freedom of expression, politi- worth doing in life. By developing and pursuing cal participation, personal autonomy, and so on. such a plan, people develop their higher capaci- But when Mill surveyed the traditional list of lib- ties of reasoning, develop intimate connections eral liberties, he singled out the economic liber- with others, and enhance their moral sensitivi- ties for relegation to a distinctly secondary place. ties. Mill saw pursuits as central to Mill’s official argument for treating the eco- a well-lived life, but he famously claimed to be nomic liberties in this exceptional way is based open to experimentation and readily acknowl- on his distinction between two spheres of human edged that there might be a wide range of activi- activity. In the sphere of liberty are activities ties and life plans that people can use to develop that primarily concern only the individual or, if themselves as individuals. they involve other people, do so only with their However, perhaps surveying the scene from free consent and participation. Mill saw this as his position of social privilege, Mill did not see the sphere of individual liberty.5 how activities in the economic sphere could The other sphere, that of coercion, con- contribute to individuality in his sense. Free- cerns activities that directly affect other people. doms of thought and association are impor- Because has a direct interest in the activ- tant to forming and carrying out a life worthy ities within this sphere, may properly of a progressive being, but Mill does not see exercise coercion there to promote the common economic liberties—the freedom to hold pro- good. While Mill sees freedoms of speech and ductive property or to enter into economic assembly, conscience and religion, and other contracts—as playing any central role in this activities that are central to becoming the author process. Starting a , holding a job, seek- of one’s own life as self-regarding activities (that ing a promotion, being a breadwinner for one’s is, as aspects of liberty), he insists that economic , saving for the future—these are roles activities—seeking a job, deciding whether to that economic necessity may require people to

62 2014 Index of Economic Freedom play from time to time, but none of these activi- the only properly human question: how, amid ties is constitutive of liberty. the abundance of wealth, “to live, wisely, agree- Economic life provides barren soil for the ably, and well.” And what about those who con- development of individuality. Progressive beings tinue to show personal concern for economic do not need economic liberty to “pursue their questions, clinging to the traditional values of own good their own way.” For Mill, economic hard work and industry, self-reliance and per- liberties are instrumentally valuable: “property sonal responsibility? In these new conditions, is only a means to an end, not itself the end.”9 Keynes says that such attitudes are not Mill is not the only hero of the Left to argue but “morbid neuroses.” People who exhibit them, against the personal importance of economic Keynes suggests (perhaps jokingly?), should be liberty. In 1930, wrote a confined to mental institutions. remarkable essay, “Economic Possibilities for Similarly, though less colorfully, , Our Grandchildren.”10 Writing at a time of eco- writing in 1971, produced a great manifesto of nomic despair, Keynes expressed long-term social . Rawls offers a machinery that is optimism: Within one hundred years, dur- designed to identify a strong set of distributive ing the lifetimes of his own grandchildren, the principles of justice, constrained only by a short economies of Western democracies such as the list of basic rights and liberties that limit the and the United Kingdom would reach and power of government. Rawls’s spare have grown approximately tenfold. At that point, list of basic rights includes protections in such roughly in 2030, Western economies would familiar areas of human freedom as association have grown enough. The economic problem, the and speech. However, following in the tradi- problem of scarcity that has bedeviled mankind tion of Mill and Keynes, Rawls makes no special since our appearance on this planet, would at last place for the economic liberties of . have been solved. That is, we would have reached Indeed, on his account, the requirements of lib- a point of sufficient wealth so that increases in eral justice could be satisfied in what he calls a could—and Keynes says “democratic socialist” regime: that is, a regime should—cease. When this not-too-distant day that limited economic liberty even to the point of prosperity dawned, Keynes suggested, a great of denying the private ownership of productive moral change could at last be welcomed across property. our social world. What would change when the economic WHAT WE VALUE problem is solved? Keynes says that, finally, the AND WHO WE ARE busy, industrious, purposive, economic “bour- With all respect, I disagree with this tradition geois virtues”—taking risks and toiling, scrimp- of thinking. Economic liberties are valuable not ing today in order to save for tomorrow, striving only because of their well-documented insti- and sacrificing so that the lives of one’s children tutional and material advantages (for example, might be better than one’s own—might at last because the protection of economic liberty is be recognized as the ugly vices that they have positively correlated with lower levels of cor- always been. We needed those deluded “virtues” ruption and with increases in per capita income). to get us to the stage of sufficient wealth, but Though Lord Keynes may have looked down his once wealth arrives, the central human problem long nose on the familiar work-a-day virtues will not be how to work better. Rather, our great associated with the economic liberties, for many problem will be how best to spend the leisure ordinary working people, the development and time that the toils of our parents, grandparents, exercise of these virtues in support of one’s own and great-great-grandparents have bought us. dreams and the dreams one has for loved ones Keynes suggests that, for the first time in comes close to the core of life. human history, life will not center on economic When we make decisions about how much we problems at all. Instead, life will center at last on are willing to work, at what wages, and in which

Chapter 3 63 business sector or profession, just as when we By denying women their economic liberties, make decisions about whether to spend now men had prevented them from fully developing or save for later, we are not engaged in activi- as free and independent adults—as moral equals, ties that are morally trivial. Instead, through each one in charge of her own life. No amount of our activities in these economic aspects of our pointing to the comforts that they were being lives, each of us says something important about provided by their male protectors could make what we value and, indeed, about who we are. up for this fact. Denied full economic liberty, Decisions about saving and spending, for exam- women of the era had been fundamentally dis- ple, are among the most common of economic respected: Their moral agency, their capacity for quandaries, and these questions regularly con- responsible self-authorship, had been stunted front people in free regardless of their and denied. income level. Those questions, distinctively, That early feminist defense of economic lib- require that each of us think carefully about the erty might well be turned against the material relationship between the person we are now and ambitions of some contemporary social democ- the person we will become in the future. racies. Here again, no matter how gilded the cage Temporal thinking of that sort is closely con- of a social may seem, no matter how nected to the process of becoming an adult. Such comfortable and plentiful the social guarantees, decisions are among the most distinctive forms if the cost of receiving those benefits is the viola- of taking responsibility for one’s own life and tion or truncation of personal economic liberty, doing so in light of one’s own dreams, values, and then there is something objectionable about this character. Economic choices about spending scheme. This is a world, whatever its material and saving, as with other economic decisions, bounty, with great moral loss. That loss is what such as setting oneself on one course of study or I mean by the personal value of economic liberty. on one career path rather than another, consti- tute a kind of passageway from childhood or late BREAKING FREE adolescence toward full adulthood. Citizens who OF OLD DICHOTOMIES are denied the chance to make such choices for Perhaps the most alarming finding in recent themselves or whose range of decision-making editions of the Index of Economic Freedom has in these areas is truncated by others (no mat- been the sharp decline in economic liberty in the ter how well meaning) will live comparatively United States, once a beacon of economic liberty. stunted lives, lives that are in some sense less I believe that the personal case for economic fully adult. liberty has been presented too weakly in recent Intriguingly, a similar assertion about the years. That moral ideal has dimmed and no lon- personal importance of economic liberty was ger burns brightly in the mind of every citizen. made by leaders of the feminist movement dur- Part of the may be that in some countries, ing the 19th century. Early feminist leaders such citizens recently have become willing to heed as argued against patriarchy the siren call of politicians offering ever more in a way that put the personal importance of eco- government services and goods in exchange for nomic liberty front and center. No matter how citizens giving up ever more personal econom- “gilded” the social cage that men of that era had ic liberty. Often, those offers of governmental constructed for women, no matter how abun- services are presented as required by morality dant the material goods made available within itself—say, under the banner of fairness or social that cage or how tender the treatment, feminist justice. Thus, within contemporary political dis- leaders of that era, denied their economic liber- course, we find the personal case for economic ties, denied the chance to have some role in the liberty pitted against another set of powerful creation and selection of whatever goods they moral ideas: the idea of material justice. were to enjoy, insisted that a great moral wrong And so citizens today face a set of political was being done to them.11 choices that are equally stark and unhappy:

64 2014 Index of Economic Freedom democracy or capitalism, economic liberty or nomic liberty and important social goods such as material justice, free markets or fairness. One and rising per capita income, side or the other, everyone has to choose. No the program of economic liberty might itself be wonder our societies have become so divided defended on grounds of material justice and fair- and the political rhetoric so extreme. ness too. If that message can be communicated Thankfully, one of the most exciting develop- to our fellow citizens, then a democratic case ments in recent political and economic thinking for economic liberty might be forged once again, has been an attempt to break free from those old thus better securing those liberties about which dichotomies.12 And here again, the Index of Eco- in recent years there has been so much doubt. nomic Freedom has an important role to play. If we attend to the full index of economic lib- One way to break the ideological deadlock erties, their personal value as well as their capac- might be to hold tight to both the personal and ity to create wealth that might be enjoyed by all, institutional cases for economic liberty but we may find ourselves living in a world of both to present the institutional case in a way that social abundance and personal freedom: democ- emphasizes economic liberty’s benefits for all racy and capitalism, economic liberty and mate- classes of citizens and most especially for ordi- rial justice, free markets and fairness. By making nary working people, including workers at the this fuller case for economic liberty, perhaps very bottom of the existing pay scale. If we con- people do not have to choose after all. sistently find a positive correlation between eco-

Chapter 3 65 Endnotes 1 “Executive Highlights,” in Terry Miller, Kim 8 Mill, On Liberty, chap. 1, sect. 11, p. 15. R. Holmes, and Edwin J. Feulner, 2013 Index of 9 John Stuart Mill, Principles of Political Economy Economic Freedom (Washington: The Heritage with Some of Their Applications to Social Foundation and Dow Jones & , Inc., Philosophy (London: Longmans, Green, 1909), 2013), p. 1. Book II, chap. II, sect. 4. 2 James Nickel, “Economic Liberties,” in The 10 John Maynard Keynes, “Economic Possibilities Idea of a Political : Essays on Rawls of Our Grandchildren,” in John Maynard (Lanham, Md.: Rowman & Littlefield, 2000, Keynes, Essays in Persuasion (: W.W. pp. 155–176. See also Lawrence C. Becker, Norton & Co., 1963), pp. 358–373. Property Rights: Philosophical Foundations 11 Voltairine de Cleyre, Exquisite Rebel: The Essays (London: Routledge & Kegan Paul, 1981), of Voltairine de Cleyre—Anarchist, Feminist, pp. 11–21. Genius, ed. and Crispin Sartwell 3 A classic discussion is Anthony Honoré, (New York: State University of New York Press, “Ownership,” in Oxford Essays in : 2005). Fourth Series, ed. Jeremy Horder (New York: 12 See, for example, Arthur C. Brooks, The Road Oxford University Press, 2000), pp. 107–147, to Freedom: How to Win the Fight for Free at 108. Enterprise (New York: Basic Books, 2012), and 4 Lysander Spooner, No Treason (Boston: Stephen Moore, Who’s the Fairest of Them All? Kessinger Publishing, 2004); Murray Newton The Truth About Opportunity, , and Wealth Rothbard, : The Libertarian in America (New York: Encounter Books, 2012). Manifesto (Auburn, Ala.: I offer a philosophical defense of this idea in Institute, 1985); Ayn Rand, (New Fairness (Princeton, N.J.: Princeton York: Ashgate Publishing Ltd., 2012); Robert University Press, 2012). I am grateful to the Nozick, , State, and (New York: Press for allowing me to Basic Books, 1974). draw on material from Free Market Fairness for 5 John Stuart Mill, On Liberty (London: Longman, this essay. Roberts & Green, 1869), esp. chap. I, sect. 12. 6 Ibid., p. 94. 7 Daniel Jacobson, “Mill on Liberty, Speech, and the Free Society,” Philosophy & Public Affairs, Vol. 29, No. 3 (Summer 2000), pp. 276–309, at 293–295.

66 2014 Index of Economic Freedom