Wednesday, December 5, 2012

Social Justice and Euvoluntary Exchange

In another excellent Learn Liberty video, Matt Zwoliniski revisits an old ethical conundrum: how can a series of voluntary transactions result in unjust patterns of wealth and income? It's a good question and one that needs to be asked, but there may be more to the story than meets the eye.

Specifically, what if the series of trades that produces the inequitable patterns of wealth and income leaned away from the euvoluntary end of the spectrum? What if the baseball factory pays its Haitian workers a pittance and has them working 75 hour work-weeks on a floor with no ventilation? What if a Wall Street hotshot makes his first million by hawking financial snake oil? What if the executives of a polluting industry pull down eight figures upstream of an inflammable river? What if wealth inequality is built on the back of non-euvoluntary trade? Is such inequality still morally tolerable?

I think I'd agree with Zwolinski that this sort of question is still a little incoherent. Wealth and income inequality is still a symptom of some underlying mechanics even in a highly non-euvoluntary world. Moreover, attempts to bolster the authority of political elites to ameliorate these symptoms may only worsen the dysfunction of the non-euvoluntary production and trade.

It's probably worth asking if we could expect to see inequality even in a purely euvoluntary world. Would an entirely I, Pencil economy produce income inequality? If every single transaction in Read's essay were completely euvoluntary, I'd be comfortable claiming that it's a trivial observation that scale economies can produce significant income and wealth differences even under entirely euvoluntary conditions. Consider the pencil magnate: she runs the pencil business, meaning that even if the producer surplus is a small fraction of total surplus per sale (let's say it's a penny per unit over a total surplus of a dime), the mere fact that she sells ten billion pencils a year means she'll soon be able to comfortably afford a custom-made replica of the Batmobile. Every girl's dream.

So what would a rational policy response be to non-euvoluntary exchanges that give rise to income or wealth inequality? At a first approximation, it seems reasonable that treating underlying causes is probably more useful than treating symptoms. If we have coercion by circumstance, clearing institutional barriers seems wise. For example, voters might want to reconsider whether it's particularly wise to throw parents into the penitentiary for choosing to use recreational drugs. If we're looking at a lot of ex-post regret, a functional common law system is an enviably useful institution.

At any rate, I suspect there's a decent case to be made that some sort of social justice is a laudable project. I would caution that the choice of metrics is important. Selecting gross measures like income and wealth can be highly misleading and can produce policy choices that may lead to attenuated economic development, structural frictions and generational impoverishment.

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Do you have suggestions on where we could find more examples of this phenomenon?