Libertarian Jackass

"Life is short, but truth works far and lives long; let us speak truth." -- Schopenhauer

Monday, September 29, 2003

Wages of Luck?

In an article circulating around the 'Net this morning, some genius named Matthew Miller interviewed Milton Friedman and decided he has solved not only the problem of inequality of opportunity but also the public policy conundrum of the "living wage." Miller writes:

"Early in his career, Friedman (the son of poor Hungarian Jewish immigrants) wanted very much to prove -- mathematically -- that luck isn't as important in human affairs as we instinctively presume. In a 1953 paper called "Chance, Choice, and the Distribution of Income," he argued that inequality of income results not merely from chance, but also from the choices, tastes, and preferences of individuals. People who have a taste for working less, for example, and for spending more time basking in the sun, earn less. It's their own choices -- not luck -- that helps shape the inequality of income."


But, after living 89 years, Friedman realizes that, "I think that luck plays an enormous role,' he went on. 'My wife and I entitled our memoirs, 'Two Lucky People.' Society may want to do something about luck. Indeed the whole argument for egalitarianism is to do something about luck. About saying, `Well, it's not people's fault that a person is born blind, it's pure chance. Why should he suffer?' That's a valid sentiment."

OK, so the great free market (HAHA) economist Milty admits there is such a thing as luck! I guess this explains Milty's concession that "inspired his call for the provision of a decent minimum to the disadvantaged, ideally via private charity, but if government was to be involved, via cash grants that in the 1950s he dubbed a 'negative income tax.'"

From here, Miller suggests forging a consensus of conservatives (those opposing the "living wage" but like Mitly conceding that public policy should correct "luck") and liberals (those promoting the "living wage") through Federal subsidies to workers! Hey, its not a living wage forced out of the pockets of private companies, its from the Federal government! "Society" will shoulder the burden and,

"Society as a whole benefits when workers make $10 per hour even when those workers' employers don't. It makes sense for taxpayers to make up the difference. The bottom line: If advocates on both the left and right took the wages of luck into consideration, our national conversation would become very different -- and before long, so would our public priorities." In other words, egalitarianism "makes sense" and "society benefits as a whole."

David Gordon in a Mises Review article of Justice, Luck, and Knowledge By S. L. Hurley, asks the question: "But why should we assume that attempting to counter luck has anything to do with promoting equality?"

Indeed, why would a Federal subsidy to workers that pushed their compensation to the equivalent of $9-10 per hour reduce income inequality or get rid of luck as a factor in human action? Gordon goes on:

At first sight, Hurley's challenge seems absurd. Let us return to the sad case of Michael Jordan and me. Suppose one grants that Jordan is not responsible for his superior athletic ability. If one's aim is to "correct for luck", is it not obvious that Jordan should have to give me a large part of his money, so long as no other people are taken into account?

Not at all, Hurley argues. We start with the premise that the existing distribution of wealth between Jordan and me arises from luck. This premise does not imply that some other distribution would manifest the influence of luck to a lesser extent. Suppose that someone divides between us the sum of Jordan's and my assets on an exactly equal basis. Why would this egalitarian distribution count as one that reduced the influence of luck?


Hurley states her point with characteristic precision: "Equalities can be just as much a matter of luck as inequalities. The fact that people are not responsible for a difference does not entail that they are responsible for nondifference. There is no more a priori reason to assume that equalities are not a matter of luck than there is to assume that differences are not a matter of luck; people may not be responsible for either."(pp.151-152)

But, one is inclined to object, is not Hurley ignoring an obvious fact about the way we speak of people as being lucky and unlucky? Surely it is Jordan, and not I , who is lucky, given the immense sums of money his talent enables him to command. Why does Hurley raise so much fuss about what is involved in correcting for luck? A redistribution from him to me takes from a lucky person and gives to an unlucky one; what is the problem?

Our author readily acknowledges that this is a legitimate way to speak of luck. But on this conception, being lucky means having more, or much more, than others. It assumes that one starts from a position of equality and judges departures from that position to be due to luck. But then one does not have an argument that inequality results from luck: one has simply made this true by definition. Hurley concludes that the "aim to neutralize interpersonal bad luck begs the question of justification and just helps itself to the goal of equality."(p.157)

Hurley distinguishes another sense of responsibility, which she terms the counterfactual. "In the counterfactual reading, I compare my actual situation with other possible situations I might have been in. I have bad luck when what I have is a matter of luck and I am worse off than I might have been."(p.156) It is this sense that underlies Hurley's claim that correcting for luck leads by itself to no egalitarian outcome.

I can here give but a sample of her subtle discussion: "It is hard enough to say whether people are responsible for what they actually have. But to neutralize luck understood counterfactually, we need to know more than this. We would have to be able to say, when people are not responsible for what they actually have, what they would be responsible for instead, if factors for which they are not responsible were eliminated. . . it is highly doubtful that we have any general, nonarbitrary basis for answering this further question. In many cases the answer is simply indeterminate."(p.162)

But while "Hurley deserves great credit for her outstanding critical account of egalitarian theories that aim to counteract luck. Murray Rothbard grasped her key insight many years ago. In Power and Market, published in 1970, he writes: "[T]here is no justification for saying that the rich are luckier than the poor. It might very well be that many or most of the rich have been unlucky and are getting less than their true DMVP[ discounted marginal value product], while most of the poor have been lucky and are getting more. No one can say what the distribution of luck is; hence there is no justification here for a 'redistribution' policy."(pp.234-235)


Rothbard in Power and Market also noted that:

And, finally, he must recognize that the goals of equality of income and equality of opportunity are conceptually unrealizable and are therefore absurd. Any drive to achieve them is ipso facto absurd as well. Egalitarianism is, therefore, a literally senseless social philosophy. Its only meaningful formulation is the goal of “equality of liberty”—formulated by Herbert Spencer in his famous Law of Equal Freedom: “Every man has freedom to do all he wills, provided he infringes not the equal freedom of any other man.” This goal does not attempt to make every individual’s total condition equal—an absolutely impossible task; instead, it advocates liberty—a condition of absence of coercion over person and property for every man. (Rothbard, 5)

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