Let’s look again at Rawls’s idea re: natural assets. We have already heard that:
No one deserves his greater natural capacity nor merits a more favorable starting place in society. But that does not mean one should eliminate these distinctions. There is another way to deal with them. The basic structure [of society] can be arranged so that these contingencies work for the good of the least fortunate.
Nozick responds: “And if there weren’t ‘another way to deal with them’? Would it then follow that one should eliminate these distinctions? What exactly would be contemplated in the case of natural assets? If people’s assets and talents couldn’t be harnessed to serve others, would something be done to remove these exceptional assets and talents, or to forbid them from being exercised for the person’s own benefit or that of someone else he chose, even though this limitation wouldn’t improve the absolute position of those somehow unable to harness the talents and abilities of others for their own benefit? Is it so implausible to claim that envy underlies this conception of justice, forming part of its root notion?” [Underline added.]
Lurking in the background of most discussions of social justice is a thinly veiled suggestion that the good fortune, the wealth, or whatever, of the so-called favored individuals is somehow illegitimate— undeserved and perhaps even ill-gotten, and so, society’s imposition of the measures required by Rawlsian or egalitarian distributive justice, as described above, is more than justified, considering that not only may there have been no merit ( i.e. a lack of desert) there may even have been a history of actual injustices involved in the holdings being re-distributed. But, as I have shown, the egalitarian types do not dare go down this road very far because, in doing so, they would have to cite some sort of history for these misdeeds, and that would open the door to an historical explanation for distributive justice, and the reason for the current distributions would be reduced to rectifications for past injustices. For this reason, the suggestion of wrongdoing will always remain an almost subliminal part of the discussion.
This leads us directly into a discussion of entitlement versus desert. First there is an almost direct analogue with our earlier assertion concerning the concepts of “just” and “fair”. Just as something can be just but not fair or fair but not just, one may be entitled to something without deserving it, or deserve it without being entitled to it. One may have a contract to exchange something for a stated price, and one is therefore entitled to receive that price at the time of exchange. It may also be the case that one deserves to get that price, but it would not be because of the existence of the contract, but for some other reasons. In the case of entitlement, one is owed something and there is no option about whether he is to receive it, but in the case of desert it is the case that some other person has decided to bestow or give the thing in question on the basis of some set of reasons for doing so, which the giver has stipulated and which the receiver has fulfilled. It may be that, in a given situation, one may have both the entitlement and deserve the thing in question, but that is not a requirement, i.e. one does not imply the other.
Possibly the most maligned of all things of value which people can receive is profits. For those of the statist persuasion, a large proportion declare outright that they are not legitimate. People are not entitled to profits, nor do they deserve to have them, according to this view. I believe a good case can be made that people are both entitled to, and deserving of profits. This leads us to our second instance of a misconception masquerading as a reasonable and widely held proposition. Conventional Wisdom Re: Profits. Although it would appear that profits are a necessary part of a market based economy, they are considered suspect and must be both limited and controlled to prevent exploitation and the excesses of greed. I will show that nothing could be further from the truth.
Mixed up in this issue are the concepts of property and of ownership. First, consider that everyone has some property—themselves, their own bodies. Second, consider that ownership speaks to the matter of control, that the owner will ultimately be the arbiter what is to be done with his property, and that this decision is not required to be shared jointly with anyone else, unless one agrees to it in advance. To own something is to be entitled to do with it as we please,subject to the restriction that others’ rights to a similar freedom are respected. So, ownership is essentially an entitlement concept. I have already exposed you to Nozick’s Entitlement Theory of (Distributive) Justice as an alternative to the egalitarian theories. The principles underlying the Entitlement Theory deal with property that is external to persons. Is there such a right to “external” property? Many of the objections of the egalitarian theorists center on their problems with the concepts of property and ownership: in truth, they are highly inimical to the level of individual autonomy that these concepts imply. In particular, they object to the reasons given for how ownership of previously unowned things could be achieved. Without going too deeply into this subject, we note four similar, but not identical approaches which individualist thinkers have taken to this problem. The first originates with John Locke, and we have also briefly discussed the justice principles as stated by Robert Nozick and Randy Barnett, both of which are property-centered. Finally, we have the “first-use” principle of Jan Narveson.
In his labor theory of ownership John Locke, a natural rights theorist, that holds that property originally comes about by the exertion of labor upon natural resources. In his Second Treatise on Government, Locke asked “by what right an individual can claim to own one part of the world, when, according to the Bible, God gave the world to all humanity in common. He answered that persons own themselves and therefore their own labor. When a person works, that labor enters into the object. Thus, the object becomes the property of that person.” Locke added an additional condition to the effect that when acquiring an original property right to things found in nature that one must leave “enough and as good in common…to others.” Nozick has elaborated on the condition to create what he called the Lockean Proviso. The Proviso says that though every appropriation of property is a diminution of another’s rights to it, it is acceptable as long as it does not make anyone worse off than they would have been without any private property. This makes strong note of the fact that every appropriation of heretofore unowned property into a private property system has the potential and even the likelihood of making everyone’s situation a little better through the general increase in wealth, i.e. it is the net benefit which must be considered.
Recall that Randy Barnett echoes the labor theory of ownership with his “right of first possession”which specifies that property rights to unowned resources are acquired by being first to establish control over them and to stake a claim.
Seeking, as always, to find principles that are compatible with liberty, Jan Narveson sets forth his “first-use” principle, namely that “She who gets there first and commences to use it, in ways that require ongoing access to it, may use it so long as she wants. No one else may use it without her say-so, so long as she neither sells it or gives it to somebody, dies without leaving a will, or ceases to care.”
What all these property-centered principles have in common is that (a) they respect the principle of liberty, i.e. non-interference with what people are already engaged in, (b) they go a long way toward reducing or eliminating conflict by giving people a way to know in advance how they should behave with respect to scarce resources and (c) they respect human action in that some non-trivial amount of effort is involved in establishing one’s ownership. Narveson illustrates how these are virtues:
Why this rule [“first-use”] and not some other? For example, why not “second come, first serve” or “all comers, no matter when, get equal control”? The answer is that second-comers intervene in first-comer’s uses, and thus violate the general liberty principle. They prevent the continuation of a commenced activity, one which harmed no one when initiated, and in which the initiator invests effort, on the results of which he forms expectations and plans.
One major objection to attempts to define a right to unowned property is that using principles such as those cited above “You can acquire absolute rights over a disproportionate share of the world, if you do not worsen the condition of others” and furthermore 4) It is relatively easy to acquire absolute rights over a disproportionate share of the world.
In response to this objection, focus first on the word ‘disproportionate’; this word is not part of the Lockean Proviso as stated by Nozick, nor is it implied in any of the other property-centered principles regarding initial acquisition, and does not the original condition of Locke almost explicitly state that one cannot take command over such a large share of a resource that little or none is left for others to exploit? Continuing, how does one define disproportionate with respect to some object or resource which may be unowned. Does it mean that, since there is a large population of humans that only a tiny slice of any particular physical stuff is in proportion to what may legitimately be appropriated. How does one know when one has crossed the threshold from reasonable and proportionate to unreasonable and disproportionate? In order to do this in any reasonable way, one would have to know at a minimum (a) the total amount of the resource in the entire world, (b) the number of people alleged to be competing for this resource, and this is only if we assume that the correct proportionate share would be an equal one. We have already suggested that equality as a standard has more than its share of problems. Suppose that land is the resource in question and equality is the standard, then one’s proportionate share would be the total surface area of land divided by the total number humans potentially wanting land. Using known figures for land area and population, this works out to approximately 5 acres as any ones’ proportionate share of land if all the land today were unowned and all the people alive today laid claim to it. If the amount of actually desirable ( for example, arable) land were used, then the figure would be smaller yet. But remember that there would have to be a historical dimension to this inasmuch as much of the desirable land was appropriated in distant times when populations were vastly different. Anyway, for most resources under consideration, the amount of the resource in existence is not known with exactitude. Given how problematic this is, I conclude that trying to come up with an appropriate idea of proportionate is futile. Moreover, consider the following:
If Columbus lands on a new continent, is it legitimate for him to proclaim all the new continent his own, or even that sector ‘as far as his eye can see’? Clearly, this would not be the case in the free society that we are postulating. Columbus …would have to use the land, to ‘cultivate’ it in some way, before he could be asserted to own it…. If there is more land than can be used by a limited labor supply, then the unused land must simply remain unowned until a first user arrives on the scene. Any attempt to claim a new resource that someone does not use would have to be considered invasive of the property right of whoever the first user will turn out to be.
This is certainly a much more rational standard than the equality example cited above, and does not lead to disproportionate appropriation; also, and this is important, to accomplish the utilization of what one has appropriated is not an easy task—it requires a consistent human effort that other possible rules ( e.g. “all comers, no matter when, get equal control”) do not demand. It is certainly not “relatively easy” to acquire title—it does not consist of planting a flag and making a declaration, or even the somewhat more arduous staking out or fencing a parcel of land. Continuous use and development are implied by all of our property-centered principles of first acquisition.
Since the critics of the classical liberal approach to property rights as described here seem to feel that the Achilles Heel of the argument is the issue of first acquisition, we would be remiss if we did not also at least allude to the argumentative proof of the correctness of the first-use approach by social philosopher Hans-Hermann Hoppe. Hoppe notes that the problem of social order is purely one derived from scarcity: in the Garden of Eden with unrestricted access to goods, conflict, at least with respect to external goods, is avoided. Ethics is nothing more nor less than the rules which prevent conflict over scarce resources ( including that scarcest of all resources, one’s own person). Hoppe points out that property rights based on first acquisition rules also satisfy one’s initial moral appraisal or intuition, but then goes in a disciplined fashion to actually prove that no other set of rules for dealing with property is appropriate. Here is my paraphrase of Hoppe’s argument:
(a) The definition of ownership includes the exclusive control by the owner of the property in question, and any uses by others requires the owner’s consent.
(b) The principle of first acquisition says that previously unowned property may be appropriated by the first person who, through his own efforts, creates the property, or utilizes the property without interfering with property owned by others. One’s own body is to be regarded as among those things appropriated by the principle of first acquisition.
(c) Assume that the principle stated in (b) is not valid, i.e. that the first person to appropriate property ( including his own body) is not to be considered its owner. Then, one of two situations must be true: first, that some other person or persons is (are) the owner, not only of property which you as first user appropriate, but also your body, or the second alternative, that every person is the co-owner of every other person and their property.
(d) In the first instance above, there are two classes of people, one of which is subservient to the other, and the those in the subservient class must obtain consent from the overlords to use or benefit from the property; since moral rules must apply universally to be valid, the two-class situation rules out that case. In the second instance, since consent for use is required, and all other co-owners must be consulted before anything is supposed to happen, ownership of everyone by everyone else simply cannot be implemented.
(e) So, unless you can come up with a third alternative to the ownership scenarios described above, one must conclude that the first-user principle of initial acquisition of property, in addition to satisfying one’s moral intuition, is also logically valid.
Hoppe’s argument is somewhat more rigorous, and those who are interested may find it verbatim in the note.
Assuming that I may have made at least some headway in getting you to accept that goods can be either “yours” or “mine”, i.e. that ownership ( including self-ownership) is itself a valid concept as the basis for moral discussions, then I can resume the discussion of how one can be both entitled to, and to deserve profits.
Ownership, as I have noted, includes control, i.e. being able to decide what to do with one’s property, as long as doing so does not interfere with the rights of others. So, employing property to create new property which may be exchanged voluntarily for some other type of property, with the incidental result that a “profit” (net benefit of some kind) accrues to the first party is something that the first party is absolutely entitled to do. This is true because, as I have suggested, ownership itself is the result of entitlements.
Whether one also deserves profits is more complicated. Earlier in this chapter, I said “In the case of entitlement, one is owed something and there is no option about whether he is to receive it, but in the case of desert it is the case that some other person has decided to bestow or give the thing in question on the basis of some set of reasons for doing so, which the giver has stipulated and which the receiver has fulfilled.” The consumer, who values a newly created good or service more than he values the amount of money asked for it thus bestows on the creator of the new good or service ( the capitalist) the requested amount. Both have reckoned that they have received adequate value in the exchange and this is the basis for the consumer considering that the capitalist has deserved his profit. He is the final arbiter. He determines the aforementioned set of reasons. So, the entrepreneur is frequently both deserving of, and entitled to profits.
Now historically many of the opponents of profit-making have argued that profits are illegitimate ( and hence cannot be deserved) because the only basis for deserving any material goods is a person’s labor. This is the well-known Labor Theory of Value, and its best known proponent is the well-known Karl Marx. This theory looks at the inputs, which are typically both labor and materials and compares the final price of the good or service less the cost of materials plus other costs and asserts that any wages totaling less than the final price less the sum of these assorted costs,including rent, interest charges, etc., is unjustified and essentially a theft of the worker’s labor. The failure of this theory is that it looks only at the input side of the transaction, how much in the way of time and energy is expended; forgotten is the other side of this value-equation, the consumer who buys the product and whose concept of its value to him sets the price at what it is. The worker is only making a partial contribution to the value: the materials (including assorted costs) and the capitalist are the other factors. Marx, and others refuse to acknowledge that the capitalist has a legitimate role in the production process–the capital, they say, could just as well come from society at large. But, in the market setting, the capitalist is the guy who (a) determines that there is a consumer need to be filled, (b) is willing to take all of the risks of time and capital to create a business entity, and (c) co-ordinates, manages and otherwise brings the project to fruition, to provide a consumer good or service which might not exist but for his activities, his human action . And for all of this, the Marxists have the nerve to imply that the surplus of proceeds of price over cost is some kind of theft! The typical worker has no stomach for doing any of the above; he wishes to take the safe way to getting his compensation by working for wages. The typical worker has no stomach for the risks involved. It is nonsensical that workers would also feel that the price of the of the goods or services produced by the enterprise should be set at the sum of their labor contribution (wages and benefits) plus the raw material costs ( if appropriate) with no residue for the guy that organized the whole thing, who made their job possible!
Political philosopher Jan Narveson summarizes relevant ideas concerning the legitimacy of profits:
The questions of desert concern when such considerations are in order, who applies them, and why. And here our answer is that when someone deserves something he deserves it from someone. No sense can attach to simply “deserving” something all by itself. It takes a minimum of two parties…. And those who bestow the prizes, who hold the goods in which the rewards consists, and so on, are the fundamental wielders of these notions. They apply them on the basis of interests and values they bring to the context. This explains why desert is not exclusively reserved for such things as effort, diligence, and application of ingenuity. It is also available for the exercise of native intelligence, talent, skill, or the display of natural charm, which are not producible merely by effort alone. Nevertheless, those who have the relevant interests in these displays may see fit to reward them.
Reviewing what been said about profits, it becomes clearer and clearer that social justice advocates, in their insistence on the undeserved nature of various forms of compensation, and their refusal to grant legitimacy to the time-honored concepts embodied in the property-centered entitlement theory of justice are really interested in using that relatively small fraction of humankind who are the prime movers and achievers as if they were nothing more than draft horses whose rations, after all, are decided by their owners. They should work for whatever they are lucky enough to get. This predilection, I suggest, does not go very far towards mitigating the basic objections one might have to unalloyed Utilitarianism.
I have spent so much time on John Rawls’s approach for several reasons. As noted earlier, it is one of the few attempts to actually formulate some sort of rational argument for the distributive notions of social justice, instead of just accepting that they should be implemented and proceeding immediately to a discussion of methods. However, Rawls’s work is also important because it accurately reflects attitudes which arose around the time of its writing due to various historical trends—first, what can be called the “rise of the economy of mass consumption”, and second, the “moral drama of the civil rights movement”. These two factors go far in explaining why the Rawlsian and/or simpler egalitarian distributive ideas have been accepted almost uncritically.
At the time A Theory of Justice was written (1971), we had experienced about two decades of unprecedented economic growth, with real incomes almost doubling in the period 1950 to 1970. As early as 1958, economist John Kenneth Galbraith was claiming that “the fundamental issue was no longer how to achieve sufficient production, but how to distribute what was being produced”. Galbraith was an economist of the Keynesian school, which focused almost exclusively on aggregate demand as the motive force for the economy. “In this land of high consumption, moreover, goods were so widely available they seemed almost to be part of the natural landscape. Galbraith believed that the problem of production had essentially been solved and that the remaining problem was how to distribute the available goods and services—to determine who gets what. Political agency existed in this view because policymakers could make decisions about whether to direct spending toward what they regarded as private luxuries  or to putative public benefits. Economic agency, though, largely disappeared from view as the economy took on the guise of a vast impersonal machine, automatically cranking out supplies in response to aggregate demand. Seen chiefly as consumers, Americans tended to be understood as passive recipients who contributed to the economy by receiving. Official attention turned to those who received the least because they were the ones least able to play the consumer role in boosting demand”.
At the same time as concern for a certain group which were deemed to be “deprived” relative to the majority was increasing, another phenomenon was developing: the civil rights movement of the 1950s and 1960s. Whereas civil liberties had been conceived of as providing freedom from regulation or interference by government, the concept of a civil right was focused on government protecting individuals through law and regulation. No one will argue that American citizens of African origin have not suffered historically both from slavery, and then subsequently from racial discrimination in voting, the use of public facilities, and other things we all take for granted; likewise, few will say that correcting these abuses was not a moral issue or not deserving of support. Burning black homes and churches, murder of civil rights activists, and other heinous crimes were and are unconscionable. It has been observed that…social movements require an energizing myth to create group solidarity and to give meaning to collective action. A highly successful myth can move beyond a movement’s adherents and become part of a larger culture. By “myth” I do not mean false or illusory account , but a narrative with enough moral and emotional force to give clarity and inspiration to an account of events. The largely nonviolent civil rights movement worked so well as moral drama in part because of the violence with which it was met and in part because the vision of an oppressed people struggling for freedom evoked themes of existing American cultural narratives.
Using this selfsame narrative, the civil rights movement changed America’s social vision such that Americans began to think of themselves in terms of groups or categories of persons who required protection. Given this attitude, it is not unusual then to see the rise of movements based on discrimination and/or maltreatment of one sort or another, including, but not limited to, other racial groups ( Hispanic, American Indians), those with special sexual preferences ( gay and lesbian), those with one or another type of disability, and finally just “the poor”. Carl Bankston summarizes what happens when groups like these try to co-opt the myth of the black civil rights struggle:
Seeing disabilities or variations in sexuality according to the civil rights model minimizes the differences between these aspects of the human condition and the historical experience of African Americans. Second, social myths oversimplify our institutions and relations by dramatizing them as sharply drawn stories of good or evil. This moral simplification not only reduces social theory to caricature but also invests political positions (such as redistributive arguments) with automatic virtue, Third, a widely accepted social myth imposes a template on thinking that discourages alternative views or the examination of assumptions. In particular, the civil rights myth discourages approaching questions of political economy as matters of competing interest groups or as matters of overall national interest. Instead, it answers these kinds of questions with assertions of irreducible rights. [Emphasis added.]
So, we are beginning to see that there are multiple aspects responsible for the largely uncritical acceptance of “justice as fairness” and its distributive consequences—they include unsupported moral intuitions on one hand, as well as the rationales developed by Rawls in his Theory, and the historical and cultural factors noted above. I submit that the actual intellectual substance, in terms of what I would consider a logically acceptable justification for economic or social justice, is very, very thin.
Leaving behind for the moment, issues about the principles of distributive justice, I need to move your attention to what is the normal result ( in an at least partially market-oriented economy) of implementing the Rawlsian type of “arrangements”, and that would, of course, be taxation. Wikipedia  defines it thus:
To tax (from the Latin taxo; “I estimate”) is to impose a financial charge or other levy upon a taxpayer (an individual or legal entity) by a state or the functional equivalent of a state such that failure to pay is punishable by law.
My first response to this kind of definition is negative, for I resent its attempt at neutrality, its attempt to avoid making any value judgements about what is really going on here. The fact, the bald-faced fact is that a tax is an expropriation of property, “a coercive, non-contractual transfer of definite physical assets (nowadays mostly , but not exclusively money), and the value embodied in them, from a person or group of persons who first had these assets and who could have derived an income from further holding them, to another, who now possesses them and now derives an income from so doing.” In plainer words, it is a legally-sanctioned form of theft. That it is coercive and non-contractual is what makes it so. It is but one example of how government (the state) violates what I contend is a bedrock moral principle, namely, that if something would be viewed a crime if done by a private citizen, then under no circumstances imaginable, should the state be able to do that same action with impunity. Let me re-state it in a slightly different way, and label it as Bedrock Principle #1 : If some act is a crime for the citizen, and so prohibited, then it is likewise prohibited for the state.
I will go on to assert that, like all theft, all taxation is inherently bad—it has no saving grace whatsoever. It is an unmitigated evil. But I won’t stop there. I will go on to show why I believe this to be the case.
First, there are only three ways a person can realize income from assets: (1) the asset was acquired through the first-user type of appropriation we have previously discussed, (2) the asset was used, together with one’s labor, to create some new asset, or (3) the asset was either acquired or transferred by some contractual arrangement. If some significant fraction of the asset is removed (read expropriated) by taxing it, then the owner loses not only that physical amount, but also its ability to contribute to a higher future income. Hoppe puts it in terms that better explain its economic implications:
… any form of taxation implies a reduction of income a person can expect to receive from original appropriation, production, or from contracting. Since these activities require the employment of scarce means—at least the time and the use of one’s body— which could be used for consumption and/or leisure, the opportunity cost of performing them is raised. The marginal utility of appropriating, producing, or contracting is decreased, and the marginal utility of consumption and leisure is increased. Accordingly, there will be a tendency to shift out of the former roles and into the latter.
In light of the fact that we will be delving deeply into economics in future posts, it is perhaps not too early to introduce some economic concepts of consequence.
Opportunity cost is the “cost” (monetary or otherwise) which is entailed in making a choice between two mutually exclusive alternatives, i.e. it is the cost of doing one thing instead of another, where the cost is based on the value of the thing forgone. The opportunity cost of producing x amount of product A instead of 1.5x amount of product B is the value of the amount of product B. Similarly, the opportunity cost of watching a ball game on TV may be the loss of quality time spent tossing around a ball with your son instead.
Marginal utility has been defined as “a measure of relative satisfaction gained or lost from an increase or decrease in the consumption of that good or service.” For example, the marginal utility of a of having fourth pair of shoes may be relatively high whereas the marginal utility of having a second or third car may be considerably less. Typically, as the supply of items increases the marginal utility of each additional item is seen to decrease. Note that this is not an objective measure, but depends on the situation of each individual.
Using these concepts, we can translate Hoppe’s language above into a simpler set of assertions, namely that taxation changes the structure of incentives so as to favor consumption over production. Hoppe further observes that
by lowering the present value associated with future-directed value-productive efforts, taxation raises the effective rate of time preference …and, accordingly, leads to a shortening of the period of production and provision and so exerts an inexorable influence pushing mankind in the direction of an existence of living from hand to mouth.
In simpler terms, what this means is that when taxed people will tend to adopt methods of production which deliver the desired goods in a shorter time frame despite the fact that a lengthening of the production period by developing and using more efficient or appropriate tools and procedures would ultimately deliver more of the product and possibly at a lower cost per unit. The loss to taxation of the capital required to do this is thus a loss that cannot be recovered from and creates a downward cycle of progressive impoverishment. And, of course, the damage done in this manner is proportional to the amount of capital taken by taxation.
As you will learn soon enough, there are many different schools and viewpoints among economists, and some have declared that taxation either has no influence on standard of living or economic well-being, or that it can be shown to actually increase the same. Yes, some economists trot out empirical evidence that increased taxation can occur simultaneously with increased output, say increased GDP. Now surely you can see through this one: the mere existence of a positive correlation between two phenomena does not prove that one caused the other or is even related to it in some logical way—this is the fallacy of post hoc ergo propter hoc.  One has to be an inveterate believer in the virtues and efficacy of the state to attribute the relatively high per capita wealth of a country like Sweden to the existence of its high levels of taxation. Whatever has been achieved in such situations is despite high taxes, not because of them.
A less strong assertion by some empirically oriented economists is that, while perhaps not causing increased economic well being, taxation is at least neutral in this regard. To the extent that statistical data might show this to be the case, a fairly simple and obvious explanation is at hand: when looked at over a reasonable time period, we note that concurrent with the damage inflicted by taxation, there is a possible, in fact probable, improvement in methods and technology which causes an increase in output to offset the loss by taxation. If the improvements are sufficiently advanced, it can also answer the question of how increased wealth could go hand in hand with high taxes.
While in most cases, the empirically oriented economist does not expound a theory as to why the phenomenon ( of high taxes and high or steady wealth) should occur, some have suggested that the higher taxation causes the taxed individuals to work harder so as to make up for what was taxed away, i.e. to become more of a “workaholic”, however, “it is still the case that the income of value-productive individuals has fallen. Even if they produce the same output as previously, they can only do so if they expend more labor now than before. Since any additional labor expenditure implies forgone leisure or consumption (leisure or consumption which they otherwise could have enjoyed along with the same output of valuable assets), their overall standard of living must be lower”.
The preceding discussion does not exhaust all the claims made concerning the alleged lack of negative influence of taxation on economic well-being and standard of living. I refer the reader to the work of Hans-Herman Hoppe (see Notes 11-14).
Since it does not appear that we are to be spared from taxation any time soon, I next want to look at the various notions people have developed concerning the types and amounts of taxes being advocated and to the particular idea of “tax justice”. This leads us to a Conventional Wisdom Re: Taxes: Those who have higher incomes should pay taxes at a progressively higher rate than those with more moderate incomes.
Now, as has become a norm with me, the first question to be asked is WHY? And the standard answer is “Because they can afford it” or alternatively, “they have the ability to pay”. (which reminds one of the old saying about why one robs banks—it’s where the money is…). As with most answers in support of liberal-egalitarian propositions, any supposed explanation or justification stops at this point; it resembles the already-discussed assertion that everyone should have equal distributive shares because “it is the only fair thing to do…”. For most egalitarian statists, there is nothing to say beyond that point. They then move on quickly to discussions of how to implement redistribution.
But again, as with our exposition concerning John Rawls, there are several attempts out there to provide some sort of intellectually respectable, or academic justification for the tax schemes in effect, and I will hold forth briefly on the most common.
To begin with, tax schemes are evaluated according to two primary criteria as to being equitable: vertical equity and horizontal equity. Vertical equity deals with how to tax incomes that are significantly different, and horizontal equity relates to taxing people whose incomes are similar.
There are a number of approaches to vertical equity. The most common is the ability-to-pay concept cited above; there are however, three variations to be considered. One approach says that the amount of wealth (“endowment”) should be used to determine the tax; a special case, which is more common in actual use, is the amount of income received. The only apparent justification for this stance is “those who have more, should pay more”. Another approach to the ability-to-pay concept is known as “equal sacrifice”, i.e. the idea that the tax on the wealthier ( or higher income ) person should be set “so as to ensure that each taxpayer sustains the same loss in welfare—so that the real, as opposed to the monetary cost to each is the same”. The equal sacrifice argument ( if it can be characterized as such) relies on the previously mentioned marginal utility idea—the money taxed away from the wealthy person is in dollars that have less marginal utility to him than the same amount to a person of lesser means: the last $10,000 of a $ 300,000 income has less utility than the last $10,000 of a $75,000 income, for instance. The third alternative is called “ability-to-pay as an egalitarian idea”. This notion insists that the equal sacrifice scenario clearly does not conform to egalitarian norms of how to tax those with substantial wealth or incomes because for those who have or receive more, proportionally greater sacrifices are required. Again, when pressed, the only justification for the egalitarian norm is “fairness”, which term is not ever explained.
Another principle sometimes cited for setting rates and amounts of tax is the “benefit principle”. In its simplest form it says that taxes should be adjusted to reflect the benefit that the taxpayer receives in the form of government services. Most tax theorists are unhappy with this idea because of the difficulty in assessing the benefit to any given individual, and to what they claim is a baseline of the level of welfare experienced in the absence of government.
The preceding review of the traditional approaches to tax justice is based on a 2002 book by Liam Murphy and Thomas Nagel entitled The Myth of Ownership. Messrs. Murphy and Nagel are strong proponents of the virtues of government:
What sort of life would be led in the total absence of government? It would be wrong to imagine life roughly as it is now, with banks, houses, and cars, and lacking only the most obvious government services such as Social Security, the National Endowment for the Arts, and the police. The no-government world is the world of Hobbe’s state of nature, which he aptly described as a war of all against all. And in such a state of affairs, there is little doubt that everyone’s level of welfare would be very low and—importantly—roughly equal. We cannot pretend that differences in ability, personality, and inherited wealth that lead to great inequalities of welfare in an orderly market economy would have the same effect if there were no government to create and protect legal property rights and their value and to facilitate mutually beneficial exchanges. (We leave aside the fact that without government the earth would support only a tiny fraction of its present human population, so that most of us wouldn’t even exist in Hobbe’s state of nature.).
These authors seem to feel that we should be eternally grateful for the benefits the state confers upon mankind. Reading the foregoing, one has to wonder about their priorities, however. Most of us would not put Social Security, the National Endowment, and the police all on the same level. Of course, the legal benefits and protections provided by the courts and various enforcement mechanisms and a certain minimum of infrastructure are important to the functioning of a market economy, but I maintain that social welfare programs, support for the arts, the Department of Housing and Urban Development, the Department of Education, the Department of Labor, and a whole host of other government “services” could disappear tomorrow forever and, for many people, never be missed. Life would be much like America in say, 1960, which was not such a bad place (if you were not concerned about the evils of a materialist, consumer-oriented society). The bald truth, as I see it, is that the average person, and more particularly, the above average person who runs a small business or is otherwise one of the producers of things is likely to justifiably view both the operations and demands of government as a net negative influence at this point in time. And, I venture he would say, “we should pay extra for this?”
In short, The Myth of Ownership’s principal pre-occupation is with the idea that we are not the owners of our pre-tax income, and even the ownership of our income net of taxes is considered by the authors as merely a legal convention, which, upon action by the democratic body politic could be rescinded. Murphy and Nagel show a complete and utter disrespect for the entitlement theory of distributive justice that we have discussed. They feel that the matter of tax justice is bound up inextricably with questions of distributive justice, and their attitudes in this regard resemble, if not exceed, those of Rawls and company.
Reading Myth and other treatises on tax justice, one cannot help but get the feeling that all of the discussion, rather than reflecting a notion of fairness that demands equal treatment, and this to me seems most often the central notion that people subscribe to, turns the entire fairness concept on its head. How can you, in good conscience, insist on taking huge, progressively larger sums from people simply because they have it, and for no other reason? The idea that high income earners benefit so extraordinarily from the things that government provides that we can justify a 10-fold or more difference in taxes would be laughable if it were not so sad. No, I submit that the entire treatment of fairness we see around us is perverse, and frankly immoral by the standards we discuss here. Also, what about all of those who in effect are paying no taxes? Economists sometimes fret about the “free rider” problem. Well, we have them in spades—as of this writing something approaching 50% of all U.S. tax filers pay no income tax, and a significant fraction of those, if their Earned Income Credit received is netted against their payroll ( FICA, Medicare, etc.) taxes, their contribution via both income and payroll taxes to our federal government is zero! These are people making $ 30,000 – $40,000 in many cases. Where, from the perspective of those who do pay tax, is the fairness in that? By any standard one could imagine, they are receiving roughly the same or greater benefit from the existence of government than the high income individual who is so progressively taxed. With respect to whatever legitimate benefits government might provide, half the population is supporting the other half. And this is a case of implementing the “fairness” principle of “treating like cases alike”? We are all people, and we all need protection of our rights, which I maintain is one of the primary functions of government. The idea that having a high income is some kind of “relevant” difference between people for the purposes of paying for something is absurd. Prices for items in the marketplace are not set based on how much income the buyer has, and neither should taxation.
Before leaving the tax justice discussion, one should note that all of the schemes of taxation seem, to me at least, to have a strong punitive element; for instance, the “equal sacrifice” requires inflicting economic pain on taxpayers, with greater pain for the reason only that someone, for whatever reason, has more income or wealth to be taxed. Why is it a function of government to punish innocent citizens, especially if those citizens are likely more productive, and for that reason, more useful to the rest of society? One cannot read Myth, for example, without coming away with the feeling that the authors are lording it over those with higher incomes, and rejoicing in “putting them in their places”, so to speak; the entire treatise is an attempt to give intellectual respectability to a theory without using any real substantive arguments.
Now suppose, despite all that has come before, you still think that we are not taxing the rich to the extent required. Since for the likes of Murphy, Nagel, Rawls, et al, property rights are mere “conventions”, then it is possible, indeed as things are currently progressing, likely, for the nature or extent of these rights to be changed politically, i.e. by majority vote. Suppose we were to implement the suggestion of that most revered Democratic president of our time, Franklin Delano Roosevelt, that no one should be entitled to have a net income after taxes of more than $25,000! Yes, FDR actually said that in Fireside chat No. 21 ( April, 1942) and repeated it again in No. 22 (September, 1942). This figure is equivalent to roughly $350,000 in today’s dollars. There are no doubt many of the statist persuasion who would absolutely welcome such a taxation proposal. Using income tax data from 2007, I have calculated that this would add approximately $ 2 trillion dollars to the actual revenue figure of $1.2 trillion. We have just gone through the so-called “debt crisis” of 2011. Our current president has insisted on new sources of revenue to reduce annual deficits; since the deficit to be dealt with is of the order of $1.3 trillion, or 40% of our expenditures, and the spending cuts proposed were so clearly token, you can see how much and how draconian any new taxes would have to be, how closely any proposal would need to approach the Rooseveltian one to make any difference. But why not go even further, perhaps confiscating all income over say, $100,000? After all, who really needs more than $100,000 to live on?
The point I am trying to make here is that, if you accept the statist/egalitarian argument that they have the monopoly on morality with their putative societal “arrangements”, then there is essentially no limit to the amount which government can confiscate and still be considered morally correct in doing so. The only impediments are the so-called practical issues, i.e. the matter of destroying incentives, etc. Or simply an appeal to “reasonableness”. It then all comes down to who has the votes, and the numbers of producers are always and ever less than those whose only predilection is to consume. Who do you think will prevail in that situation? How does this not resemble a situation of “my gang is bigger than your gang”? How does this have anything to do with morality? Morality is not, and cannot be allowed to be, simply whatever the majority declares it to be. In the last analysis, implementing the statist/egalitarian morality involves the use of force, most especially against those who have done nothing wrong. I submit that the only morally appropriate use of such force is against those who are bent on violating the rights of others, i.e. criminals. To use force just to get your way, which is, after all, what insisting on social or economic justice boils down to, is, I submit, morally reprehensible.
When discussing Rawls and even John Stuart Mill, I touched upon the concept of liberty. Rawls’s Theory calls for a principle of Equal Liberty, even for maximizing (certain kinds of ) liberty. This term, however, needs a definition. Perhaps this will do: Liberty is the freedom to make and then implement the decisions a rational being both needs and desires to make in order to live life as he desires it without interference from outsiders.  This definition involves action on the part of the person who is at liberty.. The presence of the concept of interference brands this as a definition of “social liberty”, which is the only kind I have an interest in pursuing here. The terms liberty and freedom, as I shall use them, are essentially synonymous.
As with the concepts of “fairness” and “justice”, one may belabor the concept of freedom by citing various usages of the term. One may speak of not having the freedom to accomplish one’s ends due to various external factors, such as ill health, lack of physical capacity, or other conditions beyond one’s control. This does not fit the social context I am discussing. Yes, one may speak of there being both positive liberty and negative liberty, but this does not lead to the conclusion that many advocates of statism cite as essential to their case. Jan Narveson explains it thusly:
(1) Positive Liberty: we can identify positive liberty with the presence of those conditions, such as the means for doing x, that enable you to do something, if circumstances permit; one way of being unfree to do it would be for one or more of those conditions not to obtain. These conditions can be either internal or external to the body or mind of the agent….The internal conditions are your powers: to have the requisite internal enabling conditions, granted absence of obstacles, is to have, in one main respect, the power to do the thing in question….
(2) Negative liberty: this, by contrast, refers simply to the absence of factors that would prevent you from doing x: you’ve got what it takes to do x, but something stands in your way, blocks your path—interferes, in short. [ This would include physical factors and natural limitations.] 
Statists frequently capitalize on the confusion of these two aspects of freedom by insisting that the state must create the conditions that promote or optimize the ability of the individual to realize his desires; this, of course, includes all of the typical welfare measures, like a guaranteed income, the right to a “living wage”, i.e. all sorts of “positive” or welfare rights. The failure to provide these makes one unfree, according to them. Take, for example, FDR’s famous speech on the Four Freedoms:
In the future days, which we seek to make secure, we look forward to a world founded upon four essential human freedoms.
The first is freedom of speech and expression—everywhere in the world.
The second is freedom of every person to worship God in his own way–everywhere in the world.
The third is freedom from want—which, translated into world terms, means economic understandings which will secure to every nation a healthy peacetime life for its inhabitants—everywhere in the world.
The fourth is freedom from fear—which, translated into world terms, means a world-wide reduction of armaments to such a point and in such a thorough fashion that no nation will be in a position to commit an act of physical aggression against any neighbor—anywhere in the world.
The first two are clearly negative rights ( or freedoms) as we have defined them, while the third and fourth are positive rights, and require the action of entities outside the rightholder in order to be fulfilled. By mixing these two together in one presentation, FDR was attempting to give equal status, importance, and credibility to the third and fourth “freedoms” by including them along with rights that are widely and generally supported in that they are incorporated in Amendments 1 and 4 in the U.S. Constitution’s Bill of Rights. I call this intellectual smuggling, the mixing of apples and oranges in the hope of receiving he listener’s uncritical acceptance, hoping that he will swallow them whole.
Narveson sums it up as follows:
You are at liberty in the social sense when others do not, by their actions, prevent you from doing what you want. You are at liberty in this sense when nobody is interfering with your liberty. Your liberty to do x, on the other hand, is not interfered with when someone else, even if that someone could do so if she chose, fails to provide you with something that would enable you to do x. [Additional emphasis added.]
So, it should be clear that “freedom from want” is not of the same order as freedom of expression; freedom from want almost certainly is going to involve, at some point, the forcible taking of something that already legitimately belongs to someone, and giving it to someone else. In other words, to exercise the right to be free from want, it is necessary to violate another right, the right of ownership. Harking back to what Hillel Steiner has said, this is not a compossible set of rights. But, of course, FDR purposely did not include “freedom to own (and/or keep)” as one of his Four Freedoms. He does this for the same reasons that Rawls limits property rights so severely in his scheme.
Why dwell on liberty? Because I believe that “individual liberty is the fundamental and only legitimate concern of any just society”.
 Liberty, not fairness, is the basis for justice.
By this time I hope that I have demonstrated to your satisfaction the following points about justice and fairness:
- The first level of justification for statist/egalitarian proposals for economic or social justice in most cases, involves at most an appeal to moral intuition ( “it’s only fair”); this is the argument from assertion—no further justification is required.
- Justice has to do with those things which society uses forcible means to accomplish; the historical justification for giving up one’s own right to enforce in favor of enforcement by an entity like the state is explained by appealing to the device of a “social contract” whereby a compact of mutual forbearance of threats, violence and fraud is created between the individual and some sovereign power, who will punish those who would cheat on the terms of the compact. There is a serious question as to whether the use of such force by the state should extend beyond the enforcement of mutual forbearance, and, if so, what is the justification for such an extension?
- About the only intellectually respectable attempt to justify economic or social justice, i.e going beyond the argument from assertion, is the theory of John Rawls, called “Justice as Fairness”. This theory was a reaction to the philosophy of Utilitarianism which has a primary principle that looks only at aggregate welfare as the standard of the good, i.e. it is a collectivist approach to morality. Because it can clearly sacrifice individual liberty, Rawls tried to compensate for this with his First Principle, the Equal Liberty Principle.
- Rawls’s conceptual framework is deeply flawed:
(1) The Equal Liberty principle includes only civil liberties; economic liberty is considered unimportant and unworthy of protection. Inasmuch as “Property relations go to the root of any social system.”, Rawls has gone against virtually all previous historical efforts by ignoring its importance.
(2) Although Rawls appears to accommodate capitalism as an acceptable economic system, he makes no commitment to its necessity, insisting that socialism ( including state ownership of the means of production) would be equally good. The fact that he insists that an equal distribution is the default one, unless one can justify some inequality, together with the toleration of socialism, makes this as collectivist as any Utilitarian theory. The best that could be hoped for under Rawls is a heavily regulated mixed economy.
(3) Rawls’s exposition, like most statist/egalitarian theses, suffers from a lack of context, to wit, that distribution ( i.e. consumption) is considered as isolated from production, when the two are actually intimately related. Furthermore, the distributions advocated are all of patterned, end-result type, which defies the real world of existing distributions, and must be continually re-done to satisfy the end-result desired.
(4) Rawls insists that characteristics of individuals which might justify inequality of distribution ( which occurs naturally) are unimportant because they are “morally arbitrary”, which is another way of saying they are undeserved. Our discussion shows that there is a lot of false thinking behind this concept, and that the root of its existence is likely a simple envy of some people by others. We also show that people ( i.e. producers) are frequently both entitled to, and deserve whatever profits they make, and that the Marxian labor theory of value is fallacious. I have suggested that there is an aura of illegitimacy to the existence of inequalities that is never made fully explicit, but nevertheless colors the attitude (and consequently, the conclusions) of the egalitarian theorist.
(5) The bargainers in the Original Position behind the Veil of Ignorance are not well grounded in reality: people who treat objects as if they appeared from nowhere, and without any special entitlements ( i.e. ownership) will treat anything to be distributed as “manna from heaven”. Moreover, the bargainers will be constrained to come up with only patterned, end-state distributions, because no historical distribution is possible to people who have no history, i.e are behind the Veil.
(6) Nozick notes that in Rawls’s and other egalitarian schemes, moral ends are completely embedded in the end goal and such limitations as are placed on accomplishing the goal are included within it. He claims that this arrangement will violate moral side constraints that exist independently. Such an overriding side constraint is the Kantian injunction that “people may not be sacrificed or used for the achieving of other ends without their consent”. For me, the entire argument for individualism versus collectivism hangs on observing this constraint. I submit that no goal is so worthy that this injunction can be set aside to achieve it.
In addition to Rawls’s A Theory of Justice, the attitudes toward social or economic justice have been heavily influenced by certain historical and cultural phenomena—the advocates of redistribution have attempted to justify their demands (i.e. make their claims) on the basis that enforcement of income equality is justified by its semblance to the civil rights model, i.e. the idea that certain groups or categories of persons have been maltreated, and this maltreatment must be continually rectified. If to this, you add the notion that all problems with production have been solved, that America is the Affluent Society, then it is all the more acceptable to deal only with the problem of how to distribute all this largess, to isolate production from consumption.
It is not enough to point out the numerous fallacies, errors, and faulty conceptual underpinnings of the theories behind social or economic justice as currently espoused. There are also alternative theories of distributive justice, theories about who gets what.
These theories rely on the fundamental importance of property in our lives, and so, attempt to formulate rules about entitlements to property, including how unowned property is first acquired. Nozick has his Entitlement Theory of Justice; Randy Barnett propounds a set of justice principles that echo Nozick, but emphasize their relationship to liberty, and the practical importance of how these rules (property rights) are able to solve pervasive social problems that arise when there are disputes about scarce physical resources ( including, of course, one’s own body). Hans Hermann-Hoppe has provided a rigorous proof of the validity of the principle of first acquisition to bolster Nozick’s discussion of what he calls the “Lockean proviso” and Narveson’s “first-use” rule and Barnett’s “first right of possession”. All of these views converge on the notion that people may justifiably acquire an initial title to unowned property, and that, in so doing, a fundamental theoretical problem with property rights is resolved.
Our final discussion in relation to what rules should govern property involves taxation, which, in the form of income taxation, is the ultimate means of implementing the kind of redistribution called for by social or economic justice. I discuss the various forms of taxation with respect to their supposed degrees of equity, and I note that, because of its negative influence on accumulated capital, it can never be anything but a negative influence on the general increase in wealth. I note particularly that some contemporary economists claim that taxation can either be said to increase wealth, or that taxation could be considered as neutral in this regard confuse the situation by relying on empirical data unsupported by a corresponding a priori theory as to why this should be the case. One of the more well-known works on tax justice (The Myth of Ownership) goes as far as to claim that no one has any property right in his pre-tax income; this is quite a remarkable claim, and dovetails nicely with the need of economic justice advocates to command whatever sums they require for their income-leveling plans. The authors do not answer the question of what limits, if any, are imposed on determining how much of a person’s income is included in the “pre-tax” portion; one can justifiably assume, then, that the final rate of tax is subject to political adjustment and that 100% of one’s pre-tax income is not out of the question. I note that there is no moral principle whatsoever that appears to operate to limit this amount, other than majority rule.
With regard to liberty, I note that its primary earmark is the lack of interference by others with a person’s desired actions. However, interference is not, and can never be, construed as the failure to provide or facilitate some action that I would wish to take.
So what would I have you believe on the strength what I have said so far? I would hope that:
(1) You would reject all claims that justice is synonymous with fairness.
(2) You would realize that the arguments in favor of social justice are at best weak, and at worst almost non-existent, especially in comparison with the relatively robust and rigorous treatment accorded to the entitlement theory of distributive justice I have elaborated here. More important, I would hope that, regardless of what you may have thought in the past, you would come to agree that there is a moral imperative of not ever using other people to achieve one’s goals, and a recognition that the social justice theories of all sorts require one to ignore that imperative.
(3) The entitlement theory represents ideas that are thoroughly grounded in reality, have stood the test of time, and answer the need that principles be based on human nature; it is in the nature of human beings to be motivated primarily by their self-interest ahead of the interest of others, and thus the rules of justice need to take this into account. Property is essential to life, and issues about who gets what are the source of pervasive social problems; the entitlement theory provides solutions to these problems and has provided the basis for our commonly accepted legal precepts and the rule of law. Egalitarian notions of social or economic justice run counter to human nature, and require the more or less continuous use of force for their implementation, whereas the entitlement theory only invokes the sanctioned use of force against those who would violate rights, a huge difference, as I see it. In short, based on all these reasons, you would reject the content of my statement of Conventional Wisdom Re: Justice and Fairness.
(3) You would regard taxes as having nothing beneficial about them, and that their minimization should be an overriding goal; in particular the method of taxing incomes should abolished as too coercive, and replaced with some form of consumption tax, since income taxation is a wholesale violator of our Bedrock Principle No. 1 (q.v.). Realizing that the steeply progressive taxation that is required by social justice, you would reject my statement of Conventional Wisdom Re: Taxation.
(4) The existence of anything other than the “minimal” or night-watchman state, consisting largely of agencies which protect property rights and administer justice is probably the most extensive state that is morally justified. Given that it is unlikely any time soon to achieve this status with government, one should at least draw a secondary line which defines a sphere of government activity which eliminates all programs or activities whose intention is to transfer wealth from producers to non-producers. If there is to be any type of “safety net” for those are unable to help themselves, then the redistributive aspects of such programs should require proof of need, and be recognized as the form of charity which it is, and not a matter of entitlement, and the scope of such programs should be a tiny fraction of what is currently in effect.
(5) Having considered my arguments regarding profits and whether people can be either entitled to, or deserving of profits, you would reject my stated Conventional Wisdom Re: Profits.
(6) Last, you would realize that, despite having heard it for most of your adult life, the frequent claim that the statist/egalitarian advocates have morality on their side is patently false; their program is both impractical and morally bankrupt. This is true because it relies on violence, it ignores human nature, it requires a degree of deceit in order to persuade adoption, it denies that there is any historical entitlement to property, and it sacrifices the liberty of some people in order to provide benefits to others. The welfare and, more important, the plans and aspirations of the individual might as well be trash if they interfere with the statistically relevant welfare of the group. Contrast, if you will, all of these characteristics with the entitlement theory principles and what flows from them.