The State by Anthony de Jasay (18 page)

Author: Jasay, Anthony de Title: The State

Anthony de Jasay

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2. The Adversary StateInterpersonal Justice

Property and the freedom of contract (to be upheld) produce unjust distributive shares (to be redressed).

1. Free contracts are unfree if they are unfair.
   
 

2. In sketching the posture of the state consistent with letting people sort out among themselves the bundles of goods they would rather have (pp. 25-9), I described the capitalist state as one which, subject only to the non-violation of third-party rights, respects contracts entered into by consenting adults regardless of their status and of the fairness of the terms agreed. This does not in the least imply that such a state is impervious to ideas of fairness or justice or that it lacks compassion for those whose lot, such as it emerges from the interaction of contracts, is unhappy. It does imply, though, that the state does not feel entitled to indulge its or anybody else's ideas of fairness and feelings of compassion.
   
 

3. The liberal doctrine justifying the adversary state, on the other hand, affirms (though at the outset it used to make relatively heavy weather of the grounds for any such affirmation) that it is entitled to do so; that over a wide area of contractual relations it has licence and indeed an express mandate to do so; and that its
   

moral entitlement and its political mandate are the twin sources of its right to employ the coercion without which the aims of fairness and compassion cannot be attained. This, in effect, is the ideology which calls upon the state to do what it would be induced to do anyway in the normal course of building and maintaining consent to its rule, "dispensing distributive justice" being one way of describing such actions, "buying votes, buying clout," another.

1. The progression from the Benthamite agenda of piecemeal improvements in social arrangements and additions to the range of public goods produced, to the liberal programme of doing distributive justice, is unbroken. In retrospect, once it is granted that a net interpersonal balance of good is not conceptual gibberish and special pleading, and that it can be brought about by promoting the (greater) good of some people at the expense of the (lesser) good of others, there is no difference in kind between forcing rich taxpayers to pay for prison reform, the eradication of cholera or a literacy campaign, and forcing them to supplement the standard of life of the poor (or, for that matter, of the less rich) in more comprehensive ways. As a matter of historical sequence, of course, there were differences of timing. The arguments for utilitarian tinkering with, say, public health or education were different, too, from those postulating the subordination of property rights to social justice or more generally to some conception of the greatest good of society. On the level of political practice, however, once the state, in a context of electoral democracy on a broad franchise, had made a habit of rewarding support, it was just a matter of cumulative consequences before relatively innocuous piecemeal tinkering proved inadequate for continuing political survival. Tenure of state power in competition with rivals came to require a progressively more systematic and consistent interference with contracts.
   
2. Interference can be of two broad kinds: constraint, which limits some of the terms which contracts are allowed to have (e.g. price control), and overriding, which retroactively undoes the effect of contracts (e.g. redistributive taxes and subsidies).
   
 

3. When I say "contracts," I am especially interested in their role as instruments in bringing about a certain pattern of social cooperation and the corresponding distribution of incomes. In the state of nature (in which social cooperation takes place without help or hindrance by the state), the freedom to contract has the effect that production and people's shares in the product are simultaneously determined by causes subsumed under such categories as the state of the art, tastes for goods and leisure, capital and people's capacities for various types of effort. (The reader is no doubt alert to the fact that this account of distribution glosses over formidable problems. Enterprise, what Alfred Marshall called "organization," and labour are all put in the pot labelled "capacities for various types of effort." Explicit mention of the supply of labour and, above all, of the conceptually treacherous "stock of capital" is avoided, as is that of the production function, though covertly both continue to lurk in the wings. Happily, the course of our argument does not oblige us to face these difficulties.) People in the state of nature "get what they produce," more precisely they get the value of the marginal product of whatever factor of production they contribute. Instead of "contribute," it is often more instructive to think of the factor they "could but do not withdraw." Either expression must be supplemented to allow for the quantity of the factor contributed or "not withheld." The capitalist, then, gets the marginal product of capital in proportion to the capital he owns. The entrepreneur, the doctor and the machine-minder get the marginal products of their various kinds of effort in proportion to their exertions. If under a
   

regime of free contracts, all potential contracting parties follow their interest (or if those who do not-the rational altruists or the simply irrational-do not weigh too heavily), factor prices will be bid up or down to marginal value-products (and the nearer each market approaches perfect competition, the more closely will they correspond to the values of their marginal physical products).

1. But once we leave the state of nature, we confront an irreducible complication. The state, to live, takes a share of the total final product. Hence, outside the state of nature, marginal productivity theory can at best determine the pre-tax incomes of its subjects. Post-tax distribution becomes in part some function of the pre-tax one and in part that of the political process, the latter determining what the state shall get from each of us.
   
 

2. In particular, distribution will be shaped by two major activities of the state: its production of public goods (understood, broadly, to include law and order, public health and education, roads and bridges, etc.), and its production of social justice through income redistribution. On some definitions, the production of social justice becomes part of the production of public goods; this gives rise to difficulties we can safely and advantageously leave on the side. (There is a not too far-fetched sense in which the production of any public good at public expense is ipso facto redistributive, if only because there is no unique, "right" way of apportioning the total cost to be borne, among members of the public according to the benefit derived by each from a given public good. Some can always be said to get a bargain, a subsidy, at the expense of others. Thus, the distinction between the production of public goods and explicit redistribution must be a matter of arbitrary convention.) Even the pre-tax pattern of distribution is, however, upset by the feedback effect which the post-tax one exercises
   

upon it. Factors of production will, in general, be more or less readily supplied according to the price they can command and the situation of their owners (technically, the price- and income-elasticities of supply), so that if one or both are changed by taxes, there should be repercussions on output and on marginal products.

1. Apart from recognizing their logical possibility and indeed their likely importance, I have nothing specific to say on these repercussions. (In any case, they are difficult to come to grips with empirically.) I would, nevertheless, note a plausible a priori supposition regarding capital. Capital, once it has been accumulated and embodied in capital goods, cannot quickly be withdrawn. It takes time to "decumulate" (what Sir Dennis Robertson liked to call "disentangle") it by the non-replacement of capital goods as they lose value due to physical wear and obsolescence. The short-period supply of capital goods must, therefore, be rather insensitive to the taxation of rent, interest and profit. The suppliers of effort may or may not "retaliate" against taxes on earned income by withholding their efforts. The suppliers of capital cannot, in the short period, retaliate against the taxation of unearned income, and it is the short period that is relevant to short-tenure politics. No immediate harm, then, is done to the economy by such measures as an excess profits tax, or rent control-an apartment block, once built, will not readily get unbuilt. It will fall down only after many years of non-maintenance. Though its neighbours might wish that it did so sooner, the resulting urban decay is at a politically safe distance away in the future.
   
 

2. Thus while the state can take the side of the many against the few and of the poor against the rich on the strength of arguments about the balance of total happiness or social justice, it can also favour
   

labour over capital on grounds of economic expediency. It can, on the same ground, find arguments for favouring capital over labour as well. The availability of a diversified set of reasons for taking sides, even when some of them cancel each other out, is a great comfort to the state in assembling the system of rewards for consent upon which reposes its tenure of power. While these reasons may be regarded as mere excuses, as pretexts for doing what has to be done anyway to obey the imperatives of political survival, I think it would be wrong to suppose that for the rational state, they must be pretexts. The ideological commitment of the state may be perfectly sincere. In any case, it does not matter in the least whether it is or not, and there is no way of telling, as long as the ideology is the right one-by which is simply meant that it tells the state to do what the attainment of its ends calls for.

2.5.10 Classes which adopt an ideology telling them to do things contrary to their interest are said to be in a condition of "false consciousness." It is, in principle, quite possible for this to happen to the state as well, and historical examples can be found where the condition of the state fits this description. "False consciousness" is, in particular, liable to mislead a state to relax repression in the illusory belief that it can obtain a sufficiency of consent instead, such misjudged relaxation being probably a frequent source of revolutions. Were it not for false consciousness or ineptitude or both, governments would probably last forever, states might never lose tenure. Plainly the broader, the more flexible and the less specific is an ideology, the less likely it is that false consciousness will bring to grief the state adhering to it. The liberal ideology with its malleability and plurality of ends is, from this point of view, a wonderfully safe one, in that adherence to it will rarely call for the state to stick its neck out and adopt a thoroughly risky line of conduct for its political survival. It is an
ideology which typically offers many diverse "options," each about as liberal as every other.

1. Reverting, after this digression about the concordance of ideology and rational interest, to the distributive shares which people, in entering into contracts, award to each other, there is of course no presumption for shares arrived at in this manner to be equal. The presumption for equality arises precisely out of the absence of valid reasons for inequality. If there are no reasons why people's shares should be such and such, or if we deny these reasons (so goes the egalitarian argument based on symmetry, on the avoidance of randomness), then they should all have equal shares. Theories of distribution, such as the marginal productivity theory, however, are coherent sets of such reasons. It is a very awkward condition for an ideology to incorporate both a positive theory of distribution and a postulate of equal shares.
   
 

2. Early liberal ideology, invented by T. H. Green and Hobhouse and mass-marketed by John Dewey, had not at first broken either with natural right (involving respect for existing relations of property for no other reason than that they were lawfully arrived at) or with classical and neo-classical economics (involving a disposition to consider wages and profits as any other price, a proximate effect of supply and demand). By and large, it accepted as both empirically true and morally valid, a set of reasons why the material well-being of various persons was what it was. At the same time, it was developing the thesis that relative (if not absolute) material well-being was a question of justice; that its actual distribution could be unjust; and that the state had somehow obtained a mandate to ensure distributive justice. The "ought" was obviously destined to override the "is."
   
3. As it matured, the liberal ideology progressively emancipated itself from its early respect for the reasons that make distributive shares unequal. If these reasons are invalid, they cannot constrain distributive justice. Its doctrine can go where it will in all freedom. At the outset, however, this was far from being accomplished. Liberal thought sought both to accept the causes of relative well-being and to reject their effect. This tour de force was performed by T. H. Green, with his doctrine of a contract capable of being apparently free but really unfree.*69
   
 

4. There are, in the marginal contribution type of theories of distribution, three reasons why one person's material well-being is different from another's. One is capital: some people, as a matter of historical fact, own, and contribute to the productive process, more of it than others.*70 Another is personal endowments, whether innate or acquired by education, self-improvement and experience.*71 A third is work, effort measured in some way which can distinguish between various kinds of it. "Organization" (in Marshall's sense), "enterprise" (in Schumpeter's) might fit into the "effort" category, though perhaps not very comfortably, while the reward for risk-taking must accommodate itself alongside the reward of the capital that is being risked. Taking these in reverse order, liberal thought even today (let alone a short century ago), does not strongly contest the justice of unequal shares due to unequal efforts, provided this is understood in the sense of "hard work," carrying a connotation of pain. "Hard work" in the sense of fun, or of passionate dedication, on the other hand, is a very much disputed ground for higher than average rewards.*72
   
 

5. Personal endowments are a yet more controversial matter, for there has always been a strain of thought which implied that God