I want to start from a premise. I assume that people in society would be willing to make the least-well-off better if that cost us 10% or less of our income in taxes. Some of us would go to 20% and some even higher. I simply assert that as far as I know, everyone would be happy to tithe to the church, give that same amount to government, or donate to a charity if clear causal line between their sacrifice and the improvement of the least-well-off was made.
What the market advocates have always used as an excuse is that charity distorts capital processes and wrecks the price signals in the market in the aim of charity. We, those of us that privileged markets in the war between private and public choice, have a general distaste for help that creates dependence. We emphasize this distortionary effect. This tendency of ours has always been viewed as cold hearted. Hayek, with his capital theory explains why distortions occur and persist when people manipulate the price signals and try to distort outcomes.
What I don't think is clear in this statement is that the damage done to the least well of from these manipulations is greater than the damage done to those with more resources. The difference of a few percentage points in opportunity for the least-well-off is greater when you are trying hard to string things together to escape the cycle of poverty.
This is why I find Hayek's take on John Rawls as an interesting academic question. If Rawls wants to maximize the minimum, what does that mean in practice?
The hard-line approach is always to avoid anything beyond local charity because we don't want the government distorting price signals in the aggregate. However, what is the maximum standard of living that we can achieve for the least-well-off (accounting for the weight we assign their independence)? If we foreclose opportunities and create cycles of poverty through intervention, this does not make the least-well-off better. For the very hard core anti-government person this is the end of the argument.
I want to go further.
What do we think is the best we can do to increase the welfare of the people left out from the riches of the rest of us? What is the system most likely to deliver this? I agree that unintended consequences of intervention are very diruptive and this disruption falls disproportionately on the poor; this is the positive analysis. But maybe we can talk about this in terms of calories? There has to be a standard we would all accept. What is the minimum where we can draw a line and say, "that's it!"? What is the line which is the best we can do through intervention. Certainly this is greater than non-zero intervention...
If I have a Hayekian reading of Rawls, then I am looking for the costs in terms of disruption of opportunities and the benefits in terms of some universal measure of well being transfered to the least well off. Clearly we give aid in disasters like Haiti. Clearly we give out water filters for the poor in the developing world. Some measures of aid are simply beyond the measure of distortion, right? Do we really want to say that mosquito nets as charity are a net negative for the developing world?
What is at state here is the uncertainty of aid. We can't give aid when we feel like it. If there are cycles in aid then that is what distorts the production process. If we give a steady supply of aid, then this allows productive resources to reallocate and still gain the benefit of the capital injection. There has to be a theory of aid that comports well with a Hayekian capital theory. I just wonder if we can draw a clean line in capital theory where charity does not distort our analysis.
My gut response to your last question about whether or not we can draw a clean line in capital theory where charity does not distort our analysis is no (as you might imagine).
ReplyDeleteFrom a purely theoretical (Hayekian) perspective any amount of intervention is distortive, as you rightly point out. From a practical perspective, it's impossible to draw a line. But when there are negative consequences that can be clearly identified, like local businesses that sell mosquito nets going out of business, or ruthless dictators being kept in power for longer, we have definitely gone too far.
I guess I am on the side of the cheerleaders for the market, because all I see is apologies for the thoughtless actions of the west and my belief is that the only way we can counter the thoughtlessness is to over-emphasize its negative consequences. Am I willing to be pragmatic sometimes? Sure. However, there is a big BUT there. Until I have convinced at least a thousand people that what is happening is wrong, I can't see myself being pragmatic. At least not in the face of people who blatantly ignore evidence to the contrary, are easily convinced by brainless populist rhetoric and very vocal about their obviously inaccurate beliefs.
I think the issue, at least for an academic crowd who is honest, is the uncertainty.
ReplyDeleteIf I could rely on 100 bed nets a day, every day, like clock work getting dropped from the back of a truck at a particular intersection, then there would be no problem. I, as someone who might sell bed nets, will switch into doing something else.
If I face a 2% probability of 100 bed nets every day, I might take the time to play this game and stock bed nets in my store. On the days where I am put out of business by the zero price competitor, I am disrupted.
If we could get people to see the logic in this argument, maybe they would be more willing to talk to us than when we are waving our market pom-poms!