TGIF: On Fairness

Fairness and its synonyms are among the most abused words in English. By that I mean they are commonly manipulated for ideological ends. Wokeness has aggravated a situation that has existed for some time. What better way to score points for a political position than to declare that fairness demands it? The tactic puts the unprepared opponent on the back foot.

For example, people say it is unfair that some people have more than others. There are “haves” and “have-nots,” although the latter phrase is either grossly exaggerated or outright dishonest. By and large, Americans are the richest people who have ever lived, and extreme poverty worldwide has declined from 90 percent to less than 10 percent in a dramatically short time.

At any rate, this condition of inequality, regardless of its explanation, is routinely thought to be unfair. Inequality of any kind—not just before the law or something similar—is “just not right.”

But is it so?

Not If we see society and its division of labor as a large-scale decentralized cooperative wealth-creating effort. That’s the global marketplace. In this light, income and wealth wealth and income inequality are certainly not prima facie unfair. For any large group of people, the contributions to wealth creation will vary widely. People differ in all sorts of ways, from mental agility and energy to ambition and disposition. Why wouldn’t the rewards vary widely as well? Recall that when the government does not try to manipulate people, incomes and wealth are determined, not by a central decision-maker, but through countless marginal voluntary transactions. The parties agreed to transact, preferring what they received to what they gave up. There is no distribution until government comes on the scene.

In Human Action, Mises wrote:

In the market society direct compulsion and coercion are practiced only for the sake of preventing acts detrimental to social cooperation. For the rest individuals are not molested by the police power. The law-abiding citizen is free from the interference of jailers and hangmen. What pressure is needed to impel an individual to contribute his share to the cooperative effort of production is exercised by the price structure of the market. This pressure is indirect. It puts on each individual’s contribution a premium graduated according to the value which the consumers attach to this contribution. In rewarding the individual’s effort according to its value, it leaves to everybody the choice between a more or less complete utilization of his own faculties and abilities. This method cannot, of course, eliminate the disadvantages of inherent personal inferiority. But it provides an incentive to everybody to exert his faculties and abilities to the utmost. [Emphasis added.]

That certainly is reasonable, but many people reject this perspective. They need to ask themselves what the alternative is (besides equal poverty). Those critics suffer the delusion that no connection exists between production and so-called distribution. John Stuart Mill unfortunately believed this. But that cannot be. If the state expropriates the wealth of producers in Period A, they can hardly be expected to remain vulnerable to expropriation in Period B and beyond. Even an increase in top income-tax rates prompt strategies (legal and illegal) to pay less tax. You can’t have your cake and eat it too.

Does a fairer alternative to the market economy exist? Mises went on:

The only alternative to this [above-mentioned] financial pressure as exercised by the market is direct pressure and compulsion as exercised by the police power. The authorities must be entrusted with the task of determining the quantity and quality of work that each individual is bound to perform. As individuals are unequal with regard to their abilities, this requires an examination of their personalities on the part of the authorities. The individual becomes an inmate of a penitentiary, as it were, to whom a definite task is assigned. If he fails to achieve what the authorities have ordered him to do, he is liable to punishment.

In other words, everyone is potentially subject to physical force, not because he aggressed against persons or property, but because he failed to fulfill the social engineers’ plans. This does not make for a decent society.

We have not fully reached that point yet in America because the market is still “allowed” to operate to a significant extent. But for many intellectuals and activists, America still has too much market freedom; they would quash what is left. They don’t like that “impersonal market forces”—that is, persons who freely choose with whom to do business—determine wealth and income ultimately according to the producers’ ability to please consumers. The anti-market parties would shut down the market economy if they could. Meanwhile, they’ll settle for increasing political impediments to free action. Government control of nominal private property of the means of production is what Mussolini meant by fascism and corporatism.

The only choice is between price and police, Mises taught:

No system of the social division of labor can do without a method that makes individuals responsible for their contributions to the joint productive effort. If this responsibility is not brought about by the price structure of the market and the inequality of wealth and income it begets, it must be enforced by the methods of direct compulsion as practiced by the police.

The police? We shouldn’t like the sound of that. As Mises, no anarchist, put it elsewhere in Human Action:

Government is in the last resort the employment of armed men, of policemen, gendarmes, soldiers, prison guards, and hangmen. The essential feature of government is the enforcement of its decrees by beating, killing, and imprisoning. Those who are asking for more government interference are asking ultimately for more compulsion and less freedom.

Another example of abuse of the term unfairness is that market competition is often thought to be unfair to the inferior competitors who lose out to superior competitors. Again, a key point is missed. An economy does not exist for competitors. People spontaneously generate the economic process because they want a variety of consumer goods in a world of scarcity and uncertainty—where choices must be made among alternative uses of resources and labor. It would be nice if all people could have everything at no expense, but we can’t. Yet compare the modern world to previous eras.

Here’s Mises on competition:

Catallactic [marketplace] competition must not be confused with prize fights and beauty contests. The purpose of such fights and contests is to discover who is the best boxer or the prettiest girl. The social function of catallactic competition is, to be sure, not to establish who is the smartest boy and to reward the winner by a title and medals. Its function is to safeguard the best satisfaction of the consumers attainable under the given state of the economic data.

Equality of opportunity is a factor neither in prize fights and beauty contests nor in any other field of competition, whether biological or social. The immense majority of people are by the physiological structure of their bodies deprived of a chance to attain the honors of a boxing champion or a beauty queen. Only very few people can compete on the labor market as opera singers and movie stars. The most favorable opportunity to compete in the field of scientific achievement is provided to the university professors. Yet, thousands and thousands of professors pass away without leaving any trace in the history of ideas and scientific progress, while many of the handicapped outsiders win glory through marvelous contributions.

Isn’t that unfair? Equal opportunity, except in the sense of the abolition of legal impediments, is not an option. Under no circumstances could everyone have the same shot at a given position. But again, it’s not producers but consumers who are center stage.

It is usual to find fault with the fact that catallactic competition is not open to everybody in the same way. The start is much more difficult for a poor boy than for the son of a wealthy man. But the consumers are not concerned about the problem of whether or not the men who shall serve them start their careers under equal conditions. Their only interest is to secure the best possible satisfaction of their needs…. They look at the matter from the point of view of social expediency and social welfare, not from the point of view of an alleged, imaginary, and unrealizable “natural” right of every individual to compete with equal opportunity. The realization of such a right would require placing at a disadvantage those born with better intelligence and greater will power than the average man. It is obvious that this would be absurd. [Emphasis added.]

Frédéric Bastiat said the same thing in the 19th century in demolishing the case for tariffs. Protectionists often defend their position by calling for a “level playing field” for all competitors, foreign and domestic. Yet in “Equalizing the Conditions of Production,” a chapter in his Economic Sophisms, Bastiat set the record straight:

Here as elsewhere we find the advocates of protectionism taking the point of view of the producers; whereas we defend the cause of the unfortunate consumers, whom they absolutely refuse to take into consideration. The protectionists compare the field of industry to a race track. But at the race track, the race is at once
means and end. The public takes no interest in the contest aside from the contest itself. When you spur your horses on with the single end of learning which is the fastest runner, I agree that you should equalize their weights. But if your
end were getting an important and urgent piece of news to the winning post, would it be consistent for you to put obstacles in the way of the horse that had the best chance of getting there first? Yet that is what you protectionists do with respect to industry. You forget its desired result, which is man’s well-being; by dint of begging the question, you disregard this result and even go so far as to sacrifice it.

A key to the economic and pro-freedom way of thinking is to never take your eye off the consumer.