"In a voluntary exchange, once each side has delivered and received the agreed contribution, the parties are quits. Seeking to credit and debit them for putative outstanding claims is double counting."
Did you know that your dog owns your house, or rather some portion of it? If this is not immediately obvious to you, you will find it helpful to consider some aspects of the ethics and economics of redistribution.
Your dog is alert, plucky and a fearsome guardian of your property. For all we know, without his services, you would have been burgled over and over again. Your belongings would be depleted and the utility you derived from your home would be much reduced. The difference between the actual value of your home and its unguarded value is the contribution of your dog, and so is the difference between the respective utilities or satisfactions you derive from it. We do not know the exact figure, but the main thing is that there is one.
More thought is needed fully to unravel the question of who owns your house, and indeed the question of who owns anything. If there were no fire brigade, the whole street might have burned down and your house would no longer stand. The fire brigade has contributed something to its value, and some figure ought to be put against their name. The utilities should not be forgotten, for how would you like to live in a house without running water, electricity and so forth? Some tentative numbers had better be credited to them. Surely, however, you cannot just ignore the builder who erected the house, the lumberman, the brick factory, the cement works and all the other suppliers without whom the builder could not have erected it. They too must have their contribution recognized, even if it must be done in a rough-and ready fashion.
Is it right, though, to stop at this primary level of contributions?—should we not go beyond the cement works to the builder who built the kiln, the gas pipeline that feeds the fire , the workers who keep the process going? Tracing the ever more distant contributions at level after level, we get a manifold that is as complex as we care to make it, with a correspondingly complex jumble of numbers that purport to place rough-and-ready values on the contributions. We can count them moving sideways as well as backwards as far as the mind can reach, starting with that of your dog and ending (if you finally lose patience and decide to stop there) with the Founding Fathers or Christopher Columbus.
At this point, you give up and say that your house, and any other holdings you thought you owned, really belong to society as a whole, and so do the holdings of everyone else. Everybody has a rightful stake in your holdings and you have a rightful stake in everybody else's holdings. Society, that is "we" are alone entitled to decide how big everybody's stake ought to be. "We" are the rightful owners of everything, the masters of "our" universe. As such, "we" are entitled to take from Peter and give to Paul, as well as to regulate what Peter and Paul are allowed to do in matters of production, commerce and consumption.
A less thorough-going version of this argument, instead of crediting everyone for their direct and indirect contributions to the creation of everything of value, simply states that the security of tenure of all property depends on society maintaining public order. Without it, there would be "jungle law," and no one could enjoy their holdings. It follows that it is really society which lets you have them on a grace and favour basis. Society, that is "we," can revoke such grace and favour partly or wholly. Property can be re-allocated between grace-and-favour holders as "we" see fit in the public interest, promoting efficiency, equality or some judicious mix of both.
Objections to such arguments, except when they were just angry and indignant outcries, have generally tended to be uneasy and often downright lame. The reason is probably the great intellectual weakness of our ideas about the legitimacy of property, rooted as they are in the Lockean provisos about first possession. One proviso states that you may freely take possession of unowned resources if "enough and as good" is left for others. However, there are countless millions of "others" today who should be pleased to take possession of quarter sections of rich meadow or of a handily located oil well, but cannot find unowned meadows and oil fields any more. Even if their great-grandfathers could still find such unowned pieces of property, it is clear that they have failed to leave "enough and as good" for their descendants. Under this ill-conceived proviso, all original titles are invalid, hence all present, derivative titles are defective, too. One might as well concede that only collective ownership of everything by "us" is legitimate.
In Book II of Principles of Political Economy (1909, first pub. 1848), English economist John Stuart Mill examined the nature of property. In Chapter 1, Mill compares systems of private versus communal ownership, and in Chapter 2 he discusses whether a person can rightfully own anything other than the fruit of his or her own labor.
Surely, however, you feel fully entitled to what you currently produce?—even if holdings of property are contentious. For it is hard to accept that what you earn by the sweat of your brow is at best only partly yours, even if that might imply that what others earn by the sweat of their brows is partly yours, too. The legitimacy of redistributive taxation (and ultimately there is no other kind) hinges on this. The standard argument is that under complete autarchy, you might claim that you own what you produce, but under division of labour the contributions of everyone to everything must all be considered. Only if your own effort represented the sole input could you claim the output as entirely yours. In fact, the rise of redistributive policies, and our growing acquiescence in them, is sometimes explained by the ever broader spread of the division of labour.
Modern redistributive doctrine tells us, reasonably enough, that no output is ever produced by a single input. For even if you make something single-handed, you owe your capacity to do so to teachers who taught you, doctors who kept you alive, policemen who protect you from malefactors and supermarket operators who feed you. This is exactly where we came in when we found that your dog owned a portion of your house. Current output and current earnings are subject to the same reasoning about the multiplicity and untraceability of contributions as are holdings.
To sound the depths of contemporary thinking on the matter, consider the following text: "A medical researcher might make a discovery of great commercial value. He might have worked terribly hard to bring it off. But even so, who trained him? Who moved the subject to the point where the discovery became possible? Who built their lab in which he worked? Who runs it? Who pays for it? Who is responsible for the enduring social institutions that present the commercial opportunities? One who cleverly exploits the social framework has both his cleverness and the framework to thank."
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How soon, in reading the above, did you spot the underlying, crucial fallacy? Its course is a mixture of the plausible and the preposterous, and any reader who gets a little lost in the backing and filling between such opposites has an excuse of sorts for being bemused. However, clearing away the muddle is fairly straightforward provided we refuse to be impressed by verbiage, but stick doggedly to common sense, hard as that may sometimes be to do in the face of the massive browbeating that seeks to enthrone the verbiage.
There is a minor and a major point to recognise. The minor point is that the "framework" is not a person, natural or legal, to whom a debt can be owed, "institutions" do not act, "society" has no mind, no will, and makes no contributions. Only persons do these things. Imputing responsibility and credit for accumulated wealth, current production and well-being to entities that have no mind and no will is nonsense. It is a variant of the notorious fallacy of composition.
Once this is understood, we can move on to the major point. All contributions of others to the building of your house have been paid for at each link in the chain of production. All current contributions to its maintenance and security are likewise being paid for. Value has been and is being given for value received, even though the "value" is not always money and goods, but may sometimes be affection, loyalty or the discharge of duty. In the exchange relation, a giver is also a recipient, and of course vice versa.
In the broad scheme of things, all this is part of the universal system of exchanges. Some of these exchanges may be involuntary. Such is the case where redistribution, a coercive act, is taking place. We then lose the trace, the precise measure and the assured reciprocity of contributions to wealth and income, but this circumstance can hardly serve to justify the very redistribution that has caused it. However, where exchanges are voluntary, tracing and measuring become, in a strong sense, otiose and irrelevant. For in a voluntary exchange, once each side has delivered and received the agreed contribution, the parties are quits. Seeking to credit and debit them for putative outstanding claims is double counting.
All is left then for the redistributor to argue is that value received and value given are not necessarily equal. Some, perhaps most, transactions are inequitable, leaving behind them unsettled moral claims that tax-and-transfer policies are fully entitled to square. This is a far weaker claim than the one that would have everything paid for twice, but it is still effective because it is open-ended and beyond the reach of empirical disproof. Who can falsify the allegation that an exchange has unduly favoured one of the parties, that one of them was "exploited?
It is always possible to affirm that voluntary exchanges are seldom if ever equitable, for the parties have unequal "bargaining power." This term is wide open to abuse, and is in fact widely abused. It is so easy and so irrefutable to brand a bargain as "unequal" that it is doubtful whether the expression is anything more than the speaker's say-so that can be just as irrefutably opposed by an adversarial say-so. All we can safely say of any voluntary exchange is that either party would rather enter into it than not. This is the classic case of "if it ain't broke, don't fix it," for few social arrangements have more solid foundations in manifest agreement.
It is wrong to "fix it" not because "it works"—though it undeniably "works" better than other arrangements "fixed" by well-intentioned social engineers. Social democracy in today's Europe, stricken by chronic unemployment, and socialism in yesterday's workers' paradise, are eloquent enough examples. But the decisive, argument-stopping argument against "fixing it" is quite different and has little to do with property. It has everything to do with agreement.
Most modern theories of how society ought to work rest on some idea of agreement. Almost invariably, however, the agreement is fictitious, hypothetical, one that would be concluded if all men had equal "bargaining power," or saw things through the same "veil" of ignorance or uncertainty about their future. Or felt the same need for a central authority. The social contract, in its many versions, is perhaps the best known of these alleged agreements. All are designed to suit the normative views of their inventors and to justify the kind of social arrangements they should like to see adopted. Yet the only agreement that is not hypothetical, alleged, invented is the system of voluntary exchanges where all parties give visible, objective proof by their actions that they have found the unique common ground that everybody accepts, albeit grumblingly, but without anyone being forced to give up something he had within his reach and would have preferred. The set of voluntary exchanges, in one word, is the only one that does not impose an immorality in pursuit of a moral objective.