The big surprise: Only one libertarian out of more than a dozen was willing to defend the free market on grounds of desert.
No big surprise: That libertarian was me.
Olsaretti relies heavily on the Rawlsian premise that no one deserves to profit from inborn talent. If this is right, of course, the free market looks awful, precisely because it allows and indeed encourages talented people to get ahead. But this Rawlsian premise is truly bizarre. It implies, for example, that smart students don’t deserve better grades, that great athletes don’t deserve to win, and that inventors don’t deserve to get rich from their ideas. And obviously they do.
If you want to criticize the market on grounds of desert, the sensible approach is not to complain that there is a positive correlation between talented and earnings, but that the correlation is too low. In earnings regressions, for example, smarter, better-educated, and more experienced people earn more, but there is a lot of noise. Casual empiricism suggests, moreover, that there are more than a few rich incompetents and poor people of talent, though admittedly a lot of this balances out over time.
My guess is that my fellow libertarians were reluctant to defend the market on grounds of desert precisely because they’re aware of these counter-examples. What I think they’re missing, however, is that by the metric of desert, the free market does relatively well. What other political-economic system does a better job of rewarding talented, hard-working people?
It is also worth pointing out that from the standpoint of desert, some of the largest interventions in the market are a moral disaster. The main function of progressive income taxation is to narrow the gap between talented, hard-working people and not-so-talented, not-so-hard-working people. But this pales before the greatest of all government crimes against desert: Immigration laws. Their whole function, of course, is to make sure that foreigners earn drastically less than equally deserving Americans. The free market is not a perfect arbiter of desert, but under laissez-faire there is no way that unskilled Americans would earn twenty times more than equivalent labor in India.
The bottom line: When you measure the market against any independent standard – whether it’s economic growth or desert – it falls short of perfection. It’s not hard to imagine a way that government could make things better. But when you look at what governments actually do, it usually turns out that they’re trying hard to make things worse.