Thoughts on Redistribution

POLITICS, n. A strife of interests masquerading as a contest of principles. The conduct of public affairs for private advantage.

—Ambrose Bierce, The Devil's Dictionary

The French political philosopher Bertrand de Jouvenel reposes in relative obscurity from most of the modern political spectrum. Even though he had a strong idealistic and collectivist view of politics, manifested primarily in the existence of a "common good", his disenchantment with the growth of state power—the Minotaur, his dislike of modern democracy, and his faith in the ultimate independence and goodness of the common man made him persona non grata to the Left. And, while this view often strikes a responsive chord with the conservative right, from a classical liberal perspective his view that a "good" government would raise the morals of the masses and lift the preferences of consumers smacks of benevolent authoritarianism. It is also reminiscent of the modern Left's view that socialism failed only because the wrong people were in charge. The Hayekan point that it is the system that determines who rises to the top seems never to have occurred to him.

Yet, Jouvenel has many insights into the growth and consequences of the all-powerful, Minotaur, state. To this end, several of his works have again been made available in English, most notably his On Power: The Natural History of Its Growth.[1] More recently, Brian C. Anderson has given us a thoughtful review of this aspect of Jouvenel's work.[2]

In what follows, I take a different perspective on Jouvenel's work and focus on his views on redistribution as contained in his Ethics of Redistribution.[3] This focus is occasioned by my observation that redistribution is the stuff of the politics of the Minotaur state. As such, it provides the incentive for much of the rise and use of power that Jouvenel laments.

On the surface, Jouvenel's main points on redistribution are straight-forward. Like economists, he accepts redistribution's disincentive effects. He instead focuses on the moral arguments against it—the necessity for redistribution to become regressive, how it erodes personal responsibility, and how it deprives the wealthy of the ability to support public amenities. Yet, many of his insights are neither explicit nor well-developed. Perhaps this is why he was dissatisfied with The Ethics and regarded it as a work in progress: "As to my Ethics of Redistribution, I have repeatedly refused its reprint. I have dwelt upon the subject in the many years gone by and I now have to say, not only what I then thought, but what I have acquired since...."[4] We can only speculate how his thoughts would have evolved had he revised The Ethics, but I believe I am not too far off the mark by suggesting that a revision would have anticipated much of the subsequent modern analysis of the redistributive state. In a larger sense, I want to use both the insights and faults in Jouvenel's analysis as a fulcrum to address in more detail the logic and practice of redistribution. In what follows I use the term Liberal in its classical sense.

Redistribution from What?

Before one can assess any redistribution, you have to begin with a distribution. Anyone who criticizes proposals to redistribute wealth, as Jouvenel does, must explain why the status quo is good. By failing to address the merits of the existing distribution, Jouvenel misses the opportunity to discuss the mechanics of how distributions emerge, which, as I shall argue below, is the only way any distribution can be judged.

Of course, the advocates of redistribution are not so shy. They regard the existing distribution as always wrong, always on some abstract, collectivist, grounds, which justifies their proposals to produce a different one.

For the Liberal, the starting point must be individual self-ownership. The classic quote is from John Locke: "...every man has a property in his own person. This nobody has any right to but himself. The labour of his body, and the work of his hands, we may say, are properly his."[5] In short, we own ourselves and everything we create, and since we own what we create, we can choose to do with it what is best for us. That's what ownership means. Each of us is best able to decide what to do with what we own, because each of us knows best what is to our benefit. Creation for one's own use aside, the obvious social thing we do with our created property is to exchange it with others when it is mutually beneficial. Self-ownership thus leads to production—making humans better off. In sum, the right of self ownership necessarily gives one the derivative right to exchange, thereby providing a mechanism for the production of wealth and from which a distribution of wealth will emerge. Because the distribution that emerges has its basis in the natural right of self-ownership, it must be the right one.

But suppose violations of the right of self-ownership and exchange have produced a distribution which is not right. What do we do then? Since yesterday is gone forever, but tomorrow does come, past benefits and costs that emerged from a faulty process are gone forever, and all we can do is get it right for tomorrow by establishing the rights of self ownership and exchange.

There is no reasonable process to do otherwise. First, there is the problem so eloquently exposed by Hayek[6]: no government, or anyone else, can know what would have emerged had the right process been in place in the past. It is unknowable to anyone. Further, to "correct" the results of past faulty processes means that vast coercive power must be created, and this kind of power is itself a violation of the right of self-ownership and exchange—the Minotaur that Jouvenel fears. And even if we did tolerate such a violation of rights to correct past mistakes, we have no assurance that those possessing such power would let it wither away when this task were accomplished, as Marx naively assumed and history confirms.

The best we can do now is get the process right and go on from there. The right process is to have a framework of law, protected by a constitution insulated from the political process, consistent with self-ownership: the protection of private property, the freedom of contract, and the enforcement of contractual promises. Indeed, with a common law of property, nuisance, contract and torts, protected by a constitution, there is no need for most statute law, since the latter has become almost wholly directed at redistribution. The distribution of wealth that emerges from that will be right. Of course, Jouvenel dismisses constitutional protections since they, too, are the products of the same democracy that has produced The Minotaur. He believes, inconsistently in my view, that this same flawed democracy that cannot be trusted to develop appropriate constitutional protections, can somehow be trusted to develop a state based on "social friendship" and "mutual trust".

The Concept of a Distribution.

Before we can go further, we must wrestle with the concept of a distribution of wealth itself, something Jouvenel does not do. Simply put, this concept is a collectivist abstraction. It is collectivist because it treats humans, not as individuals, but as a group in which individuals lose their identity. It is an abstraction because it is a synthetic artifact that is divorced from any underlying human value or process. There is no human value in a distribution per se, and there is no way that a distribution is the direct objective of any human action. The atom of value is individual human well-being; the atom of value-producing human activity is voluntary behavior; the atom of productive human interaction is voluntary association or exchange. A distribution is something that is derived by abstraction from these human actions and has no independent meaning.

The collectivist, of course, is not directly concerned with individuals. He deals with groups of humans—groups defined by him in arbitrary and infinite variety. Collectivist abstractions, like distributions, are both his place of value and goals for action. He mistakenly believes that there is some process out there that is purposefully and directly focused on producing some distribution of wealth, and he wants to seize it to bring about the kind of abstract distribution he wants. But, of course, as the collectivist soon finds out, there is no process that plans such abstractions. Distributions emerge from individual human action but are not of human design. Thus, the collectivist must create and use force to bring about his abstraction, and in doing so he must trample the natural rights of individual self-ownership and associations that would produce some other distribution, one he does not like.

Unfortunately, dealing in collectivist abstractions is not confined to collectivists. Jouvenel, for example, especially in the second lecture in The Ethics, often slips into the collectivist trap of treating "society" as something of value and purpose above and beyond the individuals in it.[7] Too often, Liberals, and conservatives too, by design or imprecision, talk of bringing about a certain kind of desirable "society". Often this is merely sloppiness of thought or economizing in argument: hopefully, what they really mean is that the natural process resulting from the natural right of self-ownership would result in the kind of society they value. But, again, it is not the collectivist abstraction that is really desired; it is the enhancement of individual human well-being that results from the process of getting there.

We must remember that what we call society is merely the name we give to a collection of traditions, ways of human interaction, and habits that by the test of time have proved themselves to be mutually beneficial to individual humans. They are patterns of human behavior that have emerged from past successful associations. But, again, it is the mutually beneficial individual associations that make up these patterns that is the value-creating element, not the emerged pattern we call society. And when these kind of individual associations cease to be productive, or new ground rules governing associations emerge, others will emerge and produce a new pattern.

Redistribution in General

Reduced to its essence, pure redistribution takes from some and gives to others. Some are made better off and others are made worse off. For such a move to be desirable, something bigger, or better, must result. What is that something, and how is it measured? The collectivist assumes two measures of value, one supra-human, and the other human, somehow aggregated.

The supra-human measure results from treating the distribution as the object of value. For collectivists, there is value to the distribution that transcends the values of the humans that make it up, the illegitimacy of which has been discussed above. While Jouvenel does not quite put it this way, he notes the idea: "Indeed, there are some redistributionists who would be less satisfied by a lifting up of the whole scale of incomes, preserving their present inequality, than by a flattening down of the inequalities."[8] While these collectivists usually think they are humanists, they are really supra-humanists in the same way, curiously, as those who subvert individual human values to those of some deity. Collectivists simply have another conception of the deity, one created by them.

Whatever Jouvenel lacks in his disposition of the collectivists' supra-human measure of the value of redistribution, he makes up for in his masterful discussion of the illogic of the interpersonal comparison of human satisfactions. The essence of the redistributionist's argument that the satisfaction of different people can be added together in some way, and since it is assumed that the rich put their incomes to less intense wants, total satisfaction is increased by transferring income to the poor who would use it to satisfy more intense wants. Indeed, some economists, most notably Abba Lerner, went on to argue that not only could total human satisfaction be increased by redistributing income until the last dollar received by each individual produced the same increment to each person's satisfaction,[9] but that "the probable value of total satisfactions is maximized by dividing income evenly"[10]

Citing the classic work of Lionel Robbins[11]. Jouvenel correctly notes that "the satisfactions of different persons cannot. . . be measured with a common rod".[12] Since individuals are different, it is simply impossible to compare their well-being, incrementally or totally, and thus the collectivists' argument for distributing income from the rich to the poor, or between any other individuals for that matter, falls in an illogical heap.

But then, Jouvenel, too clever by half, goes on to say that the illegitimacy of making interpersonal comparisons of satisfaction not only makes it impossible to argue that taking from the rich and giving to the poor will not increase total satisfaction, it also can be used to argue that there is no reason to depart from an equal distribution of income in the first place, as argued by Lerner. It all depends on the initial distribution, the starting point. "Therefore," he concludes, "in a discussion of the maximization of satisfactions, however the ball is set rolling, it must come to rest on the solution of even distribution."[13]

To get out of this conundrum, Jouvenel raises an unpersuasive democratic argument. It is not the satisfactions of the winners and losers that should be compared, but their numbers. If the takings come from a few people and are distributed to many then "there will be more people pleased than displeased, more positive signs than negative; and as the intensity of the values is not to be measured, all one can do is state that there are more positive signs than negative and take the result as a gain, which is what in fact is currently done."[14] By this view, it is the outcome of a democratic political struggle that should settle the issue over what distribution of wealth would maximize welfare.

But de Jouvenel would not have a conundrum to escape, which he does using other unconvincing arguments, if he had dealt with the issue discussed in the initial section of this essay: redistribution from what starting point? In Lerner's world, the alternative of equal distribution is put on the same level as every other possible initial distribution. But as I have shown above, if we base the starting point on the natural right of self-ownership, then the distribution that emerges from the resulting process is the right one, and the alternative of equal distribution is not on equal footing with that, unless, but impossibly, it too results from the natural right of self-ownership.

But the escape by democracy is also flawed. Democracy makes all people the same in tastes and judgement in the political process, which is false by Robbins' observation—which Jouvenel accepts—about the fallacy of interpersonal comparisons of satisfaction. If you cannot logically compare satisfaction differences, then the idea of equality is also false.

From Normative to Positive Democracy

While the idea that social welfare is maximized by adding up the numbers of winners and losers via the democratic process fails on logical grounds, this view of the democratic process as one driven by self-interested voters unwittingly provides a perceptive lever for explaining how in fact democratic economies work.

Individuals can and do express their values in the marketplace by their willingness to exchange goods and services. Each of us reduces our directly immeasurable individual value of anything to a monetary measure simply by revealing how much we would pay to get something, or how much we would willingly accept to give something up. These values are our simple Marshallian supply and demand prices. Goods and services are voluntarily exchanged when an exchange price is agreed upon which is lower then the buyer's valuation (demand price) and higher than the seller's valuation (supply price). Goods and services automatically move from (monetarily) lower to (monetarily) higher valued uses, and since suppliers are always compensated for giving up these goods and services, both suppliers and demanders are made better off, in their own judgement, by such voluntary exchanges.

The same is not true in the political marketplace, even though the same Smithian self-interest drives the process. In a simple, idealistic, majoritarian democracy, where each voting citizen fully knows and acts upon whether or not he is made better or worse off by any proposal, the monetary values of the gains and losses are irrelevant. Only voter numbers count, and where only numbers count, there is no assurance that the monetary value to the winners is greater than the value to the losers. Five individuals who value their gain at a penny each will always win over four others who value their loss at a hundred (or a million) dollars each. Two coyotes and a lamb voting on what to have for lunch. If the winners had to compensate the losers, as happens in the marketplace, such a proposal would never happen. But even if the value to the winners were greater than the value to the losers, there is no mechanism for compensating the losers, like in the market for goods and services, so the process is still a win-lose, redistributive proposition.

But for the individual voter in a more realistic but purely democratic world, information about possible outcomes is not costless and one is never certain of being on the winning side. In this world it is not worth spending $100 to become informed and attempt to influence voting about any issue, even with certainty, if the potential gain or loss is only, say, $50. And because the individual voter perceives his influence at the ballot box to be minuscule—since it is the total number of votes, not only his, that counts—he may rationally choose to remain ignorant and not vote or otherwise participate in the legislative process even if the potential gain or loss were much greater than $100. This is the principle of rational voter ignorance.

The same is true in a representative democracy, but with an additional twist. There, it is not simply a question of figuring out your stake in any proposal, and voting accordingly, you must somehow persuade your representative to carry out your interest after the election. If individuals each have only a little at stake, little will be ventured trying to influence the post-election legislative process. On the other hand, individuals each with a large stake in some proposal are more likely to perceive it and be willing to devote a fraction of it to ensuring a favorable outcome. Thus, the many winners or losers each with little at stake on any single redistribution issue usually do not prevail over the few on the other side each of whom have a lot at stake. Indeed, in the modern democratic redistributive society, the organized and knowledgeable few each with a lot at stake usually prevail in the legislative process over the disorganized and ignorant many, each with little at stake.[15] And this holds even if the total monetary amount at stake for the few falls far short of the total amount at stake for the many. Thus, even when the gains and losses are reduced to a common monetary measure, it is possible for the dollar losses to be far greater than the dollar gains. Of course, even if the total dollar gains always exceeded the total losses, it would still be a win-lose redistributive process because in the political arena there is no mechanism by which the losers are compensated to make it a win-win situation like in the market for goods and services.

The irony is that in the democratic political arena this whole process is voluntary at the individual level. While redistributive behavior appears rational to the individual it suffers from a fallacy of composition: the attempt of each person to get ahead by engaging in redistributive behavior, when carried out by all, results in reduced well-being for everyone. Each of us plays the democratic game voluntarily even though many (most?) of us are made worse off by it. Each of us is on both ends of total redistribution efforts, well aware of those few that benefit each of us greatly, but insensitive to the many that cost each us a little but which in sum may be far larger. This is what feeds the large, wasteful, redistributive political process in a democratic economy—Jouvenel's Minotaur.

Jouvenel misses most of this explicitly. But it is not much of a stretch from his simple, but pregnant, observation that the political process also works on self-interest to the public choice analysis that emerged and won Nobel prizes in succeeding decades.

Indeed, were it not for his untimely death, Mancur Olson almost certainly would have won a Nobel prize for his observations about how the democratic process works. Olson goes further and explains why redistribution in the small threatens to become a cancer that brings down nations over time. "As parochial lobbies form... each gains, then fiercely defends, some benefit for its members, usually with government help. Subsidies, trade protections and other economic distortions accumulate, and resources increasingly flow to a specialised class of lawyers, bureaucrats and lobbyists who know how to work the system. Redistributive struggles displace productive ones. The result, if medicine is not taken, is a pattern of economic decline."[16]

This complements another of Jouvenel's perceptive observations. "It must be granted that a loss of income is a loss of definite satisfactions, while the gain of income beyond a certain proportion is a gain of as yet indefinite satisfactions."[17] This says that ex ante there is always diminishing incremental satisfaction to income because people become accustomed to certain levels of income which they will fight to preserve. It will always be much easier to deprive people of a future, unexperienced, increment in income than to take the same amount from their existing income.

This means that the losers in any redistribution game will be more likely to complain in an economy where incomes are stagnant, than in a growing one where incomes are rising. This provides a powerful explanation why both direct government redistribution via taxing and spending policies, and private self-serving, redistribution schemes using government, tend to grow disproportionately in growing economies, something that has been the hallmark of twentieth century democratic capitalism. In this view, capitalism is itself an engine for growing redistribution. It also provides at least a partial explanation of the common governmental myopic practice of favoring policies that provide immediate benefits at the expense of great future, but now unrealized, costs, like most of the world's government social security schemes.

Jouvenel's words are uncannily descriptive of the modern redistributive Left[18]: "It is a common behavior of the mind, naturally enamored of simplicity, to build its schemes far away from the annoying complexities of a familiar reality, in the future or in a mythical past, where things have no shapes of their own. After this first operation resulting in a rational scheme, that scheme can be used as a rational model against which the disorderly architecture of today can be measured and thereby condemned."[19]

It is ironic that Jouvenel, who set out to discuss the ethics of redistribution, primarily between the rich and the poor, should end up being so prescient and seminal about how in fact redistributive democracies actually turned out, where redistribution plays out not between the rich and the poor but between the dispersed many and the concentrated few on each single redistributive issue. He demolishes the idea that the purpose of redistribution is to produce a more equal distribution of income by simply pointing out that, contrary to popular opinion, there simply is not enough wealth available among the perceived rich to make much of a difference to the perceived poor on the other end of the distribution. Thus, trying to effect rich-to-poor redistribution necessarily must dig and spread deeply into all classes, and once the Minotaur of a redistributive process has been created it quickly becomes captured by self-serving redistribution that has nothing to do, either in motive or effect, with narrowing the distribution of income. With the vast majority each well aware that they are on the receiving end of a few redistributions, at the same time each is much less aware that they are also on the giving end of many redistribution policies, and that the latter outweigh the former, the average citizen has become inoculated against the repression of a government that grows by redistributing. "[T]he greatest gainer . . . is not the lower income classes against the higher but the State against the citizen[20]. . . "[W]e have found ourselves repeatedly coming across centralization as the major implication of redistributionalist policies. . . . Thus, the consequence of redistribution is to expand the State's role."[21]

There is no mechanism, consistent with self-ownership and voluntary associations, capable of effecting abstract, idyllic, collectivist views of the world. Thus, all attempts to do so must quickly evolve into a centralization of coercive power in the government, power that in a democracy quickly metastasizes from effecting idealistic goals into vulgar schemes of self-interested redistribution. As David Horowitz recently observed, "Equality and freedom are inherently in conflict. This was all that socialist efforts had shown, over the dead bodies of millions of people. In talent, intelligence, and physical attributes, individuals were by nature different and unequal; consequently, the attempt to make them equal could only be achieved by restricting—ultimately eliminating—their individual freedom. For the same reason, redistribution could be carried out only by force."[22]

Footnotes

1. On Power, first published in 1945, was the first of Jouvenel's trilogy. The subsequent works were Sovereignty: An Inquiry into the Political Good, and The Pure Theory of Politics. All are available from The Liberty Fund, 8335 Allison Pointe Trail #300, Indianapolis, Indiana 46250-1684.

2. Anderson, Brian C., "Bertrand de Jouvenel's melancholy liberalism," The Public Interest, No. 143 (Spring 2001).

3. Jouvenel, Bertrand de, The Ethics of Redistribution, Cambridge University Press, 1952. Reprinted by The Liberty Fund, Inc., Indianapolis, Indiana, 1990

4. See John Gray's Introduction in The Ethics, p. xviii.

5. Locke, John, Political Writings, edited by David Wooton, Penguin Books, USA, 1993, The Second treatise on Government, Chapter Five, Paragraph 27, p. 274. See also the discussion in Richard A. Epstein, Simple Rules for a Complex World, Cambridge, MA: Harvard University Press, 1995, Chapter 2.

6. Hayek, Friedreich A., "The Use of Knowledge in Society," American Economic Review, 35 (1945). Hayek was primarily concerned with demonstrating why socialism could not work, but his observation is also relevant to the impossibility of redistribution.

7. Jouvenel, pp. 55, 57.

8. Jouvenel, p. 18, fn. 14.

9. Lerner, Abba P., The Economics of Control, 3rd ed, New York: Macmillan, 1947, Chapter II, p. 29. Obviously an impossible task on Hayekan grounds.

10. Lerner, pp. 29-32.

11. Robbins, Lionel, An Essay on the Nature and Significance of Economic Science, 3rd. Ed., London: Macmillan, 1984, Chapter Six.

12. Jouvenel, p. 34.

13. Jouvenel, p. 34.

14. Jouvenel, pp. 36-37.

15. Mancur Olson, who studied why people band together and collude for advantage, put it more succinctly. For him, it is easy for a few people to form a lobbying group to capture some advantageous governmental power because each reaps a relatively large portion of the gains. But organizing a large number of people, each hurt a little by such lobbying, into an effective opposition is much less likely because of the free rider problem and the fact that each has little to gain personally by joining. See his Logic of Collective Action, Cambridge, MA: Harvard University Press. 1965

16. The quote is from his obituary in The Economist, March 7, 1998, p. 91.

17. Jouvenel, p. 35.

18. Compare the observations by David Horowitz, Radical Son, The Free Press, 1997: "[C]onservatism was an attitude about the lessons of an actual past. By contrast, the attentions of progressives was directed toward an imagined future." (p. 396) And again: "The idea that men can be as gods and re-create a paradise on earth is the serpentine promise of the Left." (p. 415).

19. Jouvenel, p. 38.

20. Jouvenel, p. 73

21. Jouvenel, p. 76.

22. Horowitz, p. 397.

John T. Wenders is Professor of Economics, Emeritus, at the University of Idaho. His e-mail address is jwenders@uidaho.edu.