The Relevance of Coercion to the Defense of Markets
The arguments that can be offered for and against minimum wage regulation mirror the arguments that can be offered for and against markets generally. There are those, such as Robert Nozick, who find ethical foundations for markets in a particular view about individual rights. Assuming that people have pre-institutional (moral or natural, not just legal) rights to liberty and property, market exchange is just what happens when people’s rights are respected. Since, on this view, all interference with voluntary exchange is prima facie wrong, the objection to minimum wage legislation is easy to see.
A less thoroughgoing moral defense of market exchange is also possible. Daniel Klein proposes a moderate libertarianism that tolerates infringements of property and liberty rights by the government so long as enough is at stake in terms of social welfare.
In stark contrast, however, are purely instrumental defenses of market institutions. A freer market is generally better than a more regulated one because it is more efficient, resulting in a bigger social pie. Such a position is accepted even by most egalitarians these days. Though pretax market outcomes will tend to be, from that point of view, unacceptably unequal, properly designed tax and transfer institutions can produce a better result than the direct regulation of economic interaction. Whether the regulation of wages is an exception to this general rule divides egalitarian economists. But their dispute is the purely empirical one of whether setting a floor to legal wages makes poor people better or worse off.
Instrumental arguments for markets may be put to the service of different views about the (morally) right social aims—ranging from the neo-utilitarianism of cost-benefit analysis to strongly egalitarian views influenced by John Rawls. But in all cases the defense of markets depends entirely on the factual question of how well they serve the proposed social aims, and not at all on the idea that people have pre-institutional rights to property and its voluntary exchange.
I venture that instrumentalists generally, both those for and against minimum wage laws, would be inclined to react with puzzlement to Klein’s question about whether such laws are coercive. In one natural sense of the word, after all, the entire set of institutions that support market interaction is coercive; criminal prohibitions on theft, for example, are coercive, as is taxation.
Implicit in this kind of reaction is one of two views. Some believe that there are no natural rights and so the only question is whether government, in general, does more harm than good. Others believe that there are natural rights that constrain government’s pursuit of social goals but the questions of which such rights there are, and what strength they have, are not ones economists are likely to have any special insight about. Economists’ expertise starts downstream of the specification of both the proper social ends and the moral limits to governmental means. (Torture by the police is out, even if it somehow could increase the size of the welfare pie, but economics for the most part takes such restrictions on means for granted.)
Klein rightly notes that this reaction is in one way too quick. The notion of coercion, or free exchange, is at the foundation of the instrumentalist case for free markets because the claim that exchange of property is mutually beneficial and thus increases the size of the welfare pie is plausible only if it is limited to cases of uncoerced exchange.
But the instrumentalist can reply that the notion of coercion she needs may overlap only accidentally with the notion relevant to setting (prima facie) limits on government means. All the instrumentalist is saying is that there are general classes of transactions that we can (somehow) identify in which the assumption of mutual benefit breaks down. Label those for which the problem seems to be informational cases of fraud, and those for which the problem seems to have something to do with the decisional capacity of one of the parties cases of coercion; in both cases, the contours of the notion are shaped by the question of when the assumption of mutual benefit no longer holds.
There need be no attempt, on this approach, to argue from some independent understanding of the concept of coercion to the assumption of mutual benefit in exchange. The instrumentalist economist does not need to claim that there is no morally significant independent concept of coercion, with important applications in other contexts. That’s just not the notion of coercion she has in mind when she writes that uncoerced exchange benefits both parties. Klein’s attempt to expose all economists as market moralists in denial can be resisted.
Unpacking Political Concepts
In suggesting that there is a single notion of coercion that can play a foundational role in many different areas of social policy, Klein opens up a rather unpromising arena of debate. Key political and moral concepts such as those of liberty, coercion, democracy, and the rule of law, are well-established battle-sites within political theory. Suppose someone argues that the American combination of constitutionalized individual rights and judicial review is undemocratic. Defenders of this practice would rather be able to say that the critic doesn’t understand what democracy is than to have to say that democracy is not the only thing that matters; so they offer an account of what democracy is that is compatible with judicial review.
Sometimes this kind of move is rather obviously an attempt to disguise what is really at stake. You take a concept that has positive connotations for everyone and then build a lot of controversial political theory into the content of the concept. The claim that unrestricted markets maximize liberty falls into this category, since this can be made plausible only if you define liberty in terms of respect for the very (alleged) rights that are the basis of the moral argument for the market.
Of course two can play this game, and if arguments about the minimum wage become arguments about the concept of coercion, it is not obvious where we will end up. It could be argued that any contract of labor that pays less than a certain socially recognized minimum is coercive because uncoerced exchange occurs only when people have a range of options consistent with some standard of minimally fair social interaction. Thus minimum wage legislation could be defended on the ground that it is necessary to prevent coercion by private parties. Of course the possibility of such an account of coercion is precisely why Klein believes that theorists of the market need to think harder about this issue. They need to get the concept of coercion right.
As it happens, philosophers have thought rather a lot about the concept of coercion, starting with Nozick’s classic 1969 essay, “Coercion.” Nozick’s final but still tentative analysis of coercion goes roughly as follows: A proposal (such as “I’ll kill you if you don’t give me your money” or “I’ll pay you $5 per hour for washing the dishes”) counts as coercive if the person to whom the proposal is made would prefer never to have received it in the first place.
So on Nozick’s account, labor contracts for less than the minimum wage are not coercive. But it is also doubtful that their prohibition is coercive, since the relevant description of the government’s proposal seems to be this: “We will enforce agreements where the wage rate exceeds $X, but agreements for less than $X will not be enforced and in fact will be otherwise sanctioned.” This is better than nothing, as far as government enforcement of labor agreements is concerned, and so rational employers and employees would not prefer that the proposal had never been made.
Those who feel that something has gone wrong here might be tempted by another approach that Nozick discusses in his article, and which has been very influential. On the so-called “moral baseline” approach, we can count proposals as coercive if carrying them out would make their recipients worse off than they would be if everyone acted as they morally ought to act. A government’s proposal to enforce only certain labor agreements will count as a coercive, on this view, just in case governments ought to enforce all labor agreements.
Klein seems to have in mind some version of the moral-baseline approach to coercion. If I understand him correctly, he holds that coercion is interference with liberty or a proposal to do this, where liberty is in turn understood in the specific way necessary for the slogan that free markets maximize liberty.
There are two fundamental objections to be made to Klein’s project. The first is that the only method we have for analyzing concepts is the one Nozick used: we offer examples in order to prompt intuitive judgments about whether those cases involve coercion or not. Analysis of any concept is hostage in the first instance to people’s intuitions about correct usage. Klein tells us what coercion is, but he does not attempt to explain away the fact that many people have a very different view about the correct application of the concept. All concepts are indeterminate to some extent, but some are more so than others. The concept of coercion, I am convinced, is deeply indeterminate, with disagreement about correct usage tracking exactly the fault lines that have political significance; so there is simply no right answer to such questions as whether a labor contract for below a minimum wage, or its prohibition, is coercive.
But the more important point is that this doesn’t matter. What is really at stake in the argument over the moral foundations of the market, and therefore minimum wage laws, is what rights people have, how much weight they have, and what the proper aims of government are. It is at best misleading to disguise discussion about these issues as a debate about the proper understanding of the notion of coercion. In this respect, I side with Nozick. The argument for libertarianism in Anarchy, State, and Utopia does not trade in rhetoric about the maximization of liberty and the word “coercion” does not appear in the index.
 Robert Nozick, Anarchy, State, and Utopia (New York: Basic Books, 1974).
 Robert Nozick, “Coercion,” in Socratic Questions (Cambridge, Mass. and London: Harvard University Press, 1997).
Liam Murphy is a professor of philosophy and law at New York University.