Egalitarianism Doesn’t Care About Desert, and Neither Does the Market
by Elizabeth Anderson
The Conversation
October 22nd, 2009
Lane Kenworthy claims that, even after we do what it takes to ensure equal opportunity and remove obvious injustices, we still have a compelling reason to redistribute income because so much inequality is due to sheer luck. John Nye argues that we can never have enough evidence to distinguish what people deserve from what they get out of sheer luck. But then he goes on to illustrate his argument with standard market morality tales that contrast the prudent, hardworking family that wisely accumulates wealth with the spendthrift family that loses everything in the housing crash, the less ambitious worker whose low pay is compensated by low job demands that free him to cultivate rich personal relationships with the more ambitious worker who sacrifices personal relationships to make a fortune on a risky project, and so forth. In these stories, it certainly seems we have enough information to judge that everyone is getting what they deserve, and Nye stacks the deck by only telling stories that suggest that the market generally delivers to people what they deserve.
I think it’s time to bring Hayek to the rescue. Hayek argued that it was inherent in the market mechanism that people very often win and lose on the basis of sheer luck, on account of factors for which they cannot claim credit, because they are totally out of the individual’s control, unforeseen, and even unforeseeable. It follows that, in general, we don’t deserve what we get from the market. But he also argued that the fact that market rewards don’t track desert is essential to the market’s unique ability to efficiently allocate resources in response to constantly and unpredictably shifting demands and conditions. It’s precisely because no one can foresee or control the innumerable factors that make it worthwhile to shift production from A to B, to substitute C for D, and so forth, that we need market prices to send information signals to us to direct our productive activity to where people demand it. The information function of prices would be destroyed if we tried to rig them to reward desert instead of letting them run free so we can tell where our services are most demanded, and what production methods are too costly, and adjust our behavior accordingly.
Perhaps more importantly, Hayek argued that we couldn’t have a free society if we tried to reward people according to what they deserved. The problem isn’t that attempts to redistribute income away from market allocations lead us down the slippery slope to totalitarianism. The Scandinavian social democracies haven’t turned into the Soviet Union or Nazi Germany. That embarrassing failed prediction of Hayek’s should be relegated to the same dustbin of history as Marx’s prediction that the workers would overthrow capitalism and establish a communist utopia. Rather, the problem is that we can’t enjoy liberty if social institutions are always peering over our shoulders, taxing and rewarding us according to collective judgments of whether we have used our liberty well or poorly — which is precisely what judgments of desert amount to.
I agree with Hayek on both counts: the market doesn’t reward us according to desert, but we shouldn’t try to do that in any event. It was a fatal flaw of socialism to try to reward people according to desert, as Hayek effectively argued. Does it follow that we should just let the market chips fall where they may, regardless of the consequences? No. In fact, quite profound redistribution is wholly compatible with a free society and market efficiency, as the extremely efficient and free Scandinavian social democracies have shown us. The key is to base distributions on other principles than individualized judgments of desert. I argued in my original contribution that more equal distribution can be justified on several grounds: to prevent the degeneration of democracy into plutocracy, to enable the less advantaged to avoid or escape relations of domination and provide them with the bargaining power they need to avoid exploitation by the more advantaged, and to avoid stigma and humiliation. I could offer additional reasons, but on this point I’ll let Hayek speak for himself:
There is no reason why in a society which has reached the general level of wealth which ours has attained the first kind of security [of a given minimum of sustenance] should not be guaranteed to all without endangering general freedom. . . . [T]here can be no doubt that some minimum of food, shelter, and clothing, sufficient to preserve health and the capacity to work, can be assured to everybody. . . . Nor is there any reason why the state should not assist the individuals in providing for those common hazards of life against which, because of their uncertainty, few individuals can make adequate provision. Where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance . . . the case for the state’s helping to organize a comprehensive system of social insurance is very strong. . . . [T]here is no incompatibility in principle between the state’s providing greater security in this way and the preservation of individual freedom. To the same category belongs also the increase of security through the state’s rendering assistance to the victims of such “acts of God” as earthquakes and floods. Wherever communal action can mitigate disasters against which the individual can neither attempt to guard himself nor make provision for the consequences, such communal action should undoubtedly be taken.
Ironically, that quote is from the Road to Serfdom, the very work in which Hayek sought to prove that countries like Sweden were headed toward totalitarianism. Hayek erred, in part because social democracy has no fundamental quarrel with leaving productive assets overwhelmingly in private hands, and letting competitive markets do their work. Nor does it attempt, as socialism did, to reward people according to judgments of desert. Rather, it secures people against market risks through very generous social insurance programs — a project that Hayek accepted as necessary and just (although his ideal was considerably less generous than the Scandinavian one), provides a rich set of public goods, including first-rate primary and secondary education, to provide real opportunity to all (who can credibly object to that?), and ensures everyone a dignitary income, not merely a subsistence income. We can have all that and the virtues of the market, too.
