May 2007

Throughout the 20th century, the economics profession largely eschewed questions of value as part of the attempt to gain “scientific” status. Accordingly, when formal economic models imagine the nation-state as an agent that may either impede or improve the efficiency of an economy, the distinctively coercive character of state action is neither emphasized nor taken into the accounting of cost and benefits of various government policies. But shouldn’t there be a presumption in favor of voluntary action? If a policy violates that presumption, shouldn’t the loss of liberty be taken into account — even within a fully scientific economics? Is there an intelligible and morally compelling voluntary/coercive distinction that exists prior to and independent of considerations of efficiency? Can there even be coercion outside of a government’s framework for the assignment of legal rights?

In this month’s thought-provoking lead essay George Mason economist Daniel Klein, editor of the academically muckraking Econ Journal Watch, argues that not only do considerations of coercion and liberty figure into economists’ scientific judgment as a matter of fact, but that they ought to figure in with added clarity so that we can more directly and honestly consider the extent to which coercion is really worth it. Klein will face a wide-ranging array of eminent interlocutors, including NYU philosopher Liam Murphy, co-author (with Thomas Nagel) of The Myth of Ownership: Taxes and Justice; Harvard economist Edward Glaeser, editor of the Quarterly Journal of Economics; and University of Chicago law and economics powerhouse Richard Epstein, author of Skepticism and Freedom: A Modern Case for Classical Liberalism.


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Lead Essay

  • George Mason University’s Daniel Klein begins this month’s lead essay by presenting evidence from a poll of economists showing that more than half of those who are in favor of a minimum wage generally don’t think it is coercive, suggesting that judgments about what is coercive or voluntary underpin professional opinion about economic policy. If so, Klein asks, shouldn’t economists address the question of coercion more directly? Klein argues that we should treat non-coercion as a maxim to be followed “ninety-something percent of the time,” which allows for the legitimacy of coercion under certain conditions. Economists may then ask: “When should we endorse the liberty maxim and when not?” in a principled way. Klein draws on ideas from F.A. Hayek and Adam Smith to argue for the centrality of the distinction between voluntary and coercive action in the ordinary practice of economic inquiry, and to urge a renewed emphasis on the role of liberty in economic theory.

Response Essays

  • NYU philosopher and legal theorist Liam Murphy responds to Daniel Klein’s lead essay by questioning the relevance of the general concept of coercion to the defense of market institutions and disputing Klein’s particular characterization of coercion. Murphy observes that arguments in defense of markets generally appeal to pre-institutional rights or a conception of good consequences. In neither case does the idea of coercion play a key role. Further, Murphy suggests that Klein’s particular account of coercion is loaded with contestable moral baggage. But, Murphy writes, “The concept of coercion … 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.”

  • Harvard economist Edward Glaeser agrees with Dan Klein that economic regulations, such as minimum wage laws, are coercive, and that this ought to give us pause. “For millenia, governments have abused their control over the tools of violence,” Glaeser writes. “The historical track record insists that we treat any governmental intervention warily.” However, that does not rule out coercion. “The ultimate job of the state is to increase the range of options available to its citizens,” Glaeser maintains, and well-targeted coercion can increase total freedom in this sense. “Certainly, redistribution reduces the freedom of the taxpayer but it increases the options of the recipient of governmental largesse,” Glaeser says. He goes on to argue that laws that restrict the liberty to contract, such as the minimum wage, generally are not freedom-enhancing overall and tempt government abuse.

  • In his reply, University of Chicago law and economics guru Richard A. Epstein attempts to lay out an account of “justified coercion.” Taking the minimum wage as an example, Epstein sets forth and then rejects several grounds on which the minimum wage may be seen as non-coercive. He then sets forth and rejects several arguments that might justify the coercion in economic regulations such as the minimum wage. According to Espstein, state coercion in support of market institutions “is justified because it expands the envelope for gains from trade through voluntary exchange.” In general, coercion may be justified when “it is to the long-term advantage of all,” but detailed and systematic analysis of particular institutions — such as the one Epstein provides for the minimum wage — is required to establish when this is, and is not, the case.