How equal should economic liberty be?

In his article for Juncture, which summarises the argument of his book Free Market Fairness, John Tomasi presents his view as an attempt to synthesise the best from classical liberal defences of the free-market and egalitarian liberal theories of social justice. I am not convinced.

As I shall show in this article, Tomasi's analysis misses one of the key insights of social justice liberalism. As a result, he fails to engage adequately with a central issue of fairness. The free market and fairness remain unreconciled.

Economic liberty and the social justice tradition

At the centre of Tomasi's argument lies the notion of 'economic liberty'. A democratic citizenry should incline to the free-market because of the respect properly owed to an interest that citizens share in economic liberty:

'Many ordinary people - middle-class parents, single mums, entry-level workers - become who they are, and express who they hope to be, by the personal choices they make regarding work, saving, and spending. These are areas in which people earn esteem from others and feel a proper pride for things they themselves do.'

Tomasi adds:

'A social order best respects its citizens, and best encourages them to develop their moral powers, when it protects the liberty of citizens to make such decisions for themselves.'

There are number of ways a critic might respond to Tomasi's argument. One possibility is to argue that while economic liberty is an important value, it should reasonably be balanced against other values in determining just policies. Another possibility is to argue that Tomasi's definition ignores other aspects or kinds of economic liberty, such as freedom from subjection to arbitrary power which can emerge in private economic relationships - an issue raised in a recent blog post by Chris Bertram.

I think both responses have some force. But here I want to focus on a third response. Let's say we care about economic liberty, defined as the freedom to make our own decisions as individuals about work and saving, reflecting our own values, and living with the consequences of these choices. This is not all that Tomasi means by the term, but it is certainly a central part of what he means by it. Is he right to claim that social justice liberalism downplays the importance of economic liberty in this sense? I am not sure that he is.

Consider the theory of justice presented by Ronald Dworkin (a major theorist of social justice liberalism).

In Dworkin's view a credible theory of justice has to integrate two intuitions. The first is precisely the intuition that people are responsible for how well their lives go and that we must respect the different choices they make as a reflection of their values and goals. So if you and I have access to the same jobs and incomes, but you choose a higher-paying job and longer hours of work, then any resulting income inequality should be respected.

The second intuition, stated very crudely, is that people should not be worse off than others due to unchosen factors. As Dworkin puts it in one of the essays in his book A Matter of Principle:

'[P]eople are not equal in raw skill or intelligence or other native capacities ... they differ greatly, through no choice of their own, in the various capacities that the market tends to reward...'

These unchosen factors mean that, in a free market economy, citizens do not have access to the same sets of choices. For Smith the choice is there to earn an extra £1,000 in a day while, for Jones, an extra £1,000 might require choosing an extra month's work. In other words, the free market produces a highly unequal distribution of economic liberty. For Dworkin, this is obviously unjust.

Justice requires both (a) that we respect economic choices and (b) that we try to equalise the opportunities for economic choice. Economic liberty - the freedom to make choices about earning and saving, and to have our income and wealth depend on such choices - is not contrasted with equality here; it is, as it were, the stuff of equality, which we seek to render more equal.

A simple example: imagine two people, Alf and Betty. Imagine that under free market rules Alf has an earnings potential of half his society's average. Betty by contrast has an earnings potential of twice the society average. Imagine now that we can design a tax-transfer scheme which gives Alf a pound for every pound he chooses to earn, raising his earnings potential to the average; while, at the same time, we tax Betty at 50 per cent of every pound she earns, so putting her earnings potential on the society average. In this scenario, the income and wealth each ends up with will depend on the choices they respectively make about hours worked, which job to take, and so on. So they will have economic liberty. But the effect of the tax-transfer scheme, in this case, is to give them the samemenu of choices. So while they have economic liberty, they also have equal economic liberty.

The example is obviously simplistic. But it illustrates the basic point that different institutional schemes can deliver different distributions of economic liberty.

The ambiguity of 'economic agency'

We can pursue this point further by looking at John Tomasi's own account of the fairness constraint which applies to the economy.

In his Juncture article Tomasi tells us:

'[W]e best respect the poor when we adopt institutions designed to maximise the bundle of wealth personally controlled by the lowest-paid workers...'

However, a little later in the article, he adds:

'What's most important as a matter of moral ideal, is not simply that the unfortunate have things,but that they have those things as a result of their own economic agency.' [my emphasis]

So, in fact, we are not to select the economic system which maximizes the wealth personally controlled by the lowest-paid. We have to qualify that objective with the requirement that personal wealth be acquired through the individual's own 'economic agency.' But when is wealth due to the worker's own 'economic agency'? When every penny the worker accumulates is earned out of their free market wage? What about if someone in a low-paid job saves into an account and the state matches each dollar they save with a dollar? Is that OK?

Here we come back to Dworkin's (and, indeed, the philosopher John Rawls') basic point about how different institutional schemes affect access to economic choices.

Do we conceive of 'economic agency' against the backdrop of the highly unequal opportunities to earn presented to individuals by a free market system? Or do we conceive it in terms of one of a number of rival institutional schemes that make these opportunities, these menus of options, more equal?

The basic idea that a person's income and wealth should be responsive to their own economic choices, so that, for example, how much wealth they have depends on choices they make to work and save, is entirely consistent with (some) more egalitarian institutional schemes. It simply doesn't point necessarily towards a free market system in particular.

Nevertheless, when Tomasi speaks of workers' wealth depending on their 'economic agency' I suspect he is referring to wages earned in a free market context. But democratic citizens are perfectly at liberty to construct institutional schemes that will make economic liberty more equal and to assess 'economic agency' relative to what they can earn and save through their individual choices under these fairer alternatives.

Conclusion

Social justice liberals such as Dworkin agree with John Tomasi that individuals should be free to live by their own choices about how much to earn and save. In this respect, at least, they affirm the value of economic liberty. But social justice liberals point out that different institutional schemes, of which the free market system is just one, offer different distributions of economic liberty in this sense. One can't just be for economic liberty, in this sense, then. One has to decide what kind of distribution of economic liberty, in this sense, is just. We have to ask ourselves: How equal should economic liberty be?