Markets, Government &
Economic Justice
Stephen Nathanson
Professor of Philosophy
Northeastern University
President Obama’s Response to Critics of his Economic Policies
Press Conference, February 2009
“Now, maybe philosophically you just don't think that the federal
government should be involved... I happen to disagree with that.”
“Some of the criticisms [of my proposals] really are with the basic idea
that government should intervene at all in this moment of crisis.
You have some people, very sincere, who philosophically just think the
government has no business interfering in the marketplace. And in fact
there are several who have suggested that FDR was wrong to intervene
back in the New Deal.
They're fighting battles that I thought were resolved a pretty long time
ago….”
President Obama’s Appeal to the Opinions of Economists
Press Conference, February 2002
“Most economists, almost unanimously, recognize
that even if philosophically you're… wary of
government intervening in the economy, when you
have the kind of problem we have right now …
government is an important element of introducing
some additional demand into the economy.”
Capitalism
State Socialism
*Private ownership of
property
-----------------------*Market system of
production &
distribution
*Public ownership of
property
----------------------*Planned economy
with public control of
production
& distribution
----------------------*To each according to need
(or an equal share)
-----------------------*To each according to
ability to pay
+ gifts
Recent books on the spectre of socialism
•To Save America: Stopping Obama's Secular-Socialist Machine
Newt Gingrich
•Revolt!: How to Defeat Obama and Repeal His Socialist
Programs
Dick Morris and Eileen Mcgann
•Radical-in-Chief: Barack Obama and the Untold Story of
American Socialism
Stanley Kurtz
Is Socialism Bad? Three Criticisms

Socialism has not worked well as a productive system.
Capitalism is more productive and makes people
better off.

Fails to reward people for greater effort or
contribution.

Governments in socialist systems have too much
power and threaten personal liberty.
THE INVISIBLE WELFARE STATE
Two student comments on a survey
about capitalism, socialism, and the welfare state
“The answers about capitalism and socialism were given quickly and
were almost identical….Each of the respondents had much more
difficulty expressing their concept of the welfare state and even
expressed difficulty with grasping exactly what a welfare state is.”
“Everyone knew what capitalism is because we live in a capitalist
society, but people were unsure what a welfare state is.”
Capitalism
*Private ownership
of property
Welfare State
*Primarily private ownership,
some public ownership
---------------------------------------------*Market system plus
*Market system of production government distribution
&
of some resources
Distribution
---------------------------------------------*To each according to
*To each according to
ability to pay
ability to pay
+ gifts
+ gifts
+ guaranteed access
to some resources
The central question
Should the market be the distribution
mechanism for all goods?
Or
Should governments distribute some goods to
people independently of their ability to pay?
Three Criteria for Evaluating Economic Systems
Many defenders of each system invoke these value
Value
Criterion
Explanation
Questions
Does the system produce and
How do we measure wellMaximize utility distribute enough goods to make its being?
members as well off as members of
competing systems?
Does the system do justice by
distributing goods in accord with
what recipients deserve?
What are the criteria of
desert?
Are there different types of
desert?
Does the system do justice to its
Promote liberty members by protecting and
promoting their liberty?
Are there different types of
liberty?
How do we measure the
extent of liberty?
Reward
desert
Criterion
Maximize
utility
•
•
Capitalism
Welfare State
NO
Yes
The tendency toward concentration
•
The diminishing marginal utility argument
for using taxation to “redistribute” some •
resources.
Yes & No
Reward
• Limited rewards for individual desert
desert
(e.g., effort and contribution)
•
•
•
Ignores human desert
•
Allows excessive influence of luck on
economic well-being (inheritance, family •
status, economic climate, etc.)
NO
Raises well-being of less well-off
people
Allows inequalities as incentives to
production
Yes & No
Limited rewards for individual desert
(e.g., effort and contribution)
Recognizes human (unearned) desert
by guarantee of some resources
Limits impact of luck
Yes
Promote
• Protects negative liberty (freedom from • Promotes both positive liberty and
liberty
interference), but ignores positive
negative liberty
•
liberty, the ability to do things.
Ignores connection between liberty and
economic resources
•
Prevents economic and political
domination by the economically
powerful
Emergency
Welfare
State
Opportunity
Welfare
State
Comprehensive
Welfare
State
Market system
+
Gov’t protection against
force and fraud
+
other life-threatening
emergency
conditions
Market system
+
Gov’t protection against
force, fraud,
and
emergency, life-threatening
conditions
+
providing education
and other
opportunity-generating
resources
Market system
+
Gov’t protection against
force and fraud
+
guaranteed access of
resources required for a
decent level of well-being
(i.e., sufficient resources to
abolish poverty)
Beyond Capitalism vs. Socialism
Socialized vs. Marketized Sectors
Sectors are parts of systems that handle the production &
distribution of particular goods and services.
*Marketized sectors distribute by ability to pay
*Socialized sectors distribute according to need.
Two uncontroversial socialized sectors
Police Protection
K-12 Education
(Are there others?)
“From each according to their ability,
to each according to need.”
The health care debate revisited

Should the distribution of health care be marketized socialized?

Should it be distributed by “ability to pay” or according to need?

Why do we think that police protection and education should be
distributed to all, irrespective of ability to pay?

Is health care more like these goods and services?

Or is it more like other consumer items that we think should
depend on the ability to pay?
John Hospers
Two bad arguments for libertarian capitalism and against the welfare state
Argument #1
1. While governments should protect people against force and fraud, governments
should not provide other beneficial goods or services such as income, education,
and medical care.
2. It is wrong for governments to provide these goods and services to people
because these must be paid for by taxes.
3. Taxing people for these purposes is wrong because it takes their money without
their consent and thus violates their property rights.
Argument #2
1.If people are suffering because they are unemployed, it would be wrong for the
government to tax me in order to help these people because I did not cause them
to be unemployed.
2. People are only obligated to help others when they have caused the other
people’s suffering through their own action or negligence.
3. Taxation to help the unemployed is wrong because it forces me to help people
whose suffering I am not responsible for.
Anarchocapitalism
Minimal state
capitalism
“Pragmatic”
capitalism
Market only,
No
Gov’t
Market
+
Gov’t
that protects against
force and fraud
and no more
Market
+
Gov’t protection against
force and fraud
+
limited, other socially
useful activities
Police and military
protection as nonmarket goods
Education, e.g., as a nonmarket good
Anarchocapitalism
Minimal
state
capitalism
Pragmatic
capitalism
Emergency
Welfare
State
Opportunity
Welfare
State
Comprehensive
Welfare
State
Market
Socialism
State
Socialism
Market
only,
No
Gov’t
Market
+
Gov’t
that protects
against force
and fraud
[and no
more]
Market
+
Gov’t
protection
against force
and fraud
+
limited, other
socially useful
activities
Market
+
Gov’t
protection
against force
and fraud
+
other lifethreatening
emergency
conditions
Market
+
Gov’t
protection
against force,
fraud
and
emergency, lifethreatening
conditions
+
providing
education
+
other
opportunitygenerating
resources
Market
+
Gov’t
protection
against force,
fraud
+ guaranteed
provision of
resources
required for a
decent level of
well-being
Gov’t –
run
market
system for
producing
and
selling
goods
+
Gov’t
allocation
of roughly
equal
share of
resources
to all
Gov’t
protection
against force
+
gov’t
control of
production +
gov’t
guarantee of
a roughly
equal share
of resources
to all
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Marketized - Northeastern University