F.A. Hayek on 'Social and Economic Justice'

presentation copyright 1996, 1997, 1998, 1999 byBarry and Deborah Brownstein

Natural Rights vs. Positive LawNatural Rights vs. Positive Law

• Finite and defined- right not to be coerced, if you do not violate someone else’s rights

• win-win (not scarce, one person’s use of self-ownership doesn’t conflict with someone else’s use)

• conduct considered

• Ill-defined- whatever advances ‘the common-good’ (i.e. ‘right to a good job’, ‘right to health care’, ‘right for Netscape to sell its browser’)

• win-lose- there is no “right to a particular state of affairs unless it is the duty of someone to secure it.”

• outcomes considered

Two Questions To ConsiderTwo Questions To Consider

…’whether within an economic order based on the market the concept of "social justice' has any meaning or content whatever’.…’whether it is possible to preserve a market order while imposing upon it (in the name of social justice or any pretext) some pattern of remuneration based on the assessment of the performance or the needs of different individuals or groups by an authority possessing the power to enforce it.’

Why Does ‘Social Justice’ Sound Why Does ‘Social Justice’ Sound Attractive?Attractive?

• ...‘the results of the spontaneous ordering of the market were interpreted as if some thinking being deliberately directed them, or as if the particular benefits or harm different persons derived from them were determined by deliberate acts of will’…

• …’the demand for 'social justice' therefore becomes a demand that the members of society should organize themselves in a manner which makes it possible to assign particular shares of the product of society to the different individuals or groups.’

‘‘Justice’ in a Spontaneous OrderJustice’ in a Spontaneous Order

“nobody's will can determine the relative incomes of the different people, or prevent that they be partially dependent on accident.”

“men can be allowed to decide what work to do only if the remuneration they can expect to get for it corresponds to the value their services have to those of their fellows who receive them; and that these values which their services will have to their fellows will often have no relations to their individual merits or needs.”

‘‘Justice’ in A Spontaneous Order Justice’ in A Spontaneous Order ContinuedContinued

“Incomes earned in the market by different persons will normally not correspond to the relative values of their services to any one person...the performance of a Beethoven sonata...or a play by Shakespeare have no 'value to society' but a value only to those who know and appreciate them.”

“The rationale of the economic game in which only the conduct of the players but not the result can be just.”

A Spontaneous Order Does Not A Spontaneous Order Does Not Depends on AgreementDepends on Agreement

“Yet the complex structure of the modern Great Society would clearly not work if the remunerations of all the different activities were determined by the opinion which the majority holds of their value-or indeed if they were dependent on any one person's understanding or knowledge of the importance of all the different activities required for the functioning of the system.”

“The Great Society arose through the discovery that men can live together in peace and mutually benefiting each other without agreeing on the particular aims which they severally pursue.”

Knowledge, Justice and Knowledge, Justice and Spontaneous OrdersSpontaneous Orders

“Most of the knowledge on which we rely in the pursuit of our ends is the unintended by-product of others exploring the world in different directions from those we pursue ourselves because they are impelled by different aims; it would never have become available to us if only those ends were pursued which we regarded as desirable.”

new knowledge and discovery is inhibited if coercion is used

Are ‘Positive Rights’ Antithetical Are ‘Positive Rights’ Antithetical to ‘The Rule of Law’?to ‘The Rule of Law’?

• “... to assure the same material position to people who differ greatly in their strength , intelligence, skill, knowledge and perseverance as well as in their physical and social environment , government would clearly have to treat them very differently to compensate for those disadvantages and deficiencies it could not directly alter.”

• “If such claims (positive rights) are to be met, the spontaneous order which we call society must be replaced by a deliberately directed organization: the cosmos of the market would have to be replaced by the taxis whose members would have to do what they are instructed to do.”

What About Discrimination?What About Discrimination?

• The greater the restrictions in the output market, the greater the level of discrimination– example- AT&T (pre-deregulation)

• The greater the competition, the lower the level of discrimination – example- technology companies

Are Markets Darwinian?Are Markets Darwinian?

• In many non free-markets, the most cunning and intimidating thrive• Markets are a mixture of cooperation and competition• Reputation and trust are essential elements in markets• In free-markets property rights are respected for all

– contracts are respected and enforced– people are free to exchange

• The most productive do the best– but all thrive due to capital accumulation – but many volunteer and are charitable – technology helps the ill, less fit and disabled

System DynamicsSystem Dynamics developed by Professor Jay Forrester at MIT used and popularized by Peter Senge at MIT's Sloan

School of Management how complex feedback processes can generate

problematic patterns of behavior within organizations and large-scale human systems.

Justice Based on OutcomesBased on: Hayek, "'Social' or Distributive Justice,"

systemic diagram: copyright 1996, Barry and Deborah Brownstein

Conflict betweengroups increases

Defineproblems/solutions

"Special"Interests

Lobbying

4. Governmentintervenes to

allocate shares

Personificationof "Society"

1. Belief inJustice basedon Outcomes

DissatisfiedIdentify with

a group

Role ofGovernment

Rules to allocateshares/outcome

treat peopleunequally

TheEconomy

2. Dissatisfactionwith "unequal"

outcomes

3. Interventionsought

Discoveryinhibited

Sphere ofgovernmentincreases

5. Individualfreedom

diminishes

Economic growthdeclines

Individualresponsibilitydiminishes

Justice Based on ConductBased on: Hayek, "'Social' or Distributive Justice,"

systemic diagram: copyright 1996, Barry and Deborah Brownstein

Luck/changingcircumstances

4. Governmentintervenes tocodify/enforce

"fair rules"

Subjective valueof "services"revealed by

market

1. Belief inJustice basedon Conduct

Spontaneoussocial order

Role ofGovernment

TheEconomy

2. Individualrewards/outcomes

somewhatunpredictable

3. "Fair rules"emerge as

social normsin absenceof coercion

Discoverystimulated

Governmentas umpire

5. Individualsact freely, withresponsibility

(e.g., choose work)

Economygrows

Widely dispersedknowledge is used

Socialcooperationincreases