Problems with “Libertarian” Arguments for Income Redistribution

Can we argue for a guaranteed basic income within libertarian principles? Matt Zwolinski offered a case. But David Friedman says his arguments don’t work.
David D. Friedman

David D. Friedman, son of Nobel laureate Milton Friedman, is a leading proponent of anarcho-capitalism, the theory that the state is an unnecessary evil and that all services, including the law itself, can be provided by voluntary cooperation in the private economy.
While Friedman holds a Ph.D. in physics from the University of Chicago, he is chiefly known for his scholarly contributions to economics and law. He is the author of five books of non-fiction as well as the novels Harald and Salamander. In The Machinery of Freedom: Guide to a Radical Capitalism, Friedman argued that an economic analysis of impact of state action points to an anarchist conclusion. In Law's Order: What Economics Has to Do with Law and Why It Matters, he shows how directing the law to seek economic efficiency can lead to the achievement of justice.
Friedman stands in contrast to many other anarchists because of his "consequentialist" approach. Rather than argue that humans have inviolable natural rights which it is always wrong to violate, he uses cost-benefit analysis to assert that a world without government is measurably better than one ruled by states.

Matt Zwolinski has recently posted some possible arguments in favor of a guaranteed basic income or something similar. While the position is not one popular with libertarians—the only other example that occurs to me is In Our Hands by Charles Murray—it does raise some interesting questions.

Matt offers three different arguments. The first is that a guaranteed income or something similar would be an improvement on our present system of welfare. That is probably true, especially if you imagine it replacing not only welfare but all policies, such as the farm program, that are defended as helping poor people. The problem, as Matt appears to realize, is that if a guaranteed minimum income is introduced it will almost certainly be an addition to, not a substitute for, current programs.

His third argument is that a guaranteed income is a good thing for reasons that libertarians, among others, should recognize. One version of that is to point out that private charity faces a public good problem, hence that we are on net better off if government taxes us to provide the charity that each of us wants provided but would prefer that other people pay for. This is not a particularly libertarian argument, but it is essentially the same as one that many libertarians accept in the context of national defense.

One problem with the argument here is that we do not have any way of setting up mechanisms for income transfer that can only work in the way we would want them to. Once those mechanisms exist, individuals will try to game or alter them in order to be transferred to rather than from. That will impose real costs—resources spent gaming existing rules and lobbying to change them. And we may end up, as we often have in the past, with transfers that go up the income ladder rather than down or in all directions at once.

The most interesting part of Matt’s essay, and the most libertarian part, is the second argument. As he points out, the existing state of the world is in part a result of past rights violations. Land claims in libertarian theory may be based on a series of voluntary transfers beginning with the person who first mixed his labor with the land, but many land claims in the real world run back to an initial seizure by force. Similarly, claims to other forms of wealth must be justified, in libertarian moral theory, by a chain of voluntary transactions back to a first creator. In at least some cases that chain is interrupted by involuntary transactions. Consider a house built by slave labor. Is the legitimate owner the person with the present title to it or the heir of the slaves forced to build it, or is it perhaps partly the legitimate property of one and partly of the other? What about property in other forms inherited through a chain that leads back to a slave holding or slave trading ancestor who owed, but never paid, compensation to his victims?

Most libertarians would recognize this as a legitimate problem, although many might point at the practical difficulty of establishing just ownership in such cases as justifying some sort of statute of limitations with regard to wrongs in the distant past. Matt’s alternative, suggested by a passage he quotes from Nozick, is to argue that the descendants of those who gained by past rights violations are on average better off than the descendants of those who lost, hence redistribution from richer to poorer in the form of a guaranteed minimum income represents an approximate rectification for past injustice.

While the argument suggests that transfers from richer to poorer might do a better job of rectification of past injustices than random transfers, it does not imply that such transfers do a better job than doing nothing, that they on net reduce injustice rather than increasing it. Some present wealth may be due to causes that are, from the standpoint of libertarian moral theory, unjust, but not all. If I justly owe you forty cents, taking a dollar from me and giving it to you makes the resulting distribution less just, not more. Unless most inequalities are inherited from past rights violations, a claim I think few libertarians would support, the logic of the argument breaks down.

A brief digression is needed here to distinguish between wealth due to past rights violations and wealth inherited from such violations. Suppose I am one of two doctors in a town. Someone murders the other. The result is to increase demand for my services, hence my income. I have benefited by the murder but I have not violated any rights, so do not owe the victim’s heirs any compensation. The current distribution of income is due to all sorts of events in the past, some of them unjust, but it does not follow that everyone who is better off as a result of past history, even past rights violations, owes a debt to everyone who is worse off as a result.

A further problem with Matt’s argument is that, even if you believe that a guaranteed basic income reduces net injustice, it is hard to argue that it is the best rule of thumb for the purpose. Consider the case of Afro-​Americans. Almost nobody whose ancestors immigrated to the U.S. after the Civil War is the heir of benefits created by violation of the rights of their ancestors by his ancestors. On the other hand, the ancestors of present-​day Afro-​Americans were enslaved by Africans to be sold to European slave traders. The present inhabitants of Africa, at least sizable parts of it, are more likely than the present inhabitants of North America to be descendants of people who owe, and did not pay, reparation to slaves and their descendants.

It follows that Matt’s second argument implies that the (very poor) present inhabitants of Africa owe compensation to the (relatively rich) present American blacks. I do not think Matt would accept that argument, whether or not he could rebut it. If so, he does not really believe in his second argument.

Readers sufficiently interested in these issues my want to look at the draft of one of the new chapters for the third editions of The Machinery of Freedom which discusses some related arguments for redistribution.

This post originally appeared on David Friedman’s blog.