Liberal Failure: The Union of The Protective State and The Re-distributive State7
There are 2 recent articles1 by Shikha Dalmia at Reason that jointly imply markets/property rights are what protect us from the Hobbesian “State of Nature” default condition. This is bad political philosophy. But the incorrect use of Hobbes is a common mistake. Often progressives will appeal to Hobbes to dismiss libertarianism and justify the case for social democracy. Even worse, communitarians will sometimes invoke Hobbes to explain to us why “it takes a village.”
What is this State of Nature? In liberal political philosophy it is the “defection state”(that is, a station where agents are not constrained by any cooperative bargain agreement) where agents are only constrained by their own reason and self-interest. Liberal social contract theory attempted to explain why rational agents would choose to cede away some of their own individual sovereignty(after all, in the State of Nature, agents are fully sovereign over themselves) to “contractually” form a State–i.e, a territorial enforcement mechanism with a monopoly on the legitimate use of force.
In liberal political philosophy, the social contract and political community are artificial constructs to more or less produce a public good of “security” against a compliance problem that arises out of civil society. Hence the State is an artificial construct and there is a clear division between civil society and the State. Agents surrender some of their sovereignty in exchange for this “good” of security.
For Hobbes, the compliance problem that arose from the State of Nature was one of total conflict. This view equates human self-interest with humans as pure maximizers. Any cooperative arrangement between agents suffers from a compliance problem, not to mention the problem of agents simply dismissing any pretense of cooperation–e.g., external invasion. Hence, it is rational for pure maximizers to escape this condition of total conflict by ceding much of their sovereignty over to the external authority of the Leviathan. For Hobbes, Leviathan is “Leviathan,” that is, a single ruler. Political arrangements such as representational government or democracy would not be constraining factors against pure maximizers. These latter arrangements would just end up producing a rule by a dominant political class.
However, with Locke, the State of Nature, while sub-optimal, is not a condition of total conflict. The only applicable public goods problem that emerges from Locke’s State of Nature is an enforcement of property rights. Agents agree to a social contract of the State as means to “secure” property rights. But since the State of Nature is not one of total conflict, we have constraints the external sovereign must abide by; egregious violations of these constraints make the State a worse bargain relative to the defection condition, thus giving cause for the severing of the bonds of the governance. This, of course, is the philosophical foundation behind the American Declaration of Independence.2
So, given our little review of liberal social contract theory, it should be clear why it is nonsense for Shikha Dalmia to imply that markets/property rights are what constrain a Hobbesian State of Nature–i.e., a defection state of pure maximizers. Rationally, pure maximizers cede their claims to property, in the name of the public good of security, to the authority of the external Sovereign. Security trumps property rights. In others words, if you concede the Hobbesian State of Nature, you concede any individual claim to property or property rights.
Of course, the Hobbesian State of Nature slays more than just property rights. “Social Justice” cannot stand on a foundation of a defection state of pure maximizers either. Social Justice is whatever Leviathan tells you it is, and whatever Leviathan tells you it is still a better than the defection state. Hence, there is no individual right or claim to “social justice.” Put differently, for social democrat enthusiasts, individual voting carries no moral claim against Leviathan. This explains why, in the Hobbesian model of the State of Nature, democracy is less preferable than monarchy(single rule). Since voting carries no moral claim, democracy is nothing but a sham, merely legitimizing a political class of pure maximizers.
In liberalism, voting can only carry a moral claim under an implicit presupposition that the defection state can be a preferable outcome to rule by the Sovereign. This, of course, then undercuts any Hobbesian State of Nature foundation for Social Democracy.
Libertarianism and the Hobbesian Framework
Although it’s obvious that the Hobbesian State of Nature invalidates any libertarian claims, I would nonetheless contend that the Hobbesian framework itself is the proper one to defend libertarianism. How can this be? Well, let us define it’s gist:
(i) The State is an artificial construct and there is a clear division between civil society and the State
(ii) Politics and morals are agreements between exclusively self-interested, rational agents.
(iii) For Self-interested agents it is rational to defect from an arrangement of total conflict, accepting a radical alternative, if necessary
The only real difference between Hobbes and Libertarianism is over the source of a “total conflict.” Both agree that there is a condition of total conflict. Hobbes, however, roots the total conflict in the “State of Nature;” hence the need for “Leviathan.” Libertarianism, however, shifts the total conflict to be between the civil society and the State; hence, the need for anarchism3.
Libertarianism proper differs from Locke in the sense that although there is agreement between both regarding the State of Nature not being a condition of total conflict, there is disagreement regarding the relationship between civil society and State. Libertarianism views this relationship as an inevitable condition of total war. Locke does not.
In the end, libertarianism fundamentally differentiates itself from liberalism over the problem of “security” as a public good. For libertarianism, this “public good” is the source of the “total conflict.” Liberalism, institutionally, is bound to inevitably breed a “military industrial complex, ” or a political economy of security that engulfs civil society. It is this phenomenon that birthed the radical French Liberal class theory originating from a deconstruction of the Napoleonic permanent war economy. Libertarian class theory is more or less rooted in the political economy of security as a monopoly good.
Why the Lockean State Fails
To recount: the Lockean Social Contract essentially views the role of the State as merely enforcing contractual and property arrangements that arise from civil society. These things naturally arise from “the State of Nature,” so the SoN is not the Hobbesian jungle, but nonetheless, the SoN is sub-optimal in the sense that all agents could better their position by agreeing to a bargain of a Sovereign to enforce compliance to these contractual arrangments.
The “rule of law,” then, is a rational product whose ends are the preservaton and protection of the natural liberty that emerges from civil society. To use an alternative political dialect, the rule of law enforces and preserves “natural law.”
But, we should keep in mind that while the State is a rational product, it is nonetheless an artifical construct. This simply means that it is a compliance mechanism(as a legal entity) and not itself the source of “government.” To the extent that the State becomes the source of government(not necessarily in the sense of legislatures enacting laws, but in the sense that what is to be enforced originates from the State and not from civil society), then it can rightfully be abolished.
However, I would contend that the Lockean framework vis a vis the “Rule of Law”, in the end, only preserves the compliance framework of the Liberal State and not “liberty.” And that the Liberal State inevitably approaches the total source of government.
To demonstrate this, let us begin by defining the four generic methods of the property contractual interface:
(i) the right to the exclusive use the good
(ii) the right to earn income from the good
(iii) the right to transfer the good to others
(iv) the right of the above 3 methods to be legally recognized by the enforcement regime
For a good to be considered “property,” it must implement all four methods listed above. But the one of particular interest is (iv). Property is not property without a legal recognition of (i)-(iii), but this “legal recognition,” (iv), is itself not treated as an economic good. If we return to our Lockean definition, we can exclude (iv) from the contractual interface, but this is sub-optimal.
In modern economic terms, we can employ an opportunity costs argument to easily demonstrate the non-optimality of excluding legal recognition from “property.”4 Hence, there is an economic rationale for “legal recognition” to be included in an implementation of property, but this “legal recognition” itself is not an economic good–at leat not in liberalism. For Locke, this legal recognition is the raison d’etre of the “social contract.”
Structurally, the interesting thing about (iv) is that undoubtedly introduces another contractual reference type into any implementation of property. The Lockean resolution essentially considers (iv) to be complementary to (i)-(iii) and moves (iv) to the Legal that extends the property contractual interface consisting of (i)-(iii). For those familiar with OOP concepts, we can represent this in terms of the following pseudo-code:
interface Property {
void exclusivity();
void income();
void transfer();
}
interface Legal extends Property {
void compliance();
}
class PropertyX implements Legal {
public void exclusivity(){};
public void income(){};
public void transfer(){};
public void compliance(){};
}
Appealing to OOP again, one would point out that the purpose of extending interfaces, in regards to class implementations, is usually so as not to break existing code. This means, for example, our class PropertyX above should be able to implement Property without a violation. But we know this not be the case. For example, often that which is “legal,” and by legal we usually mean not “illegal,” becomes illegal. Occasionally, that which is illegal becomes legal. From this fact alone, we can dimiss the notion that “Legal” is complimentary or an extension of Property. Legal is, in fact, a separate interface that must be implemented by a class definition. In pseudo-code:
class PropertyX implements Property,Legal{
public void exclusivity(){};
public void income(){};
public void transfer(){};
public void compliance(){};
.
.
.
}
Legal, as a separate hierarchical contractual reference type, returns us to the question of Legal as an economic good. If we don’t treat it as one, we end up with a “social contract” bound entirely to the “Legal” without necessarily any regard to preservation of property. Certainly, in Lockean political theory, agents surrender some degree of rights to the sovereign; however , it’s clear that that “property,” in part, can be included in what is to be surrendered. Of course, with Locke, the surrendering of some degree of individual sovereignty is supposed to be for the preservation of property.
A “social contract” bound entirely to the “Legal” may be the price of civilization if there is no case for law as an economic good. But this premise can be challenged by a simple question: can agents “buy” property rights, or more specifically, legal recognition of property rights, from our socially contracted legal entity, “the State?” The empirical observation is obviously yes. This, of course, leads to an obvious conundrum: the “social contract” bound to the legal is justified because law cannot be an economic good, but it is this social contract that allows law to become an economic good, which more or less is a statement that law is an economic good only under a condition of monopoly. That is, law is an economic good only with a monopoly “price maker,” and the Social Contract represents consent to establishing such a “price maker” to sell legal recognition. A “social contract” bound entirely to the “Legal” simply reinforces the original point made by Hobbes regarding the preference of “Leviathan.” It’s also apparent that it would likely be hard to find any historical social contract document that democratically “signed off” on a “price maker” selling legal recognition.
In modern liberal political theory, a “price maker” selling legal recognition is well-established within Public Choice. Public Choice, although typically depicted as “libertarian,” is actually not5. Nonetheless, the rational choice approach to agency and law provides a valuable methodological tool for sociopolitical analysis. But the schools of thought typically associated with Public Choice–Virginia & Chicago–are “Neo-Lockean” and not libertarian.
Neo-Lockean has a specific meaning. It refers to a methodological rational choice approach that rejects the Social Democratic notion of legal redistributive agency while nonetheless reaffirming the State’s Consitutional Agency. In short, an economic treatment of law (A) spoils social democratic redistributive agency(absent homogeneous moral foundations) (B) retains the Constitutional Agency(Protective Agency) of the State.
For example: “The Calculus of Consent,” by James Buchanan and Gordon Tullock. If we establish:
(i) symmetric sharing of gains among dominant coalitions
(ii) marketable property rights in voting(via “side payments”)
and assume:
(iii) constitutional rules are derived under conditions of generalized uncertainty
Then we can arrive at an economic treatment of law that:
(1) retains the distinction between the “protective state” and the “redistributive state”
(2) establishes legitimate decision-making rules, which impose significant decision-making costs, can only be the product of conceptual unanimity.
(3) establishes a constitutional stage “rule” where agents minimize the sum of expected external costs and expected decision-making costs from collective action
However, I would point out that “The Calculus of Consent” is a more a less an “economic frictionless model.” We introduce friction into the model by including Tullock’s later insight:
the dissipation of wealth that results from agents utilizing scarce resources to seek economic rent from a price maker
The Tullock rent-seeking game, which was a later insight, was not considered in the “The Calculus of Consent.” The Tullock rent-seeking game assumes agents makes investments and the probability of success is a function of the amount of the investment. The “Return” itself is a single prize. And we expect declining marginal returns on agent investments.
The equilibrium problem of the Tullock game, however, has been subject to paradoxes almost from the start.6 A particular problem that still remains unresolved is the discrepency between the magnitude of the rents being created by the State vs the competitive outlays investing/bidding for such rents. The Tullock Resolution, the “Inefficient Market Hypothesis,” suffers from an empiricial problem when these descrepencies begin to approach orders of magnitude differences. The “Inefficient Market Hypothesis” relies on a transactional cost model of opague communication to explain the differences, but this model becomes folly when we consider something like the financial bailouts. We should expect the sheer extent of the magnitudinal differences to drive an entrepreneurial incentive for transparency.
What we shouldn’t expect–at least from a classic Public Choice perspective:
(i) the “Protective State” to circumvent its constitutional agency to protect massively opaque inefficiency against transparency. This would constitute a decision-making rule.
(ii) in the event of transparency, we shouldn’t expect the massive discrepancy between rent and competitive outlays to persist
In short, we shouldn’t rationally expect the emergence of a Police State–a decision-making rule that would violate the original Constitutional agency, one that would impose serious decision-making costs–to protect opaque markets of economic rent-seeking. Or shorter still, we shouldn’t expect a union between the protective state and the re-distributive state for the purpose of protecting opaque markets of economic rent-seeking.A further problem arises for the “Inefficient Market Hypothesis” in that a layer of transparency now has been brought to bear on our opaque financial bailouts. Indeed, we now have the Federal Reserve pledging a new transparency in price-fixing signaling. We should thusly see a convergence between rent and competitive outlays. Empirically, however, the massive discrepancies persist.
TARP drives a stake in the “Inefficient Market Hypothesis.” This hypothesis, by self-admission of the chief architects of modern Public Choice theory, is necessary to retain a rational choice model of liberalism that differentiates Constitutional Agency from the Redistributive one. The problem is further compounded when we consider that Schumpeterian Political Entrepreneurship(e.g., with respect to transparency: i.e.: Wikileaks) does not equilibria rent and outlays, but rather appears to exacerbate the costs of a decision-making rule.
Sans the distinction between Constitutional Agency and the Redistributive one, Tullock’s Equilibrium Paradox of the rent-seeking game perhaps disappears, since it is one that is restricted to the redistributive side only. If we consider the long-run equilibrium of the protective state, we likely resolve the paradox.
Liberal Failure Theorem
Law, or legal recognition, is an economic good. A Frictional model of a monopoly price maker for legal recognition likely results in economic rent-seeking being a source of decision-making rules. Thus we can likely expect rent-seeking in the liberal state to result in a long-run equilibrium of the Liberal State being the total source of government.
PART II: The Compliance Problem in the State of Nature
This will be a separate essay. It will address the problem that liberal failure does not prove the libertarian resolution. In particular, there is an apparent conundrum introduced by Nozick in “Anarchy, State, and Utopia:” namely treating security as a private market good inevitably results it in becoming a monopoly good. The libertarian resolution then does not resolve the liberal problem. If we combine this with a “Liberal Failure Theory,” then there is an argument to be made that the “State of Nature” is a useless, paradoxical-ridden concept.
I will argue that the libertarianism can survive this rational paradox of security. It survives it because moral constraint can be shown to be a reciprocity mechanism for cooperation. However, the actual problem likely lies with an evolutionary game consideration that demonstrates moral constraint is not the only reciprocity mechanism for cooperation.
1
The Selling of Zuccotti Park
Score One For Hobbes at Zuccotti Park
2With Hobbes, there is no general “right” to rebel because the defection condition, the State of Nature, will almost always be a worse condition than a binding rule of Leviathan, whatever that rule may entail. The Social Contract is more or less “eternal.”
3 Orwell’s “The Theory and Practice of Oligarchical Collectivism” explains how “Permanent War” effectively ends the problem of total conflict within the political classes.
4 The opportunity costs of resources used to defend the exclusive use of the good versus the same resources deployed for the economic utilization of the good
5 It’s origins are in 19th century British utilitarianism that associated the ends of rule law with aggregate utility and the means with democratic preference. With the advent of Neoclassical economics, it was relatively straight-forward for the equilibrium welfare economics that would follow to associate a “social welfare function” with maximum economic welfare. This became more or less rooted in Neoclassical socialism rationales–in particular noting the neoclassical dropping of cardinal utility from its calculating assumptions.
Ironically, in many ways, one could point to Kenneth Arrow as being an inadvertent founding father of Public Choice(along with Social Choice). Arrow demonstrated the problem of associating a social welfare function from welfare economics with democratic preference(voting). Arrow’s “Impossibility Theorem” more or less launched two forks in academic sociopolitical methodology: (i) one being Public Choice , (ii), the other being “Social Choice.”
6 see, e.g.: “Efficient Rent-Seeking: Chronicle of an Intellectual Quagmire”
7 Image reused from SMBIVG under the Creative Commons License
Libérale et libertaire 