A Procapitalist Philosopher

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David Gordon
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Most contemporary political philosophers view free market capitalism with suspicion, if not outright loathing, but one exception is Gerald Gaus, who taught for many years at the University of Arizona. Gaus was by no means a Rothbardian but rather worked within the framework of “public reason” set forward by John Rawls, though Gaus greatly modified it. In this week’s column, I’d like to discuss some of the arguments about property that Gaus makes in Public Reason and Diversity: Reinterpretations of Liberalism (Cambridge University Press, 2022), a posthumous collection of his essays edited by his student Kevin Vallier.

The arguments about property that I’m going to discuss don’t depend on the “public reason” approach and are of great value to those who take other standpoints. Two of these arguments share a common feature. They illustrate Gaus’s contention that a great deal of contemporary political philosophy suffers from neglect of empirical facts. For example, philosophers assume that

under the guise of doing “ideal theory” according to which we assume perfect compliance with our preferred distributive principles, we are licensed to ignore the fact that, say, market socialist regimes would almost surely employ a great deal of coercion to prevent people from starting and expanding businesses, or that governments of such states, controlling all sources of investment, would almost certainly have tremendous political power that would endanger the basic rights of their citizens.

Gaus argues that Rawls is entirely right to give priority to liberty but that he fails to realize that manifest facts about the world show that a liberal political system requires strong private property rights and a free market. In brief, if you care about civil liberties, you must support the free market:

There is powerful evidence that extensive private ownership—including private ownership of capital goods and financial instruments and institutions—is for all practical purposes a requirement for a functioning and free social order that protects civil liberties. It is, I think, astounding that Rawls never appreciates this, and simply assumes . . . that well-functioning markets can be divorced from “private ownership in the means of production.” There has never been a political order characterized by deep respect for personal freedom that was not based on a market order with widespread private ownership in the means of production.

In support of this, Gaus relies on James Gwartney, Robert Lawson, and Seth Norton’s Economic Freedom of the World: 2008 Annual Survey, which includes tables that show a strong correlation between protection of economic freedom and protection of civil rights.

Gaus considers and rejects a rejoinder to this argument that opponents of the free market might offer. This is that the free market allows, and indeed makes likely, the existence of great inequalities in wealth and income. Even if you don’t share the egalitarian view that there is something inherently bad about these inequalities, it’s claimed, you still have good reason to restrict the extent to which inequality is allowed. This is because very wealthy people have undue influence over the political system. They use the government to get money and power for themselves and by doing so reduce the value of the civil liberties of the less well off.

In response, Gaus again appeals to empirical evidence:

But while it may seem obvious to some that large inequalities of income and wealth undermine the worth of the “least advantaged” citizens’ political liberties, this claim is in fact conjectural. Whether citizens have real input—whether their political rights actually have “fair value”—is a matter of complex sociology.

Gaus proceeds to cite a study by the Organisation for Economic Co-operation and Development (OECD) that “offers little ground for accepting a strong relation between income inequality and a lesser value of political rights.”

Gaus concludes that

it is dubious indeed that there is any powerful empirical evidence for a strong correlation in wealthy countries between economic inequalities and less than a fair value of political liberty. . . . There is good reason to think that, in the countries of the OECD, the most important variable explaining high political rights scores is simply high levels of wealth and income, and that the degree of equality is a relatively minor factor.

It would be mistaken to adduce against Gaus here the manifest evils of “crony capitalism.” These depend on alliances between particular businesses and corrupt politicians. Large inequalities do not suffice to generate crony capitalism.

Some philosophers may be inclined to answer Gaus, “Even if what you say is right, it isn’t part of philosophy to use data in this way. If you want to be an economist or political scientist, fine; but philosophy is an a priori discipline and the empirical considerations you bring up don’t have a place in it.” But this is precisely what Gaus contests, and his point of view has this to be said in its favor. If you don’t study the evidence, relying instead on what you take to be commonsense beliefs about what’s plausible, your arguments may depend on factually false premises.

Gaus again uses empirical material in an interesting way to answer a point raised by Will Wilkinson, who raises a difficulty for the claim that high marginal tax rates are coercive. Wilkinson doesn’t challenge the claim that taxation is coercive but asks why high taxes are more coercive than low taxes. He argues that there aren’t degrees of coercion: a tax is either coercive or it isn’t. This contention appears at first sight counterintuitive, but Wilkinson offers an analogy in support of it. A robber who mugs five people, forcing them to give him their money, is not guilty of a greater degree of coercion if the people he robs have a lot of money in their wallets than if they don’t.

The answer that Gaus gives again shows his penchant for the empirical. He does not offer an a priori argument that there indeed are degrees of coercion. Instead, he appeals to empirical reasons that high taxes are likely to result in greater coercion than low taxes:

As tax rates rise, noncompliance will also rise; it is hopelessly utopian not to expect increased noncompliance as tax rates increase. . . . As noncompliance increases, the state will increasingly turn its attention to identifying and coercing noncompliers. The amount of money involved will be enormous, and we can expect states increasingly to turn to the criminal law.

Further, high tax rates reduce the number of eligible options a person has and are in that way coercive. If the tax rate is 80 percent,

the state essentially demands that one pay 80 percent to take up an option and threatens one’s person if one does not. . . . If we adopt a metaphor of [Joel] Feinberg’s and think of one’s options as a series of railroad tracks that one might follow, high tax rates make it very difficult to follow a great many routes; given the costs involved in taking those routes, they are effectively closed. Of course once can still engage in these activities if one is willing to pay the 80 percent, but it is equally true that one can still engage in criminal activities if one is willing to pay the penalties.

Gerald Gaus is a major classical liberal thinker who merits carful study.