A Kantian Case for Economic Liberty
Equality, Rights, and the Autonomous Self: Toward a Conservative Economics
Timothy P. Roth
Edward Elgar, 2004
Timothy Roth is neither an Austrian economist nor an advocate of libertarian natural rights. For those of us who accept these positions, though, his book performs a great service. Unfortunately, our views do not command much attention among mainstream economists and political theorists. Roth defends a free economy through an alternative strategy.
He contends that mainstream theorists assume, explicitly or implicitly, a Kantian view. Each person must be treated as an end in himself: as Ronald Dworkin, the most influential American legal philosopher, puts the point, everyone must be treated with equal concern and respect. All persons are "morally equivalent."
Roth accepts this starting point, but he contends that "liberals"—he means leftists rather than classical liberals—have misunderstood its implications. Properly interpreted, a Kantian view supports strongly free-market conclusions. Those who argue to the contrary rest their argument in part on faulty economics. Roth, though a neoclassical economist himself, assails with great force attempts to justify intervention in the market based on neoclassical welfare economics.
In brief, Roth offers an internal criticism of the reigning orthodoxies in political theory and economics. But before examining his arguments, I fear I must issue a warning. Roth’s rebarbative style will deter all but the most intrepid reader. A small sample is more than enough: "I argue, inter alia, that this moral pedagogy ignores the exogenous, culturally determined sources of ordinary conscience" (p. 23).
The essence of Roth’s Kantian argument for the free market is easy to grasp, even without using "inter alia" or "exogenous," let alone "pari passu." Public choice economics, especially as developed by James Buchanan, by whom Roth has been greatly influenced, shows why legislation all too often aims at advantages for special interests. Small groups have much to gain from these advantages, while the costs are spread out among the public. The special interests thus have much stronger incentives to seek these advantages than the public does to resist them, and "rent-seeking" is the order of the day. "Interestingly, this concentrated benefit-dispersed cost phenomenon was described at the end of the nineteenth century by Vilfredo Pareto" (p. 96).
Roth contends that this process is unethical. To benefit some at the expense of others is to violate the fundamental Kantian principle. His Kantian view that everyone is "morally equivalent" enables him to reject almost all endeavors to interfere with the market. Free trade, e.g., is morally required: tariffs and export subsidies are discriminatory, and all good Kantians must cast them aside.
Our author must here face an objection. His Kantian principle forbids discrimination; but would not a uniform tariff on all imports satisfy Kantian constraints? No, it would not: "in fact it would be unjust. Reduced to its essentials, ‘it discriminates overtly against those producing interests that seek only to enter exchanges in domestic markets or sell to foreigners. And any such restriction also discriminates against . . . consumers’" (p. 114, quoting Buchanan and Congleton).
To reject tariffs is hardly controversial, but Roth’s principle leads him to much more radical suggestions. Almost all government insurance programs fail the test of impartiality: "I observe . . . that because many individuals have access neither to defined-benefit nor to defined-contribution pension plans, the ex ante generality constraint cannot be satisfied. It follows . . . that ‘targeted’ pension guarantees must be constitutionally prohibited" (p. 110). Roth goes so far as to reject federal disaster insurance, since the benefits ‘accrue to particular, localized members of the polity. Granting this, expected benefits cannot . . . be uniformly distributed among the national polity" (p. 110). Unfortunately, Roth allows disaster relief at the state and local levels. Here he seems untrue to his own principle: even at the local level, do not some benefit at the expense of others?
Roth deploys a more questionable Kantian argument to arrive at a welcome result. He opposes deficit finance: "The irremediable fact is that future generations—those which cannot agree to bear the future costs of debt-financed government outlays—must be treated impartially. The institutional imperative is, therefore, a constitutional balanced budget constraint" (p. 106).
Contrary to Roth’s claim, the Kantian principle of moral equivalence does not by itself suffice to rule out deficit finance. To do so an additional premise is required. We need to add that potential future generations count equally with those who are now alive. Roth follows both Rawls and Buchanan in accepting the premise, but it is hardly self-evident; and without it, his conclusion does not follow.
Despite this problem, Roth makes a strong case that those who accept the principle of moral equivalence ought to endorse a market economy far freer than now exists. Since most contemporary leftist economists and philosophers accept this principle, Roth must confront a question. Why do they arrive at much more interventionist conclusions than he does?
He answers that these thinkers take Kantian moral equivalence in a different way. They argue that treating everyone equally requires that everyone’s preferences be given equal weight. In brief, the Kantian principle becomes transformed into a version of utilitarianism. Welfare economics now enters the scene. The two fundamental theorems of that discipline show how the goals of this Kantian variety of utilitarianism can be achieved. "The first fundamental welfare theorem asserts that a perfectly competitive system will automatically move to a first-best Pareto optimal or ‘efficient’ outcome. For its part, the second theorem indicates that, no matter to which ‘competitive’ equilibrium an economic system is impelled, a ‘socially desired’ allocation can be realized by an appeal to lump-sum taxes and bounties" (p. 13).
In brief, guided by economic science, we first arrive at a point on the "efficiency frontier;" once in that happy location, we can "move along the frontier" in response to egalitarian ethical requirements. Why should not Kantians in good standing adopt this approach rather than Roth’s "conservative economics"? Roth responds with a detailed technical criticism of welfare economics. One example of his line of attack must here suffice: he doubts that an efficiency frontier can be specified at all.
The details of his assault are of interest mainly to specialists, and in any case I have already had my say about some of them in my review of his earlier book. But he raises a new issue of great significance. Conventional welfare economics, and neoclassicism generally, adopts a strange view of preferences. Persons’ choices are not accepted as they manifest themselves in action. To the contrary, economists constantly deprecate actual choices: they may rest on cognitive defects, imperfect information, or other disqualifying defects. The neoclassical must peel away all sources of distortion to arrive at the "true" preferences: it is these, not preferences demonstrated in action, which must be satisfied.
Roth poses a fundamental challenge to this line of thought. Unless "the preference structure is known a priori," the neoclassical economist cannot specify when the law of demand is supposed to hold (p. 123). He has conjured into existence a set of supposedly "true" preferences, but he cannot identify them or use them in economic theory. "Unless the preference structure is known a priori"—Austrians, who use demonstrated preference, can know exactly this but neoclassicals cannot.
With great insight, Roth draws a parallel between the neoclassical view of preference and the quest by Ronald Dworkin and his followers for the "autonomous" self. Dworkin rules out "external" preferences: if, e.g., I prefer that you do not read pornography, my preference is "external," i.e., a preference about your preferences, and does not count as a "true" preference worthy of consideration.
Our author levels a common indictment against both the neoclassicals and Dworkin. They seek a pure, "transcendental" self that is nowhere to be found. Instead, both economics and political theory should begin from people’s actual, "path-dependent," choices.
He finds an unexpected ally for his view in none other than Kant. But how can this be? Was not Kant the great proponent of exactly the autonomous self that Roth rejects? Roth does not deny the obvious. Kant, he holds, recognized the autonomous self. But he also believed that only the empirical self, influenced by its desires and emotions, has a motive to act morally. Here, as it seems to me, Roth has misread Kant: he has not attended to Kant’s concept of respect for the moral law as a motive for action. He admires Kant; but he bends and twists him until he resembles Roger Scruton, another of his favorite thinkers.
Even if Roth is wrong about Kant, his defense of the free market is impressive. Rothbardians need to ask, should we abandon natural rights for Roth’s conservatism? I venture to suggest that we should not.
Roth argues, in a stunning non sequitur, that once we reject the autonomous self of modern liberalism as chimerical, we should allow the state to interfere with personal liberty. He quotes and endorses Scruton: "it is the individual’s responsibility to win whatever freedom of speech, conscience and assembly he may . . . [yet] if individuality seeks to realize itself in opposition to the institutions from which it grows—then the civil society is threatened too" (p. 91).
On this view, the state may do what it likes to repress liberty, so long as it cloaks itself in the mantle of tradition. Roth seems caught in paradox. In his discussion of economic issues, he maintains an appropriately cynical view, guided by the insights of public choice, of how the state works. Nevertheless, it is precisely this corrupt entity, dominated by rent-seeking, that he trusts to enforce tradition. He might think that Kantian fairness, cemented in place by constitutional restraints, will block the threat to freedom, but this is a false hope. Kantian "moral equivalence" forbids only the unequal suppression of liberty.
Roth has argued forcefully and effectively against the transcendental self, only to end up with a transcendental State. He fails to see that one can embrace natural rights without the baggage of the autonomous self. It is persons who have natural rights, not pure selves bereft of tradition. Roth has given us a fine book; but he should put down his Scruton, and take up his Rothbard.
Roth criticized conventional welfare economics in his earlier book The Ethics and Economics of Minimalist Government, Elgar, 2002. (See my review in the Mises Review, Fall 2002.) His new book concentrates more on philosophical issues.
Austrians will find much of value in Roth’s criticism of Milton Friedman’s use of "as if" assumptions (pp. 122–24).