Philosophical Issues in Economics

Bibliography

Berlin, I. 1969. Four Essays on Liberty. Oxford: Oxford University Press.

Friedman, M. and R. 1980. Free to Choose. London: Secker and Warburg.
Norman, R. 1987. Free and Equal: A philosophical Examination of political values. Oxford: Oxford University Press.
Sen, A. 1995 Inequality Reexamined. Oxford: Oxford University Press.
Stanford Encyclopaedia of Philosophy: http://plato.stanford.edu/entries/
Tawney, R. H. 1964. Equality. London: George Allen and Unwin LTD, fifth edition.

Essay 2

(by Maryam Tanwir)

Friedman

To Friedman, human freedom and economic freedom work together. They are part of the same whole. The greatest threat to human and economic freedom is the concentration of power, in the hands of the government or anyone else.

To lend support to his case he refers to Adam Smith’s argument in the ‘Wealth of Nations’ that the prices that emerge from voluntary transactions between buyers and sellers (a free market) could coordinate the activity of millions of people, each seeking its own interest, in such a way to make everyone better off. This invisible hand of Adam Smith is not merely restricted to economic activity, but can be extended to the social sphere where a sophisticated structure arises as an unintended consequence of individuals when they are cooperating while pursing their own interests. Example can be the development of language. ‘It developed in the same manner as the economic order develops through the market, out of voluntary interaction of individuals, in this case seeking to trade ideas or information of gossip rather than goods and services.’⁴¹ Even scientific knowledge grew freely and not under any central dictates.
And therefore ‘the whole becomes greater than the sum of the parts’. All leading to the maxim that free market mechanisms devoid of central planning and concentration of power are imperative for maximization of reward in any activity economic or otherwise.
So a society where individuals relish the idea of being free, there the government would have to take a secondary role. Friedman feels that the role of government should be inhibited to allow free trade and the law of comparative advantage to flourish.
With these assumptions in the background we explore Freidman’s treatment of freedom and equality. According to him in the earlier decades of the republic, equality symbolized equality before God, and liberty referred to the liberty to shape one’s own life. When the conflict of slavery was resolved after the civil war, equality came to be interpreted in terms of equality of opportunity, which meant that everyone should be allowed to use their capacities to pursue their own objectives. ‘Neither equality before God nor equality of opportunity presented any conflict with liberty to shape one’s own life. Equality and liberty were two faces of the same basic value-that every individual should be regarded as an end in himself ’.⁴²
Equality of opportunity, then like personal equality, is an integral part of liberty. ‘Its real meaning is perhaps best expressed by the French expression: ‘Une carriere ouverte aux talents- a career open to talents’. No arbitrary obstacles should prevent people from achieving those positions for which their talents fit them and which their values lead them to seek. Not birth, nationality, color, religion, sex, nor any other irrelevant characteristic should determine the opportunities that are open to a person- only his abilities.’⁴³
Friedman contrasts this with a different meaning equality, equality of outcome. This dictates that everyone should end up with the same end-results, the same level of income. This equality of outcome, which is supported by government-imposed restrictions, according to Freidman is in clear conflict with liberty. All should win the same prize. “Fair shares for all” is the modern slogan that has replaced Karl Marx’s, “To each according to his needs, from each according to his ability”⁴⁴
This is where liberty and equality are not synonymous he feels. Since fairness is not an objective term, and there are decisions as to what’s fair. Who will decide what is fair? Someone will have to decide, and impose their decisions on who has more than what is fair, take it from them and distribute it to who has less than their fair share. Also if people are to be given out evenly their fair shares, where are the shares to come from, and will that not eradicate the incentive to enterprise, innovate and produce?

Freidman expounds that Life is not fair. Governments attempt to rectify what nature has decided is a futile attempt. We must be cognizant that we also benefit from this same unfairness we try to rectify. There are some who are more special and talented. Should we deny them the right to maximize their talents in the attempt to clone everybody out of the same specimen?

Thus a society that forces equality of outcome on its citizens will deny them freedom. While if a society puts freedom first, without force, but with the aid of the free market, it will allow the individuals the freedom to pursue and capitalize on their goals, and will lead to prosperity.
Hayek here also agrees with Friedman ‘…the pursuit of one particular conception of justice is bound to lead to a highly collectivized and authoritarian state and hence is incompatible with personal freedom’ (Plant, 1984) he also views the market as a democratic and liberal medium for decision making, and as an efficient mechanism for balancing supply and demand. …. he argues against the egalitarian intervention by the government and feels that market outcomes should be left intact, and inequality should be accepted as it is based on specific conceptions of freedom and justice. Redistributive action by the government is interpreted as coercive intervention on the life of an individual.’
Tawney
Tawney has a different outlook on the relationship between equality and liberty. For him ‘equality implies the deliberate acceptance of social restraints upon individual expansion. It involves the prevention of sensational extremes of wealth and power by public action for the public good’⁴⁵. To Tawney if liberty implies that every individual is free to fully exercise all his powers without limit, if it is the power of the strong on the weak, then liberty is incompatible with equality. Law, to ensure that freedom of some is not at the expense of slavery to others, must limit Liberty. As ‘freedom for the pike is death for the minnows.’ ⁴⁶
Tawney feels that in a society people have different roles; some have more power than others. There should be safeguards to check the possible abuse of this power. This should be provided by the state. Otherwise liberty will merely become the privilege of the stronger class, and will be out of bounds for the rest. For him freedom and the distribution of power have a strong relationship. The correct distribution would ensure equality.
While when liberty is interpreted as ensuring civil, political, economical rights to the weak, when it offers security to the weak from the strong, and gives a guarantee that the will of all shall be respected, then equality so far as being ‘inimical to liberty, is essential to it’. Here one can perhaps also see a glimpse of utilitarian thinking on Tawney’s part. The greatest amount of happiness for all. So even if freedom of the rich is decreased say by taxation, it will lead to increase in freedom of the poor, as it will allow them more freedom in opportunities by giving them better health, education, employment, standard of living, so their general level of happiness will increase.
Tawney defends his theory, which when attacked by writers who agree with Friedman that the pursuit of equality would kill the true essence of liberty, that man’s achievements will be restricted and equality will be death by dilution. He questions whether increased equity in distribution necessarily obliterates ‘the priceless heritage of freedom’? When ensuring freedom, whose freedom will you ensure? of the strong or of the weak? There is no freedom in the abstract, divorced from the realities of a particular time and place. And inevitably the decrease of inequality will lead to the increase of freedom for most. I would add to Tawney’s argument one further point, have not also the liberties of the rich been enhanced by being in a society which allows all to have more opportunity and choices? Has not the redistribution of wealth allowed them to be a part of a more liberal and just society? Does not the exercise of reducing inequality, add to their freedom?