“Often people who do not wish to bear risks feel entitled to rewards from those who do and win; yet these same people do not feel obligated to help out by sharing the losses of those who bear risks and lose. For example, croupiers at gambling casinos expect to be well-tipped by big winners, but they do not expect to be asked to help bear some of the losses of the losers. The case for such asymmetrical sharing is even weaker for businesses where success not a random matter. Why do some feel they may stand back to see whose ventures turn out well (by hindsight determine who has survived the risks and run profitably) and then claim a share of the success; though they do not feel they must bear the losses if things turn out poorly, or feel that if they wish to share in the profits or the control of the enterprise, they should invest and run the risks also?”
– Robert Nozick: Anarchy, State, and Utopia, page 256. I suppose one answer to the question the late Prof. Nozick poses is that some people are parasites, and desire the unearned, and that socialist doctrines give their parasitism a gloss of intellectual credibility.
I have been re-reading this early 1970s book, seen at the time as a classic and which still holds up well.
I prefer ‘Law. Legislation and Liberty’ by Hayek, but to each his own.
Wonder what he would have thought of the 2008 crash, whose perpetrators privatized profits and socialize losses?
Do not underestimate the appeal of the ‘safety net’ argument. If you are ill or lose your job, the State will help you out with dole and free healthcare has a very strong appeal to many in the UK. That it turns out that some families are jobless for three generations, and hospitals become slaughterhouses is easily disregarded, even if not ignored.
Then it all collpases, because the rich haven’t paid their fair share, naturally.
And when a socialist says ‘Healthcare etc. should not be run for profit’ but by the State, no one asks if it would be OK if the contract ran at a loss?
‘Too big to fail’. The belief, which turned out to be well-founded, that some businesses did not have to run the risk of failure because the taxpayer would pick up losses resulting from poor decisions resulted in a huge mess.
That was the privatisation of profits and the socialisation of losses. The reverse of what Nozick is talking about.
Weren’t some companies ‘too’ big to fail- ie, the governments propped them up? Wasn’t that another version of crony capitalism? If not, why not?
Nicholas Gray: I prefer the Constitution of Liberty, but each to his own.
Sanity Inspector: Wonder what he would have thought of the 2008 crash, whose perpetrators privatized profits and socialize losses? I cannot say for sure but judging by some of his other comments in ASU, he’d have recognised the too-big-to-fail issue as the moral hazard machine that it was; he’d also have seen as the form of corporatism that it was and the opposite of genuine capitalism.
Mr Ed: Do not underestimate the appeal of the ‘safety net’ argument.
Yes, it is seductive, and for the reasons you give, it is also a fool’s bargain.
Final thought here: Nozick was, I think, attacking the ethical double standard whereby people get upset at the profits made by genuine entrepreneurs (ie, those who aren’t going to be bailed out by the taxpayer) but don’t feel sorry for the losses or failures said risk-taking can lead to. The bailouts of 2008 aren’t quite the same as the resentment that seems to be fostered even towards genuine businessmen, not just those who enjoy the asymmetric risk situation of banks with lines of influence to the Fed or the UK parliament.
Indeed.
“Anarchy, State and Utopia” (oddly enough I have just discussed it – in relation to another post here) is a good work – although the introduction (lots of undeserved praise for Rawls and co) is vile, and shows weakness of character.
The arguments in the work are a bit long – but people are impressed by long works. But they can be summed up in a few words – “this is not your stuff, so you have no just right to take it away from its owners and distribute it”.
Mr Ed mentions the “Safety Net” point – NOT Social Justice (as our late friend Antony Flew pointed out – many times). However, it is true that the Welfare State has grown out of control – and is having very severe economic and CULTURAL effects.
It is true that not all government welfare systems grow – not if they are designed not to grow. For example the much attacked Poor Law Amendment Act (Amendment BBC cretins – it did not CREATE government welfare taxes as a stupid history series on the BBC claimed, the principle of taxing to provide Poor Relief in this country goes back to the Tudors) did not grow as a burden after 1834 – the Poor Rate was not really more of a burden in (say) 1904 than it had been in 1834.
However, there have been many societies that did NOT have a government “Safety Net” – most of Scotland (including the city of Glasgow) did not have a Poor Rate till 1845, and France had no real government “Safety Net” till the 1890s (if even then).
“But without the Poor Law the poor would die in heaps” – that was not the case in Scotland or in France. Indeed it was Ireland in the 1840s (which had a Poor Law system of taxation) where the poor died in vast numbers.
The left totally misunderstand Ireland in the 1840s – ignoring both the artificial farming system created by the Penal Laws of the 1700s (which turned Ireland, naturally cattle country, into a land of peasant plot arable farming – an “accident waiting to happen”) and the extensive system of government intervention in Ireland specifically in the 1840s – for example the concentration of people in government make-work schemes (the infamous “roads to nowhere”) which allowed DISEASE to spread and killed vast numbers of weakened people.
It is true that the Penal Laws had been repealed at the end of the 18th century (by the work of Edmund Burke) – but the artificial farming system created by them, remained in most of Ireland. Peasant plots (“penny packet” sized) committed to arable farming was indeed an “accident (indeed a catastrophe) waiting to happen” – and the “Poor Law” proved totally ineffective in stopping it happen. Just as the vast Welfare State of today (government spending is almost half the entire economy – and most of that is on the Welfare State) does not stop people sleeping and begging on the streets.
“If we did not have X, people would be on the streets” rather loses its force when we have X (indeed an utterly vast amount of X) and there are people on the streets – sleeping on the streets and begging on the streets.
Let there be no confusion – the bureaucratic and centralised system has NOT been “cut”, the government is spending more money (in the United Kingdom, the United States, and all other major nations) than ever before on the Welfare States – and yet the poverty is both obvious and horrible.
If we are seriously interested in reducing poverty (rather than just bureaucratic empire building – showing fake “compassion” by spending lots of money without positive effect) we desperately need to adopt a fresh approach – one based in DEREGULATION to allow the poor to help themselves, and to be helped by others.
On Corporate Welfare – such as the Bailouts of 2008-9.
I condemn it. I condemn it – without evasion or mental reservation.
I have had my commenting privileges at the Guardian removed many times under many identities.
The most fun one was when they were having a blitz of articles demanding that the oil’n gas boys pay “excess profit” taxes.
I asked for, demanded even, subsidies when the oil’n gas boys were losing their shirts and harassed the Grauniardim for their refusal to consider it, making mock of them repeatedly.
Hardly even used any uncouth language either.
I prefer The Little Red Hen.