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Libertarianism vs. Utilitarianism

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Lawrence Posted: Wed, Aug 3 2011 9:53 AM

Within the field of economics there is a concept known as the equity-efficiency trade-off. Efficiency is regarded as objective. While equity is subjective and filled with value judgments. Since equity is normative the concept of fairness must be determined. Fairness is actually far more objective than economists realize. Without any distortions to private property there would not be an equity-efficiency trade-off because the most efficient allocation would be the most equitable.

Fairness is a by-product of praxeology. Fairness comes from the fact that every human acts to maximize their utility. If there are 2 people trying to decide over how to split up a fixed amount of land and labour, and the result will only exist if their decision is unanimous(without coercion or aggression). Then what will always happen is each will initially demand that they themselves get 100% of the private property while the other gets 0%. This will clearly not be unanimous and therefore the numbers will slowly converge towards 50-50. This is the only result that will satisfy both parties and cause a unanimous decision without coercion. The result will never be 70-30 because each party is utility-maximizing and therefore will demand that they have the larger share. Each utility-maximizing agent will choose the biggest share every time until finally the conclusive decision, 50-50, is reached.(Note: I believe one of the reasons for the anti-capitalistic mentality that is so widespread within society is the result of the praxeological tendency in humans to seek fairness. Fairness is inherent in all humans because we are utility-maximizing. A belief in equality comes from a desire to enforce private property rights and an understanding that humans act to maximize utility.)

Utilitarians understand diminishing marginal utility and therefore think that distributing wealth evenly between every individual can maximize utility for society. If you take wealth from a rich person and give it to a starving poor person then total utility is clearly maximized. However, this is only one side of the story.

The reason that redistribution of wealth(coercion) can seem to increase utility is only because it is not really coercion. If someone steals from me and in return I steal it back, then the latter theft is not wrong from the correct perspective. If presented in such a way it makes coercion look morally good, when really the coercion is being reversed. Utilitarianism actually makes no sense in the realm of equally distributed private property. Because all humans act to maximize utility and so if two different humans are given an equal amount of private property they will have an equal amount of wealth/utility. The fallacy of believing in utilitarianism comes from the quasi-philosophical problem of the aftermath of breaking private property rights. For instance, once healthcare is nationalized, one can make the argument that the government has the right to coerce people to eat healthy. It can’t be disputed that if innocent citizens are being coerced by you(indirectly by eating unhealthy) into paying higher taxes to fund healthcare then the government has the right to protect private property by coercing you into eating healthy food. This example clearly shows how after private property rights are violated there can be incorrect deductions that come forth if the original wrongdoing(breaking private property rights by nationalizing healthcare) is not understood. Another popular example comes from the debate over bonuses being paid to CEO’s of banks that received bailouts. Normally, expropriating salaries of hardworking CEO’s would be wrong. However, in the case of the bank bailouts, the salaries being paid to the CEO’s were initially stolen from the tax payers. So by expropriating the bonuses it is actually the reversal of the initial theft of the taxpayers. This is another clear case where we see a quasi-philosophical problem arising from an initial violation of private property rights.

In the beginning of civilization private property rights were not necessarily respected. All individuals did not willingly agree about how the available resources should be distributed among everyone. Land and monetary forms of wealth can easily be transferred, however, many forms of property like beauty and intelligence are not divisible and cannot be redistributed. If money is redistributed from an average-looking rich person to a beautiful poor person so that they each have an equal amount of money then the beautiful person is better off. The beauty should also be redistributed because marginal utility is always decreasing but it is impossible to do this. Is it more fair to allow each person to have an equal amount of utility or to maximize total utility even if one person is made worse off? This question cannot be answered because it is inherently nonsensical. Utility and fairness cannot be the foundation of moral theories or political philosophies.

If you think about it clearly, the very concept of utilitarianism makes no sense because utility and disutility are not objectively “good” or “bad”. The disutility that comes from touching something that is too hot is useful to inform you to pull your hand away. Your body simply reacts to external stimulus. It is clear that this is not a moral theory, it’s just biology.

John Rawls put forth the concept of the “Original Position”. From behind a “veil of ignorance” society would choose to maximize the well-being of the worst off individual. This political philosophy is heavily flawed. If you imagine a very hardworking and frugal rich philanthropist, and compare him to an irresponsible and impoverished heroine-user then it is clear that the veil of ignorance is an inappropriate and erroneous tool. Is it morally just to redistribute wealth from the person who earned it fairly towards a reckless consumer? It is ironic that John Rawls attempts to develop an opposing moral theory to Libertarianism through the concept of fairness when fairness is derived from the fundamental praxeological axiom and the fundamental principle of Libertarianism, the non-aggression principle.

In a world where private property rights are always perfectly respected utilitarianism could never exist and John Rawls veil of ignorance would be superfluous. Everyone would already be equally wealthy. However, just because resources were not initially distributed without coercion and transferability or divisibility of resources is in some cases not practical does not justify wealth redistribution and expropriation. Intuitively, it is clear that everyone should own their own body and there are well established methods of properly acquiring private property. Coercion is morally wrong under any circumstance.

It is clear that Libertarianism is the only political philosophy that exists. If you think you are a utilitarian or a supporter of the veil of ignorance then you are really a proponent of private property, a free marketeer and a believer in the fundamental praxeological axiom, I.e. Humans act to maximize utility.

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Fairness is a by-product of praxeology. Fairness comes from the fact that every human acts to maximize their utility. If there are 2 people trying to decide over how to split up a fixed amount of land and labour, and the result will only exist if their decision is unanimous(without coercion or aggression). Then what will always happen is each will initially demand that they themselves get 100% of the private property while the other gets 0%. This will clearly not be unanimous and therefore the numbers will slowly converge towards 50-50. This is the only result that will satisfy both parties and cause a unanimous decision without coercion. The result will never be 70-30 because each party is utility-maximizing and therefore will demand that they have the larger share. Each utility-maximizing agent will choose the biggest share every time until finally the conclusive decision, 50-50, is reached.

Assuming both parties desire the end result to the same extent. If on the other hand, one person wants it more, he will get less. Suppose I have a well paying job and my friend who has been unemployed for over a year comes to me with a great business proposition. The business entails that we each work an equal amount, but will the rewards be equal? No, I'm in a better bargaining position because I desire the money less. It could quite easily be 70-30 in my favor.  So the more you desire the less you get = fairness.

"The limits of my language mean the limits of my world." ~ Ludwig Wittgenstein
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hashem replied on Sun, Aug 14 2011 11:46 AM

Utilitarians understand diminishing marginal utility and therefore think that distributing wealth evenly between every individual can maximize utility for society.
Except they don't, because the law of marginal utility applies to units of a supply of goods percieved to be homogenous, and humans are precisely unique. If you say they're percieved as homogenous, the question is by whom?

therefore

Read about communism. Stealing and forced exchange, especially when institutionalized, are prime ways to diminish utility for society. Humans aren't computer numbers, we act based on what we think about the incentives in our environments. Communism provides anti-productive incentives.

If you take wealth from a rich person and give it to a starving poor person then total utility is clearly maximized.
No. It isn't maximized, and it certainly isn't clear. What if the rich old man has a heart attack and dies when you steal his $15? What if the rich person woke up this morning with intentions of helping this "starving poor" person he saw on the way to work every day, by giving him a job and providing housing while he also payed for his college, but instead this morning he saw the poor person eating at FancyPants Restaurant with money he snaked from the rich person's wallet? Check out Economics in One Lesson by Henry Hazzlit.

Whenever you find yourself on the side of the majority, it's time to pause and reflect. —Mark Twain
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Lawrence replied on Mon, Aug 15 2011 10:07 AM

Hashem,

I'm in no way defending socialism or forced exchange. My arguments are purely hypothetical and philosophical. The point of my article was that the redistribution of wealth does not maximize utility and is in no way justified. I was defending Libertarianism.

The typical socialist looks at the world and sees rich people and poor people. He sees all the land, labour and capital that the rich person has and assumes that it was stolen from the poor person. My article clearly explains why the of the world resources are optimally distributed, and that government hampers wealth creation.

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hashem replied on Mon, Aug 15 2011 10:46 AM

My fault, to be fair I didn't read the whole thing. I read up to that quote and I was fed up lol. Hopefully my points can contribute to people who confront these arguments.

Whenever you find yourself on the side of the majority, it's time to pause and reflect. —Mark Twain
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Lawrence replied on Mon, Aug 15 2011 2:41 PM

Lol, that's okay. You made good points.

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