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The Pragmatic Libertarian: In Defense of Income Redistribution

2010.08.28

I cannot imagine two concepts which seem, on the surface, more diametrically opposed than libertarianism and income redistribution.

The classic libertarian is staunchly opposed to taxation or welfare of any form. And in the abstract, I agree with this philosophy. In fact, I was discussing fiscal policy with a socialist friend of mine, who, in defense of socialism, stated that she didn’t want to live in a society where poor people didn’t have a place to live, food to eat, or basic health care. I replied that I wanted to live in a society so wealthy where even the poorest people had jobs capable of providing them income sufficient to pay for these things and more. I want to live in a society so wealthy that charity is plentiful and sufficent for the needs of all the disabled, infirm, and incapable. As Reagan said, “a rising tide lifts all boats.” I want to live in a society at high tide.

Perhaps, in the long run, we will achieve a goal where the society is sufficiently rich that, even owing to local economic fluctuations and personal situational crises, nobody is ever in a state of want for the basic human needs.

Arguably, however, we do not yet live in that world.

Economic theory would suggest that the quickest path to that society is to eliminate taxation and welfare and remove economic friction to the greatest degree possible, thus stimulating wealth creation. The tradeoff, however, would be that some people at the margin would be severely injured by this decision until sufficient wealth had accumulated to life the smallest of boats.

Here, the Practical Libertarian accepts that, at least in the short term, some kind of income transferral may be desirable in order to keep society’s least fortunate from undue sufferring. And, as Milton Friedman famously illustrated, the most efficient form of aid is direct cash payments to those in need.

To illustrate this point, I will recount elements of a conversation that I recently had with a socialist friend of mine. She was defending her belief that in a wealthy society, every citizen should have access to at least basic health care. I asked her, quite seriously, whether she believed that every citizen should have access to a car. She looked at me as if I were insane.

But am I? If I am a 22 year old male in a very poor town in the deep South, the few thousand dollars in health care benefits that my kindhearted socialist neighbor may wish to redistribute to me may be much better spent on a car. With a car, I might be able to acquire a better job, or start a small business that will provide me with income so that I can provide for my own medical needs. A car might provide me with an income stream, while a health benefit would only provide me with a medical safety net.

So we should recognize that while it may offend us on some abstract, philosophical level, it may be desirable to implement a system where wealth is transferred from the wealthier members of society to the poorer members of society. Yes, we should support progressive income redistribution, at least in the short term.

“Income redistribution” is, unfortunately, a loaded term. Many libertarians bristle at the very notion. The Practical Libertarian proposes that the reason that this term has become offensive to some is because of the fact that some people who support income redistribution have offensive goals. Some people find wealth to be evil, and demonize those lucky enough or successful enough to acquire great wealth. To them, income redistribution is less about helping the poor than it is about hurting the rich.

To others, the goal is less hateful: to equalize wealth. The Pragmatic Libertarian does not endorse wealth equalization as a desirable goal of any social policy. First of all, it is very unclear how a society in which all members have exactly the same level of wealth is necessarily preferred to one where some have more wealth than others. Proponents of wealth equaliation cite “fairness” as the justification for their policies. However it is clear that a society in which all members are equally dirt-poor would be more “fair” and yet less desirable than one where some people are poor while others are rich. Secondly, we should realize that while it may be “unfair” for some to have wealth while others do not, it is also “unfair” to take a person’s hard-earned wealth from them.

We should realize that any progressive form of income redistribution results in greater wealth equality. However, in our proposal, equalizing wealth is not the goal. It is merely a side-effect. The Pragmatic Libertarian seeks not to impose wealth equality, but rather to provide a wealth floor.

So, in summary:

  1. We should agree that the ultimate goal is to create a society suffiently wealthy that even the poorest people are able to find jobs that provide them with a sufficent standard of living, and the disabled, infirm, or incapable receive ample charity to meet all of their needs.
  2. We should agree that anything that prevents us from reaching that goal (such as taxation) is undesirable in the long term, but may be desirable in the short term for the purpose of helping those most in need.
  3. We should agree that any social programs that seek to help those in need should have as their goal the provision of a wealth floor, not income equalization.
  4. We should agree that such programs are inherently temporary, since the ultimate goal is to reach a level of societal wealth so great that institutionalized social programs are no longer needed.
  5. We should agree that the best form of aid to those in need is direct cash payments, so that people can determine for themselves the best allocation of resources.

The Pragmatic Libertarian endorses income redistribution.

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