"To clarify my comment, objectivism says you only deserve to get what you work for from other people. That is, you don't in any way deserve to receive from others what they didn't already agree to pay you in exchange for your work."
Although it might work as a system of ethics (or not, depending on your ethics), this definitely doesn't function as a system of economics. First of all, it makes the question of wealth creation a chicken-and-egg problem: If every individual A only deserves to receive what individual B agrees to pay them for work X, how did individual B obtain the wealth to pay A in the first place?
The answer is probably that you can also work for yourself, creating wealth that did not exist without anyone paying you. So your equation, as you've expressed it, does not quite balance. You're missing a term.
Wealth creation is very much a physical thing, which makes it hard to tie to an abstract system of ethics. The wealth created by work X is the value of X; whether it's the food grown from the earth, or the watch that has been assembled from precisely cut steel, glass, and silicon. That is the wealth that is added to the pool by labour and ingenuity, regardless of how it gets distributed or who deserves to get paid for it. And that wealth remains in the system, until the watch breaks or the food spoils (or gets eaten; it's harder to calculate the value of consumed food). It might lose its value quickly, or it might remain a treasure for centuries after the death of every individual involved in the creation of that wealth, like a work of art. It might also be destroyed by random chance well before its predicted value has been exploited.
Who deserves to benefit from the wealth that was created by the work of, and paid for by, people who have been dead for generations? The question of who deserves to benefit from the labour X, and how much, becomes very tricky when the real world is taken into account...
One might argue that that is what Wills are for, but a Will is usually a transfer of wealth in exchange for no work at all. Does an individual morally deserve their inheritance, even if they didn't work at all for it?
It also gets tricky when the nature of humans as real people and not abstract entities is taken into account. People are born helpless, have finite lifespans, and their lifespans are in some way a function of their material posessions. A child is not physically capable of executing much labour, and will die without access to food and water. If children are treated as individuals, then no child deserves to live, because no child can perform the work to pay for their upbringing. Unless they are signed into a loan, but this would need to be done before they have the decision-making capacity to enter a contract.
But the mortality of people is still an issue. A human cannot physically survive zero wealth for more than a few days. So a human on the edge of poverty cannot realistically negotiate a contract either, because the party that offers them pay has infinite bargaining power. One might argue that they don't need bargaining power if there is competition between multiple individuals offering contracts, which will drive the contract toward something reasonable. But again that abstraction ignores reality -- this individual will die after a few days of no food, and even the process of competitive bidding for contracts takes time.
In this case, a person with little wealth will do work X in exchange for very little pay, much less than the value of X, and in practice just enough to keep them alive enough to continue to do X the following day. But simply because that is what they agreed to receive (due to their inability to reject the deal), does that mean that is what they morally deserve to receive?
Finally, some goods are just too difficult (computationally) to manage as contracts between individuals. The value of the resource might not even be presently known by science, although it exists (for example, the economic value of an intact ecosystem). The trespasses and exchanges might be so frequent and poorly documented that the consumption of the resource cannot be managed by legal contracts between owners and licensees (for example, the air we breathe).
Robin Hanson proposed stores where banned products could be sold.1 There are a number of excellent arguments for such a policy—an inherent right of individual liberty, the career incentive of bureaucrats to prohibit everything, legislators being just as biased as individuals. But even so (I replied), some poor, honest, not overwhelmingly educated mother of five children is going to go into these stores and buy a “Dr. Snakeoil’s Sulfuric Acid Drink” for her arthritis and die, leaving her orphans to weep on national television.
I was just making a factual observation. Why did some people think it was an argument in favor of regulation?
On questions of simple fact (for example, whether Earthly life arose by natural selection) there’s a legitimate expectation that the argument should be a one-sided battle; the facts themselves are either one way or another, and the so-called “balance of evidence” should reflect this. Indeed, under the Bayesian definition of evidence, “strong evidence” is just that sort of evidence which we only expect to find on one side of an argument.
But there is no reason for complex actions with many consequences to exhibit this onesidedness property. Why do people seem to want their policy debates to be one-sided?
Politics is the mind-killer. Arguments are soldiers. Once you know which side you’re on, you must support all arguments of that side, and attack all arguments that appear to favor the enemy side; otherwise it’s like stabbing your soldiers in the back. If you abide within that pattern, policy debates will also appear one-sided to you—the costs and drawbacks of your favored policy are enemy soldiers, to be attacked by any means necessary.
One should also be aware of a related failure pattern: thinking that the course of Deep Wisdom is to compromise with perfect evenness between whichever two policy positions receive the most airtime. A policy may legitimately have lopsided costs or benefits. If policy questions were not tilted one way or the other, we would be unable to make decisions about them. But there is also a human tendency to deny all costs of a favored policy, or deny all benefits of a disfavored policy; and people will therefore tend to think policy tradeoffs are tilted much further than they actually are.
If you allow shops that sell otherwise banned products, some poor, honest, poorly educated mother of five kids is going to buy something that kills her. This is a prediction about a factual consequence, and as a factual question it appears rather straightforward—a sane person should readily confess this to be true regardless of which stance they take on the policy issue. You may also think that making things illegal just makes them more expensive, that regulators will abuse their power, or that her individual freedom trumps your desire to meddle with her life. But, as a matter of simple fact, she’s still going to die.
We live in an unfair universe. Like all primates, humans have strong negative reactions to perceived unfairness; thus we find this fact stressful. There are two popular methods of dealing with the resulting cognitive dissonance. First, one may change one’s view of the facts—deny that the unfair events took place, or edit the history to make it appear fair.2 Second, one may change one’s morality—deny that the events are unfair.
Some libertarians might say that if you go into a “banned products shop,” passing clear warning labels that say THINGS IN THIS STORE MAY KILL YOU, and buy something that kills you, then it’s your own fault and you deserve it. If that were a moral truth, there would be no downside to having shops that sell banned products. It wouldn’t just be a net benefit, it would be a one-sided tradeoff with no drawbacks.
Others argue that regulators can be trained to choose rationally and in harmony with consumer interests; if those were the facts of the matter then (in their moral view) there would be no downside to regulation.
Like it or not, there’s a birth lottery for intelligence—though this is one of the cases where the universe’s unfairness is so extreme that many people choose to deny the facts. The experimental evidence for a purely genetic component of 0.6–0.8 is overwhelming, but even if this were to be denied, you don’t choose your parental upbringing or your early schools either.
I was raised to believe that denying reality is a moral wrong. If I were to engage in wishful optimism about how Sulfuric Acid Drink was likely to benefit me, I would be doing something that I was warned against and raised to regard as unacceptable. Some people are born into environments—we won’t discuss their genes, because that part is too unfair—where the local witch doctor tells them that it is right to have faith and wrong to be skeptical. In all goodwill, they follow this advice and die. Unlike you, they weren’t raised to believe that people are responsible for their individual choices to follow society’s lead. Do you really think you’re so smart that you would have been a proper scientific skeptic even if you’d been born in 500 CE? Yes, there is a birth lottery, no matter what you believe about genes.
Saying “People who buy dangerous products deserve to get hurt!” is not tough-minded. It is a way of refusing to live in an unfair universe. Real tough-mindedness is saying, “Yes, sulfuric acid is a horrible painful death, and no, that mother of five children didn’t deserve it, but we’re going to keep the shops open anyway because we did this cost-benefit calculation.” Can you imagine a politician saying that? Neither can I. But insofar as economists have the power to influence policy, it might help if they could think it privately—maybe even say it in journal articles, suitably dressed up in polysyllabismic obfuscationalization so the media can’t quote it.
I don’t think that when someone makes a stupid choice and dies, this is a cause for celebration. I count it as a tragedy. It is not always helping people, to save them from the consequences of their own actions; but I draw a moral line at capital punishment. If you’re dead, you can’t learn from your mistakes.
Unfortunately the universe doesn’t agree with me. We’ll see which one of us is still standing when this is over.
1Robin Hanson et al., “The Hanson-Hughes Debate on ‘The Crack of a Future Dawn,’” 16, no. 1 (2007): 99–126, http://jetpress.org/v16/hanson.pdf.
2This is mediated by the affect heuristic and the just-world fallacy.