From economist
Friedrich Hayek's
"Law, Legislation and Liberty, Vol. 2: The Mirage of Social Justice" (1976):
Nobody
capable of useful work need today lack food and shelter in the advanced
countries, and for those incapable of themselves earning enough these
necessities are generally provided outside the market. Poverty in the
relative sense must of course continue to exist outside of any
completely egalitarian society: so long as there exists inequality,
somebody must be at the bottom of the scale. But the abolition of
absolute poverty is not helped by the endeavour to achieve 'social
justice'; in fact, in many of the countries in which absolute poverty is
still an acute problem, the concern for 'social justice' has become one
of the greatest obstacles in the elimination of poverty. In the West
the rise of the great masses to tolerable comfort has been the effect of
the general growth of wealth and has been merely slowed down by
measures interfering with the market mechanism. It has been this market
mechanism which has created the increase of aggregate income, which also
has made it possible to provide outside the market for the support of
those unable to earn enough. But the attempts to 'correct' the results
of the market in the direction of 'social justice' have probably
produced more injustice in the form of new privileges, obstacles to
mobility and frustration of efforts than they have contributed to the
alleviation of the lot of the poor.
What do you think Hayek is referring to and do you agree or disagree with him and why? Are there other economists we have studied that would support his view or disagree with him? And what was the basis for their view?
I believe Hayek is referring to government interference in the form of poverty programs that take from the rich in order to provide for the poor.I agree with him in the sense that these types of actions actually hinder rather than help. By taking from the rich, you are infringing on their right to the private property that they earned. This may be a disincentive for furthering their cause, and thus adding to society. By taking away possible motivation, society loses out on the gains that could have been made if those that actually earn higher wages are fully incentivized. Why would anyone do work, if they know that it will go to someone else. By giving to the poor, the motivation to actually catch up may be lost if they feel satisfied with whatever they are given. In the free market society, those that can push the envelope are constantly doing so in order to gain an edge on the competition and move further along. By taking from the greater and giving to the lesser, this disrupts the markets by interfering with the message that is being sent about work. If those that are higher up stop striving to further themselves, and subsequently society, then the new standards that those of lesser wealth have to shoot for will be lower. In this sense, society is holding itself back from its own potential by not allowing a competition that will constantly push the brinks of innovation and technology to get ahead. Although this competition may bring inequality as those with less to work with may produce and earn less, the baseline of poverty will continually rise as those at the top of the totem pole continuously pull society up through constant advancements. A given example of this could be the fact that the US's poverty line, at $23,850 is twice that of the world's GDP per capita as well as substantially higher than that of the US back in 1964. What is even more telling, is that the war on poverty initiated in 1964 has seen very little effects on the percentage of Americans that fall below the poverty lines in the country each year since. Overall, however, their amount they live on and relative standards of life have vastly increased over this time as constant competition and innovation has shaped the lives of not only the rich in America, but also the less fortunate.
ReplyDeleteI believe Thomas Malthus would agree with Hayek's view, as the basis for Malthus's view was that "private property was essential, for otherwise self-love would fail to have the beneficial effects" on society. Backhouse is further describes Malthus's view that "giving money to the poor would not improve their condition unless someone else was prepared to consume less, for it would have no effect on the quantity of resources available...any extension of poor relief would increase the dependence of the poor on the state" (Backhouse 134). In my opinion, Malthus is very much in the same pool of ideas that Hayek is drawing from.
I agree with Trent on several points that he made. I think Hayek is also referring to government policies that intervene and help out the less fortunate people. For example, people who make more money than others have to pay a higher tax percentage of their income and also several times more than people who make less income. Why isn't the percentage of income that people have to pay towards things like income tax the same percentage instead of an upward slope? I feel as if this really does give less motivation for people to want to work hard to accomplish things. If they know that they are essentially being punished for working hard and "making it" in life, why would they continue to pursue greatness? It's almost dissuading to the fortunate people that worked hard to make their money because they are being punished for their accomplishments.
ReplyDeleteI think that Friedman would agree with with the fact that government intervention should not be necessary on a monetary basis. His whole idea of economic thought was that government intervention was not a positive, but a negative. This can also be seen with them intervening in order to help the less fortunate.