Dworkin and the Free Market

Ronald Dworkin was an outstanding American legal philosopher, but he is usually taken to be a strong opponent of the free market and defender of the welfare state. This perception of him isn’t wrong, but he is much more favorable to the free market than you might think, and we can learn a lot from him.

In his book Sovereign Virtue, he tells us that equality is the sovereign political virtue. Dworkin’s basic principle states: “No government is legitimate that does not show equal concern for the fate of all those citizens over whom it claims dominion and from whom it claims allegiance.” What could be more antilibertarian?

This doesn’t sound very promising, but this principle can be understood in a way that makes it entirely consistent with strict adherence to the free market. A libertarian should respond that in a free market the government (or better, the private protection agencies) does treat everybody with equal concern: it respects everybody’s rights to life, liberty, and property. Dworkin, who rarely misses a philosophical trick, anticipates this objection. “Those who embrace it [laissez-faire] can also accept the abstract egalitarian principle and claim their theory as the best interpretation of that principle.”

Dworkin’s answer is that the free market is unfair to the poor. If you answer, the poor have the same rights as everybody else, Dworkin denies this. Whether you are rich or poor depends on the legal system. If you are poor, you can complain that the legal system doesn’t show you equal concern. If it did, there would be a different legal system in place that would give you more wealth.

Dworkin’s response just pushes back the issue one step. Granted that how people fare in the market depends on how the legal system defines their property rights, what then follows? What criteria govern a proper legal system?

Here Dworkin arrives at a surprising answer. Although he quickly dismisses laissez-faire capitalism, his own principle of distribution grasps a key truth about the market. In a free market, goods pass to those who are willing to pay the most to get them. A legal system that allows people to bid against each another for the goods they want displays equal concern for its citizens. Like Mises, he stresses that consumers in the market get what they want by casting dollar votes.

But he thinks there is a problem with this that Mises doesn’t solve. He accepts consumer sovereignty, but in order to be fair, everybody must start out from a baseline of equality. Specifically, we need to start from an imaginary auction where everybody has equal resources. He says,

The [market] auction proposes…that the true measure of the social resources devoted to the life of one person is fixed by asking how important, in fact, that resource is for others. It insists that the cost, measured in that way, figures in each person’s sense of what is rightly his and in each person’s judgment of what life he should lead, given that command of justice.

Here we reach the key difference between Dworkin’s conception of equal concern and that of those of us who favor the free market. As Mises long ago noted, some people do have more dollar votes than others. But, as market defenders look at matters, the government has no business attempting to “correct” for the differing talents and resources people start out with. We show equal concern by taking people as we find them: to do otherwise is to interfere drastically with individual freedom.

It turns out, though, that Dworkin doesn’t want to correct across the board for luck. He thinks that some matters of luck may be insured against: these he calls “option luck” and permits within his system. If, in the market, you could have insured against accident but failed to do so, you cannot demand that others pay your medical bills in the case that you suffer accidental injury. Dworkin here agrees with Mises and Rothbard.

What he objects to is the effect of “brute luck.” Some instances of bad luck cannot be anticipated through insurance. “Some people are born with handicaps, or develop them before they have either sufficient knowledge or funds to insure on their own behalf. They cannot buy insurance after the event.” In Dworkin’s view, the government should counteract, by his elaborate imaginary “insurance” auction, the effects of brute luck, both good and bad. The “insurance” is compulsory and redistributive.

Here the basic issue that separates Dworkin from defenders of the market comes out clearly. Does the government show respect for people by attempting to correct for “brute” luck that can’t be dealt with by ordinary insurance?

Even those inclined to accept Dworkin’s insurance plan should think twice before attempting to put the plan into practice. Surely no government can be trusted with the immense powers needed to “correct” the market. Wouldn’t those in power intervene in order to promote their own interests, rather than try to figure out Dworkin’s convoluted plan?

Rather than stress Dworkin’s deficient understanding of politics, I prefer to reiterate a fact that may surprise people. If we eliminate Dworkin’s controversial premise about “brute luck,” he offers a powerful defense of the market, along Misesian lines.