Image credit. On what terms are we agreed or allowed to trade. Which types of assets are cleared to be legitimately tradeable? Which ever way we decide, we are likely to face contention on these issues, and ultimately we can achieve freedom only by exerting a fair measure of coercion. Then what is the nature of coercion that is compatible with liberty?
In his magisterial The Constitution of Liberty, Friedrich Hayek writes:
We are concerned in this book with the condition of men in which coercion of some by others is reduced as much as is possible in society. This state we shall describe [...] as a state of liberty or freedom. (p.11)
Hence, freedom and coercion are inversely related.
Furthermore, Hayek emphasises that in talking of coercion he wishes to confine the concept to human action, whereby one human (A) forces another human (B) in such a manner that B becomes, against his own will, a means used to fulfil A's ends. Thus
coercion occurs when one man's actions are made to serve another man's will, not for his own but for the other's purpose. (p.133)
This is contrasted by certain types of enforceable restrictions voluntarily stipulated. Thus, in his paper The Meaning of Liberty, Harold Demsetz notes:
Hayek's attempt to distinguish his notion of coercion from "the terms on which our fellows men are willing to render us service" signifies an effort to associate coercion with costs whose source is not the impersonal workings of the market but in the personal decisions of men. (p. 283)
So, Hayek seems to distinguish between coercion correlated with impersonal power as exerted by outcomes brought about by free markets and coercion correlated with personal power as exercised by, say, a monopolist, who, as the owner of a spring in an oasis, can exercise enormous power over others who happen to be desperate for a drop of water.
The difference is related to the purpose of suppressing certain forms of coercion in a free society, where suppression is confined only to coercive acts that quash the network of win-win relationships among all citizens that freedom brings about. I shall return to this point at once.
However, reminds us Demsetz:
Stigler asks, What purpose is served by Hayek's attempt to distinguish personally imposed costs from those that are determined impersonally? Costs restrict freedom by restricting the degree to which persons can achieve their goals. Behaviour responds similarly to costs without regard to their source. [...] We make no distinction between the differences in the responses to different naturally caused costs. Why put the human who pursues a monopoly return beyond the pale of nature but not the insect who seeks gratification of a large appetite?
The essential equivalence of costs leads Stigler to argue for defining freedom as wealth. (pp. 284/285)
I do not think that Hayek's characterisation of the relationship between coercion and freedom is contradictory.
In what follows, I hope to explain why and hope to defend Hayek against Stigler's objections.
1.
"Costs restrict freedom by restricting the degree to which persons can achieve their goals."
True.
However, consider a rich man and a poor man, the former passionately desiring a yacht costing $ 1 billion, which, though he is rich, he cannot afford, while the poor man has no such desire and is reasonably happy with what he can afford. Is the rich man, languishing for a yacht he will never be able to get, freer than the poor man who is content with what he has got?
Lottery winners often complain about the burden of their newly acquired wealth. Rich business men feel an overload of obligations and end up dying from a heart attack. Living on a small wage but with plenty of time at hand, I may ensure to myself a far greater richness of personally valued opportunities than a rich man drowning in commitments.
What is most important is that freedom increases my chances to successfully seek the level of richness of personally valued opportunities that suits me.
In historical stages of advanced freedom, we seem to encounter a condition whereby there is a relatively small, yet sufficient number of wealth creating entrepreneurs who are able to support much vaster numbers of people with less tolerance for risk and less ambition for material advancement.
Incidentally, an entrepreneur may neither be particularly aware of the risks she is taking nor significantly motivated by prospects of enhanced wealth, but simply follow the path that leads her to a level of richness of personally valued opportunities that makes her feel content and excited about life. This may also explain why extremely rich people often continue entrepreneurial activities long after passing the point of diminishing returns from increasing wealth.
While everyone is free to maximise personal utility/psychic income, even in ways that do not maximise real wealth (sellable assets and ultimately purchasing power in an exchange economy), the overall level of real wealth will tend to grow in a free society.
Why? Because those who embark on a course of increasing real wealth purposefully or as a side effect to their activities face incomparably better conditions to do so than under alternative arrangements. The pursuit of productive, value-adding projects enjoys effective protection.
While we, the barbers, do not increase our productivity, over time we get higher wages and enjoy a better standard of living created by the relatively few engaged in productivity-enhancing entrepreneurial activities.
For more see my Demos and Freedom - Robust and Non-Robust Conditions of Freedom.
2.
"Behaviour responds similarly to costs without regard to their source."
Granted, some people (buyers) may respond in the same way to an identical increase in the price of timber, irrespective of whether it is due to a forest fire or caused by the emergence of a monopolist.
However, the immediate, nilly-willy identical behaviour of buyers of timber under these differing scenarios is not the point.
If the source of costs is one systematically incompatible with the win-win character of free markets (as is the case with monopolistic usurpation) we have a fundamentally different situation compared to a source of cost that does not suspend the economic order that produces win-win situations.
Thus, we may have to practice coercion, and quite legitimately so, in order to support the working of free markets - for instance, by prohibiting an insolvent entrepreneur from aggressing other entrepreneurs who have demonstrably brought about his demise by winning over his former customers with more attractive prices and better quality.
Coercion of this type and purpose is not inversely related to freedom, to the contrary, it enhances freedom. The reduction of coercion to the highest possible degree (see the first Hayek quote above) then means ruling out behaviour that hinders or destroys the systematic attainment of win-win constellations in human interaction.
This entails three interesting implications: (1) freedom is a consequentionalist enterprise, i.e. she must be defended along consequentialist lines -- we cannot rely on an unalterable set of first principles, but must prove the superior, win-win outcomes ensured by a regime of freedom. (2) For that very reason, freedom is contestable and subject to competing interpretations. (3) Coercion is reduced to the type needed to protect productive patterns of social win-win-interaction and to maximise the range of personal choice in every member of the community. But coercion is present, for up to a point, people will be forced to abide by the laws of the liberty game, whether or not they understand and condone their purpose.
3.
"Why put the human who pursues a monopoly return beyond the pale of nature but not the insect who seeks gratification of a large appetite?"
Unlike Stigler thinks, there are good grounds to distinguish between the monopolist and the insect. We need to ask our fellow citizens to elicit a liberty-compatible kind of behaviour to achieve the win-win type of economic system that we call the free market, while this highly advantageous economic order cannot be engendered by appealing to the behavioural propensities of insects. The latter may be occasionally destructive of the wins we hope to garner from operating in free markets, but they are neither capable of bringing about a win-win economy nor are they of particular relevance to this purpose.
By contrast, humans must be induced to defer to certain restrictions on their personal autonomy, and, if need be, coerced not to violate certain behavioural standards if we wish to achieve sociogenic liberty.
See also King George I - From Anthropogenic Liberty to Sociogenic Liberty,
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