“I think that democratic communities have a natural taste for freedom; left to themselves, they will seek it, cherish it, and view any privation with regret. But for equality their passion is ardent, insatiable, incessant, invincible; they call for equality in freedom, and if they cannot obtain that, they still call for equality in slavery.”
— Alexis de Tocqueville[1]

“Believe me, Sir, those who attempt to level never equalize.”
— Edmund Burke[2]

While the ideals of freedom and equality are not unique to one age or creed, liberalism[3] differs from its rivals in the specific meaning it attaches to these terms.[4] For a liberal in the original sense, a free society must aim first and foremost at minimizing the exercise of arbitrary power by limiting all coercion to what can be accomplished by equal, invariable, and indiscriminate law. Thus the rule of law, the absence of arbitrary legal privileges or distinctions of status, appears to the liberal as the legal embodiment of freedom and equality alike, and as his greatest and proudest achievement.[5] Other times and peoples have known liberties, but it is liberalism that can take credit for enshrining liberty.[6]

The liberal champion of formal equality before the law will have an eye, to be sure, on inequalities of opportunity, though he will resist the tendency to focus too narrowly on what happens to be most easily quantified;[7] what he will refuse to countenance, however, is the attempt, objectionable in principle but likely also futile in practice, “to impress upon society a deliberately chosen pattern of distribution, whether it be an order of equality or of inequality.”[8]

I. Freedom, Equality, and “Social Justice”

A concern with the adverse effect of material inequality is as old as our philosophical tradition, and it is hardly surprising that it should color so much of our political debates.[9] Nonetheless, while the liberal may look with favor upon the incidental equalization that may result from legitimate government action, and while he may consider a high degree of material equality desirable and even admirable, he must be wary of any attempt at forcing such an outcome by means of coercion, on grounds of principle and practicability alike.[10]

Two fundamental problems will immediately confront those seeking to bring about a more equitable distribution of wealth: the difficulty of giving principled backing to any particular pattern, on the one hand, and that of making the pattern stick, on the other. For as Hayek argues at length in his Road to Serfdom, the kind of complete ethical code that might warrant a sustained “correction” of the outcomes yielded by the spontaneous and uncoordinated interactions and exchanges within a society turns out, upon closer examination, to be full of gaps at best. The hazy vision of “social justice” that guides much of the debate over redistributional measures does not bear scrutiny, if it means anything at all, and reduces in the final analysis to little more than a vague sense of dissatisfaction that remains strictly negative, parasitical on customary or historical distributions yielded by the market, and that offers little direction beyond taking as much from the rich as possible. Since a free society will not produce the kind of uniform, coherent moral scheme that would be necessary to justify systematic redistribution, the ideal of justice that would govern it cannot be that of a society as a whole, but only that of someone within it.[11]

To give such a conception of social justice meaning, moreover, it would not suffice to impose it selectively, but a whole society would need to be reorganized around it and forced to conform to it continuously. As Robert Nozick’s “Wilt Chamberlain problem” illustrates, free exchange will quickly upset any favored distributional pattern, which cannot therefore be realized without persistent, continuous interference with people’s lives.[12] Even those who favor the pattern in question may thus come to balk at the methods that would be necessary to enforce it as they “will in practice find themselves obstructed at every move by the rule of law.”[13] While the resulting conflict between the ideal of freedom and the desire to “correct” the distribution of incomes is not often clearly recognized, the diminished ambitions of most redistributional schemes today may perhaps be taken as an acknowledgement of sorts. Instead of offering any clear-cut plans or really coherent conceptions of what a manipulation of the market for social justice would require, “the new tasks set by the ambition of modern man” are thus approached “as un-principled, in the original meaning of this word, as never before.”[14] Thus the standard procedure of the attenuated welfare state, extracting taxes from some in order to make grants to others—all in the name of equality and the eradication of poverty—ends up producing, in a largely ad hoc manner, “an erratic and contradictory mélange of subsidies to special interest groups.”[15] Though advocated as an antidote to the vagaries of the market, such piecemeal grants must have the effect of leaving everyone else in an increasingly precarious position.[16] In the end, security itself becomes a privilege.[17]

II. Merit and Value

Closely related to the demand for a less unequal distribution of the good things of the world, and perhaps underpinning much of the sense of injustice driving it, is a feeling that market outcomes do not adequately reflect our intuitions of moral merit.[18] Yet, intuitive as it may seem at first, the demand for remuneration proportionate to ascertainable merit—rather than the market’s reward in accordance with product, that is, usefulness as assessed by the exchanging parties—quickly runs into daunting difficulties.

A ready source of discontent may be found, for example, in the fact that a free society of any complexity will witness a marked discrepancy between the rewards of individuals within the same profession and even between those possessing the same technical skills or special abilities. Such differences are easily accounted for, however, by the fact that in such a society, a person’s ability per se and his success in turning it into a good or service valued by others cannot be separated. As a corollary to an individual’s freedom of making his own choices and finding his own way, safe from tutelary instructions by a supervising authority, monetary success will increasingly come to depend not only on abilities in the abstract, but on the concrete skill with which they are put to the right uses. Insofar as the burden of discovering how to make optimal use of our abilities is concerned, the free society makes an entrepreneur of every one of us, with all the attendant frustrations, disappointments, and resentments. Hard as one may find the discipline thus imposed, and bitter as it may be to fail in making oneself as useful to others as one might have been (hence failing as well to reap the rewards of that usefulness), the discipline we may deplore is inseparable from the freedom we cherish. There is a sense, of course, in which we would be relieved of a burden if we were simply told what to do: but few who rue the hard choices they face wish for such relief.[19]

What is more, the hope of ascertaining in a reliable manner the meritorious quality of a given action presupposes just those conditions—comprehensive knowledge of everything that is motivating someone—whose general absence furnishes such a powerful argument for liberty.[20] The information we would need for an adequate assessment of merit is of just the kind that exists nowhere as an integrated whole.[21] In all but the most exceptional circumstances,[22] the very most that could be hoped for—and even this may strain credulity—is the judgment that a particular service was especially meritorious in the sense of costing its producer particular pain and effort. If we were to be guided by the moral character of an action, however, rather than by the value it has for us as consumers, the allocative dimension of the problem would surely lead us to just the opposite conclusion. For inasmuch as we all have an interest in seeing resources guided to their most productive uses, as the price-mechanism does with such efficiency, “we do not wish people to earn a maximum of merit but to achieve a maximum of usefulness at a minimum of pain and sacrifice and therefore a minimum of merit”![23] What is more, one of the most appealing aspects of the free-market order, succinctly developed by Friedman, is precisely that it frees us from the personal judgments others may make about us, thus tending to minimize the expression of prejudices precisely by making all discrimination on the basis of anything other than quality and price relatively costly.[24]

That not only hard work or skill, or foresight, or even a particular knack for making one’s abilities serviceable to others, but also sheer chance and good luck should often make a crucial difference to a man’s success is sure to grate on those who fail to be so successful through no particular fault of their own. What seems a lot less certain, however, is whether those falling short would be any happier in a more strictly meritorious world, in which their lack of success could be directly and reliably attributed to their own shortcomings. Surely we should at least pause to consider that such a world might be far crueler than even the capriciousness we may deplore and lament.[25] Rather than wishing for a closer relationship between merit and value, perhaps we should acknowledge more frankly that there need not be much of a relationship at all and should check our inclination to ascribe merit where there is in fact only superior value.[26] What is more, as Friedman observes so incisively, competitors tend in fact to resign themselves rather more easily to the blindness of the goddess of chance than to deliberate judgments of relative merit.[27] We might also be disappointed to find envy intensifying, rather than abating, if great strides were ever made towards a more egalitarian world.[28]

III. The Vagaries of Redistribution

True or not, Burke’s dictum that “’too much’ and ‘too little’ are treason against property” does little to persuade the skeptic.[29] What might give more pause to the advocates of redistribution, however, are the unintended consequences and perverse effects that are likely to result from any serious effort at leveling material fortunes.

Revenue needs to be raised for legitimate state purposes, of course, and surely Adam Smith was right to find it “not very unreasonable that the rich should contribute to the public expense not only in proportion to their revenue, but something more than in that proportion.”[30] Hayek and Friedman, too, have little trouble conceding that there are good reasons, when it comes to taxation, for “some measure of graduation, both on grounds of assessing costs in accordance with benefits and on grounds of social standards of equity.”[31] Where the purpose of reducing inequality takes precedence over the need to raise revenue fairly and effectively, however, more deliberately egalitarian policies quickly reveal a short-sighted and self-defeating dimension. The farce of confiscatory marginal income tax rates approaching a hundred percent on paper, combined with myriad special provisions and loopholes that render them ineffective, has been playing itself out at great length over the past half-century and seems to have run its course at last.[32] Meanwhile the “progressive” penchant for high marginal rates tempered by exemptions remains alive and well—with all the resulting capriciousness and real inequality in actual tax levels, all the perverse incentives and pervasive misdirection of resources that it invariably engenders.[33] Perhaps the greatest paradox facing leveling ambition, however, is the fact that taxation hampering the accumulation of wealth will have the unintended side-effect of protecting established fortunes from the competition of newcomers, in fact perpetuating the most glaring inequalities and turning wealth into the very privilege to which both the liberal and the egalitarian stand opposed![34]

Second, market-incomes no less than other market-prices contain much information that could otherwise be collected only very inadequately. Behind many a seemingly unwarranted discrepancy in income are a host of equalizing factors that need to be considered, and that would be all but impossible to calculate, except in a few cases, without reliance on the information gathering power of the market. A snap-shot of income distributions at any one point in time will fail to distinguish, for one, between merely temporary, short-run differences and long-run differences in income, even though the former is the very mark of a dynamic, socially mobile society as opposed to one dominated by status.[35] What is more, compensation for different kinds of employment will in some measure reflect such factors as their unpleasantness or dangerousness, the difficulty and expense of acquiring a particular skill, the regard in which an activity is held (honor making, as Adam Smith observed, “a great part of the reward of all honorable professions”[36]), the probability or improbability of success or the shortness of the typical working life in a particular career,[37] and so forth. Anyone who would presume to combine, weigh, and reconcile all these considerations without recourse to market forces would somehow have to overcome the most daunting obstacles.

The more freely market forces are allowed to operate, on the other hand, the more reliably can they fulfill their function of signaling, to those who need to decide what to do with themselves, just what skills or services are in particular demand or especially scarce at the moment. The level of remuneration offered thus transmits some of the vitally important information necessary for an individual to decide where to invest his energies, and creates an incentive to direct them where others value them most. Though market prices cannot, of course, capture inherent or permanent value, and though one may have good reasons to, and must remain free to, pursue activities upon which others place little value—and which may yet prove of great benefit!—market valuations do offer a “readily available yardstick” by which to measure the usefulness of any given endeavor at any given time, and thus a basis for determining whether a particular level of effort, risk, inconvenience, or whatever else, is likely to prove worth the sacrifice or trouble. No such determination can ever be fail-proof, of course, and many actual options may be unappealing; yet such risk, uncertainty, and frustration is but the converse of that unrestricted freedom and opportunity which can only thrive in a society where none but the individual himself bears the responsibility for finding his way. The impediments we will all encounter in the form of unfavorable market valuations are real and serious, and at times truly bitter, but at least they do not reflect anyone’s disapproving our ends so much as the simple fact that the same means are also wanted elsewhere, by others prepared to put a higher price on them.[38]

If it is true, as Hayek contends, that the parallel growth of knowledge and civilization depends on a process whereby successful institutions and habits are imitated and adopted ever more widely, while less successful ones are correspondingly marginalized or eliminated, then the relative rise of individuals and groups alike is precisely the mechanism by which we are able to advance, and it would be foolish to seek to suppress, let alone eliminate it: “If the result of individual liberty did not demonstrate that some manners of living are more successful than others, much of the case for it would vanish.”[39] Clearly, then, a free society will unleash a process of “creative destruction” whose fury will be felt by all, and resented by many, and it would be naive to think that freedom will always console us for what progress may take away, or for the chill we may feel as we face “the perennial gale.”[40] We cannot count on freedom making us better off, or reliably happier, and we may even find ourselves as much the captives as the masters of our advances.[41] Some may therefore despise liberalism as promising little more than the freedom to make a mess of our lives;[42] still the liberal condition is a distinctive one, with its own great rewards and a vision of true dignity such as no more paternalistic arrangement could offer.[43]

IV. Inequality and Progress

Finally, even granting for the purposes of argument that the principled objections and the practical obstacles to a policy of ruthlessly “soaking the rich” could somehow be overcome, the results of such a policy are sure to disappoint. There is, for one, the straightforward fact that even billions concentrated in the hands of a relatively few will have only a modest impact when distributed among millions. More fundamentally—and again leaving aside both the most principled and the most practical objections to such a course of action—such redistributionist fantasies disregard, to everyone’s great detriment, the subtle relationship between inequality and the observable course of progress. For, implausible as it may seem at first, we all stand to benefit from the existence of a class of the rich, even if their ways may strike us as often idle and vain, frivolous and wasteful.

Two considerations stand out particularly. First, there is the important role of the wealthy as independent foci of support to foster experimentation and cultural diversity, especially in the arts (never yet adequately supported where the majority has displaced the wealthy patron), but generally wherever else new ideas have fought for recognition. It is too frequently overlooked, as Hayek rightly points out, that action by collective agreement must be limited, by its very nature, to instances where previous efforts have already produced consensus. To advance an unpopular or marginal cause in a free society—often mere idiosyncrasy and eccentricity, to be sure, but occasionally just the kind of example on which the progress of civilization depends—it may suffice to convince a single wealthy patron, whether engaging his sincere enthusiasm or merely his sense of profit.[44] A society that did not allow such independent centers of support to emerge spontaneously, or found a way to replicate the dynamics of a free society, would soon jeopardize its political health no less than its cultural fecundity.

Then there is a second, more strictly economic, respect in which even the most egalitarian society would have to mimic the dynamics of a free society or else face stagnation. For as Hayek shows in an especially thought-provoking chapter, “there is no way of making generally accessible new and still expensive ways of living except by their being initially practiced by some.”[45] In a free society, it is initially the wealthy few who, by spending freely on whatever catches their fancy, get to experiment with new goods and lifestyles that cannot yet be more widely dispersed.[46] A different kind of society might find a different basis on which to make such new possibilities available on an experimental basis, for example through deliberately privileging some by political fiat in the very way that liberal society seeks to avoid; whatever the alternative mechanism, however, it is hard to see how even socialist societies could avoid glaring inequalities between their own privileged classes and the masses.[47] What is distinctive about free capitalist society, then, is not that some goods will initially come within reach of only a few, but rather the echelon fashion in which new possibilities will be made much more widely available before long. For in effect, though also inadvertently, the expenditures of the rich will serve to defray the initial cost of experimentation and development that must precede the introduction of any consumer good on a large scale. To put it differently, the rich, while intending nothing of the sort, end up making a “free gift” of the knowledge acquired by their spending on what often appears, at first, to be no more than frivolity and caprice.[48] Ultimately, then, “new things will often become available to the greater part of the people only because for some time they have been the luxuries of the few” and the assumption that they would have been created under more egalitarian conditions just as well is as mistaken as it is widespread.[49]

Thus we arrive at the conclusion, counter-intuitive as it may seem at first, that if everyone had to wait until new and better things could be provided for all, that day might never come, and that even the poorest, let alone the broad masses, owe much of their relative material well-being to the results of past inequality. At any given moment, it is true, we might be able to improve the position of the poorest by taking from the wealthiest: “But, while such an equalizing of the positions in the column of progress would temporarily quicken the closing-up of the ranks, it would, before long, slow down the movement of the whole and in the long-run hold back those in the rear.” That there will also be real waste, bad choices and bad taste, lining the paths of progress is undeniable—but we may well conclude with Hayek that such is everywhere the price of freedom and progress, and that what is squandered by the rich pales by comparison to what is consumed, in the aggregate, by such amusements of the masses as would strike most inhabitants of the world, and most of our own ancestors, as no less extravagant and unnecessary.

* Department of Political Science, UC Davis; [email protected]. This essay was awarded first prize in the 2005 Olive W. Garvey Essay Contest and the author would like to express his thanks and appreciation to The Independent Institute.