Hudgins Letter in Wall Street Journal

[Ed Hudgins]

Hudgins Letter in The Wall Street Journal

The October 14-15, 2006 Weekend edition of the Wall Street Journal featured a letter to the editor by Atlas Society/Objectivist Center Executive Director Edward Hudgins. Under the heading “Economic Individualism and the Only Truly Just Society,” Hudgins commented on an October 10 editorial page essay in the Journal by Edmund Phelps, the 2006 Nobel Prize winner in economics.

Hudgins wrote that, “Phelps advocates not economic individualism but moral collectivism. He is on the mark to distinguish the dynamic, open capitalism found in America from the corporatism of established interest groups and government bureaucrats found in Continental Europe (where Mussolini seems to have won!). He’s also correct that capitalism allows all to find a greater sense of self-realization in their work. And he’s right to trace resentment against capitalism to a confusion of the entrenched, government-protected businesses with true entrepreneurs who must survive through open-market competition.”

Hudgins went on to say, “But he’s mistaken to use John Rawls’s standard of social justice. Under this standard, capitalism is unjust if it results in ‘raising the scores of some, though at the expense of reducing the score at the bottom,’ compared with other feasible systems. Prof. Phelps argues that, in addition to the evidence of history that under capitalism everyone wins economically, ‘In an economy in which entrepreneurs are forbidden to pursue their self-realization, they have the bottom scores in self-realization.’ Thus, capitalism is just.”

Hudgins elaborated: “Yet Rawls’s standard is wrong. Capitalism is based on the freedom of individuals to pursue their own self-interest as long as they don’t initiate force against others. This means that no group is entitled to any given distribution of benefits; individuals must earn their wealth by producing goods and services with which to trade with others. Some individuals and enterprises might be worse off in the short term, perhaps because of their own lack of initiative or adherence to out-of-date strategies, like corporatists in Europe and elsewhere. But these corporatists use Rawls’s standard to justify their stagnant systems. If they open their systems, they argue, there will be lots of immediate losers with a few, perhaps hypothetical, future winners. Such a collectivist argument is guaranteed to kill entrepreneurial capitalism.”

Hudgins concluded that, “Prof. Phelps says, ‘Ayn Rand went too far in taking ... freedom to be an absolute.’ But if the individual rather than a statistical group is the ultimate subject of justice, then freedom is the highest good in the only truly just society – a capitalist one!”

[Michael Stuart Kelly]

Ed,

Please excuse me for taking so long in getting to this. I just read Phelps's article and your excellent observations.

From what I gather, Dr. Phelps characterized the fundamental quality of capitalism as dynamism. Er... dynamism? Nice try... (Well, as he said below, it does make us "feel good.") I am glad he mentioned Ayn Rand.

I want to conclude by arguing that generating more dynamism through the injection of more capitalism does serve economic justice.

We all feel good to see people freed to pursue their dreams. Yet Hayek and Ayn Rand went too far in taking such freedom to be an absolute, the consequences be damned. In judging whether a nation's economic system is acceptable, its consequences for the prospects of the realization of people's dreams matter, too. Since the economy is a system in which people interact, the endeavors of some may damage the prospects of others. So a persuasive justification of well-functioning capitalism must be grounded on its all its consequences, not just those called freedoms.

To argue that the consequences of capitalism are just requires some conception of economic justice. I broadly subscribe to the conception of economic justice in the work by John Rawls. In any organization of the economy, the participants will score unequally in how far they manage to go in their personal growth. An organization that leaves the bottom score lower than it would be under another feasible organization is unjust. So a new organization that raised the scores of some, though at the expense of reducing scores at the bottom, would not be justified. Yet a high score is just if it does not hurt others. "Envy is the vice of mankind," said Kant, whom Rawls greatly admired.

If you want to know the truth, I didn't mind this criticism of Rand at all. Phelps is a Nobel prize winner and he finds Rand's ideas uncomfortable enough for his Rawlsian premises to criticize them in public.

I would say that things are getting better and better.

Congratulations on your response.

Michael

[Chris Grieb]

Michael; I agree. More and more people are refering to Ayn Rand. I maybe to say something we don't want to go as far as Ayn Rand but she is being mentioned. There was a time when she was never talked about. That's over.

[John Dailey]

~ Who'd'a thought that a defender of Rawls' ethics/morality would be left-handedly increasing the promotion of media-references to Rand ?

~ Yeah; things are looking up...media-wise.

LLAP

J:D

P.S: Good response, Ed.

Edited December 20, 2006 by John Dailey