Friday, 7 February 2014

John Roemer on workable socialism

John E. Roemer recently published a paper in Analyse & Kritik on "Thoughts on Arrangements of Property Rights in Productive Assets". The abstract reads,
State ownership, worker ownership, and household ownership are the three main forms in which productive assets (firms) can be held. I argue that worker ownership is not wise in economies with high capital-labor ratios, for it forces the worker to concentrate all her assets in one firm. I review the coupon economy that I proposed in 1994, and express reservations that it could work: greedy people would be able to circumvent its purpose of preventing the concentration of corporate wealth. Although extremely high corporate salaries are the norm today, I argue these are competitive and market determined, a consequence of the gargantuan size of firms. It would, however, be possible to tax such salaries at high rates, because the labor?supply response would be small. The social-democratic model remains the best one, to date, for producing a relatively egalitarian outcome, and it relies on solidarity, redistribution, and private ownership of firms. Whether a solidaristic social ethos can develop without a conflagration, such as the second world war, which not only united populations in the war effort, but also wiped out substantial middle-class wealth in Europe?thus engendering the post-war movement towards social insurance?is an open question.
Peter Boettke at the Coordination Problem blog makes a good point about Roemer's paper,
Roemer seems to be suggesting that if the population could coordinate around a solidaristic social ethos, then the social-democratic model, perhaps even the market socialist model, might be workable. I have always found these arguments weak whether they are made by libertarians, conservatives, progressives, or socialist. It amounts to arguing that the entire system turns of the moral character of the individuals who populate the system. If everyone was a libertarian (socialist), then we could have a libertarian (socialist) world. But think about that for a second, the more everyone coordinates around the norm, the greater the potential scope for gain by opportunistically violating that norm.
Roemer's argument  looks like a version of the idea that "the world would be perfect if only we could make people perfect", which may be true but I don't like your chances of making people perfect.

Boettke continues,
So rather than rely on moral character to make the argument work, I have always been more attracted to instituitonal solutions that do not require for their working improved moral character let alone a fundamental change in human nature. Instutitional problems demand institutional solutions. Human beings do have the Smithian propensity to truck, barter and exchange, as well as Smithian sentiments about others --- that is our better nature --- but human beings are also haunted by the Hobbesian propensity to rape, pillage and plunder, and sentiments such as envy, jealousy, resentment, and loathing of the other. Which propensity manifests itself is a function of institutional environment in which we interact with each other and with nature. The logic of the situation rules, not a sense of solidarity. Solidarity, instead, is a by-product of institutions. So back to the test --- is a proposed system coherent -- are the means chosen consistent with the ends sought? --- and is a proposed system vulneralbe --- can opportunistic actors disrupt the ability of the system to achieve its goals?
One of the great things about competitive markets is that they harness the Hobbesian propensities and often create social good out of them, As Keynes noted,
It is better that a man should tyrannize over his bank balance than over his fellow-citizens and whilst the former is sometimes denounced as being but a means to the latter, sometimes at least it is an alternative.

1 comment:

Matt Nolan said...

Good post, very good. I was thinking about writing something on the Roemer piece, but will probably just link to this :)