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Home Publications Blogs CEPR Blog Nobody Gets Rich On Their Own: Richard Posner Edition

Nobody Gets Rich On Their Own: Richard Posner Edition

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Written by Shawn Fremstad   
Tuesday, 27 September 2011 08:10

In a recent column, Paul Krugman cites Elizabeth Warren to make the important point that today's libertarian conservatives:

... miss[] the point that all of us live in and benefit from being part of a larger society. Elizabeth Warren, the financial reformer who is now running for the United States Senate in Massachusetts, recently made some eloquent remarks to this effect that are, rightly, getting a lot of attention. "There is nobody in this country who got rich on his own. Nobody," she declared, pointing out that the rich can only get rich thanks to the "social contract" that provides a decent, functioning society in which they can prosper.

In the National Review Online, Rich Lowry refers to the idea of an underlying social contract as "Elizabeth Warren's piffle" and "folly." Lowry's dismissal of what he calls the "supposed" social contact is worth contrasting with the views of a more substantive conservative intellectual, the jurist and legal theorist Richard Posner. Here's what Posner had to say in his 1990 book, Problems of Jurisprudence

In a state of nature people would not have much in the way of life, liberty, or property to protect. The long life, spacious liberties, and extensive property of the average American citizen are the creation not of that American alone but of society—a vast aggregation of individuals, living and dead—and of geographical luck (size, topography, location, natural resources, climate). Assuming two equally able and hard-working people, one living in a wealthy society and the other in a poor one, the former will almost certainly have more income and wealth than the latter, and the difference will be due to the efforts of other members, living and dead, of the wealthier society, as well as to the accidents of geography. Human nature being what it is, the employment of the government's taxing and spending powers to redistribute the "social" component (as one might call it) of a person's income will adversely affect the incentives of both the taxpayer and the welfare recipient. But there is no necessary breach of the social contract. The taxed person is still much better off than he would be in the state of nature. ...

The point can be made in slight different terms, with the help of the Hegelian insight that the idea of individual rights—indeed of individuality—is socially constructed rather than presocial. Men's natural state is not one of equality and sturdy independence; it is one of dependence on more powerful men. Economic freedom in the classic liberal sense is one of the luxuries made possible by social organization. The individual's right to property is not "natural." His possessions are a product of social interactions rather than of his skills and efforts alone. Moreover, these skills may be, at least in part, a social product too. American workers are paid more than South Korean workers; are they better workers? Better people?

Of course, Posner's assertion that redistribution of the social component "will" adversely affect the incentives of both the "taxpayer and the welfare recipient" is simplistic, too sweeping, and empirically incorrect.  (Most "redistribution" happens between "taxpayers and taxpayers" and between "taxpayers and corporations that don't pay taxes," and incentives can be affected either positively or negatively depending on the specifics of the redistribution.) But other than this misstatement, there isn't much in Posner's account to argue with.

On the other hand, while Lowry is willing to acknowledge that "the average earnings of the typical man working full time are beneath 1978 levels," he (and today's libertarian conservatives in general) have no serious program for doing anything other than making things worse. As the legacy of the Bush tax cuts have shown, reducing the federal income taxes of the fabulously wealthy—those "lucky duckies" who have benefitted so much from, in Posnerian terms, the efforts of others living and dead and the accidents of geography—has failed to create more good jobs for most Americans. 

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