How silly were J.S. Mill's views about income distribution?

J S Mill wrote: “The laws and conditions of the Production of wealth partake of the character of physical truths. There is nothing optional or arbitrary in them. ... It is not so with the Distribution of wealth. That is a matter of human institution solely. The things once there, mankind, individually or collectively, can do with them as they like. They can place them at the disposal of whomsoever they please, and on whatever terms” (Principles of Political Economy, 1848, II,1.1).

In 1983, Friedrich Hayek commented that this view of J S Mill “is really an incredible stupidity, showing a complete unawareness of the crucial guide function of prices ...” Hayek explains: “We must face the truth that it is not the magnitude of a given aggregate product which allows us to decide what to do with it, but rather the other way around: that a process which tells us how to reward the several contributions to this product is also the indispensable source of information for the individuals, telling them where they can make the aggregate product as large as possible” (Conference paper published in Nishiyama and Leube, “The Essence of Hayek”, p 323). This must have been one of the most intemperate remarks that Hayek ever made about anyone.

One of the things I have learned from Richard Reeves book, “John Stuart Mill, Victorian Firebrand” is that Karl Marx was also unimpressed by Mill’s attempt to separate the laws of production and distribution. Marx viewed this as “a shallow syncretism” (Reeves, p 210). He thought Mill was attempting to reconcile irreconcilables.

How silly were Mill’s views about distribution? In order to answer this question I think we need to understand Mill’s views about property and inheritance.

I see a lot of merit in much of what Mill wrote about property. For example: “The institution of property, when limited to its essential elements, consists in the recognition, in each person, of a right to the exclusive disposal of what he or she have produced by their own exertions, or received either by gift or by fair agreement, without force or fraud, from those who produced it” (“Principles of Political Economy”, II, 2.2).

It is when Mill writes about “landed property” that I begin to see problems: “When the "sacredness of property" is talked of, it should always be remembered, that any such sacredness does not belong in the same degree to landed property. No man made the land. It is the original inheritance of the whole species. Its appropriation is wholly a question of general expediency” (“Principles of Political Economy”, II,2.26). Given that land can be exchanged for other goods I don’t see how it is possible to argue that rights to ownership should not be recognized as the same for land as for other goods.

The problem that Mill had with “landed property” seems to be associated with the potential for a relatively small number of families to have a disproportionate amount of wealth and to exercise disproportionate political power. He was against the inheritance of “enormous fortunes which no one needs for any personal purpose but ostentation or improper power”. Richard Reeves points out that Mill was particularly concerned to distinguish between “earned” and “unearned” income. Mill viewed inheritances as “unearned” and argued that it would be socially beneficial to impose a limit on the amount any person could inherit.

Mill’s views about redistributive taxation were also influenced by his aversion to inherited wealth: “To tax the larger incomes at a higher percentage than the smaller is to lay a tax on industry and economy; to impose a penalty on people for having worked harder and saved more than their neighbours. It is not the fortunes which are earned, but those which are unearned, that it is for the public good to place under limitation. ...I conceive that inheritances and legacies, exceeding a certain amount, are highly proper subjects for taxation: and that the revenue from them should be as great as it can be made without giving rise to evasions ... such as it would be impossible adequately to check” (“Principles of Political Economy”, V, 2.14).

It seems to me that Mill’s claim that distribution of wealth should be viewed as entirely separate from production was silly – and contradicted by his own views about the adverse consequences of progressive taxation. Mill’s idea for an upper limit on the amount that anyone could inherit also seems extremely silly. I can see some wisdom in his views about taxation of inheritances, but even here it seems to me that he was fooling himself if he thought that inheritance taxes would impose no disincentives to working and saving. Despite all this silliness, however, Mill still had many sensible things to say about property rights and taxation.

Does our Nicole worsen income inequality in the United States?

In his recent paper, “Thinking clearly about economic inequality”, Will Wilkinson – a research fellow at the Cato Institute in the U.S. (and prominent blogger)- mentions some reasons why Nicole Kidman is wealthy. He states: “Nicole Kidman is fabulously wealthy because millions of individuals have chosen to see a movie with Nicole Kidman in it instead of a non-Kidman movie, or instead of going bowling”. He uses Nicole as an example to illustrate how the pattern of incomes “emerges from billions upon billions of individual choices and transactions” (p 14).

I think Wilkinson is making a good point. People often talk about income distribution as though government is actually distributing national income among the citizens - like a mother deciding how large a slice of a cake to give to each of her children. If we want the cake metaphor to reflect the real world, however, we have to accommodate the fact that mother doesn’t actually bake the cake, the children do. And distribution is the result of mutually beneficial process in which individuals earn cake by contributing to its production.

Wilkinson’s mention of Nicole Kidman is also relevant to a somewhat different point that he is making, although he doesn’t make the link specifically. Nicole Kidman has dual citizenship between the U.S. and Australia. If she is viewed as a U.S. citizen for the purposes of considering the distribution of income that makes the distribution of income in the U.S. look more unequal. If she is viewed as an Australian citizen that makes Australia’s income distribution look more unequal. Who cares?

The point is, of course, that there is something peculiar about viewing income inequality as a cause for concern at a national level, when this can change just because people move across national borders. When people talk about the effects of migration on income distribution in countries like the United States and Australia they are more likely to be thinking of the migrants who make income distribution less equal by occupying the lowest rungs of the economic ladder than those who make it less equal by occupying the highest rungs on the ladder. But the questions raised about the relevance of income distribution to well-being are the same in both cases.

Wilkinson makes the point: “If you focus only on the shifting pattern of incomes among legal residents within the statistics-keeping jurisdiction ... you can easily lose track of the real story of human welfare ...” (p 14). He comments as follows on the effects of the migration of unskilled migration on economic inequality in the U.S.: ‘If were to assume a natural and mundane moral perspective, from which all people involved are taken into account and assumed to have equal worth ... what we would see is a profound reduction in both poverty and economic inequality. If the question is “What happened to the people in this scenario?” then the answer is “The poorest people became considerably wealthier, narrowing the economic gap between them and the rest”.’ (p 15).

It seems to me that this reasoning is relevant to Australia as well as to the U.S. If we are interested in the well-being of people we should be interested in the opportunities that are available to them. When you look at it carefully the concept of income inequality doesn’t have much relevance to well-being.

How can a conservative favour centralization of power?

One of my reasons for reading Tony Abbott’s recent book, “Battlelines”, was to remind myself why I am not a conservative. The more serious reason was to find our how a politician who proudly wears the conservative label would attempt to justify proposing an amendment to the Australian constitution that would remove current restrictions on the policy areas in which the federal government has power to make laws.

In writing this book Tony Abbott, a former minister in the Howard Government who is now on the opposition front bench in the federal parliament, seems to have taken on the role of defining where the battlelines should be drawn in the approach to the next election.

One of the things Abbott is clearly trying to do in this book is to identify enduring values that will continue to bind the Liberal Party together. In the process he does a reasonably good job of minimizing the differences between Hayekian liberals and Burkean conservatives. At one point he writes: “Following Adam Smith, Liberals tend to think that government is necessary to keep the peace but otherwise should let people make mutually beneficial arrangements with each other” (p 82). If I believed that was a statement of conservative philosophy, I would not mind being called a conservative. In other places in the book, however, Abbott displays the contempt for personal freedom that is associated with traditional conservative values. For example: “The basic problem is that most Western countries have privatised the next generation. Having children tends to be regarded as a personal choice rather than a social good” (p 97).

Having now reminded myself why I am not a conservative, let me turn to Abbott’s views on federalism. The essence of his argument is as follows:

• When nothing else seems to solve problems, voters always expect the central government to ‘do something’.
• After more than 50 years of increasing federal government involvement in matters that were formerly the exclusive responsibility of the states, the federation has become dysfunctional. “There are few problems in contemporary Australia that a dysfunctional federation doesn’t make worse”.
• Current attempts to end the “blame game” between different levels of government are not going to work. Someone has to have the legal power to take responsibility.
• The only credible way to fix the problem is to give the central government the legal power to call the shots i.e. to over-ride the states.
• The argument that the states form a bulwark against the potential tyranny of the national government is “far-fetched”. Australia has states because this was the price of becoming a nation, not because the fathers of federation thought that an intermediate level of government was necessary to avoid tyranny.

I agree, more or less, with the first three points, but disagree with the last two. What reason do we have for thinking that a government attempting to run schools and hospitals out of Canberra would do a better job than one trying to run them from some office in a state capital? Absolutely none! And I think that Tony Abbott agrees with me. What he has in mind is that if the federal government was able to over-ride the states on health and education the most likely result would be for public hospital and school services to be “provided on a contestable basis by a range of independent and autonomous organisations as well as by state-government instrumentalities” (p 129). That sounds to me like a move in the right direction, but we can’t be sure that some control freak in charge of the central government would not attempt to intervene more directly in the management of hospitals and schools if he/she had the power to do so.

As I see it, the main problem of the federation arise from the stupidity of the central government in its choice of forms of intervention. The basic problem in both hospitals and schools prior to federal intervention was that people were unhappy with the services that state governments were providing from tax revenues. Instead of giving state governments more money to waste, the central government should have given people back some of the money they had paid in taxes so that they could purchase alternative services.

The central government does not need additional power in order to achieve contestable service provision. It just needs to stop propping up inefficient state bureaucracies and give power back to the people.

In concluding I would like to commend Tony Abbott for presenting his views in a forthright manner. It is nice to be able to disagree with quite a lot of the things he has written and yet still feel that, as politicians go, Tony Abbott is not a bad bloke.

Postscript: August 2018

Nine years on it is obvious that the defining characteristic of Tony Abbott’s policy stance hasn’t been centralism, Hayekian liberalism or Burkean conservatism. The defining characteristic has been his attitude to climate change.

It is possible to point to some differences between his current approach to climate change, the approach he adopted when prime minister and the approach adopted in Battlelines. However, I see reasonable consistency in his position on this issue. In Battlelines he wrote:

“It sounds like common sense to minimise human impact on the environment and to reduce the human contribution to increased atmospheric gas concentrations. It doesn’t make much sense, though, to impose certain and substantial costs on the economy now in order to avoid unknown and perhaps even benign changes in the future”.

In a recent speech Abbott said:

“I have never thought that reducing emissions should be a fundamental goal of policy, just something that’s worth doing if the cost is modest.

I have never thought that climate change was, to quote Kevin Rudd, the ‘great moral challenge of our generation’.

It was an issue, that’s all, and – at least on the actual changes we’ve so far seen – not a very significant one compared to man’s inhumanity to man; maintaining and improving living standards; and even to many other environmental issues such as degraded bush and waterways, particulate pollution, water quality in the third world, deforestation, and urban overcrowding.”

In my view Tony Abbott has shown too little recognition of the risks associated with climate change. He would be on firmer ground to argue that emissions reduction targets do little to mitigate those risks.

As politicians go, Abbott seems to have been fairly consistent in his views. However, I have revised my view that he is “not a bad bloke”. His recent behaviour in destabilizing the leadership of the Liberal Party has been appalling.

In Battlelines Abbott posed the question: “How can Australians, individually and collectively come closer to being their ‘best selves’ and what can the Liberal Party do to bring this about?” Abbott should think more about his own contribution in that regard. He hasn’t even been able to avoid doing harm to the electoral prospects of the Liberal Party. If Abbott’s recent failure to be his best self assists a Labor government to come to power in the near future we are likely to see not only deeper cuts in carbon emissions and higher energy prices, but also the adoption of policies that will make citizens increasingly subject to government regulation in many aspects of their lives.

How can consciousness be explained?

Before reading “Out of Our Heads”, a recently published book by the philosopher Alva Noё’, I would not have questioned Francis Crick’s claim that “you, your joys and sorrows, your memories and ambitions, your sense of personal identity and free will, are in fact no more than the behavior of a vast assembly of nerve cells and their associated molecules” (quoted by Noё on p 5).

If someone had asked me how I felt about that statement before I read this book I would probably have shrugged my shoulders and said that it was just one of those things we have to accept whether we like it or not. I might have added, however, that I thought that Friedrich Hayek made a good point over 50 years ago (in “The Sensory Order”) when he said that the type of explanation that the physical sciences aim for is not applicable to “mental events”. Hayek argued that human decisions are the result of the whole of the human mind (or personality) and we cannot reduce them to something else.

Alva Noё goes further than Hayek in casting doubt on the capacity of neuroscience to explain consciousness. He claims: It is misguided to search for neural correlates of consciousness – at least if these are understood, as they sometimes are, to be neural structures or processes that are alone sufficient for consciousness. There are no such neural structures. How could there be? (p 185).

Noё suggests: “To understand the sources of experience we need to see those neural processes in the context of the conscious being’s active relation to the world around it. ... Consciousness of the world around us is something that we do: we enact it, with the world’s help, in our dynamic living activities. It is not something that happens in us” (p 64).

He further explains: “The brain does not generate consciousness the way a stove generates heat. A better comparison would be with a musical instrument. Instruments don’t make music or generate sounds on their own. They enable people to make music or produce sounds” (p 64).

This is obviously a very different explanation of consciousness than that provided by Francis Crick. Noё doesn’t discuss the views of other neuroscientists, such as Antonio Damasio, that seem to me to be more similar to his own view. For example, Damasio writes: “The secret of making consciousness may well be this: that the plotting of a relationship between any object and the organism becomes the feeling of a feeling” (“The Feeling of What Happens”, p 313).

It will be interesting to see whether Noё’s view becomes widely accepted. Daniel Dennett’s comment (on the dust jacket) suggests that those with different views may consider this book to be a worthy challenge: “Those of us who disagree with its main conclusions have our work cut out for us”. In “Freedom Evolves” Dennett takes as his starting point that we are “each made of mindless robots and nothing else” (roughly a hundred trillion cells) and sets himself the task of explaining the evolution of human consciousness. Dennett’s explanation is that human consciousness evolved for sharing ideas i.e. it is associated with the development of language and the enhanced survival capacity of groups in which reflective agents accepted responsibility for their actions.

Noё has a very different view of when consciousness began. He views life as the lower bound of consciousness: “once you see the organism as a unity, as more than just a process, you are, in effect, recognizing its primitive agency, its possession of interests, needs, and a point of view. That is, you are recognizing its at least incipient mindfulness” (p 41).

That is the part of Noё’s view of consciousness that I have most difficulty accepting. Attempting to explain the capacity of humans to reflect upon their own actions is a different project than attempting to explain the incipient mindfulness shown by a bacterium – even accepting that both forms of behaviour are enacted with the world’s help by organisms engaged in dynamic living activities.

Finally, how would I respond now if asked how I feel about the quote from Francis Crick at the beginning of this post? I would say that Alva Noё has persuaded me that Francis Crick’s claim is as misguided as attributing music solely to the components of musical instruments.