A 19th century French philosopher named Frédéric Bastiat published a pamphlet in 1850 entitled The Law. Among other things, Bastiat addresses the ways in which a society may be organized. Imagine a group of people shipwrecked on an island. How will they organize their new community? What rules will be put in place and how will they be decided upon? Who will enforce them? Were they ever actually on the island or were they dead the whole time? And what was up with Jack and Kate?
Bastiat said there are three ways to organize society. By “organize society,” we mean to address who can use violence against whom. This is important when considering how much freedom we have within society. Are we truly free if our body or possessions are not protected against violence?
The first way society may be arranged is that everyone can take from everyone. We will call this System 1. Under such a society, there is no protection for private property since there is no private property. We may possess stuff under such a system, but we don’t truly own it since society is organized in such a way where anyone may take my stuff, and I theirs. Conceivably, only such a system could work if everyone agrees to work and live, not for their or their family’s immediate benefit, but for all of humanity’s. In other words, I am okay with my belongings being taken since I am assuming it is benefiting someone else. Likewise, if I want something that someone else has, I take it. This experiment has been tried, and failed. It is called collectivism. Under Stalin’s Five Year Plan in Soviet Russia, Ukrainian and Polish farmers were instructed to harvest a certain amount which was to be collected by the state. If they produced more, they were bourgeois pigs and sent to the gulags. Ironically, if they didn’t produce enough, it was assumed they were hoarding it for themselves, and thus they were sent to the gulags. Their produce was not theirs…it was everyone else’s. Collectivist policies have led to the deaths of millions of people worldwide in the 20th and 21st centuries. It takes many names – socialism, communism, “mixed” economies, state-run programs, democratic socialism, etc. – but what it means is that your stuff is not really yours. At least not all of it. Some of it – ostensibly someone else’s “fair share” – belongs not to you, but to them…to society. This is the first way to organize society. It’s been tried, and even though it is experiencing a resurgence in popularity among today’s youth, it will never produce prosperity. Economist Thomas Sowell has poignantly asked “What is your fair share of what someone else has worked for?” Try getting up for work everyday because you know you’re providing for some mythical, though hard to identify, them. Carol would come over from next door and instead of asking to borrow an egg, she would shoot you and take it. “Enjoy, Carol!”
The other way to organize society, System 2, is where only some people can take from others. This system differs from the first in that System 2 provides the stability of the known. In other words, rather than everyone being able to take my stuff, I know only some people can take it. I can plan my life around the assumption that some of my stuff may, and will, be taken by some people.
Because of the some versus others dichotomy in System 2, let us divide these groups into Group A and Group B. Group A can take stuff from Group B with impunity. Group B may not take stuff from Group A, nor may they take stuff from each other in Group B. In other words, property is only inviolate for Group A.
Group B lives their life and produces, even while having some of it taken by Group A. We would assume that Group B would eventually realize the raw deal they were given, and would begin to produce less since they realize that the less they produce, the less Group A can take. Meanwhile, Group A takes what it wants, when it wants. Eventually, there is little left to take since Group B will have drastically reduced their output. Group A cries “Look at these greedy people in Group B, they’re not paying their fair share,” even though Group A doesn’t actually produce anything. Group A only takes. Group B says “Why would we produce when you just take it?” Group A says “It’s not for us…it’s for Group C!”
What has happened is that the incentive structure in System 2 led to a schism in Group B. Half of Group B stopped producing altogether because they realized there wasn’t much of an incentive. As a result, Group B splintered, half of them forming the non-producing Group C.
Group C is them…they…those people…society…others.
What is taken from Group B is, we are told, done in pursuit of equality for Group C. Group A, in this scenario, is simply the benevolent middleman who knows how much to take from Group B so as to provide for Group C.
To reiterate, under System 2, only some may take from others. Let’s say…completely hypothetically…totally unrelated to our current system….that you were born into System 2. Which life path is easier for you: rise to the top in Group A, or rise to the top in Group B? If the latter, it is likely that Group A will simply take more of your belongings since you produced more than your peers. But, if you were to rise to the top in Group A, you would be the one deciding how much needs to be taken from Group B. Furthermore, nothing would be taken from you! Group C would love you and shower you with praises. You, Group C says, are compassionate and wise and not greedy like those in Group B who want to keep all of their stuff.
There is something in all of this we never addressed. How is it decided who belongs to Group A and who belongs to Group B? Well, the people in Group B actually voted on who would get to be in Group A. Now why would they do that, you wonder. Who would voluntarily vote for someone to join Group A when they knew they would just take from them? A fair question. The people in Group B are encouraged every so often to vote for a particular person to join Group A because the person asking to join Group A tells those in Group B that he won’t take as much from them. Group B figures if Group A is going to take their stuff anyway, it would be better if they take less. Meanwhile people in Group C are voting for the person who says he will take the most from Group B. For them, this egalitarian candidate is their best chance to squeeze more out of Group B.
We must consider the incentive structures in all of this, since incentives drive every action we take. Under such a system, one would be incentivized to either join Group A or Group C. If one chose Group B, the next best option is to have a friend in Group A who decides to take less of your stuff. To be in Group A would surely be the best since not only are you regarded as a saint by Group C, but Group B gave you a mandate to be in Group A by voting you in. Group B will be resigned to accept whatever benevolent, sage, seemingly divine decisions reached by everyone in Group A.
“Thank you, Group A,” Group B says, “for taking less of our stuff than the last people in Group A.”
“Thank you, Group A,” Group C says, “for thinking of us while doling out Group B’s stuff.”
The third way to organize society is where no one can take from anyone. This is System 3. Under such a system, private property does exist and people cannot go around taking whatever they please. The laws in this society are structured to punish those who take what is not theirs, and it upholds people’s rights to own and use their belongings how they see fit. If someone wants what someone else has, he or she must either buy or persuade the possessor to part with the desired good. We would call this voluntary exchange. Each is free to consider what he or she will voluntarily exchange. The beauty of this system is that everyone benefits if he or she has something to offer. Under System 2, if someone from Group A took something from Group B and gave it Group C, only Group A and C are happy, while Group B is not. Under this third way, though, both the seller and buyer are happy, for each has subjectively decided that they would rather have what the other is offering. Those formerly in Group C have two options: either begin producing something that others may want, or else rely on the charity of everyone else. This is not to say that under this third system everyone is rich, but we must conclude that this is the most ethical and prosperous of ways to organize a society. Furthermore, systems such as System 1, which were historically touted to make “everyone the same,” resulted in making “everyone poor.”
Critics of this third way would argue that it is exploitative, and that no one looks out for Group C. The irony is that under System 1 (everyone may take from everyone), everyone is relegated to Group C status anyway. There is no one left to “look out for Group C.” No one is able to break out of the economic restraints of Group C when there is no regard for private property. Under System 2 (only some may take from others), Group C is only provided for after Group A stole from Group B. Is this more ethical than the third way of voluntary action? It reminds me of people who mention the Bible’s call to look out for the poor and needy when justifying high taxes and redistribution. “And then Jesus said to disregard the commandment against stealing, if done by governments.” Under System 3, since there is no privileged class (Group A), it is likely that Group C would be looked after to an even greater extent by voluntary means. Consider if you had $10 and were planning on giving $5 to charity, but someone takes $3 from you, so now you only have $2 left for charity. Under this third system, where no one can take from anyone, you have more to give to Group C than you did under any other system.
Furthermore, you are incentivized under this third way to produce as much possible (in contrast to Systems 1 and 2) since this gives you more to exchange for other people’s stuff, and also gives you more which you may voluntarily give to anyone or any cause you please.
None of these systems is perfect. But, we live in a society, and that society will be structured in some way, whether proactively or by default. We must ask which of these systems reduces violence and promotes prosperity. I assume no one welcomes violence, and that everyone wishes to be prosperous (albeit the definition of prosperous does not necessarily have to mean financially).
Under System 1, no one is prosperous because of the incentive structure. No one is incentivized to produce since they won’t own the fruits of their labor anyway.
Under System 2, the privileged class (Group A) may use violence to extract Group B’s stuff, and may achieve prosperity, but only at the expense of Group B. It would be impossible under this system for everyone to achieve prosperity since the existence and success of one group is predicated on the labor of others. The incentive structure does not allow for economic mobility. Furthermore, one group is subject to theft at gunpoint but may not reciprocate. Who would consider such a system ethical?
Under System 3, there are certainly no guarantees that everyone is “rich,” but none of these systems guarantee that. However, unlike the first two, System 3 allows the freedom to achieve prosperity, however one defines it. It reduces violence by protecting property, and incentivizes production by allowing one to keep, exchange, or give away whatever one produces.
There is no inbetween when it comes to these systems. You cannot be “kind of pregnant.” So in which of these systems do we live? I’ll answer that question with a question…do you get to keep everything you produce?