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WHEN ARE MARKETS ILLEGITIMATE?

Published online by Cambridge University Press:  10 February 2020

Amanda R. Greene
Amanda R. Greene*
Affiliation:
Philosophy, University College London
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Abstract:

In this essay I defend an alternative account of why markets are legitimate. I argue that markets have a raison d’être—a potential to be valuable that, if fulfilled, would justify their existence. I characterize this potential in terms of the goods that are promoted by the legal protection of economic agency: resource discretion, contribution esteem, wealth, diffusion of power, and freedom of association. I argue that market institutions deliver these goods without requiring the participants to have shared ends, or shared deliberation about joint ends—indeed, this feature is the source of the market’s distinctive contribution to well-being. I suggest that when markets lack legitimacy, this is because they fail to fulfill their raison d’être, or fail to be recognized as doing so. Thus, the contours of legal protection must be drawn so that these goods are realized together in a recognizable way, without sacrificing one good for the sake of others. Finally, I argue that this account is appealing because it allows regulators to consider a plurality of goods, and because it makes room for the essential role of rhetoric in securing market legitimacy.

Keywords

marketlegitimacyesteemwealthregulationeconomic rightseconomic justice
Type
Research Article
Information
Social Philosophy and Policy , Volume 36 , Issue 2 , Winter 2019 , pp. 212 - 241
Copyright
Copyright © Social Philosophy and Policy Foundation 2020 

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Footnotes

*

For helpful feedback and discussion, I would like to acknowledge Richard Arneson, Saba Bazargan, Daniel Callies, Rosalind Chaplin, Tom Christiano, David Estlund, Anca Gheaus, Aaron James, Niko Kolodny, Sara Mrsny, Ryan Muldoon, Tom Parr, Carmen Pavel, David Schmidtz, Gina Schouten, Seana Shiffrin, Lucas Stanczyk, Peter Vallentyne, Bas van der Vossen, Steve Wall, and David Wiens.

References

1 A standard of legitimacy should help with this question, but it is not equivalent to it.

2 To be more precise, legitimacy consists of an objective element (fulfilling a promise to be valuable) and a subjective element (being seen as such by the relevant audience). For elaboration, see Amanda R. Greene, “The Logic of Legitimacy,” unpublished manuscript.

3 This way of understanding an implicit claim draws on an aspect of Joseph Raz’s approach to normative concepts. He says, “There is a class of normative concepts that have a secondary use in which they indicate a claim by their users, or some of them, that they apply in their primary, normative, sense, a claim that may be erroneous . . .” (Joseph Raz, “The Problem of Authority: Revisiting the Service Conception,” Minnesota Law Review 90 (2006): 1005–1006). While we share the idea of an implicit claim, Raz does not emphasize recognition in the way that I do.

4 To my mind, only some items in the world are suitable for the adjective “illegitimate,” such as autographs, coins, and excuses. Items that are inapt for the adjective illegitimate include leaves, colors, and music. I suspect that apparent counterexamples rely on positing some social practices or expectations in the light of which these items could fail to be what they purport to be, for instance, music that is unfit for a funeral. As long as this is so, it supports rather than detracts from the analysis I defend in Amanda R. Greene, “The Logic of Legitimacy.”

5 Satz, Debra, Why Some Things Should Not Be for Sale: The Moral Limits of Markets (New York: Oxford University Press, 2010), 15.CrossRefGoogle Scholar

6 Attempts to justify markets can operate at different levels. Advocates can focus on the outcomes of exchange, the activity of exchange, the opportunity to exchange, or the legal protection of the opportunity to exchange. My focus is on the latter.

7 Joseph Raz adopts the following definition: “X has a right if X can have rights, and, other things being equal, an aspect of X’s well-being (his interest) is a sufficient reason for holding some other person(s) to be under a duty” (Joseph Raz, The Morality of Freedom [New York: Oxford University Press, 1986], 166). For Raz, the term “holding” is constructively ambiguous between judging that someone has a duty and imposing the duty on her (ibid., 171–72).

8 For Raz, a moral right qualifies for legal recognition only when it can be fairly and effectively protected through legal processes (Joseph Raz, “Human Rights Without Foundations,” in The Philosophy of International Law, ed. John Tasioulas and Samantha Besson [Oxford: Oxford University Press, 2010], 321–38). According to Raz, the existence of any particular right depends on contingent facts about political institutions, although this dependence is not a form of relativism. See Raz, Joseph, The Practice of Value (New York: Oxford University Press, 2003).Google Scholar

9 According to Raz, “To assert that an individual has a right is to indicate . . . that an aspect of his well-being is a ground for a duty on another person. The specific role of rights in practical thinking is, therefore, the grounding of duties in the interests of other beings” (Raz, Morality of Freedom, 180). Raz’s conceptual framework has some features in common with the practice-based account outlined in Anscombe, G. E. M., “On the Source of the Authority of the State,” Ratio 20, no. 1 (1978): 1–28.Google Scholar

10 The discussion that follows builds upon ideas first outlined in Greene, Amanda R., “Making a Living: The Human Right to Livelihood,” in Human Rights and Economic Liberties, ed. Vossen, Bas van der and Queralt, Jahel (Abingdon: Routledge, 2019), 155–63.Google Scholar

11 The comment occurs in a letter to Charlotte von Stein, written during his travels in Italy in June 1787. See Johann Wolfgang von Goethe and Charlotte von Stein, Goethe’s Briefe an Charlotte von Stein (Jena: E. Diederichs, 1908), 207. The translation is from Johann Wolfgang von Goethe, Letters from Goethe, trans. M. von Herzfeld and C. Melvil Sym (Edinburgh: Edinburgh University Press, 1957), 193. Friedrich Nietzsche echoes the remark in a footnote in On the Genealogy of Morals and Ecce Homo (New York: Knopf Doubleday Publishing Group, 1989), 124.

12 Aristotle says in the Politics, “It is very pleasant to help one’s friends, guests, or companions, and do them favors, as one can if one has property of one’s own. But those who . . . [abolish] private property exclude these pleasures. They also [hinder] the virtues of temperance . . . and generosity . . . , since one cannot show oneself to be generous, nor perform any generous action” (Pol 1263b5-11). Here and throughout, translations are from Aristotle, Politics, trans. C. D. C. Reeve (Indianapolis, IN: Hackett Publishing, 1997).

13 Neither does this productive discretion necessarily imply a wide range of occupational options.

14 The scriptural references to dwelling “under their own vine and fig tree” are identified and discussed in Daniel L. Dreisbach, “The ‘Vine and Fig Tree’ in George Washington’s Letters: Reflections on a Biblical Motif in the Literature of the American Founding Era,” Anglican and Episcopal History 76, no. 3 (2007): 299–326 and in Walter Brueggemann, “‘Vine and Fig Tree’: A Case Study in Imagination and Criticism,” The Catholic Biblical Quarterly 43, no. 2 (1981): 188–204.

15 As Stefan Gosepath explains, “In social and political philosophy the principle of subsidiarity is a principle which states that in the relationship among communities, but also in the relation of the individual to any form of human community, the smaller social or political entity or institution ought to be given priority (e.g., the individual should come before the community, the community before the state, the state before the federation, and so on). In this context, it is an important, if not the most important, responsibility of the bigger institution to enable the smaller one to perform its tasks and to provide it with any necessary support (subsidium) . . . ” (Stefan Gosepath, “The Principle of Subsidiarity,” in Real World Justice: Grounds, Principles, Human Rights, and Social Institutions, ed. Andreas Føllesdal and Thomas Pogge, Studies in Global Justice [Dordrecht: Springer Netherlands, 2005], 157–70). See also Føllesdal, Andreas, “Survey Article: Subsidiarity,” Journal of Political Philosophy 6, no. 2 (1998): 190–218.CrossRefGoogle Scholar

16 For related discussion of the “goods of work,” see Gheaus, Anca and Herzog, Lisa, “The Goods of Work (Other Than Money!),” Journal of Social Philosophy 47, no. 1 (2016): 70–89;CrossRefGoogle Scholar Veltman, Andrea, Meaningful Work (New York: Oxford University Press, 2016);CrossRefGoogle Scholar Muirhead, Russell, Just Work (Cambridge, MA: Harvard University Press, 2004).Google Scholar

17 Smith, Adam, An Inquiry Into the Nature and Causes of the Wealth of Nations, ed. Todd, W. B., vol. 1 (Indianapolis, IN: Liberty Fund, 1981 [1776]), 26–27.Google Scholar

18 There are some kinds of labor where this does not hold, for instance, jobs pertaining to the administration of civil and criminal law. For an argument that such roles cannot be outsourced to a market, see Harel, Alon, Why Law Matters (New York: Oxford University Press, 2014).CrossRefGoogle Scholar

19 For further defense of the importance of social contribution esteem, see Amanda R. Greene, “Making a Living,” 156-58. There I argue that earned income in a market is an imperfect but decent indicator of beliefs on the part of others that our products and services are valuable, by their lights. The price mechanism is not a perfect instrument for conveying social contribution esteem; the point is that it can function this way in the right circumstances.

20 A radical version of this sort of skepticism is the distinction between use value and exchange value outlined in Karl Marx, Capital: A Critique of Political Economy, vol. 1, trans. Ben Fowkes (New York: Vintage Books, 1977 [1887]).

21 As I argue elsewhere, salaries for public employees reflect both the divergence between voters’ evaluations and legislative decisions, and the divergence between legislative decisions and bureaucratic discretion. This puts considerable distance between the salary of teachers or transit workers and the perceived value of their contribution by wider society. Essentially, the gap is distorted by politics in ways that make it harder for workers to see their salary as reflecting their perceived social contribution (Amanda R. Greene, “Making a Living,” 161–63).

22 This account of contribution esteem has affinities with that of Tom Parr, “Automation, Taxation, and Unemployment,” unpublished manuscript.

23 Collective goods are not exactly equivalent to what economists call public goods, defined strictly as nonrival and non-excludable.

24 Stuart Mill, John, On Liberty, ed. Rapaport, Elizabeth (Indianapolis, IN: Hackett Publishing, 1978 [1859]).Google Scholar

25 Raz, Morality of Freedom, 256-57 (emphasis added). Raz argues that freedom of contract, among other liberal rights, forms part of a healthy public culture (ibid., 252–53). He says, “[Earlier] it was suggested that the importance we attribute to the protection of those interests results from their service to the promotion and protection of a certain public culture. That culture is in turn valued for its contribution to the well-being of members of the community generally, and not only of the right-holders. The importance of liberal rights is in their service to the public good” (ibid., 256).

26 Hausman, Daniel M. and McPherson, Michael S., Economic Analysis, Moral Philosophy and Public Policy (New York: Cambridge University Press, 2006), 118–33; Satz, Why Some Things Should Not Be For Sale, 17–21.CrossRefGoogle Scholar

27 Hayek, F. A., “The Use of Knowledge in Society,” The American Economic Review 35, no. 4 (1945): 519–30.Google Scholar Hayek emphasizes that the benefits of competition do not “rest on the conditions that would exist if it were perfect” (F. A. Hayek, “The Meaning of Competition,” in Individualism and Economic Order [Chicago: University of Chicago Press, 1948], 104). He says, “The real problem [addressed by competition] is how it can be brought about that as much of the available knowledge as possible is used . . . [and] what institutional arrangements are necessary in order that the unknown persons who have knowledge specially suited to a particular task are most likely to be attracted to that task” (ibid., 95). See also F. A. Hayek, “Competition as a Discovery Procedure,” trans. Snow, Marcellus S., The Quarterly Journal of Austrian Economics 5, no. 3 (2002): 9–23.CrossRefGoogle Scholar

28 Schumpeter, Joseph A., Capitalism, Socialism, and Democracy, 5th ed. (London: Allen and Unwin, 1976), 131–34.Google Scholar

29 It can also be argued that preservation of the natural environment (e.g., clean air) is a necessary condition for the enjoyment of other goods and is therefore just as vital as defense.

30 Francis Cheneval, “Entrepreneurial Rights as Basic Rights,” in Van der Vossen and Queralt, eds., Human Rights and Economic Liberties.

31 I deliberately say “perceive” to highlight that questions of ownership rights are not settled prior to and independent of the scheme of taxation. See Liam Murphy and Thomas Nagel, The Myth of Ownership: Taxes and Justice (New York: Oxford University Press, 2002).

32 Stuart Mill, John, The Collected Works of John Stuart Mill, ed. Robson, John M., vol. XIX, Part 2 (Toronto: University of Toronto Press, 1977 [1861]), 471.Google Scholar

33 Shortly thereafter Mill argues that the destitute have no claim to influence public spending, a claim that I neither endorse nor need to endorse, since my argument relies on the operation of incentives at a general level (Mill, The Collected Works of John Stuart Mill, 471–72).

34 It should be acknowledged that development is complex, and it is difficult to isolate any single factor as determinative across a variety of contexts. Still, Moyo offers a reasoned defense: “In most functioning and healthy economies, the middle class pays taxes in return for government accountability. Foreign aid short-circuits this link . . . In an aid environment, governments are less interested in fostering entrepreneurs and the development of their middle class than in furthering their own financial interests. Without a strong economic voice a middle class is powerless to take its government to task. With easy access to cash a government remains all-powerful, accountable only (and only then nominally) to its aid donors . . . Because the government’s financial dependence on its citizens has been reduced, it owes its people nothing” (Dambisa Moyo, Dead Aid [New York: Macmillan, 2009], 57–58).

35 Despite the celebrity of Thomas Piketty’s work on capitalism and inequality, the historical record does not settle the question (Thomas Piketty and Arthur Goldhammer, Capital in the Twenty-First Century [Cambridge MA: Harvard University Press, 2014]; David N. Weil, “Capital and Wealth in the Twenty-First Century,” American Economic Review 105, no. 5 [2015]: 34–37; J. E. King, “The Literature on Piketty,” Review of Political Economy 29, no. 1 [2017]: 1–17). A historian looking across centuries argues that the only mechanisms that are known to reduce inequality are wars and pandemics (Walter Scheidel, The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century [Princeton, NJ: Princeton University Press, 2017]).

36 Someone may still think that economic concentrations of power are more threatening than political ones, but this is usually because they are thought to conflict with norms of equality See Anderson, Elizabeth, Private Government (Princeton, NJ: Princeton University Press, 2017).Google Scholar

37 Walzer, Michael, Spheres of Justice: A Defense of Pluralism and Equality (New York: Basic Books, 1983).Google Scholar

38 Milton Friedman and Rose D. Friedman, Capitalism and Freedom (Chicago: University of Chicago Press, 1962), 9, 15–16. He goes on to say, “There seems to be something like a fixed total of political power to be distributed. Consequently, if economic power is joined to political power, concentration seems almost inevitable. On the other hand, if economic power is kept in separate hands from political power, it can serve as a check and a counter to political power” (ibid., 16).

39 The freedom to associate implies a freedom not to associate. In certain social circumstances, this can have important negative consequences that should be monitored and, if need be, addressed. See Rosenblum, Nancy, Membership and Morals: The Personal Uses of Pluralism in America (Princeton, NJ: Princeton University Press, 1998);CrossRefGoogle Scholar Sullivan, Kathleen M., “The New Religion and the Constitution,” Harvard Law Review 116, no. 5 (2003): 1397–1421.CrossRefGoogle Scholar

40 Tocqueville, Alexis de, Democracy in America: And Two Essays on America (London: Penguin Books Limited, 2003 [1835]), 604–605.Google Scholar

41 Ibid., 606–608.

42 For further discussion and comparison of the places in which Aristotle relies on this idea, see John M. Cooper, “Political Animals and Civic Friendship,” in Aristotle’s Politics: Critical Essays, ed. Richard Kraut and Steven Skultety (Lanham, MD: Rowman and Littlefield, 2005), 65–89.

43 The term aretē can also be translated as excellence (and perhaps should be, to avoid the Christian connotations of virtue).

44 Aristotle, Politics, 1252b28.

45 Ibid., 1280a34-1280b4.

46 Ibid., 1280b17-28.

47 Ibid., 1280b29-38.

48 Hayek, “Competition as a Discovery Procedure,” 14.

49 For an exploration of the aim of mutual advantage as characteristic of markets, see Sugden, Robert, The Community of Advantage: A Behavioural Economist’s Defence of the Market (New York: Oxford University Press, 2018).CrossRefGoogle Scholar For an argument that market society promotes bourgeois virtues, see McCloskey, Deirdre N., The Bourgeois Virtues: Ethics for an Age of Commerce (Chicago: University of Chicago Press, 2006).CrossRefGoogle Scholar

50 Max Weber, like Aristotle, also explicitly characterized a political community in terms of a values-based social ordering that goes beyond mere economic cooperation. See Cozzaglio, Ilaria and Greene, Amanda R., “Can Power Be Self-Legitimating? Political Realism in Hobbes, Weber, and Williams,” European Journal of Philosophy (2019);CrossRefGoogle Scholar Greene, Amanda R., “Legitimacy without Liberalism: A Defense of Max Weber’s Standard of Political Legitimacy,” Analyse and Kritik 39, no. 2 (2017): 295–324;CrossRefGoogle Scholar Weber, Max, Economy and Society: An Outline of Interpretive Sociology (Berkeley: University of California Press, 1978).Google Scholar

51 By this I mean mandatory licensing only. Freedom of contract is not hampered in the same way by voluntary licensing schemes, such as those offered by professional associations and insurance providers.

52 For further defense of this recognition-oriented account of legitimacy, see Greene, Amanda R., “Is Political Legitimacy Worth Promoting?”, NOMOS: Journal of the American Society for Political and Legal Philosophy LXI (2019): 65–101.Google Scholar For an alternative standard of legitimacy that features recognition, see Allen, Buchanan, “Institutional Legitimacy,” Oxford Studies in Political Philosophy 4 (2018): 53.Google Scholar

53 Theorists of distributive justice carefully develop moral distinctions that would justify interfering in some market outcomes and not others—such as between choice and circumstance, or between “brute luck” and “option luck” (Zofia Stemplowska and Carl Knight, eds., Responsibility and Distributive Justice [New York: Oxford University Press, 2011], 7–10). Seminal versions of responsibility-oriented theories include Arneson, Richard J., “Equality and Equal Opportunity for Welfare,” Philosophical Studies 56, no. 1 (1989): 77–93;CrossRefGoogle Scholar Cohen, G. A., “On the Currency of Egalitarian Justice,” Ethics 99, no. 4 (1989): 906–44; andCrossRefGoogle Scholar Dworkin, Ronald, “What Is Equality? Part 2: Equality of Resources,” Philosophy and Public Affairs 10, no. 4 (1981): 283–345.Google Scholar

54 For an argument that responsibility is not independent of market relations, see Susan Hurley, “The Public Ecology of Responsibility,” in Responsibility and Distributive Justice, ed. Stemplowska and Knight, 187–215. This is also true of notions of desert: while it is possible to develop a notion of “institutional desert,” its relationship to natural or moral desert is not straightforward. See Herzog, Lisa, “Can Incomes in Financial Markets Be Deserved? A Justice-Based Critique,” in Just Financial Markets? Finance in a Just Society (New York: Oxford University Press, 2017) 103– 23.Google Scholar

55 For an argument against strong rights of inheritance, see Halliday, Daniel, Inheritance of Wealth: Justice, Equality, and the Right to Bequeath (Oxford, New York: Oxford University Press, 2018).CrossRefGoogle Scholar

56 See Dworkin, Ronald, Sovereign Virtue: The Theory and Practice of Equality (Cambridge, MA: Harvard University Press, 2000);Google Scholar Rawls, John, A Theory of Justice (Cambridge, MA: Belknap Press, 1971).Google Scholar Especially in his later work, Dworkin suggests a view of economic rights in which equality and responsibility form part of a multifaceted, interpretive ideal of justice. While I lack space to discuss it properly, there are some parallels with an account of market legitimacy based on a nexus of goods.

57 Some find current labor markets to be illegitimate simply because of the power asymmetries between employers and employees (Anderson, Private Government). As Niko Kolodny points out, it is difficult to say exactly when and why those power asymmetries are objectionable. See Niko Kolodny, “Help Wanted: Subordinates,” in Anderson, Private Government, 99–107.

58 Obama, Barack, “The Way Ahead,” The Economist, October 8, 2016.Google Scholar

59 Ibid.

60 Seeking to persuade people that markets serve a plurality of goods reduces the authority of economic experts, rightly in my view. It thereby avoids condescending presumptions by elites that the masses fail to understand how good markets are for them.

61 For an argument that bargaining in labor markets can involve coercion, or at least a problematic “bending your action away from the reasons that govern it,” see Julius, A. J., “The Possibility of Exchange,” Politics, Philosophy and Economics 12, no. 4 [2013]: 370–72.CrossRefGoogle Scholar

62 I would argue that the more unattainable the value grounding legitimacy is, the more it is liable to political exploitation. See Amanda R. Greene, “Democratic Legitimacy for Skeptics,” unpublished manuscript.