Benjamin Studebaker

Today I attended a lecture on the political philosopher Ronald Dworkin, and it made me think some new thoughts with regard to the concept of personal responsibility. Traditionally, I have found myself thinking the concept has relatively little merit, but in this post I would like to reconsider this position and precisely where my view on the just society stands with regard to it, to and Dworkin more broadly, specifically considering moral hazard–the notion that, without some level of personal responsibility, there is long-term damage to people’s sense of duty to society and consequently to societal outcomes.

Traditionally, in say, the views offered by the libertarians, Robert Nozick, the various anarcho-capitalists, the hard right theorists who tend to embrace personal responsibility as a guiding moral principle, the impact of luck remains unaccounted for. For instance, if one is born to rich parents in these kinds of societies, one has access to more resources than one would otherwise have, even though one has done nothing to earn those resources. This is an instance of luck–there is no reason why one deserves to be born to rich parents or to receive those advantages. It creates inequality of opportunity. This is a very common and very simple objection to these theories.

Perhaps you recall last week’s post about Nozick and the example I used involving the farmers. In that example, the farmers failed to industrialise and were failing to compete with the neighbouring industrial farm. The farmers purchased more effective seeds in an effort to increase their productivity and survive another season, but a freak storm wiped out their crop, and they were forced to sell their land to the neighbouring industrial farmer, who hired a small number of them and left the rest out on the street. I argued from a utilitarian angle, saying that it was socially inefficient to leave these people unemployed where they can provide no benefit to society and cannot even contribute significantly to economic demand. I proposed as a just solution redistribution to the dispossessed farmers for the purpose of their employment or retraining for the benefit of the entire society more broadly.

Dworkin however proposes an interesting combination of equality of opportunity and personal responsibility, in which he proposes to give everyone equal access to resources, but not to welfare. Dworkin would say that no one deserves to be born to rich parents and that redistribution should counter this, but Dworkin would also say that once the resources are distributed equally, the responsibility for outcome falls to the individual. If an individual wants to become extremely wealthy by investing those resources, the individual is free to do so. If an individual wants to hang out on the beach all day and enjoy a life of relative leisure working as a lifeguard, the individual is free to do that too. However, if a person makes a choice that results in bankruptcy, the individual must take personal responsibility–in Dworkin’s society, we all have the right to start from the same place, but we do not have further claims on society.

As a theorist with utilitarian leanings, I do not value egalitarianism or personal responsibility in themselves, but only as a means to promoting collective societal well-being. Generally I am of the view that more equality is conducive to increased consumer power on the part of the lower income groups. This is, as I conceive it, the engine of growth that drives economic development. The better the workers’ wages (to a point), the more the workers can purchase of what they produce, the higher the sales figures for the companies in question, and so on down the line. This breaks down at very high worker wages relative to worker wages in foreign countries, as it results in an inability for domestic products to compete with foreign goods, but is otherwise usually sound, especially if the good is produced primarily for sale domestically. This is reminiscent of Henry Ford’s concept of paying his employees a high enough wage such that they could afford to purchase the car they were producing. As a result of this belief, John Rawls’ principle of maximin (maximising the worst economic outcome) seems like a good general rule for driving forward utility more broadly. For me, it makes sense to redistribute to the villagers to get them producing and consuming again, and in the immediate bounds of the scenario I put forth, that seems right.

Dworkin however raises an interesting point for me, this notion that personal responsibility is necessary in the long-term in order to preserve a societal sense of the need to behave in a manner that minimises risks and costs. It seems that there is a case of moral hazard otherwise–if the individual knows that society will bail out the individual should the individual make a grave error, the individual’s incentive to minimise the risk of grave errors is taken away, and, it stands to reason, the frequency of grave errors will rise.

Take the recent global financial crisis, the Toxic Asset Relief Programme (TARP). TARP bailed out the financial institutions, rescuing the economy and preventing it from creating wider societal harms. However, TARP also creates moral hazard–becomes the financial sector’s experience of the penalties of making grave errors was minimised by the state, it stands to reason that the crisis will have minimal effectiveness at deterring them from similar behaviour in future. The electoral policies that made this possible (the system of lax regulation and so on) are also more likely to survive, resurface, and repeat, because the public’s economic suffering as a consequence of what the financial sector did was also minimised. The government ate these debts and has no long term guarantee that the banks will self-regulate better, or that the public will elect political figures committed to regulating them. Dworkin’s theory would suggest that the correct approach would have been to allow the banks to fail so as to send a message of personal responsibility to all economic agents, encouraging better long-term behaviour, even though this would, in the short-term, vastly damage society’s economic utility.

I find I cannot quite go along with Dworkin here. I see the point–even though ensuring no one suffering is the best outcome for the given situation, the long term impact could have even worse results than the initial crisis. However, by allowing the banks to fail would have destroyed a tremendously vast amount of social utility, plunging the country into a depression that could far longer than the current one, be much deeper, and inspire the sort of communist or fascist movements that we saw during the depression in many states. There must be some compromise here, one that eliminates moral hazard without the risk of such grave harm to societal utility. It still isn’t right to condemn my villagers to poverty, even if I’m operating under Dworkin’s luck egalitarianism and promise to prevent the same poverty from being transmitted to their children, and it still isn’t right to risk a thirties style depression and the resulting political instability that comes from that.

The answer, it seems to me, is to create a punishment for the financial sector that is greatly upsetting to the individuals who caused the crisis but does not punish wider society as a whole (even though, by electing governments that were lax in their regulation, they are at minimum complicit and possibly just as responsible as the bankers themselves). The answer to this would seem to be especially stiff regulations for the financial sector going forward, with perhaps a requirement that all of the money being lent out through the bailout programme eventually be repaid with interest, with stiffer penalties for failure to do so (some sort of imprisonment, perhaps). The trouble is that the people themselves are still to be spared from the consequences of their electoral decisions, and so will continue to vote in people who are opposed to regulations (consider the republicans the Americans elected to congress in 2010, or the lax regulatory record of Britain’s governing Conservative Party). As a result, there can be no account of personal responsibility that eliminates moral hazard while simultaneously limiting the damage to societal utility, because, as it stands, all of society is involved and implicated in the political system that is to blame. The democratic system is a system that is inherently flush with moral hazard, because the people are ruling themselves–they are their own judges, their own regulators. Were a democratically elected government to seek to allow the people to be punished for their decision to elect said government, the people would simply refuse to take the punishment and elect a replacement or overthrow the government in favour of a fascist or communist one. Only in a society in which the government is fundamentally detached from the rest of the population can the general public be protected from the utility infringements of preventing moral hazard. And so the right has just as much reason to be anti-democratic as the left–under democracy, personal responsibility is impossible.