Defending Economic Systems

Based on the discussion so far, the general form of the arguments against a type of economic system is reasonably clear:

1. Condition C is a necessary condition for a good society.

2. No society that has a free enterprise system (a certain type of socialist economic system) meets condition C. Therefore,

3. No society with a free enterprise system (a certain type of socialist eco­nomic system) is a good society.

What would be the form of argument in favor of some type of economic sys­tem? It would seem that one would begin with a premise to the effect that a certain set of conditions are jointly sufficient for a society to be a good soci­ety. The next premise would say that any society with the favored type of eco­nomic system meets all of these conditions. Therefore, any society with that type of economic system is a good society.

But this way of arguing will not work for two reasons. First, and most obviously, there is more to the good society than having the right sort of eco­nomic system. Economic systems are not society’s only institutions; a fully formed conception of the good society (which only someone with a complete social philosophy has) would specify the other institutions of the good soci­ety, such as the political system insofar as it is independent of the economic system, the institution of the family or its analogue, and whatever other insti­tutions a society must have. A second problem with this way of thinking about a defense of a free enterprise or socialist economic system is that there are considerable differences of opinion within each camp about what the eco­nomic system of the good society should look like. The discussions of the def­initions of the terms ‘free enterprise system’ and ‘socialist economic system’ in the first section of this chapter make it evident that there can be significant variations among the different systems to which these terms respectively refer.

Presumably, what most people have in mind when they are thinking about the economic system of the good society is something much less abstract than what is indicated by the term ‘free enterprise system’ or ‘socialist economic system.’ (By contrast, as noted in the last section, criticisms of types of eco­nomic systems tend to be pitched at a fairly high level of abstraction.) In sum, even within each camp, there are different conceptions of what the economic system should be. And yet there are points of agreement as well—points that go beyond the simple rejection of the type of economic system favored by the other side. In explaining what is involved in defending economic systems or types of economic systems, these commonalities and differences within each camp must be accurately represented.

How can this be done? This problem can be solved by distinguishing a more abstract from a less abstract type of economic system and a more lim­ited from a less limited defense of a type of economic system. To understand these distinctions, let us begin with the following Stipulative definition: A type of economic system, T_i, is defined by certain specifying features F₁... F_n. In other words, an economic system is of type T_i if and only if it meets condi­tions F₁... F_n. Particular economic systems—economic systems “on the ground”—are instances or tokens of many different types of systems, where the types are specified at higher or lower levels of abstraction. Type T₁ is more abstract than type T₂ if any system that satisfies the defining features (i.e., the F_i) of T₂ also satisfies the defining features of T₁ but not vice-versa. A highly abstract specification of an economic system would consist of merely the necessary and sufficient conditions given in the respective definitions for a system to be a free enterprise system or a socialist economic system.

Now let us turn to the notion of a limited defense of a type of economic system. Such a defense links the specifying features, F₁... F_n, of that type (henceforth call these type-defining features) to some social virtues V₁... V_n. Recall that social virtues are necessary but not sufficient conditions for a soci­ety to be a good society. For example, one such virtue might be “the vast majority of people having a high standard of living,” however that is defined. In other words, a necessary condition for a society’s being a good society is that its economic system is responsible for a high standard of living for the vast majority of its people. In part, that is what makes a society a good soci­ety. Of course, this is not a sufficient condition for a society to be a good soci­ety, but it is arguably a necessary one.

Note that the conclusion of a limited defense is, in effect, saying that any society with an economic system that has the type-defining features (the F_i) also has some social virtue or other (the V_i). Claims of this sort are generally empirical and Iawlike.¹⁸ Their Iawlike character suggests that they should be conceived of as containing an implicit ceteris paribus clause: All else being equal, any society that has this type of economic system will also have this social virtue.

Usually, a limited defense will consist of pointing out a causal connection, perhaps through mediating causes, between the type-defining features and some social virtue or virtues. The drawing of this connection will almost cer­tainly require some additional assumptions about how human beings behave, subject to the institutional constraints (e.g., positive and negative incentives) implicit in the type-defining features.

Defenses of types of economic systems can be more or less limited. A very limited defense would go from the type-defining features to a particular social virtue. A less limited defense would go from the same set of type-defin­ing features to a number of different social virtues. Often, the main virtue or virtues that a theorist attributes to a specified type of economic system is that it precludes the vices attributed to the type of economic system favored by the other side. For instance, the chief virtue most socialists attribute to socialism is that it prevents the occurrence of social vices they have traced to the defin­ing features of a free enterprise system. As indicated earlier, this is an empir­ical claim requiring empirical support. Indeed, a socialist who has criticized a free enterprise system in the manner indicated is (pragmatically) commit­ted to the proposition that some type of socialist economic system lacks that vice or those vices—not fortuitously but in virtue of its type-defining fea­tures. The socialist who does not believe that some type of socialist economic system lacks those vices is committed to the proposition that the economic system of the good society (i.e., the best society one can reasonably hope for) is not socialist. Certainly, that would be enough to get her kicked out of the Socialist International.

To summarize, the preceding discussion calls attention to two important variables involved in a defense of a type of economic system. One is the abstractness of the type of system being defended. When one is defending a type of economic system, it is important to identify the defining features of that type and thus the level of abstraction at which the defense is being car­ried out.

The main results of this section and the last are captured in the following schema, which represents the minimum that participants on each side of the debate agree on among themselves. It also provides a preliminary indication of what the burdens of proof are for each side. This issue will be explored in more detail in the next and final section of this chapter.

A. Each party to the dispute who favors a socialist economic system main­tains that

1. Any society with a free enterprise system has social vices C₁...

C_n (sufficient conditions for a society not to be a good society) because of its economic system.

2. Some type of socialist economic system, call it T, lacks all of the social vices C₁... C_n because of the features F₁...F_n, which define type T.

3. These type-defining features are, or are responsible for, some social virtues V₁... V_n, that is, necessary conditions for a good society. (These social virtues include, but need not be limited to, the denials of the C_i.)

B. Each party to the dispute who favors a free enterprise system maintains that

1. Any society with a socialist economic system has social vices C*₁... C*_n (sufficient conditions for a society not to be a good soci­ety) because of its economic system.

2. Some type of free enterprise system, call it T*, lacks all of the social vices C* ₁... C*_n in virtue of the features F* ₁... F*_n, which define type T*.

3. These type-defining features are, or are responsible for, some social virtues V*₁...

For each side, schemata 1 and 2 entail that no society with the disfavored type of economic system is a good society, which accurately reflects how par­ticipants in this debate think about societies burdened with that type of eco­nomic system. Schema 3 entails schema 2; indeed, they may be logically equiv­alent if a theorist’s defense of his favored type of economic system does not go beyond repudiating the vices of the other type of system. Note that this schema commits each participant to defending some version of the favored system against all the vices he has attributed to the other side; this does seem to be a positive duty for those who favor a socialist economic system or a free enterprise system. The reason is that the attribution of social vices to one or the other side is most naturally conceived of as the giving of reasons for social change in the direction of the favored side.

Conceiving of this dispute as a dispute about the economic system of the good society is not the only way to think about it. This approach is usefully pur­sued, however, insofar as it allows us to identify clearly the kinds of arguments and considerations that bear on it and to explain how progress might be made and, in the limit, how the dispute could be resolved. The purpose of the remainder of this section and the next is to argue for the utility of this approach along these lines. At the end of the next section, I shall explain how this book fits into the framework of the debate as it has been constructed here.

One important advantage of this approach is that it allows us to distin­guish the philosophical from the economic issues. This dispute is partly a philosophical dispute about the kind of society that is ultimately desirable. This is captured in the notion that different participants have different con­ceptions of the good society. However, another part of the dispute is about the consequences and the attending circumstances and conditions of differ­ent types of economic systems. This is a job for economists—at least insofar as economics is an empirical science and not a mathematical exercise.

Let us consider an example of each. Most socialists favor some egalitarian vision of the good society. Equality of material condition, or at least a much reduced range of inequality, is held to be a necessary condition for the good society.²⁰ Those who favor some version of the free enterprise system gener­ally do not share this view. The socialist position raises two philosophical questions. The first is an analytical question about how one should under­stand equality of material condition. Does equality of material condition mean equality of welfare? of income? of resources? Clarifying the concepts has long been thought to be a primary philosophical task, at least in the Anglo-Amer­ican philosophical community.²¹

The second question, sometimes not clearly separated from the first, is why the good society has to have this feature. One way to answer this is to develop a theory of justice that requires some version of equality of material condition. It is worth noting that this theory need not be completely a priori. It might be that the reason justice requires equality is that inequality has undesirable effects. In other words, there could be a substantial empirical component to this essentially philosophical dispute. In sum, the philosophi­cal aspect of this dispute involves clarifying the concepts and developing a theory—or at least Somejustifying reasons—to provide support for some conception of the good society.

On the other hand, some aspects of this dispute fall squarely in the domain of economics. Disputants believe that economic systems of a certain type are contingently but nonfortuitously associated with various social vices and virtues; the economist’s task is to develop the reasoning that leads from the type-defining features of the economic systems to the social virtues and vices. For example, those who favor some type of free enterprise system usually maintain that their favored type of system has important efficiency advantages over any socialist system (with the implication that having these advantages is a social virtue). The arguments for this come directly from economics.

Another advantage of conceiving of this dispute as a dispute about the nature of the economic system of the good society is that it allows us to clear up a persistent confusion that has clouded this debate for some time. Critics of socialism have frequently charged that socialists have simply assumed that a socialist society is a good society in some respect or other (by definition, as it were).²² When existing systems fall short, they are simply dismissed as nonsocialist. What troubles these critics is that this seems to make the crucial claims about socialism empirically Unfalsifiable. Interpreted in one way, there is Somejustice to this complaint, but interpreted in another way, socialists can successfully rebut the charge. We have seen how it is possible for a type-defin­ing feature of a socialist economic system to be a necessary condition for a good society. Specifically, a socialist might believe that social control (or worker control) of the means of production is both a defining feature of a socialist economic system and a necessary condition for a society to be a good society. On this way of thinking, one can legitimately debate whether or not a system is really socialist; if the means of production are not controlled in the interests of society at large (however that is to be understood), or alter­natively, if the workers do not really control the means of production, then the system is not, in fact, socialist. However, the critic can simply reformulate his objection as a query about whether or not a genuinely socialist economic system is empirically possible.

On the other hand, when the desirable feature is not part of the definition of a socialist economic system (e.g., it is some social goal, such as relative equality of material condition), the dispute must be conceived of as an empir­ical one that depends crucially on some facts about how the favored type of economic system would actually function. It distorts and trivializes the issues involved to think of these as definitional disputes about whether or not a sys­tem is really socialist.

The confusion, I suspect, ultimately lies in the word ‘socialism’, which is multiply ambiguous between an economic system, a conception of a good society, and the conjunction of the two. On the latter two understandings, it is necessarily and trivially true that socialism is a good society. In general, this book avoids the term ‘socialism,’ except where this systematic ambiguity does not threaten. The terms ‘socialist economic system’ and ‘socialist conception of the good society’ may be more ponderous, but they are also more precise. Separating the referents of these two terms is vital and sometimes more dif­ficult than one might suppose.