Freedom and Responsibility Philosophy

Freedom and Responsibility Philosophy

[source: Freedom and Responsibility]

Philosophy

Human beings prosper through cooperation. Compulsion is not cooperation. People must be free to cooperate.

With freedom comes responsibility – to accept the consequences of our choices, and to respect and protect each others' freedom. Not everyone will respect that responsibility voluntarily. Freedom without mutual responsibility is the law of the jungle. The role of government is (with the minimum of coercion, intrusion and cost) to define and enforce the rules and responsibilities that maximize freedom and cooperation.

Much follows from this. It is just the start and basis of the philosophy. But already we have introduced some terms, like freedom, that mean different things to different people. We will expand on the philosophy through examination of the meanings of certain key terms.

Freedom

We believe that the freedom that the state should protect is the freedom from coercion by others, including the minimum of coercion by the state.

The coercive acts which it is appropriate for the state to carry out are those that are necessary in order to prevent the infringement of one person's freedom by another. This includes the raising of funds needed for the state to carry out its limited roles.

Freedom from obstacles and disadvantage

The limited role of the state in the promotion of freedom does not include trying to give people the means to do what they want. We must try to achieve our desires through our own efforts, and not through government redistribution. The government may provide a social safety net as a democratically-mandated means of providing the mutual, compassionate care for those in difficulty, which reflects our humanity, strengthens our society, and frees people to take the risks that are necessary for our economy to advance. But it must be a safety-net, not a ladder. For government to involve itself in moving some people up the ladder of prosperity is to reduce our individual responsibility and incentives for self-improvement.

Freedom from distress

The freedom which the state protects also does not include freedom from outrage, disgust or any other psychological response provoked by other peoples' acts. The state should be concerned only with infringement of our material freedom. The state cannot regulate our attitudes to other peoples' preferences and lifestyles. It is the responsibility of the individual to get along with other individuals, and accept their differences, so long as those differences do not result in material intrusion.

Freedom to create and compete

The freedom from coercion by others includes the freedom of individuals and organizations to compete freely in any market they choose to enter - the vital component of innovation and prosperity. That freedom requires strong protection of competitive markets, both from intrusion by the state (which always enjoys a dominant position by its very nature) and from abuse by dominant players of their monopolistic or oligopolistic positions. That protection should consist only of avoiding the creation of competitive privilege through government intervention, and preventing the attainment of dominant positions, or dismantling the dominant position if it is not prevented. It should not include regulating businesses' performance or trying to correct for natural competitive advantage or disadvantage.

Property

Property rights are key to freedom and responsibility. They define those things that individuals should be free to use as they see fit (barring infringements of other peoples' freedoms and property rights). They define those things whose use the owner must be responsible for. Property in this sense includes goods, services, money, land and labour - any entity that is owned. Property rights include full title and partial rights of use.

The uses to which individuals should be free to put their property include non-use and exchange.

Protection of property rights – the first duty of the state

The main responsibilities of a free state are to protect person, property and nation from coercion and involuntary appropriation by others. Other responsibilities, such as the protection of competition and provision of a social safety net flow from these basic responsibilities.

Taxation is appropriation of property

Protection of individual property rights includes minimizing the appropriations that the state must make to fund the services that it provides. It is no good knowing that the state has provided such good security that no one could steal your property, if the state deprives you of the use of that property through such heavy taxation that you must dispose of your property in order to pay the tax. All taxation is appropriation of property through coercion by the state, and should be kept to a minimum. The objective of government policy and fiscal management should be, in the long-term, to minimize the amount of tax needed and taken, not to maintain the tax-take at the maximum level at which economic growth can be maintained. People's property is not a cow to be milked by the state.

Nation

Nations are the divisions of human population into groupings with a broadly-shared cultural, historical, constitutional, and linguistic (but not political) background.

Democratic units

They provide a vital function in maximising the chance that a democratically-elected government will implement policies that will have the broad support (or at least acquiescence) of the population. Consequently, it is a mistake to try to subsume nations within supra-national organizations, where the commonality between the peoples represented is diminished, and any interventions by the organization must therefore represent an unsatisfactory compromise between the various cultures.

Differentiation and homogenization

Nations can learn most effectively from each other by pursuing the policies that reflect the preferences of the majority of their populace, and comparing the outcomes with the different policies and preferences of other nations. If they move towards a common view through this process of experimentation and education, then they may gradually cooperate more closely on a voluntary basis, perhaps eventually to the extent of uniting under one government. But the process must be voluntary and progressive. It must not be forced.

Wealth

Wealth is accumulated property. Individual net wealth is the property that an individual owns minus any debts that they owe. National wealth is the sum of the net wealth of all citizens and organizations.

Creating wealth is about finding ways to do more with less.

"Make-work" jobs destroy wealth

Creating inefficiencies to “create jobs” destroys wealth and ultimately destroys jobs.

You can create jobs by paying people to dig holes and fill them back in again, but when you finish digging the holes, you have nothing to show for the effort (no job and no asset), and a whole lot of wealth has been consumed in the meantime.

The only jobs that create wealth are the ones that satisfy a demand. The objective of employment is not to provide work but to provide products or services that people want and can afford.

Money supply and wealth

Money is not wealth. Money is a medium of exchange and a yardstick for valuation.

Monetary expansion (inflation) does not increase wealth. In the short term, it transfers wealth from most people and organizations to the beneficiaries of monetary expansion (government, big corporations, and their clients). In the long-term, it destroys wealth, through its inhibition and distortion of the market.

Mercantilism and protectionism

If money is not wealth, neither does it make us richer to try to bring as much money into the country and prevent as much of it from leaving. We all benefit from each country's comparative advantages through trade. We must buy other countries' products in order for them to have the money to buy our products, and vice versa. Barriers to trade impoverish us all.

Persistent trade imbalances are evidence of government intervention to prevent trade from achieving the natural, beneficial balance that must inevitably be restored. Such intervention is both harmful and pointless in the long-run.

Human wealth

There are many things in human experience that contribute to the quality of our existence, beyond those things that can be bought and sold. Like all experience and human valuation, they are psychological, subjective, mutable. Policy has no place in the purely personal.

The personal only becomes social when the individual experience involves others. Parties to an experience may agree voluntarily on their contributions, formally through markets or informally through friendship. Government has neither the right, nor better information, to justify intervention in voluntary cooperation, to try to improve the arrangements to increase the satisfaction of the participants.

Thus, despite the wide range of human wealth beyond economic wealth, human wealth is irrelevant to policy (other than as something that should not be diminished through intervention). Policy should only concern itself with that narrow band of human experience in which one person's act affects another materially and involuntarily.

Natural wealth

Something similar can be said for natural wealth. There is a difference between a natural resource in the ground, and a natural resource within someone's property, for which there is a demand that can be met economically. Only the latter can be considered as part of our wealth, and only where intervention is required to ensure that the extraction of this resource respects our property rights is this a matter for policy. This subset of natural wealth is also a subset of property, and needs no separate consideration from the broader consideration of property rights.

Creating the conditions for the creation of wealth

Our institutional framework for the protection of property rights is vital to the creation and preservation of wealth, but is not a part of wealth. We cannot regard the rule of law as the property of anyone or anything, and yet it is vital to our prosperity. The value of the important things provided by government cannot be measured by cost-benefit analysis. Governments should concern themselves not with the direct creation of wealth, but with the indirect creation of the conditions that enable people to create wealth. Wealth is created, not by someone at the top of the hierarchy deciding what is best for everyone below them, but by freeing everyone to pursue their own objectives within the constraint of respect for others.

Wealth as factor of wealth-creation

Individual and national wealth are important factors in the creation of more wealth. Wealth provides the security that allows people to take the risks necessary for innovation and economic progress. Wealth provides the resources (capital) to invest in new processes that create more wealth.

It is true that it is easier to create wealth if you have wealth. But it does not follow from this, as the Marxist fallacy would have it, that inevitably the rich get richer and the poor are left behind. Many a spoilt, rich kid has demonstrated that a fool can lose their wealth to others as easily as a wise man can increase his wealth. And without the wealth of others, from where would the impoverished entrepreneur borrow the money that enabled him to satisfy his customer's wants, and increase his personal and the national wealth?

Appropriation and redistribution of wealth is the surest way to destroy wealth. It is as much in the interests of the poor as the rich to protect wealth, to provide the conditions for the further creation of wealth.

Wealth as incentive

One of the most powerful motivating forces is the human desire to improve the quality of life and security of oneself and one's loved ones. If the proceeds of one's efforts and skills could not be translated into wealth held securely without fear of appropriation, one of the main motivating forces to the expenditure of that effort and skill would be lost. It may seem unfair that people can enjoy an advantage in life, unrelated to their abilities, through inheritance or bequest, but the consequence of trying to eliminate this advantage is to eliminate one of the main motivating factors for our wealth-creators. Not only their beneficiaries, but everyone would suffer from the dilution of the incentive to create and preserve wealth.

Capital

Capital is that part of our wealth that is employed in the production of goods. The definition of certain types of wealth, measured in monetary terms, as capital is merely an accounting convention, for the purposes of economic calculation.

Capital has no inate properties. It is not a different type of thing to other types of good or wealth. Something is capital simply by virtue of being defined as capital.

The role of capital in the calculation of economic progress

Capital is depleted in production, whether as an input to the process, or through wear-and-tear. If the value of the production output is not sufficient to replace and repair the capital as it is used, we are consuming our capital and reducing our wealth. If the value of the production output is more than sufficient to replace and repair the capital as it is used, the excess income can be spent, saved or invested. Some of it will contribute to public expenditure through taxation. If the market is competitive, a sufficient excess will result in a reduction in costs to consumers. Whichever, we have increased our wealth.

Capital must have a monetary value

Capital that cannot, objectively and to a reasonable degree of accuracy, be quantified in monetary terms is meaningless. The point of capital is to assist in economic calculation.

Capital requires property rights

As the purpose of capital is for use in production of goods, the person employing the capital must have the right to use it - must have property rights in it. It is nonsensical to speak of investment in capital, if the investment does not give the investor the necessary property rights in that capital.