Are free markets unjust?

A few days ago I posted a piece asking why The Left has such an issue with free markets. One commenter took me to task (ever so slightly patronisingly):

I care about the well-being of humans, and I care about reducing inequality (and lots of other things). I support, for instance, rights to gay marriage because these rights can massively improve quality of life for lots of individuals, without really harming anybody. I also oppose unrestricted free markets when they lead to relatively poor quality of life for lots of individuals.

The difference is that I do no believe that the outcome of a free market is just, per se. In other words, my morals and opinions about how society should operate are derived without consideration of markets. Markets are merely a tool to realize my goals.

At the core of this argument - at least as it seems to me - is a suggestion that the outcomes of free markets are, in some way, unjust. I'm going to put to one side the argument about "unrestricted free markets" leading to a "relatively poor quality of life" because it seems to me something of a nonsense.

Are free markets unjust? The post in question referenced the opening lines of Adam Smith's other book - "The Theory of Moral Sentiments" and this is, maybe, helpful in looking at justice because it is a central theme in Smith's book:

Society, however, cannot subsist among those who are at all times ready to hurt and injure one another. The moment that injury begins, the moment that mutual resentment and animosity take place, all the bands of it are broke asunder, and the different members of which it consisted are, as it were, dissipated and scattered abroad by the violence and opposition of their discordant affections. If there is any society among robbers and murderers, they must at least, according to the trite observation, abstain from robbing and murdering one another. Beneficence, therefore, is less essential to the existence of society than justice. Society may subsist, though not in the most comfortable state, without beneficence; but the prevalence of injustice must utterly destroy it.

So free marketers much have regard to justice as well as prudence and the most common criticism - seen above in Brian's comment - is that free markets are solely concerned with utility: "Markets are merely a tool to realize my goals". And Brian suggests that, if "unrestricted", those markets may deliver an unjust outcome - we much therefore manage markets so as their outcomes are just.

The problems here are twofold - firstly, are free market outcomes ever unjust? Should we prevent or limit people's freedom to exchange because we fear that some will receive no benefit - or actual harm - from the process of exchange? Secondly, is it right - just - to restrict someone's liberty so as to deliver, we hope, a more just outcome elsewhere?

The problem with Brian's argument (which I'm taking as archetypically left wing) is that he sees a just outcome as being an equal outcome - "I care about reducing inequality". But if the consequence of this equal outcome is that everybody is, on average, poorer, is that a just outcome? We have limited or directed exchange to secure equality of outcome and in doing so have removed value from that exchange - everyone is poorer: equally poorer but still poorer.

What is unjust about free exchange - about me seeking to purchase a second hand Land Rover? Is the injustice that not everyone has the wherewithal to buy a second hand Land Rovers? 4x4s for everyone! But isn't intervening in the market to make second hand Land Rovers cheaper - the outcome that delivers social justice - simply removing value from the people with second hand Land Rovers to sell? And isn't this equally unjust?

For Adam Smith, justice was primarily about how we behave:

The principle by which we naturally either approve or disapprove of our own conduct, seems to be altogether the same with that by which we exercise the like judgments concerning the conduct of other people. We either approve or disapprove of the conduct of another man according as we feel that, when we bring his case home to ourselves, we either can or cannot entirely sympathize with the sentiments and motives which directed it.

So if we behave honestly, honourably and fairly in our exchange - in the market - then justice is served. And, if the market does what markets do, the outcome will also be fair and just because both buyer and seller have obtained value from their exchange. Preventing this from happening or saying only certain parties can engage in exchange is not just. At the level of the individual, not only are markets just but limiting, managing or directing them - ending what Marx called the "anarchy of production" - is unjust.

The problem for The Left, however, is that they see poverty or, more commonly, inequality in society and ask whether - given we've a market society - this is just. Surely, they ask, there is some better way of organising exchange that will mean there isn't any poverty or, more likely, inequality. And this is a noble aim until you begin to ask what happens in a market. When I buy that second hand Land Rover I get a benefit - value - by having the off-road vehicle my heart desires. And the person selling that vehicle has the cash I've given him - value - to use elsewhere in the marketplace to meet his heart's desires. There is no point at which free exchange leads to "relatively poor quality of life for lots of individuals", quite the opposite.

None of this is an argument against regulation, laws - Smith is very definite about the consequences of injustice being punishment - but that those laws should be directed to ensuring that exchanges in the market are honest, honourable and fair. Nor is this a pro-capitalism argument - there's no reason at all why socialist forms of ownership shouldn't operate effectively in a free market. Rather it's an argument that justice and equality are not synonyms and that, if we want a fair society, a free market system is more honest, honourable and just than a system designed by government, however well-intentioned.

It is true, however, that without justice the market is not free but rather that "society of robbers" Adam Smith describes. But justice is not achieved through coercion, price-fixing, artificial monopoly or the damning of commerce. Free markets are just only if we act - through social mores, honour if you will, as much as through laws - to ensure that justice is served. As Smith put it:

If [justice] is removed, the great, the immense fabric of human society, that fabric which to raise and support seems in this world if I may say so has the peculiar and darling care of Nature, must in a moment crumble into atoms.

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Doing our good citizen bit...

I am off to do jury service. A chore I could do without but, if we are to ensure that some small part of our justice system isn't run by lawyers for the benefit of lawyers, it is important that we play our part as citizens. I have no idea what to expect but I am still reminded that the jury - trial by jury - is an essential link to community and to the idea that justice should be delivered by that community not by a mighty state.

In the meantime I leave you with a barn owl I met at the Cottingley Fun Day - not your typical funday denizen to be sure but he* seemed pretty chipper about being there!

*Or possibly she - not expert enough to tell the difference in owls!

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Prison works...Prison doesn't work. An argument for fewer but longer prison sentences

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While rioting (might be but we're not sure) students have hogged the headlines, the Government has quietly rekindled the debate about prison. And specifically the difference of view between the "prison works" position of Michael Howard and the " prison's just a training ground for criminals" viewpoint.

It seems to me that both arguments are correct. Prison does "work" if by that you mean locking criminals up results in them not being out in the wider world burgling, mugging and robbing. In this narrow sense (and assuming that the short term supply of criminals is fixed - that we have a zero sum game), the greater the proportion of that criminal population incarcerated at any one time, the less crime.

However, if (and I hope this is the case) part of the aim of our justice system is to reduce the supply of criminals then there's no question that prison doesn't work. I've lost count of the times when a copper has said that a localised rise in crime is "probably down to several known burglars being released from prison." From this it is patently clear that - as a means of preventing recidivism - prison doesn't work.

So where does this take us? For me the starting point has to be the demographics of our prison population - a population that has, more or less, doubled under the last Labour government. Our prison population is overwhelmingly male and young - it is also disproportionately illiterate or barely literature, dependent in one way or other on booze or drugs and suffering from a bewildering assortment of mental health problems. Indeed, we know that many troubled young people find brief periods in prison quite a relief from the struggle of the world outside - regular meals, routine and a clarity of place makes up for the loss of liberty for these young people.

For me it is a failure of a civilised society to bang people up in prison and do nothing to try and sort out the chaotic mess of their lives. Don't get me wrong I'm not suggesting we get all soft - there's a strong case for reducing prisoner contact with the outside, not least in trying to reduce the use of drugs in prisons. But we should lock up fewer people.

However, when we do lock people up - and we should be very clear about the circumstances under which we will do so - it should be for a minimum of two years. At present too many short sentences are given out - nearly half of juvenile sentences and 40% or so of sentences on young adults are for less than two years. With remission and other allowances this simply does not give the system any chance to sort the lives of these young men out. At present they're herded into overcrowded prison units for short periods of time - all we do is take them off the streets for a while.

Two year minimum sentences would allow us to teach illiterates to read and write, to respond to drug and alcohol problems and to provide active mental health support. And during this time we can - and should - expect prisoners to work or learn for at least 35 hours week. Two years is also a significant loss of liberty - I would support a 'three strikes' type system where serial offenders are sent down regardless of the normal tariff for the most recent offence.

At present, we simply view prisons as containment - as places to but bad kids so they're off the streets. At the same time the overcrowding, political correct management and union spanish practices contribute to a dysfunction system that serves neither the public not the prisoner well.

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