Why Don’t Libertarians Support Redistribution? (Part 3)

In my previous posts, I explained why both hardline and moderate deontological libertarians reject redistribution. Now I’ll turn to consequentialists.

Before explaining why consequentialist libertarians oppose (most) redistribution, I’ll need to explain why one might think that redistribution has good consequences. Most of the arguments for this claim appeal to diminishing marginal utility—in brief, the more you have of something, the less satisfaction each additional unit of that thing brings you. Suppose Bill is a multibillionaire who finds a roll of quarters on the sidewalk. That $10 will bring him little, if any, satisfaction. Think of it this way: what could Bill buy with that $10 that he doesn’t already have? He’s got a mansion, a garage full of vintage cars, and a private jet. Bill could use that money to buy lunch at McDonald’s, but he could’ve afforded a million Big Macs anyway.

Penny, on the other hand, is penniless. She can’t afford food, so that $10 means a lot to her—it can prevent her from starving. So, the argument goes, taking the $10 from Bill and handing it to Penny has good consequences. More specifically, the transfer helps Penny more than it harms Bill and so it promotes well-being on net. Why, then, aren’t consequentialist libertarians persuaded?

As an initial point, I’ll note that real-world redistribution is more complicated than the redistribution from Bill to Penny. It’s not a simple transfer of resources from the rich to the poor. As Michael Munger notes in his book Tomorrow 3.0, welfare spending amounts to roughly $42,000 per year for a family of three in poverty in the US. But of course a family of three in poverty in the US isn’t receiving that level of assistance. So much of the government’s transfer spending simply doesn’t reach the poor.

Of course, showing that real-world redistribution could be more efficient and progressive than it is doesn’t show that it isn’t an improvement over no redistribution. In short, flawed redistribution could be better than zero redistribution. But this conclusion is too quick.

Here are the two main reasons why consequentialists should oppose redistribution: it worsens (1) the welfare of future people and (2) the welfare of non-citizens. Take future people. Redistribution can slow economic growth, a result that severely worsens the welfare of future people. We should expect taxes on labor income and capital to reduce the supply of labor and capital, just as we should expect taxes on carbon emissions to reduce the supply of carbon emissions. This isn’t just theory: a recent review concludes, “Taxes, particularly on corporate and individual income, harm economic growth.” And as Tyler Cowen notes, “Even if the induced decline in the growth rate is small, however, the difference in terms of national income will compound over time. Over a long enough temporal horizon, real income in a world with a large welfare state will be much lower than it would be in a world with no welfare state or a smaller welfare state.” The benefits that increased growth will bring to future people are far greater than the benefits that redistribution brings to present people and so consequentialists ought to favor growth over redistribution. (To be clear, not all tax-and-transfer schemes are anti-growth. For instance, a land value tax might not have adverse effects on economic growth. And redistribution that provides people with the resources needed to acquire childcare or healthcare could end up boosting boost growth.)

Let’s turn back to the present to explore the second objection to redistribution. The poorest people in the world aren’t living in the United States. An American at the domestic poverty line is to the rest of the world what an American who earns $110,00 is to the rest of the country (among the top 15% or so of earners). From a consequentialist perspective, then, benefiting the poorest in the world is a more urgent priority than benefiting the poorest in the United States for the same reason why benefiting the poorest in the United States is more urgent than benefiting the American middle class—it helps them more.

So what’s the most effective way of benefiting the poorest in the world? Immigration. As economist Michael Clemens writes, “[M]igrants from developing countries to the United States typically raise their real living standards by hundreds of percent, and by over 1,000 percent for the poorest people from the poorest countries.”

The problem for redistributionists is that evidence suggests that open borders and domestic redistribution may be politically incompatible. As immigration increases, support for redistribution decreases. So there’s a trade-off between immigration and redistribution. Given that the beneficiaries of immigration tend to be poorer than the beneficiaries of redistribution, the argument from diminishing marginal utility pushes us to prioritize immigration.

The most common objection to this claim alleges that citizens should prioritize the welfare of citizens over that of non-citizens. So even if redistribution benefits citizens less than liberalized immigration benefits non-citizens, we should opt for redistribution. By analogy, I should prioritize the welfare of my kids over that of strangers’ kids. This means I should throw a birthday party for my daughter even if my neighbors’ kid would benefit more from it.

I’ll assume for argument’s sake that citizens do owe something special to other citizens. (I should note, though, that I don’t actually think this view is correct for reasons I discuss here.) Still, the magnitude of the benefit you can provide to non-citizens is morally relevant. If it’s great enough, it can override whatever special obligations you have to citizens. If I’m driving my son to his football game and we see a stranger bleeding to death by the side of the road, I’m obligated to give the stranger a ride to the hospital even though it means my son will miss his game. Sure I have a stronger obligation to my son than the stranger in general, but the benefit I can give to the stranger (saving his life) is far greater than the benefit I can give to my him (driving him to his game) and so he has to take a backseat in this case. Similarly, the benefits that liberalized immigration policy generate for non-citizens (for instance, quintupling their income) are far greater than the benefits that domestic redistribution generates for citizens (for instance, topping off their retirement funds) and so we’re obligated to help non-citizens rather than citizens.

For those interested, I develop consequentialist arguments against redistribution at greater length here.