Rich, Not Powerful
Controversial Essays. By Thomas Sowell. Hoover Institution Press. X + 321 pgs.
It is always agreeable to be proved right. In an earlier review, I suggested that Thomas Sowell "had a genius for the striking fact and the apt analogy." (The Mises Review, Fall 2001, p.24). In his new collection of essays, Sowell once more demonstrates his uncanny ability to apply basic economic principles in unexpected fashion.
One of his most valuable points develops a theme much stressed by Mises, although Sowell has apparently arrived at the insight independently. Mises often stated that capitalism is a system of mass production for the masses. A rich man casts many more "dollar votes" through his purchases than does a poor man, and critics of capitalism condemn it as for that reason unfair. What these critics overlook is that because the masses are far more numerous than the wealthy elite, their dollars votes control the main direction of production.
Sowell's thought exactly parallels Mises's contention: "Although the average rich person---by definition---has more money than other people, the non-rich often have far more wealth in the aggregate, simply because they are more numerous."(p.215)
Our author finds an ingenious application of this fundamental fact. Rich people often wish to purchase large estates, but they confront an obstacle. On the free market, their money must compete with mass demands for low-cost housing. If they find the results of the struggle unsatisfactory, all is not lost. By judiciously designed environmental regulations, they can prevent those who wish to develop cheap housing from bidding against them.
In brief, regulation of housing for "environmental protection" hurts the poor: "In a free market with undiluted property rights, the non-rich would outbid the rich for much land and use that land in ways that would suit the circumstances of ordinary people. For example, grand estates would be broken up into smaller plots for more modest plots or used for building apartment complexes. That is what the affluent. .. strive to prevent by government-imposed restrictions on land use."(p.215)
But if this is taken as a conclusive reason against these regulations, is not Sowell vulnerable to objection? The votes of the masses count for much, but what of future generations? Must not the state protect the earth from undue exploitation? If the rich benefit from such laws, this consequence must be borne.
Sowell would be undaunted by this objection. Elsewhere in the book, he applies his brilliant critique of enforced elitism to the environmentalist lobby. By what right does a group of self-styled "friends of the earth" presume to impose its views on the rest of us? "We have grown so used to having the interests of millions of human beings sacrificed for some allegedly endangered species that we no longer stop and think about how outrageous that is. . . What some consider to be idealism could more accurately be called self-exaltation. What could be more exalting than to take on the God-like role of adjudicating between animals and people?. . .who elected the green bigots to play God?"(p.135)
Sowell's critique rests on an assumption that the environmentalist would challenge. He would answer that he does not seek to impose his subjective preferences on others; rather, he responds as well as he can to the objective good of environmental preservation. Nowhere in his work, so far as I am aware, does Sowell directly address theories that claim objective justification for interference with the free market: he is so out of sympathy with these views that he answers them with a Nietzchean unmasking of values. But unless these theorists can make good their ambitious claims to knowledge of the objective good, his criticism of them stands.
Sowell raises a similar point against those, vastly influential in contemporary political philosophy, who presume to indict the market for undue rewards to the lucky, and penalties to the unlucky. Is it not unfair, critics of the market such as John Rawls allege, that one person should have vastly more wealth than another just because he has the luck to be the child of rich parents?
To this, Sowell has a simple retort: "The question is not what anybody deserves. The question is who is to take on the God-like role of deciding what anyone else deserves. You can talk about 'social justice' all you want. But what death taxes boil down to is letting politicians take money from widows and orphans to pay for goodies that they will hand out to others, in order to buy votes to get reelected That is not social justice or any other kind of justice."(p.50)1
I was about to be unjust to Sowell. I was going to say that he here assumes that theories that endeavor to correct the market reflect the arbitrary preferences of their advocates. In so assuming, he dismisses without consideration the arguments of philosophers such as Rawls who claim that their theories are true. But Sowell may have in mind a deeper point. Even if it really is unfair that some are luckier than others, it is presumptuous for the state to require the "lucky" people to compensate others for their lack of good fortune. The moral obligation to compensate the poor, if any exists, is one of charity, for the "lucky" themselves to assess. (Of course an analogous argument applies to Sowell's criticism of environmentalism.) I do not know whether I am reading too much into Sowell in imputing this line of thought to him. I do know, though, that this book contains an abundance of wisdom on a large number of economic issues.
1 Sowell interjects an observation that makes us see the problem of luck in a new light: “But we are all huge beneficiaries of good fortune we do not deserve. By what merit do we deserve to be living more than twice as long as the cave man and in greater safety, comfort, health and prosperity?”(p.50) I have banished this point to a footnote, as I am unsure of its direct bearing on theories of social justice.