Not a persuasive argument about the social contract

Okay, so a few days ago Elizabeth Warren — you might know of her; she’s running against Scott Brown — said this:

Well, it just makes sense if you think about it, right?  I mean, police officers are the only thing standing between the fragile nest of civilization and marauding bands of looters with colanders strapped to their faces, aren’t they?  Nobody seriously believes that you could take away the state tomorrow with no ill effects, do they?

Not too many, no.  But it’s not just about the state: the reason we have organized trade instead of marauding bands goes far further than the laws on the books.  Will Wilkinson points out that free exchange and the respectable state (rather than the brutal Hobbesian state) both derive from the same source:

The full slate of liberal institutions that account for most first-world wealth–the rule of law, private property, well-functioning market institutions, representative democracy–can’t be bought with tax money. Not to say it hasn’t been tried. The West continues to spend a bit of its tax money trying to buy the liberal institutions of peaceful wealth-creation for countries like Bhutan, Somalia, Iraq, Afghanistan, and so forth. It doesn’t work.

The institutional infrastructure of liberal-democratic capitalism depends on a deeper moral or cultural infrastructure. One thing I’d like progressives like Elizabeth Warren and Robert Frank to get through their heads is that this deeper moral/cultural infrastructure makes possible both tax-financed public goods and wealth-producing market institutions. You can’t buy with taxes the cultural prerequisites of the productive collection and expenditure of taxes.

So, if you live in a wealthy country and made some money last year, there is some sense in which much of that wealth is an “unearned return” on your cultural patrimony. Does that have any implications for what counts as “your money”? I doubt it.

Now, despite a lot of internet commentary to the contrary, Warren isn’t claiming that the hypothetical “hunks of money” received by her hypothetical factory owner are in fact owned by the community.  She’s claiming that the factory owner ought to pay into public goods, and if that’s all she claimed I wouldn’t have a problem with it.  (In fact, the last part of Warren’s claim — “Part of the underlying social contract is that you take a hunk of that and pay forward for the next kid who comes along” — fits perfectly with my anarchocapitalist ideology, because it rests on the factory owner’s sense of obligation and perhaps ability to spot an investment opportunity, rather than insisting that thugs with guns show up to take that money by force.  She’s talking about contract, not taxation.  Oh, she means taxation, but still.)

Of course, that’s not all she claimed.  Look at the second paragraph: the rest of us paid for the roads.  The rest of us paid for the workers’ educations.  The rest of us paid for the police and fire departments.  The rest of us kept the marauding bands at bay.  This of course is false, for a couple of reasons.  First of all, while you might not think “the rich” pay their fair share of taxes, you’d have to be innumerate to the point of seeing only squiggles on a page where the rest of us recognize digits to believe that high-income taxpayers don’t pay a fucking lot of taxes.  Second, since much of those roads, educations, and public services were bought with deficit financing, the rest of us haven’t paid for them (yet), either.  We’ll leave that to our grandkids, who get to pay the interest that debt’s accrued as well.  So not only are hypothetical factory owners not freeloading as much as Warren claims, but the rest of us are freeloading a lot more than Warren claims.

I’m not done yet.  Look at the first paragraph: “You built a factory out there — good for you!”  No.  No.  Nobody can build a pencil, let alone a factory.  That factory was built by structural and mechanical engineers, metalworkers and carpenters and construction workers, miners and smelters and architects, actuaries and bankers and investors — and, more than likely, regulators and inspectors and other bureaucrats both public and private.  They benefit from the public goods Warren claims “the rest of us” paid for just as much as the factory owner — if the factory owner had looked to build a plant in Massachusetts, seen the utter devastation left in the wake of its marauding bands, and decided to build somewhere else, those carpenters and architects and &c. wouldn’t get paid.  Why isn’t Warren ranting about them?  Surely it’s not because it’s harder to score a cheap political point… is it?

Finally, tarran over at The Liberty Papers is amused to find out what happens when you switch words around a bit:

Megan McArdle has made this argument about sex as a public good before.

Update: Don Boudreaux comments on the evidence that Warren’s rhetorical target of the rich industrialist who doesn’t owe anything to anyone is a straw man soaked in oxyacetylene.