The theological hand

Many questions have arisen since reading Friedman and Hayek. Most prominently, how is the Christian worldview compatible with theirs? Or is it? What is then the relationship between the state, markets, and communities?

For instance, in the second chapter of Friedman’s Capitalism and Freedom, he wrote that “coercion of any form is inappropriate.” This means that the state should not interfere with markets. Let the markets work it out, in other words.

Here’s one example to illustrate Friedman’s point.

In 1990, the government passed the “Omnibus Budget Reconciliation Act,” which implemented strong taxes on, among other luxury items, yachts over $100,000. You’d think that, yeah, these people can afford an extra tax, which will create revenues for the government that may wind up in schools, roads, and healthcare.

Instead, the government lost money and thousands of people lost their jobs. A Washington Post article from 1999 summed it up this way.

According to a study done for the Joint Economic Committee, the tax destroyed 330 jobs in jewelry manufacturing, 1,470 in the aircraft industry and 7,600 in the boating industry. The job losses cost the government a total of $24.2 million in unemployment benefits and lost income tax revenues. So the net effect of the taxes was a loss of $7.6 million in fiscal 1991, which means the government projection was off by $38.6 million.

A slide from a Marginal Revolution University lecture gives you some more detail. (The final bullet about the bill being dumb was my summary.)

So, back to beliefs and politics.

Christianity believes that men and women are equal in the eyes of the Lord and should be equal in the laws of the land. Of course, on the land there are stark differences.

Women, for example, are left out of many corporate boards and they’re paid less than men for the same work.

Christianity would say that’s wrong. The question, though, is this: Should the government step in? In California, legislators passed a law mandating corporate boards to have at least one female. That’s a good thing, right?

I read many reports and news articles for work about gender parity and employers’ responses to the problem. Some institute quotas, which elicits Friedman’s point about “coercion”; governments pile on too. Some have gender and diversity analyses like Google’s and Microsoft’s, hoping to correct their practices in the future. Some use consultants like McKinsey to understand their talent and compensation practices to institute reform.

Again, the question is around how far the state and markets should intervene with individual liberty. If I’m understanding Friedman and Hayek, it’s something like, “Not much.”

The following are arguments for this question I received elsewhere.

First, Hayek would argue for equality of opportunity (meaning equality before the law), not equality of outcomes. How do quotas like this square with individual liberty?

Second, there is no way to discriminate in favor of one group without discriminating against another. If discrimination is wrong, it’s wrong everywhere and for all.

Third, it’s patronizing for the state to essentially say, “Without our help, you can’t overcome the social obstacles you face.”

Fourth, true discrimination is costly for discriminators. An employer who discriminates and refuses to hire a woman in spite of her equal or better competence and qualifications is hurting not only the woman but also the business. If enough people behaved like this it would reduce the demand for equally qualified women and their pay would fall. This means that any non-discriminating employer could hire equally or better qualified women at a discount and would do so. The non-discriminators would have a cost advantage and would expand relative to the discriminators. Women’s pay would rise until parity was achieved.

Last, the imposition of quotas and other similar policies are a form of central planning—a fatal conceit—in which the regulators presume to know what is good for society, what the causes of disparities are and how they can be corrected. It has unexpected and unintended consequences.

I’m not sure where to go with this.

Does that mean business owners can discriminate if they so choose? If a restaurant owner refuses to serve black people or gay people, is that his right? The market will ultimately crush him, but it shouldn’t be illegal, if I’m following the logic.

Perhaps there’s a theological hand that has moved states, markets, and communities toward the better angels of their nature. Throughout history the church has acted against injustice and changed society from within—I’m thinking here of the Protestant Reformation or William Wilberforce’s involvement in the slave trade.

In sum, what is the relationship between the state, markets, and communities, and what relationship best allows a society to flourish?

Raghuram Rajan’s The Third Pillar may have something to say here. I’ll continue to think on it.†

Thanks for reading.

Notes

† I apologize so much of this seems to ramble. My previous notions have been challenged and I feel caught in between ideas.