Could Adam Smith Have Loved Distributism?

I'm not so sure. Smith is a definite product of the so-called Enlightenment and Distributism is rooted in an earlier age.

From The Imaginative Conservative

By Alexander Salter

With this essay, I am venturing into unfamiliar territory. My previous essays featured in this journal have been distillations of my academic research. This is not the case here. I regard myself sufficiently well-informed so as to be a knowledgeable consumer of writings on the political economy of distributism, but not yet—though I am currently striving to become—sufficiently well-informed to be a scholarly producer as well. As such, my thoughts on this topic should be viewed as searching for preliminary sub-topics of overlapping interests between adherents of, or those interested in, distributism and applied political economy.

The first thing to do, as always, is to define terms. By “distributism” I do not limit myself to the economic writings of G.K. Chesterton and Hilaire Belloc, although these sources are obviously important. Instead I refer to the general themes that have since emerged from these writings, and secondary commentaries upon them. Chief among these themes are the importance of widespread ownership of the means of production for the cultivation and flourishing of the human person. This can be viewed as one application of the principle of subsidiarity to questions regarding the ownership and distribution of wealth. It comprises both statements of fact and statements of value—in fact, its closest adherents would probably push back against the existence of the fact-value distinction as anything more than merely classificatory. Gene Callahan recently wrote a fine essay on distributism that explores both history and prospective applications; to avoid retreading familiar ground, I will leave any further explanations of the necessary intellectual inputs to him.*

By “mainline” economics, I have in mind my former professor Peter Boettke’s distinction between what is currently fashionable in economic scholarship (the mainstream) and, in Lord Acton’s words, the “traveling of the minds of men who sit in the seat of Adam Smith” (the mainline). More specifically, mainline economics is the body of thought that seeks to explain social outcomes in terms of the interactions of rational (goal-oriented) individuals whose behavior is structured by rules, which come from the social institutions within which they act. The famous “Invisible Hand” theorem, as understood by mainline political economists, is not a contextless abstraction, but a concrete argument about how exchange processes unfold when underlying institutions protect property rights, enforce contracts, and maintain the rule of law. At any given time, the mainstream may converge or diverge with the mainline, depending on the sociology of the profession.

Although mainline economists are more likely to embrace a more humanistic understanding of their discipline, hearkening back to when the discipline was called “political economy,” there is also much in distributist writing that gives them pause, as Tom Woods has argued. Most of these concerns focus on proposed implementations of a distributist program. First, political economists tend to be skeptical that conscious attempts to decentralize ownership of the means of production would be durable. For example, workers are probably not the most suitable owners of capital goods. There will be other individuals who, if they had title, could more profitably employ those same capital goods. In that case, current owners and potential owners could strike a mutually-beneficial bargain: workers would simply sell their titles to the factors of production back to the (presumably) large business enterprises that can employ them to greater effect. Second, the concentration of political power necessary to bring about a distributist program is itself greatly concerning. Empowering the modern bureaucratic-administrative state to undertake a program of that kind would probably result in political elites using this power to enrich themselves at the expense of the individuals whom advocates of distributism had hoped to help.

But there are, I contend, several areas where those who are intrigued by distributism, and those who are practicing, mainline political-economists, can find common ground. The most promising common ground lies in the selection of means for advancing similar, or even common, ends. A desire for more widespread ownership of the means of production, and a desire for a less powerful centralized state, suggest several avenues for concerted effort in both scholarship and policy studies:

1. Simplifying regulations and the tax code. Why are large corporations so prevalent in today’s economies? Part of the reason is that large corporations are an efficient contractual structure for giving consumers what they want. But this is not the whole story. A large and overly-complicated set of regulatory and tax rules selects for firms that are “artificially” large. Compliance with these rules frequently takes the form of a fixed cost. In other words, no matter how small or large a business is, complying requires giving up the same amount of resources. If this is so, large organizations, because they can spread these costs over a larger quantity of output, will be better able to out-compete smaller organizations. (As an aside, this also explains why large corporations want to be regulated: regulation can be a great shield against pesky competition from smaller, nimbler firms). Smaller organizations, such as those where there is no separation of ownership and control, or ones directly owned by workers, thus have the deck stacked against them, although just how stacked is the deck is an empirical question.

2. Streamlining of transfer programs. Many transfer programs designed to blunt the effects of a dynamic market economy that are good for society, but costly for specific individuals, have a serious unintended consequence: they strongly disincentivize work. Thus even if workers had more direct control over the factors of production, financially it may make more sense for them to remain outside the workforce—and the longer they do this, the more their human capital erodes, making future employment more difficult to secure—than to engage in dignified and character-building, if not significantly remunerative, work. Eliminating these disincentives, perhaps by scrapping the programs in favor of a small, guaranteed minimum income, is of obvious interest to those looking to grow the size of the economic pie, while also refraining from skewing incentives towards favoring idleness.

3. Eliminating licensing requirements. One way for workers to gain access to the factors of production is to transform goods they already own into potentially-productive assets. The much-hailed “sharing economy” does just that: with technology like Uber and Airbnb, anyone who has a car or an apartment can turn consumption-generating assets into income-generating assets. Gene Callahan, in the previously-mentioned essay, talks specifically about this, so I will not detail it further, except to say there are frequently legal barriers to this sort of economic change. Laws that force workers’ dead capital to stay dead typically exist not to advance the common good, but to distribute supernormal profits to politically-protected interest groups. They are of questionable value in a society that wishes to increase opportunity for those on the lowest rungs of the socioeconomic ladder.

4. Reforming Education. I may already have gotten into trouble by using the word “education” to denote what humanists would insist ought to be called “schooling”: the transmission of basic skills for broad vocational application. Whatever one’s choice of words, it is certainly the case that much of the pre-college public curriculum neither enriches students in letters, nor prepares them for the workforce. This can and should change. Computing power is getting cheaper with each passing year, which means anybody with a laptop, familiarity with spreadsheets, and basic statistical knowledge can find minimally-remunerative employment. Thus a strong case can be made that greater emphasis should be placed on these skills in formal education. This can also serve as a starting point to bifurcate various public curricula: with these basic skills in reach of most, if not all, students, it is “safer” to offer advanced study in the humane disciplines, such as literature and philosophy, not for the purpose of vocational preparation, but for the cultivation of the mind for its own sake.

These are the four areas that stand out most clearly to me; undoubtedly there are many others. Ultimately these grounds for cross-fertilization exist because of the instinctual similarity with which mainline political economists, and humanists interested in distributism, approach the study of society. The various orders that exist in the social world, such as the market, are not self-subsisting entities. Instead these orders are the result of a series of overlapping institutions, from which the rules governing interpersonal behavior come, and out of which they emerge. Some of these institutions are, to a limited extent, capable of conscious modification. An appropriate metaphor, long embraced by mainline political economists, is the relationship between a game and its constituting rules. Even if we do not agree which game is the most beautiful, or most suited to man’s nature, or most justifiable to Reason, etc., so long as there is agreement that some kinds of games are better than others, we can make progress on modifying the rules to incentivize individuals to play those games that are within the mutually-agreeable subset.

*See essay here.