Concepts of Economic Liberty

In 1958, one of the intellectual giants of the XXth century, Oxford philosopher Isaiah Berlin, delivered his inaugural lecture (later published as an essay), as Oxford’s Chichele Professor of Social and Political Theory, entitled ’Two Concepts of Liberty’. For Berlin, the central question of politics is a question between obedience and coercion. In his own words “Why should I or anyone obey anyone else? Must I obey? If I disobey, may I be coerced? By whom, and to what degree, and in the name of what, and for the sake of what?”[1]. According to Berlin, the tension during the Cold War, between the Eastern and the Western world, was not a conflict between two sets of values as many seemed to suggest (say, a tension between equality and liberty), but rather a conflict between two different answers to the aforementioned questions, a conflict between two conceptions of liberty. Berlin famously distinguished between negative liberty and positive liberty. These two conceptions are radically different and arguably irreconcilable but both agree on the idea that we should have equal liberty for all. This distinction of concepts is not a mere intellectual curiosity. As argued by Berlin himself, liberty has a great variety of senses and some of the world’s worst tyrannies have been undertaken in the name of ‘freedom’. It is therefore worthwhile examining these delicate questions.

The fundamental question underlying negative liberty is ‘What is the area within which the subject - or a group of persons - is or should be left to do or to be what he is able to do or be, without interference by other persons‘? In other words, negative liberty is, quite simply, the absence of intentional coercion by others. Therefore, it implies an individual sphere of non-interference. To what extent can I move my arms freely, Berlin would ask. It fundamentally claims: “I am no one’s slave”. On the other hand, Positive Liberty answers the question “What am I free to do or be?”. In a nutshell, being a doer with clear conditions to do something makes positive liberty. As questioned by Rousseau, are we really free to do something even despite having our sphere of non-interference preserved? Following this reasoning, one might say that a person who never studied German is negatively free to read German – since nobody is intentionally coercing him –, but not positively free to do so, as he is likely to understand very little of it.

In the realm of Economics, these concepts have an interesting application. Following the negative liberty tradition, the interaction of individuals in free and voluntary markets is possibly the ultimate manifestation of absence of intentional coercion by others. Some individuals will be entrepreneurs, others won’t. Some will consume more today, others will choose to postpone consumption. This way, the absence of fraud, taxation and frequent government intervention could be seen as necessary conditions to preserve negative liberty, since these can be seen as violations of these ‘spheres of non-interference’. To a certain extent, Milton Friedman in his book Capitalism and Liberty, seems to echo this conception. Indeed he argues that the preservation of liberty justifies the limitation of government intervention[2]. Similarly, the Austrian Nobel prize laureate Friedrich von Hayek, in his influential book The Road to Serfdom, suggest that excessive government intervention would ultimately, and steadily, lead us to a State of total tyranny and thereby fully deprive us of liberty. In his own words, “[...] the more dependent the position of the individuals or groups is seen to become on the actions of government, the more they will insist the government aim at some recognizable scheme of redistributive justice; and the more government try to realize some preconceived pattern of desirable distribution, the more they must subject the position of the different individuals and groups to their control [...]”. He then closes, saying: “[...] so long as the belief in ‘social justice’ governs political action, this process must progressively approach nearer and nearer to a totalitarian system [...]”[3]. Although he leaned towards negative liberty, Berlin was slightly more moderate and does not deny that there are cases in which men should indeed be coerced. Particularly, he once said: “[...] there are other goods besides freedom, such as, for example, security or peace or culture, or other things which human beings need, which must be given them, apart from the question of whether they want them or not. Secondly, if one man obtains too much, he will deprive other people of their freedom – freedom for the pike means death to the carp – and this is a perfectly adequate reason for curtailing freedom. Still, curtailing freedom isn’t the same as freedom [...]”[4]. The second argument presented seems to go in line with J.S. Mill’s non-harm principle, “[...] the only purpose for which power can be rightfully exercised over any member of a civilized community, against his will, is to prevent harm to others [...]”[5].

Conversely, in economics, being a ‘doer’ makes positive liberty. Amartya Sen, another Nobel laureate in economics, probably sides with something similar to this conception. Indeed, for him liberty should be seen in terms of possibilities to reach a set of goals. Concretely, for Sen, the wider is the choice set of individuals, the freer they are[6]. To a certain extent, Friedman also had an indirect concern with positive liberty. Indeed, for him, the absence of potential inefficiencies generated by taxation could also enlarge the amount of resources at the disposal of individuals and could thereby enhance positive liberty.

Now, given that both sides would agree that we should promote equal liberty for all, an extreme conception of positive liberty would imply that all should have exactly the same ability to do, to consume, to pay, in the economy. But more generally speaking, taxation and redistribution (with vertical equity concerns) appear naturally as useful devices for the promotion of positive liberty. It can now be grasped that some forms of taxation seem to promote positive liberty at the expense of negative liberty. In the extreme, to attain full positive liberty, one must forego negative liberty altogether. On the other hand, to focus exclusively on negative liberty could generate starvation and profound inequalities. Thus, there is a sense in which these two concepts of liberty are deeply incompatible, as there seems to be an implicit trade-off. One can perhaps think of this corollary as a manifestation of the efficiency-equity trade-off. Indeed, to have a Pareto improvement, an intervention should improve the welfare of one individual without decreasing the other individual’s welfare. But a distribution that seeks to enhance positive liberty will indeed expand the set of choices of some individuals at the expense of at least some welfare of another group of individuals.

Finally, and to be fair, the concepts presented by Berlin are essentially descriptive, i.e. they are mere definitions. Indeed, they say very little about desirability and both seem to have at least some degree of reasonability. Concretely, if one starts from extremely low levels of positive liberty, redistribution and other restrictions to negative liberty may be quite desirable. Conversely, if one starts from the other extreme, the promotion of negative liberty may seem fairly appropriate.

[1] Berlin, Isaiah. 1958. Two concepts of liberty: an inaugural lecture delivered before the University of Oxford on 31 October 1958. Oxford: Clarendon Press.

[2] Friedman, Milton, and Rose D. Friedman. 1962. Capitalism and freedom, Chicago.

[3] Hayek, Friedrich A. von. 1994. The road to serfdom. Chicago: University of Chicago Press.

[4] On 10 January 1962 Isaiah Berlin was interviewed by Bamber Gascoigne for an ATV programme entitled ‘Freedom of Speech’. This was part of his reply to the question: “what does freedom really mean?”.

[5] Mill, John Stuart. 1859. On liberty. London: John W. Parker and Son, West Strand.

[6] Sen, Amartya. 2000. Development as freedom.

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