Following Aristotle and Aquinas, it is customary to distinguish commutative justice, which deals with the relations that arise between individuals, between individuals and groups, and between groups that comprise any given community, from distributive justice, which deals with the overarching relation of that community as a whole to all of its constituent individuals and groups. (The original Aristotelian terms are dianemetikos for distributive and diorthotikos for commutative justice, as found in the Nicomachaen Ethics 1130b ff.) The principle of distributive justice, of treating equals equally and unequals unequally, always in proportion to their relevant differences, allots to each individual and group a fair share of the common resources that their society has to divide. By contrast, commutative justice, in aiming to preserve the fairness of antecedently allotted shares, concerns itself with proper restitution or compensation that rectifies undue differences caused by an injury between parties assumed to have been equals prior to it. It does so by balancing the harm that resulted from said injury through forcing the offender to pay something of value back to his victim, so that their former equality may be restored. Which is to say that the aim and scope of distributive justice is to establish, maintain, and revise a social order that upholds some fixed principle of fair allocation of goods to its constituents, whereupon the charter of commutative justice becomes to apportion rewards to their merits, and punishments to their crimes. Hence in keeping with its purpose, commutative justice proceeds in accordance with an arithmetic mean, requiring that one receives something of equal value to what one has given or has taken from oneself; whereas distributive justice allows that common goods be allottted according to a particular standard of rank such as virtue, knowledge, wealth, power, expertise, need, and so on, taking as its overall mean the equality of geometrical proportion between the common goods subject to just distribution and the various individuals and groups, who therefore need not be treated in exactly the same way, with those designated with a greater or lesser ranking receiving unique privileges or suffering unique disabilities, in an arrangement meant to contribute to the well-being of the whole.
Thus both the Marxian maxim demanding “from each according to his ability, to each according to his need”, and the Rawlsian difference principle requiring that “the social order is not to establish and secure the more attractive prospects of those better off unless doing so is to the advantage of the less fortunate” belong to classical distributive justice, in so far as they seek to place a perpetual constraint on the outcome of the distribution of goods within a given social order. On the other hand, the libertarian principle of entitlement formulated by Robert Nozick, “from each as they choose, to each as they are chosen”, constrains only the process of acquisition and transfer of goods, without placing any constraints upon its outcome, in a way that restricts the means and aims of social justice to commuting exclusive of distributing. (Nozick’s own terminology deviates from the classical standard by distinguishing distribution from redistribution.)
Libertarians discount the costs of participating in the social contract. But money, by its socially designated nature, cannot belong entirely to any one person, let alone accrue to him solely through his choice of doing, and according to what he makes for himself. On the contrary, as a freely convertible representation of an economic exchange potential, it exists, and can be allotted, appropriated, possessed, and expended, only through the sufferance of the society as a cohesive whole. Hence any allotment, appropriation, possession, and expenditure of money incurs direct and consequential social costs that are subject to just and commensurate, i.e. progressive, compensation through direct and indirect taxation.
The direct social costs of money are mainly proportional to its amount, having to do with upholding the rudiments of John Law’s fiction of mortgages that underwrite the convertibility of banknotes. The indirect costs of the allotment, appropriation, possession, and expenditure of money however tend to rise sharply with the increases in individual monetary holdings, their emblems the walls and fences of gated communities that sprout in this land correlatively with the unfolding of the greatest economic boom in recorded history and its concomitant furtherance of social stratification. Even participation in barter economy already incurs indirect social costs, at least in so far as it relies upon the establishment and maintenance of division of labor. Thereupon the monetary system adds the direct and indirect costs of inaugurating and enforcing the status of money as “legal tender for all debts, public and private”. Proceeding from the weakest assumptions implies that the act of homo sapiens claiming the status of homo economicus gives rise to social burdens far in excess of the load capacity meant to protect libertarians against encroachment of the law of nature.
Nozick’s libertarian agenda calling for a minimal governmental body to protect his rights to his own property and the fruits of his labor, requires no more than classical commutative justice that guarantees his proper compensation against misappropriation of his goods by others. However, the underlying premiss of his total, absolute, and unqualified entitlement to the fruits of his labor, along with the fruits of labor undertaken on his behalf by his servants, purportedly acting as thoroughly disenfranchised proxies of his productive effort, cannot stand. For already in inaugurating the property relation between the apple grower and the marketplace that establishes the value of his fruit, he enters into a system of complex relations with everybody else capable of becoming a consumer or producer of similar goods. Suppose that he exploits the economies of scale to corner the market on apples, thereby directly influencing the all potential apple eaters and growers. This course of economic events stands in sharp distinction from the scenario wherein he grows the same quantity of apples for his own consumption, influencing the global apple market only minimally by withdrawing therefrom his own demand for apples. In the former case, the value of what he produces is not solely a function of the labor that he invests into it, but also of how others value the results of his labor. Inevitably, this social valuation incurs a range of costs that in all fairness must be borne by its beneficiaries, returning value to society in proportion with the advantage they derive therefrom, making a case for commutative justice. In particular, if the valuation of his goods is made in terms of their monetary value, relating them to an elaborate fiction of mortgages of all community holdings that purportedly undergird its currency, the direct and consequential social costs of his trading in commodities rise precipitously out of all proportion with its volume. Hence the case of currency trading, known to destabilize the economies of entire societies in one fell swoop, with the aggregate losses caused by the ensuing economic collapse exceeding by several orders of magnitude the total trading gains realized by the responsible parties. Who should bear such costs in the minimal libertarian state?
Mr. Nozick, meet Mr. Soros.
Robert Nozick, 16 November 1938 – 23 January 2002
Some inadvertent long range prognostications:
Suppose that Lefty the hedge fund manager is a compulsive gambler who has been rescued from the brink of ruin by a bunch of wealthy arsehole buddies in the investment banking industry, owing to their government connections. Suppose further that Lefty, bloodied but unbowed, and certainly none the wiser, is continuing to make leveraged bets to the tune of 80% of your government’s budget. Suppose finally that there are some 100,000,000 Righties encumbered with the usual variable rate credit obligations. What does Lefty owe to the Righties at the point of his financial collapse precipitating a global credit crunch?
I can’t see that Lefty owes the Righties anything. If a credit crunch is a relative unwillingness (compared to the status quo ante) of credit vendors to extend credit at the previous rates, then to consider the occurrence of this a compensatable cost is tantamount to saying that the Righties somehow had a right to the continuance of the credit vendors’ willingness to offer credit at the previous rates, which notion seems to me to be absurd on its face.
It is a commonplace that bad consequences can result from people acting entirely within their rights. Often, A’s coming to terms with B forecloses C’s dearly cherished hope. This is called “bad fortune“.
But if Lefty trades in legal tender, i.e. goods backed by fictitious mortgages upon public properties, his trades perforce manipulate very real mortgages that bind millions of Righties. Such manipulation can warrant commutative compensation even before you decide how you feel about property taxes.
Consider another example: Soros shorting the pound sterling and the ringgit to enrich himself and precipitate economic turmoil in Great Britain and Malaysia.
“The right to swing my fist ends where the other man’s nose begins.”
“Within the operation of democratic institutions, too, we want expressions of the values that concern us and that bind us together. The libertarian position I once propounded now seems to me seriously inadequate, in part because it did not fully knit the humane considerations and joint cooperative activities it left room for more closely into its fabric. It neglected the symbolic importance of an official political concern with issues or problems, as a way of marking their importance or urgency, and hence of expressing, intensifying, channeling, encouraging and validating our private actions and concerns towards them. Joint goals that the government ignores completely—it is different with private or family goals—tend to be unworthy of our joint attention and hence to receive little. There are some things we choose to do together through government in solemn marking of our human solidarity, served by the fact that we do them together in this official fashion.”
—Robert Nozick, The Examined Life: Philosophical Meditations, New York: Simon and Schuster, 1989, pp. 286-287