High stakes instrumentalism and billionaire philanthropy

Many have argued that billionaire philanthropy is objectionably undemocratic. For example, Anand Giridharadas writes:

“When a society helps people through its shared democratic institutions [as opposed to private charitable foundations], it does so on behalf of all, and in a context of equality. Those institutions, representing free and equal citizens, are making a collective choice of whom to help and how. Those who receive help are not only objects of the transaction, but also subjects of it—citizens with agency. When help is moved into the private sphere, no matter how efficient we are told it is, the context of the helping is a relationship of inequality: the giver and the taker, the helper and the helped, the donor and the recipient.”

There have been other criticisms of these arguments by Scott Alexander and from Cullen O’Keefe. I think one additional point is worth making. The point of view expressed by Giridharadas, Rob Reich and others has almost no support from within mainstream political philosophy, at least as a criticism of effective altruist billionaire philanthropy. The reason for this is that almost all mainstream political philosophers endorse a view I call High Stakes Instrumentalism, which permits the use of undemocratic procedures, such as billionaire philanthropy, in order to avoid high stakes errors.

High Stakes Instrumentalism

When studying for my doctoral thesis, I set out to argue for an instrumentalist defence of political procedures: I argued that we should use democratic procedures if and only if doing so produced the best results. Upon approaching the topic for the first time, I expected to find the field to be split broadly into two camps: pure instrumentalists and pure intrinsic proceduralists who argued that democracy is intrinsically valuable or intrinsically just and so should be used even if it does not produce the best results.

However, what I actually found was that political philosophers were broadly divided into pure instrumentalists and proponents of hybrids of instrumentalism and intrinsic proceduralism. Even proponents of the latter type of view endorse a theory I call High Stakes Instrumentalism:

High Stakes Instrumentalism = For all cases in which we can feasibly use either a political procedure in the set of procedures S₁, or a procedure in the set of procedures S₂, and all procedures in the set S₁ would produce high stakes errors if used, but those in S₂ would not, we ought, for instrumentalist reasons, to use a procedure in S₂ rather than S₁.

More informally, High Stakes Instrumentalism is the idea that if we can use undemocratic procedures to prevent high stakes political errors, then we ought to do so, even though those procedures are undemocratic.

The boundary of high stakes error is usually drawn somewhat fuzzily at policies that violate rights to subsistence or an economic minimum, or basic liberal rights. For example, Joshua Cohen argues,

“Decisions should also be substantively just, according to some reasonable conception of justice, and effective at advancing the general welfare. But a principle of political equality states norms that will normally override other considerations, apart from the most fundamental requirements of justice.”[^1]

And Tom Christiano writes:

“[Democratic] institutions are partly evaluated by whether they manage to protect democracy, liberal rights, and the economic minimum. But beyond these there is no agreement on justice in law and policy in terms of which we can evaluate democracy from the egalitarian standpoint. Therefore, with the exception of these, democracy will be entirely intrinsically justified from the egalitarian standpoint.”[^2]

I discussed the popularity of High Stakes Instrumentalism in a paper in Ethical Theory and Moral Practice. The only prominent political philosopher to deny High Stakes Instrumentalism was arguably the Jeremy Waldron of Law and Disagreement, but even he explicitly came to accept High Stakes Instrumentalism a few years later.[^3] In general, it seems as though High Stakes Instrumentalism is a principle which any prima facie plausible democratic theory ought to accept. It appears to be very difficult to defend the view that majorities have the right to violate fundamental rights or to be tyrannous to minorities. Thus, while denying High Stakes Instrumentalism is an option, it is not a palatable one. Indeed, the fact that almost all democratic theorists accept High Stakes Instrumentalism provides some indication of its intuitive strength.

Does political theory condemn billionaire philanthropy?

Billionaire philanthropy is undoubtedly politically inegalitarian and undemocratic. When Bill Gates decides to spend $1m on vaccinations in poor countries, he has unequal influence over that decision. If he were to make this decision democratically, he would put it in a fund and have the US electorate (or maybe all global citizens) vote on what to do with the money.

However, if High Stakes Instrumentalism is true, Gates’ influence over how this money is spent is not objectionable, as long as his control over it prevents high stakes errors. Gates spends substantial portions of his philanthropic money on direct global health aid and on global health research, such as research into vaccines. Open Philanthropy spends its money on saving and improving the lives of people in extremely poor countries; reducing the risk of pandemics; campaigning against horrific abuse of animals in factory farms, and so on. If this money and that of other impact-focused philanthropists were instead under the control of the American democratic system, it would not be spent on these priorities. Some would be spent on farm subsidies, some on wars in the Middle East, some on income support for people in high-income countries, and so on. There would, in short, be far more high stakes errors if this money were under democratic control.

Thus, while billionaire philanthropy may well be undemocratic, it would be incorrect to conclude that a substantial fraction of political philosophers believe it is therefore necessarily illegitimate. In fact, almost all democratic theorists accept that billionaire philanthropy is morally required, provided the money is spent wisely.

The same argument cannot be made for ineffective or harmful billionaire philanthropy. Many billionaire philanthropists donate money to projects with negligible social benefit, such as concert halls at their old university. Others, such as the Koch brothers attempt to cast doubt on the science on climate change. But this should not indict billionaire philanthropists who spend their money effectively on pressing global problems, such as Gates, Open Philanthropy, Hewlett, Children’s Investment Fund, and Bloomberg.

As Rob Reich has argued, billionaire philanthropy does deserve scrutiny in a democratic society. But this scrutiny does not mean that billionaire philanthropy should be placed under democratic control. Rather it should be focused on convincing philanthropists that the world is not, as most of them seem to think, a canvas on which to paint their personality, but is something full of huge problems that they ought to help solve by spending their resources in a careful and rational way.

[^1]: [Joshua Cohen, Philosophy, Politics, Democracy : Selected Essays (Cambridge, Mass; London: Harvard University Press, 2009), 271–72.]

[^2]: [Thomas Christiano, The Constitution of Equality: Democratic Authority and Its Limits (Oxford: Oxford University Press, 2008), 73.]

[^3]: [Jeremy Waldron, “Disagreement and Response,” Israel Law Review 39 (2006): 64–65.]

Paternalism and puritanism

Paternalists are often cast as a joyless and puritanical bunch, closing off avenues of pleasure for ordinary people because it is in their own good. But though puritanism does, I think, characterise a lot of paternalists today, it is not a necessary feature of paternalism. Paternalism properly construed is the view that we may interfere with people against their will for the sake of their own well-being, but it is often interpreted as the view that we may interfere with people against their will for the sake of their health. There is more to life than health, but some paternalists often neglect this.

I personally am in favour of paternalism. I think the state may and should sometimes intervene in people’s lives for their own good. I think seatbelt laws are wise, that tobacco should be taxed, and that people should at the very least strongly discouraged from taking heroin. But puritanism isn’t at all plausible and I think it leads people to neglect some very important benefits.

Take the example of alcohol. In their discussion of alcohol taxation, GiveWell discuss the many problems with alcohol:

“Heavy drinking is associated with many health and social problems, including liver disease, unsafe sex, domestic violence, homicide, and reckless driving. In 2012, 28,000 Americans died from alcohol-caused diseases. Another 10,000 lost their lives in alcohol-involved motor vehicle crashes, accounting for 31% of all motor vehicle deaths… Worldwide in 2010, the death toll from alcohol-caused disease was 155,000…”

These are indeed serious problems associated with alcohol. But alcohol has loads of benefits too. My friends and colleagues are psychologically normal non-alcoholics and almost all of them drink and enjoy it. Alcohol greases the wheels of social interaction, it leads to great parties, it creates friendships.

In the UK, 30 million people drink every week. If we assume that this creates an extra two hours of fun for these people, that is 600 million hours of fun per week, 68,500 years of fun per week or 3.6m years of fun per year. These are very large benefits, but I have never seen a paternalist consider them when assessing whether increased taxation or prohibition is justified. Paternalists should carry out a proper wellbeing analysis when deciding on their policies.

The political philosophy of Radical Markets

Glen Weyl and Eric Posner’s book Radical Markets is full of innovative and novel ideas about how we should organise social institutions. Perhaps most interesting is the idea of the Common Ownership Self-Assessed Tax (COST), a radical alternative to private property. Under the COST, every citizen would self-assess the value of assets they possess, pay a 7% tax on these values and be required to sell the assets to anyone willing to purchase them at this self-assessed price. Everything would constantly be for sale at a price people would be willing to accept. This incentivises socially optimal trades of goods.

Take the example of my house. Under the COST, I would have to set a price for my house at which I would be willing to sell if there were a willing buyer. I would be incentivised not to set the price too high because I would be taxed at 7% of the value I put on the house. Suppose that purchasing power is distributed equally and that people’s willingness to pay for a house is a perfect indicator of the amount of welfare that they would derive from it. If so, under the COST, as soon as someone else would get more welfare from the house than me, then the house would change hands. Compared to private property, the COST improves allocative efficiency. That is, goods go to the people who value them most. Thus, if optimising the welfare of people alive right now is our aim, then the COST produces more social welfare than private property.

Applied to the taxation of land, the COST is a land value tax, which is widely agreed to be the best of all taxes. It is market-based and avoids the problem of bureaucrats having to determine the value of land. The COST can also be applied to all assets: cars, sofas, tables and so on. Weyl and Posner propose that the revenue from the tax should be redistributed in the form of a negative income tax or universal basic income. This would make the COST highly egalitarian.

The COST is the most serious intellectual challenge to the idea of private property in history. It is also relevant to debates in the golden era of political philosophy, after Theory of Justice but before ‘public reason liberalism’. This was when philosophers like Nozick, Jerry Cohen, Ronald Dworkin, Brian Barry and Frank Arneson were disputing the social and economic institutions required by justice. The COST brings debates about the ultimate justification for private property back to life.

1. Background on libertarianism

Libertarians of all stripes usually believe in strong rights of self-ownership. This entails:

The right to use my self as I wish, and the right not to have others interfere in that right.
The right to enforce my other rights of self-ownership using force or coercion.

For example, if I want to choose to sell my labour in a call centre, I may do so and no-one may stop me, but if I choose to go to the beach and surf, I may do so and no-one may stop me.

The left-right divide in libertarianism stems from how different theories treat the acquisition of property in natural resources. Right-libertarians hold that people have extensive rights to acquire private property of natural resources, with the most popular version holding that people have a right to acquire natural resources provided they leave enough for everyone else. For example, if I cordon off a piece of land and sow and till it, others who have not worked the land do not have a right to my vegetables, unless they would otherwise be left below some threshold. Provided everyone else is left with a sufficiently high level of natural resources, I gain full libertarian rights over the land, just as I have over myself: people cannot take the land without my consent and I have full rights to use force to deny people the use of it if I so wish.

Left libertarians endorse self-ownership but hold that natural resources are held in common or that there are much stronger egalitarian conditions on people’s rights to acquire natural resources – they might require that everyone have equally valuable shares of natural resources. For example, if I cordon off more land than others, then I have to compensate those others, or they may have the right to reclaim some of the land from me.

Right libertarians and many utilitarians today form an alliance in defence of private property. Utilitarian economists recognise the instrumental value of secure property rights in helping to provide security, and incentivise productive work and investment, which in turn produces goods for consumers, higher wages and improved living standards. The utilitarian defence of private property is conditional – if there is another system of ownership that produces greater welfare, then we should switch to that. Right libertarians hold that people should have a legal right to private property regardless of the instrumental value of such rights. Even if it would increase welfare overall for someone to take my patch of farmland, they nevertheless do not have a right to take my farmland: it is mine and not theirs to take.

2. The COST and private property

The COST would abolish private property as we know it today. Suppose I own land in England, which a developer would like to buy to build a railway between Birmingham and London, bringing large social benefits. I know that the developer has deep pockets, so I will hold out for a very high price, far in excess of the price at which I marginally prefer the money rather than the house. Moreover, if I wish, I can refuse to sell, no matter the social costs. Private property is, in this case, economically inefficient.

In contrast, the COST embodies the idea that by refusing to sell, I am imposing large costs on the rest of society. I have my portion of land, but I should pay a fee to society that reflects the social cost of doing so. I am in essence renting my land off everyone else. For right libertarians in contrast, I am a full owner, not a renter.

The intuitive case for the ‘property as rental’ idea can be made as follows. Suppose that 5 settlers arrive at a piece of land, and Jim happens to cordon off the largest and most fertile land for himself. He makes good effort with half of it and then makes a half-baked attempt at the other half, but still ends up with 3 times as much food as everyone else. What is it that justifies Jim from using threats of force to keep Sarah from taking the neglected part of his patch and growing her own stuff on it? What about these ideas:

Jim has mixed his labour with his patch: I have in a very literal way mixed half of my genetic material (which, as a self-owner, I surely own) with that of my wife when making my child. Does that mean I own half my child?
It is good for Jim’s autonomy and personal projects: What about Sarah’s personal autonomy and projects? If everyone has equal moral status, shouldn’t we care about everyone’s autonomy and personal projects equally?
There is no further argument, the intuition is strong enough alone: This seems to be at odds with almost all right libertarian philosophers who have thought that some argument for original acquisition is required.

A more plausible way to view the allocation of land is as follows. There is no non-instrumental moral power or moral magic tying land to one person or another. We should allocate rights over the land insofar as those rights improve people’s lives; such rights are instrumentally justified in terms of how much welfare they produce. If I stop other people using a socially valuable thing, then I should compensate them for doing so, and if others would get more value out of it than me, then they should gain access to the land.

The COST could be justified from the point of view of several different theories. I have discussed the welfarist and utilitarian arguments for it above. Left libertarians would like it because it embodies the idea that natural resources are owned by no-one or owned in common. Our possession and control of natural resources is justified insofar as it serves the common good.

Egalitarians (close relatives to left libertarians) would like the allocative efficiency underlying the COST. As long as people have equal purchasing power and are rational, the COST embodies the idea, advanced by Ronald Dworkin, that fairness is ensured when people with equal purchasing power engage in an auction for all the resources, and no-one wants to change their bid given the bids of the others. Similarly, under the COST, there is significant redistribution, and mutually beneficial trades are incentivised so goods go to the people who value them most.

The right libertarian case for the COST

Right libertarians might not like the principle behind the COST, and they would view it as a violation of people’s basic rights to property. But then, today, the state taxes people and corporations for:

Earning income from work
Profiting from investments
Spending money in shops
Leaving money to their children
Buying a house

These taxes are widely agreed to be highly inefficient, some egregiously so. For a right libertarian who at least accepts a role for a minimal state, something has to be taxed, and this must be seen as a pro tanto rights violation. If we assume that all taxes are equally undesirable in terms of their effect on rights to private property, we may as well go for the tax that does well according to other criteria, such as making people’s lives go better. The COST is more efficient than an income tax for example because it taxes people for doing things that are to some extent socially harmful – for withholding goods from society. In contrast, income tax taxes people for doing something socially productive – working to earn an income. From a right libertarian point of view, the COST seems like the least worst-option.

3. The COST and self-ownership

That’s how the COST works for natural resources, but what about natural talent? In one of the most controversial parts of Radical Markets, Weyl and Posner argue that the COST could apply to people’s labour as well as to natural resources such as land. Consider a surgeon who announced that she would perform knee surgery for $2,000. She would pay a tax based on that amount and would be required to perform an operation on anyone who offered that amount. The tax would discourage her from overvaluing her time and thus denying her talents to the community, while the need to be on-call would avoid her setting too low a wage. There would, then, be a tax on the talented, which would be redistributed to others in society, and which would incentivise the talented to work.

In this way, the COST is in accord with the luck egalitarianism of Jerry Cohen, who argued that inequalities due to bad luck are unjust. Since differences in our natural talents are due to brute luck, they are unjust. On this hard left luck egalitarianism, the talented are under a moral duty to have a socially useful career, and as Cecile Fabre has argued, this political philosophy pushes in the direction of the state having the right to coerce people to pursue socially valuable careers, though Cohen himself was reluctant to recognise this. Similarly, utilitarians believe that people have demanding duties of beneficence, which also apply to their career choices. If the COST were a low cost way of encouraging socially beneficial work, then the utilitarian would support it.

Left libertarians would want no part of this. The left libertarian would say that if a surgeon doesn’t want to perform surgery, then, as a self-owner, she does not have to and may not be coerced into doing so. This is true even if the surgeon would increase social welfare by performing operations.

Several things may be said in response to the libertarian. It is true that the COST on labour would coerce the talented. However, as Weyl and Posner point out, the current system offers an even worse choice to the untalented. Those with few marketable skills are given a stark choice: work in harsh, boring or tedious jobs, starve, or live on welfare. If we care about the equal status and freedom of everyone, then we should recognise that the refusal of the talented to engage in socially valuable labour imposes substantial costs on the untalented. In this way, self-ownership privileges the freedom and autonomy of the talented over the untalented.

Furthermore, the talented coerce the less talented by coercively denying them the fruits of their labour. If someone on welfare in the US tries to take some of Jess Bezos’ money, they will be punished. This is coercion. It is hard to recognise because many think it just, but it is coercion nonetheless. Therefore, there must be some argument that the coercion is justified in one case but not the other.

A COST on labour reduces this inequality and relieves the pressure on the poorest in society.

Finally, my argument above against the ‘mixing labour’ argument for original acquisition also seems to me an effective argument against self-ownership. To repeat: I have in a very literal way mixed half of my genetic material (which, as a self-owner, I surely own) with that of my wife when making my child. Does that mean I own half my child? My child is made up of half of my genetic material. That doesn’t make me a slave owner.

4. The COST and the future

The discussion so far has proceeded on the assumption that the main topic of interest in political philosophy is the optimal or just distribution of goods among people right now. But we should care not only about distributing the current pie justly or optimally, but also growing the pie for the future. This crucial point is neglected by leftist political philosophy and by the political left. Both are overwhelmingly concerned with inequality right now, rather than economic growth and the welfare of current people in the future and of future generations.

The COVID-19 pandemic has shown us what exponential growth can do: doublings in cases over a handful of days. Economic growth is also exponential and this really matters. If between 1870 and 1990, the United States had grown one percentage point less per year, the country would in 1990 have had the same standard of living as Mexico. If you can boost the growth rate by two percentage points a year, after 56 years, income will be three times higher than it otherwise would have been.

In the early 1960s, South Korea was as poor as sub-Saharan Africa. If you were the South Korean government in 1960, would you focus on equally distributing income to each person, such that the poorest in society would be levelled up to the princely sum of $160 per year, or would you focus on producing one of the most impressive growth episodes in history and make your country one of the richest on Earth? (Bear in mind that GDP per capita is correlated with almost all objective and subjective measures of welfare.)

When discussing rights to natural resources, it is easy to talk as though people come across natural resources that are already socially useful. But this is not the case. We are not facing a problem in which we stumble across some manna from heaven and we have to decide how to divide it up, but rather one in which we find natural resources that are only made socially useful through talent, endeavour and cooperation in governments, corporations and markets. There is lithium in Chile, but it is only put to use in batteries due to our ingenuity. We should incentivise this ingenuity. This may involve providing unequal rewards to people who carry out socially valuable activities. We should encourage people like Jeff Bezos to build companies that are as good as Amazon. A reward of billions is perhaps excessive, but some substantial reward is justified as long as Bezos is not motivated to produce great companies out of the goodness of his heart.

The best argument for meritocracy and inequality is that it encourages people to do socially useful things. As Scott Alexander says

“If some rich parents pay for their unborn kid to have experimental gene therapy that makes him a superhumanly-brilliant economist, and it works, and through no credit of his own he becomes a superhumanly-brilliant economist – then I want that kid in charge of the Federal Reserve. And if you care about saving ten million people’s jobs, you do too.”

One might add, I also want him to be paid enough to be incentivised to work for the Federal Reserve: this means inequality.

Now let’s return to the COST. I said above that under the COST, people would in essence be renting their land from society. But if your land can be taken off you at any time, you might well let it fall into disrepair. Equally, I could buy a patch of land and then build some attractive flats on it, which would increase demand for the asset and increase its price. The COST would therefore penalise this effort to the detriment of investment. This is known as investment inefficiency. However, Weyl and Posner point out that the tax can be reduced to improve investment efficiency and the gain in investment efficiency is greater than the loss in allocative efficiency. The 7% COST is a rough sweet spot for allocative and investment efficiency. We can tweak the COST downward if we wish to adjust the balance further towards investment efficiency. This would weaken the egalitarian nature of the COST. Nonetheless, a society with a 7% COST would be dramatically more egalitarian than our society.

We should also encourage people to invest in themselves and we have to take account of this if we were to ever set a COST on human capital.

Capitalism and Selfishness

As effective altruists make increasing forays into politics, I thought it would be good to share what I have found to be one of the most useful conceptual distinctions in recent political philosophy. Many people think if you’re in favour of capitalism you have to be in favour of ruthless selfishness. But this isn’t so. As the philosopher Jason Brennan has argued,[1] we ought to distinguish capitalism – a system of ownership from selfishness – a social ethos.

Capitalism = The private ownership of the means of production.

Socialism = The collective ownership of the means of production.

People have an ethos of selfishness insofar as they pursue their own self-interest.

People have an ethos of benevolence insofar as they pursue the interests of others.

Why accept these definitions? Firstly, they align with the commonsense and dictionary definitions of ‘capitalism’ and ‘socialism’. The elision between capitalism and an ethos of selfishness tends only to happen in an informal or unstated way. People unfairly compare capitalism + selfishness with socialism + universal benevolence and conclude that socialism is the superior system, when in fact universal benevolence is doing a lot of the work. Secondly, if we conceptually tie capitalism and an ethos of selfishness, then we will be left with no term for a system in which the means of production are privately owned and everyone is perfectly benevolent. On the other side of the coin, if we conceptually tie socialism and benevolence, then we will be left with no term for a system in which the means of production are collectively owned, but people are extensively motivated by selfishness.

With these definitions in tow, we can infer the following important point:

The stance one takes on the correct social ethos implies no obvious stance on the justifiability of capitalism or socialism.

Many effective altruists are strongly critical of the ethos of selfishness: Peter Singer believes that you should give up on all luxury spending in order to help others. However, this does not mean that capitalism is bad because capitalism is not conceptually tied to selfishness.

The question of which system of economic ownership we ought to have is entirely separate to the question of which ethos we ought to follow. Effective altruists and others have made a strong case for an ethos of benevolence, but finding out whether capitalism or socialism is better involves completely different empirical questions.

Thanks to Stefan Schubert for advice.

[1] He attributes the original point to Sharon Krause.