Social Utility – MSR-3

My initial article set out a goal: “I will prove that any law that compels theft lowers social utility.” (Ceteris paribus is assumed.) The transaction I examined therein was not person A robbing person B in isolation. The article intentionally bypassed comparing the utility of a single thief and that of his victim. That way is a dead end. I proposed to work around such a comparison by using society’s revealed preference. I examined what happens to the social good when society compels a theft after the same society has previously committed to a law against theft.

The situation analyzed begins with society having created a social good via its prohibition of theft. If, for example, a society adopted the non-aggression principle (NAP), this would entail a prohibition of theft. This adoption would be for the common or social good. Thieves would not regard it as good for them, but society would have overruled the thieves. “We” wouldn’t have to make any interpersonal utility calculations; the social rule against theft would already impound such assessments and value judgments. We might explain why such a rule was instituted, and we might express our explanations in terms of the welfare of many individuals; but such explanations would not be necessary or central to the case. They’d only be illustrative of why society adopted such a prohibition.

Are we to deny that there are social goods or the general good? That position is untenable. Consider language, letters, grammar and words. As Thomas Hobbes observed

“Again, though some one man, of how excellent a wit soever, should spend all his time partly in reasoning, and partly in inventing marks for the help of his memory, and advancing himself in learning; who sees not that the benefit he reaps to himself will not be much, and to others not at all? For unless he communicate his notes with others, his science will perish with him. But if the same notes be made common to many, and so one man’s inventions be taught to others, sciences will thereby be increased to the general good of mankind.” [Vol. 1, Collected Works, p. 14.]

Likewise, the general good of mankind is increased by laws forbidding theft. They have precedence over “laws” that involve theft as a central feature. The latter have no authority except force, which is arbitrary in its operation and provides no justifiable authority. The former derive from reasonable sources of authority, be they religious, moral, ethical, sensible, or natural.

What is the common or social good? It is a good that’s beneficial to all or most all people in the society. This good, being socially-adopted and socially-endorsed, expresses a basic social preference, one that raises social utility. A societal prohibition against theft transcends the losses visited upon thieves. The premise of the proof is that society, having in place such a prohibition, has acted as a body in such a way as to remove uneasiness, as von Mises would put it. It has installed a rule that’s for the common good and thereby it has raised social utility. It has chosen a rule that brings it a value that’s higher on its value scale. You and I, or we, cannot explain or fully grasp such an aggregate value scale, but it’s still not a barren conception. We do make social value choices even if we do not fully grasp how they come into being or why they are as they are. I don’t favor ignoring important realities just because we do not understand them wholly or we run into problems or even contradictions in our failed attempts at understanding.

What then happens if judges make judgments that violate the prohibition of theft? This brings the society to a position of lower social good or lower social utility. In the article, I posed a case in which a judge lets a thief off and a rich man actually does not mind the theft having occurred. The judge doesn’t enforce the prohibition against theft; he violates it. This misjudgment necessarily brings society into a less-preferred position, one that’s lower on its collective value scale.

I explained that the judgment diminishes the social good:

“…we wish to maintain the general prohibition against theft. That prohibition is a social good, and condoning theft damages that good. The transaction between the rich and poor man, the theft, does not have isolated effects or effects limited to them. The theft impacts the individual utilities of many people who are not directly involved. But how so? There has been no physical aggression on anyone else by the theft. True enough, but their property in the social rule has been damaged. The threat of theft against them in the future has increased; and especially so if the theft is condoned. Each person has expected future benefits from the rule against theft; and the theft if allowed tends to destroy that rule and those benefits. A theft that is allowed raises the chance of a large aggregate loss in utility. It changes a fundamental societal modus operandi. This prospective damage to the social good is large since many possible thefts can occur now and in the future; and the effects of widespread theft on society are to undermine its productive capacity and divert immense resources to protection. Hence, although the utility of the poor man goes up when he steals and although the sum of the rich man’s and poor man’s utility goes up, the social utility actually falls. The aggregate present value of the long-term prospective damages from theft far outweigh the immediate net increase in the combined utility of the rich and poor man.”

What if a society made statutes that compelled a taking of wealth without compensation? Those too would violate the prohibition against theft. But why wouldn’t they mean that society is again raising social utility?

“The issue under consideration is one of legitimacy. Which law is sovereign, the one against theft or the one that itself demands theft? The law against theft must take precedence. The proof is by contradiction. Assume as the initial premise that the law against theft does not have precedence. Then it implies that legitimate laws can be passed that allow theft. And if that is so, it means that law is a synonym for power. But if law rules only because it is power, then law has become arbitrary. But if law is arbitrary, then it is despotic. This means it has no authority beyond force, or that the authority it imposes cannot be justified and is not accepted. Such a law by definition is illegitimate, which contradicts the initial premise’s first implication that legitimate laws can allow theft. Having arrived at a contradiction, we know that the initial premise must be false. This proves that the law against theft must take precedence. Then, since the law against theft is paramount, any law that involves theft is illegitimate. Such a ‘law’ is unlawful. It is actually not a law at all; it is not a true law.”

If a society has prohibited theft, any laws that compel theft are illegitimate. But since all laws that require theft also go unpunished because they are laws, they also lower social utility. We have two concurrent grounds for rejecting laws that demand theft: they are illegitimate and they lower social utility.

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“But, doesn’t the thief gain (assuming he doesn’t get caught)? Is he no longer part of ‘society’? If he still is, and I don’t see why he isn’t, then we have to take into account his welfare too. Thus, we cannot unambiguously say that theft reduces social welfare. Yes, it reduces the social welfare of the victim, but the thief gains! Isn’t it a basic insight of Austrian economics that we cannot make interpersonal comparisons of utility?”

The answer to this is that “we” are not making an interpersonal utility comparison. Society has already made that comparison implicitly when it prohibited theft, and we can infer that it has decided that it’s better off with that prohibition than without it. It follows that, other things equal, if it fails to enforce that prohibition or, worse, passes statutes that contradict it, then it is lowering its social welfare.

The thief is in society, but society has a fundamental rule against his thievery and any thievery. Are we to say that society cannot make such a foundational rule? That would deny an important reason for having and promoting the NAP. Are we to ignore that societies adopt such basic laws and that they promote the social welfare? Why should we ignore such important aggregates and commands? Are we to say that we do not know that society as a body forbids theft and murder and other crimes? If we do not know that, then we know very little social theory indeed.


10:37 am on July 12, 2020