Unlawful Laws Lower, and Free Market Exchanges Raise, Social Utility

Today’s exchange between Walter Block and Edmund ends up with Walter writing “We can’t say definitively, at least not as Austrian economists (which I also strive to be), that ‘society’ is worse off when we steal money from the rich and give it to the poor in the form of welfare, as you mention. All we can say is that as a broad empirical judgement, doing this, paradoxically, hurts the poor by making them more dependent.”

I do not believe this statement. I believe that we can say that society is worse off when a theft occurs due to a statute (“law”) that redistributes wealth from rich to poor. My argument in support of this belief appears in this article from 2007.

I prove that any law that compels theft lowers social utility.

I prove also a very important corollary: Free market exchanges (definitionally involving no theft) always increase social utility, even when innocent third parties experience losses due to the gains made by other parties.

These proofs do not rely on grounds previously used to support free market conclusions. They do not rely on natural law, natural rights, or argumentation and rationalist ethics. They rely on the existing widespread prohibitions against crimes like theft that are observed in most societies.

If a society has laws against theft, they logically foreclose the possibility of a law that makes a theft legal being lawful or legitimate. Laws against theft take precedence. Otherwise, one can show that a contradiction arises.

The only way that a society can have laws allowing theft via wealth distribution that are legitimate is not to have laws prohibiting theft in the first place as fundamental to its legal code.

In making the argument, I do rely in that article upon the notion that a law is illegitimate if it relies solely on power for its authority and cannot otherwise be justified. This means that the sovereign doesn’t define just and unjust by his laws. Instead society’s prohibition of theft takes precedence. This may be construed as introducing a natural law component to the proof.

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