The most important question at election time is also the simplest: Are you better off than you were four years ago? It is simple to state, but devilishly difficult to answer, for the inquiry depends on the interaction between two sources of human satisfaction. The first is income or wealth. The second is culture—the wide set of non-monetizable items related to personal health, family stability, marriage, friendships, hobbies, and religious, social, and charitable arrangements.
In looking at the first of these measures, the United States is not doing well. Average family income is down by over eight percent from four years ago; unemployment rates are stuck over eight percent. The next round of financial stimulus is likely to fail as did the previous attempts. Worse, no one can point to a politically feasible and economically prudent set of reforms to reverse the recent and persistent decline in both employment and residential real estate markets—the two that are most salient to ordinary people.
In the face of this, it is easy to turn our attention to the intangibles of life as David Brooks recently did. Brooks insists that the Republican Party’s folly lies in its excessive emphasis on the generative capacities of markets. Brooks argues that this shortfall is exacerbated by the GOP’s slighting of traditional conservatives—thinkers like Edmund Burke and Russell Kirk—to whom social harmony, customary practices, and slow change are foundational to the preservation and success of any social system. For Brooks, the correct balance between economic markets and social tradition is essential.
In order to make his case, Brooks quotes at length from the conservative blogger Rod Dreher, who stresses that Kirk’s version of a timeless and successful moral order starts with the proposition that “human nature is a constant, and moral truths are permanent.” From that premise, Kirk argues that conservatives are “champions of custom, convention, and continuity because they prefer the devil they know to the devil they don’t know.” Accordingly, conservatives prize a social consensus of the past, given the dangers of the utopian visions of individuals whose own imperfect knowledge can easily lead society astray.
Evolution and Conservative Thought
Taken alone, it is not credible to dismiss these insights as irrelevant to any larger social order. But nonetheless, it is vital to expose the intellectual and theoretical weaknesses of the conservative position. A more complete version of basic social theory can explain much of conservative thought, including the importance of competitive markets in all areas of human endeavor.
The first weakness in the conservative position, as laid out by Brooks, is its general unwillingness to specify what it finds to be the timeless content of natural law in light of the enduring features of human nature. The same economic theories that underlie the defense for competitive markets also supply the needed foundation for the conservative incrementalism championed by Brooks, Dreher, and Kirk. The initial premise starts with this basic fact: There are not enough resources to satisfy all human needs, so the social order has to come to grips with the inescapable problem of scarcity. This, in turn, implies that a minimum condition for a just social order is that all individuals cannot have all the material possessions and human services that they desire.
The second premise is that the forces of evolution (which, in this instance, do not rest on the theistic foundations of the traditional conservative movement) constitute a highly imperfect process, with one constant feature: Only individuals who are endowed with a strong sense of self-interest are in a position to garner enough resources to win the struggle for survival.
Third, the requisite form of self-interest in evolution is never measured in terms of individual well-being or happiness, but in terms of the overall success of the entire family, which requires, at a minimum, parental sacrifice for the benefit of the young. Put more formally, Darwinian natural selection rests on the principle of inclusive fitness, which, shorn of its technical elements, means that success is measured by the ability to complete the entire cycle from birth to birth.
Fourth, genetic interdependence in turn entails the dominance of family—a strong conservative element—as an essential social institution that predates the market and rests upon the common shared interests of all members of the family to sacrifice part of their own well-being for others within that group.
The Normative Payoff
Taken together, these four constraints help identify a key social norm: cooperation, not aggression. That principle, which lies at the heart of most natural law theories, expresses itself in the view that we need a law of contract in order to encourage cooperation (and to control the frauds that can undermine it), and a combination of tort and criminal law (which in early historical times were merged into a single law of delict) to guard against multiple forms of aggression.
The arguments in favor of this position need not be left to the conservative’s love of intuition, but can be formally stated. Cooperation creates a positive-sum game between the two parties, whether we measure outcomes by wealth or utility. Aggression generates a negative-sum game. We should therefore encourage the former by enforcing contracts and discourage the latter by punishing aggression.
On the contractual side, it is critical to note that the forms of voluntary association are not strictly limited to commercial exchanges of particular goods and services. Indeed, the legal framework needed for the protection of all of the social virtues is at root identical to the legal structures that are needed to protect the institutions of marriage, religion, charity, and friendship.
The logic of contract law lets the parties decide what kinds of benefits—material or spiritual—generate mutual gains for them, and does not prescribe that they define these in pecuniary terms if they choose to do otherwise. Indeed, there is nothing about the logic of contract that limits its operation to simple two-party transactions. The law of partnerships and voluntary associations lets any group of any size come together for any purpose they choose.
Custom and Contract
In asking how these various contractual structures operate, it is critical to note the role of custom in the organization of voluntary affairs. Given the constants of human nature, we can assume that certain patterns of exchange or cooperation that work well in one setting are likely to work well in another. There is therefore a natural instinct on the part of individuals to repeat their successful contractual ventures, with both their old and new contracting partners. It is equally plausible for others to imitate the successful forms of transaction, while shying away from those which have had a mediocre performance. Thus, we should expect, in many areas, a convergence of practices in the form that conservatives predict for perfectly rational economic reasons.
It would, however, be a mistake to assume that change happens only slowly. Many changes result from conscious departures from established practices. There is nothing about the logic of contract that forbids those hardy souls who wish to strike out on a different path to do so, and to assume the risk of failure if their decisions don’t pan out. Indeed, over time, innovation itself develops certain specified contractual forms that allow for an orderly progression—i.e. to come up with a bright idea, to receive initial backing for it from friends and family, to then graduate on to venture capital firms, and, finally, to launch public offerings that help spread the gains wider.
The Dangers of Monopoly
In dealing with the different types of contracts and associations, it is important to understand that the conservative tradition also has a deep suspicion of monopoly, which is justified under the market-oriented theories just outlined. As an economic matter, the creation of legal monopolies in standard markets will reduce output, increase price, and reduce the sum of human happiness, here measured by the sum of consumer and producer surplus, i.e. how much both gain from a voluntary transaction of any sort.
That same hostility to monopoly should also exist for the soft values, as orthodoxy in religion, for instance, has the huge tendency to embed error by resisting competition. It is no coincidence that in his powerful defense of free speech, Justice Holmes warned that “the best test of truth is the power of the thought to get itself accepted in the competition of the market.”
His apt choice of the word “test” signifies that competition offers no certitude, for it can generate errors like any other sound process. Its ultimate virtue lies in the ability of new entrants to correct for old errors, just as new firms can, in the Schumpeterian world of “creative destruction,” improve the mix of goods and services available in standard commercial markets. To the risks of force, fraud, and monopoly, we must add the risk of public and private monopoly.
The Government Risk
Thus far, I have not uttered the word government, but understanding its role is a key part of the overall equation. The Lockean point of view speak volumes, not only on the issue of religious toleration, but also on economic issues, where one key principle of social organization is that government should never use its force to displace competitive markets with monopolistic ones, a tenet which has been discarded by progressives for the past 100 years.
The sad truth here is that the government can suppress freedom and competition in economic markets, and can also wreak great destruction to the voluntary associations that operate in other areas. One recent vivid example of government overreaching is the determined effort of the Obama administration to insist that Roman Catholic institutions should provide insurance coverage for contraception.
The greatest threat to the intermediate institutions that social conservatives rightly extol is not markets. It is government, which has the power to impose its own uniform vision of the good not only on economic exchange but also on a full range of social, religious, and charitable organizations. These conclusions are consistent with the standard conservative credo. But conservatism all too often resists any rigorous defense of its own conclusions based on a set of first principles. The bottom line is that human flourishing is best served by a combination of cooperation and competition in all walks of life—economic and social alike.
Richard A. Epstein, the Peter and Kirsten Bedford Senior Fellow at the Hoover Institution, is the Laurence A. Tisch Professor of Law, New York University Law School, and a senior lecturer at the University of Chicago. His areas of expertise include constitutional law, intellectual property, and property rights. His most recent books are Design for Liberty: Private Property, Public Administration, and the Rule of Law (2011), The Case against the Employee Free Choice Act (Hoover Press, 2009) and Supreme Neglect: How to Revive the Constitutional Protection for Private Property (Oxford Press, 2008).