Richard Epstein v. Elizabeth Warren

by Pejman Yousefzadeh on January 12, 2012

It’s not even a contest. Commenting on Warren’s “there is nobody in this country who got rich on his own” pabulum, Epstein reminds the would-be junior Senator from Massachusetts about an inconvenient group of things called “facts”:

. . . Yes, it is obvious that no person “ever got rich on his own.” But that statement does nothing to undermine sensible forms of laissez-faire individualism. The reason why people do not get rich by themselves is not that they lack self-reliance or ambition. It is because the individuals who succeed understand the key proposition that personal gains result only through cooperation with others. The common business school refrain of win/win deals is not an observation about one person: it is, at its core, about two (or more) people, all of whom win through cooperative arrangements.

So when she says that “you” built a factory out there, it is the collective, not the singular, “you” that is invoked. You, the individual, built it because you were able—through a variety of voluntary transactions, all of which took advantage of the division of labor—to locate, design, finance, construct, and market that project. “You” used a variety of cooperative mechanisms: corporations, partnerships, and joint ventures; the hiring of salaried employees; and the use of personal savings, venture capital, and debt financing. To ignore all these joint efforts is to miss the entire point of how anyone succeeds. It is to miss, as well, the key point that the gains from trade are not confined to just those persons involved in building “your” factory. Rather these gains spread out to family members, friends, and everyone else whose opportunities for trade have expanded because of the new wealth created.

Looked at in this way, laissez-faire capitalism is acquitted of the charge of radical individualism driven by an insatiable greed. Rather, laissez-faire comes to embody the notions of freedom of contract and association that allow people whose assets are protected against external aggression to find each other and to share the wealth created by the gains from trade.

It would, of course, be a giant error to assume that all these voluntary transactions are self-enforcing without back up from a strong and coherent government. At their core, a sound laissez-faire program necessarily depends for its implementation on the creation of effective and focused government. Warren may be no deep political theorist, but she is certainly alert to the needs of sensible governments to provide collective goods to society. Hence, her next sally is intended to reduce the role of the individual entrepreneur in creating those goods. “You moved your goods to market on the roads the rest of us paid for.”

Her “you” is decidedly in the singular. Her “you” stands in opposition to all the other good people in society on whom “you” choose to free ride. It is there that she makes yet another fatal intellectual blunder. Last I looked, there was more than one car or truck on the interstate highway. The “you” that used the road was decidedly plural. Is it really possible to think that the “us” who have paid for the roads are only those people who did not move their goods to market on the public highway? Or did not use and consume the goods that were so moved?

If so, then we have a truly absurd situation in which millions use roads that no one really pays for. The key mistake in Warren’s rhetorical excess lies in her impolitic (but highly political) choice of pronouns. Just think of the loss of rhetorical pop that takes place by toning down the sentence so that it reads. “We all moved our goods along highways that we have all paid for.” Her misuse of the you/us dichotomy receives its deserved inclusion in the garbage dump of bad ideas. In its place, we are left with the notion that common resources are paid for out of public funds. How novel!

Do read the whole thing; it is a delight. I wish that Richard Epstein would run for office. He is smarter than Elizabeth Warren by orders of magnitude. And unlike Warren, he is wise.

(Via Stephen Bainbridge.)

  • CD_NYC

    This is disingenuous malarkey.
    CD NYC

    • Anonymous

      What a very substantive dismissal of Epstein. I am sure he is devastated.

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