Free Market Capabilities: a Restatement

Featured image is SHield World Construction, by artist Adam Burn.

This claim about the moral importance of personal economic autonomy likely would ring true for many of the women in developing countries to whom leading capabilities theorists such as Martha Nussbaum devote much attention. Could such an interest be built up in such a way that gained it a central place on the list of the basic human capabilities? How might the inclusion of such a capabilities interest affect the wider distributive aspects of the capabilities approach? [Tomasi 44%]

In Free Market Fairness, John Tomasi introduces a hybrid political theory he calls “market democracy.” He specifically defends a Rawlsian regime, “free market fairness” (FMF), but he presents market democracy itself as a broad research program that can be explored and hopefully colonized by liberals of all kinds, from luck egalitarians to classical liberals and perhaps even libertarians. It is open to all “high liberals” who are willing to commit to “thick” economic liberty and to all classical liberals interested in transplanting their economics into a high liberal framework. Tomasi lays out market democracy as a broad approach to meeting the requirements of liberalism:

Market democracy sees society as a public thing, the basic institutions of which must be justifiable to the people living under them. Persons are conceived not as disconnected happiness seekers but as democratic citizens. They are moral beings with lives of their own to lead who are simultaneously committed to living with others on terms that even the weakest among them can accept. At base, society is a fair system of cooperation among citizens committed to respecting one another as responsible self-authors. [Tomasi 25%]

I have previously advocated greater dialogue between libertarians and followers of the capabilities approach (CA). Here I adapt this idea in the spirit of Tomasi’s market democracy research program.

The Capabilities Approach

The CA is a liberal theory that evaluates well-being in terms of irreducibly plural capabilities to function in characteristically human ways. While a successful life is ultimately up to the individual and the actions they take toward the good as they understand it, the CA does posit some necessary (but not sufficient) boundary conditions for flourishing. These are effective capabilities to function, including traditional basics like access to nourishment and shelter; libertarian favorites like the negative freedoms of speech, assembly, and movement; and more republican freedoms, like freedom from domination and oppression. Exactly which capabilities deserve protection depends on the CA theorist, but determining the set is often thought best to emerge from an open and continual dialogue among all persons.

Capabilities (abilities to do or be) are distinguished from functionings (actual doings and beings) to respect the potential for well-informed persons to refrain from exercising some functionings for their own reasons (think of religious or political fasting or conscientious non-voting). Capabilities must be effective in that mere formal rights or guarantees cut little ice in the CA when social conditions such as racism or sexism effectively prevent individuals from actualizing their rights. The CA also recognizes that humans are fundamentally dependent, especially in childhood and old age, but even throughout their lives the possibility of accidents lurks in the background. Detached, able-bodied adults or “heads of families” should not be seen as the default human beings. Effective agency must be cultivated in individuals so they become able to discern and pursue their own ends by their own lights. While the CA pays close attention to outcomes, it doesn’t impose a singular theory of the good on individuals, and positive outcomes like wealth and health (individual and social) are preferred when they emerge from the freely chosen actions of responsible self-authors.

Free Market Capabilities Democracy

Following Tomasi’s discussion of free market fairness, a capabilitarian version of market democracy can be arrived at with a simple recipe. Take the justificatory framework of the CA and just add thick economic liberty. That means 1) respect “making a living” as an important and dignified form of self-authorship that can provide a source of meaning for people’s lives. And 2) foster and protect the institutions of private (including productive) property; a stable macroeconomic environment; and the presumptive freedoms to innovate, pursue chosen professions, and launch new enterprises for profit. Under a “free market capabilities” (FMC) democracy, as under Tomasi’s FMF democracy, a high but defeasible burden of justification must be met before economic freedoms can be curtailed by regulation, and any such abridgments must be for the sake of protecting other essential capabilities.

An advantage FMC has over FMF is that the capabilities approach is already committed to a broad kind of value pluralism and doesn’t try to lump everything of importance into narrow categories of “basic political rights” and the “primary goods” of income and wealth. It’s straightforward to add robust economic freedom as described above to a list of basic human capabilities that already includes capabilities like recreation, sexual fulfillment, and experiencing nature. Some capabilitarians already concede this possibility. Ingrid Robeyns allows that the most general formulation of the CA is agnostic on the roles of the state and the market in providing capabilities. Amartya Sen in Development as Freedom contends that

[a] denial of opportunities of transaction, through arbitrary controls, can be a source of unfreedom in itself. People are then prevented from doing what can be taken to be — in the absence of compelling reasons to the contrary — something that is within their right to do. [Sen 25]

This would seem to extend beyond transactions to other capitalist acts between well-informed and genuinely consenting adults. And Elizabeth Anderson acknowledges that

(5) The economy is an important domain of agency.  A just regime should arrange the rules of economic life to ensure a rich set of opportunities for people to engage in market activities according to their preferences, consistent with honoring the self-authorship of others.  (6) This includes the freedom to create, own, and operate private productive enterprises.

The Capabilities Adequacy Condition

Tomasi gives a long discussion of what he calls the “distributional adequacy condition” by which institutions must provide distributional minimum to the poor. He argues that many libertarians and classical liberals implicitly affirm this condition even if they formally reject social justice. Even such extreme libertarians as Ayn Rand and Murray Rothbard felt the need to mention that free market institutions would be advantageous even to the poor. Classical liberals like Adam Smith and Milton Friedman openly touted their widespread benefits. Friedrich Hayek famously rejected social justice, but Tomasi’s heterodox recount shows this may have been little more than a terminological “allergy”.

I submit that libertarians and classical liberals also implicitly affirm a capabilities adequacy condition (CAC). Libertarians are often enthusiastic, not only about economic growth and the effect of declining poverty worldwide under historically liberal institutions, but also about various innovations and their real life ramifications in the world. The libertarian offers a dazzling array of charts and graphs showing that we are not only richer, but have better health; greater gender equality; new capabilities for travel, communication, and social networking; better education and literacy; and more political and economic freedom. The benefits of freedom are thus cast in terms of capabilities. Libertarian Johan Norberg has just published a new book (Progress: Ten Reasons to Look Forward to the Future) with CAC insinuations.norberg-2016

Many libertarians are deeply affected by Hans Rosling’s washing machine presentation. The washing machine wasn’t a just another humdrum widget spat out by economic growth. It liberated women from backbreaking tedium, enabling them to ponder and pursue their own ends for their own reasons. Without believing in this grand expansion of the kinds of things individuals can do and be in the real world due to liberty, many libertarians would abandon their theories.


Despite noting that classical liberals are quite at ease in the messy real world, Tomasi ultimately chooses to defend FMF on the terrain of ideal theory preferred by high liberals. In contrast, FMC is best understood in non-ideal terms. Capabilities are discovered (posited?) by examining the actual lives of real people who seem to be living flourishing lives and questioning what it is about these lives in the context of their social environments that was necessary for their success. This exercise is extended to pull in information from diverse societies and diverse identities within those societies, with the aim of finding something like a provisional overlapping consensus. We tentatively map the terrain (to borrow a metaphor from David Schmidtz) of a truly human flourishing from lived experiences, not just from a priori theory.

While there’s a role for ideal theory to provide insights and aspirations, it’s perverse to construct a theory of society in studious ignorance of what liberal economic historian Deirdre McCloskey has without hyperbole called the greatest secular event in all of human history: the marvel of modern economic growth. We now know in practice and to a large degree even in theory what caused the “Great Enrichment“. This is happy news since for practical political reasons we are anyway compelled to work from current institutions. Markets, a predictable money supply, constitutional democracy, overlapping and distributed governance (à la federalism), a tapestry of intermediate institutions (churches, unions, universities, and the like), and civic norms of trust and liberal tolerance are all necessary ingredients. These features are all adaptable to improvements and new understandings. The best path to meeting the basic capabilities of the disadvantaged and to expand everyone’s capabilities is to embrace our functioning institutions and get to tinkering.

The Capabilities Explosion

Capabilitarians need market freedom as much as classical liberals need capabilities. McCloskey’s Great Enrichment since c. 1800 could more aptly be described as a continuously unfolding Capabilities Explosion. There has always been wealth, measured in heads of livestock or silver. But market-led quality of life improvements have increased in kinds as well as quantities: the ability to travel quickly by a variety of personal and public means, even across the world in a day; fast, long-distance communication; effective human prosthetics like contact lenses, hearing aids, and pacemakers; effective climate control; private entertainment first in the form of radios and televisions and now tablet computers and realistic interactive games; and independent control of reproductive choices.

Plausibly, access to high speed Internet and smartphones should in the modern world be classified as basic capabilities given the centrality of social media in the lives of many. And it’s likely that within a couple generations we—just regular folks—will have access to boutique gene therapy, versatile cybernetics, Star Trek replicator-style 3D printing, and a personal menagerie of autonomous servants à la self-driving cars. The market increases the quantity and quality of currently understood basic capabilities, of course. But when individuals are given sufficient economic freedom, the market grows the basic capabilities set itself in unforeseeable ways. We are always still discovering what truly human flourishing comprises, and a dynamic market is the most powerful instrument at our disposal for this process of discovery.

Retiring the Final Guarantor

Most capabilitarians view the government as the ultimate backstop for remedying injustice, but this places an inappropriate faith in government, even if you readily accept that markets can fail and even incubate oppressive relations. Governments, even democratic ones, fail as well. Part of non-ideality, and an important contribution of libertarian theory to FMC, is the recognition that perfect justice will likely remain out of reach and that there’s very little that can be done about it. The libertarian philosopher Matt Zwolinski addresses this possibility in a discussion of government and market exploitation.

But even … assuming that the problem of unintended consequences can be avoided, there remains another problem. We can seek to ameliorate exploitation in the market by entrusting the state with the power to regulate the market for the common good. But in doing so there is a risk of reducing one sort of exploitation only by facilitating a different sort. As the early classical liberals noted, and as modern public choice economics has confirmed, the state can be a source of exploitation too, and the more power is put into the hands of the state to correct the deficiencies of the market, the more dangerous a source it becomes.

The challenge, then … is to design institutions that will effectively protect individuals from private exploitation at the hand of their fellow citizens, without putting them in too much danger of being exploited by the very powers originally established to protect them. This is a difficult and delicate balance to strike. But one thing is virtually certain—no set of institutions will successfully eliminate exploitation. A free society must try to minimize exploitation, or to reduce it as much as possible consistent with a proper attention to other relevant moral values. But utopia is not an option.

Citizens, especially the most marginalized, can find themselves caught between the state’s blunt mandates and prohibitions and the chilly indifference of the market. Utopia is not an option, but FMC principles suggest a certain flavor of policies the government can fruitfully pursue. These will be strikingly similar to Tomasi’s FMF. Instead of prohibiting certain potentially exploitative relations (like sex work or sweatshop labor), an FMC regime would seek ways of expanding the realistic options available to all.

A universal basic income could give individuals in exploitative relations—family or employer—the means to escape. School vouchers could introduce competitive pressures to improve public schooling while expanding the choices available to poor parents who want to avoid low quality schools and still others who just have idiosyncratic preferences in education. Liberal zoning policies would facilitate choosing where to live and set up shop with minimal bureaucratic hassle. And while no FMC regime could ever be described as “low tax,” it would strive to keep taxes as low as is consistent with raising sufficient “revenues to support governmental programs needed to give substantive value to citizens’ rights and liberties” [Tomasi 30%].

Subsidized health savings accounts combined with an open health insurance market could provide health security. Rules making medical costs transparent would create better informed health care customers, enhancing agency. Drug regulators would be more concerned with accurate risk assessment and public awareness rather than forbidding new products. Pharmaceutical free trade and “medical tourism” would be encouraged, while simple, low risk medical procedures could be performed by nurses and assistants. Lowering regulatory barriers in the context of a generous health safety net would both enhance health security—a basic capability—and expand the set of genuine options individuals face.

Free trade, freedom of movement, and peace expand opportunities and respect the choices and agency of individuals inside as well as outside the nation’s borders. A carbon tax preserves choices and utilizes market prices to reduce carbon emissions, and similar approaches can be used for other environmental imperatives. Like Tomasi’s market democracies, FMC regimes “may exercise police powers: controlling poisons and dangerous substances; providing genuinely public goods such as military defense and, perhaps, public roads and bridges. But the tendency … is to look to market-based solutions before turning to simple regulatory ones.” [Tomasi 29%]

Details matter, and I’m not particularly trained in the ways of the policy wonk. The above are just sketches. But the thematic features of FMC policies focus on striving to meet the basic capabilities of all individuals, to preserve individual choice and agency and avoid imposing a “one best way,” and to use market mechanisms like prices and property rights to direct incentives to socially beneficial ends. Important objectives are understood to be plural and sometimes conflicting, so no principle or policy is enshrined as untouchable. For example, as in Tomasi’s FMF, discrimination on the basis of gender, race, religion, etc, would be verboten in government institutions, but permitted (if discouraged) in private associations or ventures. But if it is determined that pervasive private discrimination is severely oppressing a particular group of people, then such private discrimination may be prohibited by force of law.

A FMC government should not be seen in all cases as the final guarantor of all capabilities, though policymakers should be cognizant of how well capabilities are being met and open-minded about possibilities for improvement. Government should only guarantee those capabilities it can be reasonably expected to provide well. Good health is a basic capability but that doesn’t mean the government should be involved in the industry if it has no special competency. Adequate nutrition is a basic capability, but a prosperous commercial republic (especially one with thriving intermediate civic institutions) may be able to feed even the poorest quite well without government involvement.

A Cosmopolitan Commercial Republic

The vision of a FMC democracy is that of a thriving, cosmopolitan commercial republic. People of all kinds interact in peaceful liberal tolerance. Individuals are free and able to pursue diverse life projects according to their varied conceptions of the good. One is exposed to different ways of living, and can choose the careers of a professional, a worker, a priest, an academic, an entrepreneur, etc, or mix and match various options. One may choose to emphasize the importance of work, or not. One may raise a family, or not. One may seek out the city life or the country or the suburbs, and migrate far from one’s birth and family or instead stay close to home. Neither race, nor religion, nor gender nor sexuality are destiny, and these aspects of identity don’t stack the deck against anyone. Culture is dynamic and freely mixing. Democracy is boisterous at all levels, for opinions on even basic capabilities and their relation to the state are reasonably contested. In short, people live their varied lives while in the background science, the market, and everyday experimentation fuel the Capabilities Explosion of human betterment.


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