Families vs markets

Stuart White has a great post about the Orange Bookers. I’d just like to pick up an issue he raises.
He says Orange Bookers regard a free market economy as a moral baseline, in contrast to liberal egalitarians such as Rawls, who regard equality as the baseline. This yields contrasting attitudes to child trust funds. Whereas OBers see these as an intrusion  onto the market economy, liberal egalitarians see them as a way of satisfying a principle of justice - that all citizens start their adult life with reasonably equal endowments of wealth.
One question this raises is: why should there be a presumption in favour of the market economy?
The natural answer is that individuals know what’s best for themselves. So in a free economy their choices about spending and saving will maximize their well-being.
However, many market decisions do not involve an individual spending for his own benefit. Instead, he is taking decisions about others - namely, his children. And as Milton Friedman said, when you spend your own money on someone else, you “don’t pay anything like as much attention” to maximizing their well-being.
This raises the possibility that some people don’t know or care what’s best for their children. The upshot is that, in a free market, some people - those with bad parents - will suffer.
In this context, we can regard child trust funds not just as an egalitarian move, but as a means of correcting a form of market failure - the fact that some parents under-provide for their offspring and so markets don’t maximize well-being .
What can be wrong, in principle, with this?
One could deny Friedman’s argument, and argue that parents are altruistic and well-informed, and so spend on their children as well as they do on themselves. But this is surely just false. And it rules out the possibility of complaining about a “broken society” and bad parenting.
Alternatively, you could reject the methodological individualism here, and argue that the basic unit of society is not the individual, but the family.
But this has horribly illiberal implications. It means you have no grounds for objecting to the oppression of wives and daughters in traditional (Muslim?) families. If the family is the basic unit of society, then honour killings are no more morally objectionable than suicide - which is stupid.
The point I’m driving at here is simple. The standard argument for free markets is not an argument for the state keeping out of families. Interventions into family life - such as child trust funds - are quite consistent with recognizing the virtues of free markets. Aren’t they?

Comments

[Luis Enrique]

I don't understand. "intrusions in the market economy" are certainly "consistent with recognizing the virtues of free markets" - what else is the second welfare theorem?

[Rob]

In this context, we can regard child trust funds not just as an egalitarian move, but as a means of correcting a form of market failure - the fact that some parents under-provide for their offspring and so markets don’t maximize well-being .

Yes, which is why the abolition of the CTF was always tied to the creation of the pupil premium, designed to ensure extra investment in poor children during school years. One can argue about whether this is more or less effective than the CTF in promoting long-term improvements in welfare for the child, but it represents a substantially bigger financial commitment from the state than the CTF did, and does not rely on private saving on behalf of the parents in order to be useful. I think the question of impact is an empirical one, but I can't see why it is, in principle, less egalitarian than the CTF.

[Rob]

Bah, the 'blockquote' tag doesn't work :-(

[Rob]

I should also point out that the cost of the CTF was around £580m/year at its peak in 2014-15, and the pupil premium costs £2.5bn. It is thus a far larger transfer of resources, which is hardly consistent with Stuart's interpretation of the values of 'Orange Bookers'. If we regard it as a transfer of resources to the kids, it represents a far greater sum than the CTF ever did and is thus, if anything, more egalitarian.

[Marcus Warner]

In Wales we topped the CTF up with an extra payment.

The point about market failure is bang on the money.

The pupil premium is England only, but although I like the principle, I just don't see it fitting well with the 'Free Schools' idea.

***

My first comment. Regular reader, great stuff.

http://plaidpanteg.blogspot.com/2010/05/condems-rogue-traders.html

[Laura]

Surely the child trust fund was anti-egalitarian, in that it only provided £250 per child, but its key purpose was to encourage families to add extra funds to it (hence its award at birth rather than the promise of a lump sum to 18 year olds), thus increasing the gap between rich and poor, as those on the minimum wage with 6 children are unlikely to be able to add much money to each child's fund, whereas high earners, especially those with only one or two children, are able to add a significant amount for each child.

And what about those children who have arrived Britain after the cut off point that determines whether you receive the payment or not? Is it egalitarian for them?

You could easily argue that doing nothing at all (and particularly in no way providing tax breaks to rich parents saving under their child's name) is a more egalitarian policy than the child trust fund.

[Alex]

"One question this raises is: why should there be a presumption in favour of the market economy? The natural answer is that individuals know what's best for themselves."

Here is where your argument goes wrong. The argument for the free market would be that individuals know what the best use of their money is (in general).

I also think you are mistaken on Rawls. Rawls didn't argue for a presumption in favour of economic equality. He argued for the difference principle, a maximin condition.

And having a presumption in favour of markets is not anti-egalitarian. Most people think that way. Very few people have a presumption of government. It's a fairly common idea, that if you want government to do something, you have to justify it. Reasonable people can then differ on what justifiable interferences government can take. Whether someone is an egalitarian or not is surely to do with how much and why they want to interfere in the market.

Also, the abolishment of the Child Trust Fund was in the Liberal Democrats 2005 manifesto, when Kennedy was leader, which goes against the idea that there has been or is now some turn to the right by the party.

[alanm]

Rawlsian equality:

Yes I'm not sure Rawls wanted cash equality.

And if that is the aim then means testing CTF would be better than the general sum of money given even to those who don't need it.

Illiberal family:

I don't think even liberals want to give children equal rights. That an 8 year old shouldn't be allowed to vote or drive is not illiberal, just unavoidable.

[DJK]

Children are not just other people they are a part of oneself, so that parents spending on their children is (for most normally constructed people) as efficient as if they were spending on themselves.

[Charlie]

"their choices about spending and saving will maximize their well-being ... we can regard child trust funds ... as a means of correcting a form of market failure - the fact that some parents under-provide for their offspring and so markets don’t maximize well-being."

To echo Alex above, this isn't a sound argument, and there's also a bit of question-begging about it, in that you seem to assume that a market system would maximise well-being if corrected in just the right way. But choice-making in itself doesn't necessarily maximise either an individual's well-being nor collective well-being (if that's something that can be assessed). Even assuming optimal judgement, choices are constrained, and some people are operating under worse constraints than others. We don't have a situation - at least, I don't believe we do - where people will rest content knowing that they got to choose, no matter the outcome.

[jameshigham]

One question this raises is: why should there be a presumption in favour of the market economy?

The simple answer is that the alternative lets in the Marxists and federalist oligarchs. As everyone knows, Stage 5 is never achievable - it always stalls at Stage4. Marx knew this well and so do the globalists pushing us towards the new financial order.

Again, it is the delusion that we have any control. Current state of play:

http://jessescrossroadscafe.blogspot.com/2010/05/m3-hysteria-and-look-m2-mzm-gdp-and-ppi.html

[Fred Kapoor]

I totally agree with @Alex with the wrong part of the argument being "One question this raises is: why should there be a presumption in favour of the market economy? The natural answer is that individuals know what's best for themselves." And I'd like to add that I don't know if the majority of the individuals really know what they do with their money, not because they are not capable of being aware of it but becasue we are sort of the victims of a confusing a tricky market.