John Roemer, a market socialist, has proffered an alternate, liberal model of socialism which he believes rectifies the previous failures of socialism under Marxist ideology. This “coupon” socialism model is an attempt to induce unanimity and decentralized cooperation by implementing a certain economic and political system which forces people to behave competitively and maintains an equal distribution of wealth and welfare. This paper will argue that Roemer’s model does not remedy entirely all of the flaws of Marxist Socialism but, perhaps, offers a more acute understanding of a conception of distributive justice that is absolute. Coupon market socialism frustrates efficiency; erodes traditional societal ideas; and, in certain aspects, violates liberties unjustly. The root cause of these detrimental consequences stems from the errors in the premises and design of Roemer’s model. Juxtaposing Roemer’s market socialism with Milton Friedman’s classical liberalism to reveal the former’s shortcomings, this paper will argue that market socialism, although a better rendition of socialism than Marxism and a valid method of implementing corrective justice, cannot be a perfect theory of both distributive justice and equality. In practice, the model is an unviable alternative to and an equally unjustifiable system as competitive capitalism.
In Roemer’s eyes, Marx’s conception of justice is wrong, and, consequently, Marx errs in designing the fundamental principles for his egalitarian ideology. Firstly, Marx mistakenly accepts the premise of accumulation of capital throughout history as exclusively being due to unjust transactions or claims (Roemer, “Revised” 272). Thus, Marx believes that there was an unjust inequality in capital ownership, which allowed the owners of capital to produce surplus value by exploiting the surplus labor of those that own nothing but their labor (Roemer, “Revised” 263). Such employment is exploitation because the capital which made this employment possible was unjustly accumulated. Secondly, formalizing this incorrect belief and its concomitant theory, Marx erroneously postulates three conditions for the actualization of exploitation: “(1) unequal ownership of the capital stock, (2) a labor market, and (3) scarcity of capital relative to the labor available for employment” (Roemer, “Revised” 268). The third condition is an undisputed premise about the nature of the world. The first condition is an observed fact of society and history; however, its blanket use as a condition for exploitation implies that all inequality is exploitation, injecting the false premise of all accumulation being thoroughly unjust. The second condition, then, is the instrument that allows the first condition to take effect. Thus, Marxist ideology mistakenly focuses on the point of production to find a remedy for exploitation (Roemer, “Revised” 273). If any employment of another is unjust and the market is the tool for employment, then it reasonably follows that dissolving the market will stop such injustice. According to Roemer, this conclusion of Marxist ideology is incorrect due to the flaws in its foundations.
Contrary to Marx, Roemer acknowledges that capital accumulation can be a product of transactions or claims that are not inherently unjust. In particular, Roemer recognizes the roles of effort and merit—“hard work or inventiveness”—in capital accumulation (“Revised” 272). Not all unequal ownership of capital can be deemed unjust as a consequence of its acquisition; therefore, if capital accumulation and the resulting employment of others is just, then a labor market with only such just employment is not exploitive. Thus, the second condition for exploitation will not induce exploitation if not paired with the first condition. Roemer argues that Marx’s labeling of such activities as exploitive is a “false positive” (“Revised” 272). Realizing that the labor market and point of production is not the source of injustice, Roemer points to the source as being the inequality in ownership of capital stock (“Revised” 274). Building on the altered premise about methods of capital accumulation, Roemer identifies another error in Marx’s theory—a “false negative” (“Revised” 291). Unequal ownership of capital is unjustifiable if its distribution was a product of coercion or arbitrary happenstance. For example, if one were born on an empty island and lay a possessive claim to the entirety the island, it would be unjust to preclude another who happens to be born there afterward from laying equal claim to the island. Like the chronology of births, Roemer believes innate traits that are a consequence of “the luck of the birth lottery” are also arbitrary (“Revised” 280). All unequal distribution that does not arise due to choice is unjust, and thus, employment enabled through capital which was accumulated as a result of arbitrary traits is exploitive. Marx is wrong to not label these instances as such. Thus, according to Roemer, Marx’s idea of justice as an elimination of exploitation should be replaced with an idea of justice as the elimination of distributive injustice (“Revised” 304).
The subsequent communist and socialist governments which adopted Marxist ideologies failed primarily as a result of Marx’s initial errors. Marxist socialism manifested itself as two main principles in practice: “that one must abolish markets and, especially, the labor market, and that capital should be owned by the people collectively, represented by the state (and the party)” (Roemer, “Revised” 273). Without markets, people have no way to cooperate individually. It follows that the ownership of capital cannot be decentralized as people are not acting as individuals. Collective ownership was not realized as each individual having an equal, private, and separate share of capital ownership. Instead, the collective was viewed as all people comprising a sovereign body, which is represented by a government acting in accordance with the collective will. Thus, collective ownership was implemented as state ownership. Moreover, socialist and communist states held a false belief of the “socialist man” transformation to solve the perceived shortcomings in Marx’s theory (Roemer, “A Future” 457). With no labor market and a permanent allocation of capital, the “socialist man” was believed to become motivated by serving the public good.
According to Roemer, the school of socialist ideology emerging from Marxist theory was misled due to these initial misunderstandings and erroneous premises. As a result, the ensuing designs of Marxist socialism had three flawed characteristics which prevented the solution to fundamental economic problems. First, the Marxist principle of eliminating markets also eliminated competition. Second, the Marxist principle of collective ownership as state ownership gave control of capital, and thereby firms, to the government. Third, “noncompetitive, nondemocratic politics” had to be used to implement these principles (Roemer, “A Future” 457). These characteristics were severely detrimental to efficiency and productivity. The first characteristic caused a lack of innovation: without competition, no one is forced to innovate (Roemer, “A Future” 460). The socialist spirit was not powerful enough to induce a “socialist man” transformation, which would have solved this problem; however, it did have the power to further hinder capitalist innovation by devaluing consumer gratification. The second characteristic of socialism—a command economy of state ownership—also played a role in diminishing innovation as the highly-skilled would be not be employed by consumer-oriented enterprises (Roemer, “A Future” 460). Furthermore, as a result of the Marxist principles of no markets and state ownership, socialists refused to utilize economic incentives, which is the solution to the fundamental problems of an economic system in a capitalist economy. First, the combination of the first and second characteristics prevented the solution to the “manager-worker problem,” causing a lack of motivation and incentive for the worker to be productive and efficient (Roemer, “A Future” 458). Second, these characteristics induced conditions wherein managers of firms had little incentive to work in the interests of the firm’s owners and, in turn, has a certain leverage over them. Thus, without economic incentive, the “planner-manager” problem will devolve into a bargaining relationship between managers and politicians (Roemer, “A Future” 458). Lastly, the third characteristic of Marxist socialism prevented the solution to the “public-planner” problem: “[P]olitical competition is required to empower the public, and this was thoroughly squashed by Communist parties” (Roemer, “A Future” 458). Roemer holds these defective characteristics and their corresponding problems, which stemmed from and reified the initial errors in Marxist ideology, as responsible for the failure of socialist models designed according to Marxist principles.
As an alternative to the flawed model of traditional Marxist socialism, Roemer offers a model of market socialism that utilizes a coupon-based system. Having identified the errors of Marxist socialism, Roemer reformulates the ethics of socialism, focusing on distributive injustice rather exploitation (“Revised” 263). According to Roemer, distributive justice requires “socialist equality of opportunity” if one accepts the aforementioned premise of luck egalitarianism, which dictates that justice requires the equalization of opportunities due to social circumstances as well as “the luck inherent in the distribution of inborn traits” (“Revised” 304). By requiring the “compensat[ion] for handicaps…induced by factors over which [one has] no control,” socialist equality of opportunity enables the realization of three specific equalities: the equality of opportunity for self realization, equality of opportunity for political influence, and equality of social status (Roemer, “A Future” 454-455). Based on this intent, the tangible goal becomes choosing a “policy that renders the different type-distributions of wages as similar as possible,” and in ideal theory, such policy would “measure the degree of effort of an individual by his rank in the effort distribution of his type” (Roemer, “Revised” 302). The question for Roemer then becomes—how to fashion a system that can achieve socialism’s desired distribution of capital “without unacceptable costs in efficiency” (“A Future” 456).
Roemer’s coupon-based model of market socialism is an answer to socialism’s design problem. Roemer seeks to maintain efficiency by allowing a market economy, which will sustain competition and, in turn, innovation (“A Future” 469). Through the market, the autarky of individuals is maintained and cooperation is decentralized. But how can the socialist equality of opportunity be implemented in such a market economy? Roemer responds with a coupon system which distributes equal amounts of the ability to invest in capital stock (“A Future” 461). Individuals are all given a certain amount of coupons which they can invest in a mutual fund, which in turn invests the coupons into firms. Mutual funds receive profits proportional to their ownerships in their respective firms. Individuals receive a share of profits from the mutual funds that is proportional to the amount of coupons they invested. These coupons cannot be sold, inherited, or gifted, but they are still an effective incentive for firms because coupons can be exchanged with the treasury for investment funds. Banks can also extend loans to firms, monitoring and maintaining the portfolio of firms in which it is invested. In this model, no one group of individuals have majority ownership in any firm; thus, Roemer argues that no one will have a special interest in increasing levels of public bad (“A Future” 467). This partial equalization of wealth in combination with a demogrant will equalize the differentials in the market’s distribution of wealth to the extent that the distribution is due to arbitrary or coercive means. For Roemer, individuals should not have differences in the allocation of wealth assigned to them by the circumstances of their birth. Coupon socialism would equalize this distribution of wealth. The differences in wealth as a result of salaries from occupations are not equalized as these differentials are viewed as a consequence of choice and not luck. The socialist market economy will require individuals “to participate in the cooperative social project” (Roemer, “Revised” 312). The tragedy-of-the-commons problem which Marxist socialism faces will be solved by a “socialist ethos” (Roemer, “Revised” 309). As capitalist spirit provokes a Nash equilibrium, Roemer argues that the socialist ethos will instill a Kantian logic for decision-making. The Kantian equilibrium differs from the “socialist man” transformation because individuals are not acting altruistically in the former; rather, they are acting selfishly to maximize their own benefit. Thus, Roemer argues that, within his coupon market socialism, competition and efficiency are maintained while distributive injustice is eliminated.
Milton Friedman’s model of competitive capitalism is starkly different than Roemer’s coupon socialism, advocating for “a reduction of government intervention not an increase” (Friedman 39). However, the classical liberal and market socialist ideologies overlap on many grounds. The differences in their manifestation can be traced to fundamental differences in their ideologies. In fact, Roemer’s model can be viewed as a refining of the principles in Friedman’s liberal theory. Friedman may even accept the theoretical principles for such a model in some cases but be critical of its design and implementation. Specifically, Friedman would likely be critical of its coercive method of implementation, deference to justice, inheritance laws, lack of economic freedom, definition of property rights, and demogrant redistribution. What are the fundamental differences which would cause Friedman to be so averse to Roemer’s model?
For Friedman, the government’s role depends on how it decides to resolve conflicts between incompatible freedoms (29). He would likely disagree with how Roemer views freedom and resolves conflicts between freedoms. Roemer attempts to eliminate coercion on the grounds of justice, giving deference to political freedom while allowing the sacrifice of individual, economic freedoms. Although Friedman agrees that coercion should be eliminated, he would disagree with the extent to which Roemer eliminates coercion. Friedman believes the government should only eliminate “positive harm” and not “negative harm” (96). To eliminate negative harms, Friedman claims, would be a deprivation of personal freedom (16). He reasons that a socialist society cannot be democratic because it does not guarantee these individual freedoms (15). Building on this argument, Friedman would likely also be critical of Roemer’s ban on ownership through inheritance. Friedman believes that being able to gift wealth to one’s offspring is an inherent part of economic freedom, and banning such gifts for purposes of justice instead of coordination is wrong (136). Similarly, regulations which ban individuals from investing their capital stock (i.e. coupons) as they see fit—whether it be directly investing in a firm or selling to another individual—would not be approved by Friedman as they hinder economic freedom on the grounds of justice and redistribution, not coordination. Here, proportional representation is exchanged for coercive conformity in the eyes of Friedman.
Both Friedman and Roemer acknowledge that property rights are social creations (Friedman 30). Roemer proposes redefining property rights by redistributing all capital ownership evenly. Viewing current inequalities of ownership as a result of unequal ownership or arbitrary traits, Roemer wants to level the playing field to eliminate the injustices of the past. Such a drastic change in ownership would surely need to gain acceptance in order for people to voluntarily cooperate. Friedman would criticize this change in property relations on two grounds. First, Friedman would denounce a change in property relations when the current system of property rights already has general acceptance. For Friedman, this acceptance is far more important than the actual definition (30). Secondly, Friedman would argue that equally redistributing ownership at the present point in time will unjustly negate all ownership that has come about as a result of effort up to that point. Thus, he would not permit the violation of liberty of any individual who accumulated his capital and property through effort despite living in a world of unjust accumulation through the birth lottery.
Even if such a definition of property rights were to gain acceptance with a majority of people, Friedman would object to its implementation. Roemer proposes coupon socialism as a model to create cooperation, but it is implemented through uncooperative means (“Revised” 311). The principles in Roemer’s model permit a tyranny of a majority for its implementation, conjecturing that unanimous cooperation without conformity will be created as a result. Friedman would argue that such coercive implementation, which must violate the freedoms of a minority, is wrong and should only be utilized as an expedient (28). The issue of property rights creates the basis of societal law and order and, thus, is of utmost importance. According to Friedman, the opinion of the minority will be very strong as people are loss-averse. Therefore, people may not resort to majority decisions on such issues, and if they do, the size of the majority must be overwhelming (Friedman 28). Friedman believes that cooperative coordination without coercion can only exists if all “parties to an economic transaction benefit from it” (19). Since changing property relations would be against the interest of many capital owners, they would be vehemently against coupon socialism. Thus, to implement Roemer’s model, the government would have to coerce all individuals who would not vote for the model for it would be against their self-interest. Such coercion causes “substantial conformity” (Friedman 27). In this case, Friedman would argue such coercive implementation reflects “a majority impos[ing] taxes for its own benefit on an unwilling minority” (159). Roemer’s model does not “eliminate the conflict” by fixing the disadvantages that people face; instead, it compensates some individuals for their disadvantages by “forcing [others] to act against their own interest” (Friedman 165). Friedman would be highly critical of the model’s use of coercive power to enforce the tastes and attitudes of some on others (166). Thus, he would argue that Roemer’s end goal which “can be attained only by the use of bad means must give way to the more basic end of the use of acceptable means” (27). Reorganizing property relations through coercion by the state would be unjust, for Friedman believes that “two wrongs do not make a right” (137). Instead, Friedman would suggest that, as an acceptable mean, supporters of Roemer’s model should persuade the minority through advocacy in order to attain the desired equality (22). These qualms with Roemer’s model can be characterized not as attacks on the substantive content of the theory but rather as criticisms of its premature implementation: “Impatient with the slowness of persuasion…to achieve the great social changes…, they are anxious to use the power of the state to achieve their ends” (Friedman 166). However, this is not to say Friedman would not also be critical of such implementation if it weren’t premature. In a scenario where the majority does convince the minority through persuasion to adopt Roemer’s model, Friedman would argue that the design should be implemented through proportional representation of individual freedoms rather than conformity through political channels. If the implementation of the model is in fact unanimous, then private charity would be effective in redistributing capital ownership and explicit laws would not be needed (Friedman 157).
Moreover, Roemer claims coupon socialism will reallocate profits without detrimental effects on efficiency (“A Future” 454). However, Friedman would dispute this claim and be critical of Roemer’s design. In theory, coupon socialism would aim to equalize income between different type-distributions (Roemer, “Revised” 302). Thus, two individuals of varying levels of merit, who put in equal effort to create the same product, would be paid equally despite the high-merit individual creating a better product. According to Friedman, such an equalization of merit-based wealth will create inefficiency: “unless an individual receives the whole of what he adds to the product, he will enter into exchanges on the basis of what he can receive rather than what he can produce” (137). Friedman would contend that some traits—those relevant to productivity —must be discriminated against by the market in order to be fully efficient (26). If Roemer wants to fashion a market that does not discriminate based on merit, then Friedman would maintain that the costs in efficiency are obstructive. He would predict that, as people realize that they will only be compared to those in similar circumstances as them, competition will decrease. Those who are in disadvantaged groups with bad circumstances may decide to decrease their level of effort in response to the decrease in their competition.
Friedman vehemently argues against taxes for purposes of redistributing of wealth, and these arguments directly apply to Roemer’s use of redistribution of capital and a demogrant (Friedman 143). Instead of creating equality through a redistribution of wealth, Friedman would advocate for eliminating the sources of unequal opportunity so the distribution of wealth is naturally equal: “the operational virtue that they strike at the sources of inequality rather than simply alleviating the symptoms” (145). Compensating for inequalities through money is not a framework which eliminates the initial inequalities but a method to compensate after-the-fact. Although redistributing capital does eliminate initial inequalities in capital ownership, it does not directly eliminate the inequalities of merit or luck—simply compensating for them instead. To eliminate these inequalities, Friedman would use the education system to improve the skill levels of those who were born with low levels of merit (145). Friedman would also attack the demogrant on its philosophical grounds. In Roemer’s model, a demogrant is used to redistribute wealth even once there is a socialist equality of opportunity. This blatant redistribution would be unjust according to Friedman because it would create equal outcomes for individuals who have worked at unequal rates (134).
Lastly, Friedman would most likely believe Roemer’s model is substandard due to its high potential for future danger. Coupon socialism requires a high level of government interference, and therefore, would be a shift toward a more totalitarian state, regardless of whether there is unanimous support for it. Like the America’s Founding Fathers, Friedman was wary of tyranny and the concentration of power in the hands of the state. As it cannot work without every individual’s participation, coupon socialism cannot function with Friedman’s ideal of a limited government, and in turn, it would not “enable men to most easily escape coercion for a better alternative” (Friedman 21). Furthermore, the model’s regulations on how individuals and firms can use coupons “interfere[s] with [their] freedom to enter into voluntary contracts with one another” (Friedman 95). As a result, all contracts would be subject to the state’s approval—a blatantly totalitarian feature. Giving Roemer the benefit of the doubt regarding the unanimous cooperation of coupon socialism, Friedman would still avoid such a system for fear of future danger: “those who control the power today may not tomorrow” (11). If the state is given such immense power today, Friedman conjectures that it will become corrupted at some point thereafter. Friedman illustrates one such example of power’s capacity to corrupt its proprietor: “once fiduciary elements have been introduced, the temptation for government itself to issue fiduciary money is almost irresistible” (42). Coupons are a fiduciary currency as they impart trust that the contracting party will perpetually pay future sums of money. With a coupon system, there is no safeguard which prevents the government from giving extra coupons to a select few. The government, although representing the collective will, is operated by fallible individuals who have conflicting personal wills. Giving “so much power and so much discretion to a few men that mistakes…can have such far-reaching effects,” coupon socialism is substandard due to the concentrated power the state must wield for its administration (Friedman 49). In addition to its totalitarian design, the premature implementation of coupon socialism has its own potential for future dangers as well: “any minority that counts on specific majority action to defend its interests is short-sighted in the extreme…In the absence of such a self-denying ordinance, majorities [will]…use their power to give effect to their preferences…not to protect minorities from the prejudices of majorities” (Friedman 97). With the belief that unanimous agreement cannot be achieved for coupon socialism because it will not benefit everyone and thus a minority of dissenters will always exist, Friedman believes the implementation of Roemer’s model will destroy the “self-denying ordinance” which dictates that a minority cannot be coerced by a majority. The majority who implemented coupon socialism has no principle grounds for refusing subsequent majorities, effectively creating a perpetual tyranny of momentary majorities.
In response to the critiques of Friedman, one can argue that Roemer’s model is in fact committed to freedom, simply refining the conceptions of freedom and coercion as presented in Friedman’s Capitalism and Freedom. Friedman desired a competitive market which is characterized by its impersonality (102). In such a competitive capitalist market, Friedman claims that “residual discrimination” is “mistakenly attributed…to the market” (26). Roemer would argue that this is no mistake—the residual discrimination that some face is a direct result of the capitalist market’s feature that allows the arbitrary discrimination to take effect. Accepting the premise of the market functioning according to an unequal ownership of capital that is due to initial inequalities in ownership and morally arbitrary traits, Roemer would contend that clearly, following Friedman’s line of reasoning, the market cannot be impersonal as each well-endowed individual would “determine the terms on which other participants…have access to goods or jobs” (Friedman 102). One class of citizens effectively dictates the competitive capitalist market: “Existing imperfections in the capital market…make [some] individuals a ‘non-competing’ group sheltered from competition by the unavailability of the necessary capital to many able individuals” (Friedman 90). Thus, Roemer would question Friedman—isn’t such a society a status society that is characterized by “differences in long-run income status” rather than “equality of opportunity?” (Friedman 141).
The presumptions made by Friedman are the point of attack for Roemer’s theory. Friedman recognizes that voluntary cooperation requires the state to “prevent coercion of one individual by another” (Friedman 31). According to Roemer, competitive capitalism does not prevent such coercion, and Friedman wrongly presumes that if ownership is initially equal then any resulting inequalities due to the market are not coercive. If a monopoly is characterized by the "limitation [it places] on voluntary exchange through a reduction in the alternatives available to individuals,” then isn’t the limitation on alternatives to how one participates in the market also a monopoly by one class of well-endowed citizens? (Friedman 102). Roemer would contend that, as freedom necessitates voluntary cooperation, coupon socialism better protects freedom as it prevents coercion that results from unequal opportunity. Here, Friedman may invoke the argument of coercion being different than constraint and power being different than freedom (18). Friedman would argue that Roemer’s model eliminates constraints rather than coercion; in turn, Roemer’s model can be seen as a government committed to equalizing outcomes of power rather than protecting freedom. Yet, Friedman accepts that his theory does not offer a “hard and fast line” for the appropriate extent of government interference—whether to eliminate inheritance and merit-based inequalities. Thus, Friedman would likely defect to condemning coupon socialism for its design which would seemingly fail to his “balance sheet” test (34). To justify the extent of government action that he suggests, Roemer would likely point out a flaw in Friedman’s reasoning: when talking about redistribution of ownership that is a result of pure luck, Friedman falsely believes such distribution would be a redistribution of all wealth that “exceeds the average [wealth] of all persons” (137). Roemer would object to such reasoning, claiming only arbitrarily generated ownership must be subject to such redistribution. In response to possible counterarguments, he would also claim that this case is different than a gambling scenario as gambling involves voluntary choice for entry while the birth lottery has no aspect of choice—that is, it is solely based on luck.
In regards to the design of Roemer’s model, Friedman would point out that, because the coercion must be used for its implementation, it will not be sustainable by design as there will not be a “broad underlying social consensus” (29). In response, Roemer would invoke the argument of Kantian equilibrium (“Revised” 308). If the model is implemented, unanimity and cooperation would be its direct product. Friedman acknowledges that the capitalist free-rider and tragedy of the commons problems are due to not being able to ensure the actions of everyone else (157). The Nash equilibria of competitive capitalism is created due to the spirit of the system—the belief of what everyone else will do. Roemer would claim that coupon socialism, which cultivates an ethos of solidarity, solves this problem because it induces a Kantian logic (“Revised 310). The assurance needed to maintain the Kantian equilibrium is created by coupon socialism’s allocation of capital stock and participatory requirement. With no one class of capital owners and laws that ban transfers of capital, all individuals will be forced to work and participate in the market for subsistence. Thus, there are no free-riders. With this newfound assurance of equal effort by others, everyone is more likely to be productive because they will get the whole of what they toil. However, Roemer acknowledges that the Kantian equilibrium cannot be instilled without an initial tyranny of the majority, and thus, Roemer’s design cannot sustain the “broad underlying social consensus” that is needed.
Both competitive capitalism and coupon socialism are essentially tyrannies of different majorities. The two majorities vary only in regards to how much the state should compensate the individual for initial inequalities. This decision is dependent on what value the collective citizenry decides is more important—efficiency or fairness. One can argue that competitive capitalism is the better system as it relies on a majority only as an expedient, whereas coupon socialism relies on a majority even in principle. One can also claim that competitive capitalism is the better theory as it severely limits the power of the state, which is a precaution for future dangers. These are all valid arguments; however, the major reason why competitive capitalism must be chosen over coupon socialism is due to the latter’s flaws in design.
Firstly, mutual funds cannot operate efficiently as the incentive problem which prevents the solution to principal-agent problems is rehashed. For Roemer’s model to work, the total number of coupons must equal the “total coupon value of stock held by citizens” and the “aggregate equity of firms in the public sector” (Roemer, “A Future” 463). Additionally, mutual funds must work hard to compete against other mutual funds in order to acquire the best investments. However, there is no incentive for the mutual funds to do their jobs properly. They are entities which are not paid according to the market. Access to mutual funds must be egalitarian, and therefore, payment in dollars to mutual funds will create inequalities. If incentive for mutual funds were to be created by allowing mutual funds to take a cut from the profits of its shareholders, then the total value of coupon stock would not equal the aggregate equity in firms owned by the public. If such a percentage fee were implemented, mutual funds would become powerful financial institutions which would severely threaten equality. If incentive were to be created by payment from the government, then the manager-worker and planner-manager problems that crippled Marxist socialism would similarly bring the demise of coupon socialism.
Second, in capitalist markets, CEOs and upper level officials are usually given shares in the firm to align their self-interest with the firm’s interest. In Roemer’s model, this arrangement is not possible. With no way to make these officials overwhelmingly invested in the company mission, firms will experience a loss in efficiency. Additionally, if we assume that CEOs have the hardest job at the firm, then, without compensation in shares, the salary for an executive may not be enough to compensate for the immense labor required by the position. People may become averse to high-ranking jobs, and, in turn, innovation, productivity, competition in the labor market, and efficiency will decrease.
Third, although innovation is maintained in coupon socialism, it’s largely limited to firms. On theoretical grounds, Roemer is undecided on whether all firms must be nationalized (Roemer, “A Future” 471). However, his design for coupon socialism cannot exist with the presence of private firms as this would create large disparities and motivate the owners of the private firms to campaign for a public bad. If private firms are not allowed, entrepreneurs may become discouraged as they cannot keep the firm they create. The entrepreneurs who are ready to sell their firms to the public sector must be fairly compensated. In turn, these entrepreneurs would become the very wealthy elite. In the case that compensation is not fair according to market value, entrepreneurs may once again become discouraged as there is little monetary incentive for the labor needed to create a firm. With little incentive, there is likely to be an inevitable brain-drain of talented and masterful individuals who are experts in their fields. These individuals would likely leave such an economic system in order to better realize their potentials in a more unregulated market.
As a result of these design problems, Roemer’s model of coupon market socialism is not a practical alternative to competitive capitalism. With a lack of safeguards, the model creates high potential for future danger. The flaws in its design inhibit efficiency and productivity. Its implementation through coercion destroys the sanctity of inviolable rights. Thus, although Roemer’s coupon socialism is likely to fare better than Marxist socialism did, its flaws do not make it sustainable.
Works Cited
Friedman, Milton, and Rose D. Friedman. Capitalism and Freedom. With a new Preface by the Author ed., University of Chicago Press, 1982.
Roemer, John E. “A Future for Socialism.” Politics & Society, vol. 22, no. 4, 1 Dec. 1994, pp. 451–478.
Roemer, John E. “Socialism Revised.” Philosophy & Public Affairs, vol. 45, no. 3, 2017, pp. 261–315.