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Liberty + Leadership Podcast – Jim Otteson on Economic Liberalism


Dr. James (Jim) R. Otteson is the John T. Ryan Jr. Professor of Business Ethics at the University of Notre Dame and a senior scholar at The Fund for American Studies. As a renowned political economist, he specializes in business ethics, political economy, the history of economic thought, and eighteenth-century moral philosophy. For over 25 years, Jim has dedicated himself to teaching economics at some of the country’s most prestigious schools including New York University, Yeshiva University, Georgetown University, and the University of Alabama. Jim holds a bachelor’s degree from the University of Notre Dame and a doctorate from the University of Chicago.

In this week’s episode of the Liberty and Leadership Podcast, TFAS President Roger Ream ’76 and Jim take a deep dive into economic theory, discussing Adam Smith’s seminal book, The Wealth of Nations; the defense of economic liberalism in Robert Nozick’s book Anarchy, State, and Utopia; the juxtaposition between reducing poverty and increasing inequality; and why Jim’s next book will focus on universal concepts of human dignity.

Episode Transcript

The transcript below is lightly edited for clarity.

Roger Ream [00:00:00] Hello and welcome. I’m Roger Ream and this is the Liberty and Leadership Podcast, a conversation with TFAS alumni, supporters, faculty and friends who are making a real impact in public policy, business, philanthropy, law and journalism. Today I’m joined by Professor James Otteson, a TFAS senior scholar and the John T. Ryan Jr. Professor of Business Ethics at the University of Notre Dame. When he’s not teaching, Jim is writing books with the newest and ninth book getting released just this past December. We’re going to hear from Jim about his interesting books on economics and philosophy, his work with TFAS and what it is like to be a full-time professor while also spending time writing many books. Jim, congratulations on your new book and thanks for joining me today.

Jim Otteson [00:00:56] Thank you very much, Roger. It’s a pleasure to be with you.

Roger Ream [00:00:59] We’re here in sunny Amelia Island, Florida, at our TFAS Donor Conference and you’ll be speaking tonight after dinner. We appreciate you joining us. Could you give us a hint of what you’ll be talking about tonight?

Jim Otteson [00:01:14] Yeah, the topic tonight, I think it’s not just going to be me, I think Anne Bradley it’s going be joining me on the stage, but I think we’re going to have a discussion about some of the misconceptions about capitalism. So, what is capitalism, what is it not? Some of the objections people raised to it, some of the worries they have about it, and in particular are some of the worries that they raise or some of the legitimate concerns that are raised about it, really about capitalism itself, or is it about things that are related to capitalism? You know, one little example of that is, I think many of the real concerns people raise about market economies or countries in which you have something of a market economy, I would put under the heading more of cronyism than capitalism. But those things get conflated a lot and so people tend to see them all as being one thing, but I do think it’s important to separate those sorts of things out because there might be benefits and liabilities to capitalism, but it’s a very different thing from cronyism.

Roger Ream [00:02:06] Yeah, well, just if you take the word capitalism, I know I’ve seen surveys that show support or comparisons between socialism and capitalism. And when they ask young people, it’s about an even tie with about a third not knowing which one they care. But if you ask the same question and use the word free enterprise, it does much better than the word capitalism. Do you still use the word capitalism? Do you like it or do you try to shy away from it?

Jim Otteson [00:02:32] I don’t like the word okay. And, you know, I have a sort of philosophical reason for not liking the word, but also really a kind of rhetorical or strategic reason, because the word capitalism is a loaded word with a lot of baggage, you know, and it was, after all, Karl Marx who popularized that word. Adam Smith never used it. So, Adam Smith wrote about capital, and he wrote about capitals, things you own or invest, assets you might have. But this notion of capitalism as sort of a syndrome, almost kind of like a disease, as Marx thought of it as kind of a disease of soul. This was, you know, Marx popularized this idea. So today, you know, bringing it into the 21st century, if somebody calls you a capitalist, that’s usually not meant as a compliment. You know, that’s a derogatory pejorative term. And the real and but I think the real sort of reason to avoid terms like that, because a lot of the ism terms, capitalism or capitalist socialism, socialist, when you use, when you begin a discussion with those terms, people on various sides of those issues are going to start to dig in their heels immediately because they’re feeling like, okay, this is a battle and I need to defend myself against whatever the other side is. I think it’s much better to say something to begin with, something like, look, let’s discuss some shared values. Poverty is a problem. Poverty is a has attendant miseries. We would agree with both. No matter what side you’re on, you’re going to agree with that. Let’s ask ourselves and maybe do some investigation into what system of political economy, what kinds of institutions seems to do the best at enabling people to rise out of poverty, minimizing the attendant miseries of poverty. And that’s a way that we can begin having a conversation no matter what side of the issue you’re on. And there I think I mean; I know the kinds of poles you’re thinking about where, you know, people say, well, you know, they’re not sure about capitalism and socialism. But to be honest, Roger, I think a lot of the people who are asked in those polls, if you ask them, define capitalism or define socialism, they probably couldn’t do that either. I mean, they probably think, you know, capitalism is something like it’s fine to be, you know, a selfish, greedy so-and-so and, you know, everybody wants to get theirs and they’ll stab other people in the back if they want. Well, who’s going to be in favor of that. And then what is socialism? Well, socialism is we want to help people when they need help. Well, those are the alternatives. Well, who is going to pick the first one?

Roger Ream [00:04:53] Yeah, and some of the same surveys. Young people, when you ask about socialism, they seem to think it has something to do with the social media that they use, Facebook or something. Or it’s Sweden, you know, it’s Sweden.

Jim Otteson [00:05:06] Or it’s a place like Sweden.

Roger Ream [00:05:07] Which tends to rank higher than the US on the index of economic freedom.

Jim Otteson [00:05:11] Yes. And one of the great untold ironies. Yes, that’s true. I mean, there are other interesting things. Look, Sweden’s a great place, but, you know, Sweden is a tiny little country. You know, if Sweden were a state in the United States, it’s total economic output. So, its GDP would be at or near the bottom of it. So, below Alabama, below Mississippi, whatever state you might think of as a poor state in the United States, you know, these are very small.

Roger Ream [00:05:36] Heterogeneous, mostly heterogeneous until recent years.

Jim Otteson [00:05:40] Yeah. In Scandinavia, you know, it’s almost as if. I was recently in Norway for the first time and part of my family has Norwegian roots but, you know, it’s basically everybody is, you know, they’re all more or less cousins of one another and they have very similar religious beliefs, very similar culture. So, you know, things can work in a community like that. That can’t work when you have 330 million people of vastly different experiences, different races, different religions, different visions of the good life. So, those kinds of things, it’s very difficult to try to scale them.

Roger Ream [00:06:13] Yeah. Yeah. I recall at least a dozen years ago, the economist Russ Roberts spoke to our students, and he made mention of the fact that in a sense the two words got reversed, that the free-market economy it’s about voluntary cooperation among people. It’s social.

Jim Otteson [00:06:38] Yeah, it’s a nice point.

Roger Ream [00:06:39] Needing each other and pursuing their self-interest. They benefit others. Whereas the word capital comes from Latin, meaning really head, you know, it’s top down, it’s the head and runs everything. And he said it’s too bad we didn’t, you know, somehow get those reversed.

Jim Otteson [00:06:57] Yeah, you know and that’s interesting because I like that point, you know. And one of the things that so, I teach in a business school now at the University of Notre Dame. One of the things that I spend a lot of time talking with my students about is, you know, let’s not think about the buzzwords and whatever association you may or may have with capitalism or socialism. But let’s just think about if you’re actually in business, in a market economy or you want to start a business, you’re running a business. Let’s suppose you’re the CEO of a business. Who are you spending your time thinking about? Are you thinking only about yourself? Are you saying what’s in it for me? Well, if you do that, you’re going to go out of business in a New York minute because what do you need to be thinking about? Customers, clients, employees, all of the relationships you have. And as any successful enterprise is going to be one where people are united like a team and they have a vision, a purpose that they’re all on board with, which means you’re cooperating with one another. You’re not in competition with your fellow, you know, the people in your company, you’re cooperating with them. And if you think about all the different businesses and all the different industries in a market economy, what you see is an enormous amount of goodwill cooperation between people. People want themselves, their partners, their colleagues, their peers, their customers, their clients, they want them to succeed. So, I mean, you know, I’m speaking in general terms and their acceptance to everything but there’s an enormous amount of goodwill cooperation that we just don’t notice or we don’t pay attention to because we focus on, you know, the few bad examples and the bad actors, which there are, but that’s not representative of what is actually going on a day to day basis in a market economy.

Roger Ream [00:08:32] Yeah, well, let’s talk about this issue you’ve already touched on about, you know, the hope, I guess, that all of us, whatever economic systems we think we are supporting, want to see people flourish, want to see people lifted out of poverty. You’ve spoken at our programs about what you would just probably describe as is two problems that need to be addressed in society or seemingly people want to address alleviating poverty. And then there are others who are concerned about inequality. And you’ve posed the question, if you could eliminate just one of those two problems, which one would you eliminate? Could you talk a little bit more about that juxtaposition of those two concepts, poverty and inequality.

Jim Otteson [00:09:16] So you’re right. So, those are two things that that many of us of no matter what side of the political or economic spectrum you might be on, young people especially, they care about both of those. They care about poverty; they care about inequality. So, asking that question, if you could get rid of one but not the other, so not both, which would you pick? I think that’s a really interesting question, first of all, because it helps clarify for students what really matters most to them. So, you know, whatever your answer to that is whether you think inequality is a greater cause of misery or suffering or problems in the world or poverty is, that’s going to give you some indication of what system of political economy you might ultimately endorse. You know, what set of policies would you endorse. But the other interesting thing about this, and this is what really prompts me to ask that question is because it looks as if that’s not just, you know, maybe a philosophically interesting question to ask, but it looks as if that’s the actual dilemma we face. Because when you look at the history of humanity as far back as we know, and we have pretty good economic data going back as least as far as about 12,000 years ago, 10,000 B.C. So, there’s very little change in human life during that period. And in real terms, the average amount of wealth is very low and very consistent. So, what is it? Almost the entire time it’s about $3 in contemporary U.S. dollars, $3 per person per day or less. Very little variation. So, it’s extremely low, extreme. And that’s not much. I mean, imagine trying to live for, you know, $3 for everything food, clothing, shelter, equipment to make podcasts, you know. That’s not easy. And then all of a sudden something takes off. So, around 1800 or so, for the first time in human history, the overall amount of wealth in the world begins to increase. And now it’s gone to previously unprecedented levels. So, we now are blessed to live at a time when there’s more wealth in the world than there has ever been in human history. So, here’s the interesting question. When people were living in that very low level for all of the previous parts of human history, there was a great deal of equality.

Roger Ream [00:11:25] Yeah, we were all poor. Equally poor.

Jim Otteson [00:11:27] Equally poor, exactly. And then the first time in human history that we finally been able to figure out how to enable more people to rise out of those very low levels of poverty, substantially everybody’s getting better, but not at the same rate. So, looks like those really are the choices you face. You can say: “we want everybody to rise out of poverty,” and you’ll get that, but not quite at the same rate. Some will get wealthier faster than others. Substantially everybody’s coming up, but not at the same rate. So, you’re getting wealth, but inequality or you can have equality, but poverty. So, looks like that really is the dilemma we face.

Roger Ream [00:12:02] Yeah, that’s interesting. I read something the other day about the Lewis and Clark expedition, and when you think about that expedition, they traveled the same way people traveled 10,000 years earlier by boat, maybe by horse, and the change that took place in the next 200 years. We went from, you know, traveling by boat or horse to, you know, railroads to airplanes to jets that could beat the sound barrier to sending someone to the moon. I mean, the acceleration of that, the communication revolution that took place, you know, they could communicate as far as they could shout and not much further. And now, we communicate digitally, and that’s remarkable.

Jim Otteson [00:12:50] And it’s really hard, I think. Especially for, you know, I teach at a university, so I deal with students who are young. I mean, just think about students who are entering the university today. So, they don’t remember a time without Google, they don’t remember a time without internet, smartphones, so it’s not part of their lived experience. So, to get them to understand what life was like, you know, just in your in my lifetime, let alone 100 years ago, it’s very hard. It requires a lot of, sort of, you know, imaginative, historical machination trying to enter into it. But it wasn’t that long ago. I mean, it just wasn’t, you know, when you think about all the way back when the United States was founded, you know, George Washington, first president. In 1800, right after our founding, an average life expectancy in the United States was among the highest in the world at that time. And it was 29, and what is it now? Well, you know, it’s approaching 80 in the United States. So, that’s not that long ago, and yet something remarkable has happened and that’s not even talking to things like, you know, internet, smartphones, sending people to the moon. So, it’s a little bit like I think that the miracle of compounding interest, you know, if you’ve heard the story and we teach this, you know, if you had some banking or you understand about how that works, you know, when you start saving for your retirement, you put a little bit away at the beginning of your career, maybe each month you put a little bit. What happened? Well, it doesn’t really do much of anything for a long time and then it really starts to take off, and that’s a little bit like, I think, what prosperity is. We finally got the right elements in place, and it took it a little time, but once it started going, holy cow.

Roger Ream [00:14:26] Yeah, my grandfather, you know, that’s two generations back. He had ice delivered by horse drawn buggy to his house in Chicago, you know, early in the 20th century.

Jim Otteson [00:14:38] Well, my former stepfather, passed away now, but he grew up when he was a kid delivering bottles of milk to the neighborhood on a horse drawn carriage. It wasn’t that long ago.

Roger Ream [00:14:51] No. No. No. Well, let me ask you. What accounts for this tremendous burst of wealth creation that took place beginning in the 18th or 19th century?

Jim Otteson [00:15:04] It was, you know, like anything in human history, there are lots of things that were in play, but I think we really got lucky with a couple of things that fell together. But one thing I would really emphasize is I think people began, there was really a moral revolution before there was an institutional revolution. So, a lot of the elements, the institutional elements that we might think in the many economists today, development economists today say are required for there to be economic development. A lot of those institutional things have been present in the past, but there hasn’t been any increase in overall wealth. Things like, you know, a favorable geography or literate populace, maybe even educated populace. I mean, the Song Dynasty in China, around 1080, 1000. Well, they had philosophers and written language and science. They had gunpowder. They were sending ships around, they’re building ships. Large country, big geography literate population, but no general wealth in Greece. So, it’s none of those things might be necessary, but they’re not sufficient. So, what changed? But I would argue would suggest, it’s a big story. I’ll just give you a little bit. You know, the little story is people’s mindsets started to shift. So, in particular, you know, if you think about if you have something that I want, there are a couple of ways I can get it from you. I can steal it from you, I can kill you and take it, I can see it when you’re not looking, or I can make you an offer and we come to an agreement. That second way of making people an offer, which I would call cooperation, cooperating with you. People began to think that maybe that was not just efficient, meaning, you know, next time, you know, you’re a good partner for me and I can get something out of you. But it might also be moral. In other words, maybe it’s morally superior way, a morally superior way for me to deal with you by asking your permission instead of just killing you or enslaving you or taking stuff from you if I’m stronger than you. And if you think about most of human history, that’s what most of human history is. It’s as soon as one person or group gets enough power or strength, what do they do? They conquer other people.

Roger Ream [00:17:15] Enslave other people.

Jim Otteson [00:17:17] Exactly. That’s what has always happened. And what people began to do and certain small parts of the world around the 17th century, people started making these arguments that, well, maybe it’s morally better to ask people’s permission and as soon as you people begin to do that, then what you begin to have is not these extractive exchanges where I’m just stealing from you that don’t, by the way, lead to a net increase in prosperity. If I just steal your iPhone from you, that’s not adding another iPhone to the world. It’s just moving it from one place to another. But if you and I are trading something where you value something and evolution and we both get value out of it, well now we’re generating more actual value in the world. Soon as you start to get people doing that, then you get these more of these positive some transactions and like the miracle of compounding interest. The more of those you have, the more prosperity that can lead to. And so, I think that had a lot to do with the rapid increase.

Roger Ream [00:18:09] What role, if any, do you think religion played in this and the idea of, you know, human dignity, of individuals having, you know, created in the image of their creator and therefore they should be respected?

Jim Otteson [00:18:21] It’s a good question and historically speaking, it’s a hard one to answer. I think there’s a strong correlation because the places and people who are first starting to make an argument about why we should ask people, you know, for consent or permission to deal with them rather than just conquering them and treating them like barbarians, and all of these terms that people use that indicated their own moral superiority to others. The first people who started making an argument about moral equality that we’re all moral agent, equal moral agents, tended to be people who are Christians, and they invoke that in the name of their vision of theism. We’re all in the image and likeness of God. We’re all children of God. That includes not just people who, you know, look like me and my friends, but maybe some of those people, too. And so that seemed to correlate with something like this changing attitude. That’s a plausible potential story. The one difficulty or one of the difficulties with that, and maybe you have an answer if you can figure this out, you’ll win the Nobel Prize, I think. But one of the difficulties with that is, well, if Christianity or a certain kind of theism were all, you know, children of God, equal children of God did play an important role in that, why did it take so long? Jesus died a long time ago. So, why did it take until the 17th or the 18th century for that idea to really start to spread? That’s a bit harder to answer. In any case, there does seem to be this correlation between those particular people who began to make this argument and the particular beliefs that they had. So, whether that’s a causal relationship or just a correlation accident of history, that’s much harder.

Roger Ream [00:19:58] Well, I throw this out, even though you’re a professor at Notre Dame, that perhaps the Protestant Reformation had a role in this and beliefs there but I’m not going to speculate, I’m not going to go for that Nobel Prize you’re offering. So, I’d love to shift a little, but not too far away. This year, we’re going to be celebrating in June, the if I have it right, the 300th anniversary of Adam Smith’s birth.

Jim Otteson [00:20:24] Yes.

Roger Ream [00:20:25] Adam Smith as wrote two important books, Theory of Moral Sentiments and an Inquiry into the Nature and Causes of the Wealth of Nations.

Jim Otteson [00:20:36] You get a nominate for knowing that entire name, too. Congratulations.

Roger Ream [00:20:40] And he also you know, they’re notes of lectures and things that have been published of his. And, you know, he did write the Wealth of Nations because it seemingly, I guess, I’m speculating here, you know, better than I do because you’re a scholar of Adam Smith, but for the first time ever, you could inquire into why is it that some nations are becoming wealthy? Because that was starting. Coincidentally, the book was published the same year as the Declaration of Independence. So, there were things going on that talk about a little bit about Smith’s view of this, the changes that were taking place in the world and what he was seeing in the Wealth of Nations, at least.

Jim Otteson [00:21:17] So, The Wealth of Nations, I really think is one of the most important books of the last millennium in many ways. And, you know, for one big reason behind that, one big reason behind that was because just as you were saying, you know, Smith was beginning to notice that some countries were becoming wealthier, others were stagnating, others were declining. And really, for the first time, you know, Smith said: “well, let’s see if we can figure out why, what really are the causes of these things.” So, there were lots of stories and myths, sort of, you know, ideas, folklore legends that people had in their minds about where wealth came from. But usually, it resolved in the 18th century when Smith was writing. Most people thought that wealth ultimately came from little yellow pieces of metal, that the more pieces of metal you had, that was the more wealth. And so, if that’s what you think, as many people did at the time, well then suppose you’re the king of Britain and you think wealth consists in pieces of gold. Well, then you don’t want your citizens buying, say, wine from France, because if they buy wine from France and those pieces of gold go to France, which means you’re getting poorer, you’re losing your pieces of gold, and then it’s going to France and they’re getting richer. But one of the things that Smith noticed about that was that, well, if that were true, why would people do it? Why would people be wanting to voluntarily impoverish themselves by sending well, maybe they’re getting something in return. Oh, wait a minute. So, what do they get? They’re getting the wine. If they’re buying wine from France, they are getting wine. Well, maybe they value the wine, maybe more than the gold. Okay. All right. Now let that completely changes the way we should look at things. So what Smith was wanting to do was to try to figure out, all right, well, what actually are the institutions that might enable people to increase their wealth, their prosperity on the theory and this is one of the important things about it that often gets lost, I think, on the theory that enabling people to increase to improve their own situations is a moral mandate because poverty was then as extreme poverty, there is still extreme poverty in the world today, was a debilitating, miserable experience. So, Smith himself did a little field work, apparently. Went into the highlands of Scotland. So, he was Scottish. He went into the highlands of Scotland, met with some different clans of Scotland at the time in the middle part of the 18th century, and reports that it wasn’t uncommon for a highland. I mean, they were extremely poor. It’s hard today to even imagine the level of poverty eating. You know, they ate peat and bark and, you know, it’s very poor people. It wasn’t uncommon for a Highlander woman to get pregnant more than 20 times during her lifetime, very short lifetime. Almost all those children to die before four or five or six years old. So, you might get 15 to 20 pregnancies. Maybe two of them make it to adulthood. And so, Smith said, okay, and for some of them, these families would face an agonizing decision. Which of our children do we feed because we can’t feed them all, and so which of them do we leave to die? And so, the moral mandate behind the wealth of nations is if we can figure out how to increase the wealth in the world so that fewer people are forced to make those kinds of decisions, then that’s a great good for mankind and we really ought to do it. If we can figure it out, let’s do it. And the Wealth of Nations was his nearly 20-year investigation attempt to try to figure out and then give us what answers he thought he had.

Roger Ream [00:24:45] Interesting, interesting. Critics of, I’ll say, capitalism or free markets, want to dismiss the wealth of nations and the system itself as being built on selfishness because Smith talked about self-interest. Could you explain what Smith was talking about when he talked about the pursuit of self-interest?

Jim Otteson [00:25:05] Yeah. So, accusing people like merchants or people engaged in commerce of being selfish is a very old critique. In fact, it goes back literally as far as writing does. You know, when you go back and look at Aristotle and Plato you know, they’re all worried about people being selfish and in particular, associating that with commerce for various reasons. But, you know, this was Smith’s view. And one of the revolutionary things about that book is Smith said: “well, let’s not ask ourselves what would an ideally perfect society look like?” You know, Plato argued that, you know, we have models of that. Instead, what he decided was let’s see to the extent that we can understand what human beings actually are as empirical creatures, in other words, real existing creatures. And try to figure out what motivates them, what moves them, what their actual desires are, and are there any constraints in those desires? In other words, are there any constants that, no matter what else is true for a human being, you can pretty much rely on these few things. In much the way, by the way, consciously for him that Isaac Newton before him had tried to regularize what we see in movement in the heaven and on earth. Can we get some principles that we can articulate that really capture a large amount of data? That’s what he was trying to do for human beings. And so, one of the things that he thought he discovered was that human beings, whatever else, motivates them and we’re complex creatures, lots of stuff motivate us, but we are interested in improving our conditions. We want our lives to be better, we want our children’s lives to be better, we want our family’s lives, our communities, the things that the parts of humanity that we know and care about and love, we want to improve their situations. So, Smith thought: “okay, that seems to be a relative constant. It’s always been in human nature. It seems every society we know of that seems to be true for human beings. Sometimes that can go well, sometimes it can go badly. But if we assume that is a constraint, meaning it’s a constant that goes on in human nature, whatever else might motivate people, then maybe what we should try to do is instead of trying to stamp it out of human beings, let’s see if we can harness it. Let’s see if we can direct that in such a way that the only way people can benefit themselves or benefit their own families is by benefiting other people at the same time.” That’s the in this famous invisible hand argument. So, Smith says: “with the right kinds of institutions, hey, wait a minute, the self-interest stuff. Yeah, I can get off track and it can be, you know, you can be extremely self-interested, selfish, but with the right kinds of institutions, it may well be that the only way that I can make myself better off or my family or anybody I care about or the people I do care about is by at the same time benefiting somebody else.” And so, raising it both sides, that would be a pretty extraordinary thing and that’s what he thinks he figures, that’s why he’s so excited about this, because that’s what he thinks he’s figured out. This is what a market economy does.

Roger Ream [00:27:58] So, it’s not that he figured out a way to create that system. He’s saying that’s how people operate in commerce.

Jim Otteson [00:28:05] Exactly. If you give them, I mean, it’s a simple formula. You protect them from predation, so you don’t let people come along and enslave them and murder them and steal from them, which is a pretty low bar. Just prevent that from happening.

Roger Ream [00:28:18] What was this phrase “peace, easy taxes and a.”

Jim Otteson [00:28:22] Tolerable administration of justice.

Roger Ream [00:28:23] “And tolerable administration of justice.”

Jim Otteson [00:28:25] Just tolerable, it doesn’t mean perfect. Just a tolerable one. But if you enable that, protect that for people and as many people as possible, ideally, maybe everybody, what will they do? People will all on their own begin to figure out ways, look for ways to improve their lives. So, they’ll begin partnering, trading, associating, specializing, developing different kinds of skills, creating different kinds of products. So his prediction was under that very, that what he called the obvious and simple system of natural liberty, you just protect.

Roger Ream [00:28:55] Natural liberty.

Jim Otteson [00:28:56] Natural liberty. He predicted, this is 1776 so he couldn’t imagine iPhones and podcasts, of course. But he predicted that you would see so much production, innovation, new prosperity, that you would barely be able to recognize the world in the future. And in fact, one thing I have to get this in. One prediction he made in 1776 was he said: “you know, it looks like those Americans, they seem to be figuring this out.” And he said it’s actually possible that the Americans, whom, by the way, in Britain, you know, they thought of them all as, you know, the savages with pitchforks and whatever farmers and, you know, couldn’t figure out anything. He said: “it’s possible they might even one day be wealthier than the British Empire.” Can you imagine that somebody say that in 1776.

Roger Ream [00:29:41] About this colony.

Jim Otteson [00:29:42] About this tiny colony of savages, you know. And look what subsequent history has shown.

Roger Ream [00:29:47] Yeah. And subsequent history has shown that there was a tremendous amount of increase in living standards, which we’ve talked about, tremendous growth and inequality, because some people really got rich and a discovery by people in congress that by redistributing wealth, they could more easily get reelected, I guess. But talking about inequality a little bit more. Your recent book was: “Should wealth be redistributed: A debate.”

Jim Otteson [00:30:21] Right.

Roger Ream [00:30:21] And in that book, give me a summary of the arguments of your opponent. Arguing for that redistribution of wealth.

Jim Otteson [00:30:31] Yeah. So, my opponent is an economist at Hope College named Steven McMullen and the main argument that he makes is that, you know, thinking about many countries, but he focuses on the United States. In the United States there are some people whose poverty, you know, maybe it’s not the same kind of absolute poverty that you see in other parts of the world, but nevertheless, their poverty prevents them from fully participating in the economic life of the United States. And so, he really makes sort of two connected arguments from that premise. On the one hand, that means that they’re not fully participating in the economic life of the United States, which means that their own lives are in various different ways impoverished. That’s not just monetarily impoverished. It could also mean sort of mentally impoverished, socially impoverished. They just don’t have the kinds of integrative opportunities that people who can participate in that life would have. The other part of it is, and this is more of a sort of, you know, I guess an economist’s argument, or a consequentialist argument is that the United States, the rest of us would actually be much better off if more of the people who were, you know, in the lower part of the economic breakdown in the United States could actually participate in economic life. So, you know, they can contribute. So, those are the two main arguments he makes. And then the conclusion he draws is that if you redistribute some of the wealth from some of the wealthiest in the United States, to some of these people, what you can do is enable them to participate more fully in the economic life in the United States and then there would be all of these benefits that would ensue from it.

Roger Ream [00:32:07] Well, I recall a Robert Nozick’s book “Anarchy, State and Utopia,” published in the mid-seventies, I guess. He had that thought experiment where if you took all the wealth in the country and you divided it by all the people in the country, so we all had the same amount of wealth. As soon as you allow people any freedom to trade, to use that wealth very quickly, it returns to a very unequal society. But what was your counterargument to his argument he made?

Jim Otteson [00:32:37] So, it’s a strong argument and one of the main worries. So, I have a sort of a moral argument, a moral worry about the initial moral premise that I think any kind of public policy should start with is that all human beings are equal moral agents. I call it the “principle of equal moral agency,” which is connected with this notion of human dignity what we’re talking about earlier. But what that means in practice, I think, is that if we really believe that all human beings have a kind of, from birth in virtue of being human, you have a moral agency that should be respected. What that means in practice is that we have to be very careful. I say you have to meet a very high argumentative burden to justify interposing into other people’s lives and either forcing them to do something they don’t want to do or taking from them something they don’t want to give up. Doesn’t mean you can ever do it, but you really have to have a compelling reason for it. So, that’s the first sort of piece of my argument, and the other piece of it, you know, I want you to read the book. I want everybody read, but the other piece of it that I argue is that there’s a hidden premise of McMullen’s argument, which is not just him. Many people make a similar argument. Enabling people to, you know, engage to more fully participate in the economic life can have various benefits. I think that’s true, but the hidden piece of that argument is the next step, which says therefore we should redistribute. Because we’ve had many, many, many and by many, I mean thousands of experiments in human history of forcibly redistributing wealth from some to others with good intentions. So, we can look at these. How do they turn out? Well, the track record is not good. So, oftentimes what will do is either not much at all. That’s almost the best-case scenario. You really can’t tell any difference at all, but more often than that, what you get is various unintended bad consequences. So, overall prosperity in a society might begin to decline, so everybody quickly becomes worse off. Sometimes you have divides that come up in society because people resent the fact that you’re giving my money to them, or you’re taking this from me and giving it to them, and so we start to divide ourselves into us versus them. You have these kinds of divisions that can arise in society, and then the other piece of it that I think we often don’t think about very much is that, when you say: “we could redistribute,” well, who’s we exactly? Well, governments.

Roger Ream [00:35:10] Or benevolent, Uncle Sam.

Jim Otteson [00:35:12] Exactly. Well, but are you assuming that the people who are going to actually effectuate this the mechanism, the actual mechanism of redistribution are more virtuous than most human beings or more or wiser than most human beings? Who are these people? Or do they have all of the biases, self-interest and vices that most human beings have? If you think they’re just regular human beings, they’re just people like everybody else, then that greatly reduces the confidence you should have that by endorsing some kind of program, whatever result you imagine it would have would actually happen in practice.

Roger Ream [00:35:50] Doesn’t it run counter to his argument as well, because it would disincentivize these people that you’re giving the money to, to be enter more productive.

Jim Otteson [00:35:59] This is one of these interesting, sort of psychological and empirical questions. You know, what effect would it or does it have on people? And there in the book, if you read the book, each of us, we give respectively different takes on this empirical evidence. So, I cite quite a bit of evidence that from my mind makes a pretty strong case that what you might end up doing unintentionally, is actually sapping from people the desire to improve their own conditions because they don’t need to anymore.

Roger Ream [00:36:28] I see plenty of that.

Jim Otteson [00:36:29] There is quite a bit of evidence that also shows that, you know, and I think this is one of the problems with a slightly different issue, which is, you know, universal basic income. You know, whatever the intentions we might have by, you know, giving all citizens a certain amount of money every year to enable them to rise up to, you know, to engage in economic activity. There’s quite a bit of evidence, though, that, to me at least makes a strong case, if not quite decisive yet, but makes a strong case that you have to be very careful with that because the unintended result of that is often that people just basically give up, they stop working. Now, what does that lead to? Well, put aside whatever economic consequences you think it has. For those people themselves, it’s almost a recipe for an unhappy life because they come to wonder, what’s the purpose of my life if I have no demands on me to do something, nobody’s expecting me, nobody is depending on me? I can just sit home and do nothing. In the moment it might see like a great idea. “Oh, great. I can spend it, you know, I don’t have to work.” Okay, but in the long run, a life worth living has to be one that’s engaged, that’s social, that’s active, and if we don’t, you know, we’re an active species. By not being active, then I think you’re portending a lot of deep unhappiness.

Roger Ream [00:37:44] Yeah, they get to the end of their lives, and, you know, they’re lived in a subsidized housing with government checks coming in every month and not having to use their own talents and abilities to achieve that American dream. You’re trained in economics and philosophy. Your current appointment and your last are in business schools, or at least you taught in business schools. You developed a very interesting course at Wake Forest that you’re teaching at Notre Dame called: “Why Business?” Talk about that course. I mean, I’ve looked at the syllabus, it’s a fascinating course. Tell me about the reaction you get from students.

Jim Otteson [00:38:21] Thank you. I’m really proud of that course. But it really came about by accident. I was asked to teach a Business Ethics course and I have never taught one before. So, I decided to look at, you know, what other people were using to teach business ethics courses. And one of the things that I noticed about a lot of them, not all of them, but a lot of them was that they were really a kind of series of murderer’s row. You know, we’re going to look at a lot of really bad actors. We’ll look at the, you know, the guys from “Enron.” Weren’t they terrible? They were terrible. Bernie Madoff. He was terrible. And you know, soon we’ll be looking, I suppose, at Sam Bankman-Fried or something. You know, maybe he’ll be the next one in the list, I don’t know. But it was a lot of bad actors, and there have been and continue to be bad actors in business as there are in all walks of life. But my idea was: maybe we could turn the purpose of a course like that around a little bit and instead ask the students not just to consider and don’t be like these bad people, which we don’t want them to be bad people. But on the other hand, let’s look at it a little differently. Is there a moral purpose that your life could serve in business? And if so, what is it? What would that be? That’s a totally different way of looking at business. And so that’s really what gave rise to this course. So, the course is to ask students to think, to ask themselves: “is it possible to be completely virtuous and at the same time completely engaged in a market economy, or do you have to make tradeoffs, and if so, what are they?” And, you know, when you start thinking about it like that, wow, that opens up all kinds of interesting possibilities. Is it possible for there to be such a thing as honorable business, business that you don’t have to atone for or make up for afterwards or not? If there is honorable business, well, what exactly is a dishonorable business? So, that’s really what that course is about. It looks at various perspectives about worries, concerns, but also arguments in favor of business from sort of the perspective of virtue. And we ask students to try to develop a question of if you’re going to dedicate your life, your life to business, you’re going to become a business professional. Well, then you better have an answer to this question of why are you doing that? And if you don’t, then maybe you ought to think about doing something else.

Roger Ream [00:40:30] Well, you mentioned they’re bad actors in business, like in every other profession. But I think even in politics there are. But you don’t see ethics courses in political science departments. Maybe that’s how we need them. Why politics?

Jim Otteson [00:40:45] Yes. Maybe I’ll have to think about that, talk to some of my colleagues in the political science department.

Roger Ream [00:40:50] I know that at Wake Forest that was, I think, a required course for all business students, but then you met some resistance from the faculty of an office called Arts and Sciences there. But the non-business faculty who didn’t want their students taking that course, what was that resistance?

Jim Otteson [00:41:08] Yeah, you know, and I don’t think it was necessarily, I mean, you know, people might have had different reasons for their concerns about the course. But I think one of them was that it might be possible that this course is, I think, some of my colleagues thought that this course was actually trying to talk students into being businesspeople, and you might insert kind of in your mind, greedy, heartless or something like that. Valorizing business or profit making over other important things in human life. In other words, that the course might become an advocacy for a certain kind of, you know, economic world view that many of them, to be frank, found a bit distasteful, rather than a disinterested scholarly exploration of things. And I don’t think that’s what the course was. It did invite those questions and we did and continue. We look at very different perspectives on whether it’s possible to be a fully moral person as of and a businessperson integrated at the same time. But I think some of them thought, well, you know, we already own the corner on, we have the corner of the market on moral philosophy, we don’t need this course in a business school, trying to do something different. And, you know, students, I think, really responded well to the course, they liked the course and many of them were taking the course. If you live in a world where one department success comes at the expense of the other department, you got to be careful about these things as well.

Roger Ream [00:42:36] Well, we’ve been grateful for your teaching and TFAS programs in the past, and sometimes you’ve come to lecture. How have you found TFAS students?

Jim Otteson [00:42:45] Fantastic, they’re great. I mean, one of the great things about them is, you know, these are kids that give me hope for the future, frankly. You know, it’s very easy to lose hope about the future. You know, every day and now my Twitter feed is constantly filled with all the terrible things going on, there are plenty of terrible things going on. But just when you’re thinking about losing hope or that it might be hopeless, what you see when you see a group of young, intelligent, energetic people who say: “I want to figure out how the world works, I really want to figure out how I would actually not how I imagine it should work, but how is it really working and where can I apply my unique talents and gifts in such a way as we can maybe make some improvements?” That’s really inspiring and that’s what you get at TFAS. I think the students you get are, you know, maybe they don’t know yet exactly what field they’re going to go into, what discipline they’re going to go into, but they’re all united in believing that some part of the story of America’s prior success and its future success, will be an liberty opportunity and I want to make those things come alive for other people, for myself, my children, my wife, my grandchildren. And we’re not going to have a continuing American dream unless you have more students like that, and I think that’s exactly as students you get a TFAS, which makes it so much fun to work with them.

Roger Ream [00:44:02] Wonderful. Have you started thinking about your next book? I mean, you seem to be putting one out about every year, so you’re very productive.

Jim Otteson [00:44:10] Yes, I appreciate that. My dean has been asking me that, too, because, you know, my other book, it’s already two months since my last book. So, yes. So, I’m in the beginning stages, so no promises that we’ll end it, but I’m interested in this concept of human dignity. So, you know, that notion of human dignity, it’s all over in business ethics literature, it’s all over in development economics. Everybody talks about human dignity. But when I’ve looked into that a little, what I’ve noticed is that the concept of human dignity gets invoked in the service of lots of different kinds of things, which are often mutually inconsistent. So, that tells me as a philosopher that maybe there’s something strange going on with the concept, because no single concept should imply mutually contradictory things. And so, as I’ve looked into it a little bit, here’s my two-sentence summary of my book: Lots of discussions of human dignity are really applications of it, but they presume that somebody has written Volume one. That’s all Volume two. Volume one is what is the sunset? And that really hasn’t been written yet. So, I’m thinking that I might try to make that attempt and explore some of some of the surprising implications. Once you get a real, you know, a substantive but coherent conception of human dignity, it can have some pretty surprising implications.

Roger Ream [00:45:30] Yeah, that could have tremendous influence on that, and different sources for that concept throughout our history. So, I look forward to reading that book.

Jim Otteson [00:45:40] Thank you, Roger.

Roger Ream [00:45:41] I appreciate all you’ve done with TFAS. If you were to offer some advice to students at Notre Dame or at TFAS, as they come to the end of a course. I’m sure students sometimes ask you for either career advice or advice as they go forward. What kinds of things do you offer them?

Jim Otteson [00:45:58] Yeah, you know, I teach in a business school, as we’ve discussed, and so, one of the things I tell my students in the business school and maybe this could be generalized to, but what I things I tell them is: “your first question should never be how much money are you going to make?” It’s not that there’s anything wrong with making money. Your first question should be: “What kind of value can I contribute to the world?” You know, you are a unique creature. We’re at Notre Dame, so I can say you are a “uniquely created human being,” created in the image and likeness of God, of the infinity of persons God could have created, he created you. That means you have some unique package of abilities, skills, talents that literally nobody else has. Your job is to figure out how can I use those to create genuine value in the world? And if you focus on that, if that’s your North Star, everything else will take care of itself. The money and all you know, the family and raising your kids, all of that will take care of itself. But you think about that, and I think that might be something that I would say also regarding TFAS and its students and its programs, that’s really what TFAS enables you to do. You might not know exactly what the best use is, and not just in a monetary sense, but best in a much broader sense. What’s the best use of my unique talents, this short time that I have on Earth? I think TFAS is a really great opportunity to really try to figure out what that is and make some real headway towards it.

Roger Ream [00:47:23] Well, you’ve certainly figured that out for yourself, and you’ve been creating a tremendous amount of value already and continue to. So, it’s great to have you with us today, Professor Jim Otteson. Thank you, Jim.

Jim Otteson [00:47:34] Thank you very much, Roger. My pleasure.

Roger Ream [00:47:36] Thank you for listening to the Liberty and Leadership podcast. Please don’t forget to subscribe, download, like or share the show on Apple, Spotify or YouTube or wherever you listen to your podcast. If you like this episode, I ask you to rate and review it, and if you have a comment or question for the show, please drop us an email at podcast@TFAS.org. The Liberty and Leadership podcast is produced at “kglobal” studio in Washington, DC. I’m your host Roger Ream and until next time, show courage at things large and small.

About the Podcast

TFAS has reached more than 46,000 students and professionals through academic programs, fellowships and seminars. Representing more than 140 countries, TFAS alumni are courageous leaders throughout the world forging careers in politics, government, public policy, business, philanthropy, law and the media.

Join TFAS President Roger Ream ’76 as he reconnects with these outstanding alumni to share experiences, swap career stories, and find out what makes their leadership journey unique. With prominent congressmen, judges and journalists among the mix, each episode is sure to excite your interest in what makes TFAS special.

If you have a comment or question for the show, please email podcast@TFAS.org.

View future episodes and subscribe at TFAS.org/podcast.


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