Economic Human Rights, Not Tough Policy Tradeoffs

Martha McCluskey —

According to conventional law and economics wisdom, problems of economic inequality are best solved with targeted redistributive spending, not universal human economic rights. A political economy perspective suggests the opposite: that legal rights are crucial for economic justice.

Orthodox law and economics tellsus: all rights have a cost.  Law allocates economic gain, but cannot generate it, in this view.  From this premise, any new economic rights aimed at supporting those who are disadvantaged must come at the expense of some other economic gain.  For example, a universal right to affordable health care would simply mask an inevitable tradeoff in public and private spending:  fewer resources for education or jobs.  In addition, in this logic, an economic entitlement to receive basic human support will replace market discipline with incentives for waste, reducing economic resources overall.

What orthodox law and economics doesn’t tell us:  all costs have a right.  That is, any costs associated with new economic rights arise not from essential economics, but instead from contingent legal and political arrangements. Particular legal and political regimes produce, organize and limit access to human needs like education or health care. Law itself shapes the economic forces that appear to be disrupted when law re-allocates rights to advance general human needs.

On the question of health care, for example, a complex system of legal rights and institutions already protects economic gain for some at the expense of health and economic security for others.  Legal systems distributing risks and rewards in health care include patent rights, insurance regulation, corporate governance rules, antitrust law, criminal law, and tax policy. Moreover, these legal rights are not firmly settled or self-evident, but instead are continually questioned and modified, especially in response to lobbying, litigation, and advocacy by industry interests.  New rights to egalitarian economic support can similarly re-arrange economic gain and loss as a legitimate and beneficial function of democracy.

Further, we should not presume human economic rights amount to zero sum transfers or costly economic distortions.  That conventional law and economics thinking rests on the myth of an essential market order that transcends law and politics, thereby closing off analysis of how re-structuring the market could generate far better economic conditions.  But a more complete law and political economy view recognizes that entitlements do not come at the expense of naturally productive market activity; instead, entitlements generate and govern market production. New legal rights can give people new power to resist existing market constraints, and that transformative power can lead the economy to new levels of prosperity and stability.

Like traditional property rights, or the right to incorporate businesses, economic human rights can enhance security and liquidity, encouraging investments that improve productivity for those who hold specific rights as well as for society overall.  The existing market operates through legal rights designed to structure economic incentives and protect against certain forms of market pressure. These rights enable firms and individuals to make different, and potentially better, economic choices than would exist without those particular rights. In standard law and economics theory, for example, economic rights like limited liability for corporate investors offer protection against the risks associated with large scale coordination and planning, so that firms and investors will have opportunities for higher gains at lower costs. This enabling capacity may lead to general economic growth.  A broad legal right to free health care similarly can insulate people from existing costs that limit their opportunities for productive activity likely to benefit society overall.

For example, at the microeconomic level, if people can count on access to good health care, they are insulated from the risk of losing their homes, their credit, or their retirement savings. That protection can open up flexibility and opportunity that encourages greater individual achievement.  Without medical debt and costly insurance, or without being tied to an insurance-providing job or spouse, individuals may be freer to invest in advanced education, new business ventures, or in moving to better jobs or communities.  Businesses may be freer to compete and invest in developing high quality products and personnel without unpredictable and burdensome employee health care costs.

Similarly, at the macroeconomic level, encouraging societal investment in broad access to health care may lead to overall economic growth by fostering healthier and happier children, workers, and citizens able to perform better at school and on the job and who can otherwise better contribute to the well-being of their families and communities.  More generally, a universal right to health care may produce indirect economic benefits by supporting social and political solidarity, trust, and confidence.  Those intangible qualities are likely to be undermined in a society that presses individuals and families to make tough choices between the risk of losing life-saving health care and the risk of financial devastation. Even more so if they perceive their own families’ and firms’ choices will be tougher because limited protections are reserved for a select group of seemingly less deserving others.

Economic human rights can not only induce greater productivity, but can also work to reduce the wasteful administrative costs and controls involved in systems that distribute basic human needs as market commodities supplemented by targeted redistributive subsidies. A universal individual right to health care, for example, could streamline and simplify delivery of U.S. health services, encouraging economies of scope and scale and equalizing bargaining power, while also giving patients increased flexibility, freedom, and predictability to enhance individual control over care.  In contrast, the current market approach to U.S. health care is propped up by a massive and costly regulatory structure, as health law scholar Allison Hoffman explains in recent work.

Even though human economic rights can lead to transformative improvements in overall economic and social well-being, it nonetheless is true that the immediate political-economic context includes costly barriers to such beneficial transformation. But those costly barriers are fundamentally a matter of legal and political design and ideology, not natural or necessary economics. For example, in the U.S., a candidate campaigning to expand the Medicare program’s right to health care will confront not only simplistic economic thinking, but also an electoral system skewed by lavish campaign spending aimed at preserving the right to profit from scarce and costly health care.  That campaign finance system is not natural or inevitable, but rather results from particular recent judicial rulings.

To resist the existing structures that make broad economic security scarce and unequal, efforts to expand substantive economic human rights will depend on concurrent efforts to support and improve other general and procedural rights and institutions that uphold principles of democracy, fairness and expansive well-being.  In the U.S., for example, a broad human right to free health care need not come at the price of federal funding for education or jobs, if we also confront limits on democratic government designed to enforce unequal tough tradeoffs.  A wide range of legal reforms could contribute to undoing the barriers to democratic economic rights, such as: changing monetary policy and deficit spending rules designed to keep public capital scarce; defending expansive Congressional spending powers; lifting constitutional constraints on political campaign spending; re-districting gerrymandered electoral districts; or prohibiting state suppression of voting rights.

As long as healthcare is viewed as a costly and confusing tradeoff due to natural scarcity rather than misguided law and politics, then individuals, businesses, medical providers, and governments will be forced into a destructive competition driven by arbitrary and risky bets on human lives. But if there were a universal right to high quality health care, competitive expertise and societal resources could be re-routed toward improving health and prosperity instead. To solve problems of inequality and insecurity, we need to advance universal human economic rights as fundamental to building a sound and successful economy as well as for democracy and social justice.

A modified version of this post will be published under the title All Costs Have a Right, as part of the article, Eleven Things They Don’t Tell You About Law & Economics:  An Informal Introduction to Political Economy and Law, forthcoming in Volume XXXVII of Law and Inequality:  A Journal of Theory and Practice (Law & Ineq.) of the University of Minnesota.

Martha McCluskey is Professor of Law and William J. Magavern Scholar at the University at Buffalo, State University of New York.