Annual Lecture in Law and Society: Law and Social Illusion

Professor Liam B Murphy, Herbert Peterfreund Professor of Law and
Philosophy at New York University School of Law gives the 2013
Annual Lecture in Law and Society. In the wake of the House of
Commons Debate on tax fairness and increasing public outrage
at tax avoidance by Google and other multinationals, Professor
Murphy will assess how misunderstandings of the ethical bases of
the central legal institutions of a market economy badly distorts
political debate on tax and other issues of social justice. Unlike
some other parts of the law, the law of property and contract
cannot plausibly be understood as attempts to enforce moral rights
and duties that legal subjects have naturally, independently of
law. They must be understood as Hume understood them: The
legal rules of property and contract are artificial, or
conventional, in that their justification lies in their effects on
overall social welfare and justice. Once the law of property and
contract are established, however, it is hard not to think of them
as directly reflecting real rights and duties. The law of the
market encourages a kind of everyday libertarianism in social
attitudes. This illusion leads us to believe, for example, that
pre-tax income and wealth represent moral entitlements that should
be used as a baseline in discussions of tax justice. The
common criteria of tax fairness - vertical and horizontal equity -
demand that those with more pre-tax income pay proportionately more
tax, and that those with the same pre-tax income pay the same. But
justice is not a matter of applying some equitable-seeming
functions to a morally arbitrary initial distribution. The social
illusion generated by the law of the market also distorts political
discussion of contract. Everyday libertarianism lies behind the
idea of freedom of contract. More surprising, it misleads some
economic analysts of law, who would be the first to insist on the
conventional nature of the law of contract.