What We Owe Each Other: A New Social Contract for a Better Society
By Minouche Shafik
Princeton University Press, 2021

In 1936 the Welsh historian J.W. Gough wrote that “[T]he essence of both the social contract and the ordinary civil contract consists in there being mutual and reciprocal agreement between two (or more) parties, with rights and obligations on both sides.” This has been true from Hobbes, Locke, and Rousseau right up through Rawls. In fact, even a great critic such as David Hume could not quite escape the style of argument when grappling with problems of collective action, reasoning that only by consenting to “lay themselves under the necessity of observing the laws of justice” could people respond to living “amidst the licentiousness of others.”

Keeping with this quintessence of social contract theory, Minouche Shafik writes in her new book, What We Owe Each Other: A New Social Contract for a Better Society: “When I refer to the social contract. . .I mean the partnership between individuals, businesses, civil society and the state to contribute to a system in which there are collective benefits.” Setting aside that to call the relationship between the state and private actors a “partnership” is more often than not euphemistic, referring to the health of the social contract as a proxy for how responsive those parties are to each other is a perfectly unobjectionable (even useful) expression.

There is, unfortunately, little else in this book that is unobjectionable. Following her statement above, Shafik adds: “When I refer to the welfare state, I mean the mechanisms for pooling risks and investing in social benefits mediated through the political process and subsequent state action. This can be directly through taxation and public services or indirectly by regulations. . .”

Now this doesn’t preclude other ways to pool risks or invest in social benefits, but still what follows is, predictably, a panoply of statist policies that make an already pervasive government ubiquitous – indeed, each chapter, she admits, focuses “on key elements of the social contract from cradle to grave.”

Moreover, all of this is argued for on the premise that our headline anxieties, “the rise of populism, the backlash against globalization and technology, the economic aftermath of the financial crisis in 2008 and the coronavirus pandemic, the culture wars around race and women’s roles in society and the youth protests about climate change,” are the result of a “social contract [that] has broken under the weight of technological and demographic changes.”

So what we find is that from the premise down to the details, What We Owe Each Other is a minefield for anyone with even a fractionally conservative disposition or individualist worldview (the opening line, “Society is everything,” was not a propitious start). Let’s glance at a few:

First, arguing state action is necessary, and can do better (or even well), because the private sector isn’t always clean and efficient is a line we’ve heard since the 1880s. Not only is it impulsive, Shafik doesn’t adequately connect “technological and demographic changes” to issues she lists.

Second, there is the grating, sloppy (and, when taken to its logical extreme, totalitarian) identification of the state with society. This can be subtle, for example referring to an increase of tax receipts to the state as “social return.” Other times it’s quite plain:

. . .in countries where health costs are shared, the social contract generally does place an obligation on individuals to take some responsibility for their own health. The promotion of healthier lifestyles, both within and beyond the health sector, is considered a legitimate area for society to intervene in individual behavior.

But of course when we say “countries where health care costs are shared,” we mean countries where health care is regulated or controlled by the state. Therefore, to say “society” is intervening is to abuse a perfectly good collective term and evades the reality of bureaucratic standard setting and decision making.

This brings us to a third example: State intervention and control over industries means state control over individuals. This doesn’t sound so pleasant as “society” intervening to promote better social outcomes, but it’s the obvious reality and can get creepy, as Shafik writes: “The pandemic has also made the case for universal health care and public health interventions such as mandating the wearing of masks or encouraging the maintenance of a healthy weight.” So we went from social costs and the pandemic, to universal health care, ending with the state caring about your weight and promoting a healthier lifestyle “both within and beyond the health sector” (whatever “beyond the health sector” means).

The book, in short, is a 21st century example of the epistemological vanity great thinkers of social science warned us about in the previous century: It’s Hayek’s fatal conceit (the idea that planners can shape the world around them according to their wishes), Sowell’s unconstrained vision, neglect of public choice economics, and a backward (top down) conception of society. If you wish to improve the social contract and governance you need an accurate understanding of society’s spontaneous, bottom up nature and humility about what government can do. What We Owe Each Other lacks both.

David Murphy holds a Masters of Finance from the University of Minnesota.