The Distributive Justice Of The Market Essay

, Research Paper

Sam Vaknin’s Psychology, Philosophy, Economics and Foreign Affairs Web Sites(1) Each person is to have an equal right to the most extensive total system of equal basic liberties compatible with a similar system of liberty for all.

(2) Social and economic inequalities are to be arranged so that they are both:

(a) to the greatest benefit of the least advantaged, consistent with the just savings principle, and

(b) attached to offices and positions open to all under conditions of fair equality of opportunity. ”

(John Rawls, “A Theory of Justice”, 1971, p.302)

Resources are scarce. This is the basic, dismal truth of the dismal science. The second truth is that people consume resources. A basic existential anxiety makes them want more resources than they can consume (the “just in case” principle). This raises the question of fairness, a.k.a. “distributive justice”. How should resources be allocated in a manner which will conform to one or more just principles .

This apparently simple question raises a host of more complex ones : what constitutes a resource . what is meant by allocation . Who should allocate these resources or should this better be left to some Adam Smithean “invisible hand” . Such an invisible hand (working through the price mechanism) – should its mode of operation be guided by differences in power, in intelligence, in knowledge, in heritage . In other words : what should be the entitlement principle, how can it be determined who is entitled to what .

Everything constitutes a resource : income, opportunities, knowledge, brute power, wealth. Everything, therefore, is subject to distribution to individuals (natural persons), groups of people, certain classes. There are many bases for distribution, but the issue is HOW JUST these bases are and how can we ensure that we are distributing resources using a just distribution base.

We all face opportunities to acquire resources. In a just society, everyone is granted the same access to these opportunities. Access does not translate into ability to make use of it. Idiosyncrasies and differences between accessees will determine the latter, i.e. the outcome of such access. The ability to use is the bridge between the access and the accumulated resources. Given access and the capacity to utilize it – resources (material goods, knowledge, etc.) will accrue to the user.

There is a hidden assumption in all this : that all men are born equal and deserve equal respect and, therefore equal treatment. This is not self evident. It would have been probably hotly disputed by the 16th century aristocracy. As late as 1930, Jose Ortega Y Gasset thought that people should be given access to resources in accordance with their lineage, up bringing and social responsibilities. The mere fact of biological and mental existence does not endow anyone with rights. Should we equally respect the ignorant and the scholar, the criminal and the virtuous, the atheist and the pious, the male and the female, the old and the young – different societies will have different answers. Should the material wealth of these people reflect the different respect that they receive from society, is it the best, most efficacious measure of this respect . Moreover : what index will be used to measure the “equality” between people if an egalitarian view is adopted (everyone should have the same). Communism (a strict egalitarian idea) foundered exactly on these issues : equal respect and agreed index. It also failed in establishing realistic timeframes. The wish to implement strict egalitarianism here and now transformed communism into the hideous Stalinism that it became.

One solution is to specify a “bundle” or “package” of goods, services and intangibles (like information or skills or knowledge). Everyone should have the same bundle and justice will be thus guaranteed. But will justice bring happiness and satisfaction in its wake . Not necessarily. During our life, we construct our own “bundle”. It reflects our own preferences, priorities and predilections. None of us will be too happy with a standardized bundle, not selected by us.

This is precisely where trade and the market come in. It allows for the exchange of goods and services between holders of identical bundles. If I like books, but detest oranges – I will give my oranges to someone else in return for his books. That way both of us will be better off than under the strict egalitarian version.

Two problems become immediately evident :

First, there is no guarantee that I will find my match : a person who is interested in swapping his books for my oranges. Granted, the bigger the market, the more likely I am to find my trading partner. Still, illiquid markets or small ones inhibit the scope of these exchanges. The second problem is that both participants still have to agree on an index : how many books will be given in exchange for how many oranges . This is the price of the oranges in terms of books. The problem is not solved – merely simplified – by the introduction of money. Money makes matters more convenient – but it does not eliminate the necessity to negotiate. Market failures abound. In other words : money is NOT an index. It is merely a medium of exchange. The index – AS EXPRESSED IN MONEY – is the underlying agreement regarding the relative values of resources in term