Justice and the Market

Last updated

Justice and the Market is an ethical perspective based upon the allocation of scarce resources within a society which balances justice against the market. The allocation of resources depends upon governmental policies and the societal attitudes of the individuals who exist within the society. Personal perspectives are based upon ones circle of moral concern or those who the individual deems worthy of moral consideration. [1]

Contents

Philosophers, economists and politicians have sought to answer the question of which members of society deserve material rewards and how to decide what deserving is based upon. Perspectives of distributive justice vary from collectivism to extreme self-sufficiency; these perspectives vary between the importance of the group or individual respectively. Positions on distributive justice incorporate moral and political philosophies to form the extremes [2] of communism (left wing) and libertarianism (right-wing) that exist on a continuum scale.

20th century philosopher John Rawls attempted to create a thought experiment that would allow for the consideration of a societal design that is best for all involved. [3] Mechanisms of redistribution vary among countries and governmental roles within societies determine the redistributive mechanisms that are used.

Distributive justice

Distributive justice relates to the principle of fairness in the allocation of wealth, income, power and opportunities. [4] Many theoretical paradigms have been developed to approach distributive justice such as Adam Smith's invisible hand, Karl Marx's Socialist view of Communism and John Rawls original position on inequality.

Libertarianism

The Libertarian philosophy refers to freedom, and particularly individual liberty which dictates the right and ability to govern one's self. [5] In an economic sense the libertarian view assumes a free market, left to its own accord, is a fair market and that redistributive taxation is unjust. [6] Many libertarian schools of thought exist with differing views on many principles, such as the role of government in the market place.

Capitalist society

Adam Smith's idea of the invisible hand was a founding contribution to explain resource allocation within a society. The invisible hand metaphor portrayed an aggregated market created by the self-interest of those involved, and grounded in the notion that through fulfillment of one's own aspirations, society would benefit. [7] [8] This idea formed the foundation of laissez-faire economic philosophy and subsequent neoclassical economics, where Milton Friedman’s ideas about economic systems lay. The free market originated from the concept of the invisible hand, and eventuates in a meritocratic society with resources allocated on the basis of merit. Modern representations of this exemplify perfect free market capitalism.

Criticism of capitalism

The invisible hand approach, or pure free market capitalism, assumes that a competitive market allocates resources in an appropriate manner, but Stephen LeRoy highlighted the debate that ensued following the recent financial crisis upon whether this assumption holds true for modern economies. [9] Thorstein Veblen in The Theory of the Leisure Class (1899) [10] argued that some wealth is conspicuously consumed to display success to others. This proclivity to purchase luxury goods has been viewed as an inefficiency of the capitalist system. Galbraith’s writings centered mostly, however, on the market power of large corporations. He posited that the power of corporations and their associated advertising, would make the markets espoused in classical economic theory ineffectual, requiring a new economic theory to be developed. [11] Critics of Galbraith in turn objected to the fact that the focus of his writings were lay readers, as opposed to expert academics, implying that his answers to economic problems are too simplistic. [12] Social inequality and unfair distribution of wealth, are often attributed to capitalism and a pure free market is built upon a principle of rewarding effort. This however ignores persons born with greater natural abilities or greater opportunities. [4] Thus, successive iterations of pure free market capitalism would lead to a market based upon feudal aristocracy.

Price controls are a government initiative to mitigate exploitative market power. Specifically in response to systems of pricing that capitalise on the dependency of one market entity upon another, such as monopolistic markets in which the supplier is a price maker and consumers assume the role of price taker. Price controls as a strategy provide relief from the price exploitation of the dominant player in a market transaction, albeit a short term abatement of this power which is a common criticism of this method.

Communist society

Karl Marx in The Communist Manifesto postulated that the era of feudal aristocracy and the capitalism experienced in 1847 at the time of its writing, would be replaced with communism, or as today known, a socialist society. [13] Communists from a Marxian perspective are described as persons that understand the world and are enlightened to the interests of the proletariat. Marx surmised that the "dictatorship of the proletariat" [14] refers to rule by the working class and would see the battle of democracy as won.

In this scenario members of a society share common ownership of the means of production and rewards from that production. The resultant society gains and allocates resources according to the quote "From each according to his ability, to each according to his needs!". [15] The communist approach eliminates scarcity in all respects, and represents a society from a pure collectivism school of thought, based upon the utilitarian moral perspective.

The impact of Marxist theories continues to this day. Alan Taylor [16] compares The Communist Manifesto to a holy script, being acted upon and quoted by supporters that do not know the source of their belief.

Criticisms of the Communist Society

Utilitarianism

A Communist society utilises a utilitarian based moral approach as a means to preserve the society. In this system the rights of the collective are placed above the rights of individuals. The utilitarian paradigm represents "the greatest happiness principle" as theorized by John Stuart Mill. [17] This theory holds that the best course of action is that which benefits the majority, and may require the sacrifice of some to maximise happiness overall.

Motivation

Within a Communist society the sole purpose of production is in maintaining the subsistence of the collective.[ citation needed ] Removing any role for self-interest also removes this incentive to exert effort by individuals because reward is not allocated proportionate to effort or in a meritocratic manner. Introduction of a rewards system (be it economic or otherwise) breaches the basis of the communist society, because reward places value on individual achievement. An additional criticism flows from Adam Smith's discovery of the effect of market signals on resource allocation. With no consumers to express demand, optimal resource levels cannot be maintained. Instead production occurs on the basis of need only and need is not measured by willingness to pay. [ citation needed ]

Meritocracy

Meritocracy is an ideology founded in the works of Confucius, whereby the allocation of rewards, positions and responsibilities is objective and upon the merit of an individual. Merit is predominantly assessed via examinations and evaluations, [18] but a perfect meritocracy is near impossible to achieve. The attainment of a university degree is purportedly an example of a meritocratic system, but the inability to ensure equal opportunity to access university by all refutes this point. Inequalities exist in access to prior education, socio-economic factors and as Rawls argues natural abilities and talents. Criticism of meritocracy comes from the reproduction of traditional hierarchies and inequality, when merit is not awarded in a meritocratic manner but instead on the basis of opportunity. [19] Distribution based upon the arbitrary nature of desert faces criticism from egalitarianism, that dictates justice without equality is futile and that equality in itself is the highest form of justice.

The Original Position

John Rawls conceived the notion of 'The Original Position' based upon the thought experiment whereby participants must agree to a hypothetical social contract under a veil of ignorance. In this approach to the question of societal design, removal of the knowledge of particular abilities, tastes and position within society creates a veil of ignorance. The application of this veil in the thought experiment determines the basic structure of society subjectively, because knowledge of the outcome and participant's subsequent position in the society is deprived. From this naive perspective, an evaluation of resource allocation can be made from a morally arbitrary point of view. The veil of ignorance favours the selection of 'the original position' a point in between self-sufficiency and collectivism, whereby two fundamental principles of justice would be agreed upon.

  1. Equal rights to extensive basic liberties, compatible with a similar liberty for others.
  2. Social and economic inequalities that (a) work to the benefit of the least advantaged members of society and (b) attached to positions and offices available to all. [3]

As Rawls wrote: "They are the principles that free and rational persons concerned to further their own interests would accept in an initial position of equality as defining the fundamental terms of their association". [20]

The Difference Principle

Rawls’ conclusion to the regulation of inequality, was a society based upon his proposed 'difference principle' - permitting inequalities that work to the advantage of the worst off. Not to be confused with trickle-down economics, this compensates for the natural abilities of individuals through a redistributive exercise. The society that results is therefore fair on the basis of opportunity regardless of natural ability.

Criticism of Rawls theory

Rawls arranged the fundamental principles of the Original Position in lexical priority: the liberty principle, fair equality of opportunity and lastly the difference principle. This prioritisation encounters criticism, as the importance of the first principle is awarded greater weighting and must be satisfied prior to subsequent principles. So whilst liberty is said to be the dominant principle, the difference principle that results from the acceptance of inequalities (the second principle) operates in violation of the first principle. [21] This is exemplified by redistributive taxes as discussed by Robert Nozick in Anarchy, State and Utopia which criticises the use of this tax as a levelling mechanism, impinging upon an individual's basic liberties, the mainstay of the original position's principles.

Three objections to the difference principle are identified by Michael Sandel as follows: 1. A decreased incentive to work when top tier earners are taxed proportionately greater than lower tier earners. Reaching an equilibrium point demonstrates the difference principle. At equilibrium, top tier earners are provided with enough incentive so to remain in their positions of employment and thus continue to produce benefits also received by bottom tier earners. 2. A Meritocratic allocation of reward. 3. Self-Ownership of one's natural talents and abilities, violated by redistributive practises that treat these natural assets as public or communal. [22]

Redistributive mechanisms

Redistribution of wealth is attained through many forms such as taxation, monetary policies, welfare and nationalisation of private enterprise. Taxation as a means to redistribute wealth seeks to establish a level playing field for its constituents. Sweden has one of the highest income tax rates in the world, which translates to a high level of social welfare in the areas of education, healthcare and pensions. [23] This is a mostly utilitarian form of society and results in a low Gini coefficient, a measure of equality of income 0.25. [24] The United States of America has a relatively high Gini coefficient opposed to Sweden of 0.41. [24] As such the USA faces a problematic history in public sector services. Accessibility issues exist in healthcare and education in particular. Private sector ownership of these services advantage those that can afford it and for those that cannot, inequality is exacerbated further.

Inequality of wealth

The inequality of wealth distribution in the United States was the precursor to the Occupy Wall Street Movement that spread to up to 80 countries. [25] The protest's slogan "We are the 99%" aimed to draw attention to the financial power held by a minority. This power is perpetuated by the supposedly corrupt nature of large corporations said to hold overwhelming financial and political control.

A poverty trap, acts as a self-reinforcing mechanism which causes poverty to persist. This vicious cycle of poverty remains a common experience of billions and the emergence of these traps can arise from both market failure and institution failure. [26] On the opposite side to poverty traps are welfare traps, or an over-reliance upon welfare, that creates a perverse incentive to work.

Market failures are the inefficient allocation of goods and services, that can occur in a free market economy. These failures often arise in the pursuit of goals of self-interest that lead to inefficient market outcomes such as Veblen's theory of conspicuous consumption. [10]

Related Research Articles

Egalitarianism, or equalitarianism, is a school of thought within political philosophy that builds on the concept of social equality, prioritizing it for all people. Egalitarian doctrines are generally characterized by the idea that all humans are equal in fundamental worth or moral status. As such, all people should be accorded equal rights and treatment under the law. Egalitarian doctrines have supported many modern social movements, including the Enlightenment, feminism, civil rights, and international human rights.

<span class="mw-page-title-main">Justice</span> Concept of moral fairness and administration of the law

Justice, in its broadest sense, is the concept that individuals are to be treated in a manner that is equitable and fair.

Socialism is an economic and political philosophy encompassing diverse economic and social systems whose single shared feature is social ownership of the means of production, as opposed to private ownership. It describes the economic, political, and social theories and movements associated with the implementation of such systems. Social ownership can take various forms, including public, community, collective, cooperative, or employee. As one of the main ideologies on the political spectrum, socialism is considered as the standard left-wing ideology in most countries. Types of socialism vary based on the role of markets and planning in resource allocation, and the structure of management in organizations.

<span class="mw-page-title-main">John Rawls</span> American political philosopher (1921–2002)

John Bordley Rawls was an American moral, legal and political philosopher in the modern liberal tradition. Rawls has been described as one of the most influential political philosophers of the 20th century.

Distributive justice concerns the socially just allocation of resources, goods, opportunity in a society. It is concerned with how to allocate resources fairly among members of a society, taking into account factors such as wealth, income, and social status. Often contrasted with just process and formal equal opportunity, distributive justice concentrates on outcomes. This subject has been given considerable attention in philosophy and the social sciences. Theorists have developed widely different conceptions of distributive justice. These have contributed to debates around the arrangement of social, political and economic institutions to promote the just distribution of benefits and burdens within a society. Most contemporary theories of distributive justice rest on the precondition of material scarcity. From that precondition arises the need for principles to resolve competing interest and claims concerning a just or at least morally preferable distribution of scarce resources.

<span class="mw-page-title-main">Original position</span> Thought experiment used for reasoning about the principles that should structure a society

The original position (OP), often referred to as the veil of ignorance, is a thought experiment often associated with the works of American philosopher John Rawls. In the original position, one is asked to consider which principles they would select for the basic structure of society, but they must select as if they had no knowledge ahead of time what position they would end up having in that society. This choice is made from behind a "veil of ignorance", which prevents them from knowing their ethnicity, social status, gender, and their or anyone else's ideas of how to lead a good life. Ideally, this would force participants to select principles impartially and rationally.

<i>A Theory of Justice</i> 1971 book by John Rawls

A Theory of Justice is a 1971 work of political philosophy and ethics by the philosopher John Rawls (1921–2002) in which the author attempts to provide a moral theory alternative to utilitarianism and that addresses the problem of distributive justice . The theory uses an updated form of Kantian philosophy and a variant form of conventional social contract theory. Rawls's theory of justice is fully a political theory of justice as opposed to other forms of justice discussed in other disciplines and contexts.

"Justice as Fairness: Political not Metaphysical" is an essay by John Rawls, published in 1985. In it he describes his conception of justice. It comprises two main principles of liberty and equality; the second is subdivided into fair equality of opportunity and the difference principle.

<span class="mw-page-title-main">Equality of outcome</span> Political concept

Equality of outcome, equality of condition, or equality of results is a political concept which is central to some political ideologies and is used in some political discourse, often in contrast to the term equality of opportunity. It describes a state in which all people have approximately the same material wealth and income, or in which the general economic conditions of everyone's lives are alike.

Self-ownership, also known as sovereignty of the individual or individual sovereignty, is the concept of property in one's own person, expressed as the moral or natural right of a person to have bodily integrity and be the exclusive controller of one's own body and life. Self-ownership is a central idea in several political philosophies that emphasize individualism, such as libertarianism, liberalism, and anarchism.

<i>Anarchy, State, and Utopia</i> 1974 book by Robert Nozick

Anarchy, State, and Utopia is a 1974 book by the American political philosopher Robert Nozick. It won the 1975 US National Book Award in category Philosophy and Religion, has been translated into 11 languages, and was named one of the "100 most influential books since the war" (1945–1995) by the UK Times Literary Supplement.

The nature of capitalism is criticized by left-wing anarchists, who reject hierarchy and advocate stateless societies based on non-hierarchical voluntary associations. Anarchism is generally defined as the libertarian philosophy which holds the state to be undesirable, unnecessary and harmful as well as opposing authoritarianism, illegitimate authority and hierarchical organization in the conduct of human relations. Capitalism is generally considered by scholars to be an economic system that includes private ownership of the means of production, creation of goods or services for profit or income, the accumulation of capital, competitive markets, voluntary exchange and wage labor, which have generally been opposed by most anarchists historically. Since capitalism is variously defined by sources and there is no general consensus among scholars on the definition nor on how the term should be used as a historical category, the designation is applied to a variety of historical cases, varying in time, geography, politics and culture.

Criticism of libertarianism includes ethical, economic, environmental and pragmatic concerns. With right-libertarianism, critics have argued that laissez-faire capitalism does not necessarily produce the best or most efficient outcome, and that libertarianism's philosophy of individualism and policies of deregulation fail to prevent the abuse of natural resources. Criticism of left-libertarianism is instead mainly related to anarchism. Left and right-libertarians also engage in criticism of each other.

Economic justice is a component of social justice and welfare economics. It is a set of moral and ethical principles for building economic institutions, where the ultimate goal is to create an opportunity for each person to establish a sufficient material foundation upon which to have a dignified, productive, and creative life.."

Desert in philosophy is the condition of being deserving of something, whether good or bad. It is sometimes called moral desert to clarify the intended usage and distinguish it from the dry desert biome. It is a concept often associated with justice and morality: that good deeds should be rewarded and evil deeds punished.

Redistribution of income and wealth is the transfer of income and wealth from some individuals to others through a social mechanism such as taxation, welfare, public services, land reform, monetary policies, confiscation, divorce or tort law. The term typically refers to redistribution on an economy-wide basis rather than between selected individuals.

Analytical Marxism is an academic school of Marxist theory which emerged in the late 1970s, largely prompted by G. A. Cohen's Karl Marx's Theory of History: A Defence (1978). In this book, Cohen drew on the Anglo–American tradition of analytic philosophy in an attempt to raise the standards of clarity and rigor within Marxist theory, which led to his distancing of Marxism from continental European philosophy. Analytical Marxism rejects much of the Hegelian and dialectical tradition associated with Marx's thought.

Gerald Allan Cohen was a Canadian political philosopher who held the positions of Quain Professor of Jurisprudence, University College London and Chichele Professor of Social and Political Theory, All Souls College, Oxford. He was known for his work on Marxism, and later, egalitarianism and distributive justice in normative political philosophy.

A classless society is a society in which no one is born into a social class like in a class society. Distinctions of wealth, income, education, culture, or social network might arise and would only be determined by individual experience and achievement in such a society. Thus, the concept posits not the absence of a social hierarchy but the uninheritability of class status. Helen Codere defines social class as a segment of the community, the members of which show a common social position in a hierarchical ranking. Codere suggests that a true class-organized society is one in which the hierarchy of prestige and social status is divisible into groups. Each group with its own social, economic, attitudinal and cultural characteristics, and each having differential degrees of power in community decision.

A property-owning democracy is a social system whereby state institutions enable a fair distribution of productive property across the populace generally, rather than allowing monopolies to form and dominate. This intends to ensure that all individuals have a fair and equal opportunity to participate in the market. It is thought that this system is necessary to break the constraints of welfare-state capitalism and manifest a cooperation of citizens, who each hold equal political power and potential for economic advancement. This form of societal organisation was popularised by John Rawls, as the most effective structure amongst four other competing systems: laissez-faire capitalism, welfare-state capitalism, state socialism with a command economy and liberal socialism. The idea of a property-owning democracy is somewhat foreign in Western political philosophy, despite issues of political disenfranchisement emerging concurrent to the accelerating inequality of wealth and capital ownership over the past four decades.

References

  1. ↑ Laham. s.(2009). Expanding the Moral Circle: Inclusion and Exclusion Mindsets and the Circle of Moral Regard. Journal of Experimental Social Psychology, 45(1). Pg. 250–253
  2. ↑ Lamont, Julian; Favor, Christi (2017), Zalta, Edward N. (ed.), "Distributive Justice", The Stanford Encyclopedia of Philosophy (Winter 2017 ed.), Metaphysics Research Lab, Stanford University, retrieved 2022-12-19
  3. 1 2 Rawls J. (1971) A Theory of Justice. Great Britain: J. W. Arrowsmith Ltd.
  4. 1 2 Sandel, M. J. (2009) Justice: What’s The Right Thing To Do? New York: Farrar, Straus and Giroux
  5. ↑ Three Theories of Justice. [online] Available at http://lilt.ilstu.edu/pefranc/3-ts%20of%20justice.htm Archived 2012-04-24 at the Wayback Machine [accessed 22 April 2012]
  6. ↑ Chappell, Richard Y. "Libertarian vs. Utilitarian Justice" . Retrieved 2022-12-19.
  7. ↑ Smith, A. (Ed.). (1976). The Theory of Moral Sentiments. Oxford: Clarendon Press.
  8. ↑ Smith, A. (Ed.). (2007). An Inquiry into the Nature and Causes of the Wealth of Nations. Peterfield, Hampshire: Harriman House.
  9. ↑ "San Francisco Fed". San Francisco Fed. Retrieved 2022-12-19.
  10. 1 2 Veblen. T. (Ed.). (2007). The Theory of the Leisure Class. New York: Oxford University Press Inc.
  11. ↑ Galbraith, J. K. (1998). The Affluent Society (40th Anniversary ed.). Boston: Houghton Mifflin.
  12. ↑ Krugman, P. (1994). Peddling prosperity: Economic sense and nonsense in an age of diminished expectations. New York: W. W. Norton Inc.
  13. ↑ Marx K. & Engels F. (Ed.). (2008) The Communist Manifesto London: Pluto Press.
  14. ↑ Marx K. (2000) The class struggles in France. Moscow: Progress Publishers.
  15. ↑ Marx K. (1937) Marx:Critique of the Gotha Program. Co-operative Publishing Society of Foreign Workers in the USSR: Moscow, p. 14
  16. ↑ Taylor A. (1967) Introduction in The Communist Manifesto. London, England: Penguin Books.
  17. ↑ Mills. J. S. (Ed.). (1979). Utilitarianism. Indianapolis: Hacket Pub. Co.
  18. ↑ Levinson, D. and Sadovnik, l. R. (2002). Education and sociology: an encyclopedia. New York: Taylor & Francis
  19. ↑ Kidder, C. W. (2000). The Rise of the Testocracy: An Essay on the LSAT, Conventional Wisdom and the Dismantling of Diversity. Texas Journal of Women and the Law. 9(2). pp. 167 - 250.
  20. ↑ Rawls J. (1971) A Theory of Justice. Great Britain: J. W. Arrowsmith Ltd. p.11
  21. ↑ Davenport J. (1996) A Critique of Rawls's Arguments for the Lexical Priority of Liberties. [online] Available at http://www.fordham.edu/philosophy/davenport/texts/priorlib.pdf%5B‍%5D [accessed 20 April 2012].
  22. ↑ Justice: What's The Right Thing To Do? Episode 08: "WHATS A FAIR START?" , retrieved 2022-12-19
  23. ↑ "Sweden: Where tax goes up to 60 per cent, and everybody's happy paying it". the Guardian. 2008-11-16. Retrieved 2022-12-19.
  24. 1 2 List of countries by income equality [online] at List of countries by Gini coefficiency
  25. ↑ Adbusters [online] Available at http://www.adbusters.org/campaigns/occupywallstreet Archived 2011-11-04 at the Wayback Machine [accessed 20 April 2012]
  26. ↑ Azariadis C. & Stachurski J. (2005). Poverty Traps. In Aghion P. and Durlauf S. The Handbook of Economic Growth Volume 1A. Amsterdam, Holland: Elsevier.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.