Equality of resources, market luck, and the justification of adjusted market distributions

Boston University Law Review

Volumn 90, Issue 2, 2010, Pages 921-948

  Freeman, Samuel ^a,b  

^a Department of Humanities ^*  (United States)

^b UNIVERSITY OF PENNSYLVANIA   (United States)

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[No Author keywords available]

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EID: 77954347608     PISSN: 00068047     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Conference Paper

References (145)

1. For a full account ot Equality of Resources," see RONALD DWORKIN, SOVEREIGN VIRTUE 65-119 (2000), especially Chapters 1, 2, 7-9.
2. In Justice for Hedgehogs, Professor Dworkin briefly summarizes his account of equality of resources as set forth in Sovereign Virtue and incorporates its discussion.
3. See RONALD DWORKIN, JUSTICE FOR HEDGEHOGS (forthcoming 2010) (Apr. 17, 2009 manuscript at 208, 221-27, on file with the Boston University Law Review).
4. DWORKIN, JUSTICE FOR HEDGEHOGS, supra note 1 (manuscript at 221-27).
5. See JOHN RAWLS, A THEORY OF JUSTICE 274 (1971) (identifying the "choice of a social system" as the "main problem of distributive justice").
6. DWORKIN, SOVEREIGN VIRTUE, supra note 1, at 172.
7. See id.
8. See, e.g., G.A. COHEN, RESCUING JUSTICE AND EQUALITY 300 (2008) (embracing "luck egalitarianism ... the view that identifies distributive justice with an allocation which extinguishes inequalities that are due to luck rather than to choice");
9. Elizabeth Anderson, How Should Egalitarians Cope with Market Risks?, 9 THEORETICAL INQUIRIES IN L. 239, 241 (2008) (critiquing luck egalitarianism and instead promoting "a democratic egalitarian approach to market risks");
10. Richard J. Arneson, Luck Egalitarianism and Prioritarianism, 110 ETHICS 339, 340 (2000) (defending some features of luck egalitarianism against Elizabeth Anderson's critique, ultimately stating that it emerges as "superior to the 'democratic equality' conception of egalitarian justice").
11. DWORKIN, SOVEREIGN VIRTUE, supra note 1, at 73.
12. See id. at 74.
13. COHEN, supra note 6, at 181.
14. DWORKIN, JUSTICE FOR HEDGEHOGS, supra note 1 (manuscript at 224) (emphasis added).
15. Id. (manuscript at 226-27).
16. See, e.g., DAVID GAUTHIER, MORALS BY AGREEMENT 90-92 (1986);
17. ROBERT NOZICK, ANARCHY, STATE, AND UTOPIA 187-88 (1974).
18. "I argue that an equal division of resources presupposes an economic market of some form, mainly as an analytical device but also, to a certain extent, as an actual political institution."
19. DWORHN, SOVEREIGN VIRTUE, supra note 1, at 66.
20. Also, Under equality of resources the market... is endorsed by the concept of equality, as the best means of enforcing, at least up to a point, the fundamental requirement that only an equal share of social resources be devoted to the lives of each of its members, as measured by the opportunity costs of such resources to others.
21. Id. at 112.
22. Id. at 66-74 (creating this world from "shipwreck survivors ... washed up on a desert island that has abundant resources and no native population" without a chance of rescue in the short term).
23. Id. at 68-72.
24. The "envy test" says: "No division of resources is an equal division if, once the division is complete, any immigrant would prefer someone else's bundle of resources to his own bundle."
25. Id. at 67;
26. see also id. at 139.
27. Id. at 73 (recognizing that once the auction ends and people are left alone "to produce and trade as they wish... the envy test will shortly fail").
28. Id. at 102.
29. Id. at 73.
30. Id. at 73-83.
31. Id.
32. Id.
33. Id.
34. Id. at 73 (defining "brute luck" as a "matter of how risks fall out that are not . . . deliberate gambles").
35. "Option luck is a matter of how deliberate and calculated gambles turn out - whether someone gains or loses through accepting an isolated risk he or she should have anticipated and might have declined."
36. Id.
37. Id. at 74.
38. Id.
39. Id. ("[P]eople should pay the price of the life they have decided to lead.").
40. Id. at 75. Dworkin also writes: If winners were made to share their winnings with losers, then no one would gamble, as individuals, and the kind of life preferred by both those who in the end win and those who lose would be unavailable.... [T]he chance of losing is the correct price, measured on the metric we have been using, of a life that includes gambles with a chance of gain.
41. Id.
42. See id. at 103-05 ("The brute fact remains that some people have much more than others of what both desire, through no reason connected with choice.").
43. Id. at 172-73.
44. Thus, Dworkin says, "[I]n the circumstances described, in which talents are equal, efficiency simply is fairness, at least as fairness is conceived under equality of resources."
45. Id. at 84.
46. He continues: It would therefore violate equality of resources if the community were to redistribute Adrian's wealth, say, at the end of each year. If everyone had equal talents (as we have been assuming just now [in applying the envy test diachronically]), the initial auction would produce continuing equality of resources even though bank-account wealth became more and more unequal as years passed.
47. Id. at 85.
48. I return to this point below. See infra Part III.
49. DWORKIN, SOVEREIGN VIRTUE, supra note 1, at 111 (emphasis added).
50. Id. (emphasis added). At the conference, Dworkin said that the Wilt Chamberlain example needs updating for a new generation of readers, and that Kobe Bryant should now be brought in as a substitute for Chamberlain.
51. See Ronald Dworkin, Final Response at Justice for Hedgehogs: A Conference on Ronald Dworkin's Forthcoming Book 9 (Sept. 25-26, 2009) (transcript on file with the Boston University Law Review).
52. DWORKIN, SOVEREIGN VIRTUE, supra note 1, at 70.
53. DWORKIN, JUSTICE FOR HEDGEHOGS, supra note 1 (manuscript at 226).
54. DWORKIN, SOVEREIGN VIRTUE, supra note 1, at 89 (emphasis added). Dworkin also says, [P]eople should pay the price of the life they have decided to lead, measured in what others give up in order that they can do so. That was the point of the auction as a device to establish initial equality of resources. ... So we have no reason to object, against the background of our earlier decisions, to a result in which those who decline to gamble have less than some of those who do not
55. Id. at 74.
56. See infra Part III.
57. I also argue more specifically against Dworkin's position and contend that this is true, even after market income has been adjusted by recipients paying their fair share of social insurance and other public goods under equality of resources; here my concern is only to establish the more general point.
58. See infra Part III.
59. See, e.g., JOHN E. ROEMER, A FUTURE FOR SOCIALISM 28-36 (1994);
60. see also RAWLS, supra note 3, at 76-80.
61. My own view is that markets should play only an instrumental role in establishing distributions whose justice is determined by other criteria; but more on this later.
62. See infra Part III.
63. See Dworkin, SOVEREIGN VIRTUE, supra note 1, at 73-74.
64. This suggests the more general point, which I will develop infra in Part II, namely, that the idea that each individual ought to be rewarded according to his or her contributions to productive output presupposes just background conditions. In particular, determining a person's "contributions" to productive activity depends upon having in place beforehand an account of property rights that presupposes a separate criterion of distributive justice. I will contend in Part III that Dworkin's idea of personal responsibility for one's product and one's choices itself presupposes, like the idea of a person's contributions, a framework of just background institutions, including a just specification of the incidents of property.
65. See GAUTHIER, supra note 12, at 92;
66. NOZICK, supra note 12, at 149 ("There is no central distribution, no person or group entitled to control all the resources, jointly deciding how they are to be doled out").
67. See NOZICK, supra note 12, at 187-88.
68. See id. at 187.
69. Robert Nozick relies on marginal productivity theory for a similar argument: "People transfer their holdings or labor in free markets. ... If marginal productivity theory is reasonably adequate, people will be receiving, in these voluntary transfers of holdings, roughly their marginal products."
70. Id. at 187-88 (emphasis added);
71. see also id. at 301-02, 304-05. In Nozick's "Utopia," "each person receives his marginal contribution to the world."
72. Id. at 302.
73. Similarly, David Gauthier maintains: "In the free exchanges of the market each may expect a return equal in value to her contribution. Thus the income each receives... is equal to the contribution she makes, or the marginal difference she adds to the value of the total product."
74. GAUTHIER, supra note 12, at 91-92.
75. "The equation of income with marginal contribution ensures just this impartiality.... [E]ach benefits from and only from the contribution she makes."
76. Id. at 97.
77. See KARL MARX, CAPITAL 557-855 (Samuel Moore & Edward Aveling trans., Frederick Engels ed., Random House, Inc. 1906) (1867);
78. Amartya Sen, The Moral Standing of the Market, in ETHICS AND ECONOMICS 1, 15-16 (Fred D. Miller, Jr., Ellen Frankel Paul & Jeffrey Paul eds., 1985);
79. see also KARL MARX: SELECTED WRITINGS 415, 415-506 (David McLellan ed., 1977).
80. For a discussion of the "abstinence theory," as well as the idea that capital is a secondary factor deriving from the primary factor service of "waiting to consume,"
81. see MARK BLAUG, ECONOMIC THEORY IN RETROSPECT 193-94, 516-18 (4th ed., Cambridge Univ. Press 1985).
82. Marx, in effect, remarks on this conflation of different senses of "contribution" in Volume III of Capital. He says: [C]apital is merely an "economic appellation" for these means of production; and so, in itself land is by nature the earth monopolized by a certain number of landowners. Just as products confront the producer as an independent force in capital and capitalists who actually are but the personification of capital - so land becomes personified in the landlord and likewise gets on its hind legs to demand, as an independent force, its share of the product created with its help. Thus, not the land receives its due portion of the product for the restoration and improvement of its productivity, but instead the landlord takes a share of this product to chaffer away and squander.
83. MARX, SELECTED WRITINGS, supra note 49, at 500.
84. See DWORHN, JUSTICE FOR HEDGEHOGS, supra note 1 (manuscript at 225);
85. infra Part III.B;
86. see also DWORHN, SOVEREIGN VIRTUE, supra note 1, at 105;
87. infra note 67.
88. Here I use the term "capitalism" in the traditional sense of an economic system where ownership of capital is private and capital is held by a class that is largely distinct from labor; in this regard not all private property market economies are capitalist. For example, Rawls's property-owning democracy, which he contrasts with welfare-state capitalism, structures institutions to encourage workers' private ownership and control of their industries.
89. See JOHN RAWLS, JUSTICE AS FAIRNESS: A RESTATEMENT 135-40 (Erin Kelly ed., 2001);
90. see also EDMUND S. PHELPS, REWARDING WORK: HOW TO RESTORE PARTICIPATION AND SELF-SUPPORT TO FREE ENTERPRISE 103-43 (1997) (remedying the problems of the welfare-state with a "market-based solution" that includes rewarding work via wagesubsidies);
91. MARTIN L. WETTZMAN, THE SHARE ECONOMY: CONQUERING STAGFLATION 2-4, 96-99 (1984) (advocating a share system as a means to beating stagflation).
92. Thus, Robert Nozick devotes a substantial amount of space to discussing the state of nature and a right of initial appropriation of "unowned" things, subject to a "Lockean proviso."
93. See NOZICK, supra note 12, at 167-82.
94. Locke himself assumed initial common ownership of the world in a state of nature; common ownership underpins his proviso that we can appropriate land by improving it with our labor so long as "enough, and as good" is left for others.
95. JOHN LOCKE, TWO TREATISES OF GOVERNMENT AND A LETTER CONCERNING TOLERATION 114 33 (Ian Shapiro ed., Yale Univ. Press 2003) (1690).
96. Nozick conveniently eschews Locke's assumption of common ownership and does not condition initial appropriation upon the improvement of land by labor.
97. NOZICK, supra note 12, at 174-82.
98. Many have remarked on the inadequacies of Nozick's account, including Nozick's failure to address the question of how absolute ownership rights (as opposed to more qualified rights) follow from the act of merely claiming and appropriating unowned land and natural resources as one's own.
99. See the critical discussions by Thomas Scanlon, Samuel Scheffler, Thomas Nagel, Onora O'Neill, and David Lyons, READING NOZICK: ESSAYS ON ANARCHY, STATE, AND UTOPIA 107-28, 148-66, 191-203, 305-21, 355-78 (Jeffrey Paul ed., 1981).
100. DWORKIN, SOVEREIGN VIRTUE, supra note 1, at 111.
101. Id.
102. See RAWLS, supra note 53, at 77-79.
103. Federal Emergency Management Agency, Frequently Requested National Statistics Hurricane Katrina - One Year Later: Fact Sheet, ;http://www.fema.gov/ hazard/hurricane/2005katrina/anniversary-factsheetshtm (June 4, 2009). Specifically, "121,922 travel trailers and mobile homes have served as temporary housing for Hurricane Katrina victims, outnumbering any housing mission in FEMA's history."
104. Id.
105. Diane Sussman, The; 1950's: So Long Sleepy Town, PALO ALTO ONLINE, Apr. 13, 1994, http://www.paloaltoonline.com/news-features/centennial/1950SA.php ("By 1950, 40 percent of the city's housing had been built; during the next 10 years another 35 percent was added. The population more than doubled in the '50s, as more than 26,000 new residents moved in.").
106. DWORKIN, SOVEREIGN VIRTUE, supra note 1, at 111.
107. DWORKIN, JUSTICE FOR HEDGEHOGS, supra note 1 (manuscript at 225) (explaining that communities that prevent our fate from intertwining with our investment gambles inevitably cripple "our own responsibility for our choices").
108. Id.
109. Id.
110. Id. (emphasis added).
111. See, e.g., COHEN, supra note 6, at 2.
112. Nor does it follow that (as Dworkin concludes in the next sentence), "So any plausible version of an ex post approach would have to draw a distinction between investment and other forms of luck and rule out the former as a ground for redistribution."
113. DWORKIN, JUSTICE FOR HEDGEHOGS, supra note 1 (manuscript at 225) (emphasis added).
114. We can tax the product of good investment luck to some degree, according to the difference principle for example, and still preserve individuals' responsibility for their investment choices.
115. As this is true of investment luck, it is also true of other forms of market luck. Dworkin says: "If... no one can earn movie-star wages, people who wish to watch movies may perhaps find very different fare available which, rightly or wrongly, they will not regard as highly as what they now have."
116. DWORKIN, SOVEREIGN VIRTUE, supra note 1, at 105.
117. This may be true; movie stars indeed may make fewer films if their income is taxed substantially more rather than less. On the other hand, they might make more movies, to earn enough to pay for buying and maintaining multiple homes. Whether they make more or fewer movies, this is a point about the income effects and substitution effects that stem from different taxation rates. It has little directly to do with people taking responsibility for their choices, and it does not establish anyone's full right to his or her income on labor even if adjusted to discount the effects of brute luck.
118. See William Ewald, On a New Theory of Justice, 82 CAL. L. REV. 231,240 (1994).
119. See NOZICK, supra note 12, at 150-82 (supporting "the entitlement theory" as the proper theory of distributive justice, based in part on Lockean principles).
120. See DWORHN, SOVEREIGN VIRTUE, supra note 1, at 111 ("There is no place in a theory such as Nozick's for anything like the idea of an equal distribution of abstract economic power over all the goods under social control.").
121. Id. at 111-12 (using the "famous Wilt Chamberlain example" to make this point).
122. See, e.g., Richard A. Posner, Utilitarianism, Economics, and Legal Theory, 8 J. LEGAL STUD. 103, 103-05 (1979).
123. See RAWLS, supra note 53, at 42-43.
124. DWORKIN, JUSTICE FOR HEDGEHOGS, supra note 1 (manuscript at 224).
125. Compare responsibility for the returns from investment luck with taking responsibility for gambling luck: Suppose the rate of taxation on gambling profits is set at 33%. A gambler knows that any winnings he has will be taxed at this rate. How can he be said to be any more or less responsible for the return on his winnings if the taxation rate is set at 33% rather than at 25% or at 50%?
126. See JOHN RAWLS, Lecture VIII: The Basic Liberties and Their Priority, in POLITICAL LIBERALISM: EXPANDED EDITION 289, 290 (Columbia Univ. Press 2005) (explaining "how the basic liberties and the grounds for their priority can be founded on the conception of citizens as free and equal persons in conjunction with an improved account of primary goods").
127. Id. at 293.
128. Rather, to justify the difference principle, Rawls relies on considerations of reciprocity and stability of cooperation among free and equal citizens in a democratic society.
129. See RAWLS, supra note 53, at 122-26.
130. See supra Part I.
131. Here it is important to distinguish the difference principle from the principle of utility. Dworkin calls them both "ex post" theories.
132. DWORKIN, JUSTICE FOR HEDGEHOGS, supra note 1 (manuscript at 224).
133. He might mean that they are both "end-state" principles, in Nozick's sense, in that they describe a state of affairs that is to be promoted or maximized (subject to relevant constraints, such as Rawls's principle of equal basic liberties).
134. See NOZICK, supra note 12, at 153-55, 172.
135. But to regard the difference principle in this way is a misconception. Rawls says that the difference principle is part of a "social process" account, which makes distributive justice a matter of "pure procedural justice."
136. See JOHN RAWLS, Lecture VII: The Basic Structure as Subject, in POLITICAL LIBERALISM: EXPANDED EDITION, supra note 76, at 282.
137. It specifies a system of economic procedures and institutional rales, which, once complied with, result in distributions that satisfy the difference principle. Unlike "ex post" or "end-state" principles such as the principle of utility or other consequentialist principles, the difference principle does not say that we should go back ex post and readjust distributions that result from this process at the end of each term so as to correct them by maximizing the amount going to the least advantaged. Rawls contrasts his "ideal social process" conception with the "ideal historical process" view of Nozick, which says that whatever distribution results from market and other consensual activity is just, and requires no adjustments over time or even across generations.
138. See RAWLS, supra note 53, at 52-53.
139. Dworkin's equality of resources, since it allows for the regulation of markets and adjustment of market distributions, also seems to be a social process view like Rawls's, rather than an historical process view like Nozick's.
140. DWORKIN, SOVEREIGN VIRTUE, supra note 1, at 298-99 ("Other people's needs and opinions are not resources that can be justly or unjustly distributed among us; they are ... part of what we must take into account in judging what injustice is or what justice requires.").
141. See id. at 49-52.
142. See, e.g., NOZICK, jupra note 12, at 171 ("My property rights in my knife allow me to leave it where I will, but not in your chest");
143. see also sources cited supra note 6.
144. See, e.g., Posner, supra note 72, at 105;
145. see also GAUTHIER, supra note 12.