2
Why Economic Inequality?

If we conceive of society itself as a cooperative scheme for mutual benefit, how are the goods it makes possible to be divided?

If your first thought was to say, "Equally!" you would not be alone. Even philosopher Robert Nozick, that celebrated soloist, might chime in too, if the goods concerned had fallen into our laps like manna from heaven. But, as Nozick was quick to point out, the goods we are concerned with are not manna from heaven. They are the product of human effort, individual effort, in the last analysis. Even the products of cooperative effort are, from a soloist's viewpoint, the product of a combination of individual contributions. Individual efforts typically vary. One worker is stronger, another smarter. The smart worker typically does smart work, but is not perfect. Not all contributions are equal.

So, from Nozick's point of view, were we to adopt a distributive principle as part of a social contract, it should not be one of equal distribution. Nor should it be the one Marx and Engels projected for a fully communist society, "from each according to his ability, to each according to his need." From a soloist/libertarian perspective (which the later Nozick confessed misgivings about) a principle of just distribution had better be something like, "to each according to his perceived contribution to society," as judged by, well . by what he was able to earn in the labor market.

It is widely assumed that a principle of equality will govern in a socialist society. And, it is true that equality has a role to play in a socialist account of distributive justice. Even so, the principle announced by Marx and Engels was not egalitarian. The more able contribute more than the less able, and people are not assumed to be equally able. The needier receive more than the less needy, and people are needy in different degrees. Marx and Engels count as socialists, but they were not egalitarians, full stop. Lenin, who was a socialist (if not a liberal democratic one), was fond of repeating St. Paul's dictum, "Who does not work, shall not eat." The Bolshevik Revolution was motivated, in large part, by a sense of outrage at a social structure in which those who worked hardest got the least in return.

Socialism, then, cannot be reduced to simple egalitarianism, nor can it be equated with an attitude of share-and-share-alike. It is true that the Marxian critique of the wage relation under capitalism has had a profound influence. On the other hand, socialists agree that diligent effort that benefits others in society ought to be rewarded. Moreover, many today are persuaded that socialism is not incompatible with letting individual incomes from work be determined by market mechanisms. Socialism, recall, is in its essence the tenet that the means of production ought to be, and to always remain, the people's joint property. (If this tenet seems to you to be a matter of dispute among socialists, think of it as my stipulation.) How these means of production are to be deployed is for democratic decision, not for decision by private owners. To say this is not yet to say how incomes are determined.

A socialist society might choose to provide access to the means of production at no charge to those needing to use them. It might choose to lease them, and retain the rents for reinvestment. It might choose to distribute rents as dividends, equally, to all, or to dedicate rents to providing public goods of various kinds. All of these are options in a socialist society. What is not an option is for private owners to garner rents from those needing access to the means of production. That is the essence of capitalism, and it is unjust. That's the conclusion toward which this book argues. That private ownership of society's means of production is unjust can be seen as we pursue the question, what principle of distributive justice would soloists include in their social contract?

A just society is one in which each person gets what she is due. All can agree to this. Disagreement begins the moment we raise the obvious next question, how can we tell what is due to a person, each person? The idea that there is some objective, external metric that could be applied to make this determination, continuously, for everyone, seems hopeless. So also is the idea that there is some set of facts about a person which, if fed into an algorithm of some kind, could be converted into a precise figure stating the income and wealth that person is due. That seems equally hopeless.

A much more appealing way of thinking about the problem of distributive justice is to think of a productive society as being, in a way, like a fair competition. We set up a competitive game in a way such that, if the rules are followed, then the final score is what it ought to be, whatever it happens to be. If we agree to play a game by a set of rules, and the rules are followed, then the outcome is fair, whatever it happens to be. There is no external standard that the outcome has to be checked against.

Roulette and other games of chance are like this. (They are not like, say, a game of guess-your-weight.) An analogy suggests itself. If the basic institutions of society are set up fairly, and the rules we agree to are followed, then the package of basic goods delivered to each simply is what each is due, whatever it happens to contain in the form of individual wealth and income.

This takes us back to the question posed in the previous chapter: what rules would we agree to, if we were forced to play a game upon which our lives and livelihoods depended? If the rules are fair, and adhered to, then there should be no further question about the justice of distributions of goods to individual players. A tennis player who loses a match by a score of 6-0, 4-6, 4-6 cannot complain that the prize was due to her and not her opponent. The loser won more points, but the rules of tennis specify that the winner is the contestant who is the first to win two (or three) sets. If she objects to that method of scoring, she is not pressing a claim of injustice. If she doesn't like the way the rules of tennis are written, and can do nothing to get them changed, she should consider taking up another sport.

The analogy suggested here would be faulty if it distracted us from the fact that different sets of rules can make for better and worse games. Some games are no fun at all. Like "Fifty-two Pickup," in which an older sibling throws a deck of cards on the floor for the younger to pick up. Some games run according to rules that give a small but significant advantage to one of the players (the casino, or "house"). Many people find casino games fun to play, even though they know that, statistically, they are bound to be net losers over the long run. People who play casino games compulsively, or risk ruin by staking all, are to be pitied.

Some games have flaws in their design that may not be obvious. The board game Monopoly is like this. Whoever controls the orange-colored properties - New York Avenue, Tennessee Avenue, St. James Place - will usually win. This is because those properties lie six, eight, and nine places after the Jail. Any player who lands on the "Go to Jail" square or draws a "Go to Jail" card has to take another run past the orange properties. It isn't obvious at first, but overall, the chances of landing on an orange property are greater than the chances of landing on a property of any other type. Once someone has a monopoly of orange properties, in all probability the other players will slowly, slowly be ground into bankruptcy. If two players each own an orange property, and each is wise to the decisive advantage of an orange monopoly, both will hold out, and the game can go on forever (or seem to).

The inventor of the original Monopoly game, Elizabeth Magie, intended it to discredit, rather than to celebrate, the political economy of her time, the first so-called Gilded Age (ours being the second). She called it "The Landlord's Game." The Landlord's Game came with two alternative sets of rules. One set of rules was meant to reward players for benefitting all. The other set of rules rewarded the player who bled the others dry. Only the second set of rules made it into the commercialized game of Monopoly.

In the real world, no adult is forced to play Monopoly, or tennis, while all of us are forced to obey the law, like it or not, agree with it or not. Moreover, in the real world the stakes are not mere pride or Monopoly money, but control over our very lives, from cradle to grave. What we are after is a set of principles that, if adhered to, will guarantee that we can accept the distribution of the fruits of social cooperation, whatever that pattern happens to be. The idea is just like Magie's: we try out alternative sets of rules, hypothetically, and see which makes for the better game.

Let's return to an earlier thought. Suppose we could start a society from scratch, as we might a business. The business is meant to generate primary goods and to continue doing so in perpetuity. There is no intention for our enterprise ever to shut down and wind up its affairs. Generation after generation is expected to continue the business. What would a charter look like (and here we suppose there is no standing body of business law to refer to)?

At the threshold, the charter would have to specify two things about the enterprise. The first is how to capitalize it. The second is how decisions are to...