Normally, in market transactions we are not in the kind of bargaining situations described above. So the issue we face most of the time is whether to accept market determined wages and prices as fundamentally fair or not. As a general practical rule, efforts to produce alternatives run into rent-seeking public-choice type problems. So the question is not whether "we" can point to some idea better than the market but whether we will accept that the market produces rough fairness. I believe it does.
From the perspective I am presenting, I would frame the issue a bit differently. It does not really make sense to say that markets “produce fairness”, because there is no independent standard of fairness out there against which markets can simply be measured. Markets do not stand outside the game of life. They are one possible institutional way of organising cooperation and allocating its gains.
On this view, what we call fair is not an external moral property, but the set of arrangements that people in a society have come to accept as legitimate ways of sharing the benefits of cooperation. Like most economists, I see markets as an extraordinarily powerful solution to the organisation of economic activity, and therefore as one possible institutional arrangement people may agree to. But their legitimacy is not automatic. If market outcomes become too lopsided, they may cease to be socially sustainable as an accepted solution to the underlying bargaining problem. I will come back to this in a later post when I discuss what this framework implies for libertarianism as a political philosophy.
But lots of people's intuition is that market outcome are not fair. I presume for three reasons. Firstly I suspect the income and wealth disparities between the richest and poorest are much wider in a market economy than in the hunter gatherer tribes in which we evolved our instincts of fairness. Secondly in those hunter gathther tribes it was highly visible what each individual's contribution was. In a market economy its harder for the ordinary person to see what the contribution on a techbro is that warrants their riches. Thirdly our empathy also helps us notice that some people's contribution is limited by physical and mental handicaps or infirmities which they are unlucky to have and we don't feel it fair to give them shares proportional to their contribution which is limited by that bad luck. Intellectually however most realise that a market economy generates far more wealth to be distributed than a hunter gatherer tribe so our politics in relation to economics and welfare is a cultural negotiation about how to balance our hunter gatherer sense of fairness with the productivity of a modern market economy.
This is great stuff, tho it avoids a clear discussion of the difference between fairness and Justice. English today usually treats them as synonymous, but there is a conceptual difference in that a justice system exists to punish those who act unjustly and create an injustice. Then justice becomes a reaction, a response, to the initiating injustice. Some person or group acting in an unjust way, like discriminating against somebody based on sex or race (tho some argue that’s not unjust), or stealing a bike or a car. Justice is the response.
Because life is unfair, cosmic fairness is not possible and yet there is a strong desire to reduce the negative social consequences of some unfairness. Mostly income, not so much IQ, height, strength, patience, or empathy, among so many possible dimensions of unfairness.
On taxing the wealthy rich, who have the most to lose, by far, at civil breakdown, I’d like the goals to be that the wealth of the top 99th percentile level increases at a lower rate than the wealth and income of the median & 40% level tax filers. But envy of the 80% against the top seems to be the current drive to increase taxes on the rich, and there remains far too little political/social support for much less govt spending.
In thinking about these negotiations in relationships, the very common imbalance of Bob’s desire for sex is more like 10, 0; for Alice* maybe 5, 1 (with 1 being snuggling w/o sex.). This allows more bargaining so that on crime nights, there is also sex—the equilibriums are far more complex. Simultaneous multiple games are complicated further by the reality of differing desires. Many who like crime or sex one night as a 10, would like a repeat the next night at a lower 8 or 5 level, with these levels going up as the nights without enjoying that pleasure go.
So many related thoughts, thanks. The probabilistic aspect of future desires is even more intractable.
(*Not to mention Carol & Ted, or the movie, except here.)
Maybe I missed something, but what if, aside from the liking of each's own favorite movie genres, we also considered the level of disliking (or liking) of the other's favorite genre (how much Bob likes/dislikes crime and viceversa)?
You mean Alice should consider how much Bob likes SF vs Crime? In Binmore’s theory it is one of the results. The way fairness works is we take into account others’ outcomes. I’ll discuss that in the next post.
Normally, in market transactions we are not in the kind of bargaining situations described above. So the issue we face most of the time is whether to accept market determined wages and prices as fundamentally fair or not. As a general practical rule, efforts to produce alternatives run into rent-seeking public-choice type problems. So the question is not whether "we" can point to some idea better than the market but whether we will accept that the market produces rough fairness. I believe it does.
Dear Mario,
Many thanks for engaging with the post.
From the perspective I am presenting, I would frame the issue a bit differently. It does not really make sense to say that markets “produce fairness”, because there is no independent standard of fairness out there against which markets can simply be measured. Markets do not stand outside the game of life. They are one possible institutional way of organising cooperation and allocating its gains.
On this view, what we call fair is not an external moral property, but the set of arrangements that people in a society have come to accept as legitimate ways of sharing the benefits of cooperation. Like most economists, I see markets as an extraordinarily powerful solution to the organisation of economic activity, and therefore as one possible institutional arrangement people may agree to. But their legitimacy is not automatic. If market outcomes become too lopsided, they may cease to be socially sustainable as an accepted solution to the underlying bargaining problem. I will come back to this in a later post when I discuss what this framework implies for libertarianism as a political philosophy.
But lots of people's intuition is that market outcome are not fair. I presume for three reasons. Firstly I suspect the income and wealth disparities between the richest and poorest are much wider in a market economy than in the hunter gatherer tribes in which we evolved our instincts of fairness. Secondly in those hunter gathther tribes it was highly visible what each individual's contribution was. In a market economy its harder for the ordinary person to see what the contribution on a techbro is that warrants their riches. Thirdly our empathy also helps us notice that some people's contribution is limited by physical and mental handicaps or infirmities which they are unlucky to have and we don't feel it fair to give them shares proportional to their contribution which is limited by that bad luck. Intellectually however most realise that a market economy generates far more wealth to be distributed than a hunter gatherer tribe so our politics in relation to economics and welfare is a cultural negotiation about how to balance our hunter gatherer sense of fairness with the productivity of a modern market economy.
Nice analysis, from one naturalist to another.
This is great stuff, tho it avoids a clear discussion of the difference between fairness and Justice. English today usually treats them as synonymous, but there is a conceptual difference in that a justice system exists to punish those who act unjustly and create an injustice. Then justice becomes a reaction, a response, to the initiating injustice. Some person or group acting in an unjust way, like discriminating against somebody based on sex or race (tho some argue that’s not unjust), or stealing a bike or a car. Justice is the response.
Because life is unfair, cosmic fairness is not possible and yet there is a strong desire to reduce the negative social consequences of some unfairness. Mostly income, not so much IQ, height, strength, patience, or empathy, among so many possible dimensions of unfairness.
On taxing the wealthy rich, who have the most to lose, by far, at civil breakdown, I’d like the goals to be that the wealth of the top 99th percentile level increases at a lower rate than the wealth and income of the median & 40% level tax filers. But envy of the 80% against the top seems to be the current drive to increase taxes on the rich, and there remains far too little political/social support for much less govt spending.
In thinking about these negotiations in relationships, the very common imbalance of Bob’s desire for sex is more like 10, 0; for Alice* maybe 5, 1 (with 1 being snuggling w/o sex.). This allows more bargaining so that on crime nights, there is also sex—the equilibriums are far more complex. Simultaneous multiple games are complicated further by the reality of differing desires. Many who like crime or sex one night as a 10, would like a repeat the next night at a lower 8 or 5 level, with these levels going up as the nights without enjoying that pleasure go.
So many related thoughts, thanks. The probabilistic aspect of future desires is even more intractable.
(*Not to mention Carol & Ted, or the movie, except here.)
Maybe I missed something, but what if, aside from the liking of each's own favorite movie genres, we also considered the level of disliking (or liking) of the other's favorite genre (how much Bob likes/dislikes crime and viceversa)?
You mean Alice should consider how much Bob likes SF vs Crime? In Binmore’s theory it is one of the results. The way fairness works is we take into account others’ outcomes. I’ll discuss that in the next post.