The Market’s Place and Scope in Contemporary Egalitarian Political Theory

When a poor man goes to the market, often he comes home only with tears.

—African Proverb

In this chapter I examine two prominent but divergent contemporary views about the relationship between markets and equality. On the ﬁ rst view, although markets have an important role to play in society, egali-tarians should seek to rectify the distributional inequalities that markets create by using a tax-and-transfer system. For example, if there is market-generated inequality that is judged to be objectionable, such as an inequality in access to health care between the rich and the poor, the appropriate egalitarian response is the redistribution of income to those less favored so that they can choose to provide for their health needs (or not) by themselves. If egalitarians do not like the unequal distribution of health care, then they should look to the distribution of income and wealth. If they do not ﬁ nd the underlying distribution of income and wealth acceptable, then that is what they should change, using a tax-and-transfer system. I call this view, borrowing the term from the econ-omist James Tobin, general egalitarianism. ¹ General egalitarians believe that the goal of efﬁ ciency entails that any desired redistribution take place through progressive taxation and transfer, not through a limit on the scope of the market. The reason for their preference for the former over the latter is that “speciﬁ c interventions, whether in the name of equality or not, introduce inefﬁ ciencies, and the more speciﬁ c the inter-vention the more serious the inefﬁ ciency.” ² Most egalitarian economists accordingly tend to be general egalitarians.

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Not only is government intervention in a speciﬁ c market alleged to entail undesirable inefﬁ ciencies, but it is sometimes argued that such intervention is an unjustiﬁ ed restriction on individual freedom. It is objectionably paternalistic, the argument proceeds, to provide individ-uals with speciﬁ c goods such as health care or food. Instead freedom is best served by giving individuals income and letting them decide which of their preferences they themselves wish to satisfy. The government fails to treat its citizens with respect when it seeks to determine which of their individual goals, health care or music lessons, is most worthy of pursuit, regardless of the goals that these citizens themselves prefer.

Many liberal political philosophers also tend to be general egalitarians in Tobin’s sense. Some think markets serve both liberty and efﬁ ciency, whereas others would reject government restrictions on speciﬁ c mar-kets on the grounds of liberty alone.

Different theories will, of course, differ as to how much tax and trans-fer a society should undertake, and diftrans-ferent theories will attach dif-ferent weights to efﬁ ciency and liberty as opposed to equality. ³ But the basic point I want to stress is this: General egalitarians think that, with a few exceptions I will discuss, a tax-and-transfer system is the best way to harness the market’s virtues of efﬁ ciency and/or liberty to egalitarian goals.

On the second contrasting view, egalitarianism requires that partic-ular goods not be distributed using a market at all, even when blocking exchanges in these goods is inefﬁ cient. I call this view, again drawing on Tobin’s terminology, speciﬁ c egalitarianism . Speciﬁ c egalitarians believe that there are some scarce goods that should be distributed (in kind) equally to all. ⁴ They are often egalitarians only with respect to speciﬁ c goods, not in general. Candidates for such goods include health care, basic necessities, and goods related to citizenship such as education and military service. Many of the people who support social policies such as universal health insurance hold this type of view; they favor universal access to medical care even though they are not in favor of a general egalitarian redistribution of income.

In examining the merits of each perspective I consider how each respectively deals with a range of cases that I call “ Titanic cases.” ⁵ These are examples about which many people seem to have speciﬁ c egalitarian intuitions. Recall that when the Titanic sank there were enough lifeboats for ﬁ rst-class passengers, but those in steerage were expected to go down

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with the ship. Most of us, I believe, ﬁ nd this objectionable. General egal-itarians might try to accommodate this conviction by pointing out there was an initial unfair distribution of purchasing power that determined who sailed ﬁ rst class and who was relegated to steerage. Nevertheless I suspect that many of us would continue to ﬁ nd the example objection-able even if purchasing power had been fairly distributed and the inequality arose simply because some individuals cared more about, and were willing to pay more for, securing a lifeboat than others. Speciﬁ c egalitarianism is a more promising approach for accommodating this conviction, but I will argue that the speciﬁ c egalitarian theories that I consider are not adequate.

My discussion of Titanic cases will pave the way for my own theory about the limits of markets, which I develop and defend in the next chapter. On my theory there is a strong case for regulating or curtailing particular markets to the extent that their operation undermines or blocks the capacity of the parties to interact as equals , even if such mar-kets arise through voluntary individual consent and on the basis of an initial equality of conditions. The ideas of interacting as equals, and of the social and political preconditions for interacting as equals, are complex ideas, related to but not identical to other conceptions of equality, and I leave their discussion to the next chapter. I mention them here because they shape my discussion of the alternative views I con-sider below.

Both the general and the speciﬁ c egalitarian theories treat markets as mechanisms to be assessed by the extent to which they achieve or under-mine important values. But some people think that the great strength of a market system is moral: the way that it holds people responsible for their own lives and choices. On the moral view, the market holds each of us responsible for our market choices, while at the same time ensuring that the beneﬁ ts we obtain from these choices depend on the costs and beneﬁ ts of those choices to others. According to this view’s proponents, the market establishes a kind of equality between individuals, where dif-ferences between the resources that they have reﬂ ect only difdif-ferences in their preferences for work, leisure, risk, and so forth.

I begin this chapter by exploring the possibility of a deeper connec-tion between markets and equality than is found in alternative theories, including my own. I will argue that the case for a conceptual link between markets and equality fails. Markets have important roles to play in

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society, but they cannot be used as the fundamental standard by which we determine what resources people are entitled to.

T H E M O R A L V I E W O F T H E M A R K E T A S C O N C E P T UA L LY L I N K E D TO

E G A L I TA R I A N I S M

Some ground clearing: Given that human beings are different in myriad ways (e.g., individuals differ in strength, sex, age, values and preferences, health status, and levels of talent), any ideal of human equality inevi-tably must be abstract. Furthermore policies that attain equality in one dimension often create inequality in another. For example, equality in income can entail unequal reward for effort. We cannot be each other’s equals in every way, so we must decide which dimensions of our differ-ences matter. Every egalitarian theory needs to do this. ⁶

One suggestion, advanced by Ronald Dworkin, is that our equality is best understood in terms of the idea that individuals should be treated as equals ; in particular he argues that the state is obligated to treat all of its members with equal concern and respect. ⁷ Dworkin goes so far as to claim that all liberal political philosophies are committed in a fundamen-tal way to this abstract idea of equality, although they offer very different understandings of its implications. ⁸ For example, some philosophers argue that treating people with equal concern and respect means giving them equal prospects for achieving good lives, whereas others argue that it means giving people equal rights over their property and labor.

Dworkin calls his own interpretation of the distributive implications of treating people as equals equality of resources . Its basic idea is that two people are treated with equal concern and respect when they are (ini-tially) provided with an equal share of the society’s total resources. ⁹ It seems obvious, for example, that a state would not be treating its citizens with equal concern and respect if it gave its white citizens twice as many resources as its black citizens. Dworkin’s theory extends and deepens this intuitive idea.

We might imagine that the principle of equality of resources could be implemented by a planning agency that kept track of the amount of a society’s available resources and the size of its population. Yet Dworkin

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claims that we cannot achieve an equal division of assets, which is what equal respect and concern demands, without reliance on a market: “The idea of an economic market, as a device for setting prices for a vast variety of goods and services, must be at the center of any attractive theoretical development of equality of resources.” ¹⁰ Why? If the impli-cation of treating individuals as equals is that they have equal resources, why not simply give to each person an equal amount of all of the resources that are available for redistribution? ¹¹

The problem with the proposal to divide up society’s resources equally is not merely that many goods are not likely to be uniform in quality;

some pieces of land, for example, are bound to be better than others. ¹² The core problem with this proposal is that, even given an equal initial division, different people will have different preferences for goods and services. If people have different preferences over resources, then they will not be equally satisﬁ ed with the resources that they are given. Some will want to cede a portion of their resources to obtain other resources.

To decide what the different resources are worth, and to preserve equal value, we need a metric of comparison. According to Dworkin, the mar-ket gives us the metric; it sets the value of any particular resource in terms of how important that resource is for others. ¹³

Dworkin asks us to imagine a society in which all the available resources are up for sale in an auction. ¹⁴ Everyone starts with an equal amount of purchasing power—clamshells, in his hypothetical example—

with which they can bid on these resources. People exchange their clamshells for resources, and exchange with one another, until a set of market-clearing prices is arrived at. (When the markets clear, supply of the goods is equal to the demand for the goods at some price.) ¹⁵ In this model the differences between each individual’s resources are simply the result of the choices that each has made. The auction parallels the ideal market of Walrasian microeconomic theory: the interaction of the pref-erences of everyone in the community over all the society’s goods and services gives us the equilibrium prices for any one individual’s goods and services. ¹⁶

Given the background of an initial equal division of resources, the auction is meant to guarantee that people wind up with different but, for them, equally valuable resources. After the auction the division of these resources is “envy free”—everyone prefers his own bundle of resources to those of others—or is at least indifferent. (If anyonedid

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prefer a different bundle, she could have bid for it rather than the resources that she did bid for in the auction.) Differences in people’s resource bundles now reﬂ ect only their different preferences, attitudes toward risk, and life ambitions. If one person prefers more expensive food and luxuries than another, this may affect his relative well-being, but he is wholly responsible if he chooses to buy French burgundy instead of beer and so has fewer resources left to buy books. ¹⁷ This combination of markets and initial equality thus enables Dworkin to answer what he takes to be a central question for distributive justice: How can we ensure that individuals face equal circumstances while also having and exer-cising a special responsibility to make a success of their own lives?

Dworkin’s answer to this question is not fully supplied by the auction;

equality in external resources (i.e., clamshells) is not enough to ensure that individuals really face equal circumstances when making their (mar-ket) choices. This is because individuals will differ in their internal per-sonal resources, such as their level of inborn talent potential and physical powers. Although the state cannot redistribute all the differences in internal resources between people, Dworkin argues that it can mitigate their effects by offering compensation to those whose internal resources are less valuable on the market than those of others. To determine the extent of compensation that a person is owed, we must again rely on a market, in this case a hypothetical insurance market. The hypothetical market in insurance supplements the auction in external resources.

Dworkin’s argument is complex, but the basic idea is this: Imagine that no one knows whether they have or will acquire a given physical or mental impairment, although each knows the consequences of having this impairment and its statistical probability in the general population.

Through a hypothetical insurance market, individuals can, using some of their original clamshells, purchase insurance to protect themselves against the probability of having these impairments or being otherwise disadvantaged in the distribution of internal resources.

In this situation chosen levels of insurance would likely differ. Given your other goals and preferences, you might be willing to spend a signif-icant percentage of your original share of resources as insurance against being so disadvantaged; I might want to spend less. But Dworkin argues that in the case of “general handicaps . . . that affect a wide spectrum of different sorts of lives,” we should assume that most people would take out roughly similar insurance policies. ¹⁸ A society can then tax people as

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if they have taken out insurance policies against these forms of disability and provide cash beneﬁ ts for actual people with disabilities at the level at which the average person would have insured. Once the hypothetical market has determined the value of insurance premiums for disadvan-tages in internal resources and the payouts to be distributed, and once the external resources have been divided up using the auction, then equality of resources has been achieved. Everyone has been treated with equal concern and respect—everyone has been provided by the state with equally valuable resources—and no one has any basis for com-plaint on the grounds that they have been treated unfairly.

Or do they? However compelling Dworkin’s view of equality is on its own terms, I believe that he is mistaken to suppose that the market is intrinsically connected to the distributive implications of treating people with equal concern and respect. Markets may be especially useful instruments for achieving many important social and personal aims, but they cannot tell us, even under Dworkin’s demanding initial condi-tions, what resources people are entitled to or what distributive out-comes are fair. To know what resources people are entitled to and what distributive outcomes are fair we have to look elsewhere than to the equilibrium prices established (under the assumption of initial equal resources) by their subjective preferences and their voluntary choices expressed through their market behaviors.

Why? To begin with, Dworkin’s model assumes that the preferences for goods and services that people bring to the market are authentic, well supported, and exogenously given. ¹⁹ But many of our preferences are not like that. They are sometimes formed by whim, confusion, tradi-tion, peer pressure, and social context. ²⁰ Our preferences, even our life’s ambitions, do not come from nowhere. Indeed I have already argued that markets themselves can help shape our preferences. If our prefer-ences are formed in any of the ways I just mentioned, then they may not reﬂ ect what is really important for us: a way of life that we are genuinely committed to.

If my envy of your bundle of goods is based on preferences formed by misinformation or advertising or whim, then this seems a poor basis for recalibrating the distribution of our resources. Some people want to keep up with the lifestyle of anyone who has things that they themselves do not have. ²¹ Others do not feel satisﬁ ed with their lives unless they have the latest gadget, and are continually chasing after new goods

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(whose capabilities differ little from their predecessors but are well-marketed). Many people reverse their preference orderings given small changes in their environment, and few people possess a set of predeﬁ ned preferences for every contingency. In many experiments context and the procedures involved in making choices powerfully inﬂ uence the prefer-ences that are implied by the elicited choices. Some people choose things simply because of social norms in their community. Given this, why should we assume that all of the preferences that people express in mar-kets matter for ethical purposes?

Although Dworkin’s model depends on individuals having resources that are equally valuable to them for the pursuit of their own projects, some people may choose resources that have no real value for these aims. So, as Dworkin acknowledges, we will need to bring in a principle that secures the conditions for authenticity of the parties’ preferences before the auction proceeds. ²² This is a step in the right direction, but it is a tall order.

Elsewhere in his work Dworkin defends a “challenge” model according to which a life goes well insofar as it is “an appropriate response to the distinct circumstances in which it is lived.” ²³ Perhaps ﬁ lling out that model would enable us to think about the preferences that are not only authentic, but also worthy of satisfaction. At the same time Dworkin stresses that his account of distributive justice (i.e., equality of resources) does not depend on his challenge model. Instead, following contemporary economic theory, his account largely treats our preferences as given (perhaps they are subject to consistency demands; perhaps they could be subject to certain

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