If we are going to talk about how to distribute wealth, we need to familiarise ourselves with the technical aspects of a society’s wealth distribution. A wealth distribution graph shows the spread of individual wealth across the population. In the following example, the measure of wealth will be income. Below is the UK one from 2007-8. The shape changes every year depending on what each member of the population earns.

[Brewer et al, 2009]

You may have come across this graph in a different form. The Gini coefficient is a number which condenses the profile of the distribution to a single figure (with 1 meaning that everyone is earning the same amount and 0 implying that one person earns all the wealth) and is a popular (if simplistic) way of summarising this distribution.

What should the wealth distribution look like in an ideal society? Some politicians and political commentators claim that incomes should be broadly equal, arguing for instance that “it is important that [the pursuit of more income equality] is an explicit goal [of government]” (Miliband, 2010). But is inequality of income or wealth (or inequality of outcome in general) necessarily a bad thing? It all depends on what principle of distributive justice you adhere to — if everyone were to agree that the correct way to allocate wealth is to give all individuals exactly the same amount, then people earning different incomes would indeed be a bad thing. This stance of enforcing equal wealth is known as strict egalitarianism and because it entails everyone earning equal incomes it compels a nation to aspire to the distribution on the left:

Some followers of socialism take this view; that in a fair society we should all earn the same income regardless of our personal circumstances. Others argue that what is important is that, as a generation, we should start off with equal incomes, but our individual income should be allowed to grow or shrink depending on how hard we choose to work, or how we invest our money. This second view is known as the starting-gate principle of distributive justice, and one possible way incomes might eventually fan out is shown above on the right. Crucially, of these two cases, only strict egalitarianism states exactly what the wealth distribution must look like. In the case of the starting-gate principle of distributive justice, it’s impossible to measure whether the principle is being achieved from the shape of the distribution: while you can tell if people start off with the same amount of money, after this initial period the principle cannot predict the eventual distribution shape. Similarly, because measures like the Gini coefficient are estimates of income only (not hard work or other choices), they are only useful for strict egalitarians.

Other theories of distributive justice can, under certain conditions, be checked by the shape of the distribution: one such theory is the Difference Principle, which states that wealth should only be distributed in ways that increase the wealth of the poorest. Under this principle, the wealth distribution is allowed to fan out, but only if it fans upwards in such a way that the poorest are better off than if no redistribution had happened (Rawls, 1971, 1993). Unfortunately, it’s a bit difficult to know which policies would best comply with the Difference Principle. Imagine a government which taxes its population, and gives the resulting cash to the poor. This probably corresponds to the difference principle better than not doing any redistribution at all. But an economist might suggest that giving money to rich bankers is better; bankers may invest it more wisely, raising the nation’s living standards to the point where the poor end up with more wealth than if you had given them money directly. Because the Difference Principle says to give wealth to whomever makes the poor better off, the government, not knowing in advance which tactic would actually raise the standards of the poor, would have to try both approaches before coming to a decision.

Another possible principle that can be theoretically checked by the shape of the graph is utilitarianism. This principle states that the graph shape is correct if and only if it maximises the total sum of happiness in the population (Mill, 1863). But the correct shape for this principle is (as with the starting-gate principal) difficult to determine — this time because no-one knows what shape the graph would have to be for this maximisation to happen, short of continually giving people different amounts of money and then asking them how happy they are.

Perhaps you prefer the idea of people only getting money if they deserve it. Some philosophers have expanded the starting-gate principle by using more complex criteria to decide when individuals have justly earned wealth. These desert-based principles (not referring to sandy deserts, despite the spelling) argue that you should only lose or gain assets if you deserve to (under different interpretations of ‘deserve’; for instance those of Sadurski 1985, Milne 1986, Lamont 1997 and many others). Desert-based principles are intuitively popular, but fairly difficult to define in a way that everyone can agree on. And like the starting-gate principle, even if we could agree on a definition of ‘deserve’, we couldn’t tell just by looking at the distribution graph if it was being upheld.

Inevitably, this post simplifies a number of issues in order to make the discussion more straightforward. Most distributive justice principles do not limit themselves to wealth, but also consider other factors such as wellbeing and health. Moreover, working out how to choose between principles is easier said than done. Almost all principles rest on complex assumptions which are tricky to verify, making comparison difficult. Yet we can afford to feel optimistic for a number of reasons. First, consensus is growing that individuals’ earnings should be allowed to fluctuate during their lifetimes (few modern thinkers advocate strict egalitarianism1). Second, it is now generally accepted that the choices each of us make should play a part in these fluctuations. These two assertions, general as they may seem, allow us to narrow our search to only those principles that abide by them.

The remaining candidate principles hint at a further promising corollary. As Lamont & Favor (2007) note, authors of principles that adhere to the above two assertions tend to utilize the currency-based free market economy2 to direct and guide wealth distribution shape. While the free market is not itself a formal principle3, as a technique for distribution it has a number of attractions: the versatility of money as a proxy for material goods allows for easy comparisons of value; private enterprise broadly rewards hard work with comparative amount of wealth; some of aspects of the market system (like competition) have the useful side-effect of raising efficiency; whilst the addition of creative taxes offer ways to redistribute assets where the markets can’t. These features make the free market economy at least partially consistent with a number of the distributive justice principles mentioned above: the Difference Principle (because rises in efficiency often cause material goods to become cheaper, thus increasing the material assets of the poor); many desert-based principles (because individuals get to earn money based on how hard they work); and utilitarianism (because individuals are free to spend money on what they think will make them the most happy). Perhaps then, if there is a pre-eminently rational way to distribute wealth, it’s not so very different from the one we currently practice.

The question is: how different? And if we are so close, why have we yet to construct a principle of distributive justice that everyone can agree on? These are questions we will be expanding on in posts to come.

¹ Although some argue that a high Gini coefficient is empirically shown to statistically reduce health-related and social problems in a society (Wilkinson and Pickett, 2009). Like all good science though, these results are disputed (Saunders, 2010; Snowdon, 2010; Cornia and Court, 2001).

² A market economy is a society with a framework that allows citizens to exchange property and services at will. Usually this is done through the medium of currency, and usually the framework is legally enforced. The term free market economy is used to stipulate that citizens have the right to choose what price they sell/pay for another’s property with little (if any) government participation. There are other variations: a laissez-faire market economy is an economy where the government are not allowed to intervene in this transaction at all.

³ Although a principle of distributive justice called Entitlement Theory (Nozick, 1974) is one attempt to formalise a variant of the free market economy as a principle.

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Equality of opportunity (where everyone has an equal chance of achieving happiness, fulfilment, wealth etc.) is much more difficult to measure than things like equality of voting rights or equality of law1. Equality of opportunity is more complicated because ‘opportunities’ to achieve happiness and fulfilment tend to be intangible and immeasurable. Opportunities for an individual might include things like being born with a photographic memory, having access to role models, discovering hidden talents like playing the piano, meeting individuals by chance, and so on. These opportunities, which may be random or coincidental, are complicated to measure, even for a single person. To compare these opportunities between two individuals is even more difficult — a single really useful opportunity for one person (meeting a family friend who offers you work experience) might be equal to many lesser opportunities for another (say, reading an advert in a magazine for work experience and having an enjoyment of music and being interviewed by someone who’s son happens to play in a band, ultimately results in being offered work experience). Despite this, because we only care about opportunities being equal (not measuring them exactly), equal opportunity can be measured — albeit in a roundabout way.

• First, we know that an individual’s opportunities, whatever they are, are likely to influence his or her outcomes (the extent to which individuals have happiness, fulfilment, wealth etc2).
• Second, we know that a single factor often causes a number of opportunities: more years in education might cause opportunities such as greater contact with role models, better literacy skills, increased access to career advice and higher self-esteem; while access to current affairs when young might cause exposure to opposing views and popular culture and lead to better debating skills. We term these factors that might cause opportunities as opportunity variables.

Opportunity variables can be any measurable aspect of an individual’s life: the number of siblings they have; whether they are left or right handed; the number of yogurts they ate as a child; etc. Given the above two bullet points, we can infer that outcomes are dependent on opportunities and that opportunities are dependent on opportunity variables. What happens if we get a positive or negative correlation between an opportunity variable and an outcome like wealth? Provided we can’t establish any other causal link between our opportunity variable and outcome, a correlation will arise only if people’s opportunities are unequal. When opportunity variables are not causing opportunities, or the intervening opportunities are equal with respect to the outcomes they cause, there will be no correlation. We will refer to those opportunity variables that can be empirically shown to correlate with outcomes as opportunity covariates. Over a large enough sample size:

1. Finding a correlation between opportunity variables and outcome in a society will tell us that opportunity must be unequal in that society.
2. We also know the root cause of this inequality, namely the opportunity covariate itself.

A society in this situation can be considered unfair because, under the definition in the last post (“a fair society refers to any society where the principles of distributive justice have been agreed, and are thereafter enforced”), we have an asset (opportunity) which is not equal in our society even though we’ve agreed it should be.

Admittedly this all sounds a bit theoretical (thanks for staying with us this long) so we’ll consider an example. We take an outcome (such as wealth or happiness) of a population, and see if we can find an opportunity covariate for it — if we can, then we know the society has at least some unequal opportunity. A plausible potential opportunity covariate might be the number of school years that children are required to attend. The actual instances of opportunities caused by this variable would be the intangible aspects of children’s school lives: inspiring teachers; more academic knowledge, and friends to network with as an adult etc. In conclusion, if there is a correlation between an opportunity variable and an outcome, it is statistically likely that the outcome is being affected by the opportunities caused by this variable, and the society is thus unfair.

In the above fictional examples, ‘years of school education’ are plotted against adult income for a number of individuals in three different countries. Country A’s school-years and income follow a linear correlation, suggesting that more years in education give rise to more opportunities to earn wealth. A similar story can be derived from the second example, Country B, except that the correlation attenuates with the growing number of school years (so past a certain point, extra years make no difference to what you earn). We can infer that both these countries have unequal opportunities, arising from an opportunity covariate whereby adults with fewer school years do worse in later life. There would be several ways to equalise opportunity in these countries; the easiest probably being to make sure every child spends the same time in school. Country C, by contrast, has no years-in-education opportunity covariate, because years are uncorrelated with wealth. This country has more equal opportunity than the other two, with respect to schooling at least, and would not require any government intervention in this area, assuming you felt income was a good enough approximation of happiness and fulfilment.

School years actually turns out to be a strong opportunity covariate for income (Card, 1999), and this inequality is the reason why measures such as raising the compulsory school leaving-age in the UK to eighteen are being considered. Whether things like government-sponsored apprenticeships (where an individual is trained in a vocational skill instead of academic subjects) are a good idea also depends on this correlation: if apprenticeships turned out to weaken the correlation between the number-of-school-years covariate and outcome, then they are probably a good idea because they are giving extra opportunities to those children who wouldn’t otherwise continue education.

We can now talk about equality of opportunity as something measurable, even if this is indirectly through the medium of opportunity covariates, and even though a number of approximations have to be made. For instance, outcomes like ‘happiness’, ‘contentedness’ and ‘fulfilment’ are subjective, so studies into inequality use other definitions as approximations, like material wealth, profession, or number of cars3. We also have to keep in mind that, as with all statistical analysis, we must be careful what we can infer from correlations. Overlap between the opportunities caused by different covariates (for example, the years-in-school covariate and size-of-class covariate) may mean that we could come to the wrong conclusion about what is responsible for certain opportunities. But this is a problem in all scientific correlation studies, and common sense can reduce it.

A different complication comes from trying to decide whether opportunities that stem from choice should be equalised. Plenty of people (including the philosopher John Rawls who first attempted to formalise the idea of fairness in society) maintain that choices are heavily influenced by non-choice factors for which we cannot be held responsible. Others take the stance that choice-based opportunities (opportunities gained as a result of hard work, enthusiasm and patience etc.) should not be distributed equally, because society would be forced to equalise opportunities (and thus the chance of better outcomes) to people regardless of how hard they work. In these posts, we adhere to the second view: that there is such a thing as free-will, and people should be rewarded with more opportunities if they decide to put in the effort4. Thus opportunity covariates based on choice (like hard-work and patience) should not be decorrelated from outcome.

Having determined that (non-choice) opportunity covariates should be unwelcome in a society, we are now in a position to look at equality of opportunity in a wider context. Gender and ethnicity are two classic examples of non-choice opportunity covariates that have historically influenced outcome. Other less politicised opportunity covariates have also been found: height seems to restrict your opportunity to a similar extent as gender and skin-colour (Persico, Postlewaite and Silverman, 2004). Other potential opportunity covariates are more complicated to measure; for instance, whether you have access to information (the internet, newspapers) as a child, or whether your family was socially excluded or isolated5. Provided the statistics are done properly, there are an infinite number of opportunity variables we could measure. If any of these (non-choice) variables are found to correlate with outcomes, it means that the society under consideration is unfair, and its government would have an obligation to try to mitigate this, for instance by passing laws that manually undo the correlation. Anti-discrimination laws in employment (for non-choice factors like sexuality and gender) are one example of such a law. Likewise, laws for full-time education and against child-labour are passed partly in order to reduce the imbalance generated by the education-level covariate. Reducing the effect of opportunity covariates can also be achieved in other ways: taxes for instance (which, in the education case, redistributes the wealth of the rich towards the education of the poor). Some commentators have even suggested such levies may be effective in curtailing the height opportunity covariate (i.e. Mankiw & Weinzierl, 2010). Happily a tax on people over six foot may be avoidable in the UK; there is evidence that opportunity covariates such as gender, ethnicity and sexuality are decorrelating as people become more tolerant, something also true of height (Heineck, 2007). While this is encouraging, it is not necessarily universally true — some claim that the correlation between the US’s ethnicity opportunity covariate and wealth outcome, by contrast, has grown more pronounced over the past twenty years (see sources).

We have described a way to measure whether members of society are equal in opportunity. In the next post, we will look in more detail at an opportunity covariate of particular importance: that of parents’ wealth.

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Equality, fairness and egalitarianism1 are, if taken literally, misleading goals for a society. The most obvious problem with equality, for instance, is that people are naturally unequal: they have different heights, different personality traits, and have varying likes and dislikes. What’s needed is a way to establish if a particular ‘aspect’ or ‘asset’ of society should be enforced as equal by law over all its members. One suggestion on how to decide which assets to equalise was proposed by the American philosopher John Rawls. Rawls argued that if a group of people were designing a new society from scratch, without knowing in advance what their position in it would be (without knowing if they were going to be born rich, well-connected, beautiful, popular or clever etc), they would rationally decide that at least some characteristics and assets of society — like freedom, laws and opportunities — should be the same for everyone. They’d do this because they would want to maximise their chances of being happy and fulfilled, regardless of their as-yet-unspecified social circumstances.

Rawls described individuals in this hypothetical circumstance (of not knowing their own or each other’s positions in society) as being under a veil of ignorance. He called the imaginary situation where people agree how society’s assets should be distributed, while under the veil of ignorance, the original position. Despite the fact that this situation could never actually happen in a society, Rawls argued that the original position might shed light on what actual laws should be2 , because it might be possible to predict what individuals would want to be equal in. Indeed, assuming that all individuals in a society are rational, there could only be one optimal solution — that which would maximise each and every individual’s chances of happiness and fulfilment.

Working out the optimal solution for distributing assets is a complicated endeavour. Contemporaries of Rawls try to predict how people would act in the original position (and thus predict the optimal distribution of assets) by using behavioural science (such as game theory) and probability maths, approaches which require accurate understandings of human behaviour. Yet with even an incomplete model of human behaviour, Rawls’ notion of the original position allows us to investigate how distributable assets might best be shared. For instance, would rational people want to share every single asset of society equally? While such a principle might at first appear rational, it’s not clear if this is actually the case. Monetary wealth and happiness, for instance, are probably not among the things anyone would agree to distribute evenly. This is because one might not want to give one’s fellow citizens the same proportion of money or happiness in case they don’t equally deserve it. This leads to a rejection of strict egalitarianism, the principle which argues that all society’s commodities should be distributed equally to each member. Strict egalitarianism is one of many competing alternative ways to allocate society’s assets among its members, known collectively as principles of distributive justice.  Under a different distributive justice principle, you and your fellow citizens might decide that an individuals choices (like hard work and effort) are what should determine the allocation of things like wealth. Rationally, you might decide that, once in society (and other things like law and opportunity being equal), you will potentially obtain more assets under this principle than if you had agreed to divvy up all assets equally, provided you make the effort to work hard.

This stance not only allows us to define ‘equality’, but also ‘fairness’. A fair society refers to any society where a principle of distributive justice has been agreed, and is thereafter enforced. The big question then is what principle of distributive justice to agree on (and in the process, discovering which, if any, assets should be distributed equally). There are compelling arguments for the many different principles put forward by philosophers (including from Rawls himself) but so far none is thought of as definitive. Yet we can make a number of general conclusions about what the optimal principle should look like without agreeing on it exactly. To start with, although philosophers and economists argue over the rationality of allocating assets like wealth equally (since it is arguably unfair by benefiting people who don’t deserve it), they are in almost universal agreement that assets such as voting rights, legal rights, freedom and the opportunity to earn wealth and happiness should always be allocated equally (with a couple of important exceptions3).

We can be reasonably sure, therefore, that societies equal in such assets are fairer than those that are not. This is a good start. Most principles of distributive justice intrinsically support equality in education, opportunity, voting rights, legal rights and freedom (beliefs this website reflects through its egalitarianism tenet). Having worked out what people should be equal in, deciding how to enforce this equality is the next problem. In the next post we’ll examine the ways to measure and enforce the most challenging of these assets: opportunity.

¹ Lit. belief in the equality of people

² In philosophical terms, many social contract theories, like that found in Thomas Hobbes’ Leviathan (1651), are descriptive (in that they aim to describe how and why a society’s assets are distributed as they are), whereas Rawls’ is normative, in that it reaches conclusions about how assets ought to be distributed 

³ One of which is that by common consent it is agreed that these rights should be temporarily suspended if you break the law. Likewise, certain circumstances in life will rob you of some of these rights: a coma can stop you from voting.

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