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.

Sources

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.

Sources:

Hobbes’ theory of a social contract is still relevant today, especially over the question of whether the population is giving up too much freedom (ID cards, DNA databases etc.) for too little extra safety, and, more recently, that legally ambiguous UK anti-terrorism laws mean that we don’t actually know what contract we are signing. Moreover, in the intervening years since Hobbes first popularised social contract theory, the ideas surrounding the theory have been considerably expanded. England was in the midst of a civil war at the time Hobbes was writing, and he (not unreasonably) imagined that safety was the populace’s main priority. But members of a state can also agree to a contract based on other things, like considerations of happiness, fulfilment and wellbeing. Hundreds of years on, as instability became less of a concern, it was natural they would ask for contracts that covered broader aspirations. This might be a reason why governments are becoming more technocratic (meaning that legislation is now often guided by scientists, economists and statisticians and the like); the citizens are asking more of their contract, more demands mean a more complex contract, and a more complex contract is difficult to implement. Contracts of a Hobbesian nature are providing (at least in the UK), more than they ever have in the past, from transport to social services, and fiscal regulation to health provision. This makes the merits of the contract difficult for citizens to judge; so in order to make this easier we advocate using four tenets — liberty, egalitarianism, efficiency and custody — which are intended to act as criteria that will maximise the abstract aspirations of happiness, fulfilment and the like. Because such aspirations are so difficult to define, the tenets provide definite criteria that should result in achieving these aspirations.

The first thing needed for happiness and fulfilment is liberty, which owes its place on the list to John Stuart Mill’s hugely influential work On Liberty. Mill argued that the best way for people to obtain the happiness and fulfilment they sought was for them to pursue it in their own way, as people are, by and large, the best judges of how to achieve their own happiness. This naturally led to the view that laws should leave people free to do what they wanted, provided they didn’t impose upon other people’s enjoyment of life (i.e. harm):

‘[Thus] the sole end for which mankind are warranted, individually or collectively, in interfering with the liberty of action of any of their number, is self-protection. That the only purpose for which power can be rightfully exercised over any member of a civilized community, against his will, is to prevent harm to others’

(Mill, 1859)

Consequently, the state can interfere with people’s lives under very few conditions: “his own good, either physical or moral, is not sufficient warrant” for interference. One such condition is if the individual is a child or mentally disabled, both of whom, arguably, don’t always know what is best for them. And while Mill was clear that the government must not intervene in cases of self-harm (smoking, gambling etc), governments have still tried, arguing that self-harmers are doing harm to others indirectly (by removing resources from those who make healthy life choices in the case of the obese, or — because smokers pay for treatment through tax on cigarettes — by appealing to the scientific evidence that passive smoking harms others), or that these people are in some sense clinically incapable of making the correct decisions, through addiction or self-delusion, thus placing them in the category of the mentally ill.

Our next tenet is egalitarianism, which aims to guarantee every individual in society the equal opportunity to a happy and fulfilling life. This tenet arises from a popular notion in philosophy and political science: that individuals are or should be equal to one another in certain traits, and the laws of a society must reflect or enforce this. The difficulty is trying to work out exactly what traits individuals should be equal in — only with an explicit list of such traits can we form a useful tenet.

Where to get this list from? An elegant solution was suggested by the (American) philosopher John Rawls, writing in the latter half of the twentieth century. It led him to conclude both that ‘each person [should] have an equal right to the most extensive scheme of equal basic liberties compatible with a similar scheme of liberties for others’, and that ‘positions must be open to everyone under conditions of fair equality of opportunity’ (Rawls 1971). We examine details of his argument at length in other posts, but his reasoning gives us two explicit traits of equality we can introduce into the egalitarian tenet: (1) that all individuals in society have equal legal rights (meaning that no-one has special privileges under the law) and (2) that all individuals are guaranteed equal opportunity (meaning that society should implement laws that force individuals to have equal opportunity to be happy and fulfilled). While (1) is fundamental to the legal systems of nations around the world, (2) has traditionally been more challenging to implement. Equal opportunity requires a state to enforce equal access to education and other basic services for all individuals, with the explicit aim of ensuring an equal likelihood of having happiness regardless of arbitrary factors such as gender, looks, or parents’ wealth.

Happiness and well-being, for many people, is partly derived from the possession of material goods, and efficiency is the single most powerful driving force behind the affordability and improvement of such goods. We define efficiency as the ratio of work produced to work undertaken. Economics is the scientific discipline of increasing this ratio. Generations of economists have examined the means by which it can be improved, starting with the Physiocrats1 who first modelled methods of farming in order to study their efficiencies (thus discovering the law of diminishing returns), and later Adam Smith (who noted that certain mathematical trends in efficiency can be attributed to competition between producers). Smith did not prove, condone or even suggest laissez-faire capitalism would be the most efficient way to allocate resources, and economists like John Maynard Keynes have argued that in some situations, it definitely isn’t. This quest for efficiency has resulted in the overall rise in access to basic necessities, and pushed millions out of poverty.

We come finally to our last tenet of custody. Custody is leaving things as good as, or better than, you find them. Some philosophers, such as Thomas Malthus, argued that expediency in the short-term was not sufficient reason to neglect the happiness and fulfilment of future generations. Malthus himself was concerned by population growth and the creation of poverty, and the effect this would have on later generations. Yet his focus on the long term welfare of citizens, present and future, of a state, are echoed in policies designed to protect the environment, culture and arts. This tenet does not always sit well with the others given that it is difficult to conclude how far future needs overrule current requirements.

Of course, more tenets may be added in the future, or rewritten to take account of some unconsidered problem. The tenets are discussed in more detail on the tenets page, but we can address two specific criticisms immediately. To begin with, the tenets can never include the right to be happy or fulfilled explicitly, because no state can guarantee their delivery. In addition, democracy is not a tenet because it is not relevant to the contract. This is because the system of government defines who writes the contract, not what is in it. If an autocratic ruler could be found who could provide a social contract that would suit everyone, then a democratic legislature would not be necessary. This view was taken, for instance, by the Greek philosopher Plato, who argued that a philosopher king might be the best person to draft a suitable contract. Marx, on the other hand, thought the formation of communes under a socialist system would lead to such social cohesion that people wouldn’t want or need a social contract at all. Both these systems are flawed in some way (there is no safe way to choose or train a perfect ruler, and people don’t spontaneously agree with each other if they live in communes), and in practice democracy is the most stable way to install a power that will pass laws that the majority can agree on. Even if this system is less efficient than Plato’s, it is less prone to misappropriation; democracy is arguably the means of contract-writing least open to abuse.

Hobbes and other past thinkers have done society a great service in providing ideas and frameworks for increasing the wellbeing of states. Our last tenet of custody applies not just to protecting the physical environment or the tolerant society we live in, but also those ideas and ideals that have been attained through reasoning, and passed on to us by their originators.

• ‘…legally ambiguous UK anti-terrorism laws mean that we don’t actually know what contract we are signing’ http://www.guardian.co.uk/world/2010/jan/12/stop-and-search-ruled-illegal retrieved 13th February 2010
• “One of these conditions is if the individual is a child or mentally handicapped…” Namely “It is, perhaps, hardly necessary to say that this doctrine is meant to apply only to human beings in the maturity of their faculties. We are not speaking of children, or of young persons below the age which the law may fix as that of manhood or womanhood. Those who are still in a state to require being taken care of by others, must be protected against their own actions as well as against external injury.” Chapter 1. Mill, JS, On Liberty, [first published 1859]
• “First: each person is to have an equal right to the most extensive scheme of equal basic liberties compatible with a similar scheme of liberties for others” and “[resources] are to be of the greatest benefit to the least-advantaged members of society [… and …] offices and positions must be open to everyone under conditions of fair equality of opportunity” Rawls, J. A Theory of Justice [1971].
• “…from the Physiocrats who first modelled methods of farming in order to study its efficiency” Brewer, Anthony (1987), “Turgot: Founder of Classical Economics”, Economica 54 (216): 417–428.
• “…who noted that certain mathematical trends in efficiency can be attributed to competition between people…” Smith, A, An Inquiry into the Nature and Causes of the Wealth of Nations [1776]
• “…such as Thomas Malthus….” An Essay on the Principle of Population, [6th edition was 1826]
• “…who argued that a philosopher king might be the best person…” Plato, book viii of The Republic [c. 475]
• “Marx, on the other hand…” More specifically he suggested that a contract wouldn’t be needed at all. Das Capital Vol 1 & De Marco, N. Marxism and Democracy – Apex and Abrogation UCL Jurisprudence Review 2000.
• “No-one pretends that democracy is perfect or all-wise…” Churchill, W. The Official Report, House of Commons (Fifth Series) 11th November 1947. vol 444 CC.206-07