Erasmus Journal for Philosophy and Economics

On the Very Idea of a Just Wage (editorial)

Huub Brouwer — 2018-11-24

On the Very Idea of a Just Wage

Joseph Heath — 2018-09-10

The way that wages are determined in a market economy produces results that strike most people as morally counterintuitive, if not positively unjust. I argue that there is an important and easily defensible principle underlying the system—it is designed to channel labour to its best employment, the way that it does any other resource. But many consider this defence too minimal, and so strive to find a thicker, more robust moral principle that can be used to defend the market, using concepts like ‘contribution’, ‘effort’, ‘laziness’, ‘skill’ or ‘talent’—all of which combine to provide a concept of ‘desert’, or ‘fairness’ in compensation. The objective of this paper is to caution against such overreach. I begin by articulating what I take to be the central principle underlying the determination of wages. I go on to discuss three different ways that both critics and defenders of the market have sought to go further than this, by introducing thicker moral concepts to the discussion, and why each of these initiatives fails. My central contention will be that markets are structurally unable to deliver ‘just’ wages, according to any everyday-moral understanding of what justice requires in cooperative interactions.

Wages, Talents, and Egalitarianism

Andrew Lister — 2018-09-10

This paper compares Joseph Heath’s critique of the just deserts rationale for markets with an earlier critique due to Frank Knight, Milton Friedman, and Friedrich Hayek. Heath shares their emphasis upon the role of luck in prices based on supply and demand. Yet he avoids their claim that the inheritance of human capital is on a moral par with the inheritance of ordinary capital, as a basis for unequal shares of the social product. Heath prefers to argue that markets do not tend to reward talent as such. The paper raises some doubts about this factual claim, and argues that sweeping the issue of talent under the rug threatens to make our theory of justice less egalitarian than it would otherwise be. The paper also addresses the objection that claims of unfairness based on the arbitrariness of the distribution of innate abilities will undermine self-respect.

The Wage Setting Process

Thomas Christiano — 2018-09-19

The Wage Setting Process

In this paper I will defend a conception of fairness in labor markets. I will argue that we should take a procedural approach to the evaluation of fairness in markets. The procedural approach defended here goes beyond the traditional procedural view that requires only the absence of force and fraud. But it avoids the pitfalls of the other classical conception of fairness in the market: the idea of a just wage or just price. Fairness in markets is analogous to fairness in the democratic process.

I will start with a discussion and critique of Joseph Heath’s stimulating discussion of fairness in labor markets. Though I agree in part with his assessment of the just wage tradition, I will argue that there is room for thinking about fairness in markets. I will then lay out a conception of fairness that is based on the analogy with democracy. The procedural idea of equal power can be given an interpretation both in perfectly competitive markets and in imperfectly competitive markets. I will show how this approach has implications for conceiving of how firms ought to be organized and for defining a fair process of wage setting in the essentially highly imperfect conditions of the labor market.

On the Very Idea of an Efficient Wage

Peter Dietsch — 2018-09-27

This paper argues that the standard characterisation of the equity-efficiency trade-off as set out in this symposium by Joe Heath overstates the tension between these two values. The reason lies in the fact that economists tend to take individual labour supply preferences as given, which leads to a superficial analysis of the concepts of reservation wage and of economic rent. The paper suggests that we should instead think of reservation wages as variable and as influenced by social norms. Social norms play a double role in this context. First, they represent a constitutive element of market competition; second, they can be a determinant of income inequalities. From this perspective, a certain share of high reservation wages sustained by contingent inegalitarian social norms should count as economic rent. The last section of the paper strengthens this conclusion further by drawing a parallel between expensive tastes in consumption and a certain class of high reservation wages. To the extent that the latter are underpinned by social norms rather than efficiency considerations, not paying them is both just and efficient.

Just Wages in Which Markets?

Lisa Herzog — 2018-09-19

Joseph Heath argues that we should reject the idea of a ‘just wage’ because market prices are supposed to signal scarcities and thereby to promote overall efficiency, rather than reward contributions. This argument overlooks the degree to which markets are institutionally, socially, and culturally embedded. Their outcomes are hardly ever ‘pure’ market outcomes, but the result of complex interactions of economic and other factors, including various forms of power. Instead of rejecting moral intuitions about wage justice as misguided, we can often understand them as pointing towards questions about the embeddedness of markets, or lack thereof. At least in some cases, changes in the framework of markets can both increase efficiency (or at least not reduce it) and get us closer to conventional notions of fair wages, e.g. when gender discrimination is reduced. Thus, while an abstract notion of a ‘just wage’ remains problematic, we can and should recognize that some wages are unjust.

Is the Market Wage the Just Wage?

Peter J. Boettke — 2018-11-06

Do markets generate a “just” wage? The answer to this question will depend upon the particular theory of the market that the political economist employs. When comparing actual labor markets with the neoclassical theory of competitive equilibrium as its normative benchmark, Joseph Heath (2018) argues that factor pricing is orthogonal to normative issues such as distributive justice. We argue that Heath’s conclusion, though not invalid, follows from a similar normative benchmark of equilibrium, one that evaluates factor pricing without taking into account the institutional conditions within which factor prices emerge. Though indeed classical political economists and early neoclassical economists failed to deliver an explicit theory of distributive justice, what Heath overlooks is that implicit to their understanding of the market process was an institutional theory of distributive justice.

Just Wages, Desert, and Pay-What-You-Want Pricing

Teun Dekker — 2018-09-19

Some restaurants allow guests to decide how much they would like to pay for their meals, depending on how much they enjoyed the experience. It is not counterintuitive to think that such a mechanism would set a deserved wage. After all, one might think that how much one deserves depends on how much value one creates for others and that individuals can adequately judge how much value they derive from some good or service. Hence, letting consumers decide what they think certain goods or experiences are worth would result, in the aggregate, in a deserved and just wage. In this paper, I will explore and defend this argument.

Do People Deserve their Economic Rents?

Thomas Mulligan — 2018-09-27

Rather than answering the broad question, “What is a just income?”, in this essay I consider one component of income—economic rent—under one understanding of justice—as giving people what they deserve. As it turns out, the answer to this more focused question is “no”. Despite their prevalence, people do not deserve their economic rents, and there is no bar of justice to their confiscation. After briefly covering the concept of desert (§1) and explaining what economic rents are (§2), I analyze six types of rent and show that each is unjustified from the point-of-view of desert (§3). I conclude (§4) by drawing some political and economic lessons from the preceding analysis, and by describing how these considerations can help us create a more just and efficient economy.

Why a Uniform Basic Income Offends Justice

Julia Maskivker — 2018-10-24

This article explains why the traditional defense of the Basic Income policy is flawed in its assumptions about allocative uniformity. The paper argues that treating everybody identically by way of a uniform grant is ultimately in tension with the egalitarian rationale behind the Basic Income. Phillipe Van Parijs, the champion defender of the policy proposal, has fervently argued that unconditional receipt of a universal grant will render society more just by way of the egalitarian distribution of “real freedom” that the policy would elicit. Although Van Parijs is right in supposing that Basic Income will enhance real freedom, his theoretical apparatus is not prepared to address questions of differences in the level of opportunity already enjoyed by the beneficiaries of the policy. This failure poses a problem for normative reasoning, namely, that morally relevant differences among individuals are ignored. This paper concentrates on the implications of this blindness and provides an equality metric that is better equipped to recognize disparity and its moral implications.

The Domain of Desert Principles for Taxation

Steven M. Sheffrin — 2018-10-24

Joseph Heath (2018) makes a strong case that the principles of fairness or desert that arise in social interactions have at best a loose connection to economic outcomes in decentralized markets. However, there is evidence that when people are given the opportunity—say, in collective bargaining situations—they will try to alter these market outcomes in favor of their own perceptions of justice, fairness, or desert. Taxation is an important domain in which the public can alter market outcomes. This paper explores to what extent desert can be used as a principle of tax policy. It analyzes tax policies that can be used to implement both individualized and categorical assessments of desert. I argue that there might be some room for tax policy at the broad, categorical level. Finally, using the Tax Cut and Jobs Act of 2017 as a case study, I explore whether merit or other bases for desert were embedded in the recent legislation. While there was evidence of attempts to implement ideas based on principles of deservingness in the legislation, they were not of the type necessary to sustain a merit-based society.

Thinking by Drawing

Shelly Kagan — 2018-11-24

The Erasmus Journal for Philosophy and Economics (EJPE) interviewed Kagan about his formative years; his work on death, the moral status of animals, and desert; his views on changing one’s mind and convergence in philosophy; and his advice for graduate students in moral philosophy.

Review of John Mizzoni’s Evolution and the Foundations of Ethics. Lanham: Lexington Books, 2017, 272 pp.

Vaios Koliofotis — 2018-11-24

Moral Uncertainty Over Policy Evaluation

Kian Mintz-Woo — 2018-10-24

When performing intertemporal cost-benefit analyses of policies, both in terms of climate change and other long-term problems, the discounting problem becomes critical. The question is how to weight intertemporal costs and benefits to generate present value equivalents. This thesis argues that those best placed to answer the discounting problem are domain experts, not moral philosophers or the public at large. It does this by arguing that the discounting problem is a special case of an interesting class of problems, those which are both what I call morally complex and quantitative.