Economics and Justice Research Paper

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Exploration of the connections between economics and justice is complicated by the fact that both ‘ economics and justice are variously defined and deeply contested. Economics can be thought of as the study of the determinants of wealth creation, which was the view taken by many classical economists; the study of choice and allocation under conditions of scarcity, which is the view of contemporary neoclassical theory; the study of the production, appropriation, and distribution of the social surplus, which informs Marxian theory; the study of the manner in which communities provision for themselves, which is the view of many institutionalists; and in other ways. Justice is likewise a controversial concept. Here, too, one finds that distinct approaches yield diverse accounts of what is just and unjust. Justice can be defined in terms of fairness, respect for inviolable rights, or equality. Making matters more interesting, each of these definitions can be (and is) also theorized in diverse ways. For instance, egalitarians (those who define justice in terms of equal distribution) often disagree among themselves about whether a just distribution is one that assures equality of income, wealth, opportunities, rights, or something else entirely. Finally, many economists tend to avoid discussion of ethical matters, including justice, which they define as lying outside their field of expertise. As a consequence, notions of justice are implicit rather than explicit in much of economics.

This diversity implies that it is a mistake to think that there is any one right way to conceptualize economics, justice, or the connections between them. It is both intellectually honest and far more rewarding to embrace the conceptual diversity that one encounters in this context and then to explore the ways in which distinct approaches to economics engage distinct notions of justice. This allows for an informed investigation of conceptions of economics and justice. One stands to learn much about the controversies among economists over policy and the assessment of economic outcomes by attending to the justice conceptions that inform their judgments. In a reciprocal manner, one can better evaluate contending justice claims by attending to their economic implications. After all, an approach to justice that seems entirely plausible in the abstract may generate concern if one finds that its economic policy implications are damaging or even repugnant in fundamental ways.

This research paper proceeds in just this way. It begins with and gives most attention to neoclassical economic theory—the orthodox approach to economics that has predominated in the profession for many decades. One encounters a deep ambivalence among neoclassical economists about the place of moral judgments in economics—including but not limited to judgments concerning justice. This suggests that there is no one neoclassical conception of justice. This research paper instead investigates the theoretical strategies that have emerged within the tradition to manage this ambivalence. Despite the reluctance of neoclassical economists to engage matters of morality, a conception of justice has emerged within important strands of neoclassical thought. It is associated with what are called negative liberties, rights, and freedoms. This is an approach that focuses on the individual’s freedom from illegitimate constraints on his or her decision making. This approach informs the work of Nobel Laureate Milton Friedman and other economists. A particularly clear statement of this approach appears in the work of libertarian philosopher Robert Nozick (1974), and the research paper examines his central arguments and their implications for economic justice.

Then the research paper turns to one heterodox approach to political economy, Marxian theory, and explores alternative notions of justice that inform this approach. Marxian theory is exemplary of many other heterodox approaches that embrace positive rights and freedoms. These reach far beyond the requirements associated with negative rights. This research paper explores two relevant aspects of Marxian theory: (1) its notion of exploitation and (2) its conception of a just distribution of burdens and rewards. These are derived from its normative grounding in an egalitarian notion of justice.

It bears emphasis that the controversy in economics over justice is not just of academic interest. The debate is deeply consequential. To demonstrate this, this research paper investigates what each approach implies about the legitimacy of the market as an institution for distributing income, wealth, and opportunity. This is one of the most important of all policy debates in economics and politics. One sees that what a school of economic thought has to say about this question depends directly on the conception of justice to which it is committed.

Neoclassical Economics

There is a profound difficulty within neoclassical theory in speaking about justice. This difficulty stems from the conception of economics as value-free science that informs neoclassical thought. Advocates of neoclassical theory tend to view economics as an objective science, the goal of which is to theorize the functioning of economic processes and outcomes as they are, undistorted by normative judgments. Just as physics seeks to describe the physical world as it is, not as the physicist would like it to be, so must the economic scientist describe the operation of the social world independent of normative biases. Neoclassical economics holds to a rigid distinction between positive economics—the objective explanation of economic phenomena—and normative economics—the evaluation of economic outcomes and the formulation of policy prescription. In this dichotomy, positive economics is by far preeminent. Considerations of justice reside in the domain of normative economics and are taken to be far less scientific than the considerations that inform positive economics. As a consequence, most neoclassical literature is altogether silent on justice concerns.

Neoclassical theory incorporates the effort to remain value free in the specification of the assumptions with which it begins its work. Human actors are presumed to be rational, where rationality is defined in particular ways. For neoclassical theory, rationality implies self-interested, egoistic behavior. Rational actors seek their own welfare. Moreover, they always desire more of the things they like. Rationality also implies that they know best what is good for them. This requires an assumption that each agent has a preference ordering that maps his or her full set of likes, dislikes, values, commitments, tolerances, intolerances, fears, and passions. When confronted with a choice between two commodities or courses of action, rational agents simply consult their preference ordering and make those choices that benefit them most, all things considered. By benefits most is meant maximizing their personal happiness or utility, or more prosaically, simply choosing those options that best satisfy their preferences.

The assumption of rationality yields an important implication. In this framework, there is no basis for the economist or the economic theory to judge the choices that economic actors make. Because they are rational, they know best, full stop. It is of critical importance that this theoretical strategy spares the economist from having to make the value judgments that assessing actors’ prefer-ences would require. Hence, the assumption of rationality allows economics to undertake its investigation of economic matters in an apparently objective way.

Rational agents have virtually limitless desires, but they populate a world of finitude. This is because all output requires inputs from nature, but nature’s bounty is finite. At any one moment, only so much can be produced. Hence, economic actors confront a world of scarcity. This leads to the central economic problem in neoclassical thought: choice and allocation under conditions of scarcity. How can the scarce resources that society has available to it be best allocated across the diverse purposes to which they can be put? Should more energy go into auto production or into mass transportation? Which choice will leave society best off, where best off is theorized in terms of maximizing people’s satisfaction of desires, according to their own respective preference orderings?

It would seem that the neoclassical emphasis on scarcity and allocation of resources would immediately call forth questions of economics of justice, because in a world of scarcity there is not enough to go around. There would seem to be a need here for normative criteria to assess the justness of any particular distribution of total social output. For reasons already discussed, however, this is not the case. Neoclassical theory’s commitment to objective science requires that it attempt to answer questions surrounding allocation of scarce resources and distribution of final output while minimizing value judgments. Shunning value judgments has led the profession to emphasize efficiency as its chief evaluative criterion rather than alternative, value-laden criteria like justice. In this approach, an economic outcome is taken to be inefficient if at least one person could be made better off given existing resources and technologies without making at least one other person worse off. For example, if one person prefers apples to bananas but has in his or her possession only bananas, while another person has the opposite preference but possesses only apples, the situation is inefficient because both could be made better off simply by exchanging with each other. In contrast, an efficient (or Pareto optimal) outcome is one in which no one can be made better off without making at least one other person worse off. If one assumes that these two people do trade bananas and apples, the situation that results after the trade is made is efficient.

Notice that the assessment of efficiency does not seem to require of the economist any value judgments. The economist does not ask or care why one person prefers apples and another bananas. The economist does not ask how many apples or bananas each possesses prior to or after the exchange takes place. That is taken to be none of the economist’s business. And so it appears that judgments pertaining to efficiency are largely value free.

Neoclassical Economics, Distribution, and Justice

What does this approach suggest about distribution of income and wealth? Efficiency considerations imply that income should be distributed in whatever way best ensures the enhancement of social welfare. That distribution is best that permits the maximum satisfaction of preferences, given existing resources and technologies. This distribution can be summed up as follows: In the first instance, to each according to his her contribution.

Most neoclassical economists emphasize the efficiency benefits of rewarding each agent according to his or her contribution (rather than the intrinsic lightness of such arrangements). The efficiency argument is simple and is understood by its advocates to entail little in the way of value judgments. The argument is this: An economic system that rewards agents for their contributions will give them an incentive to contribute more—perhaps by investing in training (and so enhancing their human capital) or by acquiring other productive assets like land or capital. The assumption of rationality implies that individuals do this for themselves, in pursuit of increasing income, but the unintended consequence of their doing so is increasing total social output owing to their increasing productivity. Hence, the argument for rewarding agents according to their contributions is, for most economists, a simple matter of wise economic management. Economies that reward contribution will grow prosperous, and that will allow for greater satisfaction of people’s desires.

But what about distributive justice as opposed to efficiency? A central theme in neoclassical thought is that this is largely a noneconomic question, because it entails value judgments of the sort that neoclassical theory does not permit. For example, imagine that a professor distributes $100 among all his or her students, equally. Is this arrangement efficient? The answer is yes, because once the distribution is made, no one can be made better off without making another worse off (the only way for one student to get more is for another to get less). But what if, instead, a professor gives all $100 to just one student? Is this distribution efficient? The answer is again yes because the only way to make any one of the unfortunate students who received nothing better off is to take some amount of money away from the lucky student who possesses the $100. Both situations are equal in an efficiency sense. This implies that efficiency has nothing to do with equity, fairness, or justice. And because neoclassical thought emphasizes efficiency over other evaluative criteria, one is led to the conclusion that there is little more to be said about them.

Free Choice, Negative Freedom, and Justice

There is more to the story, however. Neoclassical theory’s attachment to rationality entails a strong commitment to individual free choice, which in turn implies a certain sense of justice that some (though by no means all) leading neoclassical economists embrace. Because the agents know best what is in their best interest, that economic system is best that allows them the freedom to choose from among the opportunities they face. There are constraints in this choosing, of course. As discussed, choices are constrained by scarcity. In a world of scarcity, each and every action taken entails an opportunity cost in terms of what must be forgone to pursue it. The material that goes into a bicycle tire is unavailable for producing an automobile tire. In a market economy, scarcity is imposed on each agent via his or her budget constraint. Individuals can purchase whatever they choose, provided they do not exceed the resources they have available to them (through income or borrowing).

This sense of economic freedom is often described as negative freedom and is associated with negative rights or liberties (Berlin, 1958). Negative freedom entails the right to choose from among the opportunities one confronts, given one’s circumstances (such as one’s budget), without coercion by others (and especially by government). In this account, a poor person and a rich person may be equally free, provided that each can choose without interference from among the opportunities each confronts. Naturally, the rich person will have a greater set of opportunities than the poor person. But if both can choose freely from among the options available to them, each is equally free in the sense of the enjoyment of negative rights.

This manner of thinking then leads to a particular conception of justice. A distribution is taken to be just, provided that it arises from the exercise of free choice defined as negative freedom. Agents are to be free to make the best deals available to them within the constraints set by their budgets. Whatever aggregate distribution of social wealth arises from each agent acting in this manner is on this account just, because it arises from the equal enjoyment of negative freedom of all agents, no matter how rich or poor they might be. In this account, an unjust distribution would be one that arose from the violation of some people’s (negative) rights. For instance, a distribution that arises from theft, extortion, or physical coercion (such as through the threat of force) would be unjust because it violates persons’ negative rights.

This conception of justice emerges in the work of some important neoclassical economists who engage matters of justice. Friedman (1962; Friedman & Friedman, 1990) is particularly notable in this regard. In work such as Capitalism and Freedom and Free to Choose, he advocates forcefully for negative rights in the form of freedom of choice as restricted only by one’s budget constraint. For Friedman, the enjoyment of such rights is vital to economic prosperity, for the reasons already discussed—and even to justice. He argues strenuously against physical coercion in economic affairs, especially by the state, as inherently unjust. He equates freedom with the absence of such coercion.

The equation of justice with the outcome of free choice derives from the work of political theorists like John Locke (1690) and is developed more fully in contemporary libertarian work. Locke argues that people have an inherent right to own that which they create—both directly through their own labors, and indirectly through the capital they employ to hire the labor of others. Locke reaches this important normative conclusion on the basis of a simple intuitive argument. First, Locke contends that “every Man has a Property in his own Person. This no Body has any Right to but himself” (MacPherson, 1962, p. 200). This is a natural right that cannot be legitimately abridged by society or government. Second, people have a right to attempt to survive, and this can be accomplished only by their appropriating for themselves elements of nature. One achieves this by mixing labor with nature, thereby transforming it into necessary goods. Hence, though nature is provided to humankind in common, the act of individual labor provides the normative foundation for individual appropriation. Each person acquires the exclusive right to possess and consume that which his or her own labor has created. In Locke’s words, “The Labour of his Body, and the Work of his Hands, we may say, are properly his” (MacPherson, p. 200).

Locke extends this right of property to include that output produced by the labor of others whom one has hired. He reaches this conclusion by emphasizing that the right of property in one’s own person and labor must entail the right to alienate it to others through voluntary exchange. In this respect, one’s labor is no different from other property.

The modern libertarian view of distribution, such as that advocated by prominent libertarian theorist Nozick, is consistent with these Lockean propositions. In this view, any distribution of a society’s output is just, provided that it arises only from legitimate processes. In Nozick’s (1974) words, “The complete principle of distributive justice would say simply that a distribution is just if it arises from another (just) distribution by legitimate means” (p. 151). Presuming a just prior distribution—that is, one that did not arise via the infringement of people’s rights—the outcome of a series of voluntary exchanges between free individuals must also be deemed just, regardless of the patterns of distribution that arise as a consequence. If those who make the greatest contribution are able to secure through voluntary exchange a greater reward, then the consequent inequality is entirely just. Indeed, from this perspective, government initiatives to redistribute income in pursuit of greater equality are unjust. In Nozick’s view, because such initiatives essentially force some to work, uncompensated, for others, redistributive measures are even tantamount to slavery.

Just one matter remains. Tying reward to contribution (or voluntary exchange) speaks to distribution in the first instance. But what of those who do not contribute or who have nothing to exchange? Many in society produce nothing at all, either during portions of their lives (when they are infants, elderly, or infirm), or during their entire lives (if they are in some way incapacitated in ways that prevent so-called productive work). Few would argue for their complete exclusion from a share of total output: Beneficence toward the deserving poor is widely accepted among advocates of most theoretical perspectives.

This begs the question: What degree of provisioning should society make for the unproductive? Here, neoclassical theory provides little guidance because this question is seen to lie squarely in the domain of value judgments. Instrumental (efficiency) arguments still apply, of course: In cases where the unproductive can be made productive, the argument can be made that a sufficient distribution should be made to induce this rehabilitation. In this case, value neutrality might be (apparently) preserved via the recommendation of the use of cost-benefit analysis as the appropriate scientific means for making this judgment. But this then would be seen as the nonnormative matter of determining just what distribution to the unproductive will generate an efficient outcome. Beyond this, neoclassical theory has little to say.

Egalitarianism and Heterodox Economics

Many alternative approaches to economics and political economy differ from neoclassical theory in their initial assumptions, substantive propositions, analytical methods, and especially in their normative judgments. Not least, approaches as diverse as Marxian, institutionalist, socioeconomic, and feminist theory tend toward the embrace of egalitarian normative commitments, as do many contributions to political theory (see Anderson, 1990; Lutz, 1999; Tool, 1979; Walzer, 1973, 1983). These are commitments that emphasize equality among society’s members. As Amartya Sen (1992) has argued at length, however, most normative frameworks emphasize the equality of something that is taken to be fundamental. Distinct frameworks differ primarily in what it is that each seeks to equalize across society’s members. And so it should not be surprising that distinct heterodox approaches tend to define what it is that is to be equalized differently. Indeed, even within each of these traditions, we find normative controversy including, but not limited to, what makes for a just outcome.

The Marxian approach is representative of the many diverse schools of thought that embrace some form of egalitarianism, and so this research paper investigates it in some detail here. Like other heterodox approaches, the Marxian tradition reaches beyond negative freedom (associated with negative rights) to embrace positive freedom (tied as it is to positive rights). Positive freedom (sometimes called substantive freedom) concerns not just the absence of constraints on a person’s actions. Instead, according to Sen (1992) it speaks to the full range of beings and doings that a person can actually achieve or enjoy, given his or her income, wealth, race, gender, level of schooling, and all other factors that bear on what a person can be or do. This account recognizes that two individuals with equal negative freedom (in the sense of freedom from coercion) may enjoy very different levels of positive freedom. The relatively poor person who is entirely free to choose may face a very bleak opportunity set as compared with that of a rich person. Egalitarian frameworks that privilege positive as opposed to negative freedom are inclined to find ethically deficient a social arrangement that fails to address this inequality. They seek reform that expands the opportunity set of the disadvantaged in order to equalize the life chances (and not just the negative rights) of society’s members.

John Rawls (1971) has been particularly influential in shifting the attention of political theorists and others to positive conceptions of freedom. In A Theory of Justice, Rawls advances an approach to justice as fairness. He investigates what kind of social arrangements concerning distribution (and other things) would arise voluntarily from a process of rational deliberation among society’s members. He asks us to join him in a thought experiment in which we suppose a committee of deliberators who will decide on the best institutional arrangements for the society that they will inhabit. Critically, he requires that one envisions this committee as doing its work behind a veil of ignorance—that is, they must design the rules under which they and all other members of society will live, without knowing as they deliberate into which group in society they themselves will be placed. This ensures that they will consider the fairness of the arrangements they propose from the perspective of all the groups that make up society. Rawls argues that the outcome of this thought experiment would be just, because it would potentially be deemed fair by all of society’s members.

What principles would such a committee of deliberators agree on to govern distribution in their society? Rawls (1971) argues that the committee would settle on two fundamental principles. The first requires the equal distribution of primary goods to all of society’s members. Primary goods are the “basic rights, liberties and opportunities, and the … all-purpose means such as income and wealth,” but also the “bases of self-respect.” These goods, Rawls continues, “are things citizens need as free and equal persons” (pp. 180-181). Justice as fairness requires that these goods be equally provided to all of society’s members so that each has equal substantive ability (positive freedom) to pursue his or her life plans.

Rawls’s (1971) second principle, the difference principle, modifies the first. It allows for the case in which the equal distribution of primary goods may harm all of society’s members. Justice as fairness permits inequality in the distribution of primary goods, provided that the worst off benefit most thereby. This test for inequality is quite demanding: It requires evidence that unequal distributions help most those who will receive least. Absent such evidence, Rawls argues that inequality in primary goods is illegitimate.

Rawls’s work has been deeply influential. In economics, Sen has taken up and extended Rawls’s work in ways that relate to economic conceptions of justice (see also Nussbaum, 1992). Sen argues that while Rawls is right to emphasize equality of positive freedom, he errs by focusing on the means to achieve freedom rather than on the actual freedom that people enjoy. This is because individuals differ in their abilities to convert primary goods into achievements. This implies that two people with equal bundles of primary goods may nevertheless face distinct levels of substantive freedom. For instance, a disabled person may need greater income and support than others to achieve the same level of beings and doings (such as mobility or occupational success). Were all individuals identical, this problem would not arise. But because interpersonal differences are so dramatic, the goal of promoting equality in substantive freedom requires that we focus on substantive equality directly, rather than on the means to achieve it. And this implies that we may need to distribute primary goods and other means to achieve unequally if we are to achieve the most important kind of equality: equality in the positive freedoms that people enjoy.

Positive Freedom and Marxian Economics

Look at how this emphasis on positive freedom bears on normative judgments within the Marxian framework. This framework begins with a simple, intuitively plausible assumption: To exist over time, all societies must produce a surplus. That is, those who perform the labor necessary for provisioning (producing food, clothing, health care, shelter, etc.) must produce not just enough to sustain themselves, but to sustain others. This is because at any particular moment, some in society will be unable to produce for themselves. This is true of infants, young children, the elderly, the infirm, and the otherwise disabled. If the productive workers produced only enough to sustain themselves, society would be unable to reproduce itself over time.

The Marxian framework concerns itself principally with the diverse ways that societies organize the production, appropriation, and distribution of the surplus (Resnick & Wolff, 1987). Who is assigned to produce the social surplus, and what means are used to ensure that they are induced to perform this social necessity? Who is entitled to appropriate the surplus so produced? That is, who receives it, and by what juridical, political, cultural, or other means are they ensured that the surplus flows to them? Finally, what norms, rules, laws, or conventions dictate the distribution of the social surplus across society’s members, including those who participate in and those who are excluded from the practices of producing and appropriating the social surplus?

Unlike neoclassical theory, many heterodox approaches explicitly engage normative questions and even base their theoretical frameworks on normative judgments (DeMartino, 2000). This is certainly true of the Marxian approach. Vital questions arise immediately in this approach about the rightness of the arrangements that societies adopt to manage the production, appropriation, and distribution of the social surplus. First, one finds in the Marxian tradition a normative indictment of what is called exploitation. This term is used to describe any social arrangement in which those who produce the surplus are excluded from its appropriation. This happens whenever others in society enjoy the right of appropriation at the expense of the producers. For instance, in slave societies, the surplus is produced by slaves but appropriated by the slave owners. This, for Marxists, represents a particularly clear example of exploitation. On this ground (among others), slavery is deemed unjust. And so would be any other social arrangement that shared the feature of exploitation.

The Marxian tradition has much to say not just about who should appropriate the surplus, but also about how that surplus should ultimately be distributed (DeMartino, 2003; Geras, 1985, 1992; Lukes, 1987). In this approach, a distribution of the social surplus is just when it is based on need. This conception is consistent with Sen’s framework, as already discussed. Those who require more, perhaps because of physical disabilities (permanent or temporary), age, geography, or other challenges, are entitled to greater shares of the social surplus. In contrast, distributive justice requires that those who require the least because of good fortune or other factors are to receive less (Marx, 1938).

Distribution according to need relates directly to the positive freedom that underlies the Marxian approach. Allocating more to those with the greatest need ensures that they enjoy increasing substantive freedom to live valued lives. It expands their opportunity sets by increasing the beings and doings that are available to them. Distributing more to those who are most impoverished in terms of their freedoms and who face the greatest challenges thereby contributes toward the equalization of positive freedom across society’s members. It generates what its advocates see as genuine equality. This is equality in positive freedom—in what people can actually achieve— rather than in what this approach’s proponents view as the hollow freedom associated with neoclassical theory’s emphasis on negative freedom.

The equality that underpins Marxian and other heterodox approaches is much more demanding than is the equality to which neoclassical theory is committed. The latter requires only the removal of certain kinds of constraints— especially those imposed by the state, given its monopoly over the legitimate use of violence to enforce its dictates.

For those who value positive freedom, the removal of these constraints may not be at all sufficient to the achievement of genuine equality. Indeed, the value placed on negative rights might often interfere with the realization of equality of positive freedom. This would be the case, for instance, when the exercise of rights by those who are best off interferes with and reduces the opportunity sets of those who are less advantaged. Hence, we find a tension between these two kinds of freedoms and especially between demands for equality of the one as opposed to the equality of the other.

Applications and Policy Implications

Normative judgments matter deeply—not only at the level of abstract debate, but also in the design and evaluation of institutions, policies, and outcomes. Indeed, the positions economists take on the most important public policy questions are tied directly to the normative frameworks (including their judgments about justice) that underlie their approaches to economics. To see this, consider the question of whether the economic outcomes associated with the market economy are just. Here one finds a sharp controversy between those who embrace negative and those who embrace positive accounts of freedom.

In Friedman’s (1962) account, distribution of total social wealth under the free market results from free exchange in the marketplace. Free exchange here entails only that there is no coercion. In the absence of such coercion, agents are taken to be entirely free to pursue their own interests as they see fit. This ensures that they will enter into only those agreements (or undertake those market exchanges) that improve their personal welfare. It is not for the economist to evaluate a person’s judgments in this regard. When someone consummates an exchange, economists must presume that that person has made the best bargain available to him or her.

This conception of market interactions and outcomes implies that agents will receive rewards in the marketplace that are commensurate with their contributions to social welfare. Those who have produced the goods that society deems most useful or desirable will secure a higher price when they sell these goods than will other agents who are selling less desirable goods. Moreover, those with the greatest skills and with savings that they are willing to invest will make the greatest contributions to total output, which in turn serves as the means to enhance social welfare. In a free market, these agents will be able to bargain for rewards that reflect these greater contributions. In contrast, those with few skills or other endowments will receive low rewards that are commensurate with their lower contributions to total output. This is as it should be: Justice prevails when agents secure the share of total income they are due owing to what they contribute and the choices they make, unconstrained by illegitimate infringements on their rights or the rights of others.

From this perspective, the free market is viewed as the optimal form of economic arrangement. Not only is it apt to promote economic efficiency owing to the incentives it provides each actor to make greater contributions, but it also is just in the sense that it ensures equal negative rights to all actors. Unlike other economic arrangements that are based on dictates from the state that necessarily compromise negative freedom, the marketplace operates on a logic of freedom that allows each agent to pursue his or her self-interest unimpeded by illegitimate interference. So it is that Friedman can equate capitalism with freedom.

Those who embrace positive, as opposed to negative, freedom reach a radically different conclusion about free market processes and outcomes. The Marxian tradition argues that the negative rights associated with the marketplace both obscure and deepen substantive inequality. In a capitalist economy, those who produce the social surplus, the wage laborers, are exploited by the firms that hire them because the legal right to claim the surplus produced by laborers is monopolized by the firm. The surplus is extracted from workers unfairly, despite the illusion of fairness given by the fact that under capitalism workers are free to work or not as they see fit (Bowles & Gintis, 1990; Resnick & Wolff, 1987; Roemer, 1988). In this sense, the apparently free workers under capitalism are no different from slaves because both are deprived of the right to appropriate their own surplus. Hence, Marx can call employment under capitalism wage slavery.

From the Marxian perspective, there are other reasons to deem the free market unjust. The market economy does not ensure that those with the greatest need will secure the greatest allocations of the social surplus. Instead, those who are worst off in terms of their needs will often be least able to bargain for a fair price for what they have to sell. This is particularly the case for workers. Because under capitalism the means of production are monopolized by capitalists, workers cannot sustain themselves independently in the ways that they could were they to have in their possession the means of production. They are therefore compelled to sell their labor power in a market that is stacked in favor of the capitalists. Hence, free exchange leads to systematic unfairness owing to the asymmetry in bargaining power between capital and labor.

This concern about the inherent injustice of the labor market is shared by other heterodox traditions, such as radical institutionalism (see Dugger, 1989; Dugger & Sherman, 1994). For instance, institutionalist economist John Commons (1924) argues that workers must secure a wage regularly in order to survive: Because what they have to sell is perishable, they are forced to take what they can get (Ramstad, 1987). In contrast, the firms to which they must sell their labor power often can wait. This asymmetry in the ability to wait leads to an asymmetry in bargaining power, which in turn ensures that wages will be depressed below the fair level that would exist were workers and firms to confront each other as equals. For Commons, the outcome of such asymmetric bargaining is on its face unjust. In his view, reasonable value in exchange is realized only when both parties enjoy equal ability to wait.

Future Directions

Much works remains to be done on the connections between economics and justice. At present, neoclassical theory is undergoing substantial change owing to new avenues of research. For instance, developments in behavioral and experimental economics are demonstrating the severe limitations of the rationality assumption. Research indicates that individuals are often driven in their decision making by notions of fairness, justice, the welfare of others (not just family members but even strangers), and other ethical concerns. This implies new avenues for research on several fronts, as Sen (1987) has argued. What conceptions of justice do individuals hold when they make decisions? How do these conceptions affect their behavior? How are these conceptions (and behavior) affected by the social milieus in which individuals act? And what kinds of institutional arrangements might be desirable in promoting the conceptions of justice that individuals value? Although the answers to these questions will require substantial research, it is increasingly apparent that the simplistic account of rationality that has informed neoclassical economics for many decades is unlikely to survive much longer in economics. This may encourage neoclassical economists to revisit their historical antipathy toward normative judgments in their work.

Heterodox economic research can and likely will be extended to encompass a greater focus on normative matters and the kinds of institutions and policy strategies that are consistent with the conceptions of economic justice that heterodox approaches value. Greater attention must be paid to the relationship between positive and negative economic rights, for instance. A second question concerns the kinds of policy measures that might generate equality of positive freedoms in ways that are widely taken to be ethically defensible—even perhaps by those who would do worse under such arrangements. And what challenges are posed to the equalization of positive freedom by the dramatic increases in international economic integration over the past several decades? What kinds of policy initiatives are now necessary at the multilateral level to promote global equality? These are difficult questions, to be sure, but providing compelling answers to them is vital to the success of heterodox research and political projects.


This research paper has established that distinct approaches to economics value distinct notions of rights and freedom, which in turn generate distinct notions of justice, and these differences bear heavily on their respective assessments of economic policies and outcomes. Neoclassical thought entails a strong aversion toward value judgments, and this leaves it with little to say about economic justice. That said, there is implicit in the tradition a commitment to negative rights and negative freedom. Those who embrace this conception of freedom (such as economist Friedman and philosopher Nozick) are led to view any economic outcome as just, provided it arose through just means, where just means is defined as voluntary exchange, free of coercion. In this conception, then, free market outcomes are just because they arise from the exercise of people’s rights. Even grossly unequal distributions of income are beyond reproach, provided they arose from processes (such as free exchange) that violated no one’s rights.

In contrast, many heterodox traditions explicitly engage moral judgments, and many of these adopt a positive conception of rights and freedom. These approaches place emphasis on what a person can actually be or do, and many also view a just outcome as one that entails equality in positive freedom.

The case of bargaining between capital and labor examined in this research paper is just one example of what Marxists and other heterodox economists view as a general ethical problem in free market economies. Those who enjoy greatest substantive freedom are in positions to extend their own freedoms at the expense of those with least substantive freedom, because the enjoyment of substantive freedom facilitates greater bargaining power in market exchanges. Those with the greatest income, wealth, connections, and so forth will gain at the expense of those who lack these resources. This leads to the conclusion that the equality of negative rights that the free market enshrines may often deepen inequality in the positive freedoms that people enjoy.

See also:


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