A bit more than two years ago, on July 12, 2015, in a post discussing John Rawls’ well-known theory of justice, I introduced the notion of an inequality surplus, which I suggested lies at the heart of that theory. On my walk this morning, I was delivering, in my mind, a talk that I called “A Game-Theoretic Analysis and Critique of John Rawls’ A Theory of Justice,” in which I made much of this notion of an inequality surplus and called it into question. When I coined this term, my focus was on Rawls, not on the larger question of what a socialist society might look like, but the analysis I offered there is directly relevant to this very important matter, and it occurred to me that I ought perhaps to revisit my remarks and expand upon them. Let me begin by quoting some of what I wrote two years ago:
“The centerpiece of the theory is the two principles for the general regulation of society that, according to Rawls, would be unanimously chosen by individuals engaged in what Game Theorists call a Bargaining Game. Here is the passage in which Rawls first introduces those principles:
The conception of justice which I want to develop may be stated in the form of two principles as follows: first, each person participating in a practice, or affected by it, has an equal right to the most extensive liberty compatible with a like liberty for all; and second, inequalities are arbitrary unless it is reasonable to expect that they will work out for everyone's advantage, and provided the positions and offices to which they attach, or from which they may be gained, are open to all.
The central idea of these principles is this: Modern society consists of large-scale bureaucratic organizations -- corporations, universities, hospitals, government offices, armies, and so forth -- in which there are clearly defined roles to which attach specified duties and compensations. The default baseline situation, we may imagine, is one in which all the roles receive the same compensation -- a situation of absolute equality. However, if the ablest individuals with the best sets of talents and skills are drawn into certain key positions, the institutions will function much more efficiently -- to be put it as simply as possible, the net output of the institution will be higher. Now, to ensure that these especially talented or well-prepared individuals end up in those key positions, it is necessary to pay them higher salaries, and this is an element of inequality. But the gain from their greater efficiency will be such that after they receive their added compensation, there will be something left over that can be given to everyone else [or to the least advantaged representative individual, depending on which version of Rawls' theory we are considering.]
Let us call this something extra the "inequality surplus" [not Rawls' term, by the way.] Assuming, as Rawls does, that the individuals in the society are "not envious," which is to say assuming that those getting less in the way of compensation than the key individuals do not begrudge them their higher salaries so long as they themselves are getting more than they would without the productive efforts of those key individuals, everyone will endorse this system. And that, in a nutshell, without all the baroque elaborations, is Rawls' argument.
Since this is rather abstract, let me restate it by way of a hypothetical example. Consider a manufacturing firm that makes washer-dryers. The employees, we may suppose for simplicity's sake, are divided into executives who direct the operations of the firm, production line workers who assemble the washer-dryers from components delivered to the factory, and loading dock workers who unload the components when they are delivered by truck to the back door of the factory and load the finished washer-dryers onto trucks waiting to take them to retail outlets.
Clearly, the earnings of the company will be much greater if those with special skills, training, and talent for corporate management are assigned to the executive jobs, and that fact will make it possible to raise everyone's salary. But there is a problem. Rawls does not identify this problem, but his theory makes no sense at all unless we assume that the problem exists, so we are justified, I think, in assuming it.
The problem is this: After the professionally administered aptitude tests are scored, and the individuals with special management talents are identified, they are offered jobs as managers. But when the selected individuals are invited into the executive suites, they say, "Thanks, but no thanks. I would rather work on the loading dock."
"What is this?" you say incredulously. "Where on earth does Rawls say that in A Theory of Justice?" Well, nowhere of course. But he must be assuming it, even though he doesn't know it, because if those tapped for management actually prefer to be in management [or, technically, are indifferent between executive suite and loading dock, but never mind that], WHY PAY THEM MORE TO TAKE THE JOBS?
"But it is not just to pay them no more than loading dock workers, and Rawls says his theory is a theory of justice!” you protest. "Ah," I reply, "you have not read Rawls as carefully as you ought. Rawls does not start with a pre-systematic concept of justice that he assumes without argument. He starts with a collection of rationally self-interested individuals who, according to him, will out of self-interest choose these two principles, and the fact that they will out of self-interest choose these principles MAKES THEM the principles of justice."
There is no reason for me, a rationally self-interested individual, to approve a system of unequal compensation unless I believe that doing so will draw into key positions individuals whose greater efficiency will end up benefitting ME.
Does anyone at all really believe that offered a choice between corner offices in the executive suite and nine-to-five jobs on the loading dock, potential executives will opt for the loading dock unless they are paid hefty salaries well above that of their lesser brothers and sisters out back? Rawls does. He must. Otherwise the centerpiece of his theory collapses.”
The central notion is the inequality surplus. Unequal compensation, Rawls believes, is required to draw into key jobs those with special talents or acquired abilities, whose superior performance increases output more than what is required to compensate them, leaving a surplus that can be distributed to others in a manner that leads everyone to prefer the structure of unequal compensation to the baseline of equal compensation with lower total output and hence universally lower compensation. In short, Rawls assumes, self-interest will lead everyone to prefer inequality, including those who get the short end of the longer stick.
Rawls’ focus is on the motivation of the losers in this competition. They too must prefer the outcome in order for his argument to work. But let us focus instead on the winners, those who secure the better paid positions. Rawls, following virtually everyone in the field of Sociology of his day, simply assumes that higher pay is required to get the especially talented to take the demanding jobs. Is this even notionally plausible?
Let us set to one side one irrelevant consideration, namely the cost in time and effort and money required to acquire the productive skills. Clearly, the self-interested individuals assumed by Rawls’ theory will not spend many years and tens or hundreds of thousands of dollars on special education or training unless they are in some way compensated for that expenditure. But in a well-run socialist society such costs will be socialized, as indeed many of them are even in capitalist societies.
In effect, we can imagine talented young men and women being asked the following question: Would you rather spend four or six or eight years learning to be a manufacturing executive or a doctor or a lawyer or a college professor, during which time your room, board, tuition, and pocket money will be paid by the state, after which you will work until age 65 [or whatever] as a manufacturing executive or doctor or lawyer or college professor, or would you like to start working right now as a garbage collector or office secretary or production line worker or truck driver, working until age 65 [or whatever], earning in either case the same salary with the same benefits?
In order for Rawls’ argument to make any sense at all [even before we get into the arcana of the Veil of Ignorance and the Strains of Commitment and the rest], he must assume that the specially talented young men and women will in general reply, “Well, if the pay’s the same, I’d just as soon be a truck driver, thank you very much.” In which case, a bidding war starts, with society raising the pay for doctors and professors and business executives until their indifference between those jobs and truck driving or garbage collection or whatever is overwhelmed by their desire for the higher salary, and they say, reluctantly, “Well, all right, if you put it that way, I will consent to spend my life as a Professor of Philosophy rather than as a departmental secretary in a Philosophy Department.” I say “reluctantly,” because Rawls’ theory requires that they be paid just enough to get them to consent. Anything beyond that would, he says, be unjust [which is to say, would not be chosen by the rationally self-interested actors in the Original Position.]
I suggest that put this way, the assumption, one that Rawls shares with the entire world of sociologists and economists, is downright nutty.