Saturday, September 2, 2017

331. Just reward and allocation

What is a just reward or remuneration? A soccer star or pop star earns many times more than, say, someone in nursing. Is that justified? The soccer player and pop singer have a talent that they have developed with great commitment end effort, and that is an accomplishment. They also have the luck that their particular talents are scarce and in demand. Here we find the economic argument of utility as satisfaction of demand. People are prepared to pay more for a good soccer match or pop concert than for medical care.

Then, it is necessary to recognize other values than only success in a market, such as value for society, in contributions to society. However, one can also argue that the soccer player or pop singer have cultural, symbolic value. The soccer player as symbol for the hero who takes risks and overcomes pain and opponents, and does that together, in a team. One can see the singers song as an expression and celebration of human emotion.

One can argue that talent is mere luck, but one can also argue that everyone has talent for something, however modest, and that utilizing talent not only has instrumental, economic value, as a source of income, but also intrinsic value: it is satisfying to do something you are good at, and for that one should be willing to sacrifice at least some economic value.

Justice also requires the virtue of moderation: one can be immoderate in ambition and
excellence, but not at the cost of others, and should be willing and able to engage in give and take.

Also, economic success arises not only from talent and commitment, and supply and demand, but also builds on a vast heritage of institutions (rule of law), culture (knowledge), and infrastructure (roads, technology, etc.). That heritage has been produced at the cost of blood, sweat and tears of many generations, who had to conquer it all. This calls for some modesty, and the willingness to share the returns from that heritage with those who were less lucky in the lottery of genes and birthplace.

Next to remuneration for work, how about allocation of scarce resources? Is that to be left entirely to markets? The argument for markets is to let scarcity lead to higher prices, which evokes new supply that resolves the shortage. That does not apply when there are hard constraints, for example from nature. Temporary shortage can lead to extortion, as in the supply of water after a disaster.

Markets cannot cover everything. Alternative forms of allocation are a lottery, queue, rationing, and ‘attribution’: allocation according to certain criteria. A degree or Nobel prize requires attribution of merit, and would lose its value when sold to the highest bidder.

Some measures are debatable for other reasons. How about letting rich dentists shoot a rhino at an exorbitant price, to use the proceeds for protecting rhino’s? What if due to a ban on child labour people die from hunger? Perhaps one should first abolish hunger and get children to school, and then forbid child labour.  

Markets are clever in circumventing non-market allocation. Michael Sandel[i] recounts the story of the mayor of New York who wanted to offer a free concert to the citizens, rich and poor, in the park, but because of limited capacity they had to queue for free tickets. An entrepreneur had vagrants stand in queue to collect tickets which he then auctioned to the rich.  

An example of attribution is attribution of merit, as in a contest or a prize. Another is attribution according urgency, as the triage in hospitals, with a waiting list in case of equal urgency.      

[i] Michael Sandel, What money can’t buy, Penguin 2013, p. 79.