Dworkin on equality

Notes for Tuesday, October 7, 2014

Main points

Dworkin’s project is to spell out what it would be for a society to treat its members as equals. One thing involved in that is devoting an equal share of resources to the lives of each member of the society. This paper is devoted to stating what it means to devote an equal share of resources to the lives of every member of society.

One surprising feature of Dworkin’s article is that it makes the case for economic markets on the grounds of equality. Markets are usually described as the source of inequality. But if Dworkin is right, there is no way of saying what having an equal share of resources involves outside of a system of market exchanges. That is a novel claim.

Dworkin’s auction

The idea is that the members of a society have equal shares of resources when what Dworkin calls the “envy test” is satisfied. This does not mean that the society is free from the emotion of envy. What it means is that no one in the society would trade their bundle of goods for anyone else’s bundle. The way to satisfy the envy test, Dworkin maintains, is to hold an auction for all the available resources. Since everyone is bidding on the available resources, what each person winds up with has to reflect the opportunity costs of others. If the things I want are in high demand, I will have to pay a high price for them to outbid others. By contrast, if what you want is in low demand, you will get it at a low price. So you could wind up with a lot of what you want and I could wind up with a little of what I want and we would have equal shares of the society’s resources. That is because the value of our bundles is determined by how much others bid for them. So my apartment in Manhattan could be equal in value to your farm.

Prof. Brown showed that the auction could be indeterminate. She gave us a worksheet that showed the envy test could be satisfied with at least two different prices for goods and, accordingly, two different distributions of those goods. That means that there could be at least two different ways of distributing goods that could count as equal shares for Dworkin.

Luck and insurance

Dworkin did not seriously propose auctioning off all of a society’s resources. The point was that a real society would need real markets in order to say what equal shares of resources are. But the operation of real markets would lead to a system that fails the envy test. That is because some people would wind up with less than others not as a result of their choices (their bids in the auction, if you will) but because of bad luck. Suppose bad luck befalls me but not you and you wind up with a lot more money than I have. I would be willing to exchange my bundle for yours and the envy test would not be satisfied.

Dworkin’s method for addressing this problem is insurance. When I choose to insure myself against bad outcomes, I convert what he calls “brute” luck into what he calls “option” luck. The idea is that since I chose my levels of insurance whatever happens will reflect my choices.

Real insurance policies will not be available for some cases of bad brute luck such as being born with a handicap or without living parents (as Patrick and Sally noted). To cover these cases, Dworkin imagines a hypothetical insurance market. We, in the real world, are imagined to have purchased a level of insurance against living with a handicap (or as an orphan) that an average person would have purchased. Those who are orphaned or handicapped will receive a payout from the insurance policy, presumably maintained by the state. Those who are not handicapped or orphaned will pay their premiums to the state in the form of taxes.

It is not obvious to me that this would be enough to satisfy the envy test. Someone with a handicap could well receive a generous payout but still envy the resources available to those who are not handicapped. If you are incapable of working, for example, you will almost surely have less money than those who do work. You will also lack the social and psychological benefits of work; in our society, these are quite significant.

Perhaps the envy test should give way at this point: equal shares might consist in the bundles purchased in the auction plus the choice of risks implicit in the hypothetical insurance policies. Or Dworkin might say that there is no way of meeting the envy test in some cases. Some handicaps might be so bad that it would be impossible to transfer enough resources to meet the envy test.

How does the US currently handle disability?

In a wide variety of ways. That said, one major program covering disability is Social Security. And the way disability benefits are funded by Social Security is due for some sort of overhaul. Recently, Henry Aaron wrote a short article describing both the immediate funding problem and the broader nature of the program. It gives a lot of insight into how disability is treated in the real world of policy.

This page was written by Michael Green for Freedom, Markets, and Well-being, PPE 160, Fall 2014. It was posted October 14, 2014 and updated October 28, 2014.
Freedom, Markets, and Well-being