Last time, we went through the first two steps that, according to Dworkin, a society must take in order to satisfy the envy test.
Then Dworkin turns to labor markets. He argues that the bundles of resources that we are comparing in the envy test should include work and leisure as well as things like money, claret, and plover’s eggs. We don’t want to say that the envy test is not met if A wants the money that B earns even though A would not be willing to do the work that B does in order to earn it, after all.
Even after taking those two steps and putting work and leisure into the bundles we are comparing, however, a society could still fail to meet the envy test. This would happen if one person would prefer someone else’s bundle consisting of her job, leisure, earnings, and other resources over his own similar bundle. Say, for instance, that there is a major recession and there just is not much demand for labor. Some people will have jobs and others won’t even though they are equally enthusiastic about working.
Today’s class was about how Dworkin deals with this problem.
Dworkin’s solution to this problem is another hypothetical insurance market. The question here is: what insurance would people buy against being undercompensated, that is, not being able to make as much as they want through work?
He argues that no one would buy insurance against failing to have the very highest paying jobs. Instead, they would seek to insure against failing to have a modestly paying job. If they genuinely cannot find adequate work, they receive a payout from the insurance plan to pick up the difference between what they can earn and what they wanted to earn. And if they can do better, they pay their premiums to the state as taxes.
He tries to draw the line between people who are genuinely undercompensated and those who are trying to game the system in the way that all insurance plans do: with deductibles and co-pays. The trick is to set the insurance payout low enough so that no one will be tempted to avoid work just in order to collect insurance. The idea is that almost everyone who does collect would be genuinely needy. This will be difficult to do in practice, but it is the sort of thing that insurance companies do all the time. So it is not an insuperable problem, Dworkin maintains.
As Danny noted, the steps that the “insurance company” takes to avoid moral hazard, namely, co-insurance and putting the burden of proof on the people trying to collect, are very much like the steps that our welfare system takes to try to avoid paying benefits to people who could work but simply refuse to do so.
I briefly mentioned an alternative to welfare: guaranteed income. This idea has a lot of support on both the left and the right, for different reasons, of course. And it is just an interesting thing to consider as an alternative. There is a useful primer on the idea, its actual implementation, and its advocates on Vox, my favorite PPE website.
Dworkin, Ronald. 1981. “What Is Equality? Part 2: Equality of Resources.” Philosophy & Public Affairs 10 (4): 283–345.