Dworkin on equality of resources

Main points

Today we worked through the first three sections of Dworkin’s article, “What is Equality? Part 2: Equality of Resources.”

Envy and the auction

I said that the central idea is that a distribution of resources is equal if and only if it passes what Dworkin called the envy test: no one would prefer someone else’s bundle of resources to their own. (285)

The auction is a way of arriving at bundles of resources that satisfy this test. The idea is that people bid on things they want. When the auction is done, everyone has the bundle they want more than all the others. If it had been otherwise, they would not have bid for the items in the bundle that they have but rather would have bid for other things.

Distributing resources through a market (which is what the auction is), means that the measure of the value of a person’s resources is determined by how much those resources are worth to others. The bidding process means that anyone who gets things that are in high demand will have to pay a high price for them. Those who get things that others don’t care much about will only have to pay a low price.

Luck and insurance

I got into a bit of a muddle about the hypothetical insurance market for handicaps. Specifically, I couldn’t explain how it was related to the envy test. Having gone back over the relevant material, I see why: there is no clear relationship to the envy test. In fact, having thought about it, I don’t see how the system Dworkin proposes could meet the envy test.

Let me explain.

We got into the topic of insurance because the distribution of resources would fail the envy test a short time after the auction was over. There are lots of reasons why some people will earn more than others and so accumulate bundles of resources that other people would want instead of their own. Dworkin lists differences in skill, desire to work, health, and accidents (292).

Dworkin maintains that the inequalities that crop up after the auction could be traced to one of two causes: option luck or brute luck. He then argued that there is no problem with inequalities in resources that are due to differences in option luck while implicitly conceding that inequalities due to differences in brute luck would raise problems (294–95). Once again, the reason why inequalities raise problems is that they imply the distribution of resources fails the envy test. Dworkin was trying to say that this is only true when the inequalities are due to differences in brute luck.

There are two ways of putting the point (295).

1. The resources that someone gains (or loses) through good (or bad) option luck should not be counted as part of that person’s bundle for the purposes of the envy test. We should compare A and B’s bundles prior to the risky career choice that A made; we should not compare them afterwards, when A either has a lot more than B or a lot less.
2. If we wanted to, we could describe the bundles as including not only things but risks as well. So if A takes a lot of risks that B does not want to take, B cannot envy A’s bundle even if it has more money than B’s bundle does. The reason is that B would not have wanted to take on the risky strategy that A employed in order to get all that money and the risky strategy is part of A’s bundle. So B would not, in fact want to trade B’s bundle for A’s bundle.

Either way, we exclude the results due to option luck from the envy test. But brute luck does not reflect a risk that anyone choses to take. So there is not a similar case for excluding its effects from the envy test. Fortunately, insurance exists to partially convert brute luck into option luck. The choice about whether to buy insurance or not is a choice about what risks to run. If you insure and “win,” you suffer bad brute luck but collect your insurance policy. If you “lose,” your brute luck is good but you lose your premiums without getting a payout on your policy. Either way, the resources that are available to you reflect the choices you made.

This brings us to handicaps. Those who have mental or physical handicaps have fewer resources than others do: it’s more difficult for them to lead their lives than it is for others. But physical and mental abilities are a funny resource for the envy test. You can’t trade your physical and mental abilities for mine (see pp. 300, 302). So Dworkin goes for an insurance scheme to compensate the handicapped for this shortfall. However, there can’t be an actual insurance market because the condition of the handicapped is known: no one would offer a policy without charging more in premiums than the policy would pay out and no one would buy such a policy. So the insurance market has to be hypothetical.

At the end of the day, it seems to me that the handicapped really could envy the resources held by those who are not handicapped. Assuming their skills are not in high demand, they will earn a lot less than others for reasons having nothing to do with their choices. The insurance scheme won’t move them to equality, that is, a bundle of resources that they would not want to exchange for anyone else’s bundle (excluding resources due to good or bad option luck). That is because no one would want to pay the premiums for a policy that would guarantee a handicapped person that bundle of resources.

Dworkin might be right to say that the hypothetical insurance market is the best that could be done for the handicapped. But it won’t satisfy the envy test. At least, I don’t see how it could do so.

Here’s another way to put it. Dworkin had two choices for dealing with handicaps.Added October 2.

1. Satisfy the envy test: raise the resources devoted to the handicapped until they would not trade their bundle with anyone else’s.
2. Adapt the insurance mechanism for converting brute luck into option luck as far as possible, even if the result is unlikely to satisfy the envy test.

Dworkin chose the latter rather than the former. I think the former would have been more consistent with the rest of his theory.

One more thought

I can’t believe it took me this long to put two and two together. If there are reasons why markets for health insurance and health care are likely to be inefficient, then there are limits on our ability to convert brute luck to option luck where health is concerned.

So we could not rely on an insurance market developing on its own for bad brute luck in health.