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 for the initial distribution of resources in a society, Dworkin maintains, is to auction 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 tiny apartment in Manhattan could be equal in value to your large 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.

So what? Well, it could be that one of the participants in the auction would trade the bundle he has as a result of the auction with one set of prices for the bundle he would have had with the other set of prices. If so, Prof. Brown said, the distribution of resources through the auction would not satisfy the envy test.

Sad trombones here.

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. The “auctioneer” is a personification of the market.

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 uses insurance to address this problem. 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. 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 that an average person would have purchased. Those who are handicapped will receive a payout from the insurance policy, presumably maintained by the state. Those who are not handicapped will pay their premiums to the state in the form of taxes.

Jesse and I expressed skepticism about whether this would be enough to satisfy the envy test. Even with the insurance payout, a handicapped person could want to trade her bundle for someone else’s. (Assuming the handicapped person, say, earns significantly less in the labor market.) Prof. Brown said that Dworkin’s idea was that your bundle includes both the risks taken (hypothetically) in the insurance market as well as what you have in the real world. Since the handicapped person (hypothetically) chose a bundle that included lower insurance pay-outs (for lower premiums), we know that the handicapped person does not, in fact, envy anyone else’s bundle.

I see what she is saying. Still, the fact that the insurance choice is hypothetical sticks in my throat, though. How can a hypothetical choice, meaning, one that I did not actually make, show that I would not, in fact, exchange my bundle for someone else’s? That said, I have never been able to make this point to my satisfaction. Maybe Jesse can do better.