Overview

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. He maintains that the way to satisfy the envy test for the initial distribution of resources in a society is to auction the available resources.

Dworkin believes that shares of resources should be sensitive to two things:

1. The tastes and ambitions of the people who get the resources.
2. The tastes and ambitions of the people who do not get the resources.

A simple kind of equality would give everyone exactly the amount of exactly the same thing. That’s equal! But, given the diversity of tastes and ambitions people have, it is unlikely to be a satisfactory way of devoting an equal share of resources to each person’s life. It falls short of the first aim.

A society could swing to the opposite extreme by giving people whatever they need to do whatever they want. That would give people with expensive tastes and ambitions a lot more than people with more modest aims get. So Dworkin does not find that to be a satisfactory way of devoting an equal share of resources to each person’s life either. It fails to achieve the second aim.

The auction, by contrast, is supposed to achieve both aims.

1. People bid on the things that they want.
2. The price that they pay to get what they want depends on how much others want them. In other words, the price reflects the opportunity cost of not getting a resource to other people who want it.

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. Thus my tiny apartment in Manhattan could be equal in value to your large farm in Wyoming.

Our discussion

Prof. Brown led the discussion. She began by going straight to the point that Dworkin defines equality in terms of opportunity costs.

She then demonstrated that the auction is indeterminate. Markets could clear at different prices. In her example, Bob and John have equal shares when Bob has 4 baskets of eggs and 1 bottle of wine and John has 2 baskets of eggs and 5 bottles of wine or when Bob has 4 baskets of eggs and 2 bottles of wine and John has 2 baskets of eggs and 4 bottles of wine.

Is that a problem? It’s hard to say. It might make things easier. If many different distributions of resources count as equal, it might be easier to achieve an equal distribution than if there was only one.

We ended with a discussion of insurance. Insurance is a way of ensuring that the distribution of resources reflects people’s ambitions and tastes after the auction ends and people start living their lives. Some people will do well while others will do poorly and the latter will want to trade bundles with the former; that means the distribution of resources will fail the envy test. Dworkin uses insurance to solve the problem. If you have the option of insuring yourself against doing poorly, you don’t buy the insurance, and then you do poorly, your resources reflect your tastes and ambitions again, even if the reasons you did poorly are out of your control. When we compare your big bundle of resources plus insurance against someone else’s, these big bundles satisfy the envy test: you have the big bundle that you preferred to every other big bundle because that’s what you chose.

As Dworkin puts it, insurance converts brute luck into option luck.

The problem with insurance is that there are some people who suffer terrible brute luck but cannot buy insurance against the chance of suffering bad brute luck. These are people who are born with handicaps. They cannot buy insurance because their condition is known at birth and there is no sensible market for insurance against the risk of things that have already happened.

Q: How much would an insurance policy against the risk of being blind cost for someone who is blind at birth?

A: Some amount more than the cost of caring for someone who is blind at birth.

So a society that does nothing about handicaps will fail the envy test. The person who is born blind will envy the resources held by the person who has full sight since the latter will be able to earn more than the former. (Generally speaking, of course.)

The solution is a hypothetical insurance market to cover the risks of being born with a handicap. We ask how much coverage against having condition X the average member of the society would have bought if no one knew whether they had condition X. In the real world, the state collects the premiums for this hypothetical insurance policy and pays out benefits to those who have disabilities.

This does not convert bad brute luck to bad option luck in the way that real insurance does. The person who is born blind does not actually choose the level of insurance she has. But, Dworkin believes, it is as close as we can get.