Distributive Justice: An Economist's Perspective

Democratic Distributive Justice by Ross Zucker

In Democratic Distributive Justice, Ross Zucker (2000)¹ argues that a capitalist economic system constitutes a community of agents with certain common aims; that the individuals who comprise this community contribute through their interdependent activity to the promotion of those shared aims; and that the intrinsically interdependent character of most economic activity establishes a principle of distributive justice which entitles every participant in the economy to an equal share of a part of the income and wealth created by that activity. According to Zucker, the principal common aim of all agents is the preservation and expansion of capital; for all income originates in an expanding circuit of money and production. Interruption of that circuit damages workers and capitalists, consumers and sellers, alike.

The perpetuation of this circuit depends in large part on socially organic activities. First, production is by its nature collaborative and grounded in intersectoral linkages. Second, no production process can continue unless there are buyers for what that process creates. Third, consumption patterns are themselves socially formed. And, fourth, so are the work habits upon which efficient production depends. The social character of the circuit of capital, Zucker contends, justifies egalitarianism in the distribution of part of the aggregate income. His argument can be read as an answer to Margaret Thatcher's famous remark, in a 1987 interview, that "there is no such thing as society. There are [only] individual[s] . . . and . . . families."

Zucker's argument is novel and carefully developed. It is also extremely topical. Over the past two decades income and wealth inequality in the US have gone through the roof (see Bernstein, Mishel & Brocht, 2000). A similar, though less pronounced, trend is evident in Western Europe, where economic policy discussions center on whether, or how quickly, the allegedly more efficient American model should be imported. The same issues have arisen in connection with the transition to capitalism of the economies of Eastern Europe and the former Soviet Union. Recent financial scandals in the US have cast a discomfiting light on the ethical ramifications of exploding inequality, and some observers have begun to worry that the re-emergence of Gilded Age disparities in economic well-being will have profoundly destabilizing social consequences (see Krugman, 2002).

Economists are notoriously self-conscious about the scientific pedigree of their discipline. Most of us would rather talk about efficiency than about justice, and questions of distributive justice concern precisely the sort of normative issues that economists prefer to avoid. The conventional neo-liberal wisdom maintains that there is a trade-off between efficiency and equality—that the latter can be enhanced only at the expense of the former. But this view is a distortion of the orthodox neoclassical position, which is agnostic on the desirability of alternative distributive regimes. Indeed the reluctance of orthodox economics to engage the problem of distributive justice is reflected in the ultimately vacuous criterion by which it evaluates economic outcomes—Pareto optimality. A particular allocation of resources is said to be Pareto optimal if no agent's well-being can be improved without reducing the well-being of some other agent. Leaving aside the fact that the conditions required to generate Pareto optimal outcomes are so restrictive that they can never obtain in actual market economies, the Pareto criterion is an extremely weak prescriptive device. It says only what is obvious: that if resources can be reallocated so as to make someone better off without causing harm to anyone else, such a reallocation is desirable. The criterion does not even allow us to say that a Pareto optimal allocation is always superior to a position that is not Pareto optimal.² It dodges entirely the problem of how we ought to proceed when the well-being of some agents can be improved only at the cost of diminishing the well-being of others, that is, the problem of redistribution.

Neoclassical theory does contend that market outcomes are by-and-large efficient (pace the standard caveats about...