Home / Summaries / Lecture 1 introduction and international trade theories / fair-fairness-income

Book: Effiency and Equity - Is the Competitive Market fair?

Q: Ideas of fairness divided into 2 broad groups:

1. It's not fair if the result isn't fair 2. It's not fair if the rules aren't fair

6 important questions on Book: Effiency and Equity - Is the Competitive Market fair?

Ideas of fairness divided into 2 broad groups:

1. It's not fair if the result isn't fair
2. It's not fair if the rules aren't fair

One big problem with the Utilitarian ideal

It ignores the costs of making income transfers

The greater the amount of income redistribution through income taxes

The greater the inefficiency, the smaller the economic pie

Modified version of utilitarianism

By Harvard philosopher John Rawls, a theory of Justice 1971.

Rawls " taking all the costs of income transfers into account, the fair distribution of the economic pie is the one that makes the poorest person as well off as possible

incomes should be taxed and redistributed to the poor but not taxed so highly that the economic pie shrinks.

The idea " it's not fair if the rules aren't fair" is based on what principle?

The symmetry principle

Symmetry principle translates into

Equality of opportunity
answered by Harvard Philosopher Robert Nozick (Anarchy, State and Utopia 1974)

Nozick argues: idea of fairness as an outcome or result cannot work, fairness must be based on the fairness of the rules.

Fairness obeys 2 rules:
1. State must enforce laws that establish and protect private property
2. Private property may be transferred from one person to another by voluntary exchange