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markets, opportunity, and justice

At the Winter commencement at Indiana University, one of our speakers, tech business leader Fred Luddy, made a very interesting comment. Basically, he said that life in a market isn’t fair, but there are always more opportunities. I am not sure if he appreciated the depth of the remark, but if you reflect upon it, you realize that it merits a lot of reflection.

Let’s start with the typical approaches to thinking about whether markets are just forms of interaction.  The classic Nozickian position is that markets are just because they are voluntary. If you voluntarily by or sell your property or labor, then the resulting state is just. The critics raise multiple objections. For example, many people think that extreme inequality is either inherently unfair (i.e., only mild deviations from equality are acceptable) or that inequality has negative consequences (e.g., perhaps the very wealthy can unfairly influence government).

I think the most profound response to the critics comes from Hayek, who argued that the “social justice” critique of markets misses an important point. Namely,  Hayek argued that to critique the market based social order you must assume that you know what the right order is and how to make it happen, and that’s a tall order. Still, Hayek’s counter-point to the social justice leaves a lot of people, including myself, a little cold.

Why? Maybe it is unwise to believe that some mystical central planner can know the “right way” to organize society, but it does seem to be the case that the market economy tolerates a lot of things that appear prima facie unjust. A lot of people can lose their jobs through no fault of their own, such as in a recession. Or there can be persistent discrimination against certain classes of people, such as women or ethnic minorities.

In my view, this observation – that markets tolerate substantial levels of injustice – is reasonable. This brings me back to Luddy’s point. What I think he was trying to communicate, in the context of a graduation speech, is that the valuable thing about markets isn’t that they create justice. Rather, they create opportunities you can pursue after you have experienced injustice. In his speech, for example, he described how a business partner had used a stolen identity to embezzle millions of dollars – which he had to pay back to investors. There was nothing just about the situation, but the interesting thing is that he still had more opportunities and could thus move on with this life.

The big idea is that a narrow Nozickian justice and other broader forms of justice are different and that markets are actually fairly good at the former but not the latter. If all we ask if that a chain of interactions be voluntary, then markets fit the bill. If we ask that all possible consequences be desirable, or that all bad actors are relentlessly suppressed and reformed, markets are definitely imperfect. But that doesn’t mean that markets should be rejected. Rather, Luddy’s comment indicates that they have a desirable trait that may promote justice along some margins. Economic opportunities, ranging from the modest taco truck to the next billion dollar start-up, are constantly being created. For many people who experience negative outcomes, they may be a way to move forward and that’s a good thing.

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Written by fabiorojas

December 28, 2017 at 6:45 am

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