Equational Justice and Social Value

Equational Justice and Social ValueAuthor(s): Marc R. ToolSource: Journal of Economic Issues, Vol. 17, No. 2 (Jun., 1983), pp. 335-344Published by: Association for Evolutionary EconomicsStable URL: http://www.jstor.org/stable/4225305 .

Accessed: 24/06/2014 21:06

Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at .http://www.jstor.org/page/info/about/policies/terms.jsp

.JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range ofcontent in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new formsof scholarship. For more information about JSTOR, please contact [email protected].

.

Association for Evolutionary Economics is collaborating with JSTOR to digitize, preserve and extend access toJournal of Economic Issues.

http://www.jstor.org

This content downloaded from 91.229.229.205 on Tue, 24 Jun 2014 21:06:31 PMAll use subject to JSTOR Terms and Conditions

http://www.jstor.org/action/showPublisher?publisherCode=aee

http://www.jstor.org/stable/4225305?origin=JSTOR-pdf

http://www.jstor.org/page/info/about/policies/terms.jsp


J JOURNAL OF ECONOMIC ISSUES bl Vol. XVII No.2 June 1983

Equational Justice and Social Value

Marc R. Tool

The twentieth-century quest for economic justice appears in the writ- ings of novelists Alan Paton and James Baldwin, social theorists William Beveridge and Michael Harrington, and economists Richard Tawney and Lester Thurow, among others. Those perceived by themselves or others as disadvantaged by custom, circumstance, policy, or overt act have de- cried distributive injustice and urged redress. Impairments to the avail- ability and adequacy of distributed flows of real and money income are regarded as manifestations of economic injustice. Uniformly implied by the novelists, social theorists, and economists above is the perception of a difference between "what is" and "what ought to be." Economic justice is a normative concept; its meaning, finally, is rooted in one or another construct of social value. Economists, their claims to positivism notwith- standing, in their concern for problem-solving relevance cannot avoid confronting the meaning of economic justice and its supporting social value premises.'

There can be few, if any, more pervasively held and uncritically ac- cepted constructs than the equational theory of economic justice.2 It is the conviction that justice is done when some condition, thing, event, or act is brought into equivalence with some other condition, thing, event, or

The author is Professor of Economics, California State University, Sacramento. He wishes to acknowledge his indebtedness to his mentor and colleague, J. Fagg Foster. Critical comments by Paul Dale Bush and John Henry on an earlier draft are also gratefully acknowledged. This article was presented at the Annual Meeting of the Association for Evolutionary Economics, New York City, 28-30 December 1982.

335



336 Marc R. Tool

act. Such cliches as "he got what he deserved," "there's no such thing as a free lunch," and welfare means "getting something for nothing" exhibit concerns with equational justice. For economists, the balancing off of participation and contribution, the equating of the utilitous wage with the disutilitous work, the appearance of a market equilibrium, the reaching of an agreed compromise, the balancing of effort and leisure, and the formulation of cost-benefit assessments also embody elements of equational justice.

Economists' recourse to equational justice is no recent eventuation, of course: the Canonists' concern with "just price," the Physiocrats' design of the "tableau economique," Jeremy Bentham's "hedonistic calculus," Nassau Senior's "abstinence theory of interest," and Karl Marx's analysis of the origins of "surplus value" under capitalism and of distributive shares under socialism all in some measure incorporate elements of equational economic justice.

This article is addressed especially to an illustrative examination and critique of the equational theory of economic justice and to a provisional and exploratory formulation of an alternative principle of non-equational justice.3 The social value theory undergirding each, respectively, will also require consideration. Two examples of recourse to equational justice are discussed: John Bates Clark's "law of distribution" with its utility value underpinnings, and John R. Commons's concept of a negotiational economy and its agreed compromise criterion. Consideration of the alternative theories of instrumental justice and instrumental value concludes the paper. The purpose, given constraints, is indicative and stimulative, not definitive and conclusive.

Market Justice

The significance of equational justice for economists in this century owes much to Clark's formulation of "the law of distribution." Contempo- rary versions of the marginal productivity theory of factor pricing and income distribution are firmly rooted in Clark's "natural law." He offers the following simple, cogent, and confident affirmation as the focus of his major work: "It is the purpose of this work to show that the distribution of the income of society is controlled by a natural law, and that this law, if it worked without friction, would give to every agent of production the amount of wealth which that agent creates.... So far as it is not ob- structed, it assigns to everyone what he has specifically produced."4

For Clark, this normatively endorsed outcome occurs only where a price-competitive market system exists and operates naturally withbut



Justice and Value 337

governmental intrusion or private monopoly. The market is seen as the justice-dispensing vehicle that apportions factor income shares to the market measured "worth" of the individual contributions. Pecuniarily moti- vated, actor-agent participants perceive work and "waiting," respectively, as irksome or disutilitous and wages and interest, accordingly, as pleasur- able or utilitous. The visible, market equivalencies, for example of wage and product, are but a surrogate for invisible, subjective, utility-rooted balances. Thus, the competitive market system operating without fetters generates equivalencies between earnings and effort, between pleasure and pain, between utility and disutility. Equational justice is affirmed. Any intrusion on such markets from any source implies that an injustice is being done.

Note in passing that given atomistic factor markets, there is no individual or group, public or private, to whom one with a small share may appeal against the market-measured worth as indicated by the income share received. Such an appeal, indeed, is for an "unearned" share. The market determines worth, merit, contribution, and significance as revealed by the magnitudes of the income share received. Market-generated income is earned income.

That Clark's "law of distribution" rests on the utility theory of value needs little explication. For Clark, utility is the referent for social value and, in his distribution theory, factor prices paid are its measure. What is equilibrated, at bottom, are subjective feeling states-the pleasure, happi- ness, satisfactions of the money income share balanced off against the pain, unhappiness, and irksomeness of the work and effort that generated the product.

Institutionalists and instrumentalists in familiar works over the last century, of course, have attacked and largely dismantled the orthodox philosophical and ideological assumptions that affirm the existence and atomistic functioning of unfettered markets in a capitalist institutional setting. They have, in addition, undercut confidence in methodological individualism, hedonistic psychology, and apolitical postulates of neoclassical thought and of Clark's "law of distribution." Moreover, the infirmities of utility value theory, developed more generally elsewhere,5 are reflected in utility-based forms of equational justice. These infirmatives include the characteristics of tautology, relativism, and inapplicability. These attributions require brief additional comment.

Equational justice is tautological. It assumes at the outset that which it is the burden of theory to demonstrate. In purporting to balance wages and output as a stand-in for pleasure and pain, advocates of equational justice attempt to equate that which cannot be identified as equatible-subjective



338 Marc R. Tool

feeling states. It is an egregious presumption to insist that the competitive market automatically, in the absence of frictions, achieves such a balance. It is an heroic, if not fanciful, conjecture to reason backward from the income payment received and to insist that it is a market-measured testa- ment of the "worth" of the contribution, where "worth" is thought of as utilities created through disutilities (costs) incurred. It can be neither demonstrated or falsified, neither tested or proved. The evidential mate- rials that would permit such demonstration do not exist. Recourse to "utils" and "disutils" is a rhetorical gambit, not an analytical demonstration.

Ethical relativism pervades equational justice at times, even as it does utility value theory. Some forms of equational justice are, as we saw above, based on the utility-disutility distinction. Referential content for pleasure, pain, contribution, participation, when drawn in utility terms, are relative to time, place, culture, and individual. They have no continuing, commu- nicable meaning; with ambivalent meaning, they cannot be incorporated into inquiry; they are devoid of analytical significance. Such terms are "stuffed" with whatever "feeling state" content the exigencies of the mo- ment and the tastes of the "stuffer" require. Thus, "to each his own," given unexamined and unappraised tastes and preferences.

The concept of balance, equivalence, or equilibrium does not provide an applicable referent for economic justice; it is devoid of normative merit or social value content.6 Why should the achievement of a balance or equivalence, even if it could be demonstrated, be regarded as normatively superior to an imbalance or non-equivalence, or disequilibrium? There must be something more to it than an intrinsic or esthetic quest for sym- metry. The quest for balance or equivalence occurs in an alleged value void. Given positivism, there can be no criterion resident therein. Yet we are, as a daily practical matter, compelled to distinguish between good and bad balances or equilibriums; we are even compelled to endure imbal- ances. John Maynard Keynes's identification of the probability of an un- deremployment equilibrium in a capitalist economy took the normative "shine" off the use of equilibrium as a criterion of the good, or of what ought to be. A worker's wage may indeed be assumed to equal the market- measured "worth" of his contribution, but if he and his family starve to death on that wage, can we claim normative deference or moral approval for that balance? Economic justice must be otherwise identified.

Moreover, since balance, equilibrium, equivalencies manifest a value void, a judgment of the merit of an income share must employ criteria brought in from some other body of experience or theory. By failing to recognize that void and continuing to defer to the alleged merits of Clark's




equivalency, for example, we tend to conceal from view, analysis, and appraisal the actual criteria employed. Deference to ethical relativism may well lead, because of its own inapplicability, to an unacknowledged and unexamined use of ethically absolute criteria such as custom, power, ideology, or invidiousness. Recourse to custom converts "what is" into a criterion of "what ought to be." Recourse to power means playing an adult game of "king of the mountain"; the power to coerce or impose a pattern of income sharing becomes its own justification. Recourse to ideology in this case means the normative use of the competitive model. An equilibrium outcome is "good" because it was generated by an aprior- istically approved natural order economy. Recourse to invidious distinctions means that those who are, for example, female, black, Asian, or old are deemed less "worthy," therefore, a lower wage is "justified." Indeed, equational justice routinely embeds invidious distinctions since its pursuit is consumed with the question of who is worthy, who has merit, and with whether people are "entitled" to what they get. At "nature's table" (Mal- thus), "there is no such thing as a free lunch."

Bargained Justice

The consideration here of equational justice can be illustrated by ref- erence to quite a different economics literature and tradition as well, that of the institutional economics of John R. Commons and his students as applied especially to labor economics and the resolution of economic conflict.7

Little elaboration is needed to remind institutionalists of Commons's complete break with the mainstream neoclassical tradition. In his own eyes, he formulated an alternative to that tradition reflecting a pragmatic, inductive methodology (following Charles Saunders Pierce) and con- tributing a general theory of the economic process incorporating and in- tegrating political and legal facets of the social process as well. The per- spective, recall, was an effort at social analysis of a processional reality, the continuity of which must be assured through the exercise of "human will in action," through artificial selection rather than natural selection. People are discretionary agents, not "globules of desire." They must and do make choices utilizing criteria of judgment. They exercise power as they act and choose. The economy operates as a transactional arena in which people negotiate major decisions, including pricing decisions. People hold and use economic power; conflict occurs among and between property owners and power holders. Adjudication of power conflict occurs especially in the evolutionary and pragmatic emergence of common law deci-



340 Marc R. Tool

sions in courts and through legislative action. The "working rules," the institutional forms, that order experience are under near constant scrutiny and are frequently revised and re-ordered. Courts, in their quest for "reasonable value" and the restoration of "fair competition," steer a course between the extremes of obstinate retention of the status-quo and un- realistic utopian proposals in addressing conflicts over property rights, power wielding, economic access, and the like.

In the area of labor-management relations, we establish institutions of collective bargaining to facilitate judgments reflecting "negotiated value," and recourse to "reasonable operations of human will." The use of economic power must be rendered "reasonable," if possible. For example, the quest for agreed compromise through collective bargaining, resting on an achieved balance of power, offers hope of "reasonable" decisions through compromise of differences by contending parties, each of whom has, and is prepared to use, significant economic power. Indeed, the achievement of an agreed compromise comes to be regarded as an end in itself; it is a rendering of equational justice. Compromise takes on the role of a criterion: its achievement is normatively approvable; its denial, a social ill.

From the point of view of instrumental value theory,8 there is much to applaud in the Commons value position: its concern with the continuity of human life, its recognition of the need for re-creation of community (restoring effective working rules), its advocacy of continued pragmatic inquiry (often through study and resolution of individual cases), its advocacy of reasoned and deliberate appraisal of differences through collective bargaining in preference, for example, to confrontational violence on picket lines and corporatist authoritarian modes of management. Yet there remains, it appears, a qualitative underdevelopment and resulting ambiva- lence in perceiving balance or compromise as a surrogate value principle or criterion. A reader of Commons can sense some implicit recognition of this underdevelopment; he speaks at one point of "agreements which are needful for working together are not enough. The agreements may be sub- terfuge, misleading, oppressive, or one-sided."9 But if agreements do not exhibit these attributes, are they not "reasonable" and acceptable as compatible with the public interest?

What seems to be missing is a sufficient recognition and incorporation of the Veblenian dichotomy (as elaborated by Clarence Ayres and J. Fagg Foster).10 At issue is the character of a collective bargaining agreement, for example. How did it come to be and what are its probable consequences? Critical assessment is essential. Recourse to the invidious- instrumental distinction permits a distinction between a good compromise and a bad one. "Reasonable value" and "negotiated value" are




suggestive of equational justice and are not trivial in what they imply- deliberation, give and take, deference to reality, and the like. But the fact of an agreement cannot, of course, attest to the adequacy of that agreement. An evaluative examination of the character of the consequences for the community at large, employing the instrumental value principle, can generate more adequate appraisals. Here again, a deference to balance, compromise, or equilibration of power as constituting equational justice risks generating a de facto value void that, unless corrected, may inadver- tently permit actual judgments rooted in retention of power, status, rank, tradition, or invidious discrimination in lieu of judgments in quest of the instrumental efficiency of the economic process. The pejorative expression of a "sweetheart contract" (where labor and management jointly conspire against the larger community) historically has reflected recognition that a collectively bargained agreement may have an invidious and destructive impact on the community generally.

Thus, although in comparison with orthodoxy Commons's institution- alism represents a "light years' " gain in theoretical design and problem- atic relevance, its value theory appears underdeveloped. Its compromise constructs, therefore, become vulnerable to criticisms of equational justice considered above.

Instrumental Justice

Present constraints do not permit an elaborate statement of an alternative theory of economic justice that reflects institutional and instrumental theory. But, given recent attention to the development of instrumental value theory, it is possible to offer a few observations on instrumental economic justice reflecting that value theory.

First, we reaffirm that income distribution is a consequence of overt, discretionary share setting. Income flows are, in the main, set by people, not by atomistic markets." The determination of shares, of course, is an exercise of choice by various individuals, singly and in groups, acting through or on behalf of institutional power systems, public and private (including collective bargaining), and reflecting various views concerning the worth, merit, entitlement, or propriety of recipients' contributions or demonstrated needs. The existing structure of distributive decision making and the beliefs reflected therein constitute the primary universe of inquiry and discourse for economic justice.

Second, the exercise of such choice logically compels recourse to criteria of choice or judgment, the employment of social value theory. Neo- institutionalists often utilize instrumental value theory. Accordingly, the



342 Marc R. Tool

elements of that theory-the continuity of the social process, the reconstruction of the interdependent community, the instrumental use of re- liable knowledge, and the abandonment of the invidious use of distinctions among people-collectively and interrelatedly perceived, can become the standards employed in the making of distributive judgments. Although Lord Beveridge, for example, evidently was not a self-identified institu- tionalist, his Plan in Great Britain for the reconstruction of institutions to provide for greater continuity and adequacy of income flows reflects elements of this criterion. The Plan's comprehensive coverage of risks to income, near universal participation, abandonment of means tests (mostly), and recourse to the principle of categorical presumptive needs, among other characteristics, are compatible with instrumental value theory.

Third, the use of instrumental value theory infuses meaning into a concept of non-equational justice-instrumental justice. Instrumental justice is realized in the creation of conditions in which real and/or money income is generated and distributed in patterns and amounts that permit all individuals, effectively and noninvidiously, to contribute to the economic, political, and social processes as much as possible. Patterns are to provide for continuity, maintenance, or restoration of community, and nonin- vidious access. Levels of income are to be sufficient to permit the fullest realization of physical, intellectual, emotional, reflective, and esthetic development; levels must be sufficient for knowledge acquisition, skill development, and maturation of creative talents. The question of market- measured worth is abandoned.

Note that the foregoing does not imply a Shavian (or otherwise argued) equality of income sharing.12 Instrumental justice does not connote iden- tity; instrumental justice does not connote equivalence. It may well foster and justify differential income flows to individuals and segments for whom racism, sexism, unemployment, violence, and other invidious impositions have generated deprivation and denial of instrumental participation.13

Instrumental justice is not served by the quest for "equality of opportunity" in competitive factor markets, as the orthodox would suggest. Where those who enter the competitive race do so with differential advantages of educational exposure, familv wealth, status, rank, and social class privileges and the like, the competitive scramble permits the already advantaged to gain increased advantages of wealth, status, and power over others. The pursuit of "equality of opportunitv" increases the extent of inequality by further depriving the already deprived.14

Moreover, instrumental justice cannot be achieved through meritocracy models that assign workers and their pay levels to status-ridden hierarchical ranks in the alleged quest for excellence. As John Livingston has shown




in the area of higher education, excellence is more effectively pursued in collegial models than in meritocratic models.15 The tests for worth and merit in hierarchical models generate invidious judgments. Such judgments impinge on individuals by impairing their motivation and capacity to provide excellence.

Worth and merit are not at issue with instrumental justice. At issue is whether recipients are able, given present levels of interdependence, to make maximal instrumental contributions in all facets of experience, including "work." For any not to be so enabled, because of discrimination, inflation, unemployment, or coercive intimidation, is to cripple both the individuals affected and the whole community. To deny instrumental in- volvement to some is to visit their impairment on the community. As Ayres observed, to cripple a part is to cripple the whole community.'6 Or as Foster puts it: "To meet instrumental needs of an individual means meeting more of the needs of everyone else-expanding production- whereas meeting the ceremonial [invidious] 'needs' of an individual re- quires, by definition, that others' needs be not so well met. For how else could invidious differentiation be evidenced.'7 To pursue invidious "needs" for status, power, and excessive income is to deny the fact of community and to abort the quest for instrumental economic justice. It is to deny the ancient dictum: "We are members, one of another."

Notes

1. See Robert A. Solo, "Value Judgments in the Discourse of the Sciences," in Value Judgment and Income Distribution, ed. Robert A. Solo and Charles W. Anderson (New York: Praeger, 1981), pp. 9-40.

2. The phrase "equational iustice" oripinates in the work of J. Fagg Foster, Emeritus Professor of Economics, University of Denver.

3. Although this article does not address the views of John Rawls in his A Theory of Justice (Cambridge, Mass.: Harvard University Press, 1971) and the commentary it has invoked in the last decade, readers are invited to consider Royall Brandis's views on Rawls and others in his "Just Eco- nomic Institutions: Two Philosophic Views," in Institutional Economics: Essays in Honor of Allan G. Gruchy, ed. John Adams (Boston: Martinus Niihoff, 1980), pp. 59-71, and to relate them to the approach of this article.

4. John Bates Clark, The Distribution of Wealth (New York: Macmillan, 1899), p. v.

5. Marc R. Tool, "The Social Value Theory of Orthodoxy: A Review and Critique," Journal of Economic Issues 14 (June 1980): 309-26.

6. On this Lord Robbins would agree; he insists that "there is no penumbra of approbation around the theory of equilibrium. Equilibrium is just equi-



344 Marc R. Tool

librium." An Essay on the Nature and Sionificance of Economic Science, 2d ed. (London: Macmillan, 1952), p. 143.

7. The following summary analysis and attributions concerning John R. Commons's positions are based on Commons's last maior work, The Eco- nomics of Collective Action (New York: Macmillan, 1950), passim.

8. The author's formulation of instrumental value theory appears in his The Discretionary Economy (Santa Monica, Calif.: Goodyear, 1979), chapter 15 and passim.

9. Commons, Economics of Collective Action, p. 204. 10. Marc R. Tool, "A Social Value Theory in Neoinstitutional Economics,"

Journal of Economic Issues 11 (December 1977): 823-46. 11. Tool, Discretionary Economy, pp. 130-36. 12. George Bernard Shaw, The Intelligent Woman's Guide to Socialism and

Capitalism (New York: Brentano's, 1928), pp. 41-49. 13. John C. Livingston, Fair Game? Inequality and Affirmative Action (San

Francisco: W. H. Freeman, 1979), passim. 14. John H. Schaar, "Equality of Opportunity, and Beyond," in Contempo-

rary Political Theory, ed. Anthony de Crespigny and Alan Wertheimer (New York: Atherton, 1970), pp. 135-53.

15. John C. Livingston, "Tenure Everyone?" in The Tenure Debate, Bard- well Smith and Associates (San Francisco: Jossey-Bass, 1873), po. 54-73.

16. Clarence E. Ayres, The Theory of Economic Progress (Chapel Hill: Uni- versity of North Carolina Press, 1944), p. 233, for example.

17. J. Fagg Foster, "Notes on 'Value and Its Determinants,' " unpublished, 1950, pp. 6-7.



Documents

Equational Justice and Social Value