Commutative Justice: A Liberal Theory of Just Exchange [1 ed.] 0367346796, 9780367346799

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Commutative Justice

This book develops a liberal theory of justice in exchange. It identifies the conditions that market exchanges need to fulfill to be just. It also addresses head-on a consequentialist challenge to existing theories of exchange, namely that, in light of new harms faced at the global level, we need to consider the combined consequences of millions of market exchanges to reach a final judgment about whether some individual exchange is just. The author argues that, even if we accept this challenge, the effect of it is minimal. For different reasons, normatively problematic collective market outcomes like externalities, monopolies, violations of the Lockean proviso, inequality, and commodification do not pose particular problems to the justice of market exchanges. He outlines the various conditions a market exchange needs to fulfill to be considered just from a liberal background and in light of the new harms. Ultimately, he shows, it is not the market which is to blame; if we want to tackle issues like global warming or global economic injustice, we should not blindly follow the intuition that we best restrain and regulate markets. Commutative Justice is unique in its focus on justice in exchange rather than on end-state distributive justice and the way in which it addresses the new harms we are facing today. It will be of interest to researchers and advanced students in philosophy, politics, and economics who are working on questions of economic justice. Carl David Mildenberger is International Postdoctoral Research Fellow in Philosophy at the University of St. Gallen, Switzerland. He holds a PhD in Philosophy from the University of St Andrews, UK, and a PhD in Economics from Witten/Herdecke University, Germany. He is the author of Economics and Social Conflict (2013). His published work has appeared in journals such as Philosophical Studies, Inquiry, Journal of Applied Philosophy, and Journal of Economic Behavior and Organization.

Political Philosophy for the Real World Edited by Jason F. Brennan Georgetown University

Unequivocal Justice Christopher Freiman Justice and the Meritocratic State Thomas Mulligan Unjust Borders Individuals and the Ethics of Immigration Javier S. Hidalgo Economic Liberties and Human Rights Edited by Jahel Queralt and Bas van der Vossen Commutative Justice A Liberal Theory of Just Exchange Carl David Mildenberger For more information about this series, please visit: www.routledge.com/ Political-Philosophy-for-the-Real-World/book-series/PPRW

Commutative Justice A Liberal Theory of Just Exchange Carl David Mildenberger

First published 2020 by Routledge 52 Vanderbilt Avenue, New York, NY 10017 and by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN Routledge is an imprint of the Taylor & Francis Group, an informa business © 2020 Taylor & Francis The right of Carl David Mildenberger to be identified as author of this work has been asserted by him in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. Library of Congress Cataloging-in-Publication Data A catalog record for this book has been requested ISBN: 978-0-367-34679-9 (hbk) ISBN: 978-0-429-32713-1 (ebk) Typeset in Sabon by Apex CoVantage, LLC

Contents

Acknowledgments List of Figures 1

Introduction

vi

viii

1

PART I

Foundations of Commutative Justice

9

2

Exchanges, Market Exchanges, and Their Function

11

3

The Domain of Commutative Justice

28

PART II

Commutative Justice and New Harms

69

4

Externalities

71

5

Monopolies

91

6

Lockean Provisos

108

7

Inequality

125

8

Commodification

157

9

Conclusion and Policy Implications

177

Index

183

Acknowledgments

Many people played a part in the writing of this book and I am glad that I can finally thank them in a formal way. The person who contributed most to this book – with his comments, criticisms, and encouragement – is Rowan Cruft. Rowan contributed to this book beyond everything one could reasonably expect from a supervi­ sor. He managed to discipline my stray thoughts without ever claiming that he was right (he always was). Rowan, I enjoyed every single second of our meetings. I hold the memory of me learning from you and us working together dear. Especially in the later phases of writing, Elizabeth Ashford and James Harris (my other supervisors), as well as Ben Sachs and Alex Voorho­ eve (my committee members), greatly supported me in streamlining the book and making it more concise. Special thanks also go to Hillel Steiner, David Schmidtz, Judith Lichtenberg, Antony Duff, Serena Olsaretti, Eric Mack, Elizabeth Anderson, Marcia Baron, Sarah Broadie, Justin Sned­ egar, Jens Timmermann, and Richard Arneson. They all read bits and pieces of this book – and they were so kind to provide me with much needed criticisms for half-baked arguments (as well as ideas on how to address them). I would like to thank the editorial and publication teams at Routledge, most of all Jason Brennan and Andrew Weckenmann – without them this book would not have found its way to Routledge. I am deeply grateful for their support. I also thank all those who did such an excellent job of editing, typesetting, and producing the finished product. Jonny, my friend. You had the worst part. You had to read it all. Thank you for seeing all those little things I was unable to see. I would like to thank my parents. While writing this book, I started to become a father myself. This helped a lot in understanding just how much you did for me. I hope that one day I can make good on this, somehow. Luzian, Otto, thank you for letting me work when I needed to. And thank you even more for giving me plenty of reasons to stop working and do something more sensible instead: like jumping into puddles or staring at chicken.

Acknowledgments

vii

Anna, you did it again. Last time, you had to put up with me being unable to do proper economics. This time, you had to put up with me being unable to even think straight. So one might say it has gotten worse. I guess it is easy to underestimate just how important it was for this book (and for me) that there always was someone with a sound mind around. I know better. And lest I forget: thank you, East Sands! The author and publishers wish to thank the following for permission to reproduce copyright material: Springer Nature, for allowing me to re-use significant parts of Carl David Mildenberger, “A liberal theory of externalities?”, as appeared in Philosophical Studies 175(9), pp. 2015– 2123, Copyright © 2018, in Chapter 4. Every effort has been made to trace rights holders, but if any have been inadvertently overlooked the author would be pleased to make the necessary arrangements at the first opportunity.

Figures

2.1 4.1 4.2 5.1 5.2 7.1 7.2 7.3 7.4 7.5

Supply and demand for candy bars A negative production externality The effect of a Pigovian tax Profit maximization in competitive and monopoly markets Monopoly profits and price elasticities of demand An indifference curve Individual and aggregate demand for apples An individual demand function for apples Deriving demand with equal and unequal endowments Individual and aggregate demand with equal and

unequal endowments

19

73

75

96

99

129

132

133

137

138

1

Introduction

We exchange things on the market day in, day out. Food, housing, labor, transportation, you name it. Market exchanges have become the pre­ dominant form of economic transaction in contemporary Western socie­ ties. But how can we tell whether these everyday exchanges are just? Here is a troubling thought. Maybe it is not enough that nobody is deceived or exploited in such exchanges, or that the parties to the exchange act freely and voluntarily. Maybe we also need to take into account the combined effects of millions of individual exchanges. For is it not true that our seemingly harmless exchanges, if taken together, collectively cause things like global warming or economic inequalities, furthering “market impe­ rialism”, or the overexploitation of our planet? What, then, is a just market exchange? This is the central question of this book. In order to answer it, I develop a liberal theory of jus­ tice in exchange. More precisely, I develop a conception of commutative justice – for commutative justice is that kind of particular justice whose subject matter is market exchanges. A conception of commutative justice proposes a set of conditions a market exchange has to fulfill in order to be just.1 Therefore, the main theme which runs through the individual chapters of this book is to identify those conditions exchanges need to fulfill in order to be just. And if we find a given market exchange to fulfill all proposed conditions of commutative justice, then we can rightly call this market exchange just. What drives this book is to address a consequentialist challenge to existing theories of justice in exchange – notably to liberal and libertar­ ian ones. This challenge is best understood in light of what Lichtenberg (2010) calls the new harms. She explains this notion as follows. Tradi­ tionally speaking – or when talking about “old harms” – there always was a rather tight connection between those who harm, the harms they cause, and those harmed. The general theoretical idea of how to evalu­ ate harming behavior was that individuals are primarily responsible for the harm which their actions are sufficient to produce (Hart and Honoré 1985). The resulting picture works rather well for cases in which, say, Judith breaks Tony’s nose by punching him in the face. This idea of how

2

Introduction

harming generally speaking works also underlies important normative principles, like the liberal harm principle. Unfortunately, Lichtenberg continues, things sometimes tend to be more complicated today. Take the example of climate change. It seems fair to say that no individual’s action is the cause of global warming. Rather, an individual’s action “makes at most a causal contribution to an overall effect that may be large and significant” (2010, 561). It is harms like these, which are collectively caused, but for whose emergence no individual’s actions seem to make any difference with respect to whether they emerge and how big the harm caused is, which Lichtenberg refers to as new harms. The main problem we face is that new harms do not seem properly reducible to individual wrongdoing, which makes it so difficult to correctly evaluate them from a normative perspective. Now, market exchanges – the millions and millions of market exchanges we effect each day, like buying airline tickets, and fuel for our cars, and oil for our heating, and so forth – often seem closely linked to new harms. Does not this somehow morally corrupt them? Might we not conclude that even individual market exchanges are unjust in light of the overall effects of millions of market exchanges taken together? This is one way to formulate the consequentialist challenge which drives this book. In light of collectively caused problems like global warming, global economic injustice, market imperialism, and overexploitation of natural resources, it might be insufficient to consider a market exchange just as soon as it is non-coercive, non-deceptive, non-exploitative, and so on. Put differently, when faced with new harms, it seems like when determin­ ing whether an exchange is just, we cannot exclusively focus on the act of exchanging itself, as traditional liberal theories of justice in exchange do. This book acknowledges that the consequentialist challenge is legiti­ mate. Acknowledging new harms acts, so to speak, as the spark which forces us to move beyond existing theories. I explicitly tackle the new harms we are facing today and examine their impact on theories of jus­ tice in exchange. In this sense, my conception of commutative justice updates existing theories. From a classificatory standpoint, commutative justice is a subspecies of justice in exchange, which in turn is a subspecies of justice in transfer (cf. Nozick 1977, 150–53). That is to say, there are many ways to transfer goods other than by exchange (e.g. gifts), and there are ways to exchange goods other than by market exchange (e.g. barter). What commutative justice has in common with justice in exchange and justice in transfer is its focus on determining the justice of procedures. Unlike distributive jus­ tice, commutative justice is not concerned with judging whether a given outcome is just and how we are to tell. By contrast, commutative justice is about whether a particular kind of procedure is just. Commutative justice also is distinct from justice in acquisition or from rectificatory justice. Justice in acquisition deals with questions of whether

Introduction

3

the appropriation of previously unheld things is just. By contrast, com­ mutative justice is about the redistribution of held things. This is a char­ acteristic it shares with rectificatory justice. But whereas rectificatory justice has the particular goal of rectifying injustice by a redistribution of held things, commutative justice does not aim to rectify.2 A brief comparison to Nozick’s (1977, 160–64) approach to justice in transfer might help to further clarify how I delimit commutative justice from other kinds of particular justice, my chosen emphasis within the domain of commutative justice, and how it shapes this book. As I am exclusively interested in commutative justice, I by and large ignore what leads up to the market exchange in question, and notably whether the situation right before the market exchange is just or unjust. This is done for analytical purposes. As I try to isolate what is just or unjust about the market exchange, I am not interested in whether the situation right before the exchange is just or unjust. Such a judgment would belong to the sphere of distributive justice. Compare this to Nozick’s approach in his Wilt Chamberlain example. He invites us to assume that we start out in an initial situation which complies with our favored principle of distributive justice. This move likewise excludes considerations of distributive justice with respect to the situation right before the exchanging from influencing his subsequent analysis of justice in transfer. This methodological stance also underlies this book. I am asking the following type of question. If we assume that we start out from a just situation – what could still go wrong with the subsequent exchanging?3 However, unlike Nozick, I do not also ignore what comes after the exchange. Nozick basically holds that a voluntary (i.e. non-coercive and non-deceptive) exchange is just no matter what consequences it brings about (1977, 150). That is to say that executional considerations – that is, considerations related to what is done during the establishment of the terms of exchange and in the course of exchanging – are sufficient to determine whether an exchange is just. By contrast, what motivates this book precisely is the idea that we cannot determine whether a market exchange is just irrespective of its consequences. I argue that consequential considerations matter for commutative justice. And I show which consequences of market exchanges are apt to render an exchange which brings them about unjust. Put differently, I argue that even if all of Nozick’s conditions for a just exchange are fulfilled (and many more executional conditions alike), the consequences of a market exchange may still render that exchange consequentially unjust. And the purpose of this book is to work out which consequential conditions a complete conception of commutative justice also encompasses alongside executional ones. The focus on consequences is what makes this book stand out from other treatments of commutative justice (e.g. Aristotle Nicomachean

4

Introduction

Ethics V.5; Cohen 1995, chap. 2; Hayek 1973; Nozick 1977, 149–82; Rawls 1971, 74–75, 239–42). Whereas a lot of work has been done on issues like coercion, deception, or voluntariness and how they affect the justice of market exchanges, I feel not enough work has been done with respect to how the consequences of market exchanges influence their justice.4 In turn, I will not have much to say on how to distin­ guish, say, coercive from non-coercive exchanges. I touch on executional conditions – and readily admit that a just market exchange must not feature the use of force, coercion, or deception, and has to be consensual and non-exploitative. But this is mostly for reasons of completeness and to have such considerations, as it were, out of the way. Besides the fact that talk of consequences is suspiciously absent in existing theories of justice in exchange, there is at least one other, more general, reason why we should care about an answer to this book’s cen­ tral question of what a just market exchange is. This is because it is also central to a crucial concern of ours. Namely, the concern of what a just system for administering the economic benefits and burdens in a society looks like. If we are to judge the justice of such an overall system, we can­ not do so without judging the redistributive procedures employed within this system. To be sure, our main concern might be the distributive out­ comes a system brings about. But whatever the distributive outcome of a given system may be, if it is brought about by redistributive procedures like, say, violence and theft, there seems to be something deeply wrong with that system. Market exchanges are a procedure employed in most contemporary systems of this kind. Arguably they are the most important redistributive procedure nowadays – given the frequency with which they are effected, the amount of value redistributed, and their truly global, transboundary bearing. For market economies, a particularly widespread kind of system in contemporary Western societies, they are the characteristic, even the eponymous procedure employed.5 This is why I am interested in what a just market exchange looks like. Given the impetus of the move of fully acknowledging that conse­ quences matter, one might expect that, by the end of the book, I will have identified all kinds of new consequential conditions for market exchanges. Prima facie, granting that the consequentialist challenge is legitimate seems to possess the potential to “open the floodgates”. But this is not what I find. Broadly speaking, I find that externalities, monop­ olies, violations of the Lockean proviso, commodification, and inequal­ ity are not reasons of commutative injustice. For different reasons, these normatively problematic collective market outcomes do not pose particu­ lar problems to the justice of market exchanges. Thus, while I argue that the consequentialist challenge is legitimate, I also find that it can be over­ come. Overall, the effect of the challenge on a liberal theory of justice in exchange, surprisingly, is minimal.

Introduction

5

This also means the following thing. Many theories and arguments simply imagine away phenomena like, for instance, externalities. Foot­ notes reading “I assume that no externalities are present” or “In my model market power is absent” are legion. This is a decidedly anti-realist take. But even if we do not imagine away complicated new harms, and if we open our eyes to all kinds of potential consequences and emergent properties of market exchanges, a liberal theory of justice in exchange may remain simple. A more realist conception of commutative justice is not a drastically enlarged one. I find an expansion of the domain of com­ mutative justice to be appropriate – especially in light of thereby taking the new harms seriously and granting them the attention they deserve. But this does not lead to an inflation as regards the conditions market exchanges have to be fulfill in order to be just.

Plan of the Book Structurally speaking, the book is divided in two parts. In the first part (Chapters 2 and 3), I will lay the foundations for the analysis of conse­ quential commutative justice in the second part. Notably, these founda­ tions include a definition of what a market exchange is (Chapter 2) and an argument as to why we cannot judge whether a market exchange is just completely irrespective of its consequences (Chapter 3). Besides these main functions, both chapters in the first part also have subsidiary roles to play. Chapter 2 not only defines market exchanges, but also discusses their function (Section 2.3). Knowing this function will, among other things, be important for understanding why we can never judge whether a market exchange is just irrespective of its conse­ quences. Chapter 3 not only argues why consequential considerations form a part of the domain of commutative justice but also establishes which particular consequences we should focus on in the second part and why (Section 3.3). It also gives a brief tour d’horizon as regards the more traditional, executional conditions of commutative justice (Section 3.1). Taken together, Chapters 2 and 3 establish what exchanges are, how they are traditionally evaluated from the perspective of justice in exchange, and what the new challenge to this traditional understanding is. In the second part of this book, which comprises Chapters 4 to 9, indi­ vidual aspects of this bigger challenge are addressed one by one. The overarching question of the second and main part of the book is which consequential conditions a market exchange has to fulfill (on top of the classical executional ones) in order to be just. What unifies the chapters of this second part is the methodological approach used. It is characterized by four aspects. Throughout the second part I will (1) only look at the consequences of executionally just market exchanges, that is, at consequences of exchanges which fulfill all the executional conditions discussed in Chapter 3. Again, this is done for analytical purposes in

6

Introduction

order to isolate what might go wrong with the execution of an exchange from what might go wrong with respect to its consequences – with us only being interested in the latter. I will then (2) ask for each of the consequences discussed (i.e. externalities in Chapter 4, monopolies in Chapter 5, violations of the Lockean proviso in Chapter 6, inequality in Chapter 7, and commodification in Chapter 8) whether executionally just exchanges are even able to bring about the respective consequence. If the answer is yes, I proceed to (3) asking whether, if an executionally just exchange indeed brings about one of these consequences, we should consider it consequentially unjust in light of this, and thus overall com­ mutatively unjust. The answer to this question will be dependent on (4), the common standard for consequential commutative injustice applied in Part II. It is the idea that a market exchange is consequentially unjust if it wrongfully causes or risks a harm calling for state interference. Finally, Chapter 9 offers a conclusion on the conditions a market exchange needs to fulfill to be considered just from a liberal background and in light of the new harms. It highlights that, as the consequentialist challenge can be overcome, there are surprisingly little policy implica­ tions. The exchanges are alright. Thus, if we want to tackle issues like global warming or global economic injustice, we should not blindly fol­ low the intuition that we best restrain and regulate markets. To some extent, this route is normatively blocked. For practical reasons, to inter­ fere with market exchanges which are not unjust – and thus to accept some commutative injustice – might sometimes be the best option we have. But we should be very clear in communicating that it is not the market which is to blame. While the direct practical upshots of my theory of commutative jus­ tice are few, there is more to be said as regards its indirect policy impli­ cations. Note that there is another way to interpret the “non-findings” as regards the issues of externalities, monopolies, Lockean provisos, inequality, and commodification (i.e. that neither of these phenomena qualifies as a reason of commutative injustice). For does not this also tell us something about the merits of the procedure of a market exchange? This book reveals market exchanges to be a normatively robust proce­ dure which braves the considerable impetus of the move to say “Conse­ quences matter!” In a certain sense, the findings of this book constitute a defense of markets – and my conclusion highlights how our policies should reflect this.

Notes 1. Compare this, for instance, to distributive justice. Distributive justice is that kind of particular justice we rely on to judge distributive outcomes. A very basic conception of distributive justice could feature only one condition an outcome has to fulfill to be just (e.g. that the outcome be equal).

Introduction

7

2. Because I do not focus on rectificatory justice, this book is limited to identify­ ing cases of commutative injustices, without giving advice on how exactly to rectify such injustices when they occur. 3. I will, however, discuss ways in which the situation right before the exchange may affect the exchange itself—for example, how an unequal distribution of wealth might unduly influence the market price. That is, I will not rigorously stick to this general stance, blindly excluding prior injustices from affecting the justice of subsequent exchanges. 4. This is not to say that issues like externalities, monopolies, Lockean provisos, commodification, and inequality have not received attention. There is abun­ dant literature on each of these issues. What is lacking, I feel, is literature tying back the findings on, say, externalities to the debate on commutative justice. 5. Some say market exchanges threaten to become the characteristic procedure not only for our system of administering economic benefits and burdens but for society overall (Walzer 1983, 120–21).

Bibliography Aristotle. 2000. Nicomachean Ethics. Edited and translated by Roger Crisp. Cambridge Texts in the History of Philosophy. Cambridge: Cambridge University Press. Cohen, Gerald A. 1995. Self-Ownership, Freedom, and Equality. Cambridge: Cambridge University Press. Hart, H. L. A., and A. M. Honoré. 1985. Causation in the Law. 2nd ed. Oxford: Clarendon Press. Hayek, Friedrich A. 1973. “The Mirage of Social Justice.” In Law, Legislation and Liberty, Vol. 2. London: Routledge & Kegan Paul. Lichtenberg, Judith. 2010. “Negative Duties, Positive Duties, and the ‘New Harms’.” Ethics 120: 557–78. Nozick, Robert. 1977. Anarchy, State, and Utopia. New York: Basic Books. Rawls, John. 1971. A Theory of Justice. Rev. ed. Cambridge, MA: Harvard University Press. Walzer, Michael. 1983. Spheres of Justice: A Defence of Pluralism and Equality. New York: Basic Books.

Part I

Foundations of Commutative Justice

2

Exchanges, Market Exchanges, and Their Function

What is an exchange? In which sense is a market exchange a special form of an exchange? What do (market) exchanges do (i.e. what are they for)? We all have an intuitive answer to these questions, as we are engaging in (market) exchange for particular purposes day in, day out. But these are questions we had better address in detail before even starting to develop a theory of justice in exchange. So let us have a look at (market) exchanges and their function. Developing a thorough understanding here will lay the foundations for what follows later.

2.1 Exchanges To understand what exchanges are, it is insightful to compare them to intuitively related procedures like gifts, bequests, taxes, extortion, or theft to identify similarities and differences. The most important thing all of these procedures have in common seems to be that they all have distributive effects. That is, all of these procedures affect how economic benefits and burdens are distributed among people. This seems to be what underlies our intuition that these procedures somehow are related in the first place. For example, if two people exchange a used car for $4,000, then one person ends up with a car she did not previously own, and the other per­ son ends up with an additional $4,000 in cash he did not previously have. If the car had not been exchanged but instead given away (or bequeathed, or stolen), comparable distributive effects would have resulted. For exchanges, gifts, bequests and some other procedures, these dis­ tributive effects are among the intended results of engaging in that pro­ cedure. Precisely because we want to acquire a used car, we look for a seller willing to exchange it for a certain amount of money. By contrast, there are other procedures unlike exchanges for which the distributive effects they have seem to be merely foreseen side effects. Take gambling among friends. If a group of friends is gambling because they enjoy play­ ing a game together rather than to win money, the distributive effects are merely foreseen. If they chose to play for the love of the game instead,

12

Foundations of Commutative Justice

maybe a game of Monopoly, they would even engage in a procedure with no distributive effects. A second characteristic exchanges share with gifts, bequests, theft, and so forth is that they require at least two people in order to be per­ formed. We cannot meaningfully present ourselves with a gift, steal from ourselves, or exchange with ourselves.1 The two people needed at a minimum for giving, blackmailing, or exchanging often become two “parties”. That is, collective agents may exchange with each other rather than two individuals. Third, all of these procedures require some kind of intent in order to be considered a genuine case of, say, gift-giving, stealing, or exchang­ ing. Cohen’s (1995, 43) rolling pin example nicely illustrates this point. Imagine that one of your pins rolls out of your front door and down the hill and through another person’s open door, without either of you notic­ ing. The other person innocently mistakes it to be the pin she mislaid, keeps it, and uses it. Intuitively, this is neither an example of a gift nor of theft, though it might easily be turned into either one by fiddling with the intent of the agents. If the pin does not just roll out of the front door, but is pushed by you with the intent that it replaces the mislaid pin of the person living down the hill, this very much looks like a gift. And if the receiver of the rolling pin does not innocently mistake it for hers, but intends to keep it although she knows perfectly well to whom it belongs, one might think of it as theft or unjust enrichment of some sort.2 These three aspects of having intended distributive effects, of requiring a minimum of two people, and of calling for some kind of intent seem to be the most important similarities between exchanges and some closely related procedures like gift-giving or theft. But there also are important differences. The most important difference between exchanges and related pro­ cedures is that, if two persons are exchanging something, both persons involved in this procedure actively contribute something to it. When peo­ ple are exchanging things, each party puts forth something that shall be exchanged for what the other party is putting forth. Unlike for gifts or bequests, where there seems to be one active party who gives away something whereas the other party more or less passively receives what­ ever is given, such an agent-patient distinction cannot easily be made for exchanges. One might suggest that the person who initiates the exchange (i.e. who first signals interest in exchanging) be considered the agent. But first, it is not always clear who initiated a certain exchange. Take the example of buying a candy bar at a newsstand. Should we consider the newsagent the initiating party because he first signaled his intention to sell candy bars by openly presenting them with a price attached to them? Or should we consider the buyer the initiating party, because the offer of the newsa­ gent to sell candy bars is not directed at any person in particular, and

Exchanges, Market Exchanges, and Their Function

13

it seems like it is the signaled interest of the buyer which really gets the exchange going? And second, the distinction between an active party and a passive one seems to be of little practical use, given the situation is the same for all parties. Each party is giving something in order to get something in return. Both parties do the same, and this happens regardless of who ini­ tiated the exchange. That is, there is no comparable analytical advantage in individuating the parties as, for example, in the case of promises by calling them the promisor and the promisee. In an exchange, everybody is just an “exchanger”, nobody is an “exchangee”. It seems wrong to consider any party passive who can – at any point prior to the exchange actually taking place – easily refuse to effect the exchange, and who also puts forth something to exchange just like everybody else involved in the procedure. A paradigmatic example which highlights that both parties are actively contributing to exchanges is the sale of goods over the coun­ ter. In over-the-counter transactions, both parties are basically putting whatever they are contributing to the exchange on a table in front of them, before the exchange actually takes place (before each takes what the other has put forth). Take buying cigarettes at a gas station. In such an exchange, the cashier behind the counter first puts the cigarettes on the counter. Then, the buyer places her money on the counter. Finally, in a third step, the actual exchange is executed, with the cashier taking the money and the buyer taking the cigarettes. Since both parties are actively contributing something to the exchange, namely whatever they put on the counter, it would be wrong to consider one party as active and the other as passive. Another way to put this point is to say that exchanges are symmetrical in nature. By talking of symmetry rather than of two active parties, one could acknowledge arguments that even in the case of, say, promises – for which it prima facie seems to be rather easy to identify an agent (the promisor) and a patient (the promisee) – there is action required on the promisee’s side in order to constitute a valid promise. Thomson, for one, holds that “there is no giving one’s word unless there is ‘uptake’, which includes accepting as well as receiving” (1990, 297) the promise.3 For Thomson, even with promises, neither side is purely passive. This seems to erode the clear distinction between exchanges with two active parties and gifts or promises with one active and one passive party.4 However, even if we concede that exchanges are not the only type of procedure with more than one active party, exchanges are still special in that the parties are symmetrically active. In the over-the-counter exam­ ple, both parties basically do the same thing: putting forth something to exchange. Neither is simply realizing and accepting an offer, as there is something that has to be given in return in order to perform the exchange. Such a symmetrically active relation cannot be found in gifts or promises.

14

Foundations of Commutative Justice

If it is a particularity of exchanges that the two parties exchanging are symmetrically active, there is surprisingly little else that characterizes exchanges. To be sure, there are many things that seemingly characterize just exchanges. Voluntariness first comes to mind. But then again, there are exchanges which are not voluntary. For example, if I force you in some way to do a very dangerous job for a ridiculously low payment in return, there still is exchange (your labor time for my money), but it is not voluntary. As Fried (1981, 30–31) highlights, the notion of an exchange is so abstract that beyond the idea that in an exchange something is given and something received in return for each party involved, there is little else that structures the notion. For example, the object of an exchange can be almost anything: a good, a service, a right, a promise, and so on. An exchange is not defined by what is exchanged – unlike promises, for example, where what is given and taken up is necessarily one’s word. However, in spite of the highly abstract nature of the notion of an exchange, it is not reducible to other notions like, for example, promise or contract.5 Exchanging things does not necessarily involve contract­ ing, nor does it necessarily require a contractual foundation or prom­ ises. As soon as two things can be transferred simultaneously, there is no need for a commitment device like promises or contracts. And this kind of simultaneous transfer is just what happens in many instances of exchange; for example, in over-the-counter market exchanges. There are many instances in which I basically give you something with my right hand while receiving something from you in my left hand. In these situa­ tions, where there is no risk that the other party defaults, exchange takes place without contracts or promises being involved. It is certainly true that there are exchanges featuring contracts or prom­ ises. For example, when my bank promises me to give me back $1,050 in one year if I invest $1,000 today. But to say that some kinds of exchanges feature contracts or promises, namely because they refer to future events is, of course, compatible with arguing that exchanges neither necessarily are contracts or promises nor necessarily rely on contracts or promises. Consider the following additional example. Two friends go to lunch together (say they are both attending a conference). As the lunch is an organized one, they have preassigned seats as well as preassigned meals, which, in this case, they were not able to choose beforehand. At the end of the lunch, one of the friends gets a coconut yogurt for dessert, whereas the other friend gets a strawberry yogurt. Unfortunately, the friend who was assigned the coconut yogurt hates coconut yogurt (but loves straw­ berry yogurt), just as the other friend hates strawberry yogurt (but loves coconut yogurt). As both friends are mutually aware of their respective preferences concerning coconut and strawberry yogurt, without much ado one of the friends goes ahead and does the following thing. He sim­ ply exchanges the two yogurts which stand in front of them and, while

Exchanges, Market Exchanges, and Their Function

15

doing so, looks at the other with a questioning look. The other friend smiles at him and eventually starts eating the yogurt, which now stands in front of him, with pleasure. Undoubtedly, an exchange was effected in this case. But because eve­ rything was done simultaneously, neither contract nor promise is needed to make this exchange happen. Basically, the friend who goes ahead and exchanges the yogurts offers to exchange yogurts with the other friend by the very act of exchanging them and looking at him with a questioning look. And by doing nothing but smiling, the other friend accepts the offer while the exchange is still ongoing. Now, to say that this exchange neither features nor relies on any con­ tracts or promises is not to say that no duties at all are created. For the mechanism of offer and acceptance – which is also to be seen in the yogurt case, albeit implicitly – seems to create duties. Generally speak­ ing, an offer suggests terms of exchange (i.e. what each party is giving up and receiving in return), and acceptance means the agreement to these terms. I think it is plausible that once an offer has been made, the offer­ ing person incurs the duty of sticking to the terms of exchange unless the offer is declined. That is, he incurs the duty of putting forward what was agreed on and of taking what was agreed on in return, if the offer is accepted. In the same way, once a party accepts an offer, the accepting party also incurs the duty of sticking to the terms of exchange (i.e. to do his share). But one can even put into question this weak link exchanges have to the notion of promises and contracts in that they all feature the crea­ tion of duties.6 For one can deny that the duties created in the course of exchanging via the mechanism of offer and acceptance are of central importance to the notion of an exchange. First, this is because unlike promises or contracts, exchanges are sig­ nificantly more than just a creation of duties. For exchanges, acting on the duties created (i.e. the actual execution of the terms of exchange) is central and required. Without two people actually exchanging what they agreed to exchange, we cannot speak of an exchange. With respect to this aspect, exchanges are much more similar to gifts, bequests, theft, and other procedures with distributive effects than to promises or contracts. For all procedures with distributive effects, the realization of the distribu­ tive effects is central, whereas a promise or a contract can be complete without ever being acted on. Second, this is because an exchange can take place in spite of the duties created via offer and acceptance being violated. Consider the over-the­ counter exchange at the gas station again. Let us assume I want to buy a pack of my favorite brand of cigarettes which, as I can see by the price tag next to them, are on offer for $9. I initiate the exchange by putting a $10 bill on the counter and asking for a pack of cigarettes. The cashier takes a pack of cigarettes off the shelf and places it on the counter. He takes

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the money at the same moment I take the cigarettes. But then the cashier refuses to give me any change back. In this case, it is hard to deny that an exchange has been effected. Clearly, as there was transfer of physical goods, some sort of exchange has happened. But just as clearly something has gone wrong. Notably, the cashier unilaterally did not stick to the previously agreed-on terms of exchange.7 Instead of sticking to the offer of $9, he suddenly wants to have $10. And he only informs me of this after I have already put more money on the counter than was my due, naively expecting that the cash­ ier would pay me back what was given in excess. The best way to capture what is going on in this case is to say that the duties which have been created in the course of the over-the-counter exchange have been violated or “broken”, but that the exchange itself was not “broken”. An exchange takes place – only it is not an exchange that executes the terms initially agreed on. Put differently, the fulfillment of the mutual duties we agreed on in order to even get the exchange going is not required for an exchange to take place. Exchanges cannot be bro­ ken in the same way that contracts, promises, or duties can be broken, because exchanges are, to an important extent, a purely factual affair. If the involved parties are actually exchanging something (i.e. both parties are giving something and both parties are receiving something in return), then this constitutes a kind of exchange. If they do not exchange, then the exchange is not broken. Instead, there simply is no exchange. Third, one can deny that the creation of duties is central to the notion of an exchange, as the duties typically created via the mechanism of offer and acceptance are not internal to the notion of an exchange. While they typically do accompany the exchange, so to speak, they do not exhaustively define it. There arguably are exchanges involving no duties at all. Consider that, on the one hand, some kind of an offer-and-acceptance mechanism is present in all exchanges. For all exchanges the terms of exchange have to be determined. As exchanging involves two distinct persons intending to exchange, and as it is not obvious what shall be exchanged and at which ratio, the exchanging parties have to communi­ cate and somehow determine what exactly they will exchange. Without coordination of the two parties via the mechanism of offer and accept­ ance, no exchange can take place. On the other hand, the kind of offer-and-acceptance mechanism char­ acterizing coercive exchanges in particular might be best described to be a mechanism of threat and acceptance (cf. Nozick 1969; Peetz 1977). To be sure, even in the case of coercive exchanges, the coercer has to let the other party know in some way what he wants and what he will give in return. But unless we think that threatening somebody – for example by pointing a gun at him and saying “Give me your car and I’ll give you $5!” – also creates duties to stick to the “agreed” terms of exchange

Exchanges, Market Exchanges, and Their Function

17

for the threatening and the threatened person, no duties are created in this approach to figuring out the terms of exchange. If we do not think that conditional threats necessarily create duties, then some coercive exchanges are an example of exchanges being effected without any duties being involved. There is no normative element essential to something’s being an exchange. There are instances of exchange in which I give you x and you give me y, and still neither of us is “bound” to do so – for example, if I coerce you into giving me y in exchange for x. In this case, there is no sense that you “failed” if you prevented the exchange by not giving me anything. Stressing the importance of the purely factual component of exchanges, that is, that something needs to be exchanged in order to talk of an exchange, and that this factual exchange might happen whether or not the duties corresponding to it are fulfilled (or whether there are any duties created in the first place), is a promising way to show that exchanging is not reducible to contracts or promises – and not even to a creation of duties. To summarize, an exchange is a procedure with intended distributive effects that requires at least two persons and intent to be correctly effected. The two parties to an exchange are symmetrically active, in that they both give something away and receive something in return. Exchanges always feature some kind of offer-and-acceptance mechanism in order to determine the terms of exchange – and it is plausible that both parties have symmetrical duties with respect to sticking to agreed-on terms of exchange. However, these duties are not internal to the exchange. If we believe that coercive exchanges do not create duties to stick to the com­ municated terms of exchange, then there are exchanges which do not involve any duties. In any case, because exchanges have an important factual component, the duties to stick to the terms of exchange may be violated or “broken” without this “breaking” the exchange.

2.2 Market Exchanges In order to move from exchange to market exchange, we need to narrow the general definition of exchanges in three ways. A market exchange is an exchange between two parties, of goods or services for money, and which it is effected at the market price. The first qualification only means that a market exchange is not one of those complex forms of exchange which is not completely analyzable as a set of two-party exchanges. The second qualification means that for market exchanges at least one of the things exchanged is money. The party who is bringing the money into the exchange is typically referred to as the buyer, whereas the party who is contributing the good or service is referred to as the seller. That at least one of the things exchanged is money is one aspect that

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differentiates market exchanges from barter or from most exchanges of services between friends or within a family. That at least one of the things exchanged be money is also directly linked to the third characteristic of market exchanges, namely, that an exchange should only be considered a market exchange if it is effected at the market price. There are at least two reasons for this. First, not all kinds of exchanges of goods or services between two parties even feature a monetary price.8 Take barter. Since barter is not effected at a price, the functions that prices fulfill – like allowing you to easily compare different offers – are not present in barter, which changes the nature of the exchange. The distinctiveness of market exchanges due to their featuring a price becomes even clearer if we com­ pare market exchanges to other procedures with distributive effects. Take gifts. When we present somebody with a gift, we often take extra care that the price of the gift is obscured (e.g. by blackening the price of a book on the back cover). We do this even though for many gifts the recipient has a rather good idea about the price of the gift. It is of little importance here why exactly we take measures to hide the price from the recipient. But the practice reveals that there is something deeply incompatible about prices and gifts – whereas prices and exchanges go together well. The second reason why exchanging at the market price is essential for making a certain exchange a market exchange is that, even if a certain exchange is effected at a price, this price is not necessarily the market price. What makes a price the market price is that it is determined by the free interplay of the forces of supply and demand for the good or service in question. In economics, this interplay is typically illustrated using a variation of Figure 2.1. In Figure 2.1, D is the market demand curve. It graphs the relation­ ship between the price of a good and the quantity demanded. The most important factors underlying the demand function are the income and the preferences of all those generally interested in buying that good on the market in question. On the other hand, S is the market supply curve. It graphs the relationship between the price of a good and the quantity supplied. The supply curve most importantly is influenced by the private production costs of that good for those generally interested in selling it on the market in question, which are in turn determined by the prices of input factors needed to produce the good and the available level of productive technology. When I speak of the market price of a certain good, I am referring to the market clearing or equilibrium price (p*), that is, the price at which the supply and demand curves intersect and for which the quantities sup­ plied and demanded for a certain good or service are equal. It is the market mechanism which drives the price towards p* in a free market, in that as soon as there are more people willing to buy a good than units of

Exchanges, Market Exchanges, and Their Function

19

price of candy bars S

p*

D q*

quantity of candy bars

Figure 2.1 Supply and demand for candy bars

that good being supplied (a shortage), prices are likely to rise until they hit p* – and vice versa for the case of a surplus. By saying that the market price for candy bars is determined by the free interplay of supply and demand, I mean to say that market power has to be either absent or its effects compensated for in order to determine the market price of candy bars. Put differently, when I speak of the market price, I am referring to the equilibrium price in a competitive market with no market participant single-handedly having the power to influ­ ence the market price.9 This also means that the market price might be different from the actually prevailing price for a certain good, in that the actual market for a good might not be free, not competitive, or not in equilibrium.10 Note that with the absence of market power, it is not in the power of the interacting parties to exchange a certain good or service at whichever price they want and still be effecting a market exchange. Instead, when we ask who determines the market price, then the correct answer might potentially be every living human being. This is arguably true for cases of goods which every human being needs and which are globally sourced and supplied (e.g. drinking water). This powerlessness of the exchanging parties to autonomously deter­ mine the terms of exchange is something that distinguishes market

20

Foundations of Commutative Justice

exchanges from other redistributive procedures. For instance, in the case of gift-giving, there certainly are aspects that are not controlled by one of the interacting parties alone. A presentor does not have the power to determine whether her gift will be accepted. But in these cases, it seems to always be the recipient who is fully in control of those aspects of the procedure the presentor cannot influence. This is not the case for mar­ ket exchanges, as neither party is single-handedly able to determine the market price for the good or service that is to be exchanged – and they cannot freely set the exact terms of exchange collectively either if they are to engage in a market exchange. Let me give two counterexamples of prices which are not market prices, as they are not determined by the free interplay of supply and demand: a price which results from bargaining and set prices in a planned economy. If a tourist buys some herb at a bazaar in Northern Africa, then it is likely that the exchange does not take place at the market price. Most likely, the tourist will pay more than the regular market price of that herb. This is because in this situation, the way the market price is deter­ mined and the way the price the tourist pays is determined will most likely come apart. In a bazaar, there is not simply a price tag that displays the price of a good. Instead, the price paid will be determined via bargaining between the tourist and the seller. On the other hand, the market price of the herb is determined via the supply and demand for it. The demand for the herb is an aggregate function which, for example, does not only reflect the tourist’s income and preferences but that of everybody gener­ ally interested in buying that herb on that bazaar. Thus, the demand for the herb notably reflects the incomes and preferences of all those people who, unlike the tourist, are living close by. If we suppose that the bargaining skills of the tourist are relatively bad, this means that he is likely to pay a relatively high price. If we further suppose that the income of those typically interested in buying the herb on the bazaar is rather low, this means that the market price is likely to be relatively low. This is how the price paid by the tourist and the market price might come apart. To be sure, the price paid at the bazaar does not have to be different from the market price. If the locals with their supe­ rior bargaining skills buy at the bazaar, they are able to drive the price down to the usual market level. However, even for the locals, the bar­ gaining does not affect the market price but only the price paid. This is because bargaining is a mechanism used at bazaars to drive the originally offered selling price down towards the market price, but it is not a factor that determines supply and demand. Note also that this means that there can be exchanges which happen in markets (with respect to where they happen), but which do not happen at the market price. The second example of an exchange in a market which is not a market exchange because the price paid is not the market price is a consumer buying a product in a supermarket in a country with a perfectly planned

Exchanges, Market Exchanges, and Their Function

21

economy. What determines the price the consumer pays in this case are the decisions of politicians responsible for setting prices. If the political committee decides that the price of some good be fixed at $5, then this is the price the consumer will be paying. However, as this price is not determined by the free forces of supply and demand but by political con­ siderations, this exchange is not a market exchange. There are two kinds of vagueness we necessarily have to deal with when defining a market exchange as exchange at the market price. The first one has to do with the political system in which the market exchange takes place. For if I say that the market price is the price exclusively determined by the free interplay of the impersonal forces of supply and demand, how free this interplay is a question of degree rather than of kind. In a perfectly planned economy, the prices for goods are literally fixed by political decisions. This marks one endpoint of the spectrum. But even in such systems, supply and demand will typically play some sort of role, as the political leaders are hardly likely to completely ignore the consumers’ available income and preferences as well as the production costs of goods in setting prices. Somewhere in the middle of the spectrum we will find governments that subsidize or tax particular goods or services, where there are mini­ mum prices and price ceilings. In such cases, the forces of supply and demand do not exclusively determine the price of a good or service. Yet, they still play a much bigger role than in the case of fixed prices. The other end of the spectrum is marked by the most deregulated mar­ ket economy imaginable. But even in such a system, it would be difficult to argue that market prices are not influenced by political considerations at all. For the political decision not to redistribute income in any way via levying taxes still is a political decision that affects income and thereby demand. In this case, the direct interplay of supply and demand is free, but the market price is still indirectly influenced. Put differently, a completely politically neutral market price does not exist.11 For my understanding of market prices, it is crucial that at least no direct manipulations of the price of a certain good take place. A price that includes an excise tax or a subsidy, or which results from a minimum price or price ceilings being in place, is not a market price according to my definition. The second kind of vagueness is less of a political and more of an empirical nature. When breaking down the abstract analysis to a con­ crete market, we will often be unable to clearly delimit markets from each other by using spatial criteria. For example, we cannot clearly draw a line between local and regional markets. Yet, the answer to what the market price for a certain good is differs if we solely consider the local market, say a remote village in a mountainous region, or the regional market as the appropriate frame of reference. We face a similar prob­ lem of delimitation with respect to the good exchanged. Are Standard

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Foundations of Commutative Justice

Toothpaste X and Super Shiny Whitening Paste Y really instances of the same good, namely toothpaste, and thus part of the same market? Often this might be difficult to tell.

2.3 The Function of Exchanges In developing a liberal theory of justice in exchange, it will turn out use­ ful not only to know what a (market) exchange is, but also to know the function of (market) exchanges (i.e. what we use them for, or why we resort to them). Generally speaking, the function of a certain entity is what that entity is designed to do (Kitcher 1993, 380, 2011, 218). The most clear-cut cases of functions stem from a technological background, because here the thing the entity is designed to do can most easily be iden­ tified. The function of a toaster is to toast bread. What functions have in common is their origin. First there is a person or a group of persons with a problem, which they then solve by designing a certain device. The func­ tion of this designed device then precisely is to solve the problem. We can also make functional ascriptions in the socio-economic domain (Kitcher 2011, 219–22).12 This is because in these cases there is an analog of the problem background which figures in the technological case. In the case of societies, arguably one of the basic problems is how to overcome the Hobbesian problem of social order (cf. Parsons 1968). We need some device that ensures that living together with other human beings does not lead to a life that is nasty, brutish, and short. Another basic problem is that of securing the material basis for satisfying the needs and desires of its members, for otherwise a society cannot survive. So what is the function of the practice of exchanging goods? To coun­ teract the centrifugal forces of professional specialization and division of labor. Every reasonably complex society features professional specializa­ tion and division of labor as they lead to efficiency gains in the produc­ tion of goods, and thus to a higher overall amount of material welfare the society is able to produce (Smith [1776] 1976, bk. 1, chap. 1). It makes sense to have some people who are designated shoemakers, while others are farmers or architects. However, this specialization also features some kind of centrifugal forces. It is no longer assured that each member of the society will end up having shoes, something to eat, shelter, or whatever. This is where exchange comes in. Exchanging the products of the differ­ ent professions allows the members of society to secure what they need and desire without having to give up efficient, specialized production – and thus effectively allows to them to secure more of what they need and desire. Exchanges bring back together what has been separated in the process of division of labor (Smith [1776] 1976, bk. 1, chap. 2). If people were living together but each was living in a self-sufficient way, producing the things he needs and desires himself, then no exchanges would be needed. But in every reasonably complex society in which there

Exchanges, Market Exchanges, and Their Function

23

is professional specialization and division of labor, we require exchanges in order to make sure that everybody is able to profit from the increased efficiency in producing goods by being able to exchange the products of his own trade for that of others. Increased production due to higher effi­ ciency certainly is a first step towards securing the material basis required for the survival of a society. But unless its members have a way to acquire those goods necessary for survival that they no longer produce them­ selves, nothing has really improved. In a certain sense, exchanges hold together a society by preventing its architects from dying of hunger or its farmers from lack of shelter.13 As Kitcher puts it, “responses to older problems generate new prob­ lems and new functions” (2011, 237). When the original problem was to secure a sufficient material basis, and one part of the solution was to raise productivity, with professional specialization and division of labor hav­ ing the function of doing so, then this original function breeds “second­ ary functions, generated from the ways in which that original function is discharged” (2011, 237). The new problem is that we need to come up with a device that allows a society to truly benefit from the increased productivity. We need to make sure that a society’s members do not suffer from specialization in that they no longer have the direct means of fulfill­ ing their needs and desires. The device which overcomes this secondary problem is exchange. Now, if the function of exchanges is to allow the members of a society to acquire those things they no longer (inefficiently) produce themselves, then a barter economy is a device which does the trick. What, then, is the function of market exchanges? Market exchanges constitute a functional refinement with respect to the original device of barter. They allow us to perform exchange “more reliably, more quickly, more cheaply, and with less demands on the user” (Kitcher 2011, 218). There are two prominent reasons that support this claim. The first one comes down to the main difference between market exchanges and barter, namely that the former rely on a system of prices. Relying on money as a means of exchange, people willing to buy or sell one particular good or service will have much less trouble identifying a trading partner; even if they have no good or service, the trading partner is interested in on offer in return. Put differently, using money people overcome the problem of the double coincidence of wants (Jevons 1876), that is, the problem of finding somebody willing to buy what you want to sell and willing to sell what you want to buy. Hayek (1945) has master­ fully shown the ways in which the price system contributes to the infor­ mational and allocative efficiency of exchange. He essentially argues that efficient economic coordination among a large group of loosely connected people can only succeed via the scarcity signals that constantly changing prices send. We are able to know who it is that needs or desires most what we have on offer (i.e. to efficiently allocate the goods exchanged)

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via looking at bidding prices. Prices even allow people to react to infor­ mation they do not possess (Hayek 1945, 526). For example, we do not need to know why the price of a certain good has risen. All we need to know is that it has risen, and that, consequently, we need to economize that good. By responding to prices, people can respond to changes they do not know about in an allocatively efficient way. If a certain exchange does not feature a price, then it is unable to profit from the benefits of the price system – and will fulfill its function of letting people partici­ pate in the increased productivity in an inferior, inefficient way. Similarly, exchanges in a controlled economy which do not take place at market prices equally fail to fulfill this function well. The second reason why market exchanges constitute a functional refinement over more traditional ways of exchanging is that they are particularly suited for impersonal forms of exchange. Personal exchange is exchange that “relies on reciprocity, repeat dealings, and the kind of informal norms that tend to evolve from strong reciprocity relationships” (North 2005, 117). It is predominant in archaic societies, in which fam­ ily groups and tribes exchange on an everyday basis with the same small group of people over and over again (cf. Mauss [1925] 2002). Impersonal exchange, on the other hand, is effected without a look to the person who is buying or selling the good. As it does not rely on the informal rules and emotional bonds of closely knit social groups in order to enforce exchange contracts, it requires the development of formal economic and political institutions able to ensure a smooth process of exchange (a mon­ etary system, a reliable legal system, organized markets, etc.).14 For market exchanges, which are embedded in a sophisticated legal and monetary framework, we typically do not need to know anything about the person with whom we want to exchange – whether he is trust­ worthy, for example. In order to buy a candy bar in a supermarket, I need not know about who the person sitting at the cash desk is, or even which company owns the supermarket. The exchange can take place without this sort of knowledge about the persons involved. In order to perform a successful market exchange all we need to know about is the good exchanged and its price.15 Now, impersonal exchange is crucial for sustained economic prosper­ ity. Following North (2005, 84), the historical move from personal to impersonal exchange is one of the main stumbling blocks for economic performance which was implicit in Adam Smith’s Wealth of Nations, but which was often ignored by neo-classical economists who only focused on the functioning of the price system. In order to exploit a society’s full economic potential, we have to realize the gains from large-scale and impersonal markets. But “[p]ersonal exchange by its very nature restricts the range of economic activity to clientism and repeated face-to-face interaction” (2005, 71).16

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If it is the function of exchanges to bring back together what has been separated in the course of professional specialization and division of labor, market exchanges are able to fulfill this function in a particu­ larly efficient way. This is because they feature prices and are particularly suited for impersonal exchange.

Notes 1. What we can engage in are practices like rewarding ourselves. “If I finish writing this chapter by Friday, I won’t work on the weekend”. This comes close to presenting myself with a gift – or like exchanging additional work­ ing time during the week for less working time during the weekend. But unlike procedures like gifts, bequests, or exchanges, rewarding oneself does not feature any (interpersonal) distributive effects. 2. This example also shows that different kinds of intent are characteristic of different kinds of procedures. Following Steiner (2010, 21–23), we can dis­ tinguish two kinds of exchanging – exchanges and benefits – based on intent. Donating some labor to a charity while receiving “a nondescript ballpoint pen as a token recognition of [your] contribution” (2010, 22) is a case of a benefit, as at least one of the exchanging parties is altruistically motivated. “[That person’s] motivation is of the same type as a gift-giving [person’s] who simply donates the labour. . ., without receiving anything in return” (2010, 23). By contrast, exchanges (notably market exchanges) are typically self-interestedly motivated on the part of both parties, although this does not have to be the case. I will have more to say about the intent typical of exchanges in Section 3.1 talking about consent. 3. Uptake is the idea that the promisee has to realize that the promisor asserted a proposition to him (e.g. “I will feed your pet while you are on holiday”) and invited him to rely on its truth. Furthermore, if the promisee is not willing to accept the invitation expressed by the promisor, word-giv­ ing does not take place either. For example, Thomson argues, if a promisee replied “I don’t believe you” to the promise that the promisor will feed his pet, then the promisor is not bound by his promise because no uptake took place. 4. Arguably, there is an analogous necessity of uptake with respect to gifts. In any case, it seems possible to reject a gift. 5. This thought might come to mind, as Fried (1981) famously argues that all kinds of contracts (and thus also sales contracts) come down to promises. Along the same lines, one might think that exchanges, or at least market exchanges, necessarily involve a type of sales contract and thus are likewise reducible to promises. 6. Note that unlike promises, exchanges create symmetrical duties. It is not only the promisor who owes a duty to the promisee, but both exchanging parties owe duties to each other. In addition, the duties owed do not have to be future-oriented, as the duties owed in promises necessarily are (Thomson 1990, 298–301). 7. Bilateral violations are also conceivable without changing the fact that exchange takes place. For example, the $10 bill I have given the cashier might be counterfeit money – and I might be aware of this. In this case exchange takes place, but both us have violated our duties to stick to the terms of exchange.

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8. One can define prices more generally as the ratio of the quantities of goods or services that are exchanged for each other. I will, however, only refer to monetary prices here when I talk of a price. 9. As I do not make any assumptions about product homogeneity, entry and exit conditions, or the perfect information of buyers and sellers, I am not assuming perfectly competitive markets. 10. Given that the market price as used here may be a hypothetical price, there is no vicious circle of the following kind here. I am not defining market exchanges as exchanges that take place at the market price – and the market price as the price that results from everyone’s behavior, where this means a large set of market exchanges. Actual exchanging behavior (e.g. in the case of a shortage) only tends to drive the actual price towards the market price, which can be determined independently of this behavior. (Aberrant behavior, i.e. people not pursuing their preferences, can result in actual markets failing to track market prices.) As soon as we know about the buyers’ incomes and preferences concerning a good as well as about the sellers’ costs of produc­ tion, we can theoretically determine the market price of that good. 11. It is not too far wrong to consider this embeddedness into a political system a further distinguishing criterion of market exchanges. Market exchanges nec­ essarily presuppose some kind of legal system to be in place, which defines property rights, enforces contracts, and upholds a monetary system. Argu­ ably, none of this is needed for gift-giving or simultaneous barter exchanges. Yet, the existence of a legal system in which the exchanges are embedded seems to be an enabling condition for market exchanges rather than a char­ acteristic of their own. 12. Just as we design a technological device, so does a society “design” entities in order to overcome its problems. Of course, it is problematic to conceive of society as a collective agent with beliefs, desires, and intentions. Still it makes sense to speak of “design without a designer” (1993, 390) in such cases. “Design can stem from the intentions of a cognitive agent or from the operation of selection” (1993, 396–97). Talk in terms of functions is justified precisely because there is some unity of conception that spans attributions of functions across different contexts – namely in the form of a problem background to which solutions spontaneously evolve or are intentionally designed. 13. Compare Aristotle (NE V.5, 1132b30–1133a5), who develops a similar pic­ ture of how the function of exchanges is to hold together the polis. 14. For an excellent analysis of how the necessary institutional structure for suc­ cessful impersonal exchange might evolve (or be prevented from evolving), see Greif (1993, 1994). He compares the informal and formal institutional arrangements used by Genoese and Maghribi traders in the Middle Ages. 15. This is not to say that all market exchanges necessarily are impersonal. There is no further defining feature of market exchanges here in the sense that they necessarily take place without regard to the person of the buyer and/or seller. Many market exchanges only take place because of good experiences with the same supplier in the past (i.e. because of repeated dealings), because you happen to know somebody (i.e. because you trust somebody or want to favor somebody in particular), or simply because you like the work of that particular person you are exchanging with (a hairdresser, a painter). Still, market exchanges always have the potential to be effected on an impersonal level, because what defines them is the good exchanged and the price paid. 16. For similar arguments in favor of the now widely acknowledged importance of impersonal exchange for economic performance, see for example Mant­ zavinos (2001) and Greif (2006). Hayek (1973, 133–52) argues in a simi­ lar way against the noxious effects of the emotions of the tribal society. In

Exchanges, Market Exchanges, and Their Function

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Chapter 8 on commodification, we will also look at the undesirable aspects of the impersonality of market exchanges.

Bibliography Aristotle. 2000. Nicomachean Ethics. Edited and translated by Roger Crisp. Cambridge Texts in the History of Philosophy. Cambridge: Cambridge Uni­ versity Press. Cohen, Gerald A. 1995. Self-Ownership, Freedom, and Equality. Cambridge: Cambridge University Press. Fried, Charles. 1981. Contract as Promise – A Theory of Contractual Obligation. Cambridge, MA and London: Harvard University Press. Greif, Avner. 1993. “Contract Enforceability and Economic Institutions in Early Trade: The Maghribi Traders’ Coalition.” American Economic Review 83 (3): 525–48. ———. 1994. “On the Political Foundations of the Late Medieval Commercial Revolution: Genoa During the Twelfth and Thirteenth Centuries.” Journal of Economic History 54 (2): 271–87. ———. 2006. Institutions and the Path to the Modern Economy. New York: Cambridge University Press. Hayek, Friedrich A. 1945. “The Use of Knowledge in Society.” American Eco­ nomic Review 35 (4): 519–30. ———. 1973. “The Mirage of Social Justice.” In Law, Legislation and Liberty, Vol. 2. London: Routledge & Kegan Paul. Jevons, William Stanley. 1876. Money and the Mechanism of Exchange. New York: D. Appleton and Co. Kitcher, Philip. 1993. “Function and Design.” Midwest Studies in Philosophy 18: 379–97. ———. 2011. The Ethical Project. Cambridge, MA: Harvard University Press. Mantzavinos, Chrysostomos. 2001. Individuals, Institutions, and Markets. Cam­ bridge: Cambridge University Press. Mauss, Marcel. [1925] 2002. The Gift: The Form and Reason for Exchange in Archaic Societies. London and New York: Routledge. North, Douglass C. 2005. Understanding the Process of Economic Change. Princeton: Princeton University Press. Nozick, Robert. 1969. “Coercion.” In Philosophy, Science, and Method: Essays in Honor of Ernest Nagel, edited by Sidney Morgenbesser, Patrick Suppes, and Morton White, 440–72. New York: St. Martin’s Press. Parsons, Talcott. 1968. “Utilitarianism: Sociological Thought.” International Encyclopedia of the Social Sciences 16: 229–36. New York and London: Macmillan. Peetz, Vera. 1977. “Promises and Threats.” Mind 86 (344): 578–81. Smith, Adam. [1776] 1976. An Inquiry into the Nature and Causes of the Wealth of Nations, 2 vols. Oxford: Clarendon Press. Steiner, Hillel. 2010. “Exploitation Takes Time.” In Economic Theory and Eco­ nomic Thought: Essay in Honour of Ian Steedman, edited by J. Vint, J. S. Metcalfe, H. D. Kurz, N. Salvadori, and P. A. Samuelson, 20–29. London and New York: Routledge. Thomson, Judith Jarvis. 1990. The Realm of Rights. Cambridge, MA: Harvard University Press.

3

The Domain of Commutative Justice

Commutative justice is a kind of particular justice. It is particular in the sense that considerations of commutative justice are not all we have to say as regards justice. Depending on where you look and whom you ask, there also is distributive justice, retributive justice, justice in acquisition, transitional justice, and so on. If commutative justice is a kind of particular justice in this sense, then it has a proper domain that is distinct from those of other kinds of particular justice. This is quite simply because other kinds of particular justice have subject matters other than market exchanges (e.g. distributions, committed wrongdoings, acquisitions, or redressing abuses in war). Still, delim­ iting the respective domains sometimes is less straightforward than one might think. For instance, when it is argued that the justice of a distribution depends on the procedures or steps which brought about that distribution (Rawls 1971; Nozick 1977; Cohen 1995). Likewise, it is not straightforward to draw clear distinctions within the respec­ tive domains. But unless we know which parts make up the domain of commutative justice, we will not find an answer to our question of what a just market exchange is. Traditionally speaking, most work with respect to commutative jus­ tice has been done on what one might call executional considerations. Executional considerations are considerations about what might be unjust about an exchange with respect to the initiation and execution of that exchange, that is, with respect to the determination of the terms of exchange and with what is done in the course of exchanging. Considera­ tions of coercion are among the most classic executional considerations. We typically think that a market exchange is unjust to the extent that one or both exchanging parties have been coerced. Other widely discussed executional considerations are considerations of deception, consent, or voluntariness. Overall, there seems to be little doubt that executional considera­ tions are a kind of consideration that fall within the domain of com­ mutative justice. Such considerations give rise to what I shall refer to as

The Domain of Commutative Justice

29

executional conditions of commutative justice. These are the conditions a market exchange has to fulfill in order to be just in light of executional considerations. It is less clear whether another kind of consideration also forms a part of the domain of commutative justice, namely, consequential consid­ erations. Consequential considerations are considerations about what might be unjust about an exchange with respect to the consequences of that exchange (i.e. with respect to what the exchange leads to or brings about). Labor market exchanges at unequal wages, for example, might be thought to generate monetary inequality. If many people buy the prod­ ucts of only one company, this might bring about a monopoly in the long run. Should our evaluation of whether a given market exchange is just vary in dependence on the outcomes that market exchanges engender, that is, vary in dependence on consequential considerations like inequal­ ity or monopoly formation? Are market exchanges to be considered com­ mutatively unjust in light of such consequential considerations – even if they meet all executional conditions? I think consequential considerations also fall within the domain of commutative justice. Market exchanges can be commutatively unjust not only if there is something wrong with the exchanging itself, but also because of the consequences they bring about. Consequential considera­ tions are a necessary part of the domain of commutative justice, and they give rise to distinct consequential conditions of commutative justice. To show how, on an abstract and formal level, not only executional con­ siderations but also consequential considerations shape the domain of commutative justice is the main task in this chapter. I shall first touch on traditional executional considerations of com­ mutative justice (like coercion, deception, or exploitation). I will do so very briefly, however, only to establish a common basic understanding. Not to mention these most classic executional considerations would leave any account of commutative justice substantially incomplete. But the real interest lies not with executional considerations of com­ mutative justice but with the consequentialist challenge – and those consequential conditions we need to integrate into our theory of com­ mutative justice because of it. Thus, in the longer, second part of the chapter I will argue that consequential considerations matter. The domain of commutative justice is bigger than one might have thought, for the consequentialist challenge is legitimate. I shall also highlight which consequential considerations matter when judging whether mar­ ket exchanges are just, for not all considerations frequently mentioned in the context of discussing the effects of markets matter from the standpoint of commutative justice. Thus, the domain of commutative justice also is smaller than one might think once one hears that conse­ quential considerations matter.

30 Foundations of Commutative Justice

3.1 Traditional Justice in Exchange To judge whether the initiation and actual execution of an exchange are just, we appeal to executional considerations of commutative justice. In principle, everything that concerns (1) the determination of the terms of exchange via offer and acceptance or an analogous mechanism or (2) the exchanging itself might form the subject of executional considerations. For example, one might wonder how collective misinformation affects the justice of an exchange. Say a buyer and a trader agree to exchange a certain amount of Norwegian whale meat. Neither speaks Norwe­ gian and both falsely believe that the Norwegian term for whale meat is håkjerringkjøtt. (As you know, håkjerringkjøtt is actually shark meat.) So the trader acquires the agreed amount of håkjerringkjøtt from Norway and sells it to the buyer. Only when the buyer opens the containers does he realize their mistake. How does their collective misinformation affect the justice of the exchange?1 Traditionally, however, considerations other than collective misinfor­ mation have received more widespread attention: coercion, force, exploi­ tation, deception, information asymmetry, consent, voluntariness, and the right to transfer.2 I shall not provide new insights with respect to these issues but only propose a consistent and intuitive understanding of what, say, coercive or deceptive exchanges are. Considerations of Power Two pillars of virtually all libertarian approaches to justice in transfer are that market exchanges are among the few allowable mechanisms for redistributing goods, and that there are very few restrictions needed to limit free market exchanging. Yet, even the most extreme positions seem to acknowledge that coercion is apt to bring about unjust market exchanges (cf. Child 1994). For a start, one might say that to coerce somebody is for some agent (the coercer) to use a certain kind of power he has over somebody else (the coercee) to influence the coercee’s behavior (S. Anderson 2011). According to Nozick’s influential account, one of the necessary condi­ tions of coercion is that the coercer does so by making a conditional threat as regards some action he wants the coercee to perform (1969, 441–45). Consider the example of a traveler who, almost dying of thirst, reaches the only water hole in a desert. The conditional threat might be the following. “If you don’t pay me $100,000, I won’t let you drink from my water hole”. That is, the action the coercer wants the coercee to perform is for the latter to buy some of his water at the price he dictates. In order to increase the eligibility of that action, the coercer threatens to not give the coercee any water. If the traveler acquiesces, then we face an instance of a coerced exchange.

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The notorious question is the following. Why should we consider the announcement to give the traveler water if he pays the amount of $100,000 a threat rather than an offer? Much of the literature on coer­ cion after Nozick’s seminal contribution has focused on this question (e.g. Steiner 1974; Stevens 1988; Wertheimer 1987). This question is also of importance to us, as some kind of offer-and-acceptance mechanism is present in every exchange. One intuitively appealing idea of how to tell conditional threats from conditional offers is the baseline approach. Conditional offers are such that the person addressed is at least as well or better off post-announcement than pre-announcement, whereas conditional threats are such that the addressed person is worse off post-announcement than pre-announcement. This approach captures the general intuition that ceteris paribus receiv­ ing an offer is a good thing (it betters our situation with respect to the pre-announcement baseline), whereas being threatened is not (it worsens our situation with respect to that baseline).3 I shall assume that coercive exchanges are indeed executionally unjust. That is, I take non-coercion to be an executional condition of commutative justice. It might be that there are legitimate coercive exchanges, just as there are legitimate uses of coercion in the political domain. But for reasons of simplicity I shall assume that all coercive exchanges are unjust. Adopting an account relying on baselines and conditional threats to explain coercion also allows us to develop a consistent typology of exchanges similar to coercive ones, but which are different in some respects. Consider forced exchanges. Say a child takes the toy her lit­ tle brother is currently playing with by force – but not without giv­ ing him the toy she was playing with before. This is an instance of a forced exchange. Unlike coercive exchanges, forced exchanges are not based on conditional threats. The older sister does not threaten her little brother; she simply goes ahead and forces an exchange. Unlike coerced exchanges, forced exchanges do not rely on the unwilling party’s acqui­ escence to the exchange. By calling the toy exchange an exchange, we are very much relying of the factual element all exchanges feature (i.e. that something actually is exchanged). Only figuratively speaking can we say that the force-and-submission mechanism present in forced exchanges is an instance of the typical offer-and-acceptance mechanism present in all exchanges; for example, by highlighting that at least the force-user needs to decide what to take and give. In analogy to coercive exchanges, henceforth I shall assume that forced exchanges are execu­ tionally unjust.4 The baseline approach also allows us to distinguish between coercive and exploitative exchanges. Like coercers, exploiters possess some kind of power. Exploiters characteristically use this power in order to take unfair advantage of an exploitee (Wertheimer 1996, 205). And like in the

32

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case of coercion, the exploitee acquiesces to such behavior. Yet, coercion and exploitation are different phenomena. The most interesting characteristic of exploitation is that talking of mutually advantageous or consensual exploitation is not necessarily contradictory (Wertheimer and Zwolinski 2015). There are exchanges that we consider exploitative, although the exploitee overall gains from the exchange. Put differently, some exploitative exchanges bring about Pareto improvements. For instance, labor market exchanges in develop­ ing countries might be of this kind. When a global player enters the labor market in a developing country, he might create jobs the unemployed local workers willingly accept, as working makes them better off. So the company is able to hire workers at low costs, and the formerly unem­ ployed workers are able to earn money. Still, the wages the workers earn might often seem exploitative. Notably, they might be so low that it looks like the company is increasing its profits by taking advantage of the pov­ erty of the foreign workers. In order to account for this characteristic, the following understanding of an exploitative exchange seems plausible. Exploitative exchanges dif­ fer from coercive exchanges in that the former are not characterized by the mechanism of threat and acceptance, but by the standard exchange mechanism of offer and acceptance. As the exploiter makes an offer to the exploitee, exploitation will – by the very definition of an offer – not make the exploitee worse off than in the pre-announcement situation.5 If an exploiter makes an offer that is situated right at the threshold where threats turn into offers, this constitutes the most severe form of exploita­ tion conceptually possible on this account. If exploitative exchanges feature offer and acceptance, this leaves the further question of how to distinguish exploitative exchanges from regu­ lar ones. This brings us back to the thought that exploitation involves one party using his power to unfairly take advantage of another (Wertheimer 1996, 205). One natural way to conceive of how the exploiter may take unfair advantage of the exploitee is to say that the offer is not as ben­ eficial to the exploitee as it should be. Notably, it could be the case that the exploiter benefits significantly more than the exploitee if the offer is accepted (e.g. because he sells the exploitee something he desperately needs but at a price higher than what that good is worth).6 So we might say that, as soon as an offer is such that the terms of exchange ascer­ tain that neither party receives less or pays more than what the good exchanged is worth, that exchange is not exploitative. However, it is not true that as soon as the terms of exchange ascertain this, suggesting such terms of exchange constitutes an offer. Notably, it can be the case that demanding a price that perfectly reflects what the good is worth means making a conditional threat. Arguably, charging the traveler any positive price for water constitutes a threat – even if, of course, the water is worth something. Put differently, even if an exchange

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is such that what is paid is equal to what the good is worth, it might still be normatively problematic for other reasons – e.g. a violation of duties of beneficence. Without explicitly arguing for this claim, I shall hold that exploitative exchanges are executionally unjust. On my account, non-exploitation is a necessary executional condition of commutative justice. Considerations of Information Coercion, force, and exploitation are considerations that have to do with power imbalances. The other broad class of executional considera­ tions revolves around issues of information. Classic conditions are that exchanges have to be non-deceptive, free of information asymmetries, voluntary (which not only involves freedom from other people’s power but also an informational element), and consensual. Let us have a look at the last condition first. Consent is a two-party concept. In the typical scenario, A consents to some behavior of B (which affects A), and thereby changes the moral status of B’s action. For example, if A consents to B’s behavior, one might hold that this precludes B wronging A by this behavior, according to the maxim volenti non fit iniuria (cf. Feinberg 1984, 219–22). Applying this picture of consent to market exchanges quickly leads to a “doubling” of consent. This is because market exchanges comprise two individually analyzable actions: the seller’s selling and the buyer’s buying. Thus, the buyer consents to the seller giving him a good and to himself giving money in return. And the seller consents to the buyer giving him money, and to himself giving a good in return.7 This picture, however, strikes me as contrived. If we want to stay phenomenologically close to actual exchanges, we can adapt a pro­ posal of Weinrib (2009) to come up with a more intuitively compelling picture of consent in exchanges. In the context of gift giving, Weinrib argues that correct gift giving requires that the gift be given as a gift and received as a gift. “On the donor’s side, the delivery of the gift must be accompanied by a donative intent; on the donee’s side, the gift must be accepted as donatively given” (Weinrib 2009, 40). If donative intent and receipt are present, then we can say, quite literally, that the donor and donee consent. They consent in that they agree that what was given and received was donatively given and received. If we adapt Wein­ rib’s reasoning to exchanges, this means that a consensual exchange is one in which the parties consent that what was given or received was commutatively given and received. In contrast to giving and receiving things donatively, giving and receiving something commutatively means expecting return. This captures the do ut des character of exchanging. That is, the parties consent in a threefold way. They consent that this was exchanged for that.8

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Based on this conception of consent, we can say that in the case of exchanges, it is not like each party individually consents to the actions of the other in two separate instances of consent. Rather, it is simply the case that the parties “jointly” consent that this is exchanged for that. There is only one instance of consent. I take it that in order to speak of consensual exchanges according to this conception, two sub-conditions have to be fulfilled. First, the exchange has to be an intended act of exchanging. Both parties must be aware that what they are doing is commutatively giving and receiving goods and money. Two people accidentally “exchanging” their bags in the airport are not engaging in a consensual exchange according to this conception. They interchange rather than exchange their bags. Even if one wanted to stress that, factually, they do engage in an act of exchanging, for an exchange to be consensual the exchanging has to be what the two parties intend to do (cf. Section 2.1). Second, as people consent to exchange something for something else, there must not be serious misunderstandings about what is exchanged for what. A misunderstanding cannot be a sound basis for consent.9 However, the most important defeater of consent in the context of exchanges is deception, which is why one might treat it as a separate exe­ cutional condition. In contrast to “honest” misunderstandings or inad­ vertent misrepresentation of the good exchanged, deception (or its legal counterpart fraud) means that one party intentionally misrepresents facts about the good exchanged, either explicitly (through lying) or implic­ itly (e.g. through non-disclosure when there are duties to disclose). On the one hand, agreement that deception may invalidate an otherwise just exchange is almost universal. On the other hand, defining deception in the context of exchanges is particularly tricky. As Child (1994, 722–23) notes, even among libertarians there seemingly is a universal objection to accepting deceptive exchanges as just. From Nozick (1977, 26, 63–65, 152) via Narveson (1988, chap. 15) to popu­ lar thinkers like Rand (1967, 33ff.), libertarians are united in excluding fraudulent exchanges from the sphere of just market exchanges. Just like libertarians, economists are united in objecting to deceptive exchanges as legitimate forms of market exchanges. One reason for this is the impor­ tant economic assumption that non-coercive and consensual exchanges will typically bring about Pareto improvements for the exchanging par­ ties, whereas deceptive exchanges might undermine this general rule (Posner 2011, chap. 4.6). Now, if libertarians and economists – neither group being known for lightheartedly giving up economic freedom – agree on the neces­ sity of banning deceptive exchanges, then it probably is fair to say that, intuitively speaking, deceptive exchanges invalidate consent and thus bring about unjust exchanges. However, although the objection to

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deceptive exchanges is virtually universal, the exact definition of a decep­ tive exchange is controversial. This is not because the concept of deception itself would be a particu­ larly tricky one. There is fairly widespread agreement that to deceive somebody means to intentionally cause that person to have a false belief that is known or believed to be false by the deceiver (Mahon 2015). The most salient aspect of this definition is that deception is intentional, which rules out cases of mistaken or inadvertent deception.10 Instead, the problem is that if we bring this concept of deception to the marketplace and ask for what a deceptive exchange is, less than obvi­ ous cases abound. For example, not all lying in the context of exchanges seems deceptive. As Child observes, “[i]f you are trying to sell a red car to a customer and he asks whether you prefer the red color to the green color of the car on the lot across the street, it is not fraud to lie” (1994, 737). This observation of Child’s highlights that deception typically means to deceive the other party about the nature and quality of the good exchanged, rather than about your own mental states. Or what about the marketing efforts of sellers? Machan (1987, 59) holds that not to advise the customer of the best deal available, or not to mention some of the disadvantages of a certain product, does not consti­ tute deception. Similarly, it is often argued that reasonable standards of fair dealing permit, for example, for the usual exaggeration of the advan­ tages of the bargain (Alexander and Sherwin 2003). That is to say that, as reasonable agents, we should know better than to straightforwardly rely on the statements of a seller. It is not my focus here to judge specific exchanges with respect to whether they are deceptive. For our purpose, it suffices to say that nondeception qualifies as an executional condition of commutative jus­ tice. There might be stronger and weaker concepts of what deceptive exchanges amount to. But as we shall see in Part II, on all accounts of deceptive exchanges it will be possible to argue that, even if we assume exchanges to be non-deceptive (and otherwise executionally just), they might still turn out consequentially unjust. According to Steiner (2019, 97), asymmetric information is a necessary condition for deception.11 Clearly enough, deceiving the other party to an exchange is comparatively easy, if you know more than they do. And if someone actually uses this potential for deception, then we are dealing with an executionally unjust exchange. It is a separate question, though, how information asymmetries on their own, apart from their potential to enable deception, affect the justice of an exchange. Note that information asymmetries are ubiquitous. Rarely do seller and buyer know the same about the good to be exchanged. Requiring the absence of information asymmetries to consider an exchange just would thus make for an excep­ tionally demanding executional condition of commutative justice.

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Let me propose a brief typology of different cases of information asymmetries. The basic case of an information asymmetry is that between a seller and a buyer, with one knowing more than the other. Say the buyer knows material fact p about the good g to be exchanged – but the seller in addition knows material fact q about g.12 Because one party knows p while the other knows p and q, there is a characteristic difference in information levels; that is, we are not dealing with a case of “collective misinformation” as outlined at the beginning of this sec­ tion, nor with a case of “collective full information” often assumed in economic theory. And it does not always have to be the seller who knows more than the buyer. Kronman (1980) presents the case of a buyer renting an airplane to fly over the seller’s land – thereby detect­ ing some geological information unknown to the seller, which makes the land more valuable. For reasons of simplicity, in what follows I will assume that it is the seller who possesses more information than the buyer. We need to enrich this basic case in two dimensions to develop a rea­ sonably detailed picture. The first dimension is related to the question of how one party comes to know more than the other (i.e. how the informa­ tion asymmetry arises). Take the example of you trying to sell your car. Because it is your used car that you drove for the past years, you have acquired a thorough knowledge of its particularities and quirks – and you might be the only person who knows all the small accidents you were involved in. Acquiring this in-depth knowledge about the quality of the car you are trying to sell did not cost you anything. It came as a by­ product of your using your car. Compare this to the case of the prospec­ tive buyer of the piece of land and his costly action of renting an airplane to do a flyover. Steiner (2019) holds that even if there is a moral presupposition in favor of full disclosure (as informed choices are better choices), as soon as we take into account the costs sometimes related to acquiring informa­ tion, the position that every information asymmetry should be resolved becomes implausible. Steiner seems to have a classic economic argument in favor of allowing some information asymmetries in mind. In economic terms, requiring all information asymmetries to be resolved would take most of the incentive to discover information away (Collins 1992, 556). This could lead, in the end, to a society not tapping its full potential. For instance, there would be no incentive to even start a discovery flight for the prospective buyer of the piece of land – which might lead to the resources slumbering beneath the ground indefinitely. Steiner seems to think along these lines as he stresses that a generalized duty to disclose all information would not simply be better, in the sense of constituting a Pareto improvement (2019, 98). For we would have to ask: better for whom? Those who made the initial investments in acquiring informa­ tion would most likely be worse off. They would be less able to strike

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favorable deals (overcompensating them for the investment in discov­ ering additional information), if they had to share all their acquired knowledge. This line of reasoning is intuitive enough. And there surely are cases in which costly investments in discovering information to strike a good deal seem entirely reasonable and normatively unsuspicious. But I do not see how this settles the normative issue of whether the absence of information asymmetries (read: full disclosure) might qualify as an executional condi­ tion of commutative justice. Requiring that all information asymmetries be resolved does not necessarily have to be better for everybody to be normatively called for. And the social costs of taking away the incentive to discover information have to be weighed against the costs of socially wasteful information discovery. As Eisenberg points out, “requiring [full] disclosure can save the socially wasteful costs of searching for informa­ tion that the other party already has or of making duplicate searches to generate the same information” (2003, 1647). Thus, the economic argu­ ment in favor of allowing some information asymmetries can at most be a pro tanto reason against the proposal to require that all information asymmetries be resolved.13 The second dimension is related to the question of how one party con­ tinues to know more than the other (i.e. why the information asymmetry persists). There are three salient cases we need to distinguish. First, the party with more information intentionally does not inform the less wellinformed party. This leads us right back to what has been said about deceptive exchanges. Second, the better-informed party inadvertently does not share the addi­ tional information with the less well-informed party. A concrete example might involve a piece of information about the good to be exchanged that is not material to the seller, nor to the “standard” buyer of the good, but which matters a lot to the particular buyer in question. For instance, the seller of the used car might know the identity of the person the car belonged to before he bought it secondhand. While it generally is consid­ ered material information that the prospective buyer would be the third owner of the car – and while this information typically is made public – the identity of the first owner is not typically disclosed. At most, the pur­ pose for which the first owner used the car might be discussed. Was he a traveling salesman regularly driving long distances or rather a commuter who exclusively used the car for short trips from his home to the office? Still, the first owner’s identity could be a material piece of information. Suppose the first owner was a person the buyer utterly despises. In fact, he despises the first owner so much that it would be intolerable for him to drive around in that particular car should he find out about it at a later point. (For instance, he might then come to think that the car still “smells” of the first owner.) This would make the deal a potentially very unfavorable one for him.

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Third, the party with more information might be unable to convey the additional information to the less well-informed party. This is the case Akerlof (1970) describes in his seminal paper about the market for “lemons”. The owners of high-quality used cars run into problems when trying to sell their premium cars at high prices, because of the existence of “lemons” (i.e. used cars of low quality but which still look good at first glance). The sellers of high-quality used cars have little to no way to convey the information that they gratuitously acquired – namely, that their cars are immaculate – to potential buyers. Even though making that information public would be beneficial to both parties, as the seller could realize a higher price and the buyer could be sure not to buy a “lemon”, it is virtually impossible to overcome the information asymmetry com­ pletely. Call this an unfortunate information asymmetry. How do inadvertent or unfortunate information asymmetries affect the justice of an exchange? Prima facie, it seems that inadvertent infor­ mation asymmetries are no reason of commutative injustice. Even if there was a generalized duty to disclose all material information about the good to be exchanged, the seller would be violating this duty with­ out fault. And the faultless violation of a moral duty does not qual­ ify as an injustice (cf. introduction to Part II; cf. also Steiner 2019, 99–100). Yet Steiner (2019) highlights how even in a libertarian system there could be a comprehensive legal duty to disclose information – whose inadvertent violation would qualify as executional commutative injustice. Steiner departs from the point that Child (1994), as discussed above, concludes on. Namely, while libertarians may hold that there is a moral duty to disclose information, libertarian first principles are incompatible with state interference as regards deceptive exchanges. Seemingly, liber­ tarianism cannot sustain a fraud standard. But Steiner describes a way how even libertarians may be able qualify deceptive exchanges as unjust. He stresses, first, that the principle of contractual fidelity is consistent with libertarian thinking. And second, that if contracts universally fea­ tured a vendor warranty requiring that all material information regard­ ing the good to be exchanged be disclosed, then exchanges violating this warranty would be unjust. Steiner’s proposal has a peculiar upshot. As it relies on vendor war­ ranties, he thinks that what libertarian principles “actually imply is a fairly hard-boiled version, not of caveat emptor [as Child would have it] but rather of caveat vendor!” (2019, 104).14 Put differently, if libertar­ ians indeed want to exclude fraudulent exchanges from the sphere of just market exchanges – which almost universally seems to be the case – and to do so in a way that is consistent with their basic principles, this would come at the cost of the sellers having to pay close attention to disclose all material information in order not to violate contractual fidelity. Depend­ ing on just how harsh the vendor warranties are formulated, potentially

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even inadvertent information asymmetries could constitute an injustice. In principle, “warranties in Libertarianland can . . . also be breached by unintentional misrepresentation” (2019, 105). To summarize, because inadvertent information asymmetries are dis­ tinct from those forming the basis for intentional deceit, they typically are no reason of commutative injustice. This, however, leaves open the possibility that it might be an executional condition of commutative jus­ tice that there be no information asymmetries in some jurisdictions. For instance, in libertarian jurisdictions which want to uphold an internally consistent fraud standard. Now that makes inadvertent information asymmetries at most a malum prohibitum, that is, a kind of problem whose wrongfulness essentially depends on its illegality (Duff 2007, chap. 4.4). And this is not the proper fundament for an independent executional condition of commutative justice. If one subscribes to the idea that ought implies can, unfortunate infor­ mation asymmetries seem even less troublesome. Unfortunate informa­ tion asymmetries, like the classic one concerning the uncertainty about the quality of used cars, arise precisely because one cannot overcome the information asymmetry in question. Whenever we are exchanging cre­ dence goods (i.e. goods whose quality and performance cannot be accu­ rately determined even after the purchase, like some drugs), it is part of the very nature of the good exchanged that the information asymmetry cannot be resolved. The information asymmetry necessarily persists. In other cases, we cannot prevent the information asymmetry from arising. This is the case when we are exchanging experience goods (i.e. goods whose quality can only be determined after the purchase, like used cars) secondhand. The current owner could not help but acquire knowledge about the car’s quality during his use. No decision to invest something to acquire an informational advantage was made on his part. The informa­ tion asymmetry is just the natural consequence of his using an experience good and then wanting to sell it on. If unfortunate information asymmetries cannot be resolved, it is hard to see how they could be a reason of commutative injustice. Buchanan (1985, 3–4) generally classifies information asymmetries as belonging to the sphere of efficiency considerations and not to the sphere of ethical considerations. That might be too black-and-white a position. We can imagine a consequentialist arguing that efficiency considerations have an ethical component, in that a higher efficiency means that more mutually beneficial exchanges take place. Still, if the nature of the good exchanged prevents an information asymmetry from being resolved, that kind of information asymmetry does not qualify as a reason of commutative injustice.15 Overall, the picture emerges that – apart from their potential to enable deceptive exchanges – information asymmetries are not a big issue for executional or consequential commutative justice. For our purpose here,

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it seems we may conclude that the absence of information asymmetries does not qualify as an executional condition of commutative justice. The picture drastically changes, however, once we swap information for expectations, that is, if we speak of expectation asymmetries. Expec­ tation asymmetries are tied to special cases of risky exchanges. That is to say that they are not the same as asymmetries between a seller who promises something without the intention (and consequently without the expectation) to keep that promise and a trustful buyer who expects that the seller will live up to his promise. Those are cases of fraud in the inducement (Feinberg 1986, 300). They crucially rely on false prom­ ises about future benefits. It is a widely shared idea that this kind of information asymmetries also issue into exchanges rightfully considered deceptive. By contrast, in the case of risky exchanges featuring expectation asym­ metries, no promises are made. Rather, each party individually expects something that would not be rational to expect if there was shared infor­ mation. Note that some risky transactions take place only because the parties to it have differing expectations. Such exchanges are similar to a duel which each is willing to fight only because each believes he is much more likely to win, but which no one would be willing to fight if each had a 50 percent chance of winning, which is the probability that both parties would rationally have, if they had shared information. Many exchanges involving future-oriented financial products seem to be like this. And arguably it is this kind of risky exchanges featuring expectation asymmetries which played a significant role in causing the 2008 global financial crisis (Claassen 2015; Moggia 2019). Expectation asymmetries – unlike information asymmetries – thus seem to have a considerable potential to cause a new harm. Millions of exchanges featuring expectation asymmetries together seem to have cre­ ated the externality of systemic risk. Externalities like this will be treated in the next chapter. Finally, one might ask whether there is an additional informationrelated executional condition in that exchanges also have to be voluntary in order to be just. The answer depends on the exact definition of the very elusive notion of voluntariness. Among the many aspects voluntariness is thought to be related to, there are not only coercion and deception but also phenomena like duress, manipulation, and incapacity (Feinberg 1986, 98–127). I think that given what has been acknowledged so far, commutative justice does not call for the additional executional condition of voluntari­ ness. This is first because the most troublesome and important factors leading to non-voluntary actions (force, coercion, exploitation, deception, information asymmetries, ignorance, mistakes, or acting unknowingly) have already been individually accounted for.16 This is second because requiring a more encompassing standard of voluntariness – holding that,

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say, a just exchange also has to feature calmness of mind and absence of any distracting or unsettling emotions – strikes me as too demanding. And this is third because requiring a more encompassing concept of vol­ untariness may hinder rather than help a detailed analysis of commuta­ tive justice. Let me give an example. One might hold that a genuinely voluntary exchange requires knowl­ edge of all kinds of future effects of that exchange. That is, one might hold that some undesirable and unforeseen consequences of that exchange, which were in principle foreseeable, can ex post invalidate the voluntari­ ness of the exchange. But I think it is a more promising and precise strat­ egy to look at different undesirable consequences one by one. Notably, in Part II, I will look at the role that externalities, monopolies, violations of the Lockean proviso, inequality, and commodification play. We will then see how such effects may render an exchange consequentially unjust for very different reasons. This strikes me as superior in comparison to lump­ ing together all kinds of considerations under the label of “foreseeable undesirable consequences” that render the exchange executionally unjust because of a lack of voluntariness. Further Executional Considerations Without implying that this will make this chapter’s discussion of execu­ tional considerations an exhaustive one, I think that at least one addi­ tional consideration needs to be mentioned: the right to transfer. As I understand it here, the right to transfer is the right to buy and sell particular goods or services. As exchanging is, to an important extent, a purely factual affair, we can buy or sell things we do not have the right to buy or sell.17 Take, for instance, the case of me selling my neighbor’s cat. First, I take some pictures of the cat. Then I upload them onto some website where people willing to buy and sell cats meet online. Third, I will be contacted by some potential buyers, to whom I will show the cat. (This is no problem, since I can easily attract the cat with some food.) And finally, I will choose one of the potential buyers and hand him over the cat while simultane­ ously receiving the money. Maybe all of this needs to happen while my neighbor is on holiday and I am looking after his cat – but these are just some minor complications. In other words, everything works just in the same way as it would have worked if I had had the right to sell the cat. If, in addition, I charge the usual market price, factually this is very close to being a market exchange. Now, I do not think that anybody would want to consider this exchange executionally just. And I will treat this intuitive insight hence­ forth as an additional executional condition for just market exchanges. For exchanges to be executionally just, the buyer must have the right to buy the good exchanged, and the seller must have the right to sell it.

42 Foundations of Commutative Justice This is not something we can always take as given. For some objects, the right to transfer might be substantially trimmed or outright non­ existent. Concepts like personal property (Radin 1982) or usufructs (Ellickson 1993) bear testimony to that. Similarly, the classic economic proposal to overcome problems of overuse of a certain common resource by establishing private property rights and selling it off might sometimes suffer from the illegitimacy of creating rights to transfer out of thin air.

3.2 The Consequentialist Challenge If the traditional picture of commutative justice as a kind of particular justice only encompassing executional conditions (like the ones just men­ tioned) were true, this would mean that the consequentialist challenge is in some way misguided or misleading. Even in light of collectively caused problems on a global level and new harms, we could consider a market exchange just as soon as it is non-coercive, non-deceptive, non-exploitative and so on. This book could end right here. But I think the challenge is legitimate, and that consequential considerations necessarily are part of a complete conception of commutative justice. So let us examine why the consequentialist challenge succeeds. We will do so on a fairly abstract level, showing that there are no intrinsically just procedures. An intrinsically just procedure is a proce­ dure whose justice we can judge purely based on how it proceeds (i.e. independently of the outcomes that procedure produces). Put differently, it is a procedure whose justice we can determine purely based on execu­ tional considerations. What we are going to see is that there are no such intrinsically just procedures. Whenever we judge whether social proce­ dures (like, for example, voting procedures, court procedures, or mar­ ket exchanges) are just, we cannot justifiably ignore the outcomes they generate. This is not to say that, when judging whether a certain social procedure is just, executional considerations do not matter at all. I only hold that on their own they are not sufficient to determine whether a given procedure is just. It will be particularly important to realize that for there to be a pro­ cedure whose justice we could judge independently of its outcomes, it is not enough for there to be a procedure we deem just and whose outcomes we deem just, whatever they are. In addition, we would have to deem that procedure just without relying on any consequential considerations throughout the judgment process. And this we cannot do.18 Intrinsic Procedural Justice Judging a procedure just is to make an all things considered judgment of the procedure’s value. If we judge a procedure just, this means that it is normatively fit to govern the social interactions of a certain community.

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These judgments from within the domain of justice of procedures are pro tanto or defeasible in various ways, for practical and normative rea­ sons. For instance, a just procedure might not be practically feasible, or we might not be in need of a procedure in the first place. Also, we can conceive of a situation in which a procedure is just with respect to crite­ ria of the justice of procedures, yet contributes to what people consider end-state injustice; for example, in that it perpetuates prior distributive injustices (a “garbage in, garbage out” scenario). In that case, we might decide against using it based on considerations of distributive justice. In this context, intrinsic procedural justice is a special kind of justice a procedure might conceivably exhibit. An intrinsically just procedure would be a procedure whose justice we can determine purely in light of executional considerations, not taking into account in any way the out­ comes the procedure tends to produce. I show how, in principle, intrinsi­ cally just procedures do not exist. Cohen and Estlund, for instance, have proposed similar but less general and less radical arguments against intrinsically just procedures than I do here. Cohen (1995, chap. 2) argues against Nozick’s claim that volun­ tary market exchanges are “just steps” (1977, 151). According to Cohen, what Nozick wants to establish is that the only two criteria we need to judge whether a certain market exchange is a just step are non-coercion and non-deception (two executional considerations). This would make market exchanges an intrinsically just procedure. But while Cohen argues against this idea, what he explicitly does not exclude is the possibility that there might be other procedures which are intrinsically just (1995, 37). Like Cohen, Estlund (2008, 80–81) does not explicitly deny that there are intrinsically just procedures. He only holds that intrinsically just procedures are not sufficient for justifying democracy. For him, the idea of intrinsic procedural justice is “paper-thin” because of its demanding requirements – and notably too weak to justify on its own the extensive procedures democrats would insist upon (2008, 82). If what we really want is an intrinsically just procedure in the political sphere, then we should be ready to choose a law or policy randomly. I think we can push further than both Cohen and Estlund suggest, showing that there actually are strictly no intrinsically just procedures. Notably, we can do so by developing a general understanding of what procedures are and what they do – something Estlund deliberately avoids (2008, 69). Procedures Social procedures (short: procedures) as I understand them here, are sets of explicit and/or implicit rules that members of a society resort to in order to structure their daily business of social interactions – both in cooperative and competitive ways. Procedures are what people follow to

44 Foundations of Commutative Justice coordinate their behavior with others, where coordination is needed for social life to go on. Queuing is a simple example of an all-purpose procedure. It is used in different contexts in order to allocate goods on a first-come, first-served basis. It might be said to consist of the three rules to (1) form a line when more than one person is present desiring to acquire a good, to (2) always join at the end of the queue, and that (3) next it will be the turn of the person first in line. Instances of more specialized and complex proce­ dures are court procedures (for legal interaction), voting procedures (for political interaction), games (for recreational interaction), and market exchanges (for economic interaction). Given this understanding, there is no such thing as a non-social pro­ cedure. The (sets of) rules we individually rely on, say, to coordinate our own attitudes when we are making plans (cf. Bratman 1987) are not procedures in this sense. Procedures are distinct from conventions (e.g. Hume [1740] 1896; Lewis 1969). It is a convention that prices of goods in the United States are denoted in dollars (rather than in euros). At the same time, the fact that in shops the prices of goods in dollars are on display is part of the procedure of over-the-counter market exchanges – along with, for exam­ ple, the virtually simultaneous exchange of good and money or a packag­ ing indicating in some way what the good exchanged is. This example highlights how procedures often feature conventions as an essential component. One aspect all procedures have in common is that they affect human behavior if they are abided by. Indeed, procedures essentially are about reaching an outcome in situations of social interaction. Procedures are the answer to questions like “So what do we do now with respect to allocating these scarce goods?” They are about, so to speak, produc­ tively coordinating our behavior, where “productive” simply means that an outcome is reached so that the social world can continue to turn. For instance, voting is one procedure to bring about the much-needed outcome of a government being formed. If people vote in order to deter­ mine their government, the outcome will be different from the scenario in which they do not – and the actual voting result will to some extent be affected by the kind of voting procedure used. Think, for example, of how the outcome of an election is shaped by the choice of a majoritarian versus a proportional voting system. In that procedures essentially are about reaching an outcome when productive coordination is needed, procedures differ from moral rules like “Don’t violate rights” – which might be understood as side con­ straints (Nozick 1977, 28–33). Democratic voting is not a moral rule, it is a procedure. Likewise, a moral code (i.e. a comprehensive set of moral rules) is not the same as the sets of rules society relies on to productively coordinate social interaction in need of being productively coordinated.

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There are two ways to argue for this understanding of procedures as being inherently oriented towards reaching an outcome in situations of social interaction: either based on the function of procedures (what we use them for), or based on their raison d’être (why they exist in the first place). We use procedures to productively coordinate and structure human behavior in situations where there is a need to do so. Thus, to bring about productive coordination of human behavior is the function of a procedure. Following Kitcher (1993, 380, 2011, 218), the function of a certain entity is what that entity is designed to do. Talk in terms of functions in the socio-economic domain is justified because there is some unity of conception that spans attributions of functions across different contexts – namely in the form of a problem background to which solu­ tions spontaneously evolve or are intentionally designed (2011, 219–22). In the case of societies, a basic problem we often encounter is that of productively coordinating our actions (cf. North 1990, 3; Parsons 1975, 97). Some stylized social problems in which cooperative or competitive coordination is essential (the chicken game, the prisoner’s dilemma, etc.) are extensively analyzed in game theory. Why do we form queues? Because doing so addresses the problem of how we can productively coordinate our behavior in the case of allocating scarce goods; namely on a first-come, first-served basis, which we deem appropriate in many circumstances. Consequently, if a procedure did not lead to an outcome in a situation of social interaction, there would be no need for that particular procedure. It would be devoid of a function. If we do not commit the functionalist fallacy of thinking that a proce­ dure’s function always also is the reason for its existence, this opens up the second way to see why procedures are inherently oriented towards affecting the outcome of social interaction. Hayek, for one, highlights this second way. He argues that procedures and the rules they incorpo­ rate exist because they are “a device for coping with our constitutional ignorance. There would be no need for rules among omniscient people” (Hayek 1973, 8, 20–21). According to Hayek, if we follow a procedure instead of making a case-by-case decision of what to do, we do so because we generally do not know all that we would need to know in order to make the optimal (or even a reasonably good) decision. To follow a procedure is a behav­ ioral strategy that relies on doing “what worked in the past” or “what others taught me would work” in a situation in which I only possess imperfect information. The power of a procedure is that it embodies the knowledge of countless prior actions of the same kind in similar situa­ tions, both successful and failed, both from ourselves and from others. It is because of our limited cognitive capacities that we do not solve most social problems ad hoc, paying attention to their unique character. Instead, rules are a device we have learned to use to master complex

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reality in general (Hayek 1960, 66), and social procedures are the devices we rely on to deal with recurrent social problems in particular. Proce­ dures unburden us from the need to decide what to do when interacting with others each time anew. To follow procedures, rules, and routines most of the time is imperative given the limited cognitive abilities of human beings.19 Lots of recent evidence, notably from the cognitive sciences, supports Hayek’s argument (e.g. Kahneman 2012). Hayek’s points are also widely supported in sociology (e.g. DiMaggio 1997, 270f.), anthropology (e.g. Gehlen 1961, 68), and even in economics, which typically relies on attrib­ uting high calculative powers to agents and stresses rational choice rather than rule-following (e.g. Mantzavinos 2001, 85–90). Now, procedures can only counter our fundamental ignorance if they indeed affect our behavior. In order for procedures to often bring about better outcomes than case-by-case decisions, they must affect the out­ comes of social interaction if abided by. This is why, also as regards their raison d’être, procedures essentially are about affecting the outcome of social interaction.20 The understanding of procedures I just outlined is central to what fol­ lows. There is no procedure such that it is not essentially about reaching an outcome in situations of social interaction. There are no procedures tout court, but procedures for establishing a government, for allocating goods, and so on. This is an empirically informed rather than a merely stipulative understanding. This metaphysical point about what proce­ dures are also is connected to a methodological one. We could, of course, also talk about “proshmedures”, which are just like social procedures except they are not essentially about reaching an outcome in situations of social interactions. But with my focus being on market exchanges I am not interested in doing this here. Designing Just Procedures I think the best way to defend the claim that there are no intrinsically just procedures is by assuming the perspective of somebody trying to design such an intrinsically just procedure. Suppose I want to design an intrinsi­ cally just procedure for allocating three balls (a red ball, a blue ball, and a yellow ball) to three children. Here is a tripartite procedure I might come up with. First, a computer randomly assigns the numbers 1 to 3 to the children (the child-numbering rule) and the numbers 4 to 6 to the balls (the ball-numbering rule). Then, it matches child “1” with ball “4”, child “2” with ball “5”, and child “3” with ball “6” (the matching rule) and the balls are distributed accordingly. Note a few things about this procedure. First, the outcome is influ­ enced by chance. There are six possible outcomes, so the procedure can­ not be said to straightforwardly determine the outcome. Second, I take it

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that most people share my intuition that, nevertheless, whatever outcome actually arises, it will be a just outcome.21 Third, I also take it that most people would consider this a just procedure for allocating the toys; nota­ bly, in light of all children having an equal chance to each ball. So what I have designed seems to be a just procedure whose outcome will be just, whatever it is. But this is not enough to make the proce­ dure an intrinsically just one. For the ball allocation procedure to be an intrinsically just procedure, my judgment that I have designed a just procedure must not rely on any consequential considerations. But this does not seem to be the case. For I certainly have relied on consequential considerations in designing the procedure. The design choices I made in selecting the three rules jointly constituting the procedure can hardly be said not to involve consequential considerations. For instance, I could also have opted for an alternative matching rule. Matching rule*: the computer matches child “1” with ball “4”, child “2” with ball “5”, and child “3” with ball “6” – except on Tuesdays, when child “2” gets balls “5” and “6”, and child “3” gets no ball. Given that I also could have opted for matching rule*, how could I claim that I have not taken into account consequential considerations in design­ ing the procedure? After all, I have effectively eliminated the possible outcome that on Tuesdays there will be inequality. More importantly, how could I cogently claim that the kind of consequential considerations embedded in my design choices do not affect my judgment that I have designed a just procedure? Relying on matching rule* strikes me as a design choice with the power to undermine many people’s intuition that the ball allocation procedure is just. This point can be generalized. There is a problem with respect to designing intrinsically just procedures in that whatever relevant design choices we make as regards the procedure’s constitutive rules, these rules will affect the procedure’s set of possible outcomes. Some rules will lead to the exclusion of possible outcomes. Other rules will make specific out­ comes particularly likely to occur. Yet other rules will do neither, and in this way reflect consequential considerations. But since designing a pro­ cedure is a conscious process, it seems dubious to assume we would not be aware of this aspect of designing procedures in a particular way. More importantly, again, it strikes me as dubious to argue that our intuitions about the justice of the procedure are not (at least in part) always also affected by these inbuilt consequential considerations. Note that the point I want to make here is one about the intuitions our judgments as regards the justice of a procedure rely on. Since we are aware that whatever rules we choose affect the procedure’s set of possible outcomes, how could we cogently argue that those intuitions we base our judgment on do not always also reflect consequential considerations?

48 Foundations of Commutative Justice I take it that what most people do when asked to design a just proce­ dure for whatever purpose is the following. We start with some initial set of rules, consider some possible outcomes of employing such a proce­ dure, then we maybe alter our choice of rules in light of these hypotheti­ cal outcomes, and so on, until we have reached a procedure we deem just. But this intuitive approach cannot be an appropriate process for design­ ing an intrinsically just procedure. Consider how some important kinds of rules (that one might think to be purely about executional considerations) affect a procedure’s set of possible outcomes. Take coercion. When incorporating a non-coercion rule into a procedure, this constrains the set of possible outcomes. If we say that, for instance, a given exchange must not be coercive, this excludes those outcomes in which the situation of one of the exchang­ ing parties is worsened because that party acquiesced to a conditional threat (cf. Nozick 1969). Similarly, introducing a non-deception rule constrains the set of possible outcomes. As Posner (2011, chap. 4.6) suggests, non-coercive and consensual exchanges will generally bring about Pareto improvements for the interacting parties. But exchanges in which one party is substantially deceived undermine this general rule. We can exclude such violations of Pareto efficiency by positing a non-deception rule. Even introducing a chance rule (as in flipping a coin) reflects conse­ quential considerations. Take the example of deciding of how to distrib­ ute the only available kidney between three people in need of it. The most obvious way seems to be to run a lottery with every person having a chance of one in three to receive the kidney. Again, we seem to face a case in which we intuitively have a just procedure (given the equal odds) which will lead to a just outcome, whatever the actual outcome might be. And one might want to argue that such a procedure only features execu­ tional considerations. After all, the probability with which the different outcomes are selected seems to be a characteristic that is attached to how the outcomes are selected (i.e. to how the procedure proceeds) rather than a characteristic of the different outcomes themselves. However, as Broome (1991) notes, this particular lottery is not the only possible way of distributing the kidney by chance. First, if one person is 20 and the other two 90 years old, we might decide to perform a weighted lottery in favor of the younger person (1991, 98–100). In the case in which we use a weighted lottery, we do so because of consequential considerations. For some reason, we deem certain results to be more desirable, better, or more just than others. And in the case in which we stick with the equally weighted lottery, this might reflect the fact that we deem all possible outcomes equally desirable, good, or just. More importantly, whenever we use a chance-based procedure, we have to decide from which set of possible outcomes chance will select

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one. In the case of an indivisible good and three potential recipients, it might seem like we are not really choosing a set of possible outcomes if we say that either the first, or the second, or the third person should get the kidney. But this is not true. Especially in the case in which all poten­ tial recipients have an equal claim to the good, “[i]t would be possible to satisfy their claims equally, as fairness requires, by denying the good to all of them. There may be occasions when it is so important to be fair that this is the right thing to do” (Broome 1991, 99). As Broome’s statement highlights, our design choice to give the kidney to one of the three per­ sons instead of destroying it – and thus satisfy all people’s claims equally by satisfying none of them at all – reflects an important consequential consideration. Namely, the idea that destroying the kidney is such a bad outcome that we would rather endure some unfairness (1991, 99).22 To conclude, because all of our relevant design choices affect a pro­ cedure’s set of possible outcomes, intrinsically just procedures do not exist. Once we realize that a procedure’s constitutive rules affect the set of possible outcomes in some way, we cannot cogently argue that our intuitions concerning whether a certain procedure is just are not (at least in part) based on consequential considerations. I think that when we claim to have designed an intrinsically just procedure, what we actually have designed is a procedure which we deem itself just (e.g. because it gives everybody an equal chance), and which may only lead to a set of outcomes, all of whose members we deem equally just. But the way in which we ensure this is by building consequential considerations into our procedures. An allegedly intrinsically just procedure simply is a proce­ dure which has consequential considerations built into it, so that we no longer realize the procedure relies on them. Yet, consequential considera­ tions are to some extent always already embedded into procedures. To be sure, I do not think that designing procedures in this way is a bad or blameworthy thing to do. It is all too easy to design a procedure in such way as to favor some outcomes we deem just, or exclude others we deem unjust, without this being immediately obvious. And sometimes we might actually do so unconsciously, inadvertently, or in an otherwise non-blameworthy manner. But we should not trick ourselves into think­ ing that we could design procedures we deem just completely irrespec­ tively of consequential considerations. Objections As should be clear by now, my claim that intrinsically just procedures do not exist may be split into two parts. The first part is that, given what procedures are and what they are about, you cannot design a procedure without a look to consequences. The second part is that you cannot judge a certain procedure’s justice ignoring all consequential considerations. I think the two parts are connected. Since we are aware that a procedure’s

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constitutive rules affect the set of possible outcomes in some way, we can­ not cogently argue that our intuitions concerning whether a certain pro­ cedure is just are not (at least in part) always also based on consequential considerations. Still, the different parts may raise separate objections. For example, even if one agrees that we cannot design a procedure without in any way affecting its outcomes, this does not mean that these consequen­ tial aspects also need to figure in our judgments about its justice. So let me first address one objection as regards the design of procedures with­ out taking into account consequences, then two objections as regards our judgments of a procedure’s justice, and finally one objection to my approach of assuming a design perspective. I have argued above that all our relevant design choices affect the out­ come of a procedure. However, there also seem to be design choices which do not affect a procedure’s outcome. In fact, it is rather easy to integrate rules in a procedure which do not affect that procedure’s outcome. To give an example, I could integrate a fourth rule in the ball allocation pro­ cedure according to which the computer only numbers children and balls if 2 + 2 = 4 (the addition rule). This rule does not affect the outcome of the ball allocation in any way. Consequently, it seems like we can confi­ dently say that this rule does not reflect any consequential considerations. And a procedure purely consisting of such rules might be thought not to rely on any consequential considerations. Now, it is precisely because the addition rule does not affect the ball allocation procedure’s outcome that incorporating it is not a relevant design choice. In fact, one might reasonably ask why one would want to incorporate this rule in the first place, given that it does not change anything about how the procedure operates. Put differently, the addition rule is not essential to the ball allocation procedure. It is not essential because, as argued above, procedures essentially are about reaching an outcome in situations of social interaction. If particular rules of a proce­ dure do not make any contribution to this effect, then we might as well suggest eliminating them from the procedure in an instance of applying Occam’s razor. The addition rule in no way helps the procedure to fulfill its function. Similarly, I can see no way in which the procedure’s raison d’être would rely on the inclusion of the addition rule. So we might as well be rid of it. While it is a possibility to integrate rules into a procedure which do not affect that procedure’s outcome, such rules are never an essential part of any procedure. Furthermore, a procedure purely consisting of such rules does not exist. The idea of constructing a procedure by only relying on rules which do not affect that procedure’s set of possible outcomes leaves us with no procedure at all. An upshot of this point is that, intuitively, non-essential rules should not determine our judgment as to whether that procedure is just. Suppose

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somebody claimed a certain procedure to be unjust because of some non­ essential rule it incorporates. Then a person defending that procedure could simply propose an updated version of it, not featuring the non­ essential rule, that would do the job equally well (for we only eliminate a non-essential rule) and evade the criticism.23 Let us turn to the next objection, that is, the first objection as regards judging procedures irrespective of their outcomes. When judging whether a given procedure is just, it strikes me as unjustifiable to argue that we can simply ignore the way in which a procedure’s constitu­ tive rules affect the procedure’s set of possible outcomes when making our judgment. Since we designed the procedure, we cannot simply say that we did not know how certain rules favor or exclude certain out­ comes. However, one might still argue that one did not design the pro­ cedure with a view to consequential considerations. That is, one might say that although one foresaw the effects the integration of a certain rule would have on the procedure’s outcome, it was not because of these unintended effects that the rule was chosen. One simply does not care about these effects, and it is not because of these effects that the procedure is just. Consider the examples of incorporating non-coercion or nondeception rules. One might say that one integrated such rules not because they constrain outcomes, but maybe because non-coercion is a moral side constraint, or because it is a perfect moral duty not to lie. Coercing people or deceiving them simply are really bad things to do. And a procedure is just to the extent that it does not feature such actions. In that case, it seems like executional considerations guide our design and our judgment. Now, if a person really only cared about executional considerations with respect to some rule, could we not say that at least to that person a procedure only made up of such rules can be intrinsically just? I do not think that this is a viable strategy for defending the idea that there are intrinsically just procedures. This is because, if a person truly did not care about the consequential effects of a certain rule at all, that person would not be able to argue that that rule is an essential part of the procedure. An analogous reasoning to why the addition rule is not a genuine part of the ball allocation procedure seems to apply. Consider an example. Suppose a person aims to design a procedure for deciding whether some new public building, say a swimming pool, should be built for the community. The designer comes up with the following public decision procedure. (1) Every member of the community states a dollar value expressing how much the new pool would be worth to him.24

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(2) If the total value stated is equal to or exceeds the building costs, the pool will be built. (3) If the pool is built, everybody has to pay what he stated the pool was worth to him. In case the stated sum exceeds the building costs, everybody has to pay in proportion to what he stated. (4) You must not deceive others about how much the pool is worth to you. The last rule is an instance of a non-deception rule. If the rule is abided by, this constrains the set of possible outcomes. Notably, the inefficient outcome that the swimming pool is not built although the communi­ ty’s total willingness to pay exceeds the building costs – but everybody understates his willingness to pay in order to free ride on the others’ contributions – is ruled out. There are two principal reasons for why one might want to integrate the non-deception rule. On the one hand, one might want to do so pre­ cisely because the integration of such a rule excludes the inefficient out­ come if the rule is abided by (a consequential consideration).25 On the other hand, one might want to do so purely because “you ought not lie” (an executional consideration). Let us assume the designer insists that his intention is of the latter kind and that he really does not care at all about the consequential effects of the non-deception rule. Then he runs into the following problem. How could he justify his design choice to integrate the non-deception rule into the pub­ lic decision procedure? Namely, what is the difference between wanting to integrate (4) or wanting to integrate a modified version of the addition rule? (5) Only state your willingness to pay if 2 + 2 = 4. Rule (5) clearly is not an essential rule for the public decision procedure. It cannot possibly affect the outcome of the public decision procedure, as its antecedent is always true. It does not make any sense to have (5) be a part of the public decision procedure, let alone to let it determine our judgment of whether the overall procedure is just. Now, to be sure, there is a difference between (5) and (4), which allows us to say that (4) is an essential part of the procedure whereas (5) is not. This is precisely that (4) potentially affects the procedure’s outcome. If (4) is abided by, amounts stated are likely to differ from the case in which (4) is not abided by. But of course, this difference cannot be why our designer thinks the non-deception rule is an essential part of the proce­ dure, whereas the modified addition rule is not. For he assumedly does not care at all about how the non-deception rule affects the outcome of the procedure. So he has a problem justifying his inclusion of (4). Consider another possible addition to the public decision procedure to make the designer’s problem even clearer.

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(6) You ought not kill. Again, we might ask ourselves whether (6) is an essential part of the public decision procedure. If we want to say that it is, we could argue that it is easy to see how this rule could affect the outcome of the overall procedure. For example, the situation might arise in which a very influ­ ential and solvent supporter of the new pool is killed by an overzealous opponent of the pool. But if we integrate (6), and if people follow it, such an event will not take place. (Again, this argument is not open to our designer, as it is based on consequential considerations.) On the other hand, if we want to say that (6) is not an essential part of the public decision procedure, we seem to be in a good position. For exam­ ple, we might mention that (6) intuitively is more of an aside. It feels like somebody were saying: “Oh, and by the way, don’t kill anybody”. Rule (6) seems somehow disconnected from the rest of the procedure. It certainly is not a natural design choice to have it in there. By contrast, a natural reaction to somebody suggesting such a rule to be integrated into the pro­ cedure seems to be “Alright, but how does this matter here?” So a designer wanting to incorporate (6) cannot convincingly argue that it is an essential part of the procedure, if he is not to rely on consequential considerations. Finally, consider a reformulation of the non-deception rule. (4*) You ought not lie. As outlined above, it is obvious how (4*) might affect the outcome of the overall procedure. Yet, this reformulation of the non-deception rule seems to be more disconnected from the rest of the procedure than (4). Namely, because it does not mention with respect to what we ought not lie. How (4*) might be related to the procedure is obscured. Like (6), (4*) intuitively is more of an aside. “Oh, and by the way, don’t lie”. I take it that most people still do not feel (4*) to be entirely disconnected from the procedure; or at least not to the same extent that (5) and (6) are. That is to say that we probably have an easier time arguing for the idea that (4*) is an essential part of the procedure. But I think the only reason why this is the case, is that we naturally see the consequential effects (4*) would have if abided by. And yet again, this is nothing our designer might reply with to our question of how (4*) is an essential part of the procedure. Overall, the designer’s problem seems to be the following. He has to find a way to argue how (4) is in any way more of an essential part of the public decision procedure than (5) or (6). For if it is not an essential part, then it intuitively should not figure in our evaluation of the procedure’s justice. However, if he really only cares about (4) because he thinks one ought not lie (i.e. purely because of executional considerations), he can­ not really show how integrating this rule is a relevant design choice. Con­ sequently, in another instance of applying Occam’s razor, the designer

54 Foundations of Commutative Justice should drop it. If he really is interested in the non-deception rule purely for executional considerations, he might as well drop it from the public decision procedure – a procedure with the clear function of reaching an outcome in a situation of social interaction.26 We might, of course, agree with the designer that one ought not lie. But how is the non-deception rule proposed in the designer’s spirit connected to the public decision procedure in a deeper way than (5) or (6), if not via its consequential effects? There is a difference between saying “I want to have a non-deceptive procedure because I don’t want inefficient outcomes” and saying “I want to have a non-deceptive procedure because you ought not lie”. In the for­ mer case, the rule is an essential part of the procedure as it is motivated by consequential considerations connected to the procedure’s outcome. In the latter case, it is purely motivated by executional considerations, but it is not an essential part of the procedure – no more than the addi­ tion rule. We are just stating a general moral rule.27 The designer’s prob­ lem arises in similar fashion for all other rules one might want to propose purely out of executional considerations. Therefore, the idea that there might be intrinsically just procedures which only incorporate rules pro­ posed in such a spirit fails.28 Here is the second objection as regards judging procedures indepen­ dently of their outcomes. One might object that even if one cares about how procedures affect outcomes, one does not need to appeal to these outcomes when judging whether a certain procedure is just. That is, one might argue that although all procedures affect outcomes, and all the while the way in which procedures affect outcomes might affect our intuitions of their justice, actually all we need to know to judge whether a certain procedure is just is whether it respects certain executional con­ siderations (e.g. whether it violates any rights). In order to reply to this objection, it is important to stress that judging the moral status of a certain thing is a two-step process. Herman’s (1985) account of moral judgment nicely highlights this point. Herman argues that before we decide, in a second step, whether a certain thing or action is just in light of considerations in favor or against, we need to identify, in a first step, which considerations actually play a role in that second step. For example, when we want to judge whether we should lie to some third person in order to be loyal to our friend, we need to identify those considerations which are morally salient with respect to answering this question. The first step, in which we follow rules of moral salience (RMS) to identify all the morally salient issues, does not yet decide whether a certain action is right or a certain thing just. But it brings all those aspects relevant for deciding the question out into the open (1985, 418–20). Her­ man’s two-step account of moral judgment highlights that in order for an intrinsically just procedure to exist, we would have to judge that it is just without taking into account consequential considerations in either step.

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But that cannot be the case given what procedures are and based on a complete and functioning set of RMS. Generally speaking, RMS reveal the presence of morally salient fea­ tures which must be acknowledged when moral judgment is made (1985, 421). We learn and adopt RMS in the process of moral education. This means that due to differences in moral upbringing and moral experience there will be a certain variety of RMS across agents. Still, not just any set of RMS can be considered acceptable or complete (1985, 423). If a certain set of RMS does not tag clearly morally salient issues as a matter for moral consideration, it is to that extent defective. Herman gives the example that any set of RMS not tagging issues of deception seems defec­ tive (1985, 433). Also, if a specific rule of moral salience supposed to tag a particular morally salient issue, e.g. deception, is not activated when faced with a case featuring deception, it malfunctions to that extent. I think few would deny that, on a general level, consequential consid­ erations potentially are morally salient. That is, few would hold that a set of RMS not including any rule tagging consequential considerations can be considered acceptable and complete. It is important that putting aside only this extremely anti-consequentialist position leaves open the follow­ ing possibility. There might be some things which are intrinsically just. That is, there might be things for which we do not need to appeal to con­ sequential considerations to judge whether they are just. To give only one example: it seems possible that there are things which, because of what they are, do not activate those specific rules of moral salience tagging consequential considerations. Morally judging such things, the thought that consequential considerations might matter simply never crosses our mind, and reasonably so. However, since procedures essentially are about reaching outcomes, there is no way a complete and functioning set of RMS would not pick up consequential considerations as morally salient for judging a procedure’s justice. Because outcomes are salient for procedures, those specific rules of moral salience which emphasize the importance of outcomes – which are a part of every acceptable set of RMS – could not fail to be activated. At least they could not fail to be activated for every competent judge. For competent judges need to be thoroughly acquainted with the thing they are judging (Mill [1861] 1991, chap. 2, para. 5). This is not to deny that there are procedures we deem just no matter what outcome they bring about. The original ball allocation procedure is a case in point. Procedures like this belong to a class of procedures for which we judge that – given the outcomes they possibly can produce – executional considerations override consequential ones in the sense and to the extent that no matter what concrete outcome the procedure brings about, it would not be drastic enough to tip the balance of our over­ all moral judgment that we are dealing with a just procedure. Given that there is a limited set of outcomes we all deem equally just, for such

56 Foundations of Commutative Justice procedures we no longer need to appeal to consequential considerations in the second step of moral judgment. Put differently, for such procedures executional considerations are sufficient for determining their justice as regards the second step of moral judgment. Yet it is not the same to say that executional considerations override consequential considerations in the second step and to say that conse­ quential considerations were irrelevant from the very beginning. Nota­ bly, the former leaves open the theoretical possibility that – should the procedure in question somehow yield catastrophic outcomes in very spe­ cial circumstances – we would revise our judgment that it is just. As soon as we acknowledge that consequential considerations play a role at some point in the process of judging their justice, this is a live possibility, and one that is decisive for the claim that there are no intrinsically just procedures. The final objection can be quickly dealt with. As my argument relies heavily on the context of designing procedures, one might wonder whether undesigned procedures might be able to be intrinsically just. I think they cannot. This is because, whether a certain procedure has arisen spontane­ ously or by means of design, we know that the procedure’s essential rules somehow affect its outcome. And we cannot simply ignore the fact that the procedure excludes some possible outcomes, favors others, and so on, in our overall evaluation of whether it is just. Consequently, we will also have to rely on consequential considerations when judging whether undesigned procedures are just.

3.3 Moving Forward There are no social procedures such that we could judge whether they are just purely based on executional considerations, without taking into account any consequential considerations. A fortiori consequential considerations also matter with respect to commutative justice. This is because commutative justice deals with the justice of that specific social procedure which is a market exchange. Thus, the consequentialist chal­ lenge is legitimate. Some might think that my argument against the existence of intrinsi­ cally just procedures is trivially correct. Given that social procedures are all about affecting the outcome of social interaction, it is not surprising that we always also have to take into account consequential considera­ tions when judging whether they are just. But notice that if somebody acknowledges that we always also have to take into account a social procedure’s consequences when determining whether it is just, this also means acknowledging that we have to do so when we judge whether market exchanges are just. Basically, this means that the domain of com­ mutative justice not only encompasses executional considerations but also consequential considerations. A person who holds this position does

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not need to be convinced that the consequentialist challenge succeeds in the first place. All of this is not to say that there is no place for executional considera­ tions and conditions in my conception of commutative justice. When we hold that a just market exchange must not be coercive or deceptive, this is first of all a statement about which kinds of actions a just market exchange must not feature. That is, a statement based on executional considerations. As long as we are aware that rules such as non-coercion or non-deception always also have consequential effects, there is nothing wrong with express­ ing their primary focus by calling them executional conditions. One might wonder, though, how acknowledging the importance of consequential considerations within commutative justice affects the rela­ tion of (consequential) commutative justice and distributive justice. Am I suggesting to import (absorb? subordinate?) the entirety of end-state distributive justice into commutative justice? Or am I suggesting that exchanges are consequentially unjust only because they lead to distribu­ tively unjust end-states – that is, that consequential commutative jus­ tice merely inherits its normativity from distributive justice? And one might wonder: is it not the case that all non-executional considerations of commutative justice are already covered by some other domain of justice – notably end-state distributive justice – in which case stressing consequential considerations within commutative justice would seem to lead to an unfortunate doubling of responsibilities? Now, I do not suggest importing the entirety of distributive justice into commutative justice. This is because, for example, not every dis­ tributively unjust end-state is related to market exchanges (e.g. by being caused by them). But very plausibly, if some end-state is not related in any way to market exchanges, but instead a consequence of, say, natural processes or an individual’s non-procedure-following action, then it can­ not be an issue of consequential commutative justice. That is, it is not the case that any distributively unjust outcome constitutes a potential issue for commutative justice, which – far from importing distributive justice in its entirety into consequential commutative justice – makes distributive justice more encompassing in some respects. At the same time, not every consequential consideration of commuta­ tive justice is also covered by distributive justice. Think, for instance, of harms done. Intuitively, if some market exchange causes harm to some person external to the exchange, this is a consequential consideration which plainly falls within the domain of commutative justice (cf. Chap­ ter 4 on externalities). Yet, such a case would seem to sit uneasy within the domain of distributive justice, because harm done to somebody intuitively does not qualify as a distributively unjust end-state.29 Commodification (cf. Chapter 8) seems to be another issue of consequential commutative justice that it would be odd to approach from a distributive justice perspective.

58 Foundations of Commutative Justice Thus, there are some concerns of distributive justice which are not concerns of consequential commutative justice and vice versa. This bars one domain encompassing the other or one domain merely being deriva­ tive. It leaves open the possibility that there are consequential considera­ tions that matter both within distributive and commutative justice. But even with respect to such issues, for which there seems to be a doubling of responsibility, we have to be aware that we are talking of two distinct judgments: whether an outcome as such is unjust – or whether a proce­ dure is unjust in light of bringing about a certain outcome.30 How exactly distributive justice and consequential commutative justice relate on my account will become much clearer once I outline and apply my concep­ tion of consequential commutative injustice in Part II. Which Consequences Matter? Even if consequential considerations matter for evaluating the justice of a market exchange, it would seem inappropriate to say that considerations as regards all possible consequences of market exchanges fall within the sphere of commutative justice. A market exchange might, for example, cause a divorce. If a husband sells his wife’s beloved collection of Victo­ rian teaspoons in order to finance his new motorcycle, his wife might well decide to divorce him because of that sale. But surely we would not want to say that the consequential condition that market exchanges not lead to divorces forms a part of the proper and distinct domain of commuta­ tive justice. Intuitively, only necessary and “typical” outcomes of market exchanges are apt to give rise to consequential conditions for just market exchanges. I take it that the following is a fairly exhaustive list of those negatively perceived outcomes markets are considered to bring about necessarily or frequently (cf. Herzog 2013). Markets are said to contribute to externali­ ties (e.g. Feinberg 1984, 193–244), monopoly formation (or the buildup of market power more generally) (e.g. Böhm 1933; Buchanan, Tollison, and Tullock 1980), violations of the Lockean proviso (Nozick 1977, 178–82), commodification of goods (e.g. Anderson 1993; Satz 2010), exploitation of market participants (e.g. Reiff 2013; Wertheimer 1996), material inequality, gross inefficiencies in the case of asymmetric infor­ mation (e.g. Akerlof 1970), a non-provision of public goods (e.g. Pin­ dyck and Rubinfeld 2013, 661–99), alienation (Marx and Engels [1844] 1975), and market imperialism (e.g. Sandel 2012; Walzer 1983, 106ff.). This list of markets’ vices is a mixture of market failures commonly acknowledged even by market-friendly economists (as for example exter­ nalities, monopolies, inefficiencies due to asymmetric information, nonprovision of public goods) and outcomes highlighted by those critical of (unregulated) markets. However, what is more important than who voices a concern is whether that concern is linked to markets in general

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or to market exchanges in particular. Only those concerns linked to mar­ ket exchanges in particular can possibly fall within the sphere of commu­ tative justice. Therefore, the sphere of consequential commutative justice is substantially smaller than one might think. In any case, it is smaller than the domain of common criticisms of markets. Take for example market imperialism. Markets, it is said, do not eas­ ily content themselves with structuring relations and interactions in the “economic sphere proper” (e.g. Polanyi [1944] 2001; Walzer 1983). Instead, if left completely unchallenged, economic ways of analyzing and approaching social problems would invade every other sphere of society. But although there are good reasons to be suspicious about market impe­ rialism, it is not an outcome of market exchanges. Market imperialism or, in the scientific community, economic imperialism as linked notably to Gary Becker (1976), is the consequence of economic ways of thinking being applied in spheres that used to follow a different logic. Put differ­ ently, market imperialism is a phenomenon concerned with how we think within different private and public spheres. It is not because we exchange cars on markets that we also start to exchange kidneys on markets – apart from the very obvious sense in which, if markets did not exist at all, they also could not spread.31 Instead, it is because the logic of the market for some reason seems to be either so attractive, or so dangerously expan­ sive, that we also try to make sense of other spheres in terms of it. This is why I will not examine market imperialism in this book which only deals with issues directly connected to market exchanges. For analogous reasons, alienation and the non-provision of pub­ lic goods by markets will not be examined here. Alienation is, first of all, tied to labor and the working conditions of a society. As Marx and Engels ([1844] 1975, 270–83) argue in their Economic and Philosophic Manuscripts of 1844, a worker is alienated if he has to give away the product of his work, if work itself is experienced as a torment, or if he works in a way that is not in accordance with human nature. But surely whether one experiences work itself as a torment, or whether one works in accordance with human nature, is not inherently connected to whether one exchanges one’s labor or its fruit on the market at the market price, but much more to personal characteristics and the nature of the job. The experiences of workers in communist countries bear witness to that. Because alienation first of all is a phenomenon tied to work, I will not treat it here.32 Similarly, I will not talk about the non-provision of public goods. This is, quite simply, because genuine public goods with their charac­ teristics of being non-excludable and non-rivalrous do not feature in market exchanges. However, if there are no market exchanges of pub­ lic goods, then these exchanges cannot be unjust. Also, it would seem inappropriate to deem market exchanges unjust because of their inabil­ ity to provide people with public goods. To be sure, the provision of

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public goods is an outcome which the use of the procedure of market exchanges excludes from the set of possible outcomes. But if one sub­ scribes to the idea that ought implies can, the fact that public goods cannot be provided via market exchanges is not a reason to consider market exchanges unjust. Apart from these three exclusions, I take it that all the common criti­ cisms addressed to markets are also relevant consequential considera­ tions when determining what a just market exchange is. This is why I will explicitly consider the issues of externalities, monopoly and market power, violations of the Lockean proviso, inequality, and commodifica­ tion in the chapters to come, to see whether market exchanges connected to these issues can still be judged commutatively just.

Notes 1. The responsible court judged that the seller had to reimburse the buyer on the basis of the maxim falsa demonstratio non nocet (Cordes 1991). 2. Here are some additional, more controversial issues I do not explicitly treat – but some of which are subsumed under other topics or repeatedly resurface. (1) The question of whether for an exchange to be just, the exchanging parties’ intentions have to be of a certain kind. The locus clas­ sicus is Aristotle’s distinction of more and less natural forms of exchange in Politics I.9. Roughly speaking Aristotle defends the view that exchanging in order to acquire goods is permissible, whereas trading in order to make money is dubious, and lending money charging interest should be prohib­ ited. See Meikle (1995, 43–67) for a discussion. I talk about intention, for example, with respect to defining exchanges and distinguishing them from benefits in Chapter 2, in this chapter with respect to consent and deception, or with respect to externalities (the thought that people do not intention­ ally create externalities) in Chapter 4. (2) The question of whether a just exchange must take into account personal characteristics of the exchang­ ers. Again, the locus classicus is Aristotle and his idea that there will be justice in exchange if “the terms have been equated so that as farmer is to shoemaker, the amount of shoemaker’s work is to that of the farmer’s work” (NE V.5, 1133a6–33; my emphasis). See Meikle (1995, 129–46) for an excellent summary and appraisal of the intense debate surrounding this passage. The most prominent place where I talk about personal character­ istics is Chapter 8 on commodification. (3) The idea that we have to respect the “spirit” of the good exchanged in order to exchange justly. Notably, we have to take into account that goods remain in some sense bonded to their producers or their rightful owners and seek to return there (cf. Mauss [1925] 2002, 14–18, 64–65, 99). 3. There are many alternative proposals for distinguishing threats from offers. Zimmerman (1981) holds that conditional offers are such that the person addressed prefers his post-announcement situation to its pre-announcement situation, and vice versa – thus taking a more subjective approach. Wertheimer (1987, chap. 12) holds that what matters is not the content of the announcement but the intention of the announcer. If he has the intention to make the addressed person worse (better) off it is a threat (offer). Sachs (2013, 70–71) distinguishes conditional threats and offers on the basis of how the announced conditional intention is adopted. He argues that one can

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4. 5. 6.

7. 8.

9. 10. 11.

12.

13.

61

easily walk away from conditional offers but not from threats, in that for offers it is only the addressed person’s acceptance which triggers the adop­ tion of the relevant conditional intention on the announcer’s part. Just like there might be legitimate uses of coercive exchanges, I am not com­ mitted to the idea that it is never legitimate to “force” a reasonable deal on somebody. According to this terminology, cases of non-mutually beneficial exploitative exchanges should rather be labeled coercive or forced exchanges. This is the thought which seems to underlie Reiff’s (2013) theory of exploita­ tion. Reiff’s theory is based on the notion of the just price. According to him, in a given exchange, “the party who has not received a just price for what he has contributed to the transaction has accordingly been exploited” (2013, 73). That is, if somebody had to pay more or received less than what the good exchanged is worth, this constitutes exploitation, even if the exchange is initiated via an offer. Reiff (2013, 101–53) argues that what a good is worth is determined by its production costs. Note that one party receiving less than what it contributed to the exchange can only be a necessary condition for exploitative exchanges. This is because one might not only accept bad offers because one succumbs to the power of an exploiter. One might also accept bad offers for altruistic reasons – as in the case of benefits (Steiner 2010, 21–23). This is not to be confused with some party A exchanging something on the market on B’s behalf and with B’s consent. In a certain sense, this makes the distinction between commutatively giving and commutatively receiving collapse. In exchanges, one never solely gives or receives. As one gives or receives commutatively, one also performs the opposite action. The field of misunderstandings or ignorance is wide. Feinberg (1986, 269– 85) gives a good overview, discussing the most important intricacies like, for example, the role of duties to disclosure. For an argument against this widely shared view, see e.g. Chisholm and Fee­ han (1977). It is not entirely clear whether Steiner is right. Think of a very persuasive seller. Say he is able to present all of a software’s universally known down­ sides (its “bugs”) in an incredibly positive light (as “features”). In this case, both the seller and the buyer know the same facts – but the seller is able to influence the buyer’s interpretation of these facts. I think it is at least an open question whether such behavior of the seller does not qualify as intentionally causing the buyer to have a false belief that is known to be false by the seller (i.e. as deception) without an information asymmetry being present. I will limit myself here to a discussion about information asymmetries about material facts concerning the good to be exchanged; by that I mean facts that, if known to a party to the exchange, would affect their decision to exchange. How one party may find out which facts are material to the other party – and which duties need to be fulfilled in this respect – is an important complication. Feinberg (1986, 274) notes that the respective duties might be quite onerous. He raises the question of how a seller “can . . . know exactly what facts will be critical for every possible buyer, given the large range of personal differences? What can protect him from the whims of the occa­ sional unpredictable eccentric?” He proposes that the parties to an exchange should at most be required to disclose facts about g that are material for a “standard individual” (1986, 274). Even if we do not think that all information asymmetries should be resolved, there is an interesting complication with respect to who is responsible for

62

14. 15.

16.

17.

Foundations of Commutative Justice resolving those asymmetries we think need to be resolved. When talking about responsibilities to clarify misunderstandings in the context of com­ mercial exchange, Feinberg (1986, 272) argues that “in most instances one party or the other bears a heavier initial duty to ensure that there has been no misunderstanding. . . . In general, the party with the lesser vulnerability to harm is the party with the greater duty to prevent misunderstanding”. By analogy, this seems to suggest that the party with the lesser vulnerability to harm with respect to a certain information asymmetry bears a heavier initial responsibility to resolve this asymmetry. This may sound convincing prima facie, in that the less vulnerable party has a higher responsibility than the more vulnerable party. But it also seems to lead to counterintuitive conclu­ sions. Consider the case of the poor owner of a used car (that he knows to be of very low quality) who is trying to sell to a rich buyer. We can plausibly assume that the poor seller would be harmed more if the information on the low quality of the car became shared knowledge. So applying Feinberg’s rea­ soning, the buyer would have the higher responsibility to resolve the infor­ mation asymmetry. But if the buyer is successful, this would lead to the very effect Feinberg is trying to avoid: namely, the more vulnerable party being harmed. In cases of information asymmetries that are upheld intentionally (e.g. with the intent to deceive), a solution to this counterintuitive conclu­ sion seems clear. Information asymmetries that are upheld intentionally to deceive the other party are unlike Feinberg’s “honest” misunderstandings. Since deception is wrong, the would-be deceiver has the responsibility to resolve the asymmetry, even if he is more vulnerable. But this line of argu­ ment is unavailable in cases of information asymmetries upheld inadvert­ ently (see below). At least in these cases, the question of who is responsible for resolving the asymmetry remains open. And there also are substantial practical problems connected to Feinberg’s proposal, for instance, if the party who is less vulnerable is unaware that there even is an information asymmetry. As it might sometimes be the buyer who has an informational advantage, libertarians aiming to put Steiner’s proposal into practice should take care also to include far-reaching vendee warranties in sales contracts. With respect to those information asymmetries which can, in principle, be overcome, or at least substantially alleviated, the art and science of market design (e.g. Roth 2002, 2015) acquires a normative dimension. If we can design a certain market so as to get rid of some information asymmetries between buyers and sellers, this also seems to be a normative improve­ ment. That improving markets informationally speaking, leading to more exchanges taking place, may be ethically relevant becomes salient, for instance, in the case of informationally improving the exchange of kidneys so that more transplants can take place (Roth 2015, chap. 3). The only major factor counteracting voluntariness not mentioned yet is inca­ pacity (see e.g. Feinberg 1986, 316–43). This is because incapacity (e.g. in the form of impaired reasoning) seems to be a more fundamental problem that deals with the prerequisites of action tout court rather than with execu­ tional conditions of just exchange in particular. One might object that, conceptually speaking, I can only sell (or buy) things I have a right to sell in the first place. This is because, one might add, selling essentially is a procedure that manipulates the rights of those involved in the sale. But I do not think that this is a good conception of selling. Selling some­ thing, first of all, is an activity rather than a manipulation of rights. From a certain perspective, selling is very close to driving a car. When I am 15 years old, I might be able to drive a car. Of course, I am not legally allowed to do

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18.

19. 20.

21.

22.

23.

63

so, but I am still able to. In much the same way, I think that we can sell some­ thing we do not have the right to sell. Again, this is because of the factual component of exchanges. Prima facie it might seem as if Rawls’s (1971, 73–75) concepts of pure, imperfect, and perfect procedural justice might be useful in addressing the question of how to judge the justice of a procedure. But Rawlsian procedural justice is ultimately interested in evaluating whether a certain outcome is just. For instance, in cases of pure procedural justice, the outcome of a cer­ tain procedure is “correct or fair, whatever it is” (1971, 75), all that matters is that the procedure in question has been actually and properly followed. Rawls spells out a necessary condition of pure procedural justice. “[P]ure procedural justice obtains when there is . . . a correct or fair procedure such that the outcome is likewise correct or fair, whatever it is” (1971, 75; my emphasis). Put differently, pure procedural justice presupposes the existence of a just procedure. Without giving a detailed argument, Rawls suggests that gambling can be a just procedure featuring in an instance of pure procedural justice (1971, 75). But to merely state that a certain procedure is just is precisely not what I want to do here. I want to say something substantial about how to determine the justice of a procedure in the first place. What I am not suggesting is that Rawls’s concept of pure procedural justice is conceptually flawed. The existence of pure procedural justice is compatible with the absence of intrinsically just procedures; notably in cases in which the just-making consequential aspects of a procedure are different from the just-making features of an outcome. Procedures only encompassing constitutive rules, as for example games, are an exception (Searle 1979, 33–42). The rules of chess are not adaptations to ignorance. Consider that the other classic approach to explain the raison d’être of procedures underscores the importance of my argument that there are no intrinsically just procedures. The motivational reason for procedures to exist is that where people come together, there inevitably will be disagreement. We adopt procedures to enable productive instead of destructive interaction (i.e. violence and social conflict) despite deep, common, perhaps intractable disagreements. Put differently, the existence of procedures provides the first step of overcoming the Hobbesian problem of social order, by providing a more or less permanent platform for conflict resolution (e.g. Brennan and Buchanan 1985). If the raison d’être of procedures is rooted in humans’ motivational rather than cognitive architecture, then we can immediately see how valuable intrinsically just procedures would be. In theory, they allow for productive coordination to proceed, even if we severely disagree on what a good outcome looks like. Thus, if I am right that no intrinsically just proce­ dures exist, this means that procedures can never fully succeed in overcom­ ing disagreement with respect to outcome standards. At least if we make some additional harmless assumptions like (1) apart from having different colors the balls are perfectly alike, (2) none of the children prefers any of the balls, (3) the children are alike with respect to all aspects one might judge distributively relevant (need, desert, etc.), (4) nobody is able to cheat, and so on. The argument about us having to make the choice of whether to destroy the good rather than to distribute it unequally stands whether or not we agree with Broome’s idea that destroying the kidney would be what fairness requires. An analogous argument applies if some procedure would be deemed just because of some non-essential rule.

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24. Let us assume that nobody’s willingness to pay is higher than his ability to pay. 25. Whether the rule actually is abided by is, of course, an entirely independent matter. But the reason for having the rules in a procedure is that, if they are abided by, this will affect the procedure’s outcome. 26. Note that this argument is not one about whether some rule is a part of a certain procedure – or needed to make a certain procedure just. It only starts later, so to speak, once we say that some rule is a part of certain procedure. 27. It is not an option to argue that, as a perfect moral duty, the rule not to lie is part of any procedure – albeit sometimes only implicitly. There are proce­ dures which explicitly allow for lying, or for which the permission to lie is even essential. Most notably, some games are like this. 28. My argument also applies to hierarchical systems of rules, as for example a system distinguishing constitutional and legal rules. Think of a case in which the public decision procedure for the swimming pool (situated on the legal level) actually does not encompass (4) – but where there is a general rule not to lie fixed on the constitutional level. In that case, argu­ ably (4) would still be an implicit part of the public decision procedure. Also, the non-deception rule on the constitutional level would not feature in the constitutional code purely for executional considerations. It would be a part of the constitutional code also because of how it affects the outcomes of social interactions – even if on the constitutional level the concrete occasions in which we would want such a rule to positively affect the outcomes of social interactions are not as clearly determined as they are on the legal level, on which we see laws specifically tailored to fulfill certain functions. 29. By contrast, if a certain externality is unequally incurred by different parties, this seems more naturally to be an issue of distributive justice. 30. An illustrative example from outside the sphere of commutative justice is the issue of household income inequalities for married couples. Some married couples have a significantly higher household income than others – an out­ come one might consider distributively unjust and worthy of state interfer­ ence in the form of redistributive income taxes. Now, it is well documented that the social procedure of free partner-choice partly causes these inequali­ ties, as rich people tend to marry rich people. Greenwood et al. (2014) find, for example, that if people were instead randomly assigned spouses, inequal­ ity in the United States would quickly drop back to 1960s levels. Still, the procedure of free partner-choice does not seem to be unjust even though it furthers household income inequalities. 31. Compare Honneth (2008, 28), who argues that we should not simply buy into the old Marxian premise that exchanging things on markets in itself is such a disrupting affair as to be able to overthrow our entire social landscape. Doing so constitutes a huge oversimplification when trying to explain the very complex phenomenon of market imperialism (2008, 75–76). 32. If one does not conceive of alienation as narrowly as being inherently tied to work, this dismissal of alienation as a potential issue of commutative injus­ tice might seem too quick. Suffice it to say that many aspects that fall under a broader understanding of alienation will actually be treated in this book – albeit not under the heading of alienation. Take for example the fourth and final kind of alienation Marx mentions: alienation from one’s fellow human beings, when personal relationships are replaced by anonymous relation­ ships of exchange. I will briefly consider this issue which is linked to market exchanging, in the context of commodification (Chapter 8).

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Bibliography Akerlof, George A. 1970. “The Market for ‘Lemons’: Quality Uncertainty and the Market Mechanism.” Quarterly Journal of Economics 84 (3): 488–500. Alexander, Larry, and Emily Sherwin. 2003. “Deception in Morality and Law.” Law and Philosophy 22 (5): 393–450. Anderson, Elizabeth. 1993. Value in Ethics and Economics. Cambridge, MA: Harvard University Press. Anderson, Scott. 2011. “Coercion.” In The Stanford Encyclopedia of Philosophy (Winter 2011 Edition), edited by Edward N Zalta. http://plato.stanford.edu/ archives/win2011/entries/coercion/. Aristotle. 1995. Politics. Book I and II. Translated by T. J. Saunders. Oxford: Clarendon Press. ———. 2000. Nicomachean Ethics. Edited and translated by Roger Crisp. Cam­ bridge Texts in the History of Philosophy. Cambridge: Cambridge University Press. Becker, Gary S. 1976. The Economic Approach to Human Behavior. Chicago: University of Chicago Press. Böhm, Franz. 1933. Wettbewerb Und Monopolkampf – Eine Untersuchung Zur Frage Des Wirtschaftlichen Kampfrechts Und Zur Frage Der Rechtlichen Struktur Der Geltenden Wirtschaftsordnung. Berlin: Carl Heymann. Bratman, Michael. 1987. Intention, Plans, and Practical Reason. Cambridge, MA: Harvard University Press. Brennan, Geoffrey, and James M. Buchanan. 1985. The Reason of Rules. Cam­ bridge: Cambridge University Press. Broome, John. 1991. “Fairness.” Proceedings of the Aristotelian Society 91: 87–101. Buchanan, Allen E. 1985. Ethics, Efficiency and the Market. Oxford: Clarendon Press. Buchanan, James M., R. D. Tollison, and Gordon Tullock, eds. 1980. Toward a Theory of the Rent-Seeking Society. College Station: Texas A&M University Press. Child, James W. 1994. “Can Libertarianism Sustain a Fraud Standard?” Ethics 104 (4): 722–38. Chisholm, R. M., and T. D. Feehan. 1977. “The Intent to Deceive.” Journal of Philosophy 74: 143–59. Claassen, Rutger. 2015. “Financial Crisis and the Ethics of Moral Hazard.” Social Theory and Practice 41 (3): 527–51. Cohen, Gerald A. 1995. Self-Ownership, Freedom, and Equality. Cambridge: Cambridge University Press. Collins, Hugh. 1992. “Implied Duty to Give Information during Performance of Contracts.” The Modern Law Review 55 (4): 556–62. Cordes, Albrecht. 1991. “Die Klassische Entscheidung: Der HaakjöringsködFall.” Jura 13: 352–57. DiMaggio, Paul. 1997. “Culture and Cognition.” Annual Review of Sociology 23: 263–87. Duff, R. Anthony. 2007. Answering for Crime: Responsibility and Liability in the Criminal Law. Oxford: Hart Publishing. Eisenberg, Melvin A. 2003. “Disclosure in Contract Law.” California Law Review 91 (6): 1645–91. Ellickson, Robert C. 1993. “Property in Land.” Yale Law Journal 102: 1315–400.

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Estlund, David M. 2008. Democratic Authority – A Philosophical Framework. Princeton and Oxford: Princeton University Press. Feinberg, Joel. 1984. The Moral Limits of the Criminal Law (Vol. 1). Harm to Others. New York: Oxford University Press. ———. 1986. The Moral Limits of the Criminal Law (Vol. 3). Harm to Self. New York: Oxford University Press. Gehlen, Arnold. 1961. Anthropologische Forschung. Reinbek bei Hamburg: Rowohlt. Greenwood, Jeremy, Nezih Guner, Georgi Kocharkov, and Cezar Santos. 2014. “Marry Your Like: Assortative Mating and Income Inequality.” NBER Work­ ing Papers. https://doi.org/10.3386/w19829. Hayek, Friedrich A. 1960. The Constitution of Liberty. Chicago: University of Chicago Press. ———. 1973. “The Mirage of Social Justice.” In Law, Legislation and Liberty, Vol. 2. London: Routledge & Kegan Paul. Herman, Barbara. 1985. “The Practice of Moral Judgment.” Journal of Philoso­ phy 82 (8): 414–36. Herzog, Lisa. 2013. “Markets.” In The Stanford Encyclopedia of Philosophy (Fall 2013 Edition), edited by Edward N Zalta. http://plato.stanford.edu/archives/ fall2013/entries/markets/. Honneth, Axel. 2008. Reification. New York: Oxford University Press. Hume, David. [1740] 1896. A Treatise of Human Nature. Edited by L. A. Selby-Bigge. Oxford: Clarendon Press. http://files.libertyfund.org/ files/342/0213_Bk.pdf. Kahneman, Daniel. 2012. Thinking, Fast and Slow. London: Penguin. Kitcher, Philip. 1993. “Function and Design.” Midwest Studies in Philosophy 18: 379–97. ———. 2011. The Ethical Project. Cambridge, MA: Harvard University Press. Kronman, Anthony T. 1980. “Contract Law and Distributive Justice.” Yale Law Journal 89: 472–512. Lewis, David. 1969. Convention. Cambridge, MA: Harvard University Press. Machan, Tibor R. 1987. “The Whole or Only Some of the Truth?” Public Affairs Quarterly 1 (4): 59–71. Mahon, James Edwin. 2015. “The Definition of Lying and Deception.” In The Stanford Encyclopedia of Philosophy (Fall 2015 Edition), edited by Edward N. Zalta. http://plato.stanford.edu/entries/lying-definition/. Mantzavinos, Chrysostomos. 2001. Individuals, Institutions, and Markets. Cam­ bridge: Cambridge University Press. Marx, Karl, and Friedrich Engels. [1844] 1975. “Economic and Philosophic Manuscripts of 1844.” Collected Works 3: 270–83. New York and London: International Publishers. Mauss, Marcel. [1925] 2002. The Gift: The Form and Reason for Exchange in Archaic Societies. London and New York: Routledge. Meikle, Scott. 1995. Aristotle’s Economic Thought. Oxford: Clarendon Press. Mill, John Stuart. [1861] 1991. “Utilitarianism.” In On Liberty and Other Essays, edited by John Gray. Oxford: Oxford University Press. Moggia, Jakob. 2019. “Moral Responsibility for Systemic Financial Risk.” Jour­ nal of Business Ethics. https://doi.org/10.1007/s10551-019-04288-4.

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Narveson, Jan. 1988. The Libertarian Idea. Philadelphia: Temple University Press. North, Douglass C. 1990. Institutions, Institutional Change and Economic Per­ formance. Cambridge: Cambridge University Press. Nozick, Robert. 1969. “Coercion.” In Philosophy, Science, and Method: Essays in Honor of Ernest Nagel, edited by Sidney Morgenbesser, Patrick Suppes, and Morton White, 440–72. New York: St. Martin’s Press. ———. 1977. Anarchy, State, and Utopia. New York: Basic Books. Parsons, Talcott. 1975. “Social Structure and the Symbolic Media of Exchange.” In Approaches to the Study of Social Structure, edited by Peter M. Blau, 94–120. New York and London: Macmillan. Pindyck, Robert S., and Daniel L. Rubinfeld. 2013. Microeconomics. 8th ed. Boston: Pearson. Polanyi, Karl. [1944] 2001. The Great Transformation: The Political and Eco­ nomic Origins of Our Time. 2nd ed. Boston, MA: Beacon. Posner, Richard A. 2011. Economic Analysis of Law. 8th ed. New York: Aspen Publishers. Radin, Margaret J. 1982. “Property and Personhood.” Stanford Law Review 34: 957–1015. Rand, Ayn. 1967. Capitalism: The Unknown Idea. New York: New American Library. Rawls, John. 1971. A Theory of Justice. Rev. ed. Cambridge, MA: Harvard Uni­ versity Press. Reiff, Mark R. 2013. Exploitation and Economic Justice in the Liberal Capitalist State. Oxford: Oxford University Press. Roth, Alvin E. 2002. “The Economist as Engineer: Game Theory, Experimenta­ tion, and Computation as Tools for Design Economics.” Econometrica 70 (4): 1341–78. ———. 2015. Who Gets What-and Why? London: William Collins. Sachs, Benjamin. 2013. “Why Coercion Is Wrong When It’s Wrong.” Australa­ sian Journal of Philosophy 91 (1): 63–82. Sandel, Michael. 2012. What Money Can’t Buy: The Moral Limits of Markets. London: Allen Lane. Satz, Debra. 2010. Why Some Things Should Not Be for Sale: The Moral Limits of Markets. Oxford: Oxford University Press. Searle, John R. 1979. Expression and Meaning: Studies in the Theory of Speech Acts. Cambridge: Cambridge University Press. Steiner, Hillel. 1974. “Individual Liberty.” Proceedings of the Aristotelian Society 75: 33–50. ———. 2010. “Exploitation Takes Time.” In Economic Theory and Economic Thought: Essay in Honour of Ian Steedman, edited by J. Vint, J. S. Metcalfe, H. D. Kurz, N. Salvadori, and P. A. Samuelson, 20–29. London and New York: Routledge. ———. 2019. “Asymmetric Information, Libertarianism, and Fraud.” Review of Social Economy 77 (2): 94–107. https://doi.org/10.1080/00346764.2019. 1602280. Stevens, Robert. 1988. “Coercive Offers.” Australasian Journal of Philosophy 67: 472–75.

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Walzer, Michael. 1983. Spheres of Justice: A Defence of Pluralism and Equality. New York: Basic Books. Weinrib, Ernest J. 2009. “Correctively Unjust Enrichment.” In Philosophical Foundations of the Law of Unjust Enrichment, edited by Robert Cham­ bers, Charles Mitchell, and James Penner, 31–53. Oxford: Oxford University Press. Wertheimer, Alan. 1987. Coercion. Princeton: Princeton University Press. ———. 1996. Exploitation. Princeton: Princeton University Press. Wertheimer, Alan, and Matt Zwolinski. 2015. “Exploitation.” In The Stanford Encyclopedia of Philosophy (Summer 2015 Edition), edited by Edward N. Zalta. http://plato.stanford.edu/entries/exploitation/. Zimmerman, David. 1981. “Coercive Wage Offers.” Philosophy and Public Affairs 10: 121–45.

Part II

Commutative Justice and New Harms Having established the foundations of commutative justice (i.e. what market exchanges are, which executional conditions of commutative jus­ tice there are, and why consequential considerations matter), it is time we turn to consequential commutative justice. The guiding scenario for Part II shall be the following. Suppose we look at market exchanges which are executionally just. That is, they are neither forced, nor coercive, nor exploitative, nor deceptive, and both exchanging parties consent to the exchange, having the right to transfer with respect to whatever it is they are exchanging. Further suppose such executionally just exchanges lead to either the emergence of an externality, or the formation of a monopoly, or a violation of the Lockean proviso, or to monetary inequality, or to the good exchanged being commodified. In these cases, should we still consider the executionally just exchanges fully commutatively just? Or should we say that because they lead to these consequences, they are not free of commutative injustice? Surely, if all the necessary executional conditions for a just exchange are met, yet we end up with a consequence that one might intuitively deem unjust, then it looks as if at some point injustice seeps into our supposedly just procedure. It is important to make one underlying assumption for the following analysis explicit. It has to do with what “consequentially unjust” shall mean in the context of this second part. If I will be answering the ques­ tion, “Should we consider executionally just market exchanges which bring about consequence c consequentially unjust because of this?” for each of the different topics, then it is important to fix a meaning of that term. In our context of consequential commutative justice, I want “unjust” to mean the following thing. Judging a market exchange to be unjust because it gives rise to a consequence c means the same thing as saying that it wrongfully causes or risks a harm, namely c, calling for interfer­ ence by the state (or a similar force-wielding political organization). For example, a market exchange would be consequentially unjust in light of monopolization if it wrongfully caused the formation of a harm­ ful monopoly in the market for a vital good. If a market exchange is

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somehow connected to a harmful consequence c but does not cause or risk it, or not wrongfully so, or if c is not calling for state interference (e.g. because it falls into the private domain), then that exchange is not commutatively unjust with respect to c. In such cases, I will say that c does not constitute a reason of commutative injustice. Put differently, “unjust” shall be a shortcut for saying “calling for state interference in light of a harm being wrongfully caused or risked”. To call for state interference is a short and less cumbersome way to express the thought that state interference with commutative injustices is certainly permissible, but not outright required. Commutative injustices ceteris paribus require – or defeasibly require – state interference. This is because commutative justice merely is one kind of particular justice, and other moral or practical considerations may sometimes override the call of commutative justice for state interference. What underlies this conception of injustice is (1) an understanding of justice as the virtue of political institutions (cf. Rawls 1971, 3ff.); that is, questions of justice are connected to conduct which touches on the public domain and the rightful design of the political institutions governing it. Furthermore, the idea that (2) matters of justice are by definition enforce­ able (cf. Mill [1861] 1991, Utilitarianism, chap. 5, paras. 13–40; Skorup­ ski 2010, 351–59). Matters of justice are matters that we are permitted to call on force to address. This is what distinguishes them from other moral matters. Finally, (3) the liberal tenet that the state only ought to interfere on grounds of justice with conduct causing or risking harms (cf. Feinberg 1984, 105–6, 1988, 176–210; Mill [1859] 1991, On Liberty, chap. 1, para. 9). My conception of consequential commutative injustice is a liberal one, as it basically comes down to calling exchanges unjust which violate the harm principle and thus call for interference by a lib­ eral state on grounds of justice. The focus on harms done and causation bears witness to the fact that we are dealing with a conception of justice governing a procedure (and thus human action) rather than end-states. This conception of consequential commutative injustice strikes me as a plausible starting point – as a conception that would have been proposed by some liberals had they written on consequential commutative justice and the new harms, or as one that easily can be endorsed by readers hold­ ing a liberal background broadly construed. I do not want to do much to defend this conception here and rather put it to use. How this concep­ tion of consequential commutative injustice plays out will become much clearer once it is first applied.

4

Externalities

Economists are typically concerned about externalities because of the inefficiencies they give rise to. They are one of the most classic cases of “market failure”. Philosophers on the other hand typically worry about externalities because of the third-party harms they involve. Many of the new harms take the form of harms caused by externalities – with global warming being the most prominent example. Since, for instance, the sale and purchase of flight tickets is connected to global warming via the car­ bon dioxide emissions of planes, externalities certainly are a central issue for consequential commutative justice in light of the new harms. Now, unlike exploitative exchanges, exchanges featuring externali­ ties have never seemed to pose particular problems to liberal theories of justice. State interference with exchanges featuring externalities seems permissible, like it is for coercive or deceptive exchanges. This is because exchanges featuring negative externalities seem to be clear cases of the two exchanging parties harming a third one via the exchange – and thus of conduct violating the harm principle. If this were the case, the state could legitimately interfere with new harms connected to externalities. But I do not think that is the case. Exchanges featuring negative exter­ nalities are not unjust in this straightforward way, i.e. because they would constitute an instance of wrongfully causing or risking a bodily or material harm. In fact, unless we are subscribing to particularly demand­ ing variants of liberalism (e.g. a perfectionist liberalism as proposed by Raz (1986)) or unless we are exclusively focusing on borderline cases of externalities (i.e. of effects of exchanges hardly to be called externalities), there is no liberal theory of how exchanges featuring externalities are consequentially commutatively unjust. I shall first define externalities (section 4.1) before arguing how exchanges neither wrongfully cause nor risk externalities (section 4.2), nor wrongfully enable them (section 4.3), which would be sufficient for violating a broader version of the harm principle. Section 4.4 highlights some consequences of exchanges featuring externalities not being conse­ quentially commutatively unjust.

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4.1 Externalities and Harm Externalities are first and foremost an economic concept. Economists speak of an externality in situations in which the production or con­ sumption of a certain good by an agent either confers benefits or imposes costs on others which are not accounted for in the market price of the good. More specifically, production (consumption) externalities are pre­ sent when the production (consumption) of a certain good has external effects. Negative (positive) externalities occur when the production or consumption imposes costs (confers benefits) on others. “Externality” hereby refers to the costs or benefits created, not to the actions of con­ sumption or production. This definition is widely agreed on (e.g. Gools­ bee, Levitt, and Syverson 2013, 645; Mankiw 2004, 11; Pindyck and Rubinfeld 2013, 306; Varian 2006, 329). I will focus on cases of negative externalities as these seem to be more pressing with respect to questions of commutative injustice. A classic example of a negative production externality is that of a pharmaceutical company dumping its polluted effluents in a nearby river without having to pay for this, thereby negatively affecting the quality and quantity of fish some fishermen catch downstream. While the phar­ maceutical company and its customers exchange the company’s goods (e.g. a certain drug, on the market) with the customers compensating the company for its production costs (not including any disposal costs) in the form of paying the drug’s price – the fishermen incur costs that nobody compensates them for. Both aspects are essential for externalities – that they (1) impose costs on people external to an exchange which (2) are not accounted for in the price of the good exchanged. Note that many costs to third parties are included in an exchanged good’s price. Say the production of the drug consumes certain raw mate­ rials. Then no third party is able to use these very raw materials for alter­ native purposes. But in that case third parties, notably the prior owner of those raw materials, are in fact compensated for this (opportunity) cost, because the pharmaceutical company pays a price for acquiring the raw materials. These costs are paid by the company (as part of the produc­ tion costs) and eventually by the buyers of the drug (as the market price includes and covers production costs in market equilibrium). However, when the pharmaceutical company calculates its costs of pro­ duction and sets the price of its goods accordingly, it typically only takes into account those costs it itself actually incurs (i.e. its private or internal costs). What the pharmaceutical company does not consider when making its pricing decisions are the costs others have to bear because of its produc­ tion, but for which it does not have to pay anything. Because the disposal of the polluted effluents does not cost anything in our scenario, these costs are not reflected in the producer’s decision of how much to supply to the market – and thus they are not reflected in the market price either.

Externalities

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Figure 4.1 illustrates the effect a production externality has on a mar­ ket. It is partly a typical supply-and-demand diagram featuring a mar­ ket equilibrium at an equilibrium price (p*) and an equilibrium quantity traded (q*) at the point where demand D and the pharmaceutical com­ pany’s supply curve S intersect. However, Figure 4.1 also depicts what the supply curve of the phar­ maceutical company would look like, if it also took into account the external costs imposed on the fishermen (Sext). With respect to S, Sext is shifted upwards. This is because with Sext we try to depict a situation in which everything stays the same, but the producer faces higher costs of production (because he also compensates the fishermen for the water consumed, i.e. polluted, in the production process). In this case, he ceteris paribus would charge a higher price for each unit of output, which is just what an upward shift of the supply curve illustrates. From the intersec­ tion of D and Sext we can derive the market price and the quantity traded which would obtain if the externality were accounted for (pext and qext). Generally speaking, we see that whenever negative production externali­ ties are involved, the uncorrected market equilibrium features too high a quantity of the good traded at too low a price. Given this understanding of externalities as the uncompensated-for costs certain exchanges impose on third parties, there seems to be an intuitive way for liberals to account for how they are unjust. Intuitively, we can unproblematically conceive of the uncompensated-for costs as price of good x

pext p*

Sext

D S

qext

q*

Figure 4.1 A negative production externality

quantity of good x

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Commutative Justice and New Harms

harms. Think of the material harm of foregone revenue the fishermen incur if they catch fewer fish, or think of the bodily harm they incur if they eat the polluted fish themselves. Thus, if the exchanges of drugs for money between the pharmaceutical company and its customers wrong­ fully cause or risk these harms, it seems like these exchanges qualify as conduct which violates the liberal tenet of the harm principle in its tra­ ditional or modern form (cf. Mill [1859] 1991, On Liberty, chap. 1, para. 9; Feinberg 1984, 105–6, 1988, 176–210). As we can consider the conduct causing externalities to be wrongful precisely because it is harm­ ful (Kagan 2011, 113–32), also the wrongfulness constraint of the harm principle will often be met (Feinberg 1984, chap. 3).1 Note that another characteristically liberal way of accounting for the injustice of externalities, namely by focusing on rights violations, seems blocked – at least if we aim for a general theory of why exchanges fea­ turing externalities are commutatively unjust. This is because, whereas externalities as uncompensated-for external costs of exchange have a quasi-definitional relationship to harm done, the same is not true for rights violations. That is, there is no inherent relationship between exter­ nalities and rights violations. It is true that, if the fishermen had a right to unpolluted water, then the later exchange of the pharmaceutical com­ pany’s drugs might be tainted by this prior rights violation in the same way that exchanges of stolen organs are. In both cases we could say that the exchanges are unjust from a liberal perspective because there was a prior rights violation. That is, we could rely on the same strategy Steiner (1984) uses when proposing his liberal theory of exploitation. But not all instances of externalities are like this. Notably, we still face an external­ ity if the fishermen have no right to unpolluted water but suffer from the pollution.2 So the suggested approach of arguing that exchanges featur­ ing externalities are unjust as they violate the harm principle remains the more promising and notably more general one.3 Now, as alluded to above, I do not think this approach succeeds. Exchanges do not relate to externalities in the right way to make it work. But before I turn to my argument for why that is, it is important to out­ line what my argument in the following will not rest on. Notably, it will not rest on the fact that many of today’s most pressing externalities seem to be cases of threshold harms.4 In the case of threshold harms it is more complex to evaluate an individual agent’s actions – and one might come up with an argument that such cases actually do not constitute violations of the harm principle. I do not go down this route for two reasons. First, because questions of harm thresholds are not inherently linked to the question of externalities. Some externalities are best considered thresh­ old harms, but not all of them are. So the question of how we should conceive of the injustice of externalities to some extent must be answered without pointing to such cases. Second, because I am confident that even in such cases there are ways to conceive of the individual agent’s actions

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as wrongfully harmful or wrongfully risking a harm. Kagan (2011), for one, gives a powerful argument to this effect.

4.2 Exchanges, Causes, and Enabling Conditions Regulating market exchanges by means of introducing a tax can be an effective means to combat externalities. Looking at Figure 4.2, we can see how, say, a Pigovian sales tax on deodorants containing chlorofluorocar­ bons, or CFCs (which destroy the ozone layer), can alleviate the problem of market prices being “too low” and of the quantity traded being “too high”. By implementing a Pigovian tax of size t (i.e. interfering with the terms of exchange), we can shift the unregulated supply curve S upwards until it is equal to Sext, thus reducing overall CFC emissions. The market would reach a new equilibrium at price pext and quantity qext, which reflects the existence of the externality. Notably, if the tax is set at the right level, we might thus ensure that the harm-threshold for the stock externality of ozone depletion is not exceeded.5 There is no denying the effectivity of such measures. However, even if regulating market exchanges allows us to combat externalities, this does not mean we have found an answer to our ques­ tion of whether exchanges featuring externalities should be judged con­ sequentially commutatively unjust. Just because we can use regulated market exchanges in order to prevent the emergence of some externalities price of good x

t

pext p*

Sext

D S

qext

Figure 4.2 The effect of a Pigovian tax

q*

quantity of good x

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by dictating the price at which the exchanging takes place (and combat the effect of other externalities by compensating those affected with the tax revenues), this does not mean that the exchanges were responsible for causing or risking the externality in the first place. But this question of the cause of the harm is important. For unless it is the exchanges which wrongfully cause or risk the externality, we cannot say that the exchanges violate the harm principle and, thus, are unjust in the proposed way. In fact, it is not the buying and selling (short: the exchanging) of goods or services which causes or risks externalities. It is the production or consumption of certain goods or services. What causes the consumption externality of CFC emissions, for example, is not the fact that deodorants containing CFCs are sold too cheaply. Rather, it is the actual use of these deodorants by the consumers. It is true that standard economic theory predicts that when the price of a good or service is comparably lower, as it is the case for the unregulated exchanges, more of that good or service will be demanded. But we should not confuse the demand for a certain good with the effects its consumption has. As for production externalities, consider again the case of the pharma­ ceutical company. The important thing to note is that at the time when the drug is exchanged on the market, the external costs have already been imposed on the fishermen. It would be odd to argue that the exchanging is what causes or risks the externality, for it only happens after the exter­ nality has already been created. Notice that even if the company did not sell its drugs eventually, the externality would have already been created. What causes the externality is not the exchanging of the drug for money, but the pollution associated with its production. This reasoning about why exchanges do not cause or risk the emer­ gence of externalities applies to all consumption and production exter­ nalities connected to exchanges of goods. For such externalities it is always true either that the harmful effect has already occurred at the time of the exchange (production externalities), or that the harmful effect only emerges when the good is consumed, that is, after the good with external effects has been purchased in a first step (consumption externalities).6 Now, I think that the idea that exchanges cannot be the causes of pro­ duction externalities because of temporal considerations is fairly uncon­ troversial.7 So I will focus on consumption externalities to address the natural question: if exchanges connected to the emergence of consump­ tion externalities are not causes with respect to them, what are they? I think the correct way to conceive of the relation between exchanges and consumption externalities is to hold that the selling and buying of, say, deodorants containing CFCs is an enabling condition (Dancy 2000, 128) for the emergence of the consumption externality. There is a difference between a consideration that is a proper part of an explanation [i.e. a cause], and a consideration that is required for

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the explanation to go through, but which is not itself a part of that explanation [i.e. an enabling condition]. (Dancy 2000, 128) Consider the following example for the distinction of enabling condi­ tions and causes. If I want to causally explain why a grain I planted three months ago now has developed into a flower, the formation of the sun four billion years ago surely is a consideration that is required for my explanation to go through. But unlike the consideration that the sun has been shining in the last three months, it hardly seems to be a proper part of the explanation. In much the same way, if we want to causally explain ozone depletion in the upper atmosphere, the fact that people in modern Western societies were buying and selling deodorants containing CFCs (in contrast to manufacturing them themselves or otherwise acquiring them) is a consideration that will figure in most explanations. But it is not a part of the explanation proper. In the explanation proper, only the excessive use of such deodorants would figure.8 There are several objections one might want to make against my claim that exchanges do not cause or risk but enable externalities – or against its alleged implication of exchanges featuring externalities not violating the harm principle. First, one might admit that we can distin­ guish causes and enabling conditions in explanatory contexts, but doubt whether the distinction meaningfully transfers to our context of look­ ing for a liberal theory of justice able to deal with exchanges featuring externalities. The answer to this objection is straightforward. For our purpose of questioning whether the state may permissibly interfere with a certain conduct, the most relevant context is a legal one. And in the legal con­ text there is a distinction which is largely analogous to the one between enabling conditions and causes. I am thinking of the concept of an inter­ vening cause – with the metaphor of an intervening cause being likewise derived from explanatory contexts (Honoré 2010, sec. 3.3). An interven­ ing cause cuts off existing causal chains by “intervening” between agency and outcome. Following Honoré the idea is that “an agency will not be regarded as the cause of an outcome when that outcome is [instead] explained by a later . . . action[, event,] or a deliberate intervention” (Honoré 2010, sec. 3.3). The theory of intervening causes mirrors the dis­ tinction between enabling conditions and causes, at least on non-causal intervention accounts (e.g. Kadish 1985). For such accounts, whereas the intervening cause is a cause proper, everything up to this point does not have causal status with respect to the outcome. In our case, the use of the deodorant would be the intervening cause, and everything leading up to this intervention would not be causally relevant. Hart and Honoré (1985, 28–32) claim that the idea of intervening causes is “the common sense view” of causation in legal matters.

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A second objection to the distinction between enablers and causes is that it is metaphysically unfounded and vague. Moore (2007, 408–12), for one, argues that although intervening causes purportedly are nonscalar, thorough metaphysical analysis shows that this is not the case. For him, all the actions and events that lead up to the intervention of the intervening cause might be causes with respect to the outcome in a “minor”, “secondary”, or “lesser” sense, but they are still causes. Now this is not the right place to discuss the metaphysics of causation. In reply to this objection I only want to highlight the practical need for distinguishing between enabling conditions and causes on a day-to-day basis in explanatory and legal contexts. We cannot include every causal factor in the explanation of a phenomenon lest the explanation become unwieldy. For the same reason, we cannot factor in every causal aspect that contributed to a harm when administering justice. At some point we have to agree on a cutoff point for factors to consider and to ignore, and this is just what we do. We seemingly can satisfactorily distin­ guish between causes and enabling conditions. Although the distinction between causes and enabling conditions might be metaphysically shaky, we commonly make good use of it. All I am proposing is a further area in which it can usefully be applied. A third objection is that the distinction between enabling condi­ tions and causes might be possible, but that our judgment of whether exchanges featuring externalities are unjust should not hinge on it. The idea is that, as soon as we realize that exchanges featuring externalities neither cause nor risk externalities, we should actually reconsider our approach of relying on the harm principle as the way to deal with how externalities might be unjust from a liberal perspective. After all, there seems to be something normatively problematic about exchanges ena­ bling a harm. And if our original approach simply ignores this aspect, it might have been the wrong one to start with. This objection becomes even more plausible if one points to Duff and Marshall’s (2015) argument that both Mill’s classic discussion of the harm principle as well as Feinberg’s influential modern treatment oscil­ late between two different understandings. On the one hand, there is what Duff and Marshall call the Harmful Conduct Principle (2015, 135). It roughly holds that the state is permitted to call on force if a certain conduct wrongfully causes or risks harm. This is the way in which we have understood the harm principle until now (cf. Mill [1859] 1991, On Liberty, chap. 1, para. 9; Feinberg 1984, 105–6, 1988, 176–210). On the other hand, there is the more encompassing Harm Prevention Principle which roughly holds that the state may also call on force with respect to some conduct enabling harm, if by interfering with this con­ duct we can efficiently prevent harm (Duff and Marshall 2015, 134–35; Mill [1859] 1991, On Liberty, chap. 1, para. 9; Feinberg 1984, 26). So there seemingly is a way to keep violations of the harm principle as our

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straightforward approach of how exchanges featuring externalities might be unjust from a liberal perspective – and to account for their merely enabling character. This important objection calls for a detailed reply.

4.3 Enabling Externalities If we want conduct enabling harm to constitute a violation of the harm principle, then we need to say something as to what kind of enabling con­ duct we want to consider. Given that the chain of events leading up to a certain harm can be quite long, we probably would not want to propose that just any kind of exchange enabling a harm should be considered a violation of the harm principle and thus unjust. For instance, to also judge the exchange between the supplier of plastic caps for deodorants and the producer of the deodorant containing CFCs to be unjust in light of the externality would seem excessive. But the position that at least exchanges which wrongfully enable a harm should be considered unjust is intuitively appealing – especially as it is analogous to the cases of con­ duct wrongfully causing or risking a harm. Now, if we want to endorse this position, we face the problem that we can no longer simply use the enabling exchange’s harmfulness as the reason for why it is wrongful. Whereas consequentialist approaches to externalities like that of Kagan (2011) are able to qualify conduct causing (or risking) externalities as wrongful because of its (potentially) harm­ ful consequences, this is not an option we have with respect to conduct enabling harms. For it is the defining characteristic of conduct enabling harms that it is not itself (potentially) harmful. Yet, there seem to be two other promising ways in which we can ground an enabling exchange’s wrongfulness. First, one might argue that we have some kind of associative duty to not only attend to the harms we cause or risk, but also to the harms we enable other people to cause or risk (Dworkin 1986, 195–216). Take, for exam­ ple, the case of a host who refills her guest’s wine glass although the guest has mentioned that he intends to drive home, and although she is aware that another drink will put the guest over the legal alcohol limit (cf. Duff 1990, 175). By doing so, the host enables her guest’s later drunk driving. In such a scenario, arguably the host does not simply have the duty to generously serve her guest whatever he likes, but also the associative duty to attend to the effects of her hostly conduct. And if she violates the latter duty, she may be said to wrongfully enable her guest’s drunk driving. In a similar vein, one might then argue that sellers have an associative duty to attend to what the buyers of their products proceed to do with these products. Think of a gun shop owner. It seems like people selling guns have a special duty because of their role as providers of dangerous goods. And arguably such duties also extend to sellers of deodorants containing CFCs. Thus, in light of sellers’ associative duties, one might

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consider market exchanges enabling conduct that causes or risks exter­ nalities to be instances of wrongfully enabling exchanges. Second, one might ground an enabling exchange’s wrongfulness by pointing to an analogy with the legal doctrine of aiding and abetting. Consider the case of a gun shop owner again. Suppose that, when selling a gun, the owner knows that the customer intends to use this gun to kill the president. Since the owner despises the president just as much as the would-be assassin, she advises him as to which gun best suits his needs. Two weeks later, the buyer of the gun shoots the president. In this scenario, the gun shop owner would be guilty of aiding and abetting a crime (Duff 1990, 168–74). Thus, just because the shop owner does not cause or risk the harm herself, this does not necessarily mean that her actions are not wrongful. (In fact, even aiding and abetting is a criminal offense in most jurisdictions.) Her normative involvement with the deed is decisive in this respect. Because of her normative involvement, her enabling exchange of selling the gun might be considered an instance of wrongful enabling.9 Even in light of these two ways to conceive of wrongfully enabling exchanges, I do not think that exchanges enabling externalities are unjust. I do think that enabling an externality is normatively problematic. It certainly feels like blaming the exchanging parties is not completely out of place. But not every enabling exchange which is blameworthy or even wrongful also is unjust. On the one hand, associative duties strike me as too shaky or unsuitable a basis for founding the judgment that exchanges enabling harms in violation of such duties are unjust – or even as an altogether incoherent basis for such a judgment. On the other hand, exchanges enabling externalities typically do not feature a norma­ tive involvement of either the seller or the buyer comparable to cases of aiding and abetting – and thus are not wrongful instances of enabling exchanges in the first place. Let me first elaborate on associative duties. As regards associative duties, there is the following problem. When­ ever we are trying to determine whether exchanges enabling a harm are wrongfully doing so based on the violation of such duties, we realize with Duff and Marshall (2015, 145) that it is “radically unclear, or controver­ sial, just what the scope of those duties should be”. Take the example of the generous host who keeps refilling her guest’s glass. In 1990, Duff stated that many people would think that [t]he fact that another drink would put [him] over the legal limit is not something to which she need attend (though it is something to which [he] should attend) as a reason against giving [him] another drink: she is not responsible for such effects of her hostly conduct. (Duff 1990, 175) Social norms seem to have changed quite a bit since then. Relatedly, one might ask: does only a host have an associative duty to attend to effects

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of her hostly conduct, or also a bartender selling drinks to a guest whose car she knows to be parked outside? Or: do sellers of all kinds of prod­ ucts (guns, airline tickets, cars, gasoline, deodorants, etc.) have the same kind of duties? Overall, associative duties shape up as too changeable and contested a basis for general judgments about which kind of exchanges wrongfully enable harms. In any case, they seem to be a bad basis for founding the more farreaching judgment that exchanges enabling harms in violation of such duties are unjust. Note that to call a certain kind of conduct unjust is quite a harsh and momentous judgment – irrespective of the fact of whether we are dealing with conduct causing, risking, or enabling harm. Matters of justice are enforceable, that is, the state may permissibly interfere with respect to them and they properly fall not into the private but the public domain. At the same time, arguments for the existence and strength of associative duties seem to get weaker as we move from mostly private relationships and people we regularly engage with to our duties towards strangers and one-shot, public interactions like market exchanges. So if we want to argue that conduct enabling harm in violation of such duties is unjust, this leads to two undesirable effects. First, we make a case for why the state may permissibly interfere in genuinely private affairs. Because associative duties are comparably clear and strong as regards the private domain, that case will be a strong one. Ceteris paribus this is a case liberals will be rather reluctant to make. Second, the case we actually want to make, namely that the state may permissibly interfere with high volume, anonymous market exchanges featuring externalities, remains weak. This is because associative duties are comparably unclear and weak as regards the public domain. To choose such shaky a funda­ ment to legitimize state interference strikes me as problematic. Apart from that, I feel like there is something self-defeating in appealing to associative duties for determining when a certain enabling exchange is unjust. It seems to be the very nature of associative duties to be moral rather than legal duties. They seem to cover conduct we deem morally important, desirable, maybe even admirable. But if we said that enabling exchanges violating such duties are unjust, these duties would become legally enforceable. And that would strike me as running counter to what these duties are. Again, even if such duties might serve as a basis for call­ ing a certain conduct blameworthy, they seem to be an incoherent basis for calling it unjust. All of this is not to say that there is no way to rely on associative duties in order to render state interference with exchanges enabling externali­ ties in violation of such duties permissible. Consider, for example, a per­ fectionist political system championing the idea of citizens being their brother’s keepers – as a manifest means of bringing more people closer to leading a good life. And consider the deodorant case again; notably the seller’s selling.

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From the seller’s point of view, whether the harm caused by the use of the deodorant actually occurs depends not only on her choice, but on what the buyer does as a result of what she does. There will be no harm done or risked unless the buyer actually proceeds to use the deodorant. In von Hirsch’s terms, what we are dealing with here is a remote harm, “remote in the sense that [it] involve[s] certain kinds of contingencies” (1996, 259). Notably, there is the contingency of the buyer’s intervening choice. The harm clearly transcends the individual sphere of the seller. Yet, in a perfectionist system championing the idea that sellers are their buyer’s keepers, we might still choose to impute the harm done by the buyer on using the deodorant to the seller. It is true, one might argue, that the buyer still has the choice not to use the deodorant. But as the seller wrongfully enables the buyer’s harmful conduct, that is, as she is not her buyer’s keeper with respect to an exchange featuring a good (potentially) harming a third party, her conduct might permissibly be interfered with by the state. In order to justify this interference, we might, for example, rely on Raz’s (1986, 412–13) argument that “[p]roviding, preserving or protecting bad options” – as enabling others to cause or risk harms – is not something a sound conception of liberty and autonomy calls for. Thus, he argues, sometimes a liberal state may permissibly interfere with conduct violating associative duties although this intrudes in the seller’s individual sphere of liberty. To conclude, I admit that if we rely on more demanding under­ standings of liberalism, as for example Raz’s perfectionist liberalism, then arguably we can provide a theory of why exchanges featuring externalities are unjust. But it is an open question whether we can still call such a theory which relies on perfectionist reasons to argue why exchanges featuring externalities are unjust a liberal theory without any reservation. If we instead argue for an enabling exchange’s wrongfulness along the lines of the exchanging parties’ normative involvement, we run into other problems. For there is an important disanalogy between cases of aiding and abetting a harm (like the gun shop case) and cases of enabling an externality (like the deodorant case). In the gun shop case, both the seller and the buyer exhibit a high level of mens rea. Having a mens rea is, in turn, a necessary condition for the offense of aiding and abetting. Follow­ ing Duff (1990, 168–76), there are two clear scenarios in which we can affirm a mens rea for sellers. 1. The seller intends that the crime be committed. For example, if the shop owner selling the gun to the assassin is a coconspirator in the killing of the president.

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2. The shop owner does not intend that the crime be committed, but instead intends to assist in the successful commission of the crime. Duff’s example is that of a shop owner running a store specialized in selling tools for crimes, like untraceable guns (1990, 169–70). In this case, the owner might not care whether the president is dead or alive. But she surely has an interest that the assassination will not fail because of faulty equipment, as this would negatively affect her busi­ ness prospects.10 What distinguishes exchanges which aid and abet a harm from exchanges which enable a harm in the form of enabling an externality precisely is the lack of mens rea for both the seller and the buyer in the latter case. Typically, neither the buyer nor the seller exhibit any kind of normative involvement with respect to the creation of the externality. In the deodorant case, the buyer does not intend to create an external­ ity. What he intends is, say, to feel refreshed or to smell good. As for the seller, she neither intends that the ozone layer be depleted, nor to assist in its depletion. In many cases, the seller does not even intend that the buyer uses the good he bought which features a consumption external­ ity. Think of airline tickets. The airline certainly wants to be paid, but is indifferent with respect to whether the buyer actually boards the plane. (If anything, it seems preferable if the buyer does not, as this leads to less weight and a corresponding lower use of kerosene, a lowered likelihood of overbooking, etc.) Even in cases in which the seller hopes for the buyer to return once the good has been used, all she intends is that the good be used, in the sense of “consumed” or “used up”, in order to initiate repurchases. But she has no intention as to how it should be used. To her, an activist who repeatedly buys deodorants and destroys them in a nonharmful way (so that nobody else buys them and actually uses them in their intended use) is as welcome a customer as any. To be sure, in cases in which the good has an intended use which causes a negative consumption externality, the seller foresees that the good most likely will be used in this way. But this only brings us back to the finding that a seller foreseeing that a buyer will commit a crime can only be considered to have a mens rea if we also affirm a strong role of associative duties. In a non-perfectionist state, the use the buyer actually puts the good to is beyond the things we want to impute to the seller. A good having an intended use only affects the probabilities with which a harm may ensue, but does not affect the normative involve­ ment of the seller. This is because a good having an intended use does not mean that, necessarily, the seller intends the buyer to use the good in this particular way. It is a functional characteristic of the good. It basically means that if the buyer uses the good in accordance with its intended use, then it will serve its purpose, it will function well. The

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seller only is normatively committed to the extent that, if the product is put to its intended use, he promises that it will function properly in the advertised way. But typically, for all the seller cares, the buyer may use the good in whichever way he wants.11 Cases in which the seller or the buyer intend to contribute to an exter­ nality seem to be far-fetched – if only because the individual contribution to the most pressing externalities (global warming, water pollution, etc.) is small, and the exchanging parties are themselves negatively affected. That is, the reason why we consider aiding a harm a wrongful kind of enabling conduct – the involved parties’ normative involvement – does not easily transfer to cases of exchanges enabling externalities. Note that just as it would be odd to attribute the intention to deplete the ozone layer to the buyer or the seller in the deodorant case, it would be odd to consider the killing of the president an externality. One would not reasonably suggest that guns should be taxed in order to internalize the externality of assassinations of presidents. Yet again, it would not be odd to consider a high rate of accidents involving guns an external­ ity of cheap and easily available weapons, and to call for a high sales tax on guns in order to combat this problem. In this latter case, again neither the gun shop owners nor the buyers intend these accidents in any way. What we see here is a subtle line of demarcation between exchanges aiding harms and exchanges enabling harms by enabling externalities. As outlined above, when we say that a certain exchange features an exter­ nality, this is to say that the market price of the good exchanged is dis­ torted because of some external costs not being factored in. As this is a statement about the price all the people exchanging that good face, we are not concerned with individual instances of an externally costly use (or abuse) of a certain good. That is, it typically is not individual cases (read: crimes) which underlie our judgment that an externality is present. Rather, we are making a judgment about exchanges which systematically enable the emergence of a foreseen harm, but not intentionally so. Therefore, even if exchanges aiding a harm (i.e. exchanges wrongfully enabling it in light of the exchanging parties’ normative involvement) were commutatively unjust, exchanges enabling harms by enabling exter­ nalities would not necessarily be. Because there is a difference as regards the normative involvement of the exchanging parties between exchanges aiding a harm and exchanges enabling externalities, the latter are not wrongful and thus could not be unjust.12 Whenever externalities are intended either by sellers or buyers, we are no longer dealing with a “plain vanilla” externality scenario. Some other normative concern than just the price of the good exchanged being too low and the quantity exchanged being too high because of uncompensatedfor costs of people external to the exchange seems to be present. In such cases, it is an open question whether it is indeed the externality which

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is normatively troublesome or some altogether different phenomenon (i.e. of whether we are really giving a theory of how exchanges featuring externalities are unjust).

4.4 Externalities, Justice, and Interference There is no general liberal theory of how exchanges featuring externali­ ties are consequentially commutatively unjust – at least with respect to the most common meanings of the terms “liberal” and “externality”. We might be able to reasonably widen these meanings in our context. For example, we might be able to identify some cases of non-standard or quasi-externalities which are unjust according to the criteria proposed here. But an account of why some exchanges featuring non-standard or quasi-externalities are unjust, or why “plain vanilla” externalities are unjust according to a more demanding yet broadly speaking liberal theory, is hardly what we are looking for when we are seeking a liberal theory of externalities in the context of commutative justice. I do not claim that a liberal state may never legitimately interfere with the emergence of externalities. One can at the same time hold that exchanges featuring externalities are not consequentially commutatively unjust and that a liberal state may sometimes permissibly interfere with externalities. This is important because fighting externalities is a pub­ lic matter. Unconcerted efforts typically will not be enough to overcome many externalities. I only argue that it would be wrong for the state to interfere with exchanges featuring externalities (e.g. by levying a Pig­ ovian sales tax). But if we chose to interfere in some way in order to prevent externalities (which we probably should), we could still target consumption or production rather than exchange.13 I do not deny that a liberal state may interfere on grounds of justice with the production and consumption of goods featuring externalities. Note, though, that another route for legitimate interference with exchanges of goods featuring externalities seems blocked. Namely, the route via regulation and mala prohibita. Suppose a legislator aims to prevent the depletion of the ozone layer. She realizes that interfering with the exchanges of deodorants containing CFCs is an effective way to do so. So she goes ahead and bans their sale and purchase.14 That is, she introduces regulation which makes selling and buying such deodorants a malum prohibitum, a kind of conduct whose wrongfulness depends essentially on its illegality (Duff 2007, chap. 4.4). How could she justify such regulation? I have just argued that she could not justify it by point­ ing to a violation of the harm principle and corresponding reasons of injustice. But she might appeal to other reasons. For example, she might argue that regulations of the kind she proposes are justified whenever we can prevent a harm without this regulation being unduly burdensome for those regulated. And she might then further argue that a liberal state

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cannot only interfere with exchanges on grounds of justice (as backed by the harm principle), but also on legal grounds once the respective regula­ tions are in place. Regulations dealing with conduct enabling harm in order to prevent harm are widespread. Duff and Marshall (2015) discuss the case of reg­ ulating drunk driving. They argue that whatever legal alcohol limit a rational legislator might set in order to prevent the harms connected to drunk driving, there will be some people who can drink more than that amount and still drive perfectly safely (e.g. because of their special bodily constitution). That is, whatever regulation the legislator passes, it will rule out some conduct which neither causes nor risks a harm, let alone wrongfully so, but merely enables a harm. Each regulation will be overinclusive in the sense of ruling out conduct which is not unjust. Still, some think that these kinds of regulations are warranted, precisely because they effectively prevent harm by interfering with conduct enabling harm. (And we could call conduct violating such regulations “unjust” in the sense that, once the regulation is in place, it is illegal.) Now, this general possibility of legitimately interfering with conduct enabling a harm once we have turned it into a malum prohibitum should not lead us to the conclusion that this conduct was consequentially com­ mutatively unjust to begin with (i.e. a malum in se as judged by the harm principle, or that we may easily do so in a liberal state). Only if there is a valid liberal principle allowing for regulation creating mala prohibita, the conduct may be legitimately interfered with in a second step. But that is a big if. What is crucial for our context is that we cannot rely on the harm principle to this effect. As argued in sections 4.2 and 4.3, exchanges of goods featuring externalities do not violate either understanding of the harm principle. Thus, this route for legitimate interference by a liberal state is blocked. We cannot easily find a principle other than the harm principle which is both weaker and robustly liberal, and which justifies turning exchanges of goods featuring externalities into a malum prohibi­ tum.15 If we honestly present our reasons for regulation, these reasons may not contain any talk of commutative injustice, for such regulation rules out exchanges over and above those ruled out by the harm principle. The finding that exchanges featuring externalities do not share the same normative status as exploitative, coercive, or deceptive exchanges in a liberal state is important. First, because it is important for my overall liberal theory of commutative justice. Externalities do not constitute a reason of commutative injustice. While a liberal state should interfere with exchanges that are coercive or deceptive for reasons of commuta­ tive justice, it should not interfere with exchanges that are externality­ enabling on the same grounds. Second, because somewhat surprisingly there is such a difference in status. While typically even libertarians agree that coercive and deceptive exchanges are unjust, and while there is an established liberal theory of

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exploitation, there is no liberal theory of how externalities are commu­ tatively unjust – although there is virtually unanimous agreement that exchanges featuring externalities are normatively problematic. In discus­ sions about how markets and exchanges are just or unjust, the issue of externalities – unlike the issues of exploitation, coercion, or deception – often is more or less brushed aside, for example, in footnotes which read: “I assume no externalities to be present”. Seemingly they consti­ tute a widespread but ultimately simple complication of just markets and exchanges. But externalities are a surprisingly complex normative issue. Finally, whereas interference with the production or consumption of goods connected to externalities is permissible, such interference ceteris paribus seems less desirable than interference with exchange for practical reasons. The consumption of goods is notoriously difficult to regulate, as it often happens in private. And interference with production (e.g. in the form of production quotas) runs a comparably high risk of creating an inefficient market equilibrium. That is, a particularly practical way of dealing with externalities is normatively blocked because of my finding. All of this is not to say that externalities like, for example, global warming generally speaking do not constitute a problem from the stand­ point of justice. For instance, from the standpoint of distributive justice they might do, given that global warming is predicted to affect poorer countries in more severe ways, but is mostly caused by richer coun­ tries. All I suggest is that it would be misguided to interfere with market exchanges connected to externalities on grounds of consequential com­ mutative justice.

Notes 1. There are good reasons to believe that not all actions which bring about externalities are instances of wrongful harming. For example, the external­ ity might be a trivial or personal harm. Still, there seems to be a prima facie plausible argument as to how creating externalities means wrongfully caus­ ing or risking a harm for a wide range of different kinds of externalities. 2. We should not mistake the finding that, if there are no transaction costs, then under any initial allocation of property rights the externality in question can be efficiently internalized (i.e. the Coase theorem (Coase 1960)) for the finding that it is the lack of an appropriate system of property rights which defines externalities. 3. Note also that right violations are consideration of executional commutative justice that we are ignoring in this second part. 4. When we are dealing with stock externalities rather than with flow externali­ ties, the harm is not directly caused by each individual emission of a pollutant, but rather by the accumulated stock of a pollutant. Only if the accumulated stock of a pollutant exceeds a certain threshold, will a harmful effect follow. 5. There also are other ways of internalizing externalities (e.g. via changes in property rights or emission quotas). I do not consider them here, as internal­ izing externalities via taxes is the only approach to internalization that aims to interfere with exchanges featuring externalities.

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6. This is not quite true for externalities arising from the exchange of services. A defining characteristic of services precisely is that their production and consumption happen at the same time (think of a haircut). In addition, if I buy a haircut for money, arguably the time when the haircut is produced and consumed also is exactly the time when it is exchanged. This feature makes services more complicated to analyze in the context of externali­ ties, which is why I will focus on externalities connected to the exchange of goods. Still, my argument equally applies to exchanges of services featur­ ing externalities. This is notably because even if a service’s production, con­ sumption, and exchange all happen at the same time, we can still distinguish these different aspects and argue that it is not the exchanging which is the problematic component. For example, if I pay some money in order to host a tiny but extremely loud rock concert in my front garden, to argue that it is anything but the production of the music which causes the corresponding externality would be counterintuitive. It is not my exchanging which causes the noise, and neither is it my consumption of the music. Still, there are cases in which it is not the production or consumption which creates external effects, but the act of exchanging itself. I will talk about such “exchange externalities” with respect to monopoly formation and competitive harms in Chapter 5 (exchange externalities affecting the market structure), and with respect to commodification in Chapter 8 (an exchange externality affecting the valuation of the good exchanged). 7. Discussing backward causation in detail would lead us too far off topic. One particular approach featuring a reversal of the temporal structure of cause and effect deserves mentioning, though. With respect to functional explana­ tions, Cohen (1988, 8–9) argues that a bird’s hollow bones can be explained in terms of their function, which is to allow the bird to fly. In this sense, it seems like we can sometimes say that a cause (the function of a bird’s wings to allow for flying) is preceded by its effects (the hollow bones). But I do not see how to make such ideas work with respect to straightforward production externalities and market exchanges. Surely one does not want to say that it is the function of production externalities to allow market exchanges. It is the function of production to do this. 8. The concept of an enabling condition also serves to address an objection as regards production externalities and the issue of a potential temporal rever­ sal of cause and effect. One might argue that even if the exchanging of goods with external effects does not cause past production externalities, it will most likely contribute to future production externalities. For once the good with external effects is sold, the producer will produce more of it. However, with respect to future production externalities, I think that the best way to conceive of the relation of market exchange and externality is also in terms of an enabling condition. The market exchange taking place at time t0 is at most an enabler and not a cause for the production externality at time t1. 9. It is true that externalities might be conceived of as harms, but hardly as crimes. But we might at first ignore this disanalogy for the sake of the argu­ ment and focus on the seller’s normative involvement. 10. In some jurisdictions, the seller’s knowing that the buyer intends to commit a crime suffices for being liable as an accomplice. However, as Duff (1990, 174–81) argues, this only seems to be a cogent position if we also affirm a strong role of certain associative duties – which brings us back to the abovemade argument against such a strong role. 11. This is not to deny that there might be some sellers who indeed intend that the good be used in a particular way, with this use (which does not need

Externalities

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13.

14.

15.

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to be the good’s intended use) being known to cause a harm as a negative consumption externality. I think that in these special cases the seller may be attributed a mens rea, just as the illegal gun shop owner in case (2). I am not suggesting that actions which c ause environmental harms like global warming are not wrongful or unjust as none of the agents intends but all of them only foresee that their actions will bring about climate change. I only rely on the distinction between intending and foreseeing to distinguish wrongful and non-wrongful instances of enabling. It might not always be possible to clearly separate taxing consumption or production instead of exchange, but in many cases it is. Think of the British road tax for example. Instead of taxing the sale and purchase of cars (an interference with the exchange), the road tax taxes the actual use of a car. A more efficient interference would be to impose a tax at a level so that the quantity of deodorants traded is too low for the stock externality to arise. Generally speaking, an outright prohibition of exchanges enabling externali­ ties is unlikely to be a satisfactory solution. Consider Feinberg’s argument that most activities which have external effects “are so beneficial in other ways that if they were to be prevented entirely, as a group, the resultant harm to the public would be as great or even greater than the harm they now produce” (Feinberg 1984, 229). Even the exact definition and existence of mala prohibita in a liberal state is neither clear nor uncontroversial (cf. Duff 2007, chap. 7.3; Husak 2007).

Bibliography Coase, Ronald. 1960. “The Problem of Social Cost.” Journal of Law and Eco­ nomics 3: 1–44. Cohen, Gerald A. 1988. History, Labour and Freedom: Themes from Marx. Oxford: Clarendon Press. Dancy, Jonathan. 2000. Practical Reality. Oxford: Oxford University Press. Duff, R. Anthony. 1990. “ ‘Can I Help You?’ Accessorial Liability and the Inten­ tion to Assist.” Legal Studies 10 (2): 165–81. ———. 2007. Answering for Crime: Responsibility and Liability in the Criminal Law. Oxford: Hart Publishing. Duff, R. Anthony, and S. E. Marshall. 2015. “ ‘Abstract Endangerment’, Two Harm Principles, and Two Routes to Criminalisation.” Bergen Journal of Criminal Law and Criminal Justice 3 (2): 131–61. Dworkin, Ronald. 1986. Law’s Empire. Cambridge, MA: Harvard University Press. Feinberg, Joel. 1984. The Moral Limits of the Criminal Law (Vol. 1). Harm to Others. New York: Oxford University Press. ———. 1988. The Moral Limits of the Criminal Law (Vol. 4). Harmless Wrong­ doing. New York: Oxford University Press. Goolsbee, Austan, Steven Levitt, and Chad Syverson. 2013. Microeconomics. New York: Worth. Hart, H. L. A., and A. M. Honoré. 1985. Causation in the Law. 2nd ed. Oxford: Clarendon Press. Hirsch, Andreas von. 1996. “Extending the Harm Principle: ‘Remote’ Harms and Fair Imputation.” In Harm and Culpability, edited by A. P. Simester and A. T. H. Smith, 258–74. Oxford: Clarendon Press.

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Honoré, A. M. 2010. “Causation in the Law.” In The Stanford Encyclopedia of Philosophy (Winter 2010 Edition), edited by Edward N. Zalta. http://plato. stanford.edu/archives/win2010/entries/causation-law/. Husak, Douglas. 2007. Overcriminalization. Oxford: Oxford University Press. Kadish, Sanford H. 1985. “Complicity, Cause and Blame.” California Law Review 73 (2): 329–410. Kagan, Shelly. 2011. “Do I Make a Difference?” Philosophy and Public Affairs 39 (2): 105–41. Mankiw, N. Gregory. 2004. Principles of Economics. 3rd ed. Mason, OH: Thomson/South-Western. Mill, John Stuart. 1991. On Liberty and Other Essays. Edited by John Gray. Oxford: Oxford University Press. Moore, Michael S. 2007. “Causing, Aiding, and the Superfluity of Accomplice Liability.” University of Pennsylvania Law Review 156 (2): 395–452. Pindyck, Robert S., and Daniel L. Rubinfeld. 2013. Microeconomics. 8th ed. Boston: Pearson. Rawls, John. 1971. A Theory of Justice. Rev. ed. Cambridge, MA: Harvard Uni­ versity Press. Raz, Joseph. 1986. The Morality of Freedom. Oxford: Clarendon Press. Skorupski, John. 2010. The Domain of Reasons. Oxford: Oxford University Press. Steiner, Hillel. 1984. “A Liberal Theory of Exploitation.” Ethics 94 (2): 225–41. Varian, Hal R. 2006. Intermediate Microeconomics. 7th ed. New York and Lon­ don: W. W. Norton & Co.

5

Monopolies

Like externalities, monopolies are a classic case of market failure.1 Unlike sellers in competitive markets, a monopolist can influence market out­ comes in his favor (e.g. by setting a higher price without immediately losing customers). Because of this, he is often able to pocket monopoly profits. Sometimes one might think that these profits are well deserved, for example, in the case in which a company starts to market a truly inno­ vative and all-round excellent product – and remains the only company able to supply it for some time (cf. Lamont 1997). On other occasions, for example, when somebody newly acquires the exclusive rights to sell a life-saving drug and immediately raises its price by 5,000 percent, the darker side of a monopolist’s market power shows (Worstall 2015). In analogy to the previous chapter, my guiding question shall be whether we should judge market exchanges commutatively unjust in light of their contribution to monopoly formation. If a series of executionally just exchanges brings about a monopoly, should our overall verdict be that this is commutatively unjust because of consequential considera­ tions? I shall argue no. Monopoly formation is no reason of commuta­ tive injustice. I shall first examine in which ways monopolies form quite generally – and show that a series of executionally just exchanges can give rise to a monopoly (section 5.1). That is, monopolies differ from externali­ ties in that market exchanges only enable the latter but can cause the former. In section 5.2, I will briefly outline the most visible effects of a monopolist using his market power: higher prices in comparison to competitive markets lead to inefficiencies and might spawn exploita­ tive or coercive exchanges. Yet monopoly prices are a contingent conse­ quence of monopoly formation, which depend on an intervening choice by the monopolist to use his market power exploitatively or coercively to maximize profits. While market exchanges cause monopolies, they only enable exploitative or coercive monopolies. Consequently, potential exploitation or coercion on monopoly markets is not sufficient to con­ sider market exchanges which cause the formation of a monopoly com­ mutatively unjust. There are yet other ways in which monopolies might

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be normatively problematic (section 5.3). Namely, some monopolies are instances of domination (Pettit 1997). Alas, even if we succeed in arguing that domination is not merely a contingent consequence of monopoly formation, we then still lack a clear harm which falls within the scope of a recognizably liberal harm principle.

5.1 Monopoly Formation Monopolies form in various ways. For instance, they might form natu­ rally (i.e. because of the natural characteristics of a certain good). Take the supply of water to private households. Because it is more efficient to only have one company owning a complete network of pipes run­ ning water from the water works to people’s homes rather than several companies owning fragmented networks, there is a natural tendency towards monopolization in this market. Another important process is monopoly formation due to rent-seeking (e.g. Buchanan, Tollison, and Tullock 1980; Tullock 1967). Think of a company spending money on lobbying activities, thereby inducing the legislator to pass laws protecting that company’s monopoly position in the domestic market. In the case of rent-seeking monopolies form by means of public power, monopolies may also arise by means of private power, as for example in the case of cartels (cf. Böhm 1933, 1960; Eucken 1952). If a significant number of private actors associate, this always poses the danger of creating market power. In the latter two cases, a lack of competition is the fundamental reason for the emergence of a monopoly. Consequently, economists like Hayek (1973, 83) or the German ordoliberals of the Freiburg School highlight the importance of competition as the “moral backbone” (Böhm 1960, 22) of a free economy, as it undermines power. Can a series of execu­ tionally just market exchanges lead to the formation of a monopoly at all with failures of competition or natural monopolistic pressures being absent?2 Suppose we start out in a competitive market for product x. Further suppose that one of the many competing producers is able to significantly improve his version of product x. For instance, imagine that company M comes up with an innovative technological solution to a problem all other instances of x as produced by companies N, O, P, and E suffer from. This makes M’s version of the product (xM) stand out. The tech­ nological advancement secures M a competitive advantage. Suddenly, xM might be by far the best product on the market; and it might not even be more expensive than the alternative choices. If this is the case, then all the consumers can be expected to eventually end up buying xM.3 Each indi­ vidual consumer may reach the decision to buy xM on his own, without being influenced by what other market participants are doing. The cus­ tomers may all opt for buying xM simply because it is better than what the

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competitors have to offer (i.e. not because M forces them to, or deceives them about the true quality of the product, or sells it at a dumping price). But the effect will be that eventually – if M’s existing (and potentially newly arising) competitors are not able to come up with a better alterna­ tive version of x – company M will become a monopolist in the market for x. Eventually, companies N, O, P, and E will have to shut down their production of x if they are unable to sell their respective versions of x on the market. In this way, a series of executionally just market exchanges may establish a monopoly position for M. Monopolies, or more generally speaking, situations in which some market participants acquire market power, are a possible outcome of executionally just market exchanges. Unlike a production or consumption externality, a monopoly is an out­ come which is caused and not merely enabled by market exchanges. The monopoly forms because all of the buyers in the market for x decide to buy from M. There is no intervening cause responsible for this effect, nor any intervening choice of any party required for M’s monopoly to emerge, other than the market exchanges between M and its customers. To be sure, N, O, P, and E have to actually go out of business in order to transform M from a de facto monopolist with considerable market power into a monopolist in the strict sense with even more market power. But if all the customers are exclusively exchanging with M, their going out of business is but a question of time and hardly to be considered an intervening cause or choice on their part. In fact, if we were to give an explanation of how the monopoly for M in the market for x arose, we would certainly mention M’s innovative technological solution and how everybody started to exclusively buy xM – but we might not even mention the competitors’ going out of business. That is, if anything, we might consider their going out of business an enabling condition rather than a cause. We might say that the exchanges of M and its customers only indirectly cause the monopoly, or that M’s monopoly is an external effect of the exchanging. If the direct or internal effect of these market exchanges is the exchange of xM for money, the fact that people who buy xM are not buying from N, O, P, or E is only an indirect or external effect of these exchanges. Unlike in the case of consumption or production externalities, however, it is not the production or consumption of a good which causes the external effect but the exchanging itself. That is, we might conceive of monopoly formation in the way described as an exchange externality. The exchanging between M and its customers externally affects the mar­ ket structure everybody exchanging x is operating in. There even are two potentially negative external effects of market exchanges bringing about monopolies. In the long run, there is monopoly formation (i.e. a change in the market structure). But in the course of monopoly formation, the fact that all buyers exclusively exchange with M rather than with N, O, P, or E also means that the latter companies

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incur “market harms” (Thomson 1986, 160). First they lose deals to M, then they lose profit, then they make losses, eventually they have to go out of business, people will lose their jobs, and entrepreneurs might end up indebted. If monopoly formation is the long-run effect of a continuous series of market exchanges of xM for money, the harms M’s competitors incur are the immediate effect. To be sure, market harms like this (i.e. that the person not making the deal is harmed) occur in competitive settings of all kinds. But they are particularly drastic and salient in the case of monopoly formation. What should we say from the standpoint of com­ mutative justice as regards this issue closely related to monopolization? Traditionally speaking, monopoly formation and market harms as two outcomes of the same exchanges are evaluated quite differently. Market harms typically are seen as a kind of necessary evil (i.e. as harmful), but not wrongfully so. In On Liberty, Mill ([1859] 1991, chap. 5, para. 3) refers to market harms as a classic example of a harm that does not war­ rant interference by the society. He acknowledges that many harms which arise out of competition might constitute real harms for the defeated competitor. Even if the loss of the competitor is only an external effect of the winner’s winning, a harm is indeed inflicted. But for him, such harms are not instances of wrongful harming. This is because such harms are a natural consequence of competition itself. Wherever there is competi­ tion, there will be losers. Alas, we cannot always avoid competing with each other. Mill essentially argues that as long as the form of competition the competitors are engaging in is morally legitimate, market harms are not wrongful. Only if the competition does not exclusively take place in accordance with legitimate procedural rules might we consider market harms as wrongful. Millian positions on market harms remain by far the most widely endorsed ones. Adopting such a position takes the sting out of market harms as a consequence of market exchanges. To be sure, such a posi­ tion also raises the question of what morally legitimate conditions of competition actually look like. Opinions differ. Mill himself suggests that only “unavoidable” instances of competition, such as when two sellers are competing for only one buyer, can ever be legitimate ([1859] 1991, chap. 5, para. 3). Feinberg (1984, 220) stresses the importance of the Volenti maxim for legitimate competition (i.e. the idea that competi­ tors cannot be wronged in competitions to which they consented). With respect to economic competition in particular, the procedural rule of not preventing entry of new firms has often been emphasized. Hayek (1967, 174) and other economists stress this point precisely because of its close connection to the potential harms of monopoly markets. Left-libertarians typically stress the importance of equal endowments to start competition with (e.g. Otsuka 2003). Rawls (1971) endorses the idea that competi­ tion which makes those at the bottom too badly off relative to the rest is wrongful.

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Now, my goal to present a conception of commutative justice is related to but distinct from questions about market harms and fair competition. The issues are related in that, according to the mainstream opinion, in an unfair competitive setting it can be wrongful to cause market harms. Thus, in such settings, exchanges causing market harms might have to be considered consequentially unjust. But commutative justice and fair com­ petition are also clearly distinct in that the conditions of fair competition are an independent (and substantial) topic. Note that even with respect to monopolies – in the context of which market harms are particularly salient – there is no necessary connec­ tion between commutative justice, market harms, and fair competition. This is because monopolies might form without any market harm being incurred. An example is the merging of two companies. The two remain­ ing sellers in a certain market might decide to merge by means of one company buying all of the shares of the other company, but without this in any way implying that the company which is bought lost the com­ petition against the buying company. For example, tax-based reasons might underlie the choice to have the acquisition this way rather than the other way around. Thus, although monopoly formation based on market exchanges may involve market harms of the squeezed-out competitors, it does not have to. Because commutative justice on the one hand and market harms and fair competition on the other hand are distinct issues, and because my preoccupation is with the former, I will ignore market harms in the following.

5.2 The Effects of Using Market Power The main thing that distinguishes monopoly markets from competitive markets from an economic perspective is that the monopolist has market power. Basically, all this means is that the monopolist has more leeway in pricing his products than firms in a competitive market. Notably, he has a greater power to raise the price of his products without losing profit. Unlike firms in a competitive market, a monopolist is not a passive price taker who more or less takes the market price as given and only decides how much output he wants to produce at that price. The monopolist is a price setter.4 Consider that in a competitive market for a homogenous product, whenever you raise the price of your product above the price that other firms are asking, you will lose customers to your competitors and thus make less profit. This is simply because customers ceteris paribus pre­ fer cheaper options. However, if you are a monopolist and raise the price of your product, customers cannot simply turn to other produc­ ers. That is, while you will probably sell fewer units of your product if you raise its price (simply because some people will not be able or willing to buy any longer), you will also gain a higher price per unit

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sold. A profit-maximizing monopolist tries to strike the optimal balance between these two effects. Typically, the consequence of the monopolist exercising his market power will be that the price of the product will be higher and the quantity traded lower in comparison to perfectly competi­ tive markets. In Figure 5.1, the flat line at the arbitrary value of p = 4 signifies the hypothetical competitive market price of good x. It also indicates how much additional revenue each additional unit sold would create in the competitive market. Namely, for every additional unit sold, firms would receive a constant additional revenue of 4. The upward-sloping line C on the other hand shows how much it costs the monopolist to produce one additional unit. As revenue minus costs equals profit, the shaded triangle represents the monopolist’s profit if he were to produce at the competi­ tive level. By raising the price to pM, the monopolist makes additional revenue per unit sold. This leads to a positive effect on profits. The value of the additional profit is given by the striped rectangle. But the monopolist also loses some profit, namely the area of the striped triangle. This area repre­ sents the negative effect on profits due to fewer people buying the prod­ uct. As long as the striped rectangle is bigger than the striped triangle, it pays off for the monopolist to charge an even higher price and accept an even lower quantity traded.

price of good x C

pM p=4

p

D

qM

q

Figure 5.1 Profit maximization in competitive and monopoly markets

quantity of good x

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To summarize, the expected effect of a series of market exchanges establishing one company as a monopolist is twofold. First, there is a price increase: all those still able or willing to buy the product will have to pay a higher price. Second, there is a contraction of supply: some buy­ ers who previously bought the product will be excluded from the market. At the higher price, they do not want to buy the product any longer – or they simply cannot. We expect to see these effects because the monopolist has an incentive to use his market power in such a way as to raise the price above the level that would prevail in a competitive market. Doing so increases his profits. With respect to the executional conditions of commutative justice as given in Chapter 3, we can easily see how such use of market power might be normatively problematic. For instance, one might want to judge exchanges taking place at comparably higher monopoly prices to be exploitative and thus commutatively unjust. If an exploitative exchange is a mutually beneficial exchange featuring offer and acceptance, but for which the terms of exchange are such that one party is able to unfairly take advantage of the other (e.g. by benefiting more than it should), then it looks like monopolies might often give rise to exploitative exchanges. Namely, one could argue that the monopolist raising the price above the competitive market level does exactly this: to take unfair advantage of the buyer by using his market power to raise the price. This move trans­ fers some part of what initially was the buyer’s surplus from the exchange and turns it into additional profit for the seller. Furthermore, some exchanges in which the monopolist uses his market power to dictate a price might be coercive. Consider the oasis case as discussed both by Nozick (1977, 180–81) and Hayek (1960, 136). A monopolist could exercise true coercion . . . if he were, say, the owner of a spring in an oasis. Let us say that other persons settled there on the assumption that water would always be available at a reasonable price and then found, perhaps because a second spring dried up, that they had no choice but to do whatever the owner of the spring demanded of them if they were to survive: here would be a clear case of coercion. (Hayek 1960, 136) As the good exchanged in the oasis case is an “essential” or “vital” good, the monopolist may rely on this characteristic to use his market power coercively. In concrete terms, the owner of the sole spring might present the other people at the oasis with the following choice. “Either you pay me $100,000 per bottle filled at my spring, or you are not allowed to fill your bottles at all”. Arguably, this is a threat and not an offer, as demand­ ing such a high price for a vital good makes the other people worse off than they normally are or ought to be in the pre-announcement situation.

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Consequently, it leads, if acquiesced to, to a coercive exchange. Charging such a high price would not be possible if there were competitors around. So, it is clear how monopolies might turn out normatively problematic. It would be wrong, however, to conclude at this point that, because monopolies are somewhat likely to spawn exploitative or coercive exchanges, monopolies are a reason of commutative injustice. Higher prices, a contraction of supply, exploitation and coercion on the basis of wielded market power – all of these are contingent consequences of monopoly formation. It is the monopolist’s choice of a price to charge for his product which underlies the normatively problematic effects. Put differently, there might also be benevolent monopolists and monopolies which are entirely unproblematic as regards the issues just discussed. Even if a certain monopoly actually spawns, say, coercive exchanges, this is not sufficient to consider the market exchanges which established the monopoly commutatively unjust. Because there is the intervening pric­ ing choice of the monopolist, the market exchanges which caused the monopoly cannot equally be said to have caused a coercive monopoly. Market exchanges causing the formation of a monopoly merely enable the coercive exchanges emerging within the monopoly. Consequently, even if coercive monopolies are harmful, the exchanges bringing them about are not consequentially unjust according to our conception of com­ mutative injustice. All of this is to say that those reasons most commonly cited and most widely discussed for why monopolies are problematic are not sufficient to ground the commutative injustice of market exchanges causing monopolies. What we can show is that there is a good reason to interfere on regu­ latory grounds with exchanges causing monopolies in markets for vital goods. Namely, doing so might prevent exploitative or coercive monopo­ lies in an area in which they are particularly likely to arise. This is because in monopoly markets for vital goods, the theoretically predicted price increase due to monopoly formation is particularly pronounced. We can see why that is by looking at Figure 5.2. An economic approach to describing how vital certain goods are is to examine their price elasticity of demand. Generally speaking, the price elasticity of demand measures how a 1 percent increase in price affects the quantity demanded (as a percentage). Those goods we need the most tend to have small negative numbers as values for their price elasticity of demand. For example, the price elasticity of water might be around −0.01. That is to say that even if the price of water increases by 100 per­ cent, the quantity demanded only drops by 1 percent. Generally speak­ ing, the demand for vital goods is extremely price inelastic. Still, the exact value might vary. In an everyday situation, in which are able to substitute water with milk, our price elasticity of water will be greater than when we are traveling through the desert and have already consumed all the

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drinks we brought along. In the latter case, the vital good is even more vital so to speak and our demand for it even more price inelastic. A way to represent a more price inelastic demand function in a dia­ gram like that of Figure 5.2 is to draw a comparably steep demand curve. That is, whereas Dnorm in Figure 5.2 might represent our demand for water in an everyday situation, Ddesert illustrates the demand function for a traveler in the desert. Comparing these two demand functions and the monopoly profits they allow for we can see the following. The more vital a certain good is, the steeper its demand curve ceteris paribus, and the higher the monopolist will set the price in comparison to the competitive level in order to maximize his profit. This is because ceteris paribus with a steeper demand function, it takes longer until the negative effect on profits due to the contraction in supply (the two triangular areas: striped for the normal case, shaded for the desert case) offsets the positive effect on profits of charging a higher price per unit sold (the two rectangular areas: striped for the normal case, shaded for the desert case). What we see is a somewhat pernicious mechanism to the effect that in those cases in which we are particularly worried about the effects of rising prices, monopolists are expected to raise prices particularly drasti­ cally. This is a noteworthy tendency that may serve to justify regulatory interference with exchanges causing or risking monopolies in markets

price of good x pM desert

C

pM norm

p Dnorm

Ddesert

qM desert

qM norm

q

Figure 5.2 Monopoly profits and price elasticities of demand

quantity of good x

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Commutative Justice and New Harms

for vital goods. But even in monopoly markets for vital goods, there is no necessary mechanism that would render all such monopolies harm­ ful because of the monopolist “automatically” charging coercive prices. Because there is no such automatism, we cannot interfere with exchanges causing monopolies on grounds of commutative justice. To summarize, if the only reason why we oppose monopolies is the exploitative or coercive exchanges they may give rise to, then we have not identified a reason to oppose monopolies as such. As long as the monopolist does not actually charge comparatively higher monopoly prices, there seemingly is nothing wrong with a monopoly market. And as soon as he does, we have a reason to oppose such exchanges that does not refer to the structure of the market in which they are effected, for we have already acknowledged that coercive or exploitative exchanges are commutatively unjust. Consequently, one might hold that consequential considerations as regards monopoly formation actually reduce to execu­ tional considerations about exploitative or coercive exchanges. What we are worried about is the exploitative or coercive exchanges monopoly markets bring about, not monopolies as such. In this case, no additional consequential condition of commutative justice would be needed to deal with the issue of monopolies. In a sense, we could still talk of monopolies as causes of commutative injustice, for market power remains one poten­ tial cause of coercive exchanges. But monopolies would not constitute an independent reason of commutative injustice. We must not forget, though, that just because we have ruled out exploi­ tation and coercion within monopoly markets as being able to ground monopoly formation as a reason of commutative injustice, we have not shown that monopolies never are consequentially unjust. That is, there might be other ways in which monopolies are normatively problematic.

5.3 Monopolies and Domination Consider the following variant of the oasis case. Every morning the owner of the sole spring in an oasis in the mid­ dle of the desert fills the water bottles of the people living there in exchange for the market price of the water. Given that the water just gushes out of a rock, and given that the customers bring the bot­ tles themselves, his production costs are quite low, which is reflected in a very low market price ($0.05 per bottle). Everybody is easily able to afford buying water at this price. Giving them the amount of water they need for one day, he looks at each customer and says: “For you . . . today . . . the price is 5 cents”. He invariantly does so for every member of the community, asking the same price of each, and he has been doing so since years, without any changes in price. Nobody has reason to doubt that this practice will go on as it

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always has. As there is no enforcement agency of any kind around, the owner took securing his property into his own hands. He also is the owner of the sole firearm. Should we consider this a non-harmful instance of a monopoly mar­ ket? As it stands, the owner is not engaging in exploitative or coercive exchanges. For all we know, the exchanges within the monopoly seem to be executionally just. And yet, one might reason that the monopoly is harmful in a subtle way. Note that everybody in the community is aware that his water sup­ ply depends on the goodwill of the owner. To a significant extent, the members are at the mercy of the owner, knowingly vulnerable, for he could easily raise the price of water or withhold the water altogether. When the members are facing the owner each morning, and he looks them over while giving them their share and stating a price, then, as Pettit puts it, “[t]he powerless are not going to be able to look the powerful in the eye, conscious as each will be – and conscious as each will be of the other’s consciousness – of this asymmetry [of power]” (1997, 60–61) – of the asymmetry between owning water and being in desperate need of it. Given that the members of the community have no immunity or security against the market power of the owner, given that they have, to a significant extent, no control as regards their own survival, arguably the monopoly negatively affects the self-image of the members of the community and their intersubjective status in relation to the owner. The monopoly turns the relation between the owner and the other members into a subjugating one. In short, and in Pettit’s terms, the members of the community are dominated by the owner of the spring. A dominating agent is an agent who has the capacity to interfere on an arbitrary basis in certain choices that the dominated agent is in a position to make (Pettit 1997, 52). Monopolists are often prime exam­ ples of dominating agents (1997, 61). To see why, consider that for an agent to have the capacity to interfere, he needs to have the actual (not only potential) capacity to intentionally worsen the situation of the other members of the community. The spring owner (and other monop­ olists like him) clearly has this capacity, because he is able to raise the price for the good he is supplying. Furthermore, the spring owner is able to interfere on an entirely arbitrary basis. He has the power to raise and lower prices randomly and unpredictably – and in a way that discriminates between different buyers. Furthermore, the monopolist does not have to track the “welfare and world-view” of those affected by his pricing decisions (Pettit 1997, 56) Instead, he could decide purely based on his own aim of profit maximization. Finally, he may exercise his power without being subject to democratic controls (Pettit 1999). All of these aspects which make power arbitrary apply to the oasis case and to the owner.

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The oasis case is even a particularly intense form of domination along the four dimensions Pettit (1997, 57–58) gives. We are facing an intense form of domination if (1) the power to interfere rests on an entirely arbi­ trary basis. I have just outlined in which way this is true for the spring owner. If (2) the dominating agent may interfere with ease and without incurring significant costs. In the oasis case, all the spring owner has to do to interfere is to say: “For you . . . today . . . the price is $100,000”. If (3) he can practice effective interference; that is, if he is able both to deny options to the dominated agent and to alter the payoffs of certain options. In our case, the monopolist may withhold water altogether or charge higher prices. And if (4) the dominating agent can interfere with a broad range of decisions of the dominated agent. While many monopolies intuitively seem to be intense forms of domi­ nation along the first three dimensions, prima facie one might think that the fourth dimension neither applies to monopolists in general nor to the oasis case in particular. This is because a monopolist is only able to inter­ fere with the consumption choice as regards one specific good (unless he holds a monopoly in multiple markets). But first, the owner of the spring may interfere with an all-important area: that of survival. Completely without water, there are no choices left after a short time. And second, if he proceeds to charge exceptionally high prices, this will severely affect lots of other choices the targeted community member makes – for exam­ ple, his other consumption choices (for which he has less money to spend) or his vocational choice. You had better have a well-paid job if water is very expensive. In this sense, the spring owner can interfere with a broad range of decisions of the dominated agent. Thus, at least monopolies in markets for vital goods also exhibit an intense form of domination with respect to this fourth dimension. Note that a situation of domination is one in which there is a certain structural relationship between persons such that one person is able to exercise arbitrary power over other persons or groups (Lovett 2001). What counts in order to assess whether a certain situation is one of domi­ nation is not whether power is used in a contingent event. The judgment is not about the intervening choice of the monopolist to actually charge coercive prices. Instead, the mere capacity to interfere, the structural power relation as such, is decisive for this judgment. It is true that the owner might never choose to engage in coercive exchanges. But even if he does not, the exchanges at a comparably low price will always take place in view of his goodwill and in the shadow of his power. He always has the capacity to raise or lower the price of water at his discretion, without the buyers being able to do anything about it other than putting themselves on good terms with him. For the same reasons, the extent of domination present in a situation does not depend on the perceived benevolence (or at least neutrality) of the owner. For it is not an intervening choice of him being kind or stern which is at stake. Consequently, while market

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exchanges cannot be said to cause coercive monopolies, they can cause dominating monopolies. The domination is inherently tied to the monop­ olistic market structure. To conceive of the monopolist as dominating agent reveals why one might think that monopolies as such, and in particular monopolies on vital goods, may be harmful in yet another way than leading to coercive or exploitative exchanges. If one follows this line of reasoning, then one plausibly also thinks that market exchanges causing dominating monop­ olies are candidates for exchanges we should consider consequentially unjust. Yet the question remains whether the harms of domination are suf­ ficient to call for interference by a liberal state. As a political ideal nondomination is, after all, typically linked to republicanism – and thus to a more demanding theory, in the sense of a theory calling for state interfer­ ence more often than liberalism (Pettit 1997, 77–78). Note that it is not required that we become fully fledged republicans to be able to support state interference with dominating monopolies. It is not the case that as soon as a liberal state opts to interfere with domination, it betrays its liberal heritage. All we would have to agree to in order to justify inter­ ference is that at least sometimes domination can be as harmful as to require interference. If we thought that at least sometimes dominating monopolies are as harmful as to call for state interference, this would be enough to make monopoly formation a potential reason of commutative injustice according to our conception – but far from adopting an overall republican stance. Are there such instances of interference-worthy harms in the context of domination? Being dominated first and foremost is a psychological harm. It affects the self-image of the powerless and their intersubjective status in relation to the powerful (Pettit 1997, 60–61). The powerless might feel small, unconfident, dependent, as if they are not persons in their own right compared to the powerful. The members of the desert community will constantly look out for some evil to come – for the owner to actually wield his power – although this might never happen. That is, they endure high levels of uncertainty (Pettit 1997, 82–84). To be dominated means to always keep a weather eye on the powerful, anticipating what they will expect of you and trying to please them. . . . You can never sail on, unconcerned, in the pursuit of your own affairs; you have to navigate an area that is mined on all sides with dangers. (Pettit 1997, 86) Still all the bowings and cringings, all the cunning and flattery in order to please the powerful just do not seem to constitute harms that fall within the scope of a recognizably liberal harm principle. And this is true even in

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this case of intense domination we are considering, which – with respect to the intensity of domination experienced – goes far beyond what any person in a Western democracy might plausibly experience in the regular course of life because of facing a monopolist. First, the psychological harm in question is very small. It is a harm merely of opportunities not taken, as you deny yourself choices in order to secure non-interference by the monopolist for a little longer. Or a harm of anticipatory obedience, of acquiescing to threats that are never uttered. Second, and more importantly, the psychological harm in question would not fall under a recognizably liberal harm principle even if it were bigger. There certainly are ways to come up with a liberal harm principle that encompasses some psychological harms alongside more classical bodily harms. Namely, Ellis’s (1984, 1995) discussion of Fein­ berg’s (1988, chaps. 28–29A) and Thomson’s (1990, 249–59) theories of psychological harms proves helpful in our context. Ellis gives a detailed argument of how causing universally disliked feelings which have “no moral content” (e.g. pain, repugnance, or revulsion) constitutes a viola­ tion of a recognizably liberal harm principle. By contrast, Ellis argues, arousing moral indignation or committing acts of indecency do not vio­ late such a principle, as the disliked feelings caused are feelings “which are the expression of a moral view” (1984, 9). Now the unpleasantness of anticipatory obedience clearly is not on par with the visceral feelings of pain, repugnance, or revulsion. And one might reasonably doubt both whether the feelings of being dependent or feeling the need for cringing have no moral content and are univer­ sally disliked. It strikes me as wrong to assert that the feeling of being dependent is disliked by everybody, in all circumstances, and across dif­ ferent societies. It seems that in very close relationships we can indulge in being dependent. And less individualistic societies which stress the importance of hierarchies think quite differently about the power rela­ tionships of the kind we are considering – even from the point of view of the underling. Thus, we may conclude that the psychological harms in question do not violate a recognizably liberal harm principle. Even if we conceive of the monopolist as a dominating agent, and if we consider intense forms of domination, monopoly formation cannot be a reason of commutative injustice. The monopolist’s arbitrary power over other market partici­ pants on its own is not enough to generate interference-worthy harms.

5.4 Conclusion Monopolies are not the first thing one thinks of when considering the new harms. That might be a common oversight. Like externalities aris­ ing on a global level, the market power of multinational corporations is collectively caused (by billions of individual exchanges), unintended by

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market participants, and a case of dispersed responsibility. In principle, it does make sense to think of the market power of Amazon, Google, Facebook and the like in terms of commutative justice. On the other hand, we have now seen that monopolies are no reason for commutative injustice. If they lead to coercion and exploitation, that is a contingent outcome. If they are instances of domination, then the harms caused are insufficient to warrant interference by a liberal state. What is more, pure monopolies with just one supplier of a certain good are very rare in real life. And as soon as there are at least two suppliers, the pressures of competition have an inherent tendency to counteract market power. Policy-wise, there is one interesting difference between this chapter and the previous one. In the case of externalities, I highlighted that interfering with market exchanges contributing to externalities (e.g. by taxing the good exchanged) is an effective way to deal with the problem, but cannot be done on grounds of commutative justice. For monopolies, interfering with market exchanges does not seem to be a promising way of dealing with the problem in the first place. First, it is often hard to predict in which instances a monopoly might form before it actually forms. Second, in cases in which the monopoly is caused by a series of exchanges, one might ask with which exchanges in particular we should interfere. Only with that exchange which finally breaks the camel’s back in that it drives the would-be monopolist’s last competitor out of the market? Or also with earlier exchanges which equally contributed to the emergence of the monopoly? The answer to the practical question with which exchanges to interfere is tied to questions of collective responsibility (cf. French 1984; Gilbert 1997; May 1992) and to issues of political feasibility I do not want to inquire into here. In any case, to break up the monopoly once it has formed seems to be an easier way of dealing with the problem posed.

Notes 1. I will focus on monopolies as paradigm cases of market power. Intuitively, we can deal in an analogous way with markets in which there is only one buyer (i.e. with monopsonies). 2. One might object that cartels also look like something arising out of market mechanisms – and thus like an appropriate object of analysis given our pur­ pose. But we need to distinguish cartels, which form based on non-exchange contracts which happen outside the market, and conglomerates, which form based on market exchanges. A typical example of the former is for two firms to agree on some form of collusion. A typical example of the latter are merg­ ers and acquisitions (i.e. firms buying other firms). 3. At least if we make some innocuous assumptions, like that all consumers have access to xM, that the consumers make their buying decisions on the basis of the product’s quality, that they are informed that xM exists, is supe­ rior to its alternatives, and so on.

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4. Even a monopolist is not able to raise the price to whatever level he wants. If he sets the price too high, nobody will be willing or able to pay as high a price for the product in question. Put differently, even a monopolist has to cater to its customers.

Bibliography Böhm, Franz. 1933. Wettbewerb Und Monopolkampf – Eine Untersuchung Zur Frage Des Wirtschaftlichen Kampfrechts Und Zur Frage Der Rechtlichen Struktur Der Geltenden Wirtschaftsordnung. Berlin: Carl Heymann. ———. 1960. Reden Und Schriften. Karlsruhe: C.F. Müller. Buchanan, James M., R. D. Tollison, and Gordon Tullock, eds. 1980. Toward a Theory of the Rent-Seeking Society. College Station: Texas A&M University Press. Ellis, Anthony. 1984. “Offense and the Liberal Conception of the Law.” Philoso­ phy & Public Affairs 13 (1): 3–23. ———. 1995. “Thomson on Distress.” Ethics 106 (1): 112–19. Eucken, Walter. 1952. Grundsätze Der Wirtschaftspolitik. Tübingen: J.C.B. Mohr. Feinberg, Joel. 1984. The Moral Limits of the Criminal Law (Vol. 1). Harm to Others. New York: Oxford University Press. ———. 1988. The Moral Limits of the Criminal Law (Vol. 4). Harmless Wrong­ doing. New York: Oxford University Press. French, Peter, ed. 1984. Collective and Corporate Responsibility. New York: Columbia University Press. Gilbert, Margaret. 1997. “Group Wrongs and Guilt Feelings.” Journal of Ethics 1: 65–84. Hayek, Friedrich A. 1960. The Constitution of Liberty. Chicago: University of Chicago Press. ———. 1967. Studies in Philosophy, Politics, and Economics. Chicago: Univer­ sity of Chicago Press. ———. 1973. “The Political Order of a Free People.” In Law, Legislation and Liberty, Vol. 3. London: Routledge & Kegan Paul. Lamont, Julian. 1997. “Incentive Income, Deserved Income, and Economic Rents.” Journal of Political Philosophy 5: 26–46. Lovett, Frank. 2001. “Domination: A Preliminary Analysis.” The Monist 84: 98–112. May, Larry. 1992. Sharing Responsibility. Chicago: University of Chicago Press. Mill, John Stuart. [1859] 1991. On Liberty and Other Essays. Edited by John Gray. Oxford: Oxford University Press. Nozick, Robert. 1977. Anarchy, State, and Utopia. New York: Basic Books. Otsuka, Michael. 2003. Libertarianism Without Inequality. Oxford: Clarendon Press. Pettit, Philip. 1997. Republicanism: A Theory of Freedom and Government. Oxford: Clarendon Press. ———. 1999. “Republican Freedom and Contestatory Democratization.” In Democracy’s Value, edited by Ian Shapiro and Casiano Hacker-Cordon. Cam­ bridge: Cambridge University Press.

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Rawls, John. 1971. A Theory of Justice. Rev. ed. Cambridge, MA: Harvard Uni­ versity Press. Thomson, Judith Jarvis. 1986. Rights, Restitution, and Risk. Cambridge, MA: Harvard University Press. ———. 1990. The Realm of Rights. Cambridge, MA: Harvard University Press. Tullock, Gordon. 1967. “The Welfare Costs of Tariffs, Monopolies, and Theft.” Western Economic Journal 5: 224–32. Worstall, Tim. 2015. “Markets Work: Martin Shkreli, Daraprim, and Turing Pharma Edition.” Forbes, October 23, 2015. www.forbes.com/sites/timwor­ stall/2015/10/23/markets-they-work-martin-shkreli-daraprim-and-turing­ pharma-edition/.

6

Lockean Provisos

According to Nozick (1977, 178–79), every theory of how to acquire unowned things featuring a proviso to limit uncontrolled appropria­ tion must also incorporate a similar proviso as regards subsequent transfer. Not only justice in acquisition but also justice in transfer should be guided by a proviso to leave “enough and as good” for others. If Nozick is right, then even if our purpose is not to discuss initial appropriation, one of the notorious principles of justice in that domain also casts its shadow on the domain of commutative justice. And in light of the new harms – which often predominantly affect those countries who suffered most from colonialist countries’ “initial appropriation” some hundreds of years ago – it certainly seems as if Nozick has a point. It is the purpose of this chapter to examine whether market exchanges that violate the Lockean proviso should be considered commutatively unjust. I first discuss how a proviso on exchange follows from a proviso on appropriation (section 6.1). I find that talk of the proviso on appro­ priation also governing exchange is misleading. Instead, the best way to conceive of a Lockean proviso governing exchange is to conceive of it as a separate but related proviso, which emanates from the same concerns as the one on appropriation. I proceed to analyze how market exchanges fare with respect to such a Lockean proviso on exchange (section 6.2). This analysis is tripartite. It corresponds to the three aspects of Locke’s classic proviso on appropriation, which is not only about leaving enough and as good for others, but also features a non-waste condition and thoughts on what an adequate appropriative process looks like. I find that executionally just market exchanges do well as far as the process goes, but might violate the other two conditions of an analogous proviso on exchange. But even if they do, the ways in which they do are reduc­ ible to other conditions of commutative justice we have encountered or will encounter elsewhere in this book. Thus, a Lockean proviso on exchange as independent consequential condition of commutative justice is superfluous.

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6.1 From a Proviso on Appropriation to a Proviso on Exchange When discussing how we may legitimately appropriate external resources for the first time, Nozick (1977, 174–78) spends some time examining Locke’s theory of the initial appropriation of property as set out in the second Treatise ([1689] 1988). Nozick quickly discards Locke’s idea of mixing one’s labor with external objects as the adequate appropriative process. Also, he only mentions Locke’s non-waste condition for legiti­ mate appropriation in a skeptical attitude. That is, he brushes aside two aspects of Locke’s original proviso limiting initial appropriation. How­ ever, he adopts a version of Locke’s idea that we have to leave “enough and as good . . . in common for others” ([1689] 1988, II, §27) when turning unowned external resources into private property. Nozick does not adopt this idea in a literal way. According to him, we should only make sure not to violate the weaker constraint that the situ­ ation of others should not, on balance, be worsened by a certain initial appropriation. The “on balance” refers to the idea that when we are considering the effects of an initial appropriation, we should take into account the potential benefits that might arise for a person because of this initial appropriation, and weigh these against the negative effects the appropriation might have for that person. If we follow Nozick, then [a] process normally giving rise to a permanent bequeathable prop­ erty right in a previously unowned thing will not do so if the position of others no longer at liberty to use the thing is thereby worsened. (Nozick 1977, 178) This is Nozick’s Lockean proviso – a principle of justice in the context of initial appropriation. Nozick states that “any adequate theory of justice in acquisition” (1977, 178) will contain a similar proviso. If initial appropriation were not restricted, then it would be possible for a single agent to justly appro­ priate all of the world’s stock of a vital resource; say, drinking water. Very plausibly, however, such an initial appropriation would worsen the situation of those in need of drinking water (i.e. everyone), but without a legitimate claim on it (i.e. everyone but the appropriator). Even to barely survive, they now would have to give something in order to gain access to water. This clearly was not the case when the water was still unowned. Thus, such an initial appropriation would likely violate the proviso.1 Nozick’s proviso has been widely criticized. Among the most promi­ nent points of criticism are, first, Nozick’s exclusive focus on material welfare when determining whether a certain appropriation worsens the situation of others (e.g. Cohen 1995, 67–91). Second, Nozick’s exclusive

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reliance on a regime of common ownership as the standard of compari­ son when judging how, on balance, the situation of others is worsened (e.g. Kymlicka 2002, 110–20). And third worries of inconsistency. Many commentators have argued that how Nozick conceives of his proviso is inconsistent with advocating purely historical principles of justice (e.g. Bogart 1985; Steiner 1977, 44–46; Waldron 1990, 278–80). However, there also is widespread agreement as regards some aspects of Nozick’s argument. First, virtually everybody seems to agree that some sort of Lockean proviso is needed in order to govern initial appropria­ tion.2 The literature on alternative proposals is immense (e.g. Arthur 1987; Bogart 1985; Cohen 1995; Kernohan 1988; Mack 1995; Otsuka 1998; Schmidtz 1990; Vallentyne 1997; Wenar 1998). In addition, Noz­ ick’s reinterpretation of Locke’s idea of leaving “enough and as good” in terms of a non-worsening condition, and his emphasis that this is the main point of the proviso, is followed even by his most fervent critics (Cohen 1995, 75). The entire debate surrounding a proviso on appropriation becomes relevant for us in that Nozick, right after his discussion of Locke and the legitimate initial appropriation of property, makes the following addi­ tional claim. A theory which includes. . . [a] proviso in its principle of justice in acquisition must also contain a more complex principle of justice in transfer. . . . If my appropriating all of a certain substance violates the Lockean proviso, then so does my appropriating some and purchas­ ing all the rest. (Nozick 1977, 179) What Nozick suggests is that compliance with the Lockean proviso is also necessary in order to justly exchange privately owned things once all initial appropriation is done. “Each owner’s title to his holding includes the historical shadow of the Lockean proviso” (1977, 180). That is, we might not be able to justly buy or sell a certain good if this would violate the Lockean proviso. As much as the proviso is part of any plausible theory of justice in acquisition, it is a part of any plausible theory of justice in transfer – and thus of every plausible conception of commuta­ tive justice. The thought motivating Nozick’s claim seems to be the following. Whatever we are trying to avoid with a proviso on appropriation (a classic instance of harming) could likewise emerge from a large num­ ber of exchanges (a new harm). An agent could purchase, little by lit­ tle, everybody else’s title to drinking water, thus ending up as the sole owner of all the world’s supply of drinking water. In this exchanging scenario, just as in the initial appropriation scenario, the situation of all those in need of water but bereft of a legitimate title to it seems to

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have worsened. It would be “the combination of the original appropria­ tion plus all the later transfers and actions that violates the Lockean proviso” (1977, 180). Naturally, this suggested extension of the proviso to the domain of jus­ tice in transfer inherits the perceived weaknesses of Nozick’s unextended proviso: the purely material focus, common ownership as the baseline for comparisons, and potential inconsistencies within Nozick’s entitlement theory. But there is an additional criticism that only arises in view of this extension. For one might doubt whether Nozick’s claim that the proviso also governs the domain of justice in transfer indeed can be conceived of as an extension of the proviso – leaving us with one proviso overall, but which regulates both justice in acquisition and in transfer – or whether in the domain of justice in transfer we face a related but separate proviso. In that case, there would be two Lockean provisos, so to speak: one govern­ ing justice in acquisition and the other one governing justice in transfer (and thus also commutative justice). A separate second proviso does not seem to be what Nozick has in mind given that he talks of the shadow the Lockean proviso casts on subsequent exchanges. But I think it makes more sense to conceive of two separate but related provisos which emanate from the same con­ cerns. Even if one holds that subsequent exchanges need to be regulated in ways similar to how we want to regulate initial appropriation, making this point by saying that the Lockean proviso on appropriation is the principle of justice that has to be met to this effect is misleading, because it ignores an important difference. Namely, we are talking of two differ­ ent actions we aim to regulate. On the one hand, the initial appropria­ tion of external resources; on the other hand, the exchange of privately owned things. It seems rather likely that two actions which are as different as these are answerable to different principles of justice. Come to think of it, the act of initially appropriating previously unowned things is unique in the moral domain in that it is able to unilaterally create duties for others; for example the duty to respect other people’s property (not to destroy it, not to use it, etc.) (cf. Waldron 1990, 260–62). Intuitively, an act able to unilaterally create duties for others ceteris paribus is more likely to give rise to normative concerns than acts which unilaterally create duties for ourselves (e.g. making a promise) and acts that bilaterally create duties (e.g. entering into a contract with somebody). Consequently, it seems like we would want to restrict the possibility of performing acts of the former kind in more severe ways than acts of the latter kinds. But if all of this is true, then a principle of justice governing appropriation should not simply be extended to also govern exchanges, precisely because the actions regulated seem to call for a different extent of regulation. In light of this difference, Nozick’s strong conclusion that “[i]f the proviso excludes someone’s appropriating all the drinkable water in the world,

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it also excludes his purchasing it all” (1977, 179; my emphases) does not follow. Given this criticism of simply extending the proviso, one might be tempted to conclude that we do not need a proviso on exchange at all. That would be rash. We should be more charitable towards Nozick’s claim that any adequate theory of justice featuring a proviso on appropri­ ation must also contain a more complex principle of justice in exchange reflecting that proviso’s shadow. One way to do so – but to still take into account the criticism made – is to deny that it is the same proviso govern­ ing both appropriation and exchange. Instead one could conceive of the proviso on exchange as a related but separate proviso, which emanates from the same concerns as the one on appropriation. How would such a Lockean proviso on exchange look? Given the dis­ cussion surrounding Lockean provisos on appropriation, the core of such a proviso on exchange seems clear. It must proscribe those exchanges which, on balance, worsen the position of others. At the same time, I think that we are well advised to revive those aspects of Locke’s proviso that Nozick as well as his critics and successors largely ignored. That is, if recent Lockean provisos focus on the non-worsening aspect of Locke’s proviso, we should re-emphasize the two other aspects Locke’s original proviso incorporates. The first is the non-waste condition (Locke [1689] 1988, II, §31). According to Locke, we are not allowed to acquire by initial appropria­ tion more than we can make use of. For a proviso on exchange, that translates into exchanges which must not be such that they would allocate goods to where they are wasted. The second aspect is Locke’s insistence that external resources be appropriated using the right kind of appropria­ tive process ([1689] 1988, II, §32, §38). Not just any imaginable process is adequate for founding ownership. The grabbing of resources, that is, to secure disproportionate shares by means of an easily executed process repeated rapidly and extensively, is prohibited. A proviso on exchange featuring a similar non-grabbing condition would rule out certain pro­ cesses of transferring property as illegitimate. Many things speak in favor of reviving those two aspects. First, I think Nozick unduly shoves the non-waste condition aside and thereby sets a bad precedent. Literally all he does is to ask a question intended to be rhetorical: if the non-worsening condition “is met, is there any motiva­ tion for [Locke’s] further condition of nonwaste?” (1977, 175–76). But I, for one, do not immediately see the answer to that question. For instance, it might be problematic to express all those worries related to a sustain­ able use of the terrestrial resources in terms of worsening somebody’s position. Second, both conditions limit the extent to which just appropri­ ation/exchange may take place. By including them we make sure not to propose an unduly weak proviso. And the stronger the proposed proviso, the more noteworthy the finding that market exchanges do not violate it

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in ways troubling for us. Third, by reviving those aspects we make sure to propose a proviso that reflects more of Locke’s original concerns, and thus can be called Lockean in a fuller sense. This is then our question for what follows. Will executionally just mar­ ket exchanges ever violate a proviso on exchange thus understood – that is, a tripartite proviso which proscribes worsening somebody’s position by exchange, wasteful allocation of goods by exchange, and exchanging processes prone to grabbing?

6.2 A Proviso on Exchange Non-grabbing One of the main concerns underlying the establishment of a proviso on appropriation seems to be the fear that some single agent might too easily be able to grab a disproportionate share of natural resources and acquire absolute property rights over them to the detriment of slower or future people. To this effect, it is important to notice that the kind of appropria­ tive process we regard as possessing the power to found property rights limits the extent of appropriation just as much as, say, a non-worsening condition. That is, the appropriative process itself plays a very important role in determining the possible outcomes of initial appropriation. Interestingly, with respect to discussions of initial appropriation of land, many people seem to start out from the idea that erecting a fence around a certain piece of land is a perfectly legitimate appropriative pro­ cess able to establish property rights. The (explicit or implicit) idea that this is all that needs to be done from the process-perspective in order to establish ownership can be found, for example, in Kymlicka (2002, 111–21), Cohen (1995, 75–82), and Schmidtz (1990, 511–12). How­ ever, if erecting a fence around a certain piece of land is a legitimate appropriative process, then we cannot avoid the conclusion that – from a process-perspective – this is a rather easy, fast, and cheap way of secur­ ing property rights. Consequently, it is a process which is very prone to grabbing. Locke himself was quite aware of the possibility to limit grabbing via denying certain processes the power to found ownership. Locke is a proponent of a labor theory of appropriation. According to Locke, sim­ ply enclosing a piece of land and defending it (“first claim”, e.g. Hume [1740] 1896, 490) is not enough to found a property right – and neither is living on it (“first occupancy”, e.g. Pufendorf [1673] 1991, 84). He holds that “[a]s much Land as a man Tills, Plants, Improves, Cultivates and can use the Product of, so much is his Property. He by his Labour does, as it were, inclose it from the Common” ([1689] 1988, II, §32). It is by labor that we come to own a piece of land, not by erecting a fence around it. If someone only fences a piece of land, then “this part of the

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Earth, notwithstanding Inclosure, . . . might be the Possession of any other” ([1689] 1988, II, §38). Now, when Nozick discards Locke’s theory of appropriating some­ thing by mixing one’s labor with it, there are good reasons for doing so. For instance, Locke’s examples of labor – picking up fallen acorns or immersing one’s head into a stream – are not convincing examples of labor, for they seem to be insufficiently strenuous. We might also agree with the thrust of Nozick’s example of pouring one’s tomato juice into the ocean and thereby appropriating it – namely, that Lockean labormixing itself might allow for too easy, fast, and cheap an appropriative process which furthers grabbing (1977, 175).3 But this does not mean that we should throw overboard Locke’s gen­ eral insight that the process itself plays an important role for questions of justly acquiring (and redistributing) property. For instance, processes differ with respect to the costs the would-be appropriator incurs when performing them; with more costly processes, be it only in terms of time invested, being less liable to further grabbing. It is easy, fast, and relatively cheap to erect a fence in order to appro­ priate an unowned piece of land. And there are processes which share these characteristics in the domain of subsequent transfers of private property. Consequently, they are equally prone to grabbing. Think of theft, coercion, or deception. But I do not see how executionally just market exchanges might somehow favor grabbing and thus violate the non-grabbing aspect of a Lockean proviso on exchange. If you rely on executionally just market exchanges, you cannot acquire property rights over a piece of land by doing and investing almost noth­ ing. Instead, for every new acquisition you make, you will always have to give something valuable in return. In addition, you will first need to find somebody with the right to sell the good you desire, and who consents to selling it to you at the market price without relying on force, coercion, exploitation, or deception. This is quite a costly transfer process. Even to the rich this process of acquiring ownership of privately owned goods is cheap only in a relative sense. Based on the amount of money they can dispose of, buying some good at the market price will often seem a relatively easy and cheap way of acquiring something; especially if compared to the larger percentages of their income less wealthy people have to spend to buy the same goods. Still, we should not conclude that the rich are able to “grab” by means of market exchanges. This is because we need to distinguish two differ­ ent cost-benefit ratios when judging whether a certain acquisitive process violates the non-grabbing condition. On the one hand, there is the ratio of the costs incurred relative to the value of the good acquired. On the other hand, there is the ratio of the costs incurred to how much people are able to spend overall – with different people having unequal amounts to spend.

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Locke’s concerns are about the former ratio. Consider again why Locke opposes enclosing land as inadequate. Whereas in relation to the value of a piece of land it is relatively speaking costless to enclose it, the same is not true for laboring it. In addition, Locke stresses that human labor drastically adds to the value of external resources. According to him, between 90 percent and 99.9 percent of the use-value of the world’s external resources are due to humans laboring on them (II, §40; II, §43). This might be an overstatement, but it clearly shows the underlying line of thought. Enclosing is prone to grabbing as the process is too cheap with respect to the value of what is acquired. Working the land is not.4 Thus, even if it is relatively cheap for the rich to buy things at the market price given their overall available funds, this is not where the problem of grabbing lies. As long as the costs incurred in the course of the process adequately reflect the value of what is acquired, the acquisi­ tive process is appropriate in that it does not allow for too easy grabbing. Market exchanges meet the non-grabbing condition of a Lockean pro­ viso on exchange.5 Curiously, all acquisitive processes with high transaction costs likewise are not prone to grabbing. That is something transaction-cost-intensive processes have going for them. But this advantage is connected to a sig­ nificant disadvantage. Whereas the costliness of market exchanges always is in someone’s favor (the costs of the buyer are the benefits of the seller), the high transaction costs of other processes benefit nobody. Non-worsening The non-worsening condition is Nozick’s (1977, 175 ff.) weaker inter­ pretation of Locke’s idea to leave “enough and as good . . . in common for others” ([1689] 1988, II, §27).6 The key thing Nozick wants to prevent is a worsening of the position of other people resulting from a certain property-right-altering act. In the case of an initial appropria­ tion, the property right change is that of an unowned thing becoming private property. In the case of a subsequent exchange, the property right change is that of two people exchanging their property rights for two goods.7 Overall, one might expect that subsequent market exchanges fare better with respect to meeting the non-worsening condition than acts of initial appropriation. This is because for market exchanges, one very important source of a worsening of position – the creation of new duties for third parties – does not apply. In the case of market exchanges, rights and duties are not created but exchanged. The seller loses the liberty to use the good he is selling; the buyer loses the liberty to use what he is giving in return. Apart from that, nobody else’s liberty to use the good exchanged is further restricted or his position thereby worsened.

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This does not mean, though, that executionally just market exchanges never worsen somebody’s position. They will not do so immediately, for in the absence of force, coercion, deception, and exchanging which hap­ pens at the market price, there just are not many scenarios left as to how this should happen. One might think of a scenario in which either party’s subjective eval­ uation of the good exchanged might differ from the market value – or might be based on more than just the good’s material value. But even these differences in evaluations do not lead to a worsening of position. For in a situation devoid of force, coercion, exploitation, and decep­ tion, the buyer only consents to the exchange if he thinks the good exchanged is worth more than its market price (i.e. if he thinks he is making a good deal). Similarly, the seller will only consent to exchange if she thinks the good is worth less than its market price. Therefore, even if we highlight the importance of subjective exchange values, no worsening is likely to occur.8 Or one might think of a scenario in which both parties are mistaken about what they are exchanging. But even in this case no worsening seems to happen, as performing an executionally just market exchange requires that the good be exchanged at its market price, and not at the market price of the good the exchanging parties think they are exchang­ ing. It is still the case that buyer and seller end up with the same amount of value as before. To be sure, in a combined scenario (misinformation plus differing sub­ jective evaluations), either the buyer or the seller might feel their position to be worse after the exchange. Consider the håkjerringkjøtt case again. If shark meat was exchanged at the market price of shark meat (pshark), but the buyer thinks he has bought whale meat at pshark, then it might well be that his subjective exchange value of shark meat, vshark, lies below pshark. That is, he would not have consented to buying shark meat at pshark. But even then he can just proceed to resell the shark meat, restoring his previous position.9 This positive picture of executionally just market exchanges not being involved in any worsening changes drastically if we also consider the mediate effects for third parties. What, for example, if the good exchanged contributes to an externality like global warming (see Chapter 4)? Also, executionally just market exchanges might contribute to the formation coercive monopolies (see Chapter 5). Surely this worsens some people’s position. By way of anticipation, here are two other ways in which executionally just market exchanges might be perceived to violate the non-worsening condition. First, there is the issue of inequality. If some people exchange a certain good (say, labor) on favorable terms, those unable to exchange the good on the same favorable terms might feel like their position is worsened because of those other people’s exchanging. For example,

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if some people secure high wages and others low wages, the material wealth these groups respectively hold will differ drastically over time. Surely there are ways in which one might think that such inequalities worsen the position of those less well off. Chapter 7 will deal with the issue of inequality. Second, there is the issue of commodification. Exchanging a good for money might be perceived to negatively affect that good’s value so that the position of those caring a lot about that good is thereby worsened. If the Catholic Church sold the Shroud of Turin or somebody bought the Black Stone of the Kaaba, then arguably this would worsen the situation of millions of Christians or Muslims around the world. In cases like this, it is not the fact that a good once has been appropriated which seems problematic, but that it is exchanged. Chapter 8 will deal with worsen­ ings like this. It is with respect to cases like externalities, monopolies, inequality, and commodification that the reasoning alluded to above applies. Yes, market exchanges may violate the non-worsening condition. But the different ways in which they do can better be discussed individually instead of under the overarching heading of “violations of the Lockean proviso”. The preceding analyses of externalities and monopolies may serve as examples. The analyses of inequality and commodification yet to come will be conducted along the same lines. This is what I mean when I say that, insofar as one wants to establish a Lockean proviso on exchange as a consequential condition of commutative justice, its non-worsening con­ dition is equivalent to other consequential conditions we have encoun­ tered or will encounter. If we find the non-worsening condition of a Lockean proviso on exchange to be reducible to other conditions of commutative justice dis­ cussed in this book, this is in fact not a very surprising finding. The indi­ vidual issues examined here are widely debated precisely because people are aware that market exchanges might worsen some people’s position in the respective ways. If the existing literature had failed to capture an important way in which market exchanges might worsen some people’s position, this would have been the surprising finding. So let me conclude on the non-worsening condition with the only other potentially worrisome effect of executionally just market exchanges I can think of which is not treated elsewhere in this book, but which might plausibly be dealt with under the heading of a non-worsening proviso. This is the issue of a change in the direction of duties. Exchanges affect whom we owe the respect of his or her rights. Unlike in the extreme case of monopolization, we can think of cases in which the direction of duties changes only on a small scale without this thoroughly affecting the overall distribution of ownership rights. That is, although there is a change in the distribution of rights and thus in the direction of duties, no market power is created. For example, I might live in a

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rented flat owned by A, and then A sells the flat to B without this break­ ing my status as a tenant. In this case, I suddenly owe the monthly rent to B. Such a change in the direction of my duty to pay rent might be disagreeable for me. Say I despise B because of some characteristic of his and, therefore, cannot stand to further his wealth. So it seems like my situation has worsened. Either I need to look for a new flat or I have to regularly overcome my reluctance to give money to B – neither of which I needed to do before. At the same time, I cannot think of a case in which a change in the direction of duties as such would wrongfully worsen someone’s position in a way that calls for state interference.10 First, no wrongful worsening takes place, for the Volenti maxim seems to apply. Presumably, if we engage in dealings with exchangeable property rights (leasing, renting, etc.), we consent to the risk that disagreeable changes in the direction of duties due to ownership changes might happen. Consequently, we are not wronged by such a worsening. But even if someone could cogently argue that he did not consent to such potential worsenings, there is a separate reason why a change in the direction of duties does not call for state interference. It has to do with the proper attitude a liberal state should exhibit towards its citizens; notably, with how to recognize and treat them as equals. As Carter (2011, 538–40) argues, finding a sense in which citizens are equal so that it is appropriate to treat them as equals is actually harder than one might think, given the many ways in which actual citizens empirically differ. But one basis for equality is to adopt a particular inter­ pretation of the idea of respect, which requires the state to view citizens “simply as agents” (2011, 557) or as “opaque” (2011, 552). What Carter means by this is that the state must not look too closely at certain char­ acteristics of its citizens. It has to avoid looking inside them to equally respect them. In line with Kant in the Metaphysics of Morals, Carter argues that respect involves, at least in the public sphere, to maintain “a proper distance” (Kant [1797] 1991, 215). Whereas in my “thick” relation with my new landlord B, I will engage with B as more than sim­ ply an agent (discovering certain characteristics of his that I despise and which underlie my judgment that my situation has been worsened), and while this seems to be appropriate for me, such an attitude is inappropri­ ate for the state. “In the context . . . of a politically liberal conception of justice . . . opacity respect is . . . the appropriate attitude” (Carter 2011, 554). It involves abstaining from judging citizens in any way but simply as agents without particular (laudable or despicable) characteristics. It is no business of the state to look so closely at its citizens as to allow for perceiving a change in the direction of duties to be a worsening, for in so doing the state cannot uphold the ideal of equality (Carter 2011, 557). Thus, the state needs to remain impartial when it comes to the question of whom duties are owed.

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Non-waste According to Locke, we are not allowed to appropriate things so that part of our overall property simply lies waste. God has given us all things richly. . . . But how far has he given it us? To enjoy. As much as any one can make use of to any advantage in life before it spoils; so much may he by his labour fix a Property in. Whatever is beyond this is more than his share, and belongs to others”. (Locke [1689] 1988, II, §31) For a proviso on exchange, this seems to imply the following thing. We must not exchange in a way that would reallocate goods to where they are wasted. Instead, exchanges complying with the proviso have to be such that the resulting reallocations are productively efficient. Ideally, the goods exchanged would end up with those people possessing the highest productive efficiency for them, that is, who are able maximize outputs relative to the inputs they are given, so that nothing is wasted. Market exchanges seem to do particularly well in this respect. Even critics of the market acknowledge its productive efficiency, and efficiency considerations form the core of many arguments in favor of market systems (Herzog 2013; Sen 1985). In particular, it is the price system (i.e. exchanging at the market price) which is responsible for market exchanges doing exceedingly well with respect to the non-waste condi­ tion. Hayek (1945) famously describes how the price system contributes to productive efficiency. Assume that somewhere in the world a new opportunity for the use of some raw material, say tin, has arisen. . . . All that the users of tin need to know is that some of the tin they used to consume is now more profitably employed elsewhere, and that in consequence they must economize tin. . . . If only some of them know directly of the new demand, and switch resources over to it, and if the people who are aware of the new gap thus created in turn fill it from still other sources, the effect will rapidly spread throughout the whole eco­ nomic system and influence not only all the uses of tin, but also those of its substitutes and the substitutes of these substitutes, the supply of all the things made of tin, and their substitutes, and so on. . . . The whole acts as one market, not because any of its members survey the whole field, but because their limited individual fields of vision sufficiently overlap so that through many intermediaries the relevant information is communicated to all. The mere fact that there is one price for any commodity . . . brings about the solution. (Hayek 1945, 526)

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Following Hayek, allocating goods based on their market price ensures productive efficiency like no other method, as prices serve as a measure for the opportunity costs of deploying the good in question elsewhere – and thus allow for comparisons of where the good can be most produc­ tively put to use. It is the knowledge of particular circumstances of time and place which ensures that the non-waste condition is met. This is because only individ­ uals faced with concrete economic opportunities are able to react to the ever-changing economic environment to ensure that nothing is wasted. To know of and put to use a machine not fully employed, or some­ body’s skill which could be better utilized, or to be aware of a surplus stock which can be drawn upon during an interruption of supplies, is socially quite as useful as the knowledge of better alternative tech­ niques. And the shipper who earns his living from using otherwise empty or half-filled journeys of tramp-steamers. . . [performs an] eminently useful function based on special knowledge of circum­ stances of the fleeting moment not known to others. (Hayek 1945, 522) It is this ability of the market price to make dispersed knowledge widely available in a decentralized way which qualifies exchanges at the market price to meet the non-waste condition so well. All we need to know in order to meet the non-waste condition is how much more or less certain goods are needed elsewhere. It is always a question of relative productive efficiency if one does not want to waste goods used as inputs for produc­ tion. And it is precisely this relative weighing of where goods are most productively used which is achieved by the price system. Hayek’s explanations highlight how exchanging at the market price has the general tendency to allocate resources in a productively efficient way. It also seems correct to say that this is a tendency no other process in the domain of transfer or exchange likewise possesses. For the bigger domain of transfer, take for example theft or gifts. Neither relies on any signal of scarcity at all. And as for the domain of exchanges, consider for example coercive exchanges or exchanges in a planned economy. They may both integrate signals of scarcity to some extent, but they also ignore them in that the coercer deviates from the market price, and the social planner decides based on political considerations. It seems like no other society-wide process in the domain of transfer and exchange is equally apt to satisfy the non-waste condition. Still, this is not enough to show that market exchanges never violate the non-waste condition. A plausible criticism of market exchanges to this effect is to object that exchange at market price only ensures that goods are allocated to where people are able and willing to pay most. But ability and willingness to pay are unlikely to perfectly correlate with considerations of productive

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efficiency. Put differently, actual markets rarely ever perfectly approxi­ mate the characteristics of ideal markets. Consider the following example of how market exchanges might lead to a violation of the non-waste condition. A very rich person buys an enormous quantity of food at the market price, much more than any per­ son can consume. She does so with the intention to later resell everything she does not eat herself. Maybe she is even speculating that prices will rise in the meantime. Eventually, however, she forgets to resell the food and lots of food perishes. Although she is not the only seller of food, the sheer quantity of food she bought leads to a shortage with the effect that some people starve. This is a violation of the non-waste condition even in view of Locke’s very lenient definition of what constitutes waste. For Locke, it is a per­ fectly fine use of a good if one acquires it with the sole purpose of reselling it later on ([1689] 1988, II, §46). This is enough for Locke to conclude that the good is “enjoyed”, and made “use of to any advantage in life” (Locke [1689] 1988, II, §31). Locke’s spoilation proviso clearly is not a speculation proviso. Locke’s non-waste condition is a very weak one which does not specify an upper limit to human possession. But even based on such a weak proviso, we have to conclude that as soon as the good acquired actually perishes, the non-waste condition is violated. Thus, even if this might be the exception rather than the rule, market exchanges may lead to a violation of the non-waste condition in that they may allocate goods to where they are wasted. Still, violations of the nonwaste condition do not qualify as instances of commutative injustice – for the exact same reasons that externalities are not instances of commuta­ tive injustice. Consider that letting goods one has bought spoil basically is what one might call a non-consumption externality. Such an analogy between consumption externalities and wasting goods is fitting for three reasons. First, because what causes the harmful effect is the non-consumption of a certain good. In our case, the food is neither consumed by the buyer herself, nor is it sold on – both of which are instances of using the good according to Locke. Second, because the harmful effect is incurred by people external to the exchange. Locke is very clear that those harmed by the wasting are the people with no access to the good being wasted ([1689] 1988, II, §31). Third, because the harmful effect is not directly caused by the market exchange (i.e. the buying of the food). Instead, this purchase only enables the harmful effect which only occurs once the buyer neither consumes the good herself nor sells it on (i.e. does not use it in any way).11 The scenario we face in the case of market exchanges leading to a violation of the non-waste condition is analogous to what has been dis­ cussed with respect to externalities above, only that this time it is the non-consumption which is problematic. For the exact same reasons as

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outlined in Chapter 4, market exchanges leading to a violation of the non-waste condition neither wrongfully cause nor risk a harm. Thus, even if we adopt a Lockean proviso on exchange incorporating a nonwaste condition, this does not lead to an additional consequential condi­ tion of commutative justice. This finding, in conjunction with what has been said as regards the non-grabbing and the non-worsening condition, brings us to the overall conclusion that a condition of non-violation of a Lockean proviso on exchange as independent consequential condition of commutative justice would be superfluous on my account.

Notes 1. For an argument that, given the gains in profitability and the corresponding rise of the common standard of living, the latecomers often are the real ben­ eficiaries of initial appropriation, see Schmidtz (2011, 210–11). 2. For a notable exception, see Waldron (1990, 209–18), who argues that the idea of leaving “enough and as good” for others was never intended by Locke to be a limiting condition on the legitimate initial appropriation of property. 3. For a well-balanced account of Locke’s theory of labor-mixing, see Simmons (1992, 236–77). 4. It is unlikely that Locke is concerned about the second ratio. At least his argument against enclosing and in favor of laboring as appropriative process cannot be explained in this way. There just seems to be no manifest reason why those being able to enclose land in a less costly way, relatively speaking (the strong and healthy), would not also be those able to work the land in a less costly way, relatively speaking. Of course, even if interpersonal differ­ ences are not what motivated Locke’s argument against some appropriative processes and in favor of others, one might still hold that this is a relevant concern. I am happy to acknowledge that it is. But here we are concerned with the question of whether executionally just market exchanges ever vio­ late a Lockean proviso on exchange as they allow for grabbing. So I put this issue aside. 5. This is not to deny that land grabbing remains an issue, for example in light of the 2007–2008 world food price crisis. However, we should clearly distin­ guish between land grabbing based on force, coercion, exploitation, etc., and the purchasing of land by means of an executionally just market exchanges. 6. Nozick holds it is weaker in that it ignores that kind of worsening which results from other people no longer being at liberty to appropriate the same external resource themselves. That is, he is only concerned with kinds of worsening which arise out of the newly created ownership right of the appropriator and the corresponding duties for everybody else. But whereas Nozick’s non-worsening interpretation of “enough and as good” might indeed be a weaker condition when we apply the proviso to appropriation, it might turn out to be a stronger condition for subsequent exchanges on a literal reading of Locke. Note that such a literal reading of Locke’s proviso would result in exchanges always fulfilling the “leaving enough and as good in common for others” condition, for by exchanging privately held property, it seems we never affect what is left in common for others. By contrast, there are ways in which market exchanges might worsen the situation of the exchanging parties and third parties.

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7. In the case of initial appropriation, Nozick is comparing the pre-appropriation situation to the post-appropriation situation when checking for worsenings. One might think that, for the case of subsequent exchange, we thus have to compare the pre-appropriation situation to the post-exchange situation in order to be faithful to Nozick’s approach. I think, however, the appropriate comparison is that between the pre-exchange situation and the post-exchange situation. Only this approach isolates the effects of the exchange, which is what we are interested in. This is not to deny that there might be cases in which – post-exchange – we end up in a situation that is both worse in com­ parison to the pre-exchange situation and to a pre-appropriation situation. This might be the case, for example, if exchanging lets us end up in monopoly market for a vital good. Such cases violate both Nozick’s combined proviso on appropriation and exchange as well as my suggested separate proviso on exchange. 8. I again ignore cases of b enefits here (Steiner 2010, 21–23); i.e. cases in which, for example, a seller exchanges some good below the market price because he is in some way altruistically motivated. Ignoring such “generous” exchanges makes sense, for we will hardly find cases in which somebody’s position is meaningfully worsened by a benefit. 9. There has to be at least one alternative buyer around willing to buy the shark meat at pshark. This is because pshark is not determined by the intersection of the supply and demand of misinformed buyers and sellers, but by the sup­ ply and demand curves of those people actually willing to buy shark meat. If there were no other buyer around willing to pay pshark for the shark meat, then pshark would not be the market price of shark meat. 10. If the content of the duty also changes – say, B raises the rent – there might be an issue. But this would constitute an independent market exchange between B and me which needs to be judged separately from the exchange between A and B. 11. As regards the non-waste condition, the fact that there is always an interven­ ing event which actually causes the harm is particularly clear. This is because the exchange of services – for which one might want to deny that there is such an intervening cause between the exchange and the consumption – can­ not be wasteful in a Lockean sense. As mentioned above, what is charac­ teristic for services is that their production, consumption, and exchange all happen at the same time. If this is the case, then no exchanged service can be non-consumed. Thus, it is only the exchange of goods which needs to trouble us with respect to the non-waste condition. And for the exchange of goods there clearly is an action other than the exchange intervening to cause the (non-)consumption.

Bibliography Arthur, John. 1987. “Resource Acquisition and Harm.” Canadian Journal of Philosophy 17 (2): 337–47. Bogart, J. H. 1985. “Lockean Provisos and State of Nature Theories.” Ethics 95 (4): 828–36. Carter, Ian. 2011. “Respect and the Basis of Equality.” Ethics 121 (3): 538–71. Cohen, Gerald A. 1995. Self-Ownership, Freedom, and Equality. Cambridge: Cambridge University Press. Hayek, Friedrich A. 1945. “The Use of Knowledge in Society.” American Eco­ nomic Review 35 (4): 519–30.

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Herzog, Lisa. 2013. “Markets.” In The Stanford Encyclopedia of Philosophy (Fall 2013 Edition), edited by Edward N Zalta. http://plato.stanford.edu/ archives/fall2013/entries/markets/. Hume, David. [1740] 1896. A Treatise of Human Nature. Edited by L. A. Selby-Bigge. Oxford: Clarendon Press. http://files.libertyfund.org/files/342/ 0213_Bk.pdf. Kant, Immanuel. [1797] 1991. The Metaphysics of Morals. Translated by Mary Gregor. Cambridge Texts in the History of Philosophy. New York and Cam­ bridge: Cambridge University Press. Kernohan, Andrew. 1988. “Capitalism and Self-Ownership.” Social Philosophy and Policy 6 (1): 60–76. Kymlicka, Will. 2002. Contemporary Political Philosophy: An Introduction. 2nd ed. Oxford: Oxford University Press. Locke, John. [1689] 1988. Two Treatises of Government. Edited by Peter Laslett. Cambridge Texts in the History of Political Thought. Cambridge: Cambridge University Press. Mack, Eric. 1995. “The Self-Ownership Proviso: A New and Improved Lockean Proviso.” In Contemporary Political and Social Philosophy, edited by Ellen Frankel Paul, 186–216. Cambridge: Needham Heights. Nozick, Robert. 1977. Anarchy, State, and Utopia. New York: Basic Books. Otsuka, Michael. 1998. “Self-Ownership and Equality: A Lockean Reconcilia­ tion.” Philosophy and Public Affairs 27 (1): 65–92. Pufendorf, Samuel. [1673] 1991. On the Duty of Man and Citizen According to Natural Law. Cambridge: Cambridge University Press. Schmidtz, David. 1990. “When Is Original Appropriation Required?” The Monist 73 (4): 504–18. ———. 2011. “The Right to Distribute.” In Anarchy, State, & Utopia Reap­ praised, edited by J Meadowcroft and R Bader, 197–229. Cambridge: Cam­ bridge University Press. Sen, Amartya. 1985. “The Moral Standing of the Market.” Social Philosophy and Policy 3: 1–19. Simmons, A. John. 1992. The Lockean Theory of Rights. Princeton: Princeton University Press. Steiner, Hillel. 1977. “The Natural Rights to the Means of Production.” The Philosophical Quarterly 27 (106): 41–49. ———. 2010. “Exploitation Takes Time.” In Economic Theory and Economic Thought: Essay in Honour of Ian Steedman, edited by J. Vint, J. S. Metcalfe, H. D. Kurz, N. Salvadori, and P. A. Samuelson, 20–29. London and New York: Routledge. Vallentyne, Peter. 1997. “Self-Ownership and Equality: Brute Luck, Gifts, Uni­ versal Dominance, and Leximin.” Ethics 107 (2): 321–43. Waldron, Jeremy. 1990. The Right to Private Property. Oxford: Clarendon Press. Wenar, Leif. 1998. “Original Acquisition of Private Property.” Mind 107: 799–819.

7

Inequality

A common characteristic of virtually all the approaches to the ethics of social arrangements that have stood the test of time is to want equality of something. . . . They are all “egalitarians” in some essential way. (Sen 1992, ix)

It seems impossible to keep silent about the relationship of market exchanges and equality if one wants to present a reasonably complete conception of consequential commutative justice. Given the long tradi­ tion of examining the connection between markets and inequality, ine­ quality might not strike us as a particularly salient example of a new harm. At the same time, highlighting ever new ways in which markets and inequality are connected comes back into fashion again and again – not only in philosophy but also in economics (e.g. Piketty 2014). In fact, it probably has never been out of fashion. In analogy to the preceding chapters, the purpose of this chapter is to address the following question. In cases when market exchanges bring about inequality, should we consider them consequentially unjust because they do so? I will give an unexpected answer to this question; namely, that market exchanges do not create inequality in the first place. This is because market exchanges fulfill the equivalence principle: if we exchange at the market price, then the two goods exchanged are of equal value (section 7.1). If this is the case, then market exchanges do not give rise to (new) inequality, but at most preserve existing inequality (sec­ tion 7.2). Consequently, inequality does not constitute a reason of con­ sequential commutative injustice. After discussing some objections to my argument (section 7.3), I shall highlight an important upshot. If market exchanges do not create inequality, then whenever we are concerned with equality and justice in the context of markets, we should ceteris paribus focus our efforts on equalizing starting positions, rather than on interfer­ ing with the exchanging (section 7.4). I will only talk about monetary inequality in the following, that is, about inequality with respect to material income or wealth. I am aware

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that there are many kinds of inequality worthy of discussion with respect to their relation to market exchanges. But inequalities in income and wealth seem to be most important and most closely associated with market exchanges. Also, they often seem to be temporally prior to other kinds of inequalities – like for example inequalities of opportunity, of capabilities, of status, and so on – and thus provide a plausible starting point for potential additional analyses.

7.1 The Equivalence Principle Consider the infamous colonialist practice of exchanging some glass beads and a bit of shiny cloth for entire estates. Why do we intuitively judge exchanges of this kind to be unjust? One consideration that seems to play a major role is the perceived crass inequality of value as regards the two goods exchanged. “Surely”, one might want to say, “even if the exchanging parties see things differently (and for understandable rea­ sons), estates are worth far more than some glass beads and a bit of cloth. And an exchange can only be just if the two goods exchanged are of equal value”. Call this latter consideration the equivalence principle. Arguments in favor of the equivalence principle as a necessary exe­ cutional condition of justice in exchange have a long-standing and cross-cultural tradition (Aristotle NE V.5; Mauss [1925] 2002, 33–54). However, it is not our purpose here to argue that equivalence indeed is an executional condition for justice in exchange. All we need to show with respect to the issue of inequality as a potential reason of consequential commutative injustice is that, by their very nature, market exchanges satisfy this principle. In his classic treatment of the equivalence principle, Aristotle remarks that in order for there to be just exchange, there has to be equality of value, and for there to be equality of value, we have to be able to com­ pare the two goods exchanged (NE V.5, 1133b17–18). This remark reveals that we actually have to deal with two separate problems. First, the problem of how we are even able to compare the values of what we exchange. Second, the problem of establishing equal values. Let us focus on the first problem first. Comparability Say we want to know whether a portrait painter and one of her custom­ ers engage in an equivalent exchange when they exchange a portrait for money. We might know precisely the aesthetic value of the portrait, and the monetary value of the wad of banknotes the customer is handing over. But this does not mean that we know whether the two values are equal – or whether the values are at all commensurable, and the two goods at all comparable.1 Chang (1997, 5–6) argues that for all comparisons of two

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goods, we need a value with respect to which we compare them, which acts as standard for the comparison. She calls this the covering value for that comparison. After all, there is no notion of comparable simpliciter. “This rod may be greater than that one with respect to length or mass or conductivity, but it cannot be greater, period” (Chang 1997, 6). Given that the we are concerned with equivalent exchanges, it is plausi­ ble that the covering value we are looking for must be a kind of exchange value. That is, for an exchange to be equivalent, the exchange values of the two goods exchanged would have to be equal. But just how should exchange value as covering value be able to make myriad goods and ser­ vices comparable with each other or with money? A preference satisfaction account of exchange value is able to address this issue. Subjective preferences and their satisfaction can be consid­ ered as what grounds exchange value and universal comparability via exchange value. For preference satisfaction views in general, what is of value is desire satisfaction or the fulfillment of preferences (e.g. Brandt 1979; Griffin 1986; Hare 1981). On preference satisfaction views, goods like cars, knowledge, friendship, and so on are valuable as long as they are desired (i.e. as long as their obtainment satisfies a preference) and stop being valuable when they are not desired anymore. Mason (2015) gives the instructive example of a one-person-preference-satisfaction account of value which holds that whatever S desires is valuable. Such an account is foundationally monist in the sense that there is only one thing that con­ fers value – namely being desired by S – but pluralist in the sense that they are many different bearers of value – namely everything that S desires. An intuitive idea about what a good’s exchange value amounts to is that the exchange value of a good is what that good is worth if exchanged for another. In terms of preference satisfaction, this becomes: a certain good’s exchange value for me is the amount of preference satisfaction I can generate by exchanging that good for something else apt to satisfy my preferences. Given that preference satisfaction views are foundationally monist in nature, they are able to address the problem of comparability.2 If the exchange value of everything can be expressed in terms of preference sat­ isfaction, then preference satisfaction may act as that aspect of exchange value which enables each of us to compare goods with respect to how well they satisfy our subjective preferences. The grounding of exchange value in preference satisfaction allows exchange value to function as an appropriate covering value. There are at least four desirable aspects about a preference satisfaction account of exchange value besides the most important one in our con­ text, namely that it allows us to overcome the problem of comparability. First, grounding exchange value in preference satisfaction ties in nicely with the function exchanges fulfill in a society, thus making it a highly plausible approach. As argued above, the function of exchanges is to

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counteract the efficiency-increasing but centrifugal forces of professional specialization and division of labor. Exchanges bring together people producing different things, allowing them to acquire what they need and desire but do not produce themselves. The satisfaction of these desires, which also is an instance of the fulfillment of an exchange’s function, is what constitutes exchange value. Second, endorsing the preference satisfaction approach to exchange value, we do not have to commit ourselves to a general theory of value and value comparisons. The approach is a clearly limited one. Notably, I am not suggesting that all kinds of value come down to preference satis­ faction. All I claim is that exchange value is constituted by preference sat­ isfaction. Put differently, the approach is only regionally monist, but not globally so. This is a much weaker and, I take it, more plausible claim. There might be things which are valuable independently of our desiring them. Also, other kinds of value might require us to behave differently than responding with a desire to acquire – for example, to admire or respect them (cf. Anderson 1993, 1–16). But if we are willing to engage in exchange, that is, if we respond to the value of a certain thing by desiring it, then it seems right to say that the nature of the exchange value of that thing is constituted by preference satisfaction. Third, other widely endorsed accounts of exchange value are not able to overcome the problem of comparability. It is true that proposals of basing exchange value on something objective and interpersonally com­ parable, e.g. the amount of socially necessary labor time it takes to pro­ duce a good (Marx 1969, chap. 6), might provide us with a prima facie appealing solution to the problem of equivalence. This is because we can straightforwardly equalize the amount of socially necessary labor the production of a good requires across goods and people. But such approaches get us into trouble with respect to the analytically prior prob­ lem of comparability. Before we evaluate whether two goods are of equal value, we need to make sure they are comparable. And unless an account of exchange value can give us universal comparability with respect to eve­ rything we exchange, it cannot found a complete account of equivalence. Consider the following example. A person is charging an entrance fee of $100 for access to her land, as there is an absolutely breathtaking viewpoint located on it. Suppose that somebody actually pays this fee in order to enjoy the view. How should we evaluate this exchange with respect to equivalence? We can neither compare the two goods on the basis of, say, an objective-needs account, nor on a labor-theory account. This is because the good of having access to the view is beyond any kind of objective need and does not incorporate any kind of socially necessary labor. It is not only that the value of having access to the view is zero, say, on a labor-theory-of-value account. Instead, we cannot even express the value of the good along this dimension, as the good does not incorporate any labor at all. It is as though we had decided to compare all elementary

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particles with respect to their rest mass, and suddenly stumbled across photons. There just is no way to compare photons to electrons with respect to their rest mass, as photons do not have the property of a rest mass. Therefore, while it seems that objective-needs or labor-theory-of­ value accounts offer a good solution for the equivalence problem, they are unable to address the issue of comparability. The fourth aspect which speaks in favor of the preference satisfaction approach to exchange value is that it is able to account for comparabil­ ity and equivalence with respect to an analytically prior problem to the one we are examining. This testifies to its usability. Namely, we can rely on the preference satisfaction approach in order to explain equivalent exchanges if only one person but two goods are involved (rather than two persons and two goods). The easiest way to illustrate how this works is to rely on economic tools. In economics, a widely used method of illustration to represent a person’s preferences is to draw that person’s indifference curves (cf. Figure 7.1). IS,1 represents how S thinks apples (a) and oranges (o) compare. For all points on IS,1, S’s amount of preference satisfaction is equal. From a preference satisfaction perspective, S is indif­ ferent between being at point Y or at point Z.

a IS,1 4

Z

3

Y

2

S

2

Figure 7.1 An indifference curve

3

4

5

o

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Commutative Justice and New Harms

If S starts at Y and then exchanges two oranges for one apple, S ends up at point Z. Given that S is just as well off with respect to preference satisfaction as before, we can call this an equivalent exchange if only S’s perspective counted, i.e. an intrapersonally equivalent exchange. Equiva­ lence thus is rather easy if only one person’s perspective counts, and if we rely on the preference satisfaction approach to exchange value. Things become more difficult if two people are involved, which is what the equivalence principle is all about. The equivalence principle is not about intrapersonal but interpersonal equivalence. Even if the colonial­ ist exchange would be intrapersonally equivalent for each person – that is, if for each the native and the colonialist what they give and get in return equally satisfies their respective subjective preferences (call this double intrapersonal equivalence) – we would still feel that the exchange is non-equivalent across people because the goods are of drastically une­ qual value. That is, it seems like double intrapersonal equivalence is not enough to make the exchange interpersonally equivalent. With respect to the equivalence principle, we do not want to know if what S gives away and receives in return is equally valuable to S (and if an analogous thing is true for T). We want to know if S and T interpersonally exchange equal values. Equivalence My suggested way of answering the problem of comparability compli­ cates meeting the problem of equivalence. This is because for a preference satisfaction account of exchange value, exchange values ultimately are a subjective affair. But how can we ever say that a certain exchange is interpersonally equivalent in light of thoroughly subjective exchange val­ ues? Let me first explain why some prima facie solutions to this problem fail before suggesting why one might conceive of exchange at the market price as a solution to the problem of equivalence. Imagine two people, S and T, who want to exchange apples for oranges. One natural proposal for how we can achieve equivalence would be to equalize the amount of preference satisfaction S and T get from the exchange. That is to say, if what S gets in the exchange (more apples) gives him the same amount of preference satisfaction as what T gets in the exchange (more oranges), then we can speak of an equivalent exchange. There are two problems with this proposal. First, it presupposes that we compare preference satisfaction across people. This is a problematic presupposition (cf. Harsanyi 1977; Binmore 1994, 1998). For even if one is willing to endorse the controversial standpoint that it is possible to compare preference satisfaction across people, it opens up the account to an entire group of objections along Nozickian lines (1977, 41). What if S is similar to a utility monster in that he derives huge amounts of

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preference satisfaction from goods? Then it would seem possible that many exchanges we intuitively judge to be drastically unequal because S seems to profit so little are, after all, equivalent. Second, such a view of what an equivalent exchange is seems overly nar­ row. For most everyday exchanges that we execute without any worries of injustice, one party will benefit more from the exchange in terms of prefer­ ence satisfaction. Consider the following example. A man with a serious disease goes to see a doctor. For him, this is an existential matter. The doctor, on the other hand, is a wealthy woman who does not really care whether she treats one patient more or less. If the doctor and the patient agree on a price for the therapy which is roughly equal to what everybody else pays for the same therapy – and considerably below the patient’s willingness to pay – it would seem odd to say hold that this is an unjust exchange. Here is a second proposal. Every mutually beneficial exchange is equivalent. One could argue for this proposal by saying that when peo­ ple voluntarily decide to exchange (notably without coercion, deception, etc. being present), their preference satisfactions are “equalized” in that each person desires what the other has more than what he is giving up. According to this proposal, our initial intuition that freely exchanging some glass beads and a bit of cloth for an entire estate is non-equivalent would be wrong. This still strikes me as an unwelcome conclusion. The proposal to treat every mutually beneficial exchange as equivalent seems to be overly permissive. Finally, one might propose a range solution. One might suggest that all those exchanges are equivalent for which the amount of preference satisfaction one party generates is not more than twice (Five times? Fifty times?) as large as that of the other party. By fine tuning the range, this would effectively deal with the problem of the overly restrictive or per­ missive suggestions just presented. But first it would be hard to find a non-arbitrary range that both rules out colonialist exchange but allows for the described patient-doctor exchange. And second we would again have to compare preference satisfaction across people. These three failed proposals of what constitutes equivalent exchange in the face of subjective exchange values highlight the central problem we face. If, for reasons of comparability, we suggest that exchange value comes down to preference satisfaction and consequently is thoroughly subjective, what we need is a kind of “intersubjective exchange value” – cognizant of the fact that exchange value ultimately is a subjective affair – with respect to which we can tell equivalent exchanges from non-equivalent ones. It needs to reflect and respect subjective exchange values. That is, it needs to be based on exchange values understood as subjective pref­ erence satisfaction, and somehow combine them into an intersubjective measure of exchange value without relying on interpersonal comparisons of preference satisfaction. I think that a good’s market price is just that kind of thing.

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Exchange at Market Price The general idea of why the market price is the kind of intersubjec­ tive measure of exchange value we are looking for is that, first, it can be directly derived from subjective preferences for goods. This is what relates it to exchange value. The preferences of every person who is in principle interested in buying and selling a certain good are reflected in the market price. Second, it combines all of these preferences into a sim­ ple measure – respecting them in the sense of not lumping them together in an effort of interpersonal comparison. It is beyond the scope of this book to show in detail how the market price of goods is determined by the preferences of those interested in buy­ ing and selling the product. Any microeconomics textbook explains this in great detail (e.g. Pindyck and Rubinfeld 2013, chaps. 3–4, 6–8). But consider the following rough sketch. The demand function that, together with supply, determines the market price, is an aggregate function. It is the aggregate of all individual demand functions of people generally interested in buying the good. Graphically, the aggregate demand function (Dagg) for apples can be obtained by hori­ zontally adding the quantities demanded by each individual buyer (A, B, and C) (Figure 7.2).

price (in dollar) 5

4

3

2

1 DA

5

DB

10

Dagg

DC

15

20

Figure 7.2 Individual and aggregate demand for apples

25

quantity of apples

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price (in dollar) 1

0.8

0.6

0.4

0.2 DS 1

2

3

4

5

quantity of apples

Figure 7.3 An individual demand function for apples

One way to explain individual demand, in turn, is to conceive of an individual demand function as a representation of an individual’s reser­ vation prices for different quantities of a certain good. Figure 7.3 depicts S’s discrete demand function for apples. In the depicted case, $1 is S’s reservation price for apples. The maxi­ mum that S is willing to pay to buy an apple is $1. We can extend the concept of a reservation price to other choices than the one between buy­ ing one unit of a good or none at all. That is, we could say that S’s reservation price for buying two apples rather than one is $0.80. The maximum that S is willing to pay per apple and still buy two apples is $0.80. And so on. An individual demand function then emerges as a series of S’s reservation prices. Where do these reservation prices come from? They are determined by S’s relative valuations of all goods he is generally interested in buying, as well as his available income and the prices of other goods. According to standard economic theory, if S wants to maximize preference satisfac­ tion, then for all points on S’s individual demand function the following is true.3 If he consumes one apple at the price of $1 (or two apples at the price of $0.80, or three apples at the price of $0.60, and so on), then the marginal amount of preference satisfaction per dollar he receives from consuming one apple (or two rather than one, or three rather than two),

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is equal to the marginal amount of preference satisfaction per dollar he receives from consuming all the other goods he also buys at the quantities he does. That is, the marginal amount of preference satisfaction he gener­ ates per dollar spent is equal across all goods he consumes. If apples cost $1.10 per piece, he would not consume any apples, because then he could generate a higher amount of preference satisfaction for himself by buying something else. Maybe an additional orange. This comparative reasoning on the margin is true for all points on DS. It is what allows us to derive DS in the first place. Each individual demand function can be derived from the unproblematic case of intrapersonal comparison of preference satisfaction for one person and two goods described above. As market demand is but an aggregate of all individual demand func­ tions, we can see how market prices incorporate many people’s rela­ tive valuations of goods in terms of preference satisfaction. If S and T exchange at the market price, then the ratio of apples to oranges they exchange at does not only reflect their own valuations (i.e. the prefer­ ences of S and T alone). Instead, all the evaluations of everybody inter­ ested in buying and selling apples and oranges are incorporated in the market prices of apples and oranges, yet without any interpersonal com­ parison of preference satisfaction taking place. In this sense, the market price is an intersubjective measure of exchange value for a certain good. Consequently, the idea of how exchanging at the market price ensures equivalent exchanges is the following. The market price incorporates the potential exchangers’ subjective valuations of a certain good. As thou­ sands of people think about how to evaluate the good in comparison to others in terms of exchange value (as based on preference satisfaction), an intersubjective valuation emerges (List 2014). If the market price is what emerges as the “intersubjective exchange value” of the good in comparison to all other goods, could we not say that, if we exchange a good at its market price, this exchange is equivalent? Certainly, an inter­ personal sense of equivalence is fulfilled. What is equalized when people are exchanging at the market price are the intersubjective measures of the exchange values of the two goods exchanged. In this sense we can claim that exchange at the market price fulfills the equivalence principle.4 To conclude, relying on a preference satisfaction approach to exchange value and exchange at the market price we can make equivalence work – in the sense that we can give a plausible and complete account of how exchangeable goods are comparable and at which ratio we may exchange them to exchange equivalently. The Objection From Impurity It is one thing to establish that exchange at market price can be said to be equivalent in a certain sense. It is another thing to show that the kind of equivalence which exchange at the market price provides instantiates

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a kind of equivalence which is normatively privileged. Put differently, it seems possible to hold that exchange at market price is equivalent in the sense of ensuring that two goods of equal monetary value are exchanged, but still deny that we should use the market price as an “intersubjective exchange value” as it is somehow normatively flawed. We need to address three important objections to the claim that the market price as intersubjective measure of a good’s exchange value is normatively sound. The first objection – the “objection from impurity” – concerns the steps taken in order to get from the subjective exchange values for one person to the market price as an intersubjective measure of exchange value. The suggested account essentially proposes to add things to people’s prefer­ ences in order to establish an intersubjective measure. Notably, in order to derive a market price from people’s preferences even in the simplest economic model we need to say something about people’s income, the prices of other goods, and – in order to integrate the supply side – the production costs of the good in question. These three objective aspects need to be added, so to speak, to arrive at the market price. Now, if we calculate the intersubjective measure of a good’s exchange value in this way, do not the added aspects render the final outcome in some sense “impure” in comparison to the “pure” subjective exchange values as given by a person’s preferences? And is not such an “impure” intersubjective measure of exchange value normatively flawed? For instance, it is a standard criticism that the market price as a measure of exchange value is too endowment-sensitive. And this problem of endowment-sensitivity only emerges once we add income (i.e. a budget constraint) to the purely preference-based picture.5 Now, it does not strike me as problematic if the prices of other goods (and notably of substitutes and complements) influence the sug­ gested intersubjective measure of exchange value. It makes sense that the exchange value of one good should be influenced by the exchange value of other goods able to replace it and of goods typically consumed together. That is because exchange value is inherently relative. Every con­ vincing account of exchange value must not only be able to determine the value of one good at a time, but also the value of all other goods at the same time. In this light, the added price aspect featuring in the market price approach to equivalence does not seem to be problematic. The same seems to be true for the production costs aspect. The mar­ ket price is not solely determined by demand, but by the intersection of demand and supply. The main factor that determines the supply curve for a certain good, in turn, is its costs of production. Is it a problem if the production costs of a certain good influence its suggested “intersub­ jective exchange value”? I do not see how it would be. Production costs work as a lower boundary for exchange value. The market price typically cannot fall below the price of the retrievable raw materials used in the

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production of a good. People would immediately start buying the prod­ uct to sell on its parts. Also, if the lowest possible costs of production are above the maximum reservation price of any potential buyer, nobody would supply the good. I do not see how either scenario leads us to a normatively flawed intersubjective measure of exchange value. Finally, the income aspect. It makes sense that a measure of exchange value should be sensitive to income in certain ways. For instance, if there is more money circulating, if only in nominal terms, it is plausi­ ble that the exchange values of goods as expressed in monetary terms should ceteris paribus be higher. This kind of dependence on income seems unproblematic. However, market prices typically depend not only on the absolute amount of income, but also on its distribution. Based on the general suspicion that market-based solutions tend to favor the rich, one might worry that, as a suggested intersubjective measure of exchange value, the market price is similarly flawed. What one could suggest using instead – as a more appropriate measure eliminating the issue of endowment-sensitivity – would be the hypothetical market prices that would prevail if everybody had the same income to start with. I will have four points to make in order to address and dispel the worry that the market price, in being too endowment-sensitive, somehow tends to favor the rich over the poor and therefore is a normatively unacceptable intersubjective measure of exchange value. (1) It is not the case that market prices on the basis of equal or unequal endowments necessarily differ. Consider the market prices in a simple two-people-two-goods economy, which moves from equal to unequal endowments. Suppose that for both agents the two goods available, apples and oranges, are perfect substitutes indifferently traded at a 2-to-1 ratio, i.e. that both agents’ indifference curves look like I1, I2, and I3 in Figure 7.4. Further suppose that originally the price of oranges is the same as that of apples ($1), and that each agent has an income of $2 (i.e. finds him­ self faced with the budget constraint B1). In this case, if they spend all of their income, each agent would buy two oranges and no apples, as this allows them to reach the highest indifference curve possible, I1. The total amount of oranges demanded is four. If we now redistribute the total income available so that there is inequality – say one agent’s income is raised to $3 (represented by B2) whereas the other agent’s income is reduced to $1 (represented by B3) – this does not affect the market price. The richer agent now consumes three oranges (and reaches I2), whereas the poorer agent only buys one orange (ending up at some non-depicted indifference curve lower but parallel to I1). But the total demand for oranges stays at four. Given that there is no change in demand for either of the two goods exchanged, market prices will also stay the same. Thus, while market prices typically will be endowment-sensitive, they do not have to be.

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quantity of oranges 4

3

2

B2

1

B1

2

I3

I2

I1

B3

4

6

8

quantity of apples

Figure 7.4 Deriving demand with equal and unequal endowments

(2) It is outright impossible to predict how a society’s set of relative prices changes if we move from unequal to equal endowments. For example, we cannot predict how exactly people will be dropping out of some markets and moving into others with changed income. What this means is that, if one is opposed to market prices based on actual, unequal endowments because one feels that the “true” exchange value of some goods, say malaria drugs, surely has to be lower than it is – and if this is the reason why one thinks that market prices must be too endowmentsensitive and why one argues in favor of hypothetical market prices based on equal endowments – this reasoning might backfire. I feel that many arguments against market prices as a measure of intersubjective exchange value ultimately are thus motivated. But as nobody is able to predict how prices would change if we changed the income of millions of people, this argument is actually unsound. There is just nothing to be said as to how equalizing endowments would affect the prices of certain goods.6 (3) Even if market prices typically are influenced by the income dis­ tribution, I do not see how they would systematically favor the rich qua

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intersubjective measure of exchange value. To see why, consider again how aggregate demand curves are derived (cf. Figure 7.5). Figure 7.5a depicts the construction of aggregate demand for some good demanded by two people, A and B, with equal income and equal preferences, as represented by their identical demand functions DA and DB.7 We derive aggregate demand Dagg by horizontally summing up the individual demand curves. In Figure 7.5b, we introduce a little inequality between A’s and B’s income – and in Figure 7.5c a lot of inequality – but everything else stays the same.8 This leads, first, to a parallel shift of the individual demand curves (outward for the now richer A and inward for the now poorer B) and, second, to the aggregate demand curved becoming kinked, with the upper part only representing the rich person A’s demand, and the part below the kink representing A’s and B’s combined demand. If we look at where the supply curve S intersects aggregate demand in Figures 7.5b and 7.5c, respectively, we find that it depends on how unequal the buyer’s endowments are, and on the shape of the supply curve, whether the mar­ ket price p* ultimately realized is one at which only the rich, or the poor and the rich end up exchanging.9 In Figure 7.5c, A ends up as the only

p

p

(a)

(b)

S

S DB

p*

Dagg

DA

p

DB

p*

p

(c)

Dagg

DA

q

q (d)

S p* DB

DA

Dagg

Dagg q

q

Figure 7.5 Individual and aggregate demand with equal and unequal endowments

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buyer, as the market price is above B’s reservation price as indicated by the intersection of DB and the vertical axis. More importantly, however, I do not see how a market-based way of determining prices would grant the rich an unfair advantage in determin­ ing intersubjective exchange values. To begin with, note that everybody’s “vote” for how much he would consume of a certain good at a given price is registered and represented in the aggregate demand curve – albeit on different parts of it. This is the case in Figures 7.5a to 7.5c, and also in Figure 7.5d, which I take to depict a typical demand curve for a good demanded both by the rich and the poor in a world where there are few rich people and many poor. Its upper, nearly vertical part mostly repre­ sents the votes of the richer (few people on the market, but with deep pockets) and the lower part mostly represents the votes of the poorer (less solvent but in higher number). In determining the intersubjective exchange value of the good in question, the votes of everybody generally interested in buying it are represented. This distinguishes this case from, say, a political one in which only certain groups are enfranchised. What is more, the often-heard statement that it takes many votes by the poor to offset the vote of one rich person (i.e. that not everyone has an equal vote), is hard to defend in this context. Any such argument simply ignores the supply side. If we look at Figure 7.5d, then it is not the case that suppliers can choose what price to charge: a high price aiming at the few rich and at making a high profit per unit for few units sold, or a price aiming at the many poor and at making little profit per unit, but selling many units. If this were the case, then talk of many poor people’s votes being required to offset one rich person’s vote would make sense. But this is not how price-building on competitive markets works. Because of com­ petitive pressures, suppliers cannot choose a price. Instead, the market price which realizes one of the many possible prices on the demand curve is determined by the intersection of demand and supply, with supply in turn being mostly determined by production costs. Because of this, any talk of offsetting is mistaken. Overall, I do not see how this procedure grants the rich an unfair advantage in determining the “intersubjective exchange value”. The mar­ ket prices of goods probably would be different if incomes were redistrib­ uted according to egalitarian principles. But this change in prices would not reflect the fact that now suddenly everybody has the same power to determine the intersubjective measure of exchange value where there used to be power discrepancies. Instead, it would only reflect the fact that if people have more or less income, they make different consump­ tion choices. (4) One might still wonder why one would want to add something objective but unevenly distributed – such as actual incomes – in order to make subjective preferences interpersonally comparable. Would it not make more sense to determine intersubjective exchange values on the

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basis of equal endowments? This way, we would avoid the problem that we cannot straightforwardly compare a rich person’s and a poor person’s willingness to pay $1 for one unit of a certain good. This reasoning is plausible but beside the point. What I wish to show is that exchange at market price is equivalent, not that there is no other way to establish equivalence. What counts is that, even if we add something objective but unevenly distributed to subjective preferences, exchanges at the evolving prices will be interpersonally equivalent. Notably, they will be interpersonally equivalent on the basis of the actual distribution of incomes. If everybody had the same income to spend, and an exchange would be effected at the then prevailing market price, this exchange would not be more or less equivalent. It would be equally interpersonally equivalent. One might object that, given that the actual income distribution is une­ qual and suffers from prior, historical injustices, this should surely push us to move from the actual, unequal to a hypothetical, equal distribution of incomes to define equivalent exchanges. After all, we are not only looking for some sense of equivalence, but for a normatively privileged one. Still, even an unjust pre-exchange distribution of incomes actually does not matter with respect to our issue here. This is because the point I want to make is smaller than one might initially think. I am only interested in whether the equivalence principle. Thus, I am not interested in prior injustices (e.g. in questions of justice in acquisition). All I want to determine is whether exchanges at the mar­ ket price are equivalent and thus justice-preserving (Cohen 1995, 40–53) with respect to the distribution of monetary value. If the initial situation was just (as determined, for example, by standards of justice in acquisi­ tion), a justice-preserving step will transform the initial distribution into a just final distribution (as determined by standards of end-state distribu­ tive justice). Also, if the initial situation was unjust, the justice-preserving step will at least not add additional injustice – although it will also do nothing to rectify it. To be justice-preserving, that is, to at least not add additional monetary inequality, is all I claim exchanges at the market price to be. This is not the same as suggesting that the market price is the just price tout court. Indeed, in some situations in which the market price is paid, that price might be equivalent-but-unjust. Exchanges at the market price often are essential steps in a chain of events leading to unequal end states. If we are end-state egalitarians, we might legitimately oppose exchanges at the market price for that reason. But we should be aware that when we are doing so, we are actually opposing exchanges which redistribute exchange value equivalently. In a sense, we are opposing them because they are “merely” justice-preserving when alternative forms of exchange might be equality-creating. We might sometimes have reason to sacri­ fice equivalence for the sake of end-state equality. Importantly, however,

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we can at the same time hold that a certain exchange is not unjust­ because-inequivalent, and contend that it must be interfered with to prevent its issuing in very unjust results (Cohen 1995, 37). The Objection From Defective Preferences Preference satisfaction views are often criticized for conferring value on too many objects. A person’s preferences can be misinformed, short­ sighted, ethically questionable, and so on. On the other hand, if we argued that only the fulfillment of certain desires (e.g. “informed” ones; Griffin 1986, 26) constitutes value, we would be risking the monist char­ acter of our account of exchange value on which we relied for addressing the comparability problem. Interestingly, in our context we may come up with an idiosyncratic solution to these objections. Consider what the criticism of being overly permissive with respect to conferring exchange value concretely means. The worry is that a certain exchange might satisfy the equivalence prin­ ciple according to the preference satisfaction account, although the exchange value of one of the goods exchanged is intuitively non-existent. That is, the situation we worry about is one in which somebody sells, say, his services as a grass-counter to somebody else who is willing to have his grass counted for the positive amount of money of pGC (cf. Rawls 1971, 379–80). The criticism is that the equivalence principle is “falsely” met, as the grass-counting – although possessing a positive exchange value on the preference satisfaction account – actually does not have any exchange value, for the preferences of the exchanging parties are defective. Thus, the only truly equivalent exchange that could be effected in this situation would be an exchange effected at a price of p = 0. Now, this sort of example will trouble the approach suggested here significantly less often than Rawls’s original grass-counting example will trouble standard preference satisfaction views. This is because the example of selling grass-counting, unlike the example of the grasscounter, necessarily features two agents whose preferences are defec­ tive. Only if both of them share the defective preferences concerning the good in question, will there even be an exchange – and only then could the exchange be falsely considered equivalent. Put differently, if the grass-counter desires to count grass in order to satisfy his defective preferences, that is one thing. But if he is trying to find somebody to whom he could sell his labor time (in the form of grass-counting) that is a different thing. The grass-counter might very well think that the exchange value of his labor time spent counting grass is quite high. But only if there is a second person willing to hire the grass-counter (i.e. a person who desires to know the number of blades of grass in her front garden), we might face an exchange that runs the risk of falsely being judged equivalent.

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Even then the exchange only runs the risk of falsely being considered equivalent if the amount of money paid in return for the services of the grass-counter is substantial. For who says that the market price for knowing the number of blades in your front garden is strictly zero? To be sure, the market price is probably not very high, but it might actually be as high as $0.05. (I would pay $0.05 in order to know the number of blades in my front garden.) In any case, the markets for those important goods we typically care most about when thinking about justice (food, drink, housing, health care, etc.) are characterized by basically all of us having the same “rea­ sonable” preferences towards them and are particularly big markets. The latter means that we can typically rely on two effects which counter the worry of defective preferences creating exchange value where there is none. First, two people’s defective preferences might simply cancel each other out. While our preferences are not likely to significantly differ for important goods anyway, given how diverse a bunch humanity is, it is somewhat probable that for every person with an “abnormal” liking of a certain good there is one with a thorough dislike of that same good. Second, one person’s defective preferences simply lose their effectiveness with respect to determining the market price when there are thousands of other people around. I think that there is power in numbers in the sense that thousands of people’s preferences jointly determining the market price of a good are less likely to be fatally distorted than one person’s.10 This is, then, the idiosyncratic solution to the problem of defective preferences. Defective preferences are not as big a threat when we are concerned with exchange value, because their power to create value where there is none is comparably negligible. Do not mistake what I am saying for the general claim that the majority is always right. What I am suggesting is merely that the more people’s evaluations are combined with respect to a judgment of exchange value, the less likely these evalu­ ations are to be severely distorted. The Objection From Incomparability Given what has been said so far, it looks like we might be able to equiva­ lently exchange apples and oranges at their market prices. But is this true for all kinds of goods? What about such special cases as the markets for gestational labor (e.g. Anderson 1993, 168–89; Satz 2010, 115–34)? Can we ever equivalently exchange things like surrogacy for money? The underlying worry is one of incomparability. Maybe some goods are incomparable with money. The key thought to address such worries is the following. When we are concerned with meeting the equivalence principle, we are not comparing pregnancy and money, we are comparing the exchange value of gesta­ tional labor and the exchange value of money. In order for an exchange

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to be equivalent, the exchange values of the two goods exchanged have to be equal. And to ask whether the exchange value of gestational labor and the exchange value of money are equal is a different thing than com­ paring the entire good of pregnancy with the entire good of money, so to speak. Consider Aristotle’s (Pol. I.9, 1257a6–13) classic example of trading shoes for chairs. When we are exchanging shoes for chairs, we are not interested in comparing shoes and chairs as such – and certainly not their different use values. We are interested in comparing their exchange val­ ues. Consequently, when determining the justice of an exchange accord­ ing to the equivalence principle, there are some kinds of value the good exchanged might possess that we can safely ignore. In the case of shoes and chairs, this was their use value. In the case of pregnancy, this might be other values. In any case, the only thing that counts in order to make an exchange just according to the equivalence principle is the equality of the exchange values. So can we compare the exchange values of gestational labor and money? I do not see why we should not be able to. Factually speak­ ing, there is nothing that speaks against exchanging gestational labor for money. We can exchange gestational labor for money. It is not impossible to pay a surrogate mother for bearing a child. But if we can exchange gestational labor for something, it also possesses an exchange value. And since we are comparing two exchange values, the nature of both values is the same. Both can be expressed in terms of preference satisfaction. Some people desire to hire a certain person as a surrogate mother. Some women desire to earn money by acting as a surrogate mother. And if two parties like this engage in a contract on commercial surrogacy and an exchange takes place, then the exchange value of both goods exchanged can straightforwardly be expressed in terms of preference satisfaction. I am not claiming that the value of pregnancy or gestational labor is reducible to exchange value or monetary value. But exchange value cer­ tainly is a part of those goods’ total value – and it is this part we are solely interested in and which can be compared to other goods’ exchange value. If the objection made against practices like commercial surrogacy is that pregnancy and money are incomparable, and that, thus, equivalence cannot be established, I think that this objection is actually imprecise. For what we compare in the case of checking the equivalence of an exchange is not the goods as such, but their respective exchange values. Once we realize this, we can see that incomparability objections are misguided and can be refuted.11

7.2 Labor Market Exchanges and Monetary Inequality With an idea of how exchanges at market price are equivalent in place, let us now proceed to show how market exchanges do not give rise to

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monetary inequality. To keep things simple, let us consider a particu­ lar kind of market exchange: labor market exchanges (i.e. exchanges of a person’s labor for a wage). I am aware that many different kinds of market exchanges may be thought to bring about monetary inequality. Think, for example, of a capital market exchange of buying some shares at a low price today and selling them on for a significantly higher price tomorrow. A series of such lucky exchanges could easily make me very rich with everybody else staying at roughly the same level of wealth. Still, I think that the single most important kind of market exchange with respect to the issue of monetary inequality is labor market exchanges. First, because selling one’s labor is the main source of material income for practically all households. Second, labor market exchanges seem to create monetary inequality in a particularly straightforward way, as some people earn higher wages than others. Suppose two people, a worker and an engineer, are selling their labor on the market. Will not the engineer typically secure multiple times the worker’s wage, and will this not lead to more and more monetary ine­ quality with every payday? Even if they both start out with the same amount of money in their bank accounts, surely we will see that their account balances develop quite differently because of the difference in incomes. As this difference ultimately comes down to the market evalu­ ating and rewarding their labor differently, it surely seems like it is the exchange at the market price which causes the arising monetary inequal­ ity. If both of them were paid an equal wage instead, we would not see those effects. So how can we possibly claim that labor market exchanges do not create monetary inequality? Prima facie, there seem to be two ways in which exchanges of labor for money might create monetary inequality. First, such exchanges might cre­ ate inequality by producing new value, but in unequal amounts for those involved in the exchange. Intuitively, however, labor market exchanges are not productive of value. Let me give two examples. Given his outstanding talent, if Wilt Chamberlain plays basketball (i.e. if he does his work), he creates something that other people are eager to see (cf. Nozick 1977, 161). It is his executing his job which is productive of value. By contrast, Wilt Chamberlain’s being paid for playing only remunerates value thus created by redistributing money from the fans to Wilt Chamberlain. The second example concerns repeated interaction. One might have the intuition that in particular repeated exchanges create value. For instance, they might create trust – and such trust seems to be at least instrumentally valuable. For without any trust being around, signifi­ cantly fewer mutually beneficial exchanges between the sellers and buy­ ers of credence goods (e.g. labor time spent repairing cars) would be effected. But also in this case it strikes me that it is not the repeated exchanges which are productive of valuable trust. Rather, because I have

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not had any bad experiences after buying labor time from my car repair shop (no unnecessary repairs made, all necessary repairs carried out to my satisfaction), that is, because my original trusting behavior seems justified in hindsight, additional trust is created. I think that analogous lines of argument apply to other cases in which exchanges are seemingly productive of value. The second way in which exchanges of labor for money might create monetary inequality – by redistributing already existing value – seems more likely to underlie the creation of monetary inequality. Whenever an exchange is not effected at an equivalent price, one party will make a monetary gain from that exchange whereas the other party will make a loss. Such non-equivalent exchanges are able to turn what used to be equal starting positions with respect to monetary holdings into an une­ qual end state. However, if we exchange at the market price (i.e. if we perform a mar­ ket exchange strictu sensu), then no monetary inequality is created, for exchanges at the market price are equivalent with respect to the mon­ etary value exchanged. Monetarily equivalent exchanges do not create monetary inequality. (They also do nothing to overcome existing inequal­ ity.) Thus, no additional consequential condition of commutative justice aiming at monetary equality is needed. Monetary inequality is ruled out as a possible consequence when it comes to market exchanges. This result will continue to strike many as counterintuitive. Some might acknowledge that internal to the exchange no inequality is created if we perform a labor market exchange. That is, they might agree that no inequality is created between one particular seller (S1) and one particular buyer of labor (B1) who exchange at the market price. But what about those external to the exchange, they might ask? If S2 has to sell his work at a lower market price than S1, should we not say that, taken together, the labor market exchanges between S1 and B1 and between S2 and B2 cre­ ate monetary inequality between S1 and S2? The intuition is that, once we start to compare different sellers to each other, labor market exchanges do create monetary inequality. Let me use the rest of this section to dis­ cuss four different variants of this intuition. Consider the following example. Two fraternal twins aged 18 start working as self-employed models. Whatever their customers pay them is their wage. Suppose that all the modeling contracts they enter are effected at market prices. It so happens that one of them has inherited his mother’s full hair (let us call him Fullie), whereas his brother has inher­ ited his father’s thin hair (let us call him Baldie). Until the age of 21, Fullie and Baldie earn the same wage. After that, the first signs of male baldness are starting to show. This leads to a substantial drop in bookings for Baldie and, consequently, a substantial drop in income. This is because the market wage for male models with thin hair is significantly lower. At the end of his modeling career at 25, Fullie has made more money than

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Baldie, who also ends his career at this point – frustrated about the low pay in the last couple of years. Should we say that the respective labor market exchanges created mon­ etary inequality between the twins? No. I think this example clearly shows what applies to all labor market exchanges. Namely, that exchanges at the market price do not create monetary inequality. Instead, exchanges at differing market prices just reflect existing inequality. Far from creating it, exchanges at the market price reflect the brothers’ genetic inequality. More generally speaking, whenever there is a difference in market prices for the same kind of labor being offered – in this case working as a male model – there will be some difference in what is offered which the differ­ ent market prices reflect. The reflected difference does not have to be a genetic one, that is, caused by the natural lottery and beyond the control of the person affected (except for compensating measures). The reflected difference could also be one of desert; as, for example, when long-serving employees earn higher wages just because they are long-serving. Or it could come down to a certain choice the seller of labor made (e.g. to take on a particularly risky job). Similarly, it could come down to the choice of others (Steiner 2012, 102), as, for example, when a child’s parents decide that their daughter should become a professional chess player (rather than, say, a manager) and train her from her early childhood days. Whatever the reflected difference does come down to – be it “choice” or “circumstance” (Roemer 1993, 150) – market prices differ for a reason, and notably because there is some inequality with respect to what is exchanged.12 The market price, being nothing but a monetary evaluation of a given situation, does not create this inequality. If one agrees that market exchanges do no create inequality in the sense of giving rise to new inequality, one might still have a second, related intuition. For one might hold that they create monetary inequality in the sense of transforming existing non-monetary inequality into monetary inequality – and consider this equally normatively problematic. Fullie and Baldie are unequal with respect to their genetic predisposition, one might say, but they are not monetarily unequal before exchanging takes place. In this sense, labor market exchanges create monetary inequality. To be sure, after the exchanging the monetary inequality between Ful­ lie and Baldie is obvious. We can put a number on it simply by look­ ing at their respective account balances. But this does not mean that the monetary inequality does not predate the exchange, albeit in a harder to identify form. Consider the following straightforward approach to check whether a certain exchange creates monetary inequality. (1) We identify the mon­ etary value Fullie and Baldie each hold in the situation right before the exchange and in the situation right after it. (2) We compare the two values before and after the exchange. (3) If we find that monetary inequality has

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increased from the pre- to the post-exchange situation, then monetary inequality is created. Now, in order to express the pre-exchange situation in monetary terms as required by step (1), we are forced to express in monetary terms ine­ qualities we usually do not express in monetary terms. That is, we are forced to put a monetary value on the genetic inequality between Fullie and Baldie. There is no way around this, for how are we to diagnose an increase in monetary inequality if we do not express both the preand post-exchange situation in monetary terms? What we will find is that in the pre-exchange situation at the age of 18, the monetary value Baldie holds is smaller than what Fullie holds. This is because Baldie’s labor as a male model between the ages of 18 and 25 is worth less than Fullie’s given their genetic difference. That is, the monetary inequality predates the exchange – albeit in the less recognizable form of a lower value of future labor – and the labor market exchanges merely reflect this difference. Note that such a measurement of genetic inequality in terms of mon­ etary value is not a transformation of some kind of inequality into a dif­ ferent kind of inequality. Likewise, it is not the case that, by exchanging labor for money, we transform some kind of non-monetary inequality into monetary inequality. Rather, we just transform one instance of mon­ etary inequality (a difference in genetic predispositions as expressed in monetary terms) into a different instance of monetary inequality (a dif­ ference in account balances after the exchange). Here is the third related intuition one might have. We could also under­ stand “creating monetary inequality” in the sense of actualizing potential monetary inequality. Intuitively, this seems to be what happens when we move from the pre-exchange situation to the post-exchange situation. What used to be only potential monetary inequality (inequality measured in monetary terms but not yet reflected in an actual difference of account balances) becomes actualized by Fullie and Baldie engaging in labor mar­ ket exchanges. And one might think that actualizing potential inequality is normatively problematic. However, this intuition is also wrong. In the pre-exchange situation there is already actual monetary inequality. This is because, if you have the opportunity to sell something at a certain favorable price, this is an actual and not merely a potential monetary value. The best way to see why that is might be to consider the options market. Say someone plans to present you with one of two options for selling a good you own but which you want to sell. One grants you the right of selling the good you own (current market value: $50) at a price of $60. The other grants you the right of selling the good at the price of $70. In this case, you would probably prefer if that person gave you the latter option – not because that option is potentially worth more, but because it just is worth more. More generally, the whole point about the market for options is to buy

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or sell the option to buy or sell something. And what is traded on this market is not goods of potential value but goods of actual value. Con­ sequently, if Fullie has the opportunity to sell his labor in the next seven years for a higher price than Baldie can sell his, there already is actual monetary inequality between them in the pre-exchange situation. Fullie possesses a more valuable opportunity than Baldie. This reasoning also allows us to realize that labor market exchanges do not enable monetary inequality. This can be seen by pointing to the fact that, even without any labor market exchange taking place, the monetary inequalities are present. If we discount the future market wages of Fullie and Baldie back to the pre-exchange situation, then all the monetary ine­ quality realized when they turn 25 is already present in the initial situation. To conclude, executionally just labor market exchanges do not create monetary inequality, they reflect existing inequality. They neither trans­ form non-monetary inequality into monetary inequality, nor actualize potential monetary inequality, nor enable monetary inequality. And even if market exchanges are a causal link in the chain of events leading to inequality, they are justice-preserving with respect to inequality. What is responsible for the monetary inequality between Fullie and Baldie is not the labor market exchanges they engage in. Instead, it is the fact that the labor they sell is of different value. All monetary inequality we see after labor market exchanges have been effected – either between the buyer and the seller of labor, or among sellers, or among buyers – goes back to previously existing inequality.

7.3 Equivalence and Labor Market Exchanges My argument that labor market exchanges do not give rise to monetary inequality stands and falls with my claim that exchanges at the mar­ ket price fulfill the equivalence principle. Basically, if one agrees that exchanges at market price are equivalent, I can only think of one way to deny my conclusion here. Namely, one could argue that exchanges of labor for money are somehow special, and therefore deny that exchang­ ing labor for the market wage in particular is an equivalent exchange. The Special Good of Labor Intuitively, labor seems to be a special good calling for special ways of evaluation. This might be, for example, because of the central role labor plays with respect to the constitution of human nature (Arendt 1998; Marx and Engels [1844] 1975). Or because we are aware that a marketbased evaluation will lead to differences in wages, whereas we think that each person’s productive contribution to the common good of a society should be seen as equally valuable. And what if some job truly is a voca­ tion for the person performing it? Should this count for nothing? Are not

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we losing some important aspect of the value of labor if we exclusively focus on its monetary exchange value? I am sympathetic to these kinds of thoughts. However, we should remind ourselves of our purpose here. The question we are trying to answer is whether executionally just labor market exchanges give rise to monetary inequality. And this question severely limits the kind of consid­ erations that play a role. First, as we are concerned with how market exchanges influence mon­ etary inequality, we necessarily have to focus on the monetary value of labor. I am not claiming that the value of labor in any of its forms is reducible to monetary value. But labor’s monetary value is a part of the total value of labor. And it is this part we are solely interested in. As the monetary part of the total value of labor is exchanged equivalently in labor market exchanges, labor market exchanges do not give rise to mon­ etary inequality even if the total value of the good of labor is worth more than its monetary value. Even if market exchanges had the tendency to overstate the monetary value of labor in comparison to the other kinds of value the good of labor features, this would not be a problem in our context – although it might be one in the context of commodification (cf. Chapter 8).13 Second, in some respects, it might be wrong or unjust that Fullie’s labor should be worth more than Baldie’s (e.g. with respect to the role their work plays for their feelings of self-worth or with respect to their contribution to the common good of a society). Intuitively, what one does should make the difference in both of these respects – not what one earns doing what one does – and both Fullie and Baldie basically do the same thing. But we are concerned with consequential commutative justice. And as regards exchange scenarios, and the question of whether labor market exchanges bring about monetary inequality as one of their consequences, the finding that market exchanges at unequal wages still are equivalent applies – and is all that matters. As long as market exchanges do not cre­ ate monetary inequality, there is no problem with the idea that Fullie’s labor should be worth more than Baldie’s with respect to our purpose. Finally, I am not claiming that the market wage is the just price of labor tout court. Nor am I claiming that exchanging labor for market wages will bring about a more just society. Establishing an overall just society is not the task of a conception of commutative justice; much less is it our focus here. One might raise all kinds of further problems with respect to the examples given, and rightfully so, but they are not issues of conse­ quential commutative justice as regards monetary inequality. Unaccounted-for Costs of Labor Another objection to the idea that labor market exchanges are equivalent in the same way that other market exchanges are relies on the fact that

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labor markets differ from most other markets in that, on labor markets, households are the sellers and companies are the buyers. On the labor market, the supply curve (mostly determined by the production costs) represents the households, whereas the demand curve (mostly deter­ mined by preferences, available monetary means, and alternative prices) represents companies. In this context, one might think that individuals selling their labor often are less skilled in accounting for the costs they incur when “produc­ ing” their labor than professional accountants working for companies. Reiff (2013, 126–29), for one, holds that, although households certainly are aware that there are costs to supplying labor, they typically do not account for all of the actually accruing costs. Among these often nonaccounted for costs are, for example, health care costs, childcare costs, education costs, costs for acquiring a reputation and a professional net­ work, and the costs of retiring. Although it is clear that food and housing are important aspects of the production costs of labor, these other costs might all too often be forgotten about. If Reiff is right, this might lead to the following problem. If households systematically underestimate the costs they incur for supplying labor, then market wages might be systematically too low. Inequality would be created to the detriment of the sellers, as the households underestimate their costs. Thus, labor market exchanges, unlike market exchanges for consumption goods (in which companies do the cost accounting), might have a certain tendency to be non-equivalent. But I do not think that Reiff is right. Consider the following scenario. In some libertarian state, education, health care, and the pension system are completely privatized. In order to pay for education, younger mem­ bers of this society typically take out a student loan. In order to make sure their health care and retirement needs are met, people buy private health and life insurance. In this scenario, every member directly sees the costs of education, health care, and retirement whenever he looks at his account statement. He can directly see (and thus account for) how much he has to pay per month in order to repay his student loan, and to pay the insurance premiums. That is, in such a libertarian society, the alleg­ edly hidden costs of producing labor are very visible. This example shows that the problem of sellers forgetting about accounting for all the costs of supplying labor is not a problem in principle.14 Most of us do not live in a state resembling the libertarian one just pictured. In most Western societies, the state assumes at least some role in providing education, health care, and pensions. Is it true that, if the state provides, say, free public health care to its citizens, the costs of hav­ ing access to these services become non-accounted for when calculating the costs of labor? No. In this case, it might no longer be the individual seller of labor who directly accounts for the costs of health care when calculating the costs of supplying labor. Individual sellers of labor might

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just pay their taxes, maybe not wondering too much about what the tax revenues are exactly used for. But the state certainly does account in a very detailed way for the health care costs of its citizens. What we face in the case of a less-than-minimal state providing some goods to the public is an instance of indirect accounting for health care costs. It is no longer the sellers of labor themselves who account for their health care costs, but the state which accounts for these costs for all of its citizens combined. The change in who actually transfers the money to hospitals, physicians, and so forth – from private insurance companies in the liber­ tarian state to governmental agencies in a welfare state – does not affect whether health care costs are accounted for or not. Every welfare state closely monitors how much needs to be paid in order to keep its working population healthy and levies taxes accordingly. Thus it is not true that some actual production costs of labor are sys­ tematically underestimated. Whether households are calculating with a high gross wage (only to spend a lot of money on private insurances in a libertarian state) or whether households are calculating with a sub­ stantially lower net wage (in a welfare state) – either way households certainly are aware of whether what they earn covers their costs of living and of supplying labor. They might not be able to break down their total costs into individual positions the way a professional accountant could. But they will know their total costs, which is all that matters in this con­ text. Notably, if there is a way to be better off not supplying labor to the market because the costs of supplying it exceed the wage earned, then we can expect people to realize this and to stop supplying labor.15 Appreciation of Labor by Experience Finally, one might want to make the following objection. People who repeatedly exchange their labor on the market will become more experi­ enced in what they do. That is, labor market exchanges have the external effect of creating experienced workers, engineers, hairdressers, and so on. This learning effect does not rely on training on- or off-the-job, but directly arises because people exchange their labor on the market and thus work in their chosen profession. Once some seller has become sub­ stantially more experienced, he will be able to secure higher wages than inexperienced colleagues. Because labor market exchanges lead to higher wages for those who regularly engage in them, they might be said to gen­ erate monetary inequality as an external effect. The monetary inequality would not arise between those who practice different professions with average experience, but between those who practice the same profession with different levels of experience. Although such experience effects are very likely to occur, the refuta­ tion of this objection seems straightforward. What creates the experience effects is not the exchanging of labor at the market price, but the actual

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performing of the task. A hairdresser who has cut the hair of family members and his wider circle of friends and acquaintances for free over a period of 20 years might be just as experienced as a hairdresser employed in a shop. Although the exchanging of labor on the market typically leads to experience gains, it is performing the task – not performing it and being paid the market price for doing so – which underlies the effect. Thus, the objection ignores what the labor-appreciating effect is actually caused by.

7.4 Inequality, Theories of Justice, and Interference Executionally just labor market exchanges do not create monetary inequality. Therefore, monetary inequality is not a reason of conse­ quential commutative injustice – at least not within the limitations dis­ cussed here. It is important not to confuse this finding with the idea that inequality as such is not problematic. Inequality stays an important normative problem outside of the sphere of commutative justice. Note that my finding here is perfectly compatible with left-libertarian or luckegalitarian positions aiming to equalize starting positions, letting the agents proceed with free exchanging in a second step, in order to achieve distributive justice. To give just one example, Steiner’s (1994, chap. 8) proposal of establishing a global fund, which compensates for genetic differences and thus balances out, from the very start, inequalities of pay caused by the natural lottery, is perfectly compatible with my argu­ ment. In general, left-libertarian or luck-egalitarian theories need a clear account of transactional justice to ensure that just starting positions are transformed into just end states. My theory of commutative justice lends itself to this role. The flip side of this compatibility is a certain (though not complete) incompatibility with approaches arguing that what should be interfered with in order to deal with the problem of inequality is free exchange. As in the case of externalities, I am not in principle opposed to the thought that this might be done for regulative or preventive purposes. But my conception of commutative justice lends itself more readily to being com­ bined with approaches focusing on equal starting positions. I think the finding that market exchanges do not create monetary inequality sug­ gests that, when we are concerned with equality and justice as regards the outcomes of markets from a normative-philosophical (and not a politically pragmatic) perspective, then what we should focus on is initial distribution, not exchange. This is not to say that we could rarely find reason to sacrifice commutative justice – by regulating or banning cer­ tain equivalent market exchanges – for the sake of end-state distributive justice or other values including equality. One might plausibly feel that denying this possibility would be giving commutative justice too much weight. But I feel the fact that it is not the market exchanges which are

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inequality-creating should count for something; especially in situations in which we have the possibility to interfere with the initial distribution. If we care about equality and justice, I feel we should ceteris paribus focus our efforts on equalizing unequal starting positions rather than on inter­ fering with commutatively just equivalent exchanges.

Notes 1. I follow Chang (1997, 4) in distinguishing comparability from commensu­ rability. The former is about comparisons of two goods (i.e. two concrete bearers of value). The latter is about comparisons of two abstract values, for example freedom and beauty. Throughout this chapter, I am concerned with questions of comparability. 2. It is not universally accepted that what underlies incomparabilities or incom­ mensurabilities is value pluralism. There are value pluralists who think that value pluralism on its own does not entail incommensurability (e.g. Griffin 1986). And Chang (1997, 16–17) thinks that even value monist theories might feature incomparabilities. She argues this might be the case if quan­ titatively more of a certain value (e.g. friendship) is not necessarily better in an evaluative sense (one can be too friendly). But first Chang might be wrong in the sense that, if one is “too friendly”, this supposedly means that beyond some point, any further increment of friendship detracts from some other value – in which case this is not even an instance of value monism. And second, Chang admits that for some values such a distinction between the quantitative dimension and the evaluative dimension cannot be made and that having quantitatively more of a certain value always also means a bet­ terment with respect to that value. Intuitively, exchange value is such a case. 3. The maximization assumption is often met with skepticism. However, I think that in our context it is a plausible assumption to make. When we are considering exchanging goods for money, it does make sense to think that we want to receive the most value possible for the money we spend. 4. If we follow this approach, this implies that an exchange at the market price in which S and T move to a Pareto-superior situation with respect to prefer­ ence satisfaction is equivalent. S might subjectively speaking gain exchange value in an exchange – and T likewise. However, we have to distinguish between an analysis of whether people are better off, subjectively speaking, with respect to exchange value because of a certain exchange, and an analy­ sis of whether one party gains exchange value to the detriment of another party from an interpersonal perspective. Thus, if we employ the market price as an intersubjective measure of exchange value, then a Pareto-improving exchange at the market price can still be said to be equivalent. 5. There are other factors besides production costs, people’s income, and prices of substitutes and complements which might affect the market price. On the one hand, these are factors which influence the market price, but which intuitively should not. One might think that speculation belongs here. On the other hand, these are factors which do not influence the market price, but which intuitively should (e.g. the presence of externalities). I assume that no such factors are present. I am aware that this is a strong assumption, but it likewise has to be made by other suggested approaches for determining the exchange value of a certain good, say production cost approaches (e.g. Aquinas 2003, st. 2–2, quest. 61, art. 1–3, 123–9; quest. 77, art. 1 and 4, 143–8; Reiff 2013, 51–79).

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6. We are not even able to predict how the consumption patterns of the poor change once we raise their income – that is, we are surprised to see them buy a TV rather than better-quality food or health care (cf. Banerjee and Duflo 2012). 7. The dashed DA and the dotted DB are only drawn as two distinct curves for illustrative purposes. 8. This step is analogous to the example illustrated in Figure 7.4. 9. For some goods, the rich drop out of the market entirely if high quantities of the good are traded. In this case, the part below the kink in the demand curve exclusively represents the poor people’s demand. 10. I do not think that there are, in a strong sense, genuinely or systematically defective preferences. I do not even know with respect to what standard this should be judged. In the end, “a person’s preferences are (permissibly) what they are” (Steiner 2010, 23). I ignore cases in which the preferences of a sub­ stantial number of people have been altered against their will, for example, by forcibly equipping them with preference-altering brain implants. 11. It is a different question whether exchanging gestational labor for money has yet other negative effects besides the alleged violation of the equivalence principle. For example, one might argue that exchanging gestational labor for money commodifies pregnancy (e.g. Sandel 2012). That is, one might have other objections to entering into an exchange, even though qua equiv­ alence principle the exchange is just. There certainly are important criti­ cisms along these lines, but they are independent criticisms I will address in Chapter 8. 12. Often we want to distinguish inequalities created by an autonomous agent’s choice from inequalities due to favorable circumstances, for example, brute luck in the natural lottery (cf. Dworkin 1981a, 1981b; Steiner 1997); for instance, if we are sympathetic to luck-egalitarian positions holding that we should compensate for the latter but not for the former in order to achieve distributive justice. But drawing such distinctions is not our purpose here. For our purpose, all that matters is that exchanges at the market price do not create inequality but reflect existing inequalities – irrespective of their cause. 13. My account does not necessarily lead to undervaluing certain kinds of labor (e.g. domestic work) to other kinds of labor. The value of domestic work can just as well be determined by market standards as any other kind of labor. 14. In such a scenario, individuals might also choose, say, not to have health insur­ ance at all. But this decision to directly bear the costs without risk protection by an insurance is different from forgetting about factoring in these costs. 15. Even in developing countries, in which people are working despite not earn­ ing enough to cover all of the costs of supplying labor, it would be wrong to characterize this situation as one in which households do not account for hid­ den costs of supplying labor. Instead, because they are in situation of distress, they consciously ignore these costs, for they are still better off working than not working. But during all of this the households are, of course, aware that should a working member fall ill, they will be unable to pay healthcare costs.

Bibliography Anderson, Elizabeth. 1993. Value in Ethics and Economics. Cambridge, MA: Harvard University Press. Aquinas, Thomas. 2003. On Law, Morality, and Politics. Edited by William P. Baumgarth and Richard J. Regan. 2nd ed. Indianapolis and Cambridge: Hackett.

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Arendt, Hannah. 1998. The Human Condition. 2nd ed. Chicago and London: University of Chicago Press. Aristotle. 1995. Politics. Book I and II. Translated by T. J. Saunders. Oxford: Clarendon Press. ———. 2000. Nicomachean Ethics. Edited and translated by Roger Crisp. Cam­ bridge Texts in the History of Philosophy. Cambridge: Cambridge University Press. Banerjee, Abhijit V., and Esther Duflo. 2012. Poor Economics: Barefoot HedgeFund Managers, DIY Doctors and the Surprising Truth About Life on Less Than 1 Dollar a Day. London: Penguin Books. Binmore, Ken. 1994. Playing Fair (Game Theory and the Social Contract; Vol 1). Cambridge, MA: The MIT Press. ———. 1998. Just Playing (Game Theory and the Social Contract, Vol. 2). Cam­ bridge, MA: The MIT Press. Brandt, Richard. 1979. A Theory of the Good and the Right. New York: Oxford University Press. Chang, Ruth. 1997. “Introduction.” In Incommensurability, Incomparability, and Practical Reason, edited by Ruth Chang, 1–34. Cambridge, MA: Harvard University Press. Cohen, Gerald A. 1995. Self-Ownership, Freedom, and Equality. Cambridge: Cambridge University Press. Dworkin, Ronald. 1981a. “What Is Equality? Part I: Equality of Welfare.” Phi­ losophy and Public Affairs 10: 185–246. ———. 1981b. “What Is Equality? Part II: Equality of Resources.” Philosophy and Public Affairs 10: 283–345. Griffin, James. 1986. Well-Being. Oxford: Clarendon Press. Hare, Richard Mervyn. 1981. Moral Thinking. Oxford: Clarendon Press. Harsanyi, John. 1977. Rational Behavior and Bargaining Equilibrium in Games and Social Situations. Cambridge: Cambridge University Press. List, Christian. 2014. “Three Kinds of Collective Attitudes.” Erkenntnis 79 (Suppl 9): 1601–22. Marx, Karl. 1969. Value, Price, and Profit. New York: International Co., Inc. Marx, Karl, and Friedrich Engels. [1844] 1975. “Economic and Philosophic Manuscripts of 1844.” Collected Works 3: 270–83. New York and London: International Publishers. Mason, Elinor. 2015. “Value Pluralism.” In The Stanford Encyclopedia of Philos­ ophy (Summer 2015 Edition), edited by Edward N Zalta. http://plato.stanford. edu/archives/sum2015/entries/value-pluralism/. Mauss, Marcel. [1925] 2002. The Gift: The Form and Reason for Exchange in Archaic Societies. London and New York: Routledge. Nozick, Robert. 1977. Anarchy, State, and Utopia. New York: Basic Books. Piketty, Thomas. 2014. Capital in the Twenty-First Century. Translated by Arthur Goldhammer. Cambridge: Belknap Press of Harvard University Press. Pindyck, Robert S., and Daniel L. Rubinfeld. 2013. Microeconomics. 8th ed. Boston: Pearson. Rawls, John. 1971. A Theory of Justice. Rev. ed. Cambridge, MA: Harvard Uni­ versity Press. Reiff, Mark R. 2013. Exploitation and Economic Justice in the Liberal Capitalist State. Oxford: Oxford University Press.

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Roemer, John. 1993. “A Pragmatic Theory of Responsibility for the Egalitarian Planner.” Philosophy and Public Affairs 22: 146–66. Sandel, Michael. 2012. What Money Can’t Buy: The Moral Limits of Markets. London: Allen Lane. Satz, Debra. 2010. Why Some Things Should Not Be for Sale: The Moral Limits of Markets. Oxford: Oxford University Press. Sen, Amartya. 1992. Inequality Reexamined. Oxford: Oxford University Press. Steiner, Hillel. 1994. An Essay on Rights. Oxford: Blackwell. ———. 1997. “Choice and Circumstance.” Ratio 10: 296–312. ———. 2010. “Exploitation Takes Time.” In Economic Theory and Economic Thought: Essay in Honour of Ian Steedman, edited by J. Vint, J. S. Metcalfe, H. D. Kurz, N. Salvadori, and P. A. Samuelson, 20–29. London and New York: Routledge. ———. 2012. “The Consequences of Choice.” Archiv Für Rechts- Und Sozial­ philosophie 134: 101–8.

8

Commodification

Commodification typically refers to the negative effects that may arise if certain goods are exchanged for money on the market. The basic idea is that sometimes, if a certain good is exchanged for money on the market, the good is “devalued” because of this.1 According to Anderson (1993, 168–89), this negative effect is due to a misevaluation of the good in question. Not all goods are properly valued by putting a price on them (i.e. by responding to their value with a market attitude). An important side effect of Anderson’s seminal account of commodification – as well as of other semiotic objections (Brennan and Jaworski 2015) to selling certain goods on the market – is that there seemingly can be no liberal theory of commodification.2 Liberalism, with its commitment to individual choice and to neutrality as regards compet­ ing evaluation practices, seems conceptually incapable of identifying or abolishing many significant forms of commodification. The situation thus roughly seems to be the following one. Many people have the intuition that exchanging certain goods on the market can be a normatively problematic affair. If we give citizenship status to everybody who pays a certain amount of money, if we allow people to buy prison cell upgrades, or grant them the right to shoot an endangered species in exchange for money, then something seems to be amiss (Sandel 2012, 3–4). However, normatively speaking, we can only make sense of this intuition if we are willing to leave behind core liberal principles. But I think there actually is a liberal theory of commodification. In the context of this book, this means that market exchanges which bring about commodification can be considered commutatively unjust. Commodification can be a reason of commutative injustice. However, it is a contingent feature of market exchanges to bring about an interferenceworthy kind of commodification. Even on the basis of the liberal theory of commodification I am about to suggest, there is no way for liberals to straightforwardly identify normatively problematic instances of commodification, to clearly condemn them, and to easily agree on appropri­ ate regulatory policies.

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At the end of this chapter, I will conclude that, while concerns of commodification might not be in principle irrelevant for a liberal theory of commutative justice – practically speaking, they are. But first I shall show how we can develop a liberal theory of commodification. I shall do so by highlighting what needs to be true so that a just liberal state commit­ ted in some fashion to liberal neutrality may permissibly interfere with instances of commodification. Namely, if we are working with a particu­ lar conception of what is normatively problematic about commodifica­ tion (section 8.1), and if we are dealing with the invasive crowding out of evaluation practices of social goods (section 8.2), and if we think that certain psychological harms fall under the harm principle (section 8.3), then we can show how liberals, in principle, may condemn and counter commodification. That is a lot of ifs. And this is why commodification as a reason of consequential commutative injustice might be theoreti­ cally consistent, even for liberals, but has minimal practical implications (section 8.4).3

8.1 Commodification, Crowding Out, and Harm Consider a widely used example of commodification. In commercial gestational surrogacy, a woman is implanted with an egg from another woman that has been fertilized in vitro. She is paid for undergoing the implantation procedure, for bearing the child and giving birth to it, and for then handing the baby over to the commissioning parties (usually a couple), relinquishing all rights. Although widely used as an example, this is an extreme case of commodification, namely, the commodification of bodies. Throughout most of this chapter I shall rely on this example. But I will eventually touch on how my argument likewise applies to commodification in other areas (e.g. politics and education). According to Anderson (1993, 175), the normative problem with commercial surrogacy is the following. Instead of evaluating gesta­ tional labor according to the norms of love, wonder, admiration, or awe and responding appropriately to this kind of value, we misevaluate it based on market norms and misrespond to the value present in the good exchanged with a desire to use (i.e. the typical evaluative response for market transactions). These ideas of misevaluation and misresponse have to be understood against the background of Anderson’s theory of different appropriate responses to different kinds of value (1993, 1–16).4 Some responses are more fitting than others – and yet others are clearly unfitting. With respect to commodification this means that some things simply should not be “shopped for” but admired, not economi­ cally assessed but met with awe, not priced but loved. The misresponse (in that people do not opt for the appropriate way to respond to the value of the good) is what is normatively problematic about commodi­ fication. As soon as we exchange a good on a market which supposedly

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cannot be appropriately desired, we misrespond and thereby cause the “devaluation” of the good. Anderson’s (1993, 172, 179) strong claim that we cannot value a cer­ tain good appropriately in two ways at once has been criticized (e.g. Arneson 1992, 193; Kymlicka 1991, 95). A strong opposition between on the one hand desiring a good and on the other hand, say, admiring it simply does not seem to exist. For example, a buyer commissioning a portrait, who expresses his desire for it in monetary terms, can still admire its beauty once it is finished. It does not seem to be the case that as soon as we desire to buy a good for which the appropriate response is admiration, we thereby commodify and devalue it. As Arneson puts it, “[m]any kinds of work thought by many of us to be noble labor are nevertheless regarded as appropriately done for money, and no widely held norm in market societies denigrates the performance of noble labor for pay” (1992, 153–54). Furthermore, one might wonder whether Anderson’s account equally applies to different kinds of market transactions. Auctions, for instance, are often used in cases in which the monetary value of some good is unknown. And auctioneers go to great lengths to explain why the good to be auctioned off is uniquely special (and not just some other commodity). Finally, epistemological doubts abound. How can we identify the appropriate response to the value proper of a certain good? It is note­ worthy that Anderson does not explicitly tell us what the fitting response to the value present in gestational labor is – the list of love, wonder, admi­ ration, or awe is my own. And I do not think it is necessarily complete. Other options one might reasonably suggest are respect or even gratitude on behalf of the species. In light of these criticisms and doubts, I think there is a promising alternative account of what exactly the normative problem with commodification is. We can argue, pace Anderson, that the normative prob­ lem with commodification is not that we individually “misrespond” to the value of the good exchanged. Instead, normative problems only arise once a good’s market-based evaluation practice crowds out other evalu­ ation practices on the social level, leaving some people behind harmed. This opens up the general possibility for a liberal theory of commodifi­ cation, based on commodification sometimes constituting a violation of the harm principle. It opens up a possibility, as a liberal’s condemning commodification no longer needs to be based on the idea of fitting and unfitting responses; a route which seems to be blocked by the principle of neutrality. Without giving up liberal neutrality, this theory holds that the harm principle provides us with a pro tanto reason for condemning and countering commodification.5 My suggested account is in line with Anderson’s idea that commodifi­ cation essentially is about the crowding out of nonmarket values by mar­ ket values. I also assume that Anderson is right about the empirical facts

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involved. That is, I will suppose that commodifying gestational labor in the non-evaluative sense leads to commodification in the evaluative sense.6 However, my account differs in that it holds that the normative problems with commodification do not start with an alleged individual misresponse to the value proper of a marketed good. I think the nor­ mative problems only start once this new evaluation practice drastically spreads. This is because we have to distinguish two things that happen if a currently non-marketed good starts being exchanged for money. First, a new evaluation practice emerges. If gestational labor used to be evalu­ ated based on nonmarket norms and the appropriate response to its value seemed to be wonder, love, admiration, or awe, there now is a new way to evaluate it and respond to it; namely, evaluating its exchange value and desiring to use it. We can now also evaluate gestational labor by asking whether the surrogate mother fulfilled her contractual duties and what price was paid. This is less of a misevaluation of the good exchanged and more of an additional evaluation emerging.7 By its very emergence, this new evaluation necessarily relativizes existing evaluations and modes of response. We realize that our traditional evaluation was not as exclusive as we might have thought. But it does not do much else from a normative perspective. In a second step, the new evaluation practice diffuses. We act on this new evaluation in that we effect exchanges based on it. This does not in itself constitute a problem because doing so would be “misresponding” to its value. The problem is not that we choose an “unfitting” response, when there would be a more “fitting” response around. However, what might happen in the long run is that, as we become more and more used to evaluating the good in terms of its exchange value and our desire to use it, the new evaluation practice comes to crowd out traditionally held ones.8 This also is the point where we clearly see in which way commodi­ fication might be an instance of a new harm. Whether the emergence and diffusion of an alternative evaluation practice is something we should welcome or oppose depends on the case in question. To present an optimistic scenario, if we allow the market to evaluate gestational labor, this might break the monopoly of a cultural standard for evaluating gestational labor which notoriously undervalues it out of obscure ideological reasons (Satz 2010, 120). Some feminist authors praise commercial gestational surrogacy for its potential to lib­ erate women from oppressive stereotypes, such as the idea that women are governed by maternal instincts they cannot overcome, which in turn necessarily bind them to the domestic sphere (e.g. Shalev 1989, 17). Generally speaking, if two evaluation practices exist side by side, little seems to be wrong with this. But even a complete crowding out of old evaluation practices by new ones does not have to be a bad thing. Argu­ ably, if we started to evaluate housework exclusively according to market

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norms and our desire to use it, this would improve the social standing of those who do the housework (still mostly women in Western societies) – and rightfully so. They would come to be regarded as contributing to the overall output and performance of a society. On a more pessimistic outlook, there could be cases in which the market-based evaluation does not coexist with traditional practices but completely crowds them out, and in which this leads to an impoverish­ ment of both the culture and the good exchanged. That is, we can con­ ceive of extreme cases of commodification in which the crowding out threatens to eliminate an evaluation practice so important that the harm done is palpable. Consider a society in which evaluating gestational labor in terms of wonder, love, admiration, or awe is completely crowded out. In such a society, gestational labor is reduced to just another kind of unquali­ fied bodily labor. The rich would shun it, try to keep working in their well-respected jobs, and outsource this nuisance as best they could – like they nowadays outsource cleaning. Women walking the streets with baby bumps would not be looked at as hopeful mothers-to-be but as members of the working class. Even in the case of non-surrogate pregnancies, the fathers of the children would not regard the gestational labor of their partners lovingly, but as indifferently as they regard their income-earning work as a waitress. Especially as the due date draws closer, pregnant women would not be admired for what they achieve but simply pitied. Also, those who would end up performing gestational labor would them­ selves only look at it with the idea in mind of how to best avoid the arduous parts. A woman performing gestational labor would not be awe­ struck any more upon feeling the first movements of the child, thinking about the wonder of how she is able to give life. Instead, women would be hoping that it was just another case of flatulence, because the first movements mean nothing but that the truly stressful part is beginning. If this were the only way in which gestational labor were supplied and demanded, I think few would deny that that society had lost some­ thing very valuable. A source of value simply would have run dry. The traditional evaluative responses with which we react to the value of ges­ tational labor having been crowded out, some part of pregnancy’s total value simply could not be tapped any longer. Those harmed in such a scenario would be all those for whom the non-monetary part of the total value of gestational labor functioned as a source of value. They might well be external to the commodify­ ing exchanges, as a “market in reproductive services would have adverse effects on all persons, not simply on those who choose to enter the mar­ ket” (Radin and Capron 1988, 36). To some extent commodification, like monopolization, can be conceived of as an exchange externality. Although instances of commercial surrogacy might be truly beneficial for all parties internal to the exchange, there can be external effects at the

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social level which shed a negative light on repeatedly and continuously engaging in it. To summarize, given that commodification is, by definition, an effect of exchanging a good on the market, there can be no doubt that market exchanges indeed cause commodification. However, how exactly market exchanges do so is not trivial. I suggest that normatively problematic commodification does not start with an individual evaluative “misre­ sponse”. To begin with, to commodify a good (in the non-evaluative sense) only means to employ a new, alternative evaluation practice for that good. Only if this new evaluation practice starts to replace more traditional ones (i.e. when market-based evaluation practices crowd out others), and if this process is normatively worrisome because this crowding out threatens to completely eliminate an important evaluation practice so that the harm done is palpable, do we witness normatively problematic commodification.

8.2 Neutrality, Invasive Crowding Out, and Social Goods Can we really rely on violations of the harm principle to justify that the state (or a similar force-wielding political organization) is permitted to interfere with commodification? Prima facie this does not seem to be the case. First, because one might think that the psychological harms in ques­ tion are outside of the scope of the harm principle properly understood (cf. next section). Second, because a central tenet of liberalism is neutral­ ity. Even if we think that what is normatively problematic about commodification is not that we exchange “fitting” for “unfitting” responses, but instead the harm we cause by such exchanging, the principle of neu­ trality seems to prevent state interference. Consider, for instance, Rawls’s (1993, 174–201) argument that a liberal state ought not strive to protect evaluation practices from dying out which can be saved only through force-backed measures (like prohibiting commercial surrogacy). A Neutrality Argument Against State Interference Rawls argues that in a free society some forms of belief, religious outlooks, or evaluation practices might not survive. But for him this in itself is not enough reason to condemn this phenomenon or legitimize state interfer­ ence. If a certain evaluation practice spontaneously vanishes as more and more people freely come to engage in new practices until nobody practic­ ing the traditional one is left, without anybody being indoctrinated or forced to give up his or her traditional practice, there is nothing a liberal state should do about this. A certain pluralism of views on the good is a permanent feature of liberal, non-repressive societies. Yet, to actively maintain this pluralism by interfering with spontaneous crowding out is beyond what a liberal state is supposed to do (Rawls 1993, 37).

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Rawls (1993, 197–98, nn. 32, 33) explicitly endorses Berlin’s ([1988] 2013) view that there exists no political system that can allow sufficient space for all permissible and reasonable evaluation practices to coexist. “No society can include within itself all forms of life. . . . [T]here is no social world without loss: that is, no social world that does not exclude some ways of life that realize in special ways certain fundamental values” (Rawls 1993, 197). But, he argues, “these social necessities”, that is the decline of some evaluation practices failing to gain adherents under the political and social conditions of a free and just constitutional regime, “are not to be taken for . . . injustice” (1993, 197). Even though certain forms of beliefs, ways of life, or evaluation prac­ tices might be permissible (i.e. they are not in direct conflict with prin­ ciples of justice, for example because they would be discriminatory on grounds of race or ethnicity) and also reasonable (i.e. they stand up to the critical rational examination of a society of free and equal citizens), they might still die out without this being unjust. This is not to say that the loss of a certain evaluation practice would never be regrettable. Rawls admits that the optimistic belief that only “unworthy forms of life lose out in a just constitutional regime” (1993, 198, n. 33) is false. He holds that we may rightly lament the limited space even comparably spacious liberal societies provide, especially in light of the suffering of those losing out. The psychological harm they are experiencing also is why those who endorse a certain evaluation practice which is fully worthy of their allegiance – but which does not flourish in a liberal state – have some intuitive pull in favor of their argument that the liberal state did not allow sufficient space for that particular evaluation practice. Alas, “there is no criterion for what counts as sufficient space” (1993, 198, n. 33). To summarize, on the one hand Rawls holds that we can distinguish permissible and reasonable evaluation practices (i.e. those “worthy of allegiance”) that would be rightfully lamented if lost from other, less val­ uable practices. But on the other hand, there is no criterion to distinguish cases in which a liberal state should condemn and fight such regretta­ ble loss – to allocate to a worthy evaluation practice under pressure the space it needs and duly deserves – from cases in which it should not. This is Rawls’s version of the characteristically liberal neutrality-argument against state interference with commodification.9 Invasive Crowding Out and Social Goods I agree with Rawls that even the regrettable loss of a worthy evaluation practice is not necessarily unjust. However, in contrast to Rawls (but less so in contrast to Berlin), I think there are cases in which the loss of a certain evaluation practice, above and beyond being regrettable, may be considered unjust by liberals.10 Sometimes we can tell that a certain

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evaluation practice in danger of extinction is not allocated sufficient space. Notably, when a worthy evaluation practice of a social good is subject to invasive crowding out. Put differently, I think that what has to be true for a liberal state to permissibly interfere to protect the adherents of a certain evaluation practice from harm is that we are dealing with the invasive crowding out of an evaluation practice of a social good. Such cases show how there is a liberal theory of commodification. Let me explain, first by elaborating on the idea of invasive crowding out. Invasive crowding out is unlike voluntary forms of crowding out. We can readily distinguish two voluntary ways of adopting a market-based evaluation practice of a good. First, there is the pioneering adoption by agents internal to initial market exchanges of that good. Second, there is the following adoption of a market-based evaluation by agents external to the initial market exchanges because of the example set by those ear­ lier agents. Clearly, both agents internal and external to the exchanges might voluntarily choose to adopt a market-based evaluation practice in these respective ways. In concrete terms, some people might pioneeringly choose to engage in commercial surrogacy; maybe also because they feel this is a way of liberating women from oppressive stereotypes. And their example might then lead others to see that evaluating gestational labor in market terms is a legitimate or even desirable evaluation practice. Invasive crowding out refers to neither of these two voluntary kinds of how a new evaluation practice may crowd out existing practices. Instead, it refers to the phenomenon that sometimes people are unable to continue practicing their chosen evaluative response in an environment dominated by another evaluation practice of that good. Even if they want to, they cannot uphold their chosen evaluation practice as everybody else opts for a different practice. Thus, it is an involuntary kind of crowding out. For instance, as the traditional social standards, norms, and evaluative responses change in light of more and more market exchanges of gesta­ tional labor, those opposed to these exchanges can no longer freely choose to evaluate gestational labor as they used to. Due to the dominance of the former there simply is nobody left practicing it with them. Their evalu­ ation practices are invasively crowded out, as a side effect of voluntary kinds of crowding out. People are harmed in this changing landscape of evaluation practices, as one of their sources of value runs dry. Although people are unable to freely uphold their chosen evaluation practice, that is, although being involuntary, invasive crowding out also is unlike indoctrination. In cases of indoctrination, some organization forcibly changes some people’s evaluation practices (e.g. by first brain­ washing them and then prescribing a new orthodoxy). But with respect to invasive crowding out, it is more appropriate to say that people are “indirectly forced out of” their chosen evaluation practice rather than “directly forced into” a new one. They are forced out of rather than forced into an evaluation practice, for all that happens is that they cannot

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uphold their traditional evaluation practice as there is nobody left prac­ ticing it with them. This is different from people pushing you to accept a new and different evaluation practice as the only true one. In a liberal society, even if market attitudes towards a certain good come to domi­ nate in the wake of commodification, nobody forces you to adopt these very attitudes yourself. It is just that your favorite evaluative response is no longer available. Also, people are indirectly rather than directly forced out of their chosen evaluation practice. This is because people adopting a market-based evaluation practice first of all are concerned with chang­ ing their own ways of responding to a good rather than aiming to affect your evaluation practice. It only so happens that in light of their changed evaluation practices, you cannot uphold your chosen practice either. One might object that such invasive crowding out could not happen, as people are always free to evaluatively respond to a certain good in whichever way they want – if only on an individual level. That is, it might seem as if we are always free to idiosyncratically value goods in a certain way even if nobody around us likewise does. You might be the only one left doing so, still you always have the free choice to respond with a nonmarket attitude towards a certain good. The idea is that it simply could not happen that other people’s evaluation practices invade our personal evaluation practices, rendering them impossible to be practiced or taint­ ing them. However, that some people can no longer freely choose to evaluate a certain good based on the same meaningful and untainted evaluation practice they used to because of invasive crowding out may happen with respect to social goods. The two concepts of invasive crowding out and social goods are closely linked. I shall assume here that there can only be invasive crowding out where there are social goods. That is to say that what characteristically distinguishes invasive crowding out from the spontaneous instances of evaluation practices dying out that Rawls discusses and dismisses is the object of the crowding out. Speaking of invasive crowding out only makes sense with respect to certain objects – namely, if evaluation practices of social goods are crowded out. Note that the existence of what I call social goods is an empirical premise of my liberal theory of commodification. I think it plausible that our psychol­ ogy works in the way I am about to describe. But empirical facts may cut against my naive view. A social good, as I shall use the term here, is a good which is inher­ ently about the social relations of human beings with each other, about the bonds they form. Examples include citizenship (about the bonds of a political community), voting rights (about the bonds among voters, between voters and non-voters, and between voters and elects), friend­ ship (about the non-familial, non-professional, non-romantic bonds we voluntarily form), or gestational labor (about the bonds between (sur­ rogate) mother and child).11

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What all social goods have in common is that they are goods whose (even individual) evaluation depends on how others evaluatively respond to them. This is not to say that social goods are goods which can only be enjoyed by more than one person at the same time (like playing a game of football) or which can be enjoyed in a better way if enjoyed together (arguably, watching a football game). Instead, the point is that even individual evaluative responses to social goods are influenced by others’ evaluative responses and thoroughly dependent on them. We can­ not evaluatively respond to social goods completely independently of how others do simply because social goods are inherently about human bonds. As regards a bond, there always is at least one other agent or party involved whose evaluative response matters and affects our own.12 The example of friendship serves well to illustrate this defining char­ acteristic of social goods. Say one party in a friendship secretly responds to the value of the friendship mostly with a desire to use it for her own purposes. If the other party’s evaluative response, however, is originally dominated by his respect for her, then his evaluative response will be influenced by her response, and potentially tainted, should he become aware of her secret evaluation at some point. As regards social goods, we cannot choose not to care about the other’s evaluative response, as if a certain friendship would not suffer if it is not based on reciprocity. The social good we are evaluatively responding to might be devalued if others do not practice the same evaluative response we do. Which others have to share my evaluation practice and on how many others my personal evaluation depends on differs from social good to social good. Friendship typically seems to be a two-person bond between well-acquainted individuals. Citizenship is an n-person bond also includ­ ing strangers. What all social goods have in common, however, is that there is at least one other person on whose evaluation my evaluation depends.13 This is why how we evaluatively respond to a social good is to some extent beyond our own control. And this is why social goods are prone to invasive crowding out.14 In the case of commodification, the invasive crowding out proceeds in such a way that more and more people start to voluntarily adopt market attitudes. At some point, even if nobody directly forces the “traditionalists” to adopt a market attitude toward the social good, they can no longer freely choose to evaluate the social good based on the same evaluation practice they used to – as there are not enough people left to join them. When exactly this threshold is reached depends on how many others a meaningful and untainted evaluation of the social good in question depends on. But whenever it is reached, the social good and the corresponding evaluative response either outright disappear, in the sense that the social good can no longer be meaning­ fully valued at all. Or the social good is devalued and the corresponding evaluative response becomes tainted. You may still value the social good

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in some way, but not in the same way as before. A source of value has run dry and a psychological harm ensues. If there is invasive crowding out, this prevents us from individually and independently choosing how we evaluatively respond to a social good. This distinguishes invasive crowding from those spontaneous and vol­ untary instances of evaluation practices dying out Rawls discusses. The evaluation practices for social goods (i.e. the objects of invasive crowd­ ing out), feature a minimal number of people needed to uphold them. This allows us to draw the line Rawls thinks cannot be drawn. For the evaluation practices of social goods there is a criterion for what counts as sufficient space; namely the respective threshold. And if you find yourself lacking somebody to practice a certain evaluative response to a social good with, the crowding out might be involuntary on your part. You might find yourself “indirectly forced out of” your favorite practice. Consider commercial surrogacy again for a concrete example of inva­ sive crowding out due to commodification. Even a non-surrogate mother cannot evaluate her own gestational labor completely independently of others (e.g. by responding to its value with love). I think that the mother’s individual valuation is at least dependent on the evaluative response of her child.15 As is the case for friendship, I think only one other person sharing the mother’s evaluative response to gestational labor is needed for her not to suffer from invasive crowding out in the wake of spreading commercial surrogacy. She only needs her child to respond in the “right” way to establish an untainted bond and to be able to tap the full value of the social good. So the mother’s chances to avoid ever being harmed by inva­ sive crowding out seem high – especially if she raises and educates the child, giving her the possibility to pass on her values. But if the overwhelming majority of society started to evaluate gesta­ tional labor based on market values, there is a certain risk. And if every­ body in a society started to evaluate gestational labor in a new way, then the mother could not simply go on evaluating it in the way she used to either. This is because in a society in which gestational labor is extremely commodified and the evaluative responses of wonder, love, admiration, or awe are crowded out, the child is very likely not to mirror the mother’s loving evaluation. That is, being socialized in such a world, the child typi­ cally will respond to the gestational labor necessary for its birth in the same way as all of its friends: with indifference.16 Nowadays children regard the labor of midwives or doctors as some­ thing necessarily involved in their birth, but without calling for a par­ ticular evaluative response on their part. (I do not know the name of the midwife involved in my birth. I do not feel blameworthy because of this.) An analogous thing could happen to gestational labor. Note that a child could easily subscribe to the idea that it is important that the nonsurrogate mother is its genetic mother, that is, affirm the importance of

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biological bonds, and at the same time deny that it is in any way relevant whether she performed the gestational labor rather than some surrogate mother – because performing gestational labor is just another job that somebody has to do. In such an environment, a child might say the fol­ lowing thing. “Sure, somebody had to do this so that I could be born, mom . . . but why didn’t you let somebody else do the work? Didn’t you and dad have enough money back then to afford a surrogate mother? I mean, if I have the money, I will, of course, look for a surrogate mother once I want to have kids!” To give a more drastic example, at some point in time mother and child might end up in a heated argument about who is doing more for the family and who has done more for the other in the past. A not unheard of knock-out argument of mothers in such a context seems to be: “But I have given birth to you!” To which the child might reply: “A fat lot I care!” I happen to think that nowadays the child’s reply typically is a lie. If the child were to calm down and reconsider the issue, it would have to admit that that statement was wrong. It would have to admit that it does care about the fact that it used to be in its mother’s womb. At the same time, I think the mother knows about this state of affairs – and this influences her own evaluation of her gestational labor. But in a society in which gestational labor is completely commodified, the child might really mean what it said. And it could go on to say, more calmly: “Here, take this money. That is even more than a surrogate mother costs. But don’t tell me I don’t pay my dues!” This would affect the mother’s evaluative response. She could not just overlook the child’s purely market-based attitude towards her gestational labor, its “ingratitude” as expressed by offering money.17 The situation is analogous to that of unreciprocated friendship mentioned above. You cannot just go on valuing a relation­ ship you deemed a friendship in the same way, if you find out that your “friend” only desires to use you. If the non-surrogate mother were to claim that her own evaluative response is not tainted by the evaluative responses of society overall and in particular that of her child, that claim would ring hollow. This just does not seem to be how our evaluative responses with respect to social goods work. No woman is an island – especially in the context of goods inher­ ently about the relationships between human beings and the bonds we form. This means that, in principle, there can be cases in which nobody can uphold an untainted traditional evaluation practice of a social good because of invasive crowding out in the wake of commodification.

8.3 Commodification and Psychological Harm It is not clear whether the harms caused by invasive crowding out fall within the scope of a recognizably liberal harm principle. That is to say, similar worries as those we face in section 5.3 when discussing the harms

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caused by domination arise. There we concluded that the psychological harms caused by domination do not activate a liberal harm principle. As regards commodification, once again, one might be worried that the harm caused is too small. In a situation in which the value of gesta­ tional labor is met with a market attitude on the child’s part, a source of value has been contaminated for the mother. This clearly is not a very serious psychological harm. Still, those experiencing it because of commodification have some reason which speaks in favor of their argument that the state should interfere with the invasive crowding out. It might be a defeasible pro tanto reason, which could not justify outright bans of commercial surrogacy. But it is a reason nevertheless, which might suffice for, say, banning the advertisement of surrogacy services. Also, with respect to disliked feelings caused, there is a difference between those caused by domination and those caused by commodifica­ tion. Recall Ellis’s argument of how causing universally disliked feelings which have “no moral content” (e.g. pain, fear, repugnance) constitutes a violation of a recognizably liberal harm principle – whereas arous­ ing moral indignation or committing acts of indecency do not violate the principle, as the disliked feelings caused are feelings “which are the expression of a moral view” (1984, 9). I think that the feelings of loneliness, abandonment, or desperation the victims of invasive crowding out experience as one of their sources of value runs dry constitute universally disliked feelings of the non-moral kind. Consider that invasive crowding out in itself is blind to the moral standing of the evaluation practice it eliminates. Evaluation practices which are laudable might just as well become subject to invasive crowd­ ing out as “scandalous” ones. To this effect, the amoral distress caused by invasive crowding out is unlike the distress caused by the indecency of, say, polygamy. Thus, we may conclude that the psychological harms in question violate a recognizably liberal harm principle. The fact that the bonding between mother and child does not happen simultaneously (as it typically does when bonds of friendship are formed) is but a complication. While in its mother’s womb, the child is unaware of the gestational labor, and only able to reciprocate its mother’s evalu­ ative response at a later time. But this does not amount to making the mother’s evaluative response independent of that of the child, or at least temporally immune to invasive crowding out. This is, first, because a social good can only be fully evaluated when the bond is mutually responded to. While the bonds underlying friend­ ship and gestational labor may differ with respect to whether they emerge simultaneously or successively, both ultimately require mutual evalua­ tive responses. This is, second, because even if the non-surrogate mother evaluates her gestational labor at the time she performs it rather than ex post, what influences her evaluative response is the expected later evalu­ ative response of her child. And the high risk of the child not valuing

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gestational labor in her way has the power to taint her chosen evaluation practice from the very start. Doubts about the child’s expected evaluative response will settle in, not allowing her to freely continue practicing it. The probabilities and risks associated with these issues do not affect the judgment that the harm principle applies (cf. sections 4.3 and 4.4). Everything just said is compatible with the following two ideas. First, if we are dealing with the crowding out of evaluation practices of a non­ social good, the state should not interfere. Such voluntary crowding out of evaluation practices – even if they are “reasonable” and “worthy” (Rawls 1993, 197), and replaced with some “unworthy” practice – does not cause a psychological harm in the first place. Because as regards non­ social goods, you are individually free to choose your favorite practice. And should you be harmed, in some weird way, by your free choice to adopt the “unworthy” evaluation practice, the maxim volenti non fit ini­ uria would apply. So there is no pro tanto reason for state interference here. Second, people experiencing relevant psychological harms because of the invasive crowding out of their chosen evaluative response are not necessarily wronged. This might be the case, for instance, for racist or sexist evaluation practices. If such evaluation practices are threatened to be invasively crowded out, a liberal state need not interfere to save their practitioners from psychological harm. This is because, in Rawls’s words, these evaluation practices are not permissible to begin with. They are in direct conflict with principles of justice, because they are discriminatory on grounds of race or ethnicity (Rawls 1993, 197).18

8.4 Practical Implications We now know what needs to be true for a liberal state committed in some fashion to liberal neutrality to permissibly interfere with commodi­ fication. Market exchanges are consequentially commutatively unjust if market-based evaluation practices invasively crowd out an evaluation practice of a social good, which causes a relevant psychological harm to those whose evaluation practice is crowded out. In such cases, state inter­ ference is permissible. Commodification can be a reason of consequential commutative injustice. This position allows liberals to make sense of the widespread intuition that exchanging certain goods on the market can be a normatively problematic affair. All the while it does so without leaving behind core liberal principles. What we need to acknowledge, though, is that interference-worthy commodification is a contingent effect of market exchanges.19 Put dif­ ferently, there also are cases in which there is nothing wrong with commodification. More often than not, different evaluation practices seem to be able to coexist. And if the market-based evaluation of a good does not have the tendency to completely invasively crowd out existing evaluation

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practices, or if we actually appreciate this process, nothing seems to speak against commodification from the standpoint of commutative jus­ tice. Supposedly, this is the large majority of cases – as the large majority of goods are not social goods. Even in scenarios in which there is a certain risk of invasive crowding out (i.e. when we are dealing with social goods), my suggested liberal the­ ory of commodification often has no practical consequences for the regu­ latory policies of a just liberal state. This is because in many cases a social good can be maintained if only two people share the relevant evaluation practice. As a result, in order for the crowding out to be truly invasive, it would have to be the case that 100 percent of the population, minus one, changed their valuation. This is exceedingly unlikely to occur. To make a historical comparison: hundreds of years of prostitution do not seem to have rendered untainted sexual relationships impossible (what­ ever “untainted” might mean in this context). Thus, the slippery slope argument that letting a handful of people practice commercial surrogacy will set in motion a dynamic that will completely eradicate other evalu­ ation practices seems a particularly far-fetched instance of this kind of argument. It cannot carry the weight of banning commercial surrogacy. To be sure, the argument that complete invasive crowding out virtu­ ally never obtains as a result of commodification is an empirical one. So it might be refuted by empirical examples. And we should notice how much hangs on the number two. Given that social goods like friendship or gestational labor only require one other person who shares my evalu­ ative response to resist invasive crowding out, there will typically only be a very small risk of invasive crowding out for such goods. But one may ask whether there are other social goods whose underlying bonds essentially involve more than two people. Citizenship or voting rights seem to be plausible candidates. If we started to sell these goods, or even to predominantly allocate them via markets, it seems like the condi­ tions for interference could more readily be met. (But then again, does it really need significantly more than three people to safeguard a meaning­ ful idea of a political community and voting?) Generally speaking, the more people are needed to untaintedly evaluate a certain social good, the more likely a practical scenario of interference-worthy commodification becomes, while it probably also becomes more difficult to tell at which point exactly the state should interfere to prevent harm. To conclude, if one looks for a liberal theory of commodification which is able to handle cases of commodification in an easy fashion with clear practical guidance, then this goal seems unreachable. While possible in some cases, condemning and countering commodification on liberal grounds just is not a straightforward affair. And in every single case the burden of proof lies heavily on those liberals who want to do so. I can­ not imagine any real-life case in which arguments based on my suggested liberal theory of commodification would be sufficient to ban – or at least

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to severely limit – the exchange of some social good for money.20 While concerns of commodification might not be in principle irrelevant for a liberal theory of commutative justice, practically speaking they are.

Notes 1. If used in a non-evaluative sense, to commodify a good simply means to exchange it for money on the market. If I paint pictures for recreational purposes and then decide to sell them, I thereby commodify my pictures. 2. Anderson’s account has very much become the “standard account” of commodification, in that she has prominent and influential followers – notably Sandel (2012, 9, n. 18) – and that even those who think differently about commodification rely on her account as the point of reference (e.g. Fabre 2006; Satz 2010). 3. I will not connect to the debate about commodification following Marx’s analysis of the “fetishism of the commodity” ([1867] 1992, 163–78) in the first volume of Capital – as notably advanced by Lukács (1971) and Adorno (1973). There are two reasons for this. First, if Marx’s original worry was that, in capitalist systems, people (and notably also philosophers) succumb to the illusion that one could talk about commodities independent of the totality of social relations and human activity, concentrating only on the exchange itself, then this entire book is a prime example of commodity fet­ ishism. I do not agree with Marx’s claim. At least for analytical purposes, I think it is legitimate to focus on market exchanges and the domain of com­ mutative justice in isolation. But such a focus in itself is incompatible with thoroughly engaging with the Marxian line of thinking as regards commodi­ fication. Second, the Marxian tradition following Lukács tends to regard commodification as a pervasive phenomenon, as constituting human beings’ “second nature” (Lukács 1971, 86) in capitalism. By contrast, the tradition I am connecting to here is that of Nussbaum (1999, 213–39), Anderson (1993, 168–89), or Satz (2010, 115–34), for whom commodification refers to particularly extreme forms of turning goods into mere commodities. As Honneth (2008, 19–23) highlights, this latter tradition is more concerned with examining when commodification becomes so extreme as to violate moral principles, rather than when it is a kind of general social tendency. And it is such violations of moral principles which are central to a concep­ tion of commutative justice. 4. For a similar theory compare Swanton (2003, chap. 2). 5. Note that other routes for establishing a general liberal theory of commodi­ fication are blocked. While commodification will often go hand in hand with one party of the exchange being coerced or exploited, or with the exchang­ ing parties misusing their rights (Anderson 1993, 168, 170), normatively problematic commodification neither inherently is about coercion or exploi­ tation, which are independent normative worries, nor always linked to a violation of rights (cf. e.g. Satz 2010, 122–24). Furthermore, Satz’s (2010) account of why some things should not be for sale – which one might take for an existing liberal theory of commodification – is not putting the concept of commodification to work. Notably, with respect to commercial surrogacy, she holds that “the concern about the discounting of women’s reproductive labor is best posed in terms of a principle of equality” (2010, 122). While

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Satz provides a liberal-egalitarian account of what makes markets noxious, commodification plays no central role. Recent work of economic sociologists seems to suggest otherwise (e.g. Zelizer 2017). For instance, it does not seem to be the case that money simply “flat­ tens everything it touches” (Dodd 2014, 138) from a value perspective. We sometimes seem to use kinds of money that are functionally equivalent, yet carry different meanings. Often the initial spark leading to the emergence of a new evaluation prac­ tice is not “market imperialism” but technological progress. Without the advances in reproductive medicine, commercial gestational surrogacy would not be possible. Plausibly, commodification mostly emerges as the combined effect of a large number of exchanges. Arguably, however, severe effects of commodification may sometimes also result from one singular act of exchange. Think, for example, of the effects if somebody were to sell the Black Stone of the Kaaba. I am aware that Rawlsian neutrality is not straightforwardly liberal neu­ trality more generally, especially as there is no uniform conception of the neutrality requirement in liberal thinking. Thus, one might accuse me of presenting a Rawlsian liberal theory of commodification rather than a liberal theory of commodification tout court – especially as my following argument relies on some of the distinctions Rawls draws. Berlin argues that, even if values and evaluations necessarily collide, liberals need to “soften” the collisions to “maintain a precarious equilibrium” of a plurality of values and evaluations, “which is constantly threatened and in constant need of repair” ([1988] 2013, 18). If one is committed, like Berlin, to a pluralist idea of liberalism, then this commitment may form the basis of an argument justifying state interference with commodification. In the fol­ lowing, I will not assume such a pluralist reading of liberalism in establishing a liberal theory of commodification. My concept of a social good is not to be confused with Walzer’s (1983, 6–11). For Walzer, basically all goods, with their meanings, their shared con­ ceptions of what they are and what they are for, are social. My concept is narrower. I acknowledge, for example, the existence of non-social goods. A car is a non-social good on my account, as it is not about human bonds. But arguably it is a social good for Walzer; given the cultural importance of cars (think of the film genre of road movies) or their role as signs of social status. This is certainly true for those internal to a bond, but also for those external to it. For people who evaluate a social good and the bond, it is about as out­ siders, the evaluations of those internal to the bond surely matter for their external evaluation. Note that to say that evaluative responses to social goods are necessar­ ily interdependent is more than to say that how valuable a certain good is within a given evaluation practice depends on how other people evaluate it. A good’s market price, for example, depends on many people’s evaluations. But the point about social goods is that whether some social good can be meaningfully and untaintedly evaluated according to a certain evaluation practice at all depends on the evaluation practices other people adopt. If one subscribes to the idea that friendship cannot be bought and sold in the first place (cf. Raz 1986, 350–52), then friendship in particular is not prone to invasive crowding out due to commodification. One might also argue that her individual valuation depends on that of her partner. But I think cases in which the partner does not even know about the

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Commutative Justice and New Harms pregnancy highlight that this is not necessarily the case. Think of a soldier dying in battle shortly after being sent to war and without ever learning about his status as a father-to-be. In itself, the child not mirroring its mother’s evaluative response is not neces­ sarily normatively problematic. In any case, it is not the business of the state to ensure that the child mirrors its mother’s loving evaluative response. But if its evaluation practice is one of indifference because of the effects of commodifying gestational labor, that is a different thing. For the child, who is fully convinced that handing over money appropriately settles the issue, this action does not express ingratitude. It is only from the mother’s perspective, and with her not employing a market-based evaluation practice, that this response seems ungrateful. My suggested liberal theory of commodification might provide arguments for state interference in a “reverse-commodification” case; i.e. if a market-based evaluation practice is in danger of being crowded out by evaluative responses of, say, love, awe, admiration, or wonder. If this reverse-commodification causes wrongful and involuntary psychological harms to those adhering to the market-based evaluation practice, then there is a pro tanto reason for state interference in my theory. We could avoid this somewhat counterin­ tuitive upshot by setting additional, more demanding conditions for state interference in this context. We might even rely on Rawls’s concepts to this effect. Namely, we could argue that a necessary condition for state interfer­ ence is that the evaluation practice of the social good in question, in addition to being invasively crowded with its adherents being harmed, must be “rea­ sonable” and “worthy of our allegiance” (Rawls 1993, 197) – while denying that any market-based evaluation practice meets these conditions. But how to exactly draw these distinctions Rawls suggests is beyond our scope here. And I do not see it as a flaw of the suggested theory that it might allow for condemning and countering reverse-commodification. A liberal theory of commodification which takes neutrality seriously should avoid distinguish­ ing between more and less “fitting” responses at all cost – lest it loses its liberal character. This is not to exclude the possibility that some goods might be such, that they always only allow for one evaluation practice to be evaluated by. That is, there might be goods such that commodifying them in the non-evaluative sense also necessarily means to commodify them in the evaluative sense. Again, the Black Stone of the Kaaba seems to be an example of such a good. For such goods, commodification in the evaluative sense is a necessary con­ sequence of market exchanges. One might also be worried that this liberal theory of commodification within the realm of justice in exchange causes trouble elsewhere; namely, that this theory seemingly would have regulatory implications for practices we do not think the state should interfere with. In order to see this, one can vary the example to consider a domain in which we are not usually sympathetic to state intervention, such as religion. It is an essential feature of Catho­ lic worship that it be communal. Unlike Protestantism, it cannot be prac­ ticed alone; there must be a church. Does endorsing the suggested theory not license Catholics to prevent conversion to Protestantism on the grounds that it could set in motion a dynamic that generates invasive crowding out, resulting in the entire population becoming Protestant? I do not think this is a problem we should be worried about. For what does the normative work in my argument is the idea that causing universally disliked feelings which have no moral content constitutes a violation of a recognizably liberal harm principle. In such cases, there is a pro tanto reason in favor of state

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interference. All I add is the idea, adopted from Ellis, that feelings of loneli­ ness, abandonment, or desperation (which might plausibly result from the invasive crowding out of an evaluation practice of a social good) are univer­ sally disliked feelings of the non-moral kind. One might disagree. One might also think that one thing which speaks against Ellis’s position precisely is that it renders liberal thinking and practice, e.g. in the case of Protestantism crowding out Catholicism, exceedingly complicated. But I do not see how Ellis’s nuanced position is illiberal. A theory which relies on Ellis’s idea of interference-worthy psychological harms does not even require us to become perfectionist liberals like Raz (1986), or pluralist liberals like Berlin ([1988] 2013).

Bibliography Adorno, Theodor W. 1973. Negative Dialectics. Translated by E. B. Ashton. New York: Seabury Press. Anderson, Elizabeth. 1993. Value in Ethics and Economics. Cambridge, MA: Harvard University Press. Arneson, Richard J. 1992. “Commodification and Commercial Surrogacy.” Phi­ losophy and Public Affairs 21 (2): 132–64. Berlin, Isaiah. [1988] 2013. “The Pursuit of the Ideal.” In The Crooked Timber of Humanity, edited by Henry Hardy, 2nd ed., 1–20. Princeton: Princeton Uni­ versity Press. Brennan, Jason, and Peter Martin Jaworski. 2015. “Markets Without Symbolic Limits.” Ethics 125: 1053–77. Dodd, Nigel. 2014. The Social Life of Money. Princeton and Oxford: Princeton University Press. Ellis, Anthony. 1984. “Offense and the Liberal Conception of the Law.” Philoso­ phy & Public Affairs 13 (1): 3–23. Fabre, Cécile. 2006. Whose Body Is It Anyway? Justice and the Integrity of the Person. Oxford: Clarendon Press. Honneth, Axel. 2008. Reification. New York: Oxford University Press. Horkheimer, Max, and Theodor W. Adorno. 2002. Dialectic of Enlightenment: Philosophical Fragments. Edited by G. S. Noerr. Translated by E. Jephcott. Stanford: Stanford University Press. Kymlicka, Will. 1991. “Rethinking the Family.” Philosophy and Public Affairs 20 (1): 77–97. Lukács, György. 1971. History and Class Consciousness: Studies in Marxist Dia­ lectics. Translated by Rodney Livingstone. London: Merlin Press. Marx, Karl. [1867] 1992. Capital: Volume 1: A Critique of Political Economy. Edited by Ben Fowkes. Reprint. London: Penguin Books. Nussbaum, Martha C. 1999. Sex & Social Justice. Oxford: Oxford University Press. Radin, Margaret J., and Alexander M. Capron. 1988. “Choosing Family Law over Contract Law as a Paradigm for Surrogate Motherhood.” Law, Medicine, and Health Care 16 (1–2): 34–43. Rawls, John. 1993. Political Liberalism. Expanded ed. New York: Columbia University Press. Raz, Joseph. 1986. The Morality of Freedom. Oxford: Clarendon Press.

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Sandel, Michael. 2012. What Money Can’t Buy: The Moral Limits of Markets. London: Allen Lane. Satz, Debra. 2010. Why Some Things Should Not Be for Sale: The Moral Limits of Markets. Oxford: Oxford University Press. Shalev, Carmel. 1989. Birth Power. New Haven: Yale University Press. Swanton, Christine. 2003. Virtue Ethics: A Pluralistic View. Oxford: Oxford University Press. Walzer, Michael. 1983. Spheres of Justice: A Defence of Pluralism and Equality. New York: Basic Books. Zelizer, Viviana A. Rotman. 2017. The Social Meaning of Money. Princeton: Princeton University Press.

9

Conclusion and Policy Implications

What is a just market exchange? I have argued that in order to answer this question we cannot ignore the consequences of market exchanges. As the consequentialist challenge to purely executional theories of justice in exchange succeeds, on an abstract level, the domain of commutative justice also encompasses consequential considerations. In light of the new harms, a complete liberal theory of justice in exchange is more encom­ passing than many would think. However, the truly surprising finding is how little acknowledging that “consequences matter” matters. Even if the consequentialist challenge is successful, externalities are no reason of commutative injustice, as mar­ ket exchanges do not cause or risk but merely enable them. Monopolies are no reason of commutative injustice, as the only negative effect they might cause – instances of domination – do not fall under a recognizably liberal harm principle. Violations of the Lockean proviso do not consti­ tute an independent reason of commutative injustice. Insofar as we want to integrate a version of the Lockean proviso into our conception of com­ mutative justice, it does not lead to additional consequential conditions. Monetary inequality is no reason of commutative injustice either. This is because market exchanges always feature two goods of equal monetary value being exchanged. If this is the case, then they cannot create mon­ etary inequality. And while commodification might in theory amount to a potential reason of commutative injustice, it only does so in theory. A scenario in which a society would slide down the slippery slope to complete invasive crowding out of certain non-market-based evaluation practices seems exceedingly unlikely to occur. Finally, many other phe­ nomena often associated with market exchanges (e.g. a non-provision of public goods) exhibit an even looser connection than the problematic consequences explicitly discussed. Thus, the most surprising findings of this book are, as it were, nonfindings – and how little we need to add to more traditional conceptions of commutative justice if we explicitly acknowledge that consequences matter. Put differently, while the consequentialist challenge is a genu­ ine challenge, it can be overcome. For different reasons, normatively

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problematic collective market outcomes like externalities, monopolies, violations of the Lockean proviso, inequality, and commodification do not pose particular problems to the justice of market exchanges. Even if one does not agree with all conclusions drawn in the individual chapters – or with the basis on which they are developed – there is yet something else one might take away from this book. For in a certain sense all I aimed for was to provide a framework which makes it easier to analyze claims like, for example, that market exchanges contributing to externalities are unjust. I did so in a liberal framework, with the harm principle as the main standard of judgment. Needless to say, that if one used a different framework, the conclusions would probably also differ. If, for instance, one subscribed to a republican interpretation of liber­ alism, the argument in Chapter 5 that monopolies do not constitute a reason of commutative injustice would come out differently. Likewise, if one subscribed to a decidedly pluralist variant of liberalism, e.g. in a Ber­ linian spirit, commodification might become a bigger issue. For if we are motivated to actively maintain an equilibrium of coexisting evaluation practices in a certain society, it seems likely that we would have to inter­ vene more often (and earlier) with tendencies of crowding out. Still, the framework provided in this book of how to structure the domain of com­ mutative justice will prove useful for future efforts to elucidate justice in exchange – from whatever political standpoint they might be made. Because traditional liberal conceptions of commutative justice do not need to be drastically expanded, the practical upshots of my findings might seem minimal. Yes, consequences matter in the domain of com­ mutative justice. And if market exchanges are commutatively unjust, we should interfere with them on grounds of commutative justice. But for the most part the exchanges are alright. It is not the market which is to blame for the new harms. Thus, if we want to tackle issues like global warming or global economic injustice, we should not blindly follow the intuition that we best restrain and regulate markets. To some extent, this route even is normatively blocked. For what speaks against interfering with market exchanges which are not commutatively unjust to being with is the pro tanto reason that this is bound to topple commutative justice. To be sure, we already interfere with negative consequences of market exchanges in ways other than to interfere with the exchanges causing them. If we take the example of monopolies, one established measure is the asset stripping of an incumbent monopolist. In addition, we already interfere with market exchanges on grounds other than commutative jus­ tice in order to prevent negative consequences. To thus interfere with market exchanges which are not unjust – accepting some commuta­ tive injustice – might sometimes be the best option we have, if only for practical reasons. Put differently, if we assume an all things consideredperspective, the goal to remedy non-commutative injustices might sim­ ply outweigh the pro tanto reason not to interfere with just exchanges.

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However, if we choose to do so, then these are instances in which we should at least be very clear in communicating that the exchanges actu­ ally are alright; lest we again foster the faulty impression that it is the market which is to blame. That the direct practical upshots of my liberal theory of justice in exchange are comparably small is to be expected. First, since my main findings are, as it were, non-findings. Second, since neither the criterion I used for identifying interference-worthy exchanges is new (namely the wrongful causing of harm), nor the phenomena I examine in the light of commutative justice (from externalities to inequality), we would cer­ tainly hope that liberal societies would have already identified and coun­ teracted existing injustices. But I think there is more to be said as regards the indirect policy impli­ cations. Note that there is another way to interpret the non-findings as regards the issues of externalities, monopolies, Lockean provisos, ine­ quality, and commodification. For does not this also tell us something about the merits of the procedure of a market exchange? Notably, mar­ ket exchanges seem to be a normatively robust procedure. What I mean by this is that, if we run a social system for administering the economic benefits and burdens relying on market exchanges as a redistributive pro­ cedure, we seemingly do not have to incorporate many new conditions in light of drastically changing circumstances or assumptions in order to maintain a just system. Market exchanges brave the considerable impe­ tus of the move to say “Consequences matter!” in a compelling way. My guess (and it is a guess until somebody comes up with a liberal theory of gifts and of benefits and of yet other redistributive procedures) is that many other procedures would fare much worse if put to a similar test. In this sense, the findings of this book constitute a defense of the market. They are not a defense of the market in the sense that they would advocate the market as being the best mechanism for allocating all kinds of goods in all kinds of social spheres above and beyond what it tradi­ tionally considered the economic sphere. For we need to acknowledge that many findings – like the one that market exchanges are equivalent – only hold when there is a reasonably well-functioning system of prices in place. Otherwise, we cannot confidently speak (or know about) the market price for certain goods. But not many social spheres other than the economic one feature such an elaborate price system. This is a con­ siderable drawback were we to use the normative robustness of market exchanges in order to argue for more markets in traditionally non­ economic spheres. Rather, this book is a defense of the market in the sense that it allows us to see what kind of costs there are connected with heavily interfering with a system of market exchanges. And also what kind of benefits we might be able to reap from interfering with the market less often. Let me give one example for each.

180

Commutative Justice and New Harms

The liberal approach to a market economy – while being quite diverse on its own if we compare, for example, Germany’s take to that of the US – can be clearly distinguished from what one might call “non-liberal capitalism” (for want of a better phrase). What I have in mind are coun­ tries like, for example, Russia or China. They do have an economic sys­ tem which recognizably resembles a market economy. Still, the political influence on the market is particularly pronounced because of the respec­ tive regimes. Now, there have been (and continue to be) many attempts to compare “liberal capitalism” and “non-liberal capitalism”. The main questions that such comparisons seem to address are questions of economic perfor­ mance. Is it not true that “liberal capitalism” fares better with respect to increases in productivity and the general standard of living? Is it not true that “non-liberal capitalism” fares better with respect to dealing with economic crises, like for instance the 2008 global financial crisis? What the defense of markets this book establishes suggests is that there is another important comparison to be made, which has nothing to do with productive output and economic performance. Given what has been argued above, it seems like some costs inherently tied to non-liberal approaches are costs in terms of commutative injustices incurred. If we interfere as much in the market as “non-liberal capitalism” tends to do, then commutative injustices are bound to follow. The second example – that is, the one concerning the benefits we might be able to reap from interfering with the market less often – does not require us to look to other politico-economic regimes. It has to do with how liberal Western democracies choose to interfere with the “free” market. Sometimes we can read – in the newspapers, blogs, online discussions – calls for more active political control of markets in contrast to merely passively establishing the political and legal enabling condi­ tions of well-functioning markets. In Western democracies, such attempts to strengthen the political influence over markets might be called, in a manner of speaking, attempts to “democratize” the market. The demos realizes, as it were, that it is not at the mercy of the blind market forces (once it has decided to run its economy in the form of a market econ­ omy), and calls for more state control. In case there is such a public call to “democratize” the market, there seem to be at least two principal ways to do so. Let me suggest the following rough sketch. The standard approach of welfare state capitalism seems to be to “democratize” the market by exercising democratic control as regards market exchanges. A classic example in the context of the labor market is that of a democratic government setting a minimum wage which lies above the wage the free market yielded as an outcome. The motivation underlying this direct interference is to bring about different, politically more desirable outcomes by directly meddling with the market itself, notably with the price system.

Conclusion and Policy Implications

181

Yet, if we want to strengthen democratic influence over the market, we can also do so more indirectly. Consider that introducing or strengthen­ ing democratic control as regards the decisions of economic agents (most notably: corporations) is one of the main tenets of economic democracy (e.g. Christie 1984; Dahl 1985; McMahon 1989; Anderson 2017). The idea is that, if all firms were turned into co-operatives featuring demo­ cratic decision procedures for all major economic decisions made (pro­ duction technology used, staffing, research and development decisions, working hours, managerial salaries, etc.), this would drastically change what happens within firms. This kind of proposal – to “democratize” corporations – is a paradigm case of a second way to democratize the market. If we established a mar­ ket in which all relevant group agents who participate in the market have to be democratically governed, this would also affect market outcomes, but in a different way. Note how this approach does not directly interfere with market exchanges, but rather with the kind of agents we allow on markets. Still, it seems a plausible assumption that we could expect out­ comes similar to those reached by the more direct interference of welfare state capitalism. At the very least it seems a plausible assumption to make that, in a market in which all firms are co-operatives, wages below the level at which the envisaged minimum wage would be are unlikely. One of the main differences between these more and less direct ways to exercise political control over the market is when political interfer­ ence takes place: before or after the free interplay of supply and demand. Either we start with equilibrium prices as established by the free market (e.g. the market wage for a certain job), and then directly change this outcome. Or we interfere before the free interplay even takes place. There certainly are many reasons why we might want to doubt just how successful more indirect measures are with respect to reaching the political goals we aim to achieve. Because they do not directly establish a desired outcome – like a certain well-calculated minimum wage or a strict upper limit on harmful emissions – we can never be sure that they actually produce those effects we want to see. So we probably would not want to abandon the traditional politico-economic toolbox of taxes, subsidies, minimum prices, price ceilings, and so forth altogether. Purely relying on indirect interferences like requiring market participants to be democratically governed in order to ensure certain social welfare goals are met is risky. And sometimes getting the outcome just right is too important to allow for experiments – like whether a free market popu­ lated exclusively by co-operatives also yields good results. But against the background of the findings of this book, we now know one additional reason which speaks in favor of such less direct interferences – namely, that market exchanges already are commutatively just. Put differently, one policy implication of my liberal theory of jus­ tice in exchange is that we should more often dare to rely on indirect

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Commutative Justice and New Harms

approaches of exercising political control over the market. The question becomes: are we brave enough to set aside our doubts about the justice of markets?

Bibliography Anderson, Elizabeth. 2017. Private Government. Princeton and Oxford: Prince­ ton University Press. Christie, Drew. 1984. “Recent Calls for Economic Democracy.” Ethics 95 (1): 112–28. Dahl, Robert A. 1985. A Preface to Economic Democracy. Oxford: Blackwell. McMahon, Christopher. 1989. “Managerial Authority.” Ethics 100 (1): 33–53.

Index

ability to pay 52, 120 acceptance 15–17, 30–2 aiding and abetting 80–4 alienation 59, 64n32 Anderson, E. 128, 157–9 Aristotle 126, 143 Arneson, R.J. 159 barter 18, 23 bazaar 20 bequest 11–12 Berlin, I. 163, 173n10, 175 Broome, J. 48–9 cartel 92 causation 70, 77–8, 88n7 chance 46–9 Chang, R. 126–7, 153n1–2 Child, J.W. 34–5, 38 coercion 30–3, 48, 51, 97–100 Cohen, G.A. 12, 43, 140–1 commensurability 153n2 commodification 117, 157–75; evaluative 165; non-evaluative 172n1 commutative justice 2–5, 28–9, 54–60; consequential condition of 3–6, 58; consequential consideration of 3–6, 29, 42, 47–60, 69–71; executional condition of 3–6, 28–33; executional consideration of 3–6, 28–33 comparability 126–30 competition 92–5, 105 consent 33–4, 116–18 contract 14–17 costs: of production 73, 135–6; unaccounted 149–51

covering value 127 crowding out 158–62; invasive 162–8; and psychological harm 168–70 Dancy, J. 76–7 deception 34–5, 40, 51–7 division of labor 22–5 domination 100–4, 169 Duff, R.A. 78–83, 86 duty 14–17; associative 79–82; to disclose 38; violation of 16–17, 38, 81–2 efficiency 22–3, 39, 79–82; productive 119–21 enabling condition 76–7, 93 endowment sensitivity 135–8 equivalence 130–1; interpersonal 130–4, 139–40; intrapersonal 130–4 equivalence principle 126–34 evaluation practice 159–70 exchange 9–17; impersonal 24–5; personal 24–5; terms of 15–17 experience 151–2 explanation 76–8 exploitation 31–3, 105 externality 40, 72–5; consumption externality 76, 83; enabling 79–85; exchange externality 88n6, 93, 161; flow externality 87n4; negative 72; positive 72; production externality 72–3; stock externality 75 fairness 49 Feinberg, J. 40, 61n13, 70, 74, 78 force 30–1 Fried, C. 14

184

Index

function 22–5

functional refinement 23

gambling 11

gift 11–18

harm principle 70–1, 74–9, 86,

103–4, 162, 168–70

harms: causing of 70–1; collective 105; enabling 75–86; market 95; material 71; new 1–2; psychological 103–4, 168–70; risking of 70–1, 79; threshold 74; wrongful 69–70, 71–85 Hayek, F.A. 23–4, 45–6, 97, 119–20

Herman, B. 54–5

Hume, D. 44, 113

income 125–6, 133–40, 144–5

incomparability 142–3

indifference curve 129, 136

inequality 116–17, 125, 152; genetic

146–7; monetary 125, 140, 143–9,

151–2

information asymmetry 36–9

intent 12

intention 34–5, 39–40, 82–5

market exchange 17–22; labor market exchange 145–8

market imperialism 59

market power 19, 91, 95–100, 104–5

Marx, K. 59, 64n31, 128, 148, 172n3

Mauss, M. 60n2

mens rea 82–3

Mill, J.S. 70, 74, 78, 94, 101–4

monopoly 91–2, 92–5; dominating

101–4; pricing 95–100

Moore, M.S. 78

needs 12–13, 113, 128–31 new harms 1–2 Nozick, R. 3, 43, 109–13 offer 15–17, 30–2

opaque agents 118

ownership 110–14

particular justice 1, 3, 28, 42

perfectionism 82–3

Pettit, P. 100–4

planned economy 20–1

pluralism 162–3

Polanyi, K. 59

preference: comparison 127–31,

justice: in acquisition 28, 108–11;

132–4; defective 141–2; informed distributive 2–4, 57–8, 152; end-

141; objective 128–9, 139–40; state principles of 57, 140, 152;

satisfaction 127–34 historical 110; procedural 42–3; of price: elasticity 98–9; equilibrium

procedures 2, 43; pure procedural

18–19, 73; just 140, 149; market-

63n18; rectificatory 2–3; in transfer

clearing 18; reservation 133

2–3, 108–11

procedure 11–12, 48–56; designed

46–9; intrinsically just 42–3;

Kitcher, P. 22–3, 45

undesigned 56

profit maximization 96, 101

labor 113–16, 128–9, 141–52,

promise 13–15, 40

158–61; gestational 142–3,

pubic goods 58–60

159–71; socially necessary 128

liberalism 71, 162–8 queueing 44–5 Lichtenberg, J. 1–2 Locke, J. 106–13 Radin, M.J. 161

Lockean proviso: non-grabbing Rawls, J. 63n18, 141, 162–7, 170

condition of 113–15; non-waste Reiff, M. 150

condition of 119–22; nonrent seeking 92

worsening condition of 115–18 republicanism 103

lotteries 48

right to transfer 41

luck-egalitarianism 152

rules of moral salience 54–7

malum in se 86

malum prohibitum 39, 85–6

market: competitive 95–7;

delimitation of 21–2; free 18–22

Satz, D. 160, 172n5

scarcity 120

side-constraint 51

Smith, A. 22–4

Index specialization 22–3 state interference 70–1; regulatory grounds of 86–7, 98

Steiner, H. 35–8, 74, 152

surrogacy 142–3, 158–61, 167–71

taxes 21, 151, 181; Pigovian 75

theft 4, 11–12

threat 17, 30–2

value: exchange value 116, 127–32, 134–7, 139–43; monism 153n2;

185

response to 158–60, 166–9; use value 143

vital goods 97–100

Volenti maxim 94, 118

voluntariness 14, 40–1

voting 42–4, 165

wage 144–5, 148–9, 151, 180–1

Waldron, J. 111

Walzer, M. 173n11

Wertheimer, A. 32

willingness to pay 52, 131, 140