Comparing and Contrasting the Implication of Rawlss and Hayeks Theory of Justice on Economic Policy - Coursework Example

Comparing and Contrasting the Implication of Rawls’s and Hayek’s Theory of Justice on Economic Policy Introduction Lawrence Connin suggests that thetheory of justice of Rawls can be employed in rationalising the distributive foundations of free enterprise. Connin substantiates this argument by emphasising that Frederick Hayek, clearly in a quite concise and enigmatic statement, has adopted the two premises of Rawls without any doubts (Wood & Woods 1991). The argument of Connin is that, because of the ‘ambiguity’ of the difference theory and the primacy given to the first theory, left scholars have to be careful in applying the theory of Rawls to support egalitarian, and particularly socialist, distribution strategies (ibid, p. 201). It is apparent that Rawls is not adequately certain in sorting out those distributive institutions that are in agreement with, or needed by, his principle. In reality, the theory is intentionally vague as Rawls, exercising his ‘method of avoidance’, tries to ‘avoid the question of the correctness of important social theories and rather to set out a conception of justice on the basis of which the question of private property vs. socialism in the means of production could be reasonably discussed’ (Wood & Woods 1991, 202). This essay will review the similarity and difference between the implications of Rawls’s and Hayek’s theory of justice on economic policy. Specifically, it will discuss the implication of Rawls’s theory of social justice on welfare economics, and the implication of Hayek’s spontaneous economic order on economic policy. Basically, the difference between Rawls and Hayek is that the former focuses on microeconomics whereas the other on macroeconomics; however, both of them included in their discussion property-owning democracy and market socialism in a minimal fashion, while disregarding capitalism. The Implication of Rawls’s and Hayek’s Theory of Justice on Economic Policy The ideas of Rawls represent one thorough broad discussion of the issue to which others have felt forced to address. A comprehensive analysis of Rawls is relevant, not because he is ‘accurate’ whilst others are ‘inaccurate’, but because he methodically deals with these major concerns and his outcomes may be of particular relevance. In a recent literature review interconnecting ethics and economics, Hausman and McPherson (1973) firmly argue for the importance of ethics to economic policy. They refer to Rawls’s theory of justice as well. They cite a number of ethics systematisations, including Rawls, and claim “In our view, the parts of ethical theories we shall survey here may be of more interests to economists than are the whole systems” (Edgren 1995, 332). In applying the work of Rawls to discuss welfare economic policy economists have inclined to be careful. Others who mention Rawls frequently give an apparently rather more inclusive discussion. They will include the veil of ignorance, or the initial standpoint, for instance, but the emphasis is still quite on the difference theory and they still overlook much of the essence (Edgren 1995). Several applications of Rawls’s difference theory to economic policy are in opposition to the essence of Rawls’s notion. Primarily, it is entrenched in a thought system that is in some substantial essence utilitarian, whilst the system of Rawls is openly designed as a substitute for utilitarianism (Edgren 1995). Utilities, in welfare economics, are representation and not directly analogous, whilst in Rawls they are evidently the contrary (Bojer 2003). I think that some might claim that Rawls is in error here, that he has created stronger premises than he requires, and that the remedial is incidentally. However, Rawls is struggling to expand the concept of primary goods and their importance to direct comparison. Moreover, the difference theory is related by Rawls to the anticipations of representative individuals in a theoretical scenario of imperfect unawareness, and is aimed to explain how social institutions are to be organised (Bojer 2003). In contrast, the welfare economics creation is aimed to resolve the issue of how resources are to be distributed among individuals who are completely knowledgeable, and who are working in already established institutions (Edgren 1995). This, obviously, is not an insignificant difference. Rawls (1971) claim that a notion of justice founded on a need for agreement in a concrete situation of actual individuals with absolute awareness would ‘indeed be weak and trivial’ (ibid, p. 141). The difference principle is a secondary concept in a scheme of thoughts the superordinate components of which have lexicographic primacy (Rawls 1971). It is certainly not suitable to remobilise reorganise the use of resource in such a manner as to lessen the parity of fundamental liberties. If a particular extent of resource use is needed to guarantee parity of liberties, in that case, those resources should be used there (Petsoulas 2001). They should not be seized and exploited to enlarge the material wealth of anyone. Apparently, the welfare economic policy discerns an ideal resiliency of resource use triggered by the necessity that one makes best use of welfare. The difference theory is to be used in organising a well structured society, one rooted in Rawls’s theory of justice. Rawls does not greatly elaborate on proper behaviour in a society that is unstable, and it is obvious that our current society is unstable (Edgren 1995). A catalogue of primary goods is employed to assess the expectation of advantage of the representative individuals. A catalogue of this kind is employed to discern who is worst off. Not all of these primary goods are commodities in the point of view of economists. They involve things such as self-respect, health, intelligence, and others, several of which are, certainly, furnished as genetic provision (Bojer 2003). As economists make use of the concept ‘division of goods’ may well have to be disproportionate, to make up for these ancient inequalities. Similar to Rawls, Friedrich Hayek did not elaborate how, rooted in the notion that unforced interaction is equally beneficial, spontaneous economic order can be proven to be commonly advantageous. But without doubt there is, unlike Rawls, an explanation to that effect. Everyone can advance his wellbeing if there is opportunity for exchange. This, as argued by Hayek, is an idea already made long ago (Hayek 1978): It was the simple recognition that different persons had different uses for the same things, and that often each of two individuals would benefit if he obtained something the other had, in return for his giving the other what he needed (ibid, p. 109). The process of exchange, as he argues briefly elsewhere, ‘is productive; it does increase the satisfaction of human needs from available resources’ (Kley 1994, 50). For exchange to be possible and its advantages to be realised, two institutions were required, contract and private property: “All that was required to bring this about was that rules be recognised which determined what belonged to each, and how such property could be transferred by consent” (ibid, p. 50). These principles are called by Hayek as ‘rules of conduct’ (Kley 1994, 50). Basically, we can now discern the implication of Hayek’s theory on economic policy. Unlike Rawls, it begins from the argument that voluntary exchange is equally advantageous, the assumption being that an individual only takes part in an exchange if all things considered the exchange is to his benefit. The imposition of the rules of appropriate behaviour precludes force among the trading sides, ensuring that any exchange decision is initiated willingly—and, thus, is beneficial on all parties (Petsoulas 2001). What is relevant to each single market exchange, the theory then indicates, should mutually be relevant to aggregate of exchange interactions. Hence the assumption is that if each single market transaction is beneficial, the entire network of exchange relations active in a market society, or referred to as ‘spontaneous economic order’ (ibid, p. 204), should be beneficial as well. If this is an assumption aimed to substantiate that, for its constituents, a spontaneous economic order is thoroughly advantageous, just like in the case of Rawls’s difference principle, it fails. The most evident limitation of Hayek’s and Rawls’s theory of justice as it relates to economic policy involves the implicit belief that everyone is integrated into the network of the economy. This belief is important to the assumption that, since taking part in that network is beneficial, participation in the market arena and, hence, the market arena itself is advantageous. It is a contingent and empirical issue whether all constituents are actually intertwined to the economic core (Bojer 2003). It is not difficult to visualise individuals who, although formally under market rules, stay outside the economic network due to their incapability to provide anything the market would compensate. That such estrangement is no sheer likelihood but a reality of life both Rawls and Hayek admits when they support a minimum safety net for the unemployed, the disabled, and the elderly (Edgren 1995). In contrast to what the theories argues, they thus admit that the market arena usually fails to make include everyone in its economic foundation. This equates to the recognition that spontaneous economic order and economic self-organisation are not constantly advantageous in general (Bojer 2003). Rawls may protest by stating that a market arena generates sufficient wealth to allow it to take care of those incapable of making a living on their own. Hayek may also think of this when he argues, for instance, that “[a] society relying on the market order... is likely fairly soon to reach an overall level of wealth which makes it possible for this minimum to be at an adequate level” (Petsoulas 2001, 60). This argument, whether valid or not, cannot defend the assumption. The establishment of provision of benefits for people situated outside the market society, or the formation of a social safety net, necessitates collective action, which is unlikely for a system of voluntary relations to accomplish independently. It could be that the market arena generates a bigger output than any other economic structure (Petsoulas 2001). However, should the advantages of such wealth reach all members methodically society should turn to a system aside from economic self-organisation. Because on Hayek’s recognition, a market arena is beneficial for its entire parties only if it also forms redistributive policies (Petsoulas 2001), its collective gain cannot be attributed to the premise that voluntary transaction is equally rewarding. As Rawls and Hayek argue, the pure market arena cannot be assumed to be advantageous for everyone because there will constantly be individuals who, unable to connect to the network of exchange interactions, have no way in to the aspects they would require for a simply tolerable life. To individuals situated outside the market core the principles that voluntary transaction is equally beneficial simply are inapplicable. But these principles can barely say anything about the welfare of people who are members of the spontaneous economic order (Hausman & McPherson 1993). Bear in mind that the arguments of Rawls and Hayek are that the natural order of the market arena, made up of infinite voluntary exchange relationships, is advantageous for everybody taking part in it because it represents in simplified form the premise that unforced transaction is equally beneficial. Emphasising the increasing accumulation of benefits through reiterative transaction (Edgren 1995), the theories of Rawls and Hayek critically argue that the network of exchange relationships is quite intimately intertwined, and hence given with numerous prospects, as to make everybody able to achieve an adequate degree of welfare. Conclusions Now, according to Rawls’s and Hayek’s theory of justice, it cannot be refuted that the success of an economy relies partly on opportunity and hence does bear a resemblance to a game. As observed by Hayek (1978), “we do not at every moment have to start from scratch, but can begin with equipment which is the result of past efforts” (ibid, p. 124). And, he admits clearly that “[I]n a sense it is even true that such a system gives to those who already have” (Kley 1994, 99). Such an economic policy is barely a game. With Rawls’s and Hayek’s unusual and constantly indirect recognition that, inevitably, there is ‘inequality’, the theories developing the generally advantageous nature of the market arena from the argument that voluntary transaction is equally beneficial is deficient of a fundamental empirical connection. The generalising assumptions on which Rawls’s and Hayek’s theories depend would be relevant only if the prospects were generally the identical for all members. The applicability of these prominent theories of justice to economic policy relies on a clear concept of unforced decision, and that implies a strong definition of force. References Bojer, H., (2003). Distributional Justice: Theory and Measurement. New York: Routledge. Edgren, J.A., (1995). ‘On the Relevance of John Rawls’s Theory of Justice to Welfare Economics,’ Review of Social Economy, 53(3), 332+ Hausman, D.M. & McPherson, M.S., (1993). ‘Taking Ethics Seriously: Economics and Contemporary Moral Philosophy,’ Journal of Economic Literature, 31, 671-731. Hayek, F.A., (1978). Law, Legislation and Liberty: The Mirage of Social Justice. London: University of Chicago Press. Kley, R., (1994). Hayek’s social and political thought. New York: Clarendon Press. Petsoulas, C., (2001). Hayek’s Liberalism and its Origins: His Idea of Spontaneous Order and the Scottish Enlightenment. London: Routledge. Rawls, J., (1971). Theory of Justice. Cambridge, MA: Belknap Press of Harvard University. Wood, J.C. & Woods, R.N., (1991). Friedrich Hayek: critical assessments. London: Routledge. Read More