The Distributive Justice of the Market - Part II

Written by Sam Vaknin


Continued from page 1

According to Rawles' Difference Principle, all tenets of justice are either redistributive or retributive. This ignores non-economic activities and human inherent variance. Moreover, conflict and inequality arerepparttar engines of growth and innovation - which mostly benefitrepparttar 132671 least advantaged inrepparttar 132672 long run. Experience shows that unmitigated equality results in atrophy, corruption and stagnation. Thermodynamics teaches us that life and motion are engendered by an irregular distribution of energy. Entropy - an even distribution of energy - equals death and stasis.

What aboutrepparttar 132673 disadvantaged and challenged -repparttar 132674 mentally retarded,repparttar 132675 mentally insane,repparttar 132676 paralyzed,repparttar 132677 chronically ill? For that matter, what aboutrepparttar 132678 less talented, less skilled, less daring? Dworkin (1981) proposed a compensation scheme. He suggested a model of fair distribution in which every person is givenrepparttar 132679 same purchasing power and uses it to bid, in a fair auction, for resources that best fit that person's life plan, goals and preferences.

Having thus acquired these resources, we are then permitted to use them as we see fit. Obviously, we end up with disparate economic results. But we cannot complain - we were givenrepparttar 132680 same purchasing power andrepparttar 132681 freedom to bid for a bundle of our choice.

Dworkin assumes that prior torepparttar 132682 hypothetical auction, people are unaware of their own natural endowments but are willing and able to insure against being naturally disadvantaged. Their payments create an insurance pool to compensaterepparttar 132683 less fortunate for their misfortune.

This, of course, is highly unrealistic. We are usually very much aware of natural endowments and liabilities - both ours and others'. Therefore,repparttar 132684 demand for such insurance is not universal, nor uniform. Some of us badly need and want it - others not at all. It is morally acceptable to let willing buyers and sellers to trade in such coverage (e.g., by offering charity or alms) - but may be immoral to make it compulsory.

Most ofrepparttar 132685 modern welfare programs are involuntary Dworkin schemes. Worse yet, they often measure differences in natural endowments arbitrarily, compensate for lack of acquired skills, and discriminate between types of endowments in accordance with cultural biases and fads.

Libertarians limit themselves to ensuring a level playing field of just exchanges, where just actions always result in just outcomes. Justice is not dependent on a particular distribution pattern, whether as a starting point, or as an outcome. Robert Nozick "Entitlement Theory" proposed in 1974 is based on this approach.

Thatrepparttar 132686 market is wiser than any of its participants is a pillar ofrepparttar 132687 philosophy of capitalism. In its pure form,repparttar 132688 theory claims that markets yield patterns of merited distribution - i.e., reward and punish justly. Capitalism generate just deserts. Market failures - for instance, inrepparttar 132689 provision of public goods - should be tackled by governments. But a just distribution of income and wealth does not constitute a market failure and, therefore, should not be tampered with.



Sam Vaknin is the author of Malignant Self Love - Narcissism Revisited and After the Rain - How the West Lost the East. He is a columnist for Central Europe Review, United Press International (UPI) and eBookWeb and the editor of mental health and Central East Europe categories in The Open Directory, Suite101 and searcheurope.com.

Visit Sam's Web site at http://samvak.tripod.com




The Dismal Mind - Economics as a Pretension to Science - Part III

Written by Sam Vaknin


Continued from page 1

VII. Time Inconsistencies

People tend to lose control of their actions or procrastinate because they place greater importance (greater "weight") onrepparttar present andrepparttar 132669 near future than onrepparttar 132670 far future. This makes them both irrational and unpredictable.

VIII. Positivism versus Pragmatism

Should economics be aboutrepparttar 132671 construction and testing of of models, which are consistent with basic assumptions? Or should it revolve aroundrepparttar 132672 mining of data for emerging patterns (=rules, "laws")? Onrepparttar 132673 one hand, patterns based on a limited set of data are, by definition, inconclusive and temporary and, therefore, cannot serve as a basis for any "science". Onrepparttar 132674 other hand, models based on assumptions are also temporary because they can (and are bound to) be replaced by new models with new (better?) assumptions.

One way around this apparent quagmire is to put human cognition (=psychology) atrepparttar 132675 heart of economics. Assuming thatrepparttar 132676 human is immutable and knowable - it should be amenable to scientific treatment. "Prospect theory", "bounded rationality theories" andrepparttar 132677 study of "hindsight bias" and other cognitive deficiencies arerepparttar 132678 fruits of this approach.

IX. Econometrics

Humans and their world are a multi-dimensional, hyper-complex universe. Mathematics (statistics, computational mathematics, information theory, etc.) is ill equipped to deal with such problems. Econometric models are either weak and lack predictive powers or fall intorepparttar 132679 traps of logical fallacies (such asrepparttar 132680 "omitted variable bias" or "reverse causality").



Sam Vaknin is the author of Malignant Self Love - Narcissism Revisited and After the Rain - How the West Lost the East. He is a columnist for Central Europe Review, United Press International (UPI) and eBookWeb and the editor of mental health and Central East Europe categories in The Open Directory, Suite101 and searcheurope.com.

Visit Sam's Web site at http://samvak.tripod.com




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