On Fairness

In which I describe how my idea of fairness is different from free market principles.

In this post, I talk about the definition of fairness in the context of economic transaction. Many of you may have simple framework based on free market principles to judge a transaction as fair or unfair. I have a different framework that is based on equality. This post should be read from a philosophical standpoint and not from a practical or enforcement standpoint.

Two Transactions

I will present two transactions to you. Both of them follow free market principles. I would like you to judge if these transaction are fair. First, a rich businessman approaches several equally rich engineers and arrives at $200 as a price for a job, which is given to least expensive engineer. Second, knowing that the price of the job was $200, the businessman goes to a poorer, desperate (for tangential reasons) engineers. The businessman uses the poorer engineers’ lack of bargaining power to establish $50 as the price for the same job. All the engineers are equally skilled and efficient at the job. My question is: do you think the second transaction was fair? If the businessman goes to the poorer engineers first and then to the richer ones, are the same transactions fair?

Fairness

If you argue that the all transactions were fair because they were all mutually agreed upon by the parties involved (free market economics), I respect your judgement, but I disagree with it. I think that fairness and free market principle are different entities altogether. I think that free market is just one of the many possible systems to distribute capital and resources.

My framework to judge fairness is based on equality. If the businessman *knowingly* exploits the lack of the bargaining power, which has got nothing to do with the job, I think that he is being unfair. You may ask me how I know that $200 is the “real” price for the job. The key term in my definition is “knowingly.” If the businessman genuinely thought that $200 was too much, and that $50 is reasonable, I wouldn’t call it unfair. In the second case, where the businessman approaches the poorer engineers first, he does not really know the price of the job, and so he negotiates the best he can. I wouldn’t call that unfair either. We assume here that the businessman used his bargaining position, which had no relation to the job, to treat people in different ways. Fairness goes the other way too. If the engineers were to treat different businessmen differently, I would call them unfair too.

What if it Happens to You?

I would like to put the same question in the context of your employer. Suppose your boss knows that you and  your colleague are both equally productive and equally valuable to the company. And he also *knows* that you are desperate to keep this job. Perhaps, you and your spouse  just had a baby, and cannot afford to change health insurance plans, while your colleague  can afford to quit the job and look for a new one because he has a richer ancestry. Or, perhaps, your colleague may be as desperate a you are. If your boss decides that only your colleague gets a bonus for no reason (your boss tells you so), would you still call that fair? Remember that reason why he decided to treat you unequally had nothing do your job, but other tangential reason, and everything here follows free market principles; you are free to walk away from your job if you don’t like the salary.

Personal Confession

I knew that the previous owner from whom I bought my car was going out of country in a few days. So I used that information to lower the price I paid for the car. In my opinion, I was being unfair to him because the value of the car had got nothing do with his going abroad. Will I be unfair next time I am a part of such transactions? I think I will be. I am not taking a moral highground. I think that the social cost of my unfair actions is not very high. I hope I will be less selfish if the social costs are high.

Relevance to Foxconn, Walmart and Apple

Clearly, everyone knows that Chinese workers are more desperate for work. The companies use this to exploit them. I have read many posts online that explain that it is fair because it follows free market principles, and that their life is better off as a result. I have to disagree with that reasoning. No one would complain if the employees has a decent standard of living. But we all know that condition of workers in Foxconn (link) and Walmart (link). The companies are not doing the worker a favour by giving them the job. It is business transaction in which the workers are being treated worse thay should be (based on my framework on fairness). The social cost of their actions is very high. That is the reason why their practices are frowned upon.

Practical?

I realise that enforcing my idea of fairness is not practical. Walmart can simply say that they genuinely believe that their worker do deserve health insurance. This is where government mandates come into play. I am not a fan of ideas that imply fairness if all rules are followed (government rules or otherwise). How would you decide if the rules are themselves fair? I think a judgement on what is fair should not have external dependence because it is a personal moral compass.

Other Frameworks

I have not had the time to read any of the following wiki links or books to which they refer. If you happen to know other frameworks (described in the links below or otherwise), do let me know.

a. Justice as Fairness: John Rawls conception of Justice

b. A Theory of Justice: A book by John Rawls.

c. Justice as Fairness: A Restatement: A book by John Rawls

d. The Theory of Moral Sentiments: A book by Adam Smith

e. The Idea of Justice: A book by Amartya Sen

Comment Policy:

If you diagree with me, provide your framework, and let me know what you think about the transaction with your employer.  It’s a simple “is it fair” question. Keep it to the point. Please do not explain free market principles to me in a hundred possible ways (willingness to pay, current value of the job to the engineer or businessman etc.). I have a different framework. Please respect it.