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Most of the time in the study of economics, we focus on efficiency. We ask if there are better or worse ways for society to organize its production of goods and services, and we ask if society has institutions in place that allow people to obtain all the available gains from trade. Although these can be complex questions, there is broad agreement among most people that efficiency is a desirable goal.
In this chapter, we tackled a rather different and more contentious set of issues: what is fair and just? Economists can (relatively) easily explain how society ends up distributing its resources, but the tools of economics do not allow us to say whether a given distribution is fair or not. People certainly seem to care about fairness and hold strong opinions about how society should share out its resources. Unfortunately, different people have very different ideas about what is fair.
The questions we address here go beyond economics; they vex philosophers and political scientists as well. They go to the heart of what we think of as right and good. They also force us to think about the appropriate role of the state and how that matters for the distribution of resources. Is the role of the state simply to provide an environment where people are free to pursue their own self-interest and to keep what they earn? Or does the existence of the state mean that we are all in a social contract, so all have some rights to the output of society as a whole?
As we have said previously, we cannot and do not want to answer these questions for you. Indeed we, as authors of this book, do not even agree among ourselves on the answers. Instead, we have given you some tools so you can think about these questions—which are some of the most important you will ever confront—yourself.
Economics Detective
Spreadsheet Exercise