Perhaps the problem with kidney sales and exporting pollution to poor countries is not trade per se, but the poverty and inequality that make the trade happen. We might accept that when a poor person sells a kidney to a rich person, both are made better off, but still rue the fact that the poor person is poor. In earlier chapters, we emphasized that under certain conditions, markets maximize consumer plus producer surplus—that is an important virtue—but as the kidney example illustrates, in addition to efficiency, we may also have concerns about justice or equity. With a different distribution of income, the demand and supply curves would shift and the poor might not want to sell their kidneys at a price that the rich could afford—that too would be efficient and it might also be more just.

But what is a just distribution of income? How much is owed to the poor? How much is owed to the rich? Questions like these are at the heart of many debates about foreign aid, trade, taxation, health care, and immigration, to name just a few controversial areas.

Many economists have turned to moral philosophy to seek support for their normative policy judgments, and three views have proven especially influential: John Rawls’s maximin principle, utilitarianism, and Robert Nozick’s entitlement theory of justice. These three views have very different implications for how we, as citizens, should judge the distribution of income and the status of voluntary marketplace transactions.

John Rawls’s A Theory of Justice, published in 1971, argued that questions of income and wealth distribution are keys for evaluating social policy. Rawls, a Harvard philosopher, laid out the maximin principle, namely that a government should (without violating people’s basic rights) maximize the benefits going to society’s most disadvantaged group. The notion of “maximizing the minimum” led to the phrase “maximin.” For Rawls, doing well by the worst-off group is more important than improving the lot of better-off groups. Rawls deliberately rejects the economist’s idea of trade-offs, instead concluding that the worst-off group should be the clear first priority.

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Rawls’s argument for making the worst-off the first priority is that if no one knew what position they held in society, that is, if people were behind a “veil of ignorance,” then they would want a rule that maximized the position of the worst-off, just in case they turned out to be the worst-off! In economic terms, Rawls believed that people were extremely risk-averse.

To see how maximin works in practice, consider a simple example with three people, Red, Blue, and Green.

Now let’s compare Society A where Red, Blue, and Green have equal incomes of 100 to Society B where the respective incomes are 150, 100, and 50. Rawls’s maximin principle implies that Society A is better or more just than Society B because the worst-off person in Society B, Green, has more income in Society A. Notice that the only difference between Society A and B is that income is more equally distributed in A than in B; average income is identical so it doesn’t seem unreasonable to prefer Society A to Society B.

But now let’s compare Society A with Society C. In Society C, Red and Blue are much better off than in Society A and Green is slightly worse off. Notice that average income in Society C is more than four times as high as in Society A. Which society would you rank as the better society? Which society does maximin rank more highly? The maximin principle says that Society A is better than Society C because the worst-off person in Society C, Green, is better off in Society A. The maximin principle says that the extra income of Red and Blue counts for nothing; only the income of the least well-off person counts.

It’s sometimes said that the maximin principle favors societies with more equal division of incomes but that is not necessarily true. Let’s compare Society A with Society D. Even though income is perfectly egalitarian in Society A, the maximin principle says that Society D is better because, once again, the income of the least well-off person is higher. The maximin principle even prefers Society D to Society C, even though Society C has a more equal division of the same average income.

The maximin principle is influential among philosophers but less so among economists who, as you know, tend to think in terms of trade-offs between values. A little bit less income for the worst-off might be acceptable if it comes with a big enough gain to others. Lower average income might be acceptable if income is a little bit more equally divided, and so forth.

Under utilitarianism, we try to implement the outcome that brings the greatest sum of utility or “happiness” to society. The best known utilitarian philosopher today is Peter Singer, whom you also may know as an advocate of animal rights.

When it comes to redistribution, a utilitarian approach tries to determine which people have the greatest need for some additional income. For instance, an extra dollar for a poor person may go toward a doctor’s visit, but an extra dollar for a rich person may just go toward buying an extra silk tie. The poor person probably gets greater happiness from the extra dollar. The utilitarian is likely to suggest that some amount of money be redistributed from rich people toward poor people. Unlike Rawls, however, utilitarians are not always trying to make the poorest people as well off as possible. Utilitarians advocate redistributing income only up to the point where the marginal change in utility created from the redistribution is positive. They try to maximize the total sum of utility, not the utility of the worst-off person. So, in principle, utilitarianism (unlike maximin) allows the poor to undergo some extra suffering, provided that suffering is outweighed by enough gains elsewhere in the economy.

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What might limit the amount of wealth a utilitarian would redistribute from rich to poor? Incentives! Taking money away from richer people decreases their incentive to earn, so more redistribution could reduce overall wealth by enough to reduce total utility. A utilitarian recipe therefore might involve only a modest amount of redistribution, especially if people are very responsive to incentives. Utilitarianism will also take into account the incentive effects of redistribution on the poor. Giving dollars to poor people is not always the best way to improve their welfare. As Milton Friedman once said, if you pay people to be poor, you’re going to have a lot of poor people.

Notice that the usual assumption in economics is that a dollar is a dollar no matter who gets the dollar, so utilitarianism needs to make assumptions that extend beyond those of economic theory. Economic theory does not assume that a dollar is worth more to a poor person than to a rich person and standard economic tools don’t give us any easy way to measure happiness or utility. In fact, many economists believe that comparing the happiness of two people is not very scientific. We might think that the poor person gets more happiness than the rich person from an extra dollar of wealth, but perhaps the poor person is a monk who neither needs nor wants money, while the rich person really does desire another silk tie. Maybe the rich person is rich precisely because he loves money and worked very hard to get it. We aren’t saying that this is the case; we are only pointing out that there is no natural unit of measure ment of utility and human beings have very different preferences.

Most economists do believe in a safety net and a welfare state to take care of the poor people in a wealthy society. But this belief doesn’t have to be rooted in any very strict comparison of utilities between rich people and poor people. Economists frequently portray the social safety net as a way of obtaining insurance against bankruptcy, major health-care problems, and other bad outcomes. If you think that insurance has value, and that private markets might not provide this insurance on their own (see Chapter 24 for a discussion), that provides some case for a social safety net. Utilitarians go further, however, and try to offer very specific recipes for just how much money should be transferred from the rich to the poor.

Whether we accept Rawls’s maximin principle or prefer utilitarianism or choose almost any other theory of justice, one thing is clear. There is no guarantee that the distribution of income generated by market forces will be anything like what these theories describe as the just distribution. Most theories of justice, therefore, will call for some amount of taxation and redistribution, using the force of government. One of the few exceptions is Robert Nozick's entitlement theory of justice, which is also known as a libertarian theory of justice.

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Robert Nozick, another Harvard philosopher, laid out a moral system very different from that of Rawls. Nozick was far more sympathetic to the market economy than was Rawls, and he outlined a defense of the market in a 1974 book called Anarchy, State, and Utopia. Nozick argued that the pattern of the distribution of income was irrelevant. What mattered was whether income differences were justly acquired and thus Nozick focused on the process by which income is distributed.

Nozick argued that if John wishes to trade with Mary, that decision should be up to John and Mary alone, provided they do not infringe on the rights of others. In the words of Nozick, all capitalist acts between consenting adults should be allowed. Nozick admitted and indeed emphasized that such trades, performed on a cumulative basis, would result in different and indeed unequal outcomes and opportunities for people, but he saw nothing wrong with those inequalities. Nozick went further and positively endorsed those inequalities that resulted from freely chosen market transactions, devoid of coercive force or fraud.

Nozick offered a classic rebuttal to Rawlsian and other theories of justice. Nozick said let’s imagine that one day we create a world in which the distribution of wealth is exactly as described by some theory of justice. Let’s say the distribution of wealth is exactly like that described by your theory of justice. Now, Nozick said, imagine someone like J. K. Rowling, the author of the Harry Potter book series (Nozick actually used the example of Wilt Chamberlain, the basketball star of the 1960s and 1970s).

Rowling, let us say, writes another Harry Potter book and she offers to sell a copy to anyone who is willing to buy. Of course, many people are very willing to buy Rowling’s book, and so person by person money is transferred from book buyers to Rowling. Rowling becomes very rich so at the end of the day, the distribution of wealth will be very different than at the beginning of the day, when by assumption all was just. Yet how can the new distribution of wealth, the one with a very rich J. K. Rowling, be unjust? No one’s rights were violated in the process and indeed everyone, including both the fans and Rowling, was made better off every time Rowling sold a book. All that has happened has been voluntary, peaceful trade. A just and rightful trade, Nozick’s theory would imply. So why should any outsider disapprove of the resulting pattern of wealth?

Note that this example is not fanciful: When she wrote her first book, J. K. Rowling was an unemployed single mother living on welfare. Yet Rowling became the first author ever to become a billionaire by writing and today her income is thousands of times higher than that of her average fan.

Nozick’s example is a direct criticism of the view that equality of outcome is important. Nozick argues that what we should care about is the justness of the process that leads to differences in wealth—theft is bad and should be condemned and rectified, but voluntary, peaceful trade should not be condemned even when it leads to large differences in wealth.

In the libertarian account, what is just is to respect an individual’s rights. One way to think of libertarian rights is that they are “side constraints” on possible government actions. The libertarian view corresponds to some common intuitions. For instance, as discussed, many people in the world need kidneys; otherwise, they will die or require dialysis. Thus, many people need a kidney and you have two good ones. But you need only one kidney to live and be healthy. Is it okay to take a kidney from you against your will? Is it okay to draft your kidney for the greater good? Is it okay to redistribute kidneys?

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If you believe the answer to that question is no, you have taken one big step toward the libertarian theory of justice. If you want to think about the next step, a libertarian would ask, if it’s not okay to draft your kidney, why is it okay to draft your whole body? And if redistributing kidneys is wrong, isn’t redistributing income wrong for similar reasons?

Philosophers continue to debate the relevance of the perspectives of Rawls, utilitarianism, and Nozick, among other ideas. One contribution of the economist is simply to insist that people should be more focused on producing rather than redistributing wealth. Moral philosophers sometimes write as if all the goods were just sitting there on the table ready to be divvied up, but economists know this isn’t true. Economists usually stress the importance of producing the wealth in the first place.