Just Savings and Dynamic Contractualism

I don’t understand the principal of just savings.

Rawls says that parties to the OP will pick a principle of savings that satisfies maximin, that maximizes the welfare of the least-well off group. But I cannot make intelligible to myself just who the least well-off group is here in the inter-generational context. It may turn out the best off person in generation 1 is much less well off than the least well off in generation 7.

So, OK, suppose I’m a party to the OP. I don’t know which generation I’m in. So, I’ve got to assume I’m in generation 1, on the assumption that later generations are better off because of the accumulation of capital. And I am suppose to ask how much I am willing to save, on the assumption that generation 0 has saved at the same rate, and that future generations will follow the same principle. I am assumed to have my children and grandchildren in my (primary goods maximizing) welfare function in order to ensure I don’t choose to save nothing. But it seems that there’s no firm place to stand.

If I’m in generation 1, I ask how much I wish generation 0 to have saved. Oh, but then, generation 0 will have been less well-off than generation 1. So then I have to assume I am in generation 0. But then the problem reiterates until I need to assume that I’m in the Pleistocene. What rate of savings do I want? Well it depends on the kinds of institutions that exist at generation 0. I can’t save money in the bank if there is no banks, or no money. But isn’t the point of choosing from the OP that we’re choosing institutions for all time? Well, it can’t be, if Rawls is assuming that we want rules that will lead to capital accumulation sufficient to eventually produce resources for all to realize their capacities, etc. “Each [generation] passes on to the next a fair equivalent in real capital as defined by a just savings principle,” Rawls says. And then he immediately urges: “It should be kept in mind here that capital is not only factories and machines, and so on, but also the knowledge and the culture, as well as the techniques and skills, that make possible just institutions and the fair value of liberty.” But then, of course, if certain techniques and skills, as well as knowledge and culture, are needed to make certain institutions possible, and these all have to be accumulated by a process of savings and then passed on, then I cannot assume that members of generation 0-n have yet accumulated the necessary capital to enable certain other kinds of capital accumulation. You can’t begin to accumulate sufficient amounts of “factories and machines”, for example, unless your culture has developed a shared moral understanding of property rights. Does Rawls say anywhere that I’m supposed to think of the status quo as the state of nature or the no-agreement point? I should remember this. If so, then this makes considerably more sense. But still not enough sense, I think.

Rawls I think is hamstrung my trying to smash together a commonsense conception of dynamic institutional change with his remarkably static, rationalist conception of institutional choice. Rawls wants to avoid the result that the basic structure needs to be renegotiated in each generation. But he clearly sees that the principle of savings we implement at an earlier period changes the institutional possibilities in later periods. So it just won’t work to pick a principle of savings that is invariant across generations. And Rawls knows this, sort of, so he says that “presumably different rates [of savings] are assigned at different stages.” Yet if capital is more than cash and physical infrastructure, but also cultural know-how, then the parties to the OP will need a theory of the relationship between cultural capital and institutional possibility (not to mention a theory of the relationship between technology and institutional possibility) in order to determine the kind and rate of savings at each stage.

So, OK, stipulate that the parties to the OP have this theory. The problem is, the theorist doesn’t (i.e., Rawls doesn’t, we don’t), so we have no way of knowing what the parties to the OP are going to say about the principle of just savings. Rawls does admit that “it is impossible to be very specific about the schedule of rates . . .” He then goes on to try to be more specific. But isn’t this problem just endemic to the whole rationalist contractarian enterprise: the contractarian theorist cannot possibly know what his idealized proxies will decide, because he can’t know what the idealized proxies need to know in order to make the theory work. Which is why we have to a move to a more dynamic process-based mechanism for institutional choice, in which the principles get worked out by real-world mechanisms that simulate ideal normative deliberation better than a ruminating professor.

(And this is all independent of the deeper problems about intergenerational obligation. The institutions chosen now don’t simply determine how things will be for people later. They determine who will exist later. That makes everything incredibly confusing. We runs smack into metaphysics. Is existence a perfection? If next generation’s worst off are the children of this generation’s worst off, can we make next generation’s worst off better off simply by sterilizing this generation’s? Etc.)

Author: Will Wilkinson

Vice President for Research at the Niskanen Center