Bryan Caplan says he was the only libertarian at our recent Liberty Fund willing to defend the free market on grounds of desert. That’s not true! It’s too bad that Dave Schmidtz missed the first part of the desert discussion, since he has a whole (brilliant) section on desert in his new book Elements of Justice. And I, like Dave, am willing to defend the free market partially on grounds of desert. I think Bryan’s confusing accepting Olsaretti’s particular terms of justification with accepting some desert argument or other for the market. Olsaretti thinks, absurdly to my mind, that justifying the market requires justifying the differences in the distribution of income. When she asks whether desert can justify the free market she is asking whether income differentials across the entire national economy are deserved. I think this questions is like, as Elaine Sternberg put it, asking whether the market is ten feet tall.
I think desert can justify differences in distribution when people are working in a common cooperative enterprise. If you and I do a job that neither of us could have done alone, but I simply worked harder than you, then I deserve more than you. That is a bedrock principle of moral common sense. And people who add more value inside a firm deserve bigger raises and more frequent promotion than people who do less. Etc.
And there is a sense in which entrepreneurs or firms competing in the same sector can deserve to do better of worse. If I offer you a better product at a lower price than my competitor (if I offer terms of cooperation that includes a bigger surplus together with a bigger share of that surplus for you), then I deserve to be your partner in cooperation. Businesses that are more deserving of their customers, by offering better terms of cooperation, will tend to do better than those that offer slightly worse terms. If Bryan and I are are competing for customers, and I succeed by offering better terms, I think there is a pretty obvious sense in which my larger income will be a reflection of my desert. However, if Bryan is trying to sell hot dogs, and I am trying to sell little Buddha statues, and we both outcompete our rivals, but I end up making more than Bryan because of Angelina Jolie is seen in a movie fondly stroking a Buddha exactly like the kind I sell, then I think it is just as obvious that our differential will not be a reflection of my desert. Of course, entrepreneurs who correctly predict an increase in demand may in some sense deserve to do well. But it pretty quickly becomes incoherent to justify the size of income gaps across even a very small, not very complex economy in terms of desert.
That said, I’m open to Bryan’s idea that there could be a significant positive correlation between some kind of deservingness or other and position in the income distribution, and that the correlation is stronger under free market institutions than under any alternative. To show that free-market distributions are more desert-sensitive than the alternatives would be neat. But demonstrating the desert-sensitivity of an entire distribution under certain institutions is rather different from justifying particular income gaps in terms of desert (e.g., Gates’s deserving the differential between him and Buffet, or Bryan deserving the differential between him and me.) Actually, I think a comparative study of desert-sensitivity is a pretty awesome idea, though I wonder if even this is coherent in the end. Now, I don’t know how you’d actually measure that, especially on Olsaretti’s terms (she tries not to make a silly Big Bang argument—the Big Bang happened so nobody deserves anything—but seemed to me to make one anyway), but I think would be worth thinking through.