Exploring Fairness

10. Many years ago I attended a college founded by Benedictine monks. My economics professor, the late Martin Schirber, OSB, recounted that in days past, the school had tried to apply what the monks thought were Christian principles in determining compensation. People who needed more money should be paid more than people who needed less money. So when a worker had an extra child, that family would need more money, and the worker would get a raise. Today, very few people would consider attempts to pay people based on need as fair. If you think it is unfair, why do you think it is unfair?

If you think that the pay based on need is unfair, is it fair for the government to take need into account when determining taxes? The tax code gives deductions for extra children, and it also allows the deduction of large medical bills, which can be justified with a need argument. If you think it is not right for a private employer to take need into account in determining pay, why is it right for the government to take need into account when determining taxes?

11. Much discussion of issues of fairness and the ideal distribution of income is done in the language of social contract theory. This discussion recognizes a tradeoff between more equality and the total size of output; that is, it assumes that if everyone is guaranteed an equal share of total production, there is little incentive to work hard.
Suppose that you and four others are shipwrecked. As you approach a tiny island, you decide to form a social contract and these are your best guesses of what you are choosing from:

Option A: Share everything equally. Total output will be $10,000 and each will get $2000.
Option B: One-half of what each produces, each keeps; but the other half goes into a communal pot and is split up evenly. Total output will be $14,000. Before the split income will be $6000, $4000, $2000, $1000, and $1000. After the split, the incomes will be $4400, $3400, $2400, $1900, and $1900.
Option C. Each get to keep all he or she produces. Total output will be $18,000. Incomes will be $7500, $5000, $3000, $1500, and $1000.
(In options B and C you have absolutely no idea which of the five you will be. You have an equal chance of being any one of them.)

a) Which of the three options would you prefer? Why?
b) How would the numbers have to change for you prefer more or less redistribution?
c) Can you generalize your way of deciding what is best?
d) Could you rewrite this example using an allocation of dorm fines or damages? (Should everyone bear the costs, or should an effort be made to apply them to the parties that cause them? What would dorm residents decide if they make that choice at the beginning of the semester?)

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