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By Root 1007 0

all other attempts to redistribute wealth, is the moral equivalent of slavery, and therefore unacceptable no matter what benefits it might confer on others. Nozick’s argument was appealing to many people, and not only because it provided a philosophical rationale for low taxes. By reasoning about what would be considered fair in a hypothetical “state of nature,” Nozick’s arguments also played well to commonsense notions of individual success and failure. In a state of nature, that is, if one man invests the time and effort to build, say, a canoe for fishing, no one else is entitled to take it from him, even if it means that the man lacking the canoe will suffer or perish. Individual outcomes, in other words, are solely the product of individual efforts and skill.

And in a state of nature, Nozick might well be right. But the whole point of Rawls’s argument was that we do not live in such a world. Rather, we live in a highly developed society in which disproportionately large rewards can accrue to individuals who happen to possess particular attributes and who experience the right opportunities. In the United States, for example, two equally skilled and disciplined athletes—one a world-class gymnast and the other a world-class basketball player—are likely to enjoy wildly different degrees of fame and fortune through no fault or merit of their own. Likewise, two children with indistinguishable genetic endowments—one of whom is born into a wealthy, highly educated, socially prestigious family, and the other who is born into a poor, socially isolated family with no history of educational achievement—have dramatically different prospects for lifetime success.25 Finally, even random differences in opportunities that arise early in one’s career can accumulate, via the Matthew Effect, to generate large differences in outcomes over the course of a lifetime. Rawls’s claim was that because the mechanisms of inequality are essentially accidents—whether of birth, or of talent, or of opportunity—a just society is one in which the adverse effects of these accidents is minimized.

Rawls’s claim is often misunderstood to mean that inequality of any kind is undesirable, but this is not at all what he was saying. Allowing for the possibility that through hard work and application of one’s talents one can do better than one’s peers is no doubt beneficial for society as a whole—just as libertarians believe. In a Rawlsian world, therefore, people are free to do whatever they want, and are perfectly within their rights to take whatever they can according to the rules of the game. And if the rules of the game have it that basketball players earn more than gymnasts, or investment bankers earn more than teachers, so be it. Rawls’s point was just that the rules of the game themselves should be chosen to satisfy social, not individual, ends. Bankers, in other words, are entitled to whatever they are able to negotiate with their employers, but they are not entitled to an economic system in which the financial industry is so much more profitable than any other.

The counterintuitive consequence of this argument is that debates over individual compensation should not be conducted at the level of individuals. If it’s true that bankers are paid too much, in other words, the solution is not to get into the messy business of regulating individual pay—as indeed the financial industry itself has argued. Instead, it is to make banking less profitable overall, say by limiting how much banks and hedge funds can leverage their portfolios with borrowed money, or by forcing so-called over-the-counter derivatives to be traded on public exchanges. The financial industry could argue, of course, that leverage and customization offer benefits to their customers and to the broader economy as well as to themselves. And these claims, although self-serving, may have merit. But if the purported benefits are outweighed by the economic costs of increased risk to the economic system as a whole, then there is nothing inherently unjust about society changing the rules. We can argue