Contents
1 Introduction
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Theories of justice
2 About distributional justice
2.1 Economic goods . . . . . . . . . . . . . . . . . .
2.2 Global and local justice . . . . . . . . . . . . . .
2.3 Principles of justice . . . . . . . . . . . . . . .
2.4 About theories of justice . . . . . . . . . . . . .
2.5 Egalitarianisms . . . . . . . . . . . . . . . . . .
2.6 The social contract . . . . . . . . . . . . . . . .
2.7 Libertarianism and Marxism: Two special cases
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3 Deserts and the fruits of our labour
3.1 Deserts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.2 Rewards according to contribution . . . . . . . . . . . . . . .
3.3 The fruits of our labour . . . . . . . . . . . . . . . . . . . . .
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4 Welfarism: utilitarianism and
4.1 Utilitarianism . . . . . . . .
4.2 Welfarism and equality . .
4.3 Social evaluation functions
4.4 Welfarism and ethics . . . .
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welfare
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economics
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5 John Rawls’s theory of justice: the social contract
5.1 The original position . . . . . . . . . . . . . . . . . .
5.2 The difference principle . . . . . . . . . . . . . . . .
5.3 Illustrations of the difference principle . . . . . . . .
5.4 The difference principle and the theory of uncertainty
5.5 Primary goods . . . . . . . . . . . . . . . . . . . . .
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6 Equality of what? Resources and capabilities
6.1 Approaches to economic equality . . . . . . . . . . . . . . . .
6.2 Dworkin and equality of resources . . . . . . . . . . . . . . . .
6.3 Capabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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7 Libertarianism and Marxism
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7.1 Libertarianism . . . . . . . . . . . . . . . . . . . . . . . . . . 85
7.2 Marxism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
8 Children and their mothers
8.1 What is special about children?
8.2 Welfarism and children . . . .
8.3 Libertarianism and children . .
8.4 The Rawlsian social contract .
8.5 The good of children . . . . . .
II
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Measuring inequality
9 Income and wealth
9.1 Economic goods . . . . .
9.2 Income . . . . . . . . . .
9.3 Components of income . .
9.4 Extended income . . . . .
9.5 Full income . . . . . . . .
9.6 Lifetime income . . . . . .
9.7 Wealth . . . . . . . . . . .
9.8 Access to economic goods
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10 Household income
10.1 Equivalent adult scales . . . . . . . . . . . . . . .
10.2 The cost of living function and economies of scale
10.3 The cost of children . . . . . . . . . . . . . . . .
10.4 Estimating equivalent adult scales . . . . . . . . .
10.5 The unit of analysis . . . . . . . . . . . . . . . .
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109
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129
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131
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. 144
11 What should we measure?
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11.1 Household or individual income? . . . . . . . . . . . . . . . . 147
11.2 Standard income, extended income, full income? . . . . . . . . 151
11.3 Lifetime income or annual income? . . . . . . . . . . . . . . . 153
2
12 Lorenz curves and inequality measures
12.1 The distribution function . . . . . . . . . . . . .
12.2 The Lorenz curve . . . . . . . . . . . . . . . . .
12.3 Inequality measures . . . . . . . . . . . . . . .
12.4 The theory of inequality measures . . . . . . . .
12.5 Ordinality of inequality measures . . . . . . . .
12.6 Some properties of different inequality measures.
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13 Social evaluation of inequality
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13.1 Lorenz dominance and inequality aversion . . . . . . . . . . . 176
13.2 Ethical inequality measures . . . . . . . . . . . . . . . . . . . 178
13.3 Atkinson’s inequality measure . . . . . . . . . . . . . . . . . . 180
14 Some inequality measures
14.1 The Generalised Entropy class of inequality measures
14.2 The M-curve and the A-measure. . . . . . . . . . . .
14.3 Kolm’s inequality measure . . . . . . . . . . . . . . .
14.4 Choosing an inequality measure . . . . . . . . . . . .
14.5 Inequality in some OECD countries . . . . . . . . . .
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15 Poverty
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15.1 Relative poverty . . . . . . . . . . . . . . . . . . . . . . . . . . 194
15.2 Measuring poverty . . . . . . . . . . . . . . . . . . . . . . . . 197
15.3 The importance of equivalence scales . . . . . . . . . . . . . . 198
16 Decomposition of
16.1 Decomposition
16.2 Decomposition
16.3 Decomposition
16.4 Decomposition
inequality measures
by group . . . . . . . . . .
by group: an example . .
by income component . . .
by component: An example
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200
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A Uncertainty and expected utility
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B Sampling errors
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Further reading
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References
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3
Chapter 1
Introduction
Women work longer hours than men in nearly every country, but men receive
the lion’s share of income an recognition.1
In November 2002, British firefighters threatened to strike for higher
wages. One firefighter interviewed by the Guardian earned around 30,000
pounds a year after 22 years of service.2 An English premiership football
player might well earn as much in a week, while a care assistant had yearly
earnings of 10 000 pounds.3
These are some examples of differences in economic circumstances, and
I know in my heart they are unjust. For many years, I did not know that I
could use my reason to explain why. When I studied economics in Oslo in the
beginning of the 1960s, a truth universally acknowledged in the profession was
that justice in distribution is not, and cannot be, the subject of academic
research. There is, to be sure, the social welfare function. But the social
welfare function is for the politicians to determine, and for the economics
profession to put unquestioned into practice.
Accordingly, when I first began doing research on income distribution,
I started off by learning what I could about empirical methods, inequality
measures and the intricacies of concepts and definitions in income statistics.
But increasingly I found myself more interested in the why than the how of
the analysis. Why is the distribution of household income more interesting
than the distribution of individual income? Why should we be interested in
measuring the degree of inequality in either of them? So I tentatively started
to read Rawls and Sen, and made two discoveries, one of them delightful and
the other rather disheartening.
The delightful discovery was that academic research into questions of
1
Human Development Report 1995: 88
The Guardian 12 November 2002
3
The Guardian 15 January 2003. (Polly Toynbee: Who cares?)
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justice in distribution is not only possible and legitimate, but a flourishing
academic discipline with an increasing number of practitioners. The disheartening discovery was that I did not understand the literature. I found it
dense, abstruse, impenetrable. As I slowly began to understand something
of the content, I made a third discovery, namely of the gap between what the
philosophers write about and what is studied in empirical analyses of income
distribution. Researchers working with empirical methods seem to take for
granted that the ultimate aim of public policy is to increase welfare, and
the task of the empirical analyst is to find the level and distribution of individual welfare. On the other hand, such outstanding moral philosophers as
Ronald Dworkin, Martha Nussbaum, John Rawls and Amartya Sen are not
at all concerned with welfare, but with opportunities, resources, rights and
capabilities. According to them, achieving individual welfare and happiness
is the person’s own responsibility. The state has the moral duty to further
the means to, and remove constraints on, the pursuit of happiness, but not
to secure that happiness itself.
But then again, these same philosophers seem quite unconcerned with
how their concepts can be made operational for empirical analysis.
So I decided to write this book to bridge the gap between moral philosophy and empirical research. I have not succeeded; the bridge is still unbuilt.
But here at least is a book where moral philosophy and empirical methods
co-exist between the same two covers, and with some attempts at interaction
between the two parts.
The book is addressed to those students of the social sciences who are
interested in both the why and the how of studying income distribution.
Perhaps it may be of some interest also to researchers on either side of the
gap who want to learn something about how the other half thinks.
Moral philosophy cannot, of course, prove that one way of organising society and arranging the distribution of economic goods is ‘objectively’ better
than another. But it can make our ideas of justice more precise, help us to
reason logically about justice and to find areas of agreement and disagreement. I also think that knowledge of moral philosophy could make empirical
research more relevant to people’s concerns about justice in distribution.
I happen to know Norwegian income statistics fairly well, which is the
reason why they supply most of the numerical examples in this book. Here
is one: by the end of the nineteen nineties, the average woman in Norway
received about 60 per cent of the income of the average man. (The percentage varies slightly with the definition of income used.) Is this difference in
income unjust? To answer the question, we have to know the reasons for the
difference. These are reasonably well known. About half the difference is due
to different wage rates. Some part of these 20 per cent may be due to women
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receiving lower wages than men for the same work, but this part is probably
fairly small. It is also very difficult to identify, because women on the whole
do not do the same work as men. And the kinds of paid employment women
tend to do, are also the kinds of paid employment that are not very well paid.
The remaining 20 per cent difference is due to women either working
part-time or not being in paid work at all.
Most people now agree that it is wrong and unjust to discriminate against
women by giving them lower pay than men for the same work. (But trade
unions in Norway negotiated separate wage rates for women and men until
about 1960.) The greater part of the difference in incomes, however, does not
stem from discrimination, but from men and women making different choices
in the labour market. In my country, it is a long time since any profession
or education was formally closed to women. Women’s choices of education
and profession are made of their own free will. So it seems is their choice of
part-time work.
At this point in my lectures, I usually ask the students to suggest why so
many women work part-time. Invariably, the answer is given by one of the female students: women spend time taking care of the children. Disagreement
about the justice of women’s low incomes then stems from disagreements
on two points. The first concerns the question of just wages in the typical
women’s professions, like nursing. The second concerns the justice of women’s
doing most of the domestic unpaid work, particularly child care. There are
also those who feel that the difference in men’s and women’s own incomes
is of no importance because of income sharing between married couples. (I
have never yet met a woman who agreed with this last statement.)
All the empirical research drawn on in the above example has been carried
out in the last twenty to thirty years. (Before 1970, Statistics Norway did not
even publish separate tables on women’s and men’s income.) The research
was grounded in moral concerns about women’s economic and social position.
The use I have made of it stems from what I have learned in moral philosophy
about the importance of free choice and contingent circumstances. It has
led me to question the widespread practice of basing empirical analysis on
household income only.
In spite of this example, the present book is not a feminist treatise. It
contains no specific feminist methods or analyses. But it is written by a
woman concerned about justice to women.
The book is in two parts: Theories of Justice, and Measuring Inequality.
Part I is an introduction to some important theories of justice. It starts with
an overview of the theories considered in the following chapters. Chapter 3
discusses the idea of rewards according to deserts. I have tried to present
welfarism (chapter 4), Rawls’s social contract (chapter 5), Dworkin’s equal6
ity of resources and the Nussbaum/Sen capability approach (chapter 6) both
critically and, I hope, fairly. But I found it impossible to hide my lack of
enthusiasm for libertarianism and Marxism (chapter 7). The final chapter 8
contains my own ideas on children and motherhood in relation to distributional justice. I had to develop my own ideas because I found very little about
children and women in the theories presented in the first seven chapters.
It should be emphasised that Part I is an introduction to the subject,
aimed at social science students, not students of political philosophy. And it
is my hope that the text can be read by social scientists in general, not only
economists, even though there are some (very simple) formulas in chapter 4.
Students of economics may find parts of this same chapter wordy and lacking
in rigour precisely because the mathematics are missing.
The first two chapters of part II contain a detailed discussion of various
ways of defining and measuring access to economic goods. I have tried to
make clear that such access is more than cash income, and that therefore
justice in distribution of economic goods concerns not only distribution of
income. In chapter 11, I have tried to make a connection between theories
of justice and empirical measurement by regarding income as a constraint
rather than as a measure of welfare.
Chapters 12 to 14 and chapter 16 contain the theory of inequality measures, and a discussion of their properties. I have tried to avoid unnecessary
formalisation. But it is impossible to compute measures of any kind without taking the trouble to understand at least a few formulas. Measuring
inequality is not altogether a straightforward business, and it is important
to understand why. I have given no proofs, only assertions. Those interested
will find references to more rigorous expositions, containing references to the
original articles with proofs, in Suggestions for further reading at the end of
the book.
Chapter 15 is a minimalist treatment of the definition and measurement
of poverty.
There are a number of examples from Norwegian income statistics in part
II, because these are statistics I know well and have access to. They are there
to illustrate the methods, not because I imagine conditions in Norway to be
of absorbing interest.
As for the vexing problem of he, she or they, I have addressed this issue
by sometimes writing he and sometimes she more or less at random.
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