Question

Explain the main ideas about fairness and evaluate the fairness of the alternative methods of allocating scarce resources.

Answer 1

Firstly, if a market distributes a good which is scarce in nature then those people will get the good who are ready to pay the market price. But the idea of fairness is segregated into 2 parts which stand as conflicting:

•It’s not fair if the rules aren’t fair

•It’s not fair if the result isn’t fair.

It’s not fair if the rules aren’t fair: Harvard philosopher, Robert Nozick, in Anarchy, State, and Utopia(1974), argues that the rules must be fair and must respect two principles:

• The state must enforce laws that establish and protect private property

In this we have utilitarianism. In this perspective it is believed that we should achieve bigger happiness for bigger number. Thus it requires fairness of income so we need to redistribute the income to achieve fairness.

Redistribution leads to big tradeoff, which is between efficiency and equity The tradeoff occurs because taxes decrease people’s incentives to work,thereby decreasing the size of the economic pie.

•It’s not fair if the result isn’t fair. Private property may be transferred from one person to another only by voluntary exchange and that the government may apply property rights for individual. If private rights are enforced and there are no obstacles to achieve efficiency then the competitive market becomes absolutely fair and there lies no unfair activities.