Working in groups and sharing

Humans are social animals that operate in groups. We share the workload and the fruits of our efforts, which might be a band of hunter-gatherers, a corporation or a society. We make agreements on who does what and who gets what. That is the social contract. Otherwise, we can’t work together. It helps if we think the social contract is fair. Violations of fairness provoke strong feelings. What is fair isn’t always straightforward. Some people contribute more to the effort than others, which can be either due to willingness or ability. And some people have more needs than others.

A study demonstrated that monkeys also have an idea of fairness. If one ape received less valuable rewards for the same work than its partner, such as less tasty foods, it could become angry and reject the reward. You can become frustrated if you feel your partner gets a better reward for the same job.¹

Children have a sense of fairness early on. Giving one individual more than another without reason can surprise toddlers as young as fifteen months old. Children also wish to see you help those they like and harm those they dislike, such as children who do not share their food preferences. Young children already prefer people similar to them (the in-group) to children who are different (the out-group).¹ Many people believe it is perfectly fine when those they dislike receive unfair treatment. As young children already have it, it could be a natural inclination that we can unlearn.

We may believe those who contribute more to a group’s success deserve more, for instance, if a venture’s success hinges on a single person’s skills or efforts. That is the excuse for high pay for CEOs of large corporations. Business is a competitive environment, and a CEO can make a difference while a factory worker can’t. When we cooperate, we are more willing to share, but in a competition, we are more willing to accept inequality. In sports, the winner gets everything. But if a team wins, the members share the prize, even if some talented players decide the outcome.

Innate or learned

The golden rule says you should treat others the way you want them to treat you. But is that rule innate or learned? If our sense of fairness is innate, moral rules apply to everyone. If it is learned behaviour, fairness is a matter of taste. If someone is helpful, we react positively. If someone acts harmfully, we react negatively. Infants already do that. An experiment involving toddlers and two puppets, one friendly and helpful, and the other mean and harmful, demonstrated that toddlers more frequently chose the friendly puppet as their preferred toy.¹

Some of our ideas regarding fairness are learned or cultural, and some are innate or natural. Researchers tested children in seven cultures (Canada, India, Mexico, Peru, Senegal, Uganda, and the US). They could get candy by pulling a lever. One child pulled the lever, which could give both children the candy or drop it in a box, so both got nothing. The rewards were unequal, sometimes to the advantage and sometimes to the disadvantage of the lever-pulling child.¹

The children always reject deals that are unfavourable for themselves. They might accept receiving more than the other child, but never agree to getting less than the other child. In some cultures, older children also reject unfairly advantageous options for themselves. That happened in some countries but not in others. Refusing a bad deal may be a natural human instinct, but forgoing a good deal that is unfair could be a learned behaviour and a cultural norm.¹

The mistakes we make

Are poor people responsible for their choices? And what is the influence of choice? During an experiment with pairs of students who did a task together, one received the pay. It was a random pick. Those who received the pay could choose how much they would give the other. Receiving pay was a matter of luck, and most people believed it was unfair, so they were often willing to share.

Adding a choice, for instance, between getting a small reward or participating in a lottery to get the full reward, changes the picture. The participants were less willing to share. If both participants opted to participate in the lottery, we think it is fair that one of them wins. People often think poverty is a choice, as poor people decide not to get an education or divorce and, as a result, cannot work full-time.¹

They made these choices, but what were the alternatives? Possibly, the small reward was not enough to live off, so you had to participate in the lottery to have a chance of paying the bills. Or, the alternative to divorce was living with an abusive spouse. Perhaps a good education was too expensive for you, or you were unqualified. But poor people also have options and can influence their lives.¹

If we do not reap the consequences of our choices, choices don’t matter. And that is also unfair. That becomes clearer if two individuals have similar opportunities but make different choices. If one decides to spend his money while the other person saves for retirement, we think it is unfair to tax the latter to pay for the retirement of the former. In this case, it might be better not to have options and a mandatory retirement savings scheme.

Liberals in the United States focus on equality so different groups get equal outcomes, but ethnic differences in health, education and wealth remain. Some ethnic groups work harder, divorce less and invest more in their children’s education. Conservatives think working hard and making the right choices should make you better off. Some societies invest in equal opportunities, for instance, by investing in the education of underprivileged children, but conservatives do not like to pay taxes for that.

Luck is everywhere

Your place of birth, the upbringing you received, your education, and the opportunities you had in life determine for a large part your success in society. Successful people usually think their brilliance and hard work brought them there. That is half the story. Your efforts matter, but your talents are a matter of luck. Luck conflicts with fairness. There are many other instances of luck. Some live long, some die early, some have love, some are alone, some are healthy, and some are sick. Luck is part of life. Luck is a privilege. And you may only realise that when you are an unlucky person.

If we can eliminate luck, that would be fairer. But not rewarding talent, even when it is the result of luck, can result in bad outcomes. If a group’s success depends on the brave, the hard-working or the talented, we think they deserve an extra reward. It can inspire them to do their utmost. It is why low-skilled labourers receive low wages. Wages above the market price can bankrupt the business if there is intense competition. That is why minimum wages exist to mitigate the unfair consequences of luck.

Fairness connects to cooperation and inclusiveness. Inequality relates to competition, winners and losers. And we need cooperation as well as competition. In a village economy with little outside trade, villagers can distribute the fruits of their endeavours in ways they see fit. They can weigh issues that the market cannot, such as effort. There are exchanges where members can trade goods and services outside the market economy. But people with sought-after skills often get a better deal in the market.

The market as a party pooper

Economics is about competition, collaboration and contributions. We accept unequal pay for different tasks. Scarce talent can determine the success of an enterprise. Talented people have a better bargaining position than the expendable. We also accept that unsuccessful businesses fail if we do not buy their products. And we think workers deserve a minimum wage, regardless of the market value of their contributions.

Fairness connects to cooperation and inclusiveness. Inequality relates to competition, winners and losers. In a village economy with little outside trade, villagers can distribute the fruits of their endeavours in ways they see fit. The community movement has started exchanges where members trade goods and services outside the market economy. But people with sought-after skills usually get a better deal in the market.

Fairness is about rights and how rewards relate to contributions. It is about how we value contributions and support those who contribute little. The market principle is not always fair but can promote efficiency. For instance, if farmers grow too many carrots and too few bananas, the price of carrots drops and of bananas rises, making people eat more carrots and farmers grow more bananas.

Consumers and producers solve the carrot surplus and the banana deficit by rewarding carrot-eating and banana-growing efforts. It ensures that there is enough food, reduces waste and promotes an alignment of production to our needs and preferences. If farmers grow more carrots, poverty is their reward. Choices do have consequences, so we have food on the table. Markets are not the only way to make people reap the consequences of their choices.

Justice and fairness

The past casts a shadow over the present. We live with the consequences of colonialism, slavery and feudalism. Colonialism and exploitation, including the slave and opium trade, helped to make Western countries rich. This wealth accrued with interest as capitalists invested that surplus in new capital. People in Western countries still enjoy some advantages of colonialism and exploitation. Exploitation alone cannot explain wealth differences between countries. And so, the issue of fairness is not straightforward.

The alternative of colonialism could have been an absence of that surplus as it required trade relations with other continents or modern organisation methods. For instance, the surplus of spice trade came from the price Europeans were willing to pay for these spices. Europeans also controlled the trade routes and collected the surplus. Capital and wealth require saving and investing. The colonies had not yet developed capitalism, so they would not have invested in new means of production as European capitalists did.

Organisation and trade contribute to surplus value, but those in control take that surplus. And some trade practices came down to theft. For instance, the British East India Company collected taxes in India and used a portion to purchase Indian goods for British use. Thus, instead of paying for them, British traders acquired these goods for free by buying them from peasants and weavers using money they had taken from them. Through this scheme and other scams, the British stole trillions of dollars from India.²

Had that theft not occurred, the Indian peasants and weavers would have been better off. But if they didn’t have a capitalist mindset like the English merchants, they would not have invested their money into means of production and research and wouldn’t have increased India’s capital base. The wealthy British traders likely invested parts of the proceeds of their thievery on the London Stock Exchange into new ventures like factories running on steam engines.

History advantages some people and disadvantages other people. In India, the caste system determines what jobs you can do. Some women in India have to clean toilets for $ 1,50 per month because of the caste in which they were born.¹ The Indian caste system is a relic from the past. Some inherit large estates and think they deserve them because their grandparents wisely invested the money stolen from poor Indian farmers, while others inherit nothing. In all societies, some groups have fewer opportunities than others.

The powerful make the rules

The powerful make the rules. The tax codes are an example. From the 1920s onwards, multinational corporations emerged, and the question became how to distribute the wealth they created. The League of Nations addressed that issue. Powerful nations like Great Britain, France and Germany dominated the discussion and agreed on rules that suited their interests. They did not grant taxing rights to their colonies.¹

The United States also played a crucial role. The tax codes allow corporations to pretend that the profits came from a tax haven like Bermuda instead of the countries where the production and the sales occurred. This corrupting situation undermines democracy and the rule of law everywhere. To the rich, different rules apply than to the rest of us. In 2010, wealthy people hid 21 to 32 trillion US dollars in tax havens.

We think it is fair that you can start a business, and if it is successful and contributes to our well-being, you should be able to get rich. But we believe it is unfair that some people inherit large estates or that individuals become billionaires in a winner-takes-all industry. And we think that the wealthy and multinational corporations should pay taxes. And we believe that receiving an income without working for it usually is not good.

The corruption debate is often about petty corruption that contributes to poverty and inequality but ignores the tax havens and the massive white-collar corruption industry surrounding it. Tax haven countries like Great Britain, the Netherlands, Luxembourg and Switzerland help the elites avoid paying taxes. Many people know the system is unjust but believe we can’t change it. But perhaps we can.

From moral philosophy to revolution

Fairness is the primary concern of moral philosophy. The Golden Rule is a fundamental moral rule. It appears in most ancient religions and traditions. Confucius formulated it as what you do not wish for yourself, do not do to others. Starting with Plato, philosophers tried to find a rational foundation for morality. Today, we know that humans are social animals, and moral systems help us to survive. Our nature allows for different cultural values, but our ethical systems share the same ingredients.

Western moral philosophy has two main traditions. A pragmatic school prevalent in Great Britain and the United States claims that ethical rules are an agreement between group members. Moral rules are thus a cultural phenomenon. David Hume was one of its most prominent philosophers. And outcomes might be more important than intent. If you kill two people by accident, that might be worse than murdering one person. In this tradition, freedom means doing as you please.

On the other hand, you have the idealist, notably German, continental European school. It claims that moral rules can be absolute and apply to everyone, thus universal. A prominent philosopher in this tradition was Immanuel Kant, who was a deeply religious person. He tried to find a rational foundation for morality. In this view, intent might be more important than outcomes. Accidentally killing two people might not be as bad as murdering one. Freedom means liberating yourself from depraved impulses and becoming a rational and morally upright person.

It is thus not entirely a coincidence that Adam Smith lived in Great Britain and that Karl Marx and the Marxist Frankfurt School came from Germany. Heteronomy is acting on desires rather than reason. To Kant, that is reprehensible as you do not behave like you should. Karl Marx believed there was heteronomy in legitimising exploitative social relations. Marx claimed history is the outcome of our unenlightened self-interest, such as greed, and our willingness to trust the fantasies of the elites ruling society. Our unwillingness to be rational by ruthlessly reasoning from the evidence and acting upon it blocks a better future. Religion was opium from the masses, Marx claimed, as it prevented people from seeing the truth and taking action.

The French had already tried such ruthless reasoning from the evidence under the banner of liberty, equality, and brotherhood. Taxes in France were low overall compared to Great Britain, but the elites didn’t pay them, so the burden fell on the peasants and the middle class. And so, revolutions are not only about ideals like liberty, equality, and brotherhood. The fairness of taxes often plays a significant role in revolutions. It happened in England during the Glorious Revolution and in the American colonies during the American Revolution. The French Revolution rid the country of the corrupt old regime and improved the quality of the state but at the cost of bloodshed and war.

While the French Revolution and its aftermath occupied Europe, pragmatism prevailed in Great Britain. One of the leading British conservative politicians, Edmund Burke, tried to find out what works in practice. No matter how good your idea might seem, you can be wrong. Burke saw the need for reform but only pushed for it when necessary, as changing the status quo was dangerous. The French Revolution underpinned his point. But, the conditions in Great Britain and France were very different. After the Glorious Revolution, the British state was responsive to the wishes of taxpaying citizens. Gradual reforms were not an option in France as its entrenched elites didn’t allow them. The current state of the world resembles France before the French Revolution.

Featured image: Confucius (possibly the inventor of the Golden Rule)

1. The Price of Fairness (film). Alex Gabbay (2017).
2. Independence Day: How the British pulled off a $45 trillion heist in India. The India Times (2023).