John Rawls’s A Theory of Justice is highly relevant to the ways we think about our economic system. If we just read the citations, Rawls seems to be primarily influenced by “modern” economics — Samuelson, equilibrium theory, game theory, and marginalist theory. And so we might suppose that his moral worldview reflects a neoclassical vision of economy and society. However, his thought actually seems to reflect a recognition of the intellectual tension between classical political economy and “modern economics”. In some ways his framework for thinking about our contemporary economy seems to be closer intellectually to Mill, Ricardo, and Marx than it is to Pareto and Samuelson.
Classical political economy was premised on the labor theory of value—the idea that there is a concrete, economically meaningful measure of value that guides economic organization. Further, there was the idea that the economic needs that individuals had were also concrete—the consumption goods that permitted life to proceed. These goods included items like food, clothing, shelter, medicines, and perhaps schooling. So economic activity, according to the classical economists, was about something objective.
Neoclassical economy, by contrast, rejected even the idea of utility as a concrete or objective human reality. Instead, modern economics bracketed the reality of needs in favor of a metaphysics of subjective preference. Economists no longer needed to think about what people needed, but rather simply what they preferred; so the utilities “consumers” ascribed to outcomes could be discovered by the quasi-experiments of “revealed preference.” Welfare was then defined as the extent to which the individual can satisfy the range of subjective preferences he or she happens to have. So classical and modern economic paradigms differ substantially on what economic activity ought to achieve: satisfaction of material needs, for the classical economists; and satisfaction of subjective preferences, for the modern economists.
A major thrust of the critique of neoclassical economics arises at just this point. Development organizations like the Dag Hammarskjöld Foundation and economists like Amartya Sen have put forward fundamentally different ideas about human wellbeing. The basic needs approach disputed that the goal of economic development in poor countries should be defined in terms of subjective preferences or utilities. These thinkers argued instead for achieving a decent minimum for whole populations in the satisfaction of basic needs. A 1975 report from the Dag Hammarskjöld Foundation to the United Nations (What Now – the 1975 Dag Hammarskjöld Report on Development and International Cooperation; link) is illustrative; it emphasized the idea of basic needs within the discussion of development priorities.
Amartya Sen went a step further, by introducing a more adequate theory of the human person in terms of capabilities and functionings, and argued for a conception of wellbeing that is defined in terms of the ability of individuals and populations to realize their capabilities. Sen advanced these ideas in many places, including On Economic Inequality and Development as Freedom. (Earlier posts have discussed the capabilities approach; link, link.) These are objective criteria of wellbeing, not simply summations of subjective preference satisfaction. And these frameworks of thought present a major challenge to the foundations of modern economic thought.
In light of these observations, it is very interesting to observe that Rawls defined the foundation of his theory of justice, the original position, in terms that are strikingly classical. In the original position, representative individuals are asked to deliberate behind a veil of ignorance about what principles of justice they would choose to regulate their social cooperation and competition. Individuals are presumed to be mutually disinterested, and their sole concern is to adopt principles that they can live with in the resulting society. But what are their interests? Rawls says that the participants in the OP are interested in a set of primary goods: material resources and liberties, essentially. These are “things which a rational man wants whatever else he wants” (TJ:92).
So Rawls’s definition of the situation of deliberation within the original position is one that focuses on primary goods, not subjective utilities. And this sounds much closer to a classical assumption about economic interests and the human good than it does a modern assumption. It offers an objective and realistic assumption about what people need in order to live decent lives.
(See a post on “property-owning democracy” for more discussion of the institutional implications of Rawls’s reasoning.)