The second principle says that " inequalities are arbitrary unless it is reasonable to expect that they will work out for everyone's advantage." Remember that in the original version of Rawls' principles, it is inequalities in a practice that are being referenced -- differential salaries, for example, or differences in the perks associated with one of the roles in the practice. The core idea is that economic inequalities may actually result in an increase in total social output, for example by attracting especially talented people to positions demanding highly skilled workers. Inequalities may also motivate young people to acquire time consuming and demanding skills whose deployment in more highly compensated positions will once again increase total output. Higher wages are required to attract the talented workers or to persuade them to spend the time and money acquiring the skills. If there is something left over from the increased output after the skilled workers have received sufficient additional compensation to motivate them, then the remainder -- what we might call an "inequality surplus" --can be spread around to the rest of the society, making everyone better off than he or she would have been in a society that enforces equal compensation at the price of a universally lowered standard of living.
This is really the core idea in Rawls' entire theory of social justice. It is, we may note, the standard Sociological rationale for the extreme inequality of modern capitalist society. I like to think of it as the Brain Surgery argument -- to wit, "If you have to have brain surgery, do you want to be operated on by someone who is paid no more than a burger flipper at Wendy's?" The idea roughly is this: If everyone were paid the same wage -- say something above what is now Minimum Wage -- no one would have any particular motivation to swap the job of burger flipper or ditch digger or garbage collector for the job of corporate executive or brain surgeon or professor, assuming that those jobs had been stripped of their various perks as well as of their higher salaries [corner offices, people who call you "sir" or "ma'am," and so forth.] But society needs talented corporate executives and well-trained brain surgeons and professors. Otherwise the Gross Domestic Product will be sub-optimal and everyone will suffer. So efficiency demands that we slap big salaries on those jobs to motivate some of the more promising burger flippers and garbage collectors to trade in their jobs for brain surgery. If we manage things skillfully, we will pay them just enough to drag them away from their spatulas and garbage trucks and into the executive suites and hospitals. Those salary increases will come out of the GDP, of course, but there will be enough left over to raise the pay of all the remaining burger flippers and garbage collectors. So, assuming no one is envious, and resents the higher salaries of the brain surgeons even though the productivity of the brain surgeons is raising the wages of the burger flippers, everyone will be in favor of this inequality. [This is the reason for the non-envy clause in Rawls' theory, in case you ever wondered.]
I have spelled this out at length because thus explicated, it is so wildly implausible. As a description of what motivates people in a modern capitalist society to pursue one career path rather than another it is so tone-deaf sociologically and psychologically as to sound like a Jon Stewart send-up. But that is not the focus of these remarks, so let us leave that to one side.
One of the purposes of the Difference Principle, so called, is supposed to be to allow us to adjudicate complaints against a scheme of unequal compensation by showing that the inequality works to everyone's advantage. But "to everyone's advantage" is, grammatically speaking, a comparative rather than a superlative. To everyone's advantage compared to what? This is a good deal harder to answer than it might seem at first glance.
Presumably, the answer is that the scheme works to everyone's advantage compared to the same social system with equal compensation, if indeed one can even imagine the same social system without the inequalities. [Would a corporation be the same institution if everyone made the same wage? Would a hospital be?] But there are almost certainly a number of alternative schemes of unequal wages, each of which generates an Inequality Surplus adequate to make everyone better off, and each of which makes some positions better off and some positions worse off than those positions would be under a different inequality scheme generating a surplus. If that is so, considerations of Pareto Comparability do not permit us to say which scheme is preferable to which, even though each of them is preferable to the society without inequality.
Assuming [what is in fact false] that all of these problems with the Two Principles can be solved, we are left with the central question: Would a group of rationally self-interested individuals faced with the circumstances of justice necessarily coordinate on the Two Principles? [By the way, for those who are not up to speed on all of this, the "circumstances of justice" are these: First, that the members of the society have something to gain from cooperation, if they can only agree; and Second, that their pre-agreement assets and powers are sufficiently equal to motivate them to seek common agreement. This is all standard Social Contract stuff, straight out of Hume, Hobbes, etc.] In short, we are faced with a proposed theorem in Bargaining Theory.
As Rawls conceives the Bargaining Game, this is a multi-party game with full communication among players who are assumed to have cardinal utility functions invariant under affine transformations. Rawls never tells us how the game is played, nor does he even seem to think that he needs to do so. That is one of the odd things about his invocation of "theorems" in Game Theory. We are left to try to imagine for ourselves how the game would actually be played. I think we are meant to imagine something like this: The players sit in a circle in such a way that what each says is heard, and is known to be heard, by all. One player starts, and proposes a rule. [Say, the old Bill Cosby rule from early Sesame Street -- "All for one and everything for myself."] The next player either accepts the first player's rule, which of course she won't, or proposes a new rule. They go around the circle again and again, proposing foundational rules, until they succeed in making one complete circle during which everyone agrees to the same rule. That is then the solution to the game. Rawls says that after a bit "they will settle on [his] two principles." Is he right?
Alas, no. There are two problems, one procedural, the other substantive. The procedural problem is that the bargaining game has no termination rule. There is no reason for the first player ["Everything for myself"] ever to stop proposing that rule. There is presumably some very, very small, but not zero, probability that sooner or later [probably later] the rest of the players will get tired or drop the ball and agree. Since there are no costs in the game associated with continuing to play it, none of the players has any incentive to "be reasonable."
You can fix this glitch, of course, by imposing a time limit on the game. But that gives an asymmetrical advantage to the last player whose turn leaves just enough time to go around the circle once. When that moment is reached, the lucky player can propose a rule that makes everyone better off than having no rule at all, but advantages that player [such as "People with naturally curly hair get first dibs on all the nifty jobs," said by someone who has naturally curly hair]. Now, this is silly, right? But when you claim to be proving a theorem that is necessary, that is the sort of thing you have to take into account. This is an example of what I mean by wrapping yourself in the impressive language of Game Theory to make what you are doing sound impressive, while not actually engaging in Game Theoretic arguments. As Rawls says in "Justice as Fairness," "there remain certain details to be filled in, and various alternatives to be ruled out." Indeed.
The second problem is substantive. The two principles proposed by Rawls would not win unanimous agreement from the players. The problem is this: While the players are faced by the circumstances of justice, and hence are roughly comparable in their powers and endowments, there are nevertheless significant differences among them in natural talents and abilities. Some of them will fare much better than others in a society in which "the positions ... are open to all." What is more, despite these differences in native intelligence or ability, all of them know these facts. Now, if you are one of the most talented members of society, you are going to be in favor of a structure of inequality in which you know quite well that you will be one of those ending up in the favored positions. But if you are not one of the talented, you will conduct an expected utility calculation and come to the conclusion that you might be better off with a system in which the better paid jobs are distributed by lot to anyone who meets certain minimum requirements [for example, a college degree, even with a low GPA]. The imposition of minimum requirements will suffice to generate some Inequality Surplus, but the allocation of the favored jobs by lot will work to the advantage of the less talented members of the society, who will thus have a shot at the higher paid jobs, something they would never have if those jobs were allocated strictly on the basis of a fair competition. [As Senator Roman Hruska of Nebraska said in 1970, defending the Supreme Court nomination of G. Harrold Carswell from the charge of mediocrity, "There are a lot of mediocre judges and people and lawyers. They are entitled to a little representation, aren't they?"]
So Rawls' "theorem" is no theorem at all. I pointed this out in an article I published in The
Journal of Philosophy, and Jack's face fell when I told him about it at an annual APA meeting. But I went on to say that his subsequent essay, "Distributive Justice," changed his theory in a way that met all of my objections, and his face brightened. "Oh, that's all right then," he said before wandering off.