Understanding Fairness

Introduction
We naturally appeal to fairness to avoid or resolve conflict. Unfortunately when conflict emerges it is often difficult for adversaries to agree on what is actually fair. We often hear the complaint "But that's not fair!" Why is this? This course explores various concepts of fairness and helps the student become aware of the several forms that we consider fair.

Objectives
The objectives of this course are to:

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 * Define the concept of fairness,
 * Understand our inherent sense of fairness,
 * Demonstrate ambiguity inherent in our concepts of fairness,
 * Identify various forms of fairness,
 * Become aware of our own bias in suggesting what is fair when negotiating or resolving conflict,
 * Explore solutions that avoid bias when advocating for fairness.

lbeaumont The course contains many hyperlinks to further information. Use your judgment and these link following guidelines to decide when to follow a link, and when to skip over it. This course is part of the Applied Wisdom Curriculum.

Origins of Fairness
Researcher Frans de Waal studies moral behavior in animals. Collaborating with Dr. Sarah Brosnan they conducted a famous experiment that demonstrated capuchin monkeys rejecting unequal pay. In the experiment two capuchins were caged side by side. The first was given the simple task of handing a small rock to the experimenter. For completing the task the first capuchin was rewarded with a slice of cucumber and seemed satisfied. The second capuchin was then given the same task, and rewarded with a grape. Capuchins find grapes much tastier than cucumber slices. When the task was repeated and the first capuchin rewarded with the cucumber slice, the capuchin immediately rejected this unfair reward by throwing it back at the researcher. You may enjoy seeing video of the experiment in the TED talk “Moral Behavior in Animals”, Frans de Wall, filmed November 2011.

Apparently fairness demands equal pay for equal work, at least for capuchins, and perhaps even for humans!

What is Fair?
Dictionary definitions of “fair” highlight freedom from bias, dishonesty, or injustice. How is this concept applied? Is it sufficient for the rules of the game to be fair, or must the outcome of the process provide each person with their fair share? Is an unfair outcome evidence of unfair rules?

The 2009 US Supreme Court case Ricci v. DeStefano provides an opportunity to explore the concept of fairness. In this case eighteen New Haven Connecticut city firefighters, seventeen of whom were white and one of whom was Hispanic, brought suit under Title VII of the Civil Rights Act of 1964 after they had passed the test for promotions to management positions and the city declined to promote them. New Haven officials invalidated the test results because none of the black firefighters scored high enough to be considered for the positions. Because all of the applicants took the same test, the procedure used to identify the best candidates was fair. However, because the outcome of the process resulted in disparate impact to the black firefighters, the distribution of rewards—being chosen for the job—was unfair. It was argued that the blacks did not get their fair share. The case highlights a natural tension between the disparate-treatment and disparate-impact interpretations of the law.

Courts differed in their decisions on this case. The district court ruled in favor of the city, indicating the disparate-impact interpretation prevailed. The second circuit panel upheld that decision on appeal. However, the Supreme Court ruled in favor the defendants, finding there was no disparate-treatment and rejecting the disparate-impact argument in this case.

Decisions on how to distribute the September 11th Victim Compensation Fund highlight difficulties in understanding the concept of a “fair share”. Attorney Kenneth Feinburg became responsible for making the decisions on how much each family of a victim would receive from the $7 billion fund created to compensate the families of the victims of the 9/11 terrorist attacks. This highlights the tension between proportional distribution and equal distribution alternatives. Distributing the same amount to each family would provide an equal distribution of the funds. However, there are good arguments for using a proportional distribution, using various bases for computing the proportions.

Here are some alternatives:
 * larger families get the larger share because there are more people impacted and more people to divide the funds among,
 * Younger people get larger shares, because they will be living longer after the tragedy,
 * Distribute shares in proportion to the life earnings lost by person who died in the tragedy.

Proportional distribution based on lost earnings was the primary alternative chosen. A stumbling block to settlements was the fact that many of the World Trade Center victims were highly compensated financial professionals. Families of these victims felt the compensation offers were too low, and, had a court considered their case on an individual basis, they would have been awarded much higher amounts. This concern had to be balanced against the time, complications, and risks of pursuing an individual case, and the real possibility that the airlines and their insurers could be bankrupted before being able to pay the claim.

Three Forms of Fairness
These cases provide examples of what Johnathan Haidt describes as three forms of fairness. These are:

Procedural Fairness—Playing by the same rules—are honest, open and impartial procedures used to decide who got what?

and

Distributive Fairness—Does everyone get what they deserve? This has two interpretations: The New Haven firefighters were arguing for procedural fairness over distributive fairness. The families of the 9/11 victims were arguing for various forms of distributive fairness, and various interpretations of proportionality.
 * Equality—Equal outcomes, Equality as a result, everyone gets the same reward.
 * Proportionality—Fair share, based on effort expended, impact suffered, or some other criteria.

Fair Tax Levies
Politicians, tax payers, free riders, and revenue beneficiaries argue endlessly over the fairness of tax levies. Tax laws have become very complicated, and the need for and use of revenue collected is hotly debated. Here we will limit discussion to federal income tax rates for individuals in the United States. Marginal tax rates currently range from 10% for individuals with yearly taxable income below $9,275, to 39% for those with a single taxable income exceeding $415,051. Effective tax rates are typically lower than marginal rates due to various deductions, and range from zero for those with lower incomes to 20.1% for the top 1% of the population. Because the tax rate increases as the taxable amount increases, this is a progressive tax.

Is this progressive tax levy fair? Since every person is subjected to the same tax laws, on the surface it appears to be procedurally fair. But the tax law is very complicated, it offers many deductions for various reasons and exempts certain types of entities from paying taxes. Advocacy groups are able to influence the tax code, by lobbying legislators for example, to gain an advantage. Because individuals rarely have the resources required to influence tax laws, the creation of tax laws is not procedurally fair. Uniformly applying laws created under a procedurally unfair process leads to a procedurally unfair result.

Is the resulting distribution of taxes fair? Because individuals who earn more income pay more taxes, the outcomes (in terms of the total taxes paid) are not equal. Because the tax is progressive, the tax paid is not proportional to the income earned; it is more than would be proportional under a flat tax. What happens if we look at the distribution of money retained after paying tax rather than the tax levy itself? Under today’s progressive tax plan the amount retained increases as the amount earned increases. Tax rates would have to become much more steeply progressive to result in equal amounts retained regardless of the amount earned.

Arguing for or against any particular tax plan on the basis of fairness seems unable to provide a clear resolution of the many issues typically raised. It can be coherently argued that the system is or is not procedurally fair. It can be coherently argued that any particular plan results in unfair distributions of the tax burden, or of the retained income. Perhaps another viewpoint can provide better insight.

Assignment

 * 1) Choose some topic related to the distribution of wealth to study for this assignment. This might be wealth concentration, economic inequality, progressive tax, wealth taxes, inheritance and estate taxes, old money, philanthropy, universal basic income, or some other related topic
 * 2) Read the essay /Luck, Land, and Legacy/.
 * 3) Propose a policy position related to your chosen distribution of wealth topic that you believe is fair.

Deep Pragmatism
Eighteenth century philosopher Jeremy Bentham and his successor John Stuart Mill introduced the utilitarian philosophy. Jeremy Bentham's famous formulation of utilitarianism is known as the “greatest-happiness principle”. It holds that one must always act so as to produce the greatest aggregate happiness among all sentient beings, within reason. In his recently published book Moral Tribes: Emotion, Reason, and the Gap Between Us and Them, Joshua Green revived interest in this archaic philosophy by addressing the many objections that have been raised over the centuries. He suggests using the name “deep pragmatism”, and as he explains, deep pragmatism provides the answers to two essential questions: What really matters? and Who really matters? After an in-depth exploration of these questions, he provides this shorthand answer: “Happiness is what matters, and everyone’s happiness counts the same.”

It is important to recognize that the term “happiness” as it is used here is not a reference to cheap thrills, but is shorthand for a much deeper gratification, perhaps better called well-being, flourishing, or eudaimonia.

The connection between happiness and wealth is complex. The Easterlin Paradox holds that, "high incomes do correlate with happiness, but long term, increased income doesn't correlate with increased happiness." The economic law of diminishing marginal utility expresses an important element of the relationship. This law recognizes that a few more dollars is more useful to a low-income person than it is to a high-income individual. For example, to a low income person a modest amount of additional money may mean the vital difference between eating a nutritious meal and going hungry, whereas the same amount of additional money may only slightly increase the opulence or convenience available to a high-income person. A consequence of the law of diminishing marginal utility is that income distributions approaching equality theoretically maximize total utility. This is one basis for social justice arguments in favor of sharply progressive tax levies.

Using the principle of deep pragmatism rather than a variety of arguments based on fairness suggests that the most equitable tax would be a sharply progressive tax. Various claims of moral hazard and disincentives can raise objections to this approach.

Inequality
Appeals to “reduce inequality” and often to “reduce income inequality” are often made in pursuit of fairness.

In his book On Inequality, philosopher Harry Frankfurt notes that income equality can be achieved by arranging that all incomes are equally below the poverty line. He then states “Economic equality is not, as such, of any particular moral importance; and by the same token, economic inequality is not in itself morally objectionable.” He goes on to say “What is morally important is that each should have enough” and then introduces the “doctrine of sufficiency” where what is morally important is that everyone has enough money.

A Fair Price to Pay
Luck influences our lives in many ways. We often mistake chance results for outcomes due to skill or incompetence. Rich people may attribute their wealth to hard work, good character, and excellent judgement, while blaming poor people for being lazy and undeserving. The story “fair enough” suggests a thought experiment than can help us analyze the role luck plays in our lives, and what we might be willing to pay to ensure our ongoing good luck.

Assignment

 * 1) Read the story fair enough.
 * 2) List those factors in your life that resulted from luck. Consider gender, intelligence, talents, race, birth defects, genetic traits, birthplace, parental structure, family structure, inherited wealth, and other factors.
 * 3) For each of these factors, decide if you are satisfied with, dissatisfied with, or indifferent to the attributes you were born with.
 * 4) What, if anything, would you like to change?
 * 5) How much might you be willing to pay to keep your fortunate attributes?
 * 6) How much might you regard as fair compensation for continuing to live with your unfortunate characteristics?
 * 7) How would a basic income change your life?

Steps Toward a Fair Resolution
We can begin to assemble the various arguments explored above into an outline of steps that may result in a fair resolution of a dispute.
 * 1) Identify the nature of the conflict. What are the real interests of each part in the dispute? Is this about money, pride, utility, power, prestige, ideology, spite, humiliation, winning, survival, or something else? What is the real problem that needs to be solved?
 * 2) Explore alternatives based on each of the three forms of fairness: procedural, equal distribution, or proportional distribution. Examine reasons for and against each approach. Be explicit about what form of fairness is being analyzed at each stage of the dialogue. Recognize that procedural fairness is typically necessary, but not sufficient to ensure distributive fairness.
 * 3) If dialogue carried out in good faith becomes deadlocked because appeals to fairness have become circular, then a new criteria needs to be introduced. If a resolution cannot be arrived at based on appeals to some form of fairness, then use deep pragmatism to resolve the issue. Ask: What really matters? and Who really matters?
 * 4) Apply the principle that “Happiness is what matters, and everyone’s happiness counts the same.” Identify each stakeholder. Identify what happiness—understood as well-being or flourishing—means to each stakeholder in this case. Explore solutions based on this understanding.
 * 5) Test the fairness of various proposals being considered by offering stakeholders the hypothetical opportunity to change places with each of the other stakeholders. Ask each to describe the fairness of the resolution from this new vantage point. Assess the accuracy of these alternative viewpoint descriptions. This is an application of the golden rule.

Assignment

 * 1) Choose an issue from the “struggles for fairness” gallery, or some other fairness issue you would like to study for this assignment.
 * 2) Study the issue thoroughly enough to allow you to argue both for and against a variety of resolutions, based on various reasonable assessments of fairness.
 * 3) Follow the “Steps toward a fair resolution” described above to arrive at your proposed resolution.
 * 4) If you wish, change places (i.e. assume the role of another stakeholder to the issue) and repeat the previous step to arrive at your proposed resolution from this new point of view. Does the previously proposed solution still seem fair from this new viewpoint?