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I have always understood a (broadly speaking) capitalist, free market approach to economics to rest on the notion that a resource distribution is fair in light of how closely it correlates the resources an individual or firm receives to the value they contribute to the market. This value might be apparent and concrete, such as a good, service, loan, land utilization, labor, etc., or abstract, such as human attention, a vivid vision of a firm's future operations and role in the economy, liquidity, etc.

On the flip side, I have understood a (broadly speaking) socialist approach to economics to rest on the notion that a resource distribution is fair in light of how closely it correlates the resources an individual or firm receives to his/her/its need for such resources. For example, August Becker described "From each according to his ability, to each according to his needs" as "the basic principle of communism."

However, in order to ground normative claims related to the bourgeoisie/proletariat distinction, perhaps most notably the claim that the hierarchies they form and occupy in a capitalist economy are fundamentally unjust, socialists seem to make frequent use of the former notion of fairness, perhaps merely failing to recognize some of the categories listed above as legitimate value (claiming that CEOs, landlords, securities traders, etc., "contribute nothing to society"), but generally recognizing at least labor, goods, and services as legitimate things to correlate to the acquisition of economic resources. Whether or not you think this is a narrow minded analysis of what contributes to society, at the least it is an attempt to correlate resource distribution with contribution to society, as opposed to with need. Thus I am confused as to what notion of fairness a socialist economic theory actually rests upon.

Obviously, pretty much everyone agrees that a fair resource distribution is not automatically a good resource distribution. No one getting any resources is presumably fair, but not very good. The goodness of a resource distribution is thus a multivariable function of its fairness and some other consideration(s).

Does the socialist fundamentally disagree with the capitalist about what constitutes a fair resource distribution, or is the foundational notion of fairness agreed upon, with the socialist merely giving less weight than the capitalist to fairness relative to the other considerations that factor into crafting a viable resource distribution model?

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    Some links would greatly benefit your post in my opinion, because a fact without proof is just an opinion. Specifically I think here, “ socialists seem to make frequent use of the former notion of fairness, perhaps merely failing to recognize some of the categories listed above as legitimate value (claiming that CEOs, landlords, securities traders, etc., "contribute nothing to society")” would greatly benefit from a link or two. – Ekadh Singh Apr 26 at 19:34
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    Also, for me at least, “with the socialist merely giving less weight than the capitalist to fairness, relative to other variables of which the goodness of a resource distribution is comprised?” is somewhat confusing, can you please explain that to me? I also suggested an edit to your post, but might have accidentally changed the meaning of it, I do apologize if I did. – Ekadh Singh Apr 26 at 19:34
  • @EkadhSingh Is it clearer now? – user10478 Apr 26 at 19:46
  • the question is clearer now, thank you. I do wonder why it has the democratic socialism tag though, can you please explain that to me? – Ekadh Singh Apr 26 at 19:57
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    "Fairness" is a rationalization of the emergent behavior of the system, not an inherent property of it. The distribution of profits between wages and dividends is not related to the share of each factor that goes into production (labor is used up completely, machines and buildings only depreciate a little in value, so while initial capital investment is high, the amount that goes into each product is dwarfed by labor costs), so to justify capitalism, a different definition of "fairness" is required than the immediately obvious one. – Simon Richter Apr 27 at 10:53
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I think it is necessary to distinguish some points. Mostly definitions. They are somewhat simplified to show how they are applicable here. Capitalism: An economic system where those with money/material resources, called capital, control the means of production, the tools used to create things. Socialism: An economic system where the means of production are controlled by those who use them. Communism: A classless, stateless, moneyless society with the means of production owned by everyone.

I bring this up because socialism and communism are often conflated, including in the question, to a degree. Whilst many communists argue in favour of socialism as a transitory position, many socialists do not want communism. The reasons vary, some criticise it based off of moral critiques, some like the idea but consider it utopian and dangerous to attempt.

The quote about "to each, fom each" is specifically referring to what Marx called a "higher form" of communism, that is, one fully distinct from socialism where, thanks to advances in technology, the need for physical labour would be no more. Whether or not this is logistically possible, it is certainly very utopian. Marx claimed that in this society, people would still work, but for the benefit of society rather than themselves, and since work would then be a "creative and pleasurable" activity. The "according to his ability" part of the quote refers not, or at least not only, to working hard, but to working in such a way as to use ones full talent for the good of the community.

So with all that, we can actually draw three different ideas for fairness of distribution, in line with each of the economic systems. To call a capitalist system fair, one can say that resources should be distributed in line with wealth. If we are being cheeky, we could say that this means resources are distributed according to resources. Note that most advocates of capitalism would resent this formulation, but it is the one that most justifies capitalism. To call a socialist system fair, one can claim that wealth belonging to those who make it is fair and means belonging to those who use them is fair. This conceptualisation also has a couple of problems, as, at some point, means would likely have to be siezed or bought, and it relies on the definition of what socialism is "supposed" to be, not really applying to all, or indeed any, country that has called itself socialist. To call a communist society fair, again by the theoretical definition striven for, rather than those who have declared their country communist, fair would mean that all peoples needs are met, and everyone does what they can to meet everyones needs. This would mean some people giving vastly more than they get in absolute terms, however in proportion of need and skill, they would be equal.

Tl;dr: socialism is distinct from communism, but capitalism, socialism and communism can all be justified by different ideas of fairness.

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  • Would it be more accurate to say that on capitalism, resources should be distributed in line with wealth/resources loaned (simply owning wealth/resources doesn't contribute to society, but allowing others to borrow it often does)? – user10478 May 3 at 17:15
  • Even if so, this still seems too narrow, as the circular flow model, which I assume to be applicable to a capitalist economy, allows income to be counterbalanced by many things besides loans, including labor. Is it perhaps more accurate to say that socialism admits a subset of what capitalism admits as fair tradeoffs for income, or are the circular flow model and the U.S. economy too far away from an academic/conceptual model of capitalism to draw these conclusions? – user10478 May 3 at 17:19
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    "This conceptualisation also has a couple of problems, as, at some point, means would likely have to be siezed or bought," - this is about the transition to that system, not the system itself, right? – user253751 May 3 at 17:20
  • @user253751 To transition to it at a society-wide level, yeah. There are a lot of systems are reasonably called socialist, as well as some unreasonably so, and the criticisms of, say state-socialism, market-socialism and anarcho-socialism would all be different. – MegaCrow May 3 at 22:19
  • @user10478 Having power because you have money and having power because you loan money strike me as a difference in rhetoric, especially since in a market you have an impact by not acting. As for the academic model of capitalism, I have to ask which version? A lot of "introductory" stuff at school is simplified beyond both utility and distinction from other market systems. – MegaCrow May 3 at 22:35
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The fundamental principle of 'fairness' in Liberal society (for better or worse) is that a man should own that which he invests labor in. That goes straight back to John Locke in his "Two Treatises of Government". Locke was trying to establish property as a 'natural' right of human beings, such that unjustly removing property from someone was as morally objectionable as unjustly cutting off one of his limbs. The investment of labor was the lynchpin of the argument: in Locke's view, natural resources were free (and practically boundless), but the act of finding, extracting, and preparing the resource confers (inviolable) ownership on the one exerts those efforts.

Early — pre 19th century — Liberalism was geared towards the promotion and protection of what we would probably call these days the upper middle class. By that I mean merchants, traders, financiers, colonists, ship owners, early industrialists... Anyone with either a certain amount of wealth or property, or the means to acquire such, and who were thus subject to taxation and expropriation by the aristocracy at the aristocracy's whim. 'Fairness' in this context was predicated on freedom of wealthy, industrious commoners to retain what they have earned for themselves against the depredations of entitled nobles.

That being said, by the mid-19th century the power of the aristocracy had waned significantly, while this wealthy 'upper middle class' (hereafter the 'capitalist class') gained in power and status. At that point a number of theorists — culminating eventually in Marx's work — started pointing out that those rights specified in Liberal philosophies which had brought capitalists out of the shadow of the aristocracy and into power, were now being denied to the laboring classes. In brief, they noticed that someone who (say) works in a coal mine ought to get a share of the value of coal the mine produces proportional to the labor he has invested in mining, which he could then sell at market value. But instead, the miner invests labor, while receiving a paycheck worth only a fraction of what his labor produced. The mine-owner takes the entire output of the mine on the pretense that it is all a product of his own labor, and sells it for his own profit. The capitalist class effectively takes over the role of the old aristocracy: where the aristocracy exploited the labor of the wealthy commoners by taxing and expropriating their wealth, the capitalist class exploits the labor of poor commoners by taking the entire product of their labor and returning a pittance in the form of a wage. 'Fairness' in this socialist/Marxist frame, then, was predicated on the freedom of laborers to retain what they have rightfully earned as (inviolable) property through their labor.

So throughout the Liberal era, 'fairness' has always been judged by the rights of a man to properly enjoy the fruits of his own labor. All that changed over time was the issue of who was being unjustly expropriated. Marxists and capitalists do not disagree on the fundamentals of the matter; both Marxism and Capitalism are theories within the Liberal spectrum of philosophy. The disagreement is over which people have (inviolable) ownership over goods that are produced collectively. And that issue is nowhere near as black and white as either side tends to make it. A factory needs both owners and workers or it will never produce anything. The owners can rightly be said to invest labor in financing, building, managing, and equipping the factory; the workers can rightly be said to invest labor in making the factory run. The Marxist complaint has always been that capitalists (for a number of historical, social, and practical reasons) take too much for themselves.

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    "A factory needs both owners and workers or it will never produce anything." But the owners and workers don't have to be separate people for it to work. – JS Lavertu Apr 29 at 19:10
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    @JSLavertu: True; I"m a fan of worker-owned businesses. But division of labor does include the labor of planning and strategy; all the 'managerial' tasks. Even if there's no explicit owner, someone has to take over the tasks of maintaining the company. – Ted Wrigley Apr 29 at 19:16
  • This answer is interesting, but does not seem to account for the quote in the question,"From each according to his ability, to each according to his needs," which Wikipedia describes as "common within the socialist movement" and "the basic principle of communism," attributing the slogan to August Becker, Louis Blanc, Karl Marx, et al. This strikes me as a very different framework for analyzing fairness than the Liberal framework you've outlined. – user10478 Apr 29 at 19:20
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    @TedWrigley Absolutely, but I consider those tasks to also be labor. A manager can plan and strategize without owning the business, just as an owner can have no involvement with the business besides collecting dividents. – JS Lavertu Apr 29 at 19:56
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    Note that socialists would probably agree that managing a factory is labour and therefore deserves a share of the factory's profit, same as any other labour. The disagreement comes about when the owner receives additional money simply for having his name on the title deed. For example, the owner could pay a manager to manage the factory for him, and if the manager does 100% of the managing work and the owner still receives money, that is the money which is unfair. – user253751 May 3 at 17:22
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Does the socialist fundamentally disagree with the capitalist about what constitutes a fair resource distribution

This is a somewhat bad, black and white framing. I dare say there's no such thing as capitalist ideology, although I suppose if you take some "laissez faire" adherents, you could get such a dichotomy.

On the other hand you can find plenty of "left wing" economists who aren't exactly socialist (in the sense of Marxist), but who do worry about inequality and don't subscribe to "laissez faire". The typical criticism you find from them is something like the words of Amartya Sen:

An economy can be optimal in this [Pareto] sense even when some people are rolling in luxury and others are near starvation as long as the starvers cannot be made better off without cutting into the pleasures of the rich. If preventing the burning of Rome would have made Emperor Nero feel worse off, then letting him burn Rome would have been Pareto-optimal. In short, a society or an economy can be Pareto-­optimal and still be perfectly disgusting.

Piketty expressed similar views, albeit in less flamboyant terms

many allocations are Pareto-optimal, [but] some of them violate any reasonable view of equity; for example, the lassez-faire market equilibrium [...]

Or as Varian put it:

when Nozick describes a laissez-faire world, in which each agent is paid his "marginal product," and asks what is the role of a theory of justice here (pp. 82-83) we can well answer: in the determination of the initial endowment--for the market equilibrium is completely indeterminate until it has been specified who owns what in the beginning. [...]

Thus the laissez-faire economy described above generally will operate in an efficient manner; however, there is no other ethical content to this result. If, for example, the initial endowment gives one agent everything, the market equilibrium from this endowment will also give this agent everything. There is nothing just about that.

[...] when Nozick says, "From each as they choose, to each as they are chosen," we might well reply, "Fine, but how are the initial endowments of agents to be determined?"

(Emphasis in original.) Varian develops a more elaborate notion of wealth-fair allocation.

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    To which the laissz faire capitalist might well respond that (at least in most cases) the "starvers" can stop being starvers by simply changing their behavior, and doing so would also increase the pleasures of the rich. – jamesqf Apr 27 at 17:46
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    @jamesqf: not if they can't work at all, e.g. the crippled. On laissez-faire they should just die (unless they were born rich). – Fizz Apr 27 at 17:59
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    @Fizz: That's why I said "at least in most cases". And of course we can find many examples of "crippled" people making a decent living. – jamesqf Apr 28 at 4:52
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    @jamesqf The specific point in that quote was about there being a possible configuration of the economy that is Pareto optimal where some people are rich and others starving. I believe the point of that statement is that the starvers in this scenario can't "simply change their behaviour", or it wouldn't have reached Pareto optimality yet; it's a criticism of the concept of Pareto optimality as a condition to aim for. Your laissez faire capitalist response is addressing a completely different argument (one about people starving in the real world while others are rich). – Ben Apr 29 at 22:19
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    @Ben: My point was much more of an argument against the claim that such configurations are in fact Pareto optimal. That is, if simple behavior changes can improve the lot of the "starving" while not harming (or actually improving) the condition of the rich, then the state can hardly be said to be optimal. Of course, if I'm understanding the idea of Pareto optimality properly, it's inherently flawed, since it assumes a fixed amount of goods which are redistributed. But with most things in the real world, you can always produce more. – jamesqf Apr 30 at 16:18

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