Desert in the Market – The Case of Adam Smith

Abstract

The question of justice in the market has often been asked in terms of the notion of desert: can one say that (labour) markets give people what they deserve? While this idea has been criticized both from the right (Hayek, Nozick) and from the left (Rawls, Barry), it is very much alive in public discourse, and has recently been revived in political philosophy (Miller, Honneth). This paper, which combines history of economic thought with systematic reflection, analyses the applicability of the notion of desert to markets. It argues that in the writings of Adam Smith, the ‘father’ of economics, the market rewards certain virtues like honesty, probity and industry, while other virtues are rewarded in other spheres of the social world. The market can reward these virtues because under ideal circumstances the price mechanism resembles the process by which moral judgments are formed from the point of view of an “impartial spectator.” Market outcomes that result from these virtues can thus be called deserved. This is an aspect of the fact that for Smith the market society is a natural order created by a benevolent deity – if this system punished vice instead of virtue, it could not be considered just, and its author could not be seen as benevolent. But when analyzing Smith’s account more closely, one can see that the reward of what one might call the “bourgeois virtues” in the market depends on a number of structural assumptions. In particular, these concern the flexibility of human capital and the absence of imbalances of power. Although Smith describes perfectly “free” markets in which the market price “gravitates” towards the natural price, he is aware that these problems affect the equity of the market process and disadvantage the workers vis-a-vis the employers.This shows that it is problematic to apply the notion of desert to the contemporary economic world. But this concept is nevertheless useful for reflecting on the ways in which economic systems reward certain kinds of behaviour and punish others, and thus allows us to compare the character traits that are rewarded in the market with those we value from a moral point of view. It can thus serve as a kind of “regulatory ideal” about how the frameworks that surround markets should be structured.