Topics Justice

Question According to libertarians, a fair price is simply whatever a buyer and a seller can agree on. Critics of libertarianism say this enables exploitation, because a person in desperate circumstances might have to agree to a low price if she is to sell anything at all (ie. sweatshop workers). If we reject the libertarian definition of a fair price, what other metric can we use to determine whether a price is fair?

Accepted:
January 4, 2011

Comments

In first approximation, the fair price is the one that would emerge in a well-structured open market if the existing distribution of socio-economic positions were replaced by the one that would exist in the absence of historical wrongs under just social institutions (leaving all else -- and especially the current stage of technological and economic development -- constant).

This answer accepts the libertarian position for the special case of just social institutions but rejects it for conditions of injustice. Stated in this way, most libertarians would agree. They would agree, for example, that transactions in a feudal society (which leaves landless persons no choice but to subject themselves to the authority of a landlord) do not establish fair prices even when buyer and seller agree. Still, libertarians, Rawlsians, socialists, etc., have quite diverse views about what just social institutions would be like. So, while they can all formally accept the answer I have given, they will not thereby be led to the same fair price.

Many libertarians criticize our society for having too much government. According to them, a just society would be one in which the state does not get into education, health-care, social security, and the like, but confines itself to maintaining security through a military and a criminal justice system. In such a libertarian society, inequalities of income and wealth would be much higher than they are in ours because inequalities would accumulate over generations as the children of poor parents cannot even obtain basic health care and basic education. There would then be ample supply of menial labor, and the wages for such labor would be much lower than they actually are in the US. By combining my answer with such a libertarian theory, we thus reach the conclusion that the price for menial labor in the US today is far above what a fair price would be.

A Rawlsian would reach the opposite conclusion. If US citizens had roughly equal opportunities to influence the political process (in Rawls's language: if the fair value of the political liberties were maintained) and if the socio-economic position of the poor were raised as high as is feasible (in Rawls's words: if the Difference Principle were satisfied), then disparities in social starting positions would be much narrower, the supply of menial labor much smaller and the wages for such work substantially higher than they are. So, to avoid taking advantage of injustice, you might have to pay more for menial labor than the going market price (if you subscribe to Rawls's theory of social justice).

Given the legacies of colonialism, slavery, and genocide, pretty much any theory would lead to the conclusion that the price of labor in the poor countries is unfairly low. Some libertarian theories would disagree, however, on the ground that similarly extreme inequalities would have evolved under libertarian global institutional arrangements even if there had never been any force or fraud. Such libertarians would then accept as fair the very low wages for sweatshop work. But they would also acknowledge that grave historical wrongs have played a crucial role in placing many sweatshop workers in a situation where such work is their best option as well as in placing others into affluent conditions with abundant opportunities. These libertarians would then say that, even though the current wages for sweatshop labor are roughly fair, the historical selection of those compelled to do this sort of work is nonetheless unjustifiable.