When making a substantive judgement about the fairness of an allocation, various criteria can be applied. These can include measures of financial wellbeing, such as disparities in income or wealth between individuals. Alternatively, criteria can focus on non-monetary aspects, like differences in personal freedom within a strategic interaction, or variations in individual happiness resulting from the outcome.

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People's values regarding fairness differ, meaning there is no single, universally accepted standard for judging an allocation. These subjective values lead to different conclusions about what is fair. For example, some prioritize procedural justice, while others focus on substantive outcomes like the fulfillment of basic needs. Consequently, two individuals may assess the same situation differently, as the appropriate standard often depends on context and personal values. For instance, an equal distribution might seem fair initially, but learning about individuals' specific needs could justify applying a different standard of justice.

Subjectivity and Context-Dependency of Fairness Standards

To cite the ebook, use The CORE Econ Team 2023 The Economy 2.0: Microeconomics Open access e-text https://core-econ.org/the-economy/.

To cite a unit, use The CORE Econ Team 2023 The Economy 2.0: Microeconomics Open access e-text https://core-econ.org/the-economy/ Unit [unit number] (url).

CORE Econ - The Economy 2.0: Microeconomics

A scenario analogous to the ultimatum game involves two friends, An and Bai, who find \$100. If An, who picks it up, offers Bai only one cent, this is typically seen as unfair. However, this perception of fairness can change with more information. If it is revealed that An has just lost her job and is homeless, while Bai is financially secure, many would consider it fair for An to keep \$99.99. This demonstrates that judgments about the fairness of an outcome can be highly dependent on the individuals' circumstances.

Context-Dependent Fairness in Dividing a Windfall

Diverse Criteria for Substantive Fairness

This example illustrates how the choice of fairness criterion affects the evaluation of an outcome. If happiness is used as the standard for fairness, an unequal distribution of income may be considered just. For example, a person with a serious illness might require a much larger income than a healthy individual to achieve an equivalent level of life satisfaction or happiness. Therefore, providing them with more money could be seen as a fair allocation under this specific criterion.

Fairness, Happiness, and Income Disparity Due to Health Status

This activity prompts an individual to apply the principles of fairness to a real-world context. It involves selecting a society with which one is familiar and evaluating the fairness of its economic allocations based on various potential criteria.

Activity: Evaluating Fairness in a Familiar Society

One viewpoint on fairness holds that any level of inequality in an outcome is acceptable, provided that the 'rules of the game' or the procedures that led to it were fair and impartial. In this view, the justice of the process is the paramount concern, not the equality of the final distribution.

Procedural Fairness as the Sole Criterion for Justice

An alternative viewpoint judges an allocation's fairness based on its substance, considering it unfair if some individuals are seriously deprived of basic necessities while others enjoy luxuries. From this perspective, the outcome itself, particularly the disparity in meeting fundamental human needs, is the primary criterion for judging fairness.

Substantive Fairness Based on Basic Needs

John Rawls was an American philosopher who developed a specific methodology for clarifying arguments about values. His work provides a framework that can help individuals find common ground on contentious issues like fairness.

John Rawls (1921–2002)

No scientific field, including economics or philosophy, can definitively resolve disagreements that are based on personal or societal values. However, economics can play a crucial role in clarifying these disputes. It provides analytical tools and frameworks to understand the sources of disagreement, the consequences of different value-based choices, and the potential trade-offs involved when addressing normative concepts like fairness.

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