The only things I know about basketball are that Wilt Chamberlain was seven feet tall and that he scored a hundred points when he led the Philadelphia Warriors to victory over the New York Knicks in 1962. I know these facts because Chamberlain is a central figure in the seminal work Anarchy, State and Utopia by the American political philosopher Robert Nozick.
Nozick invites us to imagine a world that we think is perfectly just. But then Chamberlain appears, and we all have the opportunity to watch him play. Chamberlain insists that he will only take to the court if everyone puts 25c in a special box marked “for Wilt Chamberlain”. Over a season, a million fans consider 25 cents a small price to pay for this pleasure, and so his box contains a quarter of a million dollars. The fans who put their money in Chamberlain’s box are happier, Chamberlain is richer, and people who are not interested in basketball are in the same position as before. If the distribution before Chamberlain was just, how can you dispute the justice of the distribution after Chamberlain?
There are some practical problems about this story, but these do not concern great philosophers. Nozick wishes to argue that justice can never be defined by reference to the distribution of outcomes – which is what those who present egalitarian arguments try to do. Any such just outcome could, and would, be upset by voluntary transactions whose effect might be inegalitarian but which left everyone better off. Traders, celebrities and business people might struggle with Nozick’s philosophy but they love his conclusion. He offers a principled rationale for the claim that the outcome of a market process is not only efficient but just. Fairness should be judged by access to opportunity, not by the perceived fairness of the result.
Perhaps there is some resemblance between the fans who willingly gave their quarters to Chamberlain and the crowds that sell out every Coldplay concert or the enthusiasts, waiting outside the Apple store as it opens, and have made that company the most valuable in the world. But if you placed a box outside the headquarters of Goldman Sachs labelled “for Lloyd Blankfein”, you would probably not find much in it at the end of the day.
Generalisation of the argument requires that the chain of voluntary transactions which leads to the award of a bonus to the chief executive is essentially identical to the single voluntary transaction that passes a coin to Chamberlain.
The highwayman who offers “your money or your life” leaves you free to choose – in a sense. There is a spectrum, not a sharp distinction, between free exchange and coercion. Transactions in real markets are often characterised by dominant positions and imperfect information. It is not hard to see a difference between enthusiastic fans placing quarters in Chamberlain’s box and sales people pushing to their clients the mortgage-backed securities John Paulson wished to short.
And again, problems arise when people voluntarily hand over money that is not their own. John Kenneth Galbraith once described executive pay as a warm personal gesture by the beneficiary to himself. In today’s world of remuneration committees, it is more often a warm personal gesture by friends to each other.
Most people share Nozick’s intuition that process and rationale, as well as outcome, are relevant to our judgment of the fairness of income distribution. We are less grudging of the riches of successful entrepreneurs and talented sports people than the wealth of heirs and kleptocrats. But most people also have a well-founded intuition that, when it comes to bankers’ bonuses, an inquiry into process and rationale does not make them any more defensible.
And what of the real Chamberlain? Nozick did not pluck the figure of $250,000 out of the air: it was the amount the owner of the Los Angeles Lakers paid to attract Chamberlain from Philadelphia.
It is a modest sum, by modern standards, because the National Basketball Association operated – and still does, though less effectively – a cartel to hold down wages and restrict competition between clubs. If you want to understand income distribution, look not just to the talent or the market, but to the power structure that controls them both.