Rewards and returns in a free market economy
Topic: Society
Elizabeth Anderson has an interesting post that suggests that the income or returns that people earn in a free market economy does not necessarily constitute a reward for some virtues possessed by these people. Rather, the returns offered in a free market economy serve only as signals to direct people to productive activities. The corollary is that people cannot always justifiably claim to deserve their income.

Excerpt:

The claim "I deserve my income," as applied to an individual's pretax income in free market economies, has considerable intuitive force... But...they are unjustified...

... However virtuous they were, by whatever standard of virtue one can name, individuals cannot count on their virtue being rewarded in the free market. For the function of the market isn't to reward people for past good behavior. It's to direct them toward producing for current demand, regardless of what they did in the past.

This isn't to say that virtue makes no difference to what returns one may expect for one's productive contributions. The exercise of prudence and foresight in laying out one's production and investment plans, and diligence in carrying them out, generally improves one's odds. But sheer dumb luck is also, ineradicably, a prominent factor determining free market returns. And nobody deserves what comes to them by sheer luck.

The ultimate aim of her post is to make a case for tax-funded social insurance, although by her own admission, this post by itself cannot clinch the argument. Her post suggests that the individual may not have deserved his income, but not necessarily that any part of that income should be turned over to the government for redistribution.

Her post drew a fair bit of criticism in the comments section. This is not surprising, as her end objective -- tax-funded social insurance -- is transparent. Conservatives and libertarians are unlikely to agree to it. Some even criticised her for arguing for social insurance, despite her explicitly saying that the post, by itself, is not intended to do so.

However, regardless of whether her end objective proves justifiable or not, I think Anderson's point regarding the function of return in a free market is a good one: It is a signal of desirable economic activity, and not necessarily a reward for past virtues.