While we are all capable of identifying unfairness at a local level, i.e. the guy on the next desk is getting paid more than you for doing the same job, in economics more distant and general concepts of fairness are harder to pin down. In some ways, concepts of fairness do not sit comfortably within the subject of economics, as fairness is usually considered a moral judgment which has to be subjectively made by a person or group, whereas economics is the study of a mostly autonomous system which mechanically manages and responds to human economic needs and economic actions. Usually measures of fairness in economics have to resort to level playing field type concepts, which focus on fairness consisting of an absence of distortion or advantage, rather than being about equal outcomes. The famous right wing economist Friedrich Hayek did as much as any one to popularize these concepts, and in his book, Law Legislation and Liberty, he also has a take on why we crave fairness / social justice, and how this craving might even be dangerous!

“Since only situations which have been created by human will can be called just or unjust, the particulars of a spontaneous order cannot be just or unjust: if it is not the intended or foreseen result of somebody's action that A should have much and B little, this cannot be called just or unjust. We shall see that what is called 'social' or 'distributive' justice is indeed meaningless within a spontaneous order and has meaning only within an organization.” ^p.199-200

“A thousand years of vain efforts to discover substantively just prices or wages were abandoned and the late schoolmen recognized them to be empty formulae and taught instead that the prices determined by just conduct of the parties in the market, i.e. the competitive prices arrived at without fraud, monopoly and violence, were all that justice required.” ^p.237

“The futile medieval search for the just price and just wage, finally abandoned when it was recognized that only that natural price could be regarded as just which would be arrived at in a competitive market … Nearly a century of endeavours by public spirited men and women in many parts of the world to discover principles by which just wage rates could be determined have, as more and more of them acknowledged, produced not a single rule which would do this.” ^p.238

“At a time when the great majority are employed in organizations and have little opportunity to learn the morals of the market, their intuitive craving for more humane and personal morals corresponding to their inherited instincts is quite likely to destroy the Open Society. … unreflected natural emotions deeply grounded on millennia of life in the small horde, leads thus directly to the demand for a socialist society in which authority ensures that visible social justice is done in a manner which gratifies natural emotions.” ^p.304

Another famous right wing economist, Milton Freidman, in his book, Free to Choose also argues that it is competition and choice that are the best drivers of fairness in economic relations:

“A free society releases the energies and abilities of people to pursue their own objectives. … It does not prevent some people from achieving positions of privilege, but so long as freedom is maintained, it prevents those positions of privilege from becoming institutionalized; they are subject to continued attack by other, ambitious people.” ^p.148

“The consumer is protected from being exploited by one seller by the existence of another seller from whom he can buy and who is eager to sell to him. Alternative sources of supply protect the consumer far more effectively than all the Ralph Naders of the world.” ^p.226

In economics, the labour market provides an incredibly complex instance where fairness issues get created and (kind of) resolved continuously. As Friedman tells us above, the main mode of resolution in the labour market is choice: if a person thinks he or she is underpaid they can change jobs. If an employer believes the same labour can be attained for less, they restructure, outsource or offshore. But the reference point for making these fairness judgements is the going market prices of the factors in question, not a higher concept of fairness. However, this free choice driven model of the labour market without qualification is in danger of being overly simplistic, and things get more complicated when one or both sides has sunken non-transferable costs into the relationship, or when one or both sides attains a monopoly strangle hold over the choice mechanism.

For example our current junior doctors dispute involves these monopoly and sunken cost issues in spades. The doctors have sunken years of hard study into their careers, and are at the mercy of a monopoly employer whom can change the relative attractiveness of their vocation at a stroke. Likewise, the doctors are capable of organizing to strike, knowing that their labour is particularly urgent and irreplaceable. To an economist, the debate becomes: are the government trying to capture the short term advantage of doctors having already sunken the costs of years of study, knowing they are unable to switch professions easily, or are the doctors stuck in a pre recession mindset, where wages are high and NHS spending generous? I stress that regarding this dispute, I do not know all the details and cannot answer as to what is fair. But it is possible none the less to take heed of the two giants of economics above and ask a couple of penetrating questions which could shed a bit of light on the issue:

1. In hindsight, would some doctors have made a different career choice due to the changes the government is making, or, even with the changes, does the profession still compare favourably to their alternatives at that time?
2. Will the governments new terms and conditions result in a lack of suitable high calibre (and that is an important qualification) undergraduates wishing to become doctors, or is the profession like a cartel, with many capable individuals prevented from entering and rewards held high?

I do not know the answers to these questions and have no opinion, but what the questions have in common is that they are trying to reveal the free choice mechanism from behind the sunken costs and monopoly issues that distort it. Again a concept of economic fairness has to defer to supply and demand concepts which have choice operating at their core, although now the choice factor is more theoretical in that we look for a one step removed proxy for it. There are some who may rail against these supply and demand concepts being employed by the dismal, cold hearted economists to settle such complex moral arguments, and there probably are other considerations important within the debate. … But challenge them for an alternative rational system of 'fairly' setting wage rates, and you quickly realise that deferring to these free choice concepts, although they are imperfect, are often the best guidance we can find to settle these kind of ongoing conflicts of interest.