Institute for Policy Research, better known locally among restricted circles as IKD (Institut Kajian Dasar) organized a small forum on the New Economic Policy a couple of hours ago. As it turned out, the forum focused on the weaknesses of the New Economic Policy but throughout the forum, the most interesting point was raised by Dzulkefly Ahmad and later followed up by Khalid Jaafar.
Dzulkefly Ahmad, the director of PAS Research Centre, mentioned the phrase distributive justice. I quickly recognized this as another word for equitability. In my head, I was quick to point out that mainstream economics does not deal with equitability but rather, stresses on efficiency. Nevertheless, there is a mechanism to achieve a perceived efficient equitable point; the Second Fundamental Theorem of Welfare Economics provides for this. In layperson’s term, the theorem proves that any efficient outcome could be achieved through a lump-sum wealth redistribution. Through the new allocation of endowment, the new efficient outcome is attainable through market forces.
While I was thinking in technical term, Khalid Jaafar came up with a more meaningful question: who would be responsible for the redistribution of wealth?
My bias wants me to say the market. After deeper casual mental masturbation however, I am struggling to answer the question of how would or could the market reallocate individuals’ endowment?
The tougher questions are these: what is an economic efficient equitable outcome? Could the market recognize that efficient equitable outcome?
At 02:40, my eyes are heavy and my brain is shutting off.
Unlike me, all speakers — Rajah Rasiah of Universiti Malaya, Dzulkelfly Ahmad of PAS and Tony Pua of DAP — prefer the easier path which requires government intervention. That endowment reallocation is of course done through taxation.
7 replies on “[1261] Of distributive justice in free market”
Dear John,
I think you misread Wan Saiful’s statement. He said the same thing about equality of opportunity.
Well, I think the question should not be equality of outcomes, but equality of opportunities. In this case, I disagree with Wan Saiful – I think the government has a role to play in ensuring equality of opportunity by providing opportunities for those who do not have them.
I do not buy into this thinking about redistributive justice beyond the most fundamental things, e.g. the right to not starve to death. The most just outcome is that which arises when everyone has the same opportunities.
We really should hook up at some stage. Your thoughts are most interesting.
Oh no. Please do not get me wrong. When I said easier, I was really just being polite. Indeed, you are right about the wealth redistribution and I share your opinion.
And please not worry. IKD is pretty pro-market (though there seems to be a slant for “liberal islam”, which I find it slightly worrying) and it just wanted to have an discussion on economics. At least, that is how I take it.
I think discussions like this are healthy.
With regards to who would be responsible for redictribution of wealth, you said “all speakers … prefer the easier path which requires government intervention”.
I think government intervention is not the “easier path”. It is the wrong path. What we get when the state intervene is more inequality as the state would enrich itself and those around it.
I would argue that ‘redistribution’ to create equal outcomes is not necessary. There will always be inequality and that is reality. The market allows for all to participate in it, and benefit from it. But it doesn’t guarantee equality or redistribution. That is not at all bad.
There will always be rich and poor – otherwise one of Islam’s pillar (zakat) would be obsolete. The aim I think is not equaility of outcome, but equality of opportunity. People should have equal opportunity, and we should expect inequality of outcome.
By the way, I am getting even more worried by the fact that the Islamists in PAS are happily working with the socialists of DAP!!!
I am not questioning why some people prefer government intervention to market solution. The arguments for such action are pretty standard if one reads enough of economics. What I am questioning is how to do it through the market?
You might want help answer the question I posed if you know more about it.
But anyway, I have read most of his books since Globalization and Its Discontent. But it is good to know that you read Stiglitz too.
if you read making globalization work by joseph stiglitz, you might have better understanding why those people prefer government intervention