A debate with a long history
Social justice and merit are ideas in conflict, and the conflict translates today (fall 2012) into a passionate political debate. These ideas are in conflict because they provide a very different criterion to decide a fundamental issue: what is a fair society.
Take the formulation given by Rawls of the idea of Justice. He builds on the utilitarian tradition and in particular on Harsanyi's idea of a social contract stipulated behind the veil of ignorance. Individuals have to agree on a fair social arrangement, but they have to do so before they know the place they will occupy on the society. Being averse to risk, they will naturally try to avoid social rules that allow or favor social outcomes with very large differences across individuals. If the risk aversion is moderate, then there is a genuine trade-off between fairness of the allocation and its effect on the size of the social pie. Individuals might be willing to accept a more unequal prospective allocation (keeping in mind that they might be at the short end of that allocation) in exchange for a larger overall size of the social product, because they might be among the lucky ones. With a large degree of risk aversion, which is implicit in Rawls, only changes in the allocation that improve the worst case (the lowest personal outcome) can be preferred. Nothing in this view links fairness of outcome with the individual contribution.
In contrast with the idea that fair social arrangement is what one would agree upon if he or she had to decide behind the veil of ignorance, is the idea of justice as desert. This idea has a long tradition, going back to the maxim on the homo faber by Appius Claudius Caecus. A systematic treatment is the Lockean idea that one's labor provides the justification for the property to its fruits.
In the philosophical tradition, the necessary condition for merit is that someone deserves an outcome if he is responsible for its realization.
Current experimental research
So the questions being debated are: is merit a justification for a difference in outcomes? And even prior to this, is merit justified? Can one reasonably say that he can isolate his individual contribution, and claim his right to its outcomes, from the general contribution that society makes to everyone's activity? These are from the philosophical point of view the positions in contrast. It is an impasse: it has a long, glorious tradition, but it is an impasse. Current experimental and neuro-economic research tries to put the contrast between the two principles on firmer and more constructive grounds, by exploring the psychological, both cognitive and emotional, foundations. While it would be good to present a unified survey on these recent developments, I will focus here on what I have done.
Part of my research is within this recent trend, and centers on the contrast between justice and merit using experimental methods. A simple exposition of the main ideas, and an experimental test, is in a paper that shows Causes of social reward differences encoded in human brain. In that paper we study how individuals respond to the comparison between their outcome and the outcomes of others, and how this comparison is affected by the reason of the difference, namely whether this is due to skill or luck. Before we go into the details, a premise is necessary.
Regret and Envy
The starting point is the analysis of a basic emotion, regret, and another (envy) which I think are closely related. What is the link between the two? Regret is a counterfactual emotion: it codes the aversive response we have when we compare the outcome of the action we chose with the better outcome of an action we did not choose. It has an important role in teaching us how to behave in choices under uncertainty, because it makes us consider potential beneficial switches from our current choices to different ones. My view is that envy has a similar role of counterfactual emotion. The only difference from this point of view between regret and envy is that in envy we make a comparison between the outcome of the action we chose and the outcome of an action that someone else chose, and we could have chosen.
However, envy has an additional, social, component: an outcome lower than the outcome of our neighbor shows (to us and to all who are watching) that we are losing ground in the social race. So, we can predict that the behavioral, emotional, and brain response to envy is stronger everything else being equal, than to regret. A measure of how much stronger this response is will give us a measure of how strong the social motivation is. Our experiments confirm this hypothesis. First of all, brain response in fMRI studies confirm the hypothesis that envy and regret are related, because the regions processing the response in the two cases are very similar. But in all measures (reported subjective ratings, skin conductance, and BOLD response in fMRI studies) the response to envy is stronger than the response to regret. This view, and a summary of some of the experimental results that support the conjecture, are presented in the paper showing how Medial prefrontal cortex and striatum mediate the influence of social comparison on the decision process. Related findings are also in this paper and this paper). A review of the theory and the experiments, and a survey of related literature, are presented here and here. There is also a formal axiomatic model (presented here) that gives the analysis the sound foundation of modern decision theory. So, in evaluating our outcomes and the outcomes of others, both the counter-factual factor (common to regret) and the monitoring of social ranking matter.
One may wonder whether people respond differently also because the source of the outcome inequality is different. The theory of signaling provides us with a simple and clear answer. Differences in outcome may signal other, underlying differences that are important depending on whether others are doing better because of skill and effort, or because of luck. In the latter case, there is very little information being conveyed by the outcomes. If luck decides, you lose today but you might win tomorrow, and social ranking is not permanently affected. Instead, if skill decides, then if you lost today we all now know that you are more likely to lose tomorrow as well. The consequences on social ranking are considerably worse. The theories of envy and regret that we have presented, together with signaling theory, predict a stronger response after an outcome difference is observed when this is due to skill than when it is due to luck.
Skill and luck
We can now go back to our discussion of the paper dealing with social justice and merit. There we report results of an experiment in which subjects play against the computer in a skill game and in a luck game. The luck game only involves dumb luck: subjects have to guess as well as they can the random choice of a number made by a computer. The skill game requires attention, and brain power: subjects have to beat the computer in an alternate move game, and we know from earlier studies that performance in this game is highly correlated with IQ. Three subjects take part in the experiment, and they all do their best in the two games over a sequence of rounds. We make sure of that by providing adequate financial incentives for good performance. After each round they could see their score and the score of the others in each of the two games, and evaluate the difference between their outcomes and the outcomes of others. They also have the opportunity to do something about the difference, by reducing if they wanted the score of the others. They could, in a way, tax the income of others to reduce (or increase) the inequality of outcomes. We (the experimenters) can observe what they do and the brain activity associated with the response to observing the relative outcomes as well as their decision to subtract score from others.
What we find confirms our predictions. The inclination to subtract from the others’ score is, naturally enough, stronger as the difference becomes larger. However, the way in which the difference affects behavior and brain responses depends on the reason for the difference, proving that the social perception of merit is widespread and powerful. Subtracting from others when the superior outcome is due to luck is considered admissible, so for a given difference in outcome, subtracting is more likely to occur, and larger in size, in luck than in skill games. But a more sizable, and more unfavorable difference carries more weight in the minds of subjects, because as we noted it signals a more permanent and therefore more important difference from others. So, the probability of subtracting and the amount subtracted increase more with this difference in skill than in luck games. The same happens for the brain response (in the Orbitofrontal Cortex): again stronger in skill games. The strength of this response influences the propensity to subtract, showing that the brain response has practical implications.
All the contract theorists were not speculating how in some imaginary past people actually agreed on a social arrangement. They invited us to perform a thought experiment, and argued that, if we were asked to take that imaginary decision, and being honest in our revelations, we would then agree on the social compact that they propose. This criterion is also used in the utilitarian tradition and is explicit in Rawls. He sets up the thought experiment, and writes its basic rule: ``You have to abstract from your present condition, and imagine what you would agree upon in this case, if you only cared about your expected welfare''.
The recent experimental research is putting this introspective exercise, this thought experiment, on the firmer grounds of a controlled laboratory experiment. We have a lot to learn from this.