The market economy as a social system

To approach this subject, as it seems to be much related to instability ineconomies, it is useful, accordingly, to focus on society’s economic structure.Given that almost every country’s

The Market Economy

as a Social System

The Market Economy as a Social System

Hiroto Tsukada

The Market Economy

as a Social System

123

Hiroto Tsukada (emeritus)

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Reforming society is the social sciences’ raison d’être What is society? Society can

be considered to be a means by which human beings strive to create better lives.Humans are driven by the need to fulfill wants, such as the acquisition of people(for example, heterosexual families), materials (food, clothing, etc.), and humanrelations (for example, satisfactory cooperation in production) How to acquirepeople can be considered to be a personal issue and is not dealt with here.Therefore, it can be stated that humans need goods to live; in order to obtain them,humans cooperate In other words, human relationships emerge from the need toengage in cooperative activities to better fulfill needs, which leads to the creation ofsociety This type of cooperation is distributive behavior, i.e., the sharing of laborand the resultant products Through such methods, humans obtain satisfaction fromthe product and the cooperative relationships developed to obtain it The cumulativetotal of this satisfaction represents the degree of satisfaction with a human society,and its magnitude determines the necessity of social reform

This book studies the market economy as a social system Most countries todayhave economies that mix features of a market economy with those of a publiceconomy Market economies appearedfirst, and gradually, to complement them, thepublic economy emerged This book focuses on the market economy and its con-comitant basic rules and structures It asks how the market economy and society as

a whole function, what problems exist with its basic rules and structures, and howthese problems can be solved

Thus, this book deals with the basic structure and problems of the marketeconomy The natural place to start, then, is by asking the following question: what

is its basic structure? The fundamental task of a market economy is the productionand distribution of goods, i.e., the distribution of labor and its outcome or product.Here, we focus on the principles or rules underlying the distribution of productivefactors and products Later chapters identify fairness and kindness as beingimportant criteria in these underlying principles; hence, these aspects are the focus

of the discussion there Fairness and kindness are motives in the social dimension,and they seem to originate from deeper motives residing in the personal dimension,

v

namely, self-interest and human fellowship Fairness is related to self-interest, andkindness is related to human fellowship Thus, these elements are also addressed.The necessity of dealing with these deeper motives is amply demonstrated by thenumerous incidents of unstable economic fluctuation that many countries haveexperienced in recent years, which also raise questions regarding the wholestructure of society and our deeper motives for participating in society Oneexample of such instability is that experienced by Japan.1In the late 1990s, after aneconomic crisis in 1990–91 and an unprecedentedly long economic downturn in thefollowing years, serious dissatisfaction emerged regarding human relationships.The persistent economic depression and low rate of economic growth continuingthrough the late 2010s seemed to spur people to seek a new state of society Peopletoday seem to desire not only economic recovery but also a country in which theycould feel secure despite the changing economic and social environment undereconomic globalization and attendant problems for a welfare state, an example ofwhich is Japan’s decreasing and aging population that threatens the stability of thepension system in Japan.2

The Asian economic crisis occurred in the late 1990s, and in the late 2000s, mostcountries faced simultaneous recession originating from the US“subprime shock.”This global economic crisis caused widespread, serious dissatisfaction and anxiety.Despite the recent moderate economic improvements, with global economic change

as the backdrop, such discontent has not completely waned as evidenced by the

“99% vs 1%” movements in some countries Such continuing discontent andanxiety serve as evidence that the problem does not simply stem from short-termeconomic fluctuations but rather originates from instability inside society itself,probably much more on the distribution side, which therefore needs some kind ofrestructuring If we now live in such a period of substantial transition, we need totackle the problem from a broader perspective than ever because as the questionsraised until now indicate, the whole structure of our society itself, both the pro-duction part and the distribution part, is implicated in creating this situation andtherefore needs to be reconsidered

To approach this subject, as it seems to be much related to instability ineconomies, it is useful, accordingly, to focus on society’s economic structure.Given that almost every country’s society is centered on the market economymechanism, it will be useful to tackle this instability problem above byfirst askingthe following question: what is the structure of the market mechanism and its

1 Today, there seems to be substantial dissatisfaction with human relationships Let us take the example of Japan Dissatisfactions with cooperative relationships between humans have generally manifested as interpersonal hostile actions as in the case of bullying among children or in the antisocial behaviors of groups that even indulged in mass murder in recent decades To counter these problems, various social phenomena appeared, often in the form of words such as “fairness,”

“compassion,” and “real wealth.” They are words that have come to be widely discussed under the concept of “stable” growth since the 1970s in Japan, although they were invisible under high postwar growth However, once again, these words seem to threaten to disappear behind the voices

of “global competition,” with two decades of the twenty-first century having passed.

2 Tsukada, 2002, discusses such social pathological phenomena in US, UK, Japan, and Sweden.

related elements? Thus, this work aims to delineate the structure of the marketmechanism and therefore the related part of our society, its problems, and hope-fully, the solutions.

The relationship between efficiency and fairness is worth noting here.Competition among companies in the market, which is the fundamental driving force

of the market economy system, often accompanies economicfluctuation as tioned above And given that we will suffer the outcomes of this serious defect if wedare to adopt this system, there must be an overwhelming countervailing merit Thebasic function of the market mechanism is usually expected to be the efficientdistribution of labor and the fair distribution of products, the latter of which is animportant question of this book Efficiency in production is a substantial factor thatcan even restructure society itself, such as from a feudal type to a market mechanismone But in restructuring society, fairness in production is also important In theaforementioned transition from a feudal to a market mechanism economic system,the most important factor for the revolutionary change was, probably, the unfairnessthat people felt within society and particularly class structure To review our societyfrom such a perspective will be—even when given the overall dissatisfactionregarding income distribution worldwide—more useful today

men-Addressing social instability today from such a perspective is the subject of thisbook For this goal, we try to grasp the main“framework” or “basic structure” ofeconomy and society Here using the words of economy and society togetherrepresents,first, the importance of economy or economic cooperation Because itsupports our physical existence itself, it is the most important part of society and sodescribing these two words together shows the understanding that in dealing withthe large-scale problems described above, we should always consider the economy

to be the core of society We may use the word“socioeconomy” for economy andsociety when necessary

This book thus places emphasis on “wholeness.” When we encounter suchlarge-scale problems as the“health,” “fairness,” and “efficiency” of a society, asdescribed above, we need to hold a broad enough view, a bird’s-eye view, to tacklethem Given that human society is initially formed by individuals seeking their owninterest in light of the efficiency obtained from cooperative production, to maintainthis cooperation, we need consensus on cooperative manners, e.g., what justice is orhow human fellowship works, particularly in the distribution of products Whentwo peoplefind an apple on a tree or when hundreds of people are set to divide thesum total of their sales, they are often eager to obtain a larger portion regardless ofother people This can be termed self-interest, which here only means a situationwhere people try to obtain as much as possible regardless of other people However,this definition does not consider for whom or what purpose a person wishes toacquire this larger portion, i.e., it does not encompass motivation They may want toeat the apple personally or give it to their children or poor neighbors But here, as afirst approach, it is supposed that irrespective of the circumstances, they think theyneed to take the maximum share, believing in the significance and probably thesuperiority of their own motivation and utility when compared with those of otherpeople This question of“for whom” is a very important question, and in this book,

is discussed in Chap 9, with reference to key concepts such as self-interest andhuman fellowship In considering those aspects, the spotlight will be placed on howthese two motives function in both production and distribution environments, wheresuch key words as justice, fairness, and kindness are dealt with.

Of course I owe much to ancient and contemporary scholars Here, I would like

to refer to John Rawls Rawls emphasized that a critical factor underlying thecooperation in every society lies in the distributive rules of products and income.Posing this distributive question as a core problem in social rules should be highlyevaluated He described it from the viewpoint of a confrontation between utilitar-ianism and social contract theory His theory appealed to many people and drew alarge number of people into this researchfield

One thing to note here is that utilitarianism is a rule of conduct that proposescertain modes of conduct; however, social contract theory is in its most generalform a way of thinking about how to form a society Being common at this point,various forms can be born from it However, all of them have the same under-standing that a society gains its validity and authority by consent, which is a socialcontract among the members of that society Thus depending on the characteristics

of the people, and other conditions at the starting point, the resulting society would

be different, and it could even be utilitarian if the people at the starting point preferutilitarianism, the maximum happiness of the people In this sense, social contracttheory tells us how we choose and how utilitarianism could be what we choose.Because this book is in a sense an attempt at developing on the theory of justice

by John Rawls, I would like to offer a short account of related discussion on histheories and my own comments on it

Thefirst aspect of Rawls to be discussed is his characterization of the peoplewho make the contract Rawls grounds his social contract theory by characterizingthe people at the starting point as interested mostly in themselves, meaning that theybehave to obtain as much of the product as possible in distribution after cooperation

in production This does not mean that these individuals dislike or hate other peoplebut merely that they seek to gain as much as possible as a priority and then utilize itfor themselves or for other people Thefinal purposive subject, or object subject,may be other people; however, theyfirst attempt to obtain the maximum amount

of the product for themselves We can ask ourselves to imagine a case in whichpeople’s demand consists of one part to benefit themselves and another for others.However, empirically, our kindness is unstable and depends on many factors, one

of which is our state of mind regarding others, and therefore, it cannot be said withcertainty that kindness operates as a stable motive Thus, Rawls’ idea above can beaccepted as a realistic presumption, which leads to a situation in which as everyonetries to get more than everyone else, conflict breaks out

The second element of Rawls’ theory to be mentioned here is the creatingprocess of contract, which is related to the conflict question above How shouldsociety deal with these inevitable conflicts? If left unaddressed, they could harm the

efficiency and need for cooperation that drove people together in the first place.Rawls posits the need for society to create a device to escape conflict and reachunanimous consent: the veil of ignorance, which is defined as veiled rule-making

that permits people to see who they are but not distinguish themselves from all othermembers of society This idea is very unique to his argument However, this bookapproaches it from a different perspective, and the process of making a socialcontract is discussed with a focus on the actual process of ameliorating conflicts so

as to reach broader consensus through historical cases of trial and error, which arediscussed in Chaps.4 and9

The third element is the development of Rawls’ theory According to my study

on Rawls’ theory, the next questions to be asked are regarding the manner in whichactual rules function in a real society, the kinds of problems that arise from them,and how they can be solved This is neither Rawls’ primary nor direct interest that ishardly discussed in his study, but dealing with it is inevitable if one is to apply hisbasic theory to reality To deal with these questions, wefirst adopt a bird’s-eye view

of the structure of modern civil society that uses a market mechanism By thuspreparing the blueprint of the social structure, we then deal with the respectiveissues in each of its parts We pick up supposedly the most important and pressingproblems of politics, land distribution, education burden, fair share of profit, andbalance between self-interest and human fellowship Such discussions are anextension and development of the above fundamental question left by Rawls.Regarding the question of the manner in which people choose or make socialrules nowadays, we, as independent people, usually choose to establish a contractamong us Therefore, most of us are currently living under some form of socialcontract But how do we choose the form of contract? In answering this question,related factors should also be considered Generally, the more the factors involved,the more difficult such a choice becomes In the modern era, however, the scale ofmodern societies makes reaching consensus very difficult The fact that people tend

to change their mind over time further complicates the process However, given thatthe choice of rules depends on people’s assumption regarding the conditions sur-rounding the choice, considering such conditions is important and inevitable whenexamining this choice

What we seem to lack today in our discussions of fairness or justice or when weseek to address the tension between efficiency and equity or consider these kinds ofbig social issues and find better rules is this consideration of the conditionsunderlying the choice situation Essentially, the questions here are what we wantand what tools we have at our disposal to attain those desires In terms of answeringthis question of fundamental social agreement, social contract theory emergedhistorically after the abolition of the unequal social structures that existed during thefeudal age When we look back at human history, it can be observed that the socialrules changed in line with changes in our understanding of what we want and what

we are allowed to want as well as what tools we have and what tools we are allowed

to have Human beings have much moreflexibility in shaping social cooperationthan do other animals, and new ideas for social reformation are born when wenotice new possibilities for ourselves or new desires emerge Thus, consideringthese two factors, possibilities and desires, is very important when discussing how

we choose our social rules

Thus, thinking about the concrete questions mentioned earlier is important Fromthis perspective, a weakness with Rawls’ argument emerges He proposed one type

of person in terms of the“what we want” question and one type of condition for the

“what tool we have” question However, in retrospect, these remain rather abstractwhen compared with what we need today He focused on the questions of justiceand fairness and tried to describe the people, what they want, and the tools theyhave according to modern industrialized society However, these aspectsnonetheless remained abstract His argument on the problem setting, the people,

definitions of equal and reasonable, and tools all reflect modern, highly capitalisticmarket society However, in terms of the development of problems of economicfluctuation or dissent at income disparities in the late twentieth and earlytwenty-first century, we notice that we need to deal with the two factors at a muchmore concrete level and in specific terms

Rawls pointed out the importance of the distribution of economic goods and thenproceeded to the question of how to reach social consent over distributive rules.However, in dealing with this question, the aforementioned two questions, desiresand tools, have not been sufficiently dealt with In thinking about this question at acertain abstract level, he may have known the scope of his theory Of course,notwithstanding this shortcoming, his work proposed that this distributive questionshould be considered as a core problem when deciding upon social rules Here, weneed to make clear where we are to start in terms of his approach We need toelaborate on“what we want” and “what tools we have” at a more concrete level for

us to be able to answer more clearly the big economic and social problems at hand

To improve our rules, wefirst need to know where we are In this task, Rawls’ mainframework was attractive However, to construct a real foundation, we also needmore detailed frameworks The veil of ignorance is a solution when discussing theproblem at his abstract level; however, it needs to be developed further to solveconcrete questions

When considering social structure, we encounter a serious difficulty, namely,needing to deal with the substantial issues of social image that stretch across spaceand time This is the same as asking the meaning of the basic structure of modernsociety or the “market economy system.” Because economy and economics arerelated to the entire social structure, reexamining the former inevitably encompassesconsidering the latter Thus, in trying to elucidate a desirable social state by con-sidering efficiency in production along with fairness and human fellowship indistributing the burden and the product in total, the most fundamental aspect of theeconomic and social system must be considered

This task is difficult, but as social systems are created by human beings, we canevaluate and consider them on two grounds: purpose and means What purposedoes it have? Has the purpose changed between past and present? Is the existingsystem the optimum means and method for that purpose? These are fundamentalissues that require clarification concerning the future of the present socioeconomicstructure

As the market economy advances and production undergoes competition, thequestion of the distributive side becomes increasingly important The task of thisbook is thus to systematically elucidate the economic distributive rules, which are themost basic human relationships Toward this goal, Part I discusses basic questions

of the distributive rules concerning “what” (Chap 2), “who” (Chap 3), “how”(Chap.4), and“for whom” (Chap 5) in modern civil society The discussion on

“what” aims to present the overall picture of the problem by providing a top-downview, outlining circumstances under which distributive rules are required Discussion

on“who,” “how,” and “for whom” aims to examine these issues in more detail.Second, based on the analytical viewpoint and understanding reached in Part I,more concrete problems in threefields are considered in Part II as important dis-tributive rules that appear to have garnered the greatest amount of dissatisfaction inmodern society First, issues around the way (direction) of distributive rules ofnatural resources are discussed in terms of land (Chap.6) and human capabilities oreducation (Chap.7) Second, problems with distributive way (direction) of coop-erative outcomes between employer and employees are discussed focusing onproblems in measuring their “contribution degree” and the effect of disparity inbargaining power (Chap 8) Third, problems with motives behind societies ofdistributive rules (direction) in relation to the socially vulnerable are discussed(Chap.9) Thefirst three—land, education, and income distribution—are related tothe question of fairness and the last, to the balance between self-interest and humanfellowship

To make one more step toward a systematic grasp of distributive rules in linewith the above questions is the task of this book

The author would be very pleased if this book makes even a modest contribution

to the study of fairness and kindness in distribution that bestfits the style of humanmotives, self-interest, and human fellowship, today

Lastly, I would like to thank everyone who helped me nurture and tackle myquestion in this book They are my families in Japan, Miki, Asato and Yuki, andalso my American host families, Mary, Bill and Lee, and my colleagues in andoutside Yamaguchi University, including those in Copenhagen University, CaseWestern Reserve University, John Carrol University, Inha University, and partic-ularly Vic George and Peter Taylor-Gooby in my intensive research years inUniversity of Kent All of them provided me with valuable opinions, questions, andsuggestions I also owe much to the sincere questions I received from my studentsduring my classes in Yamaguchi, Fukuoka, and other universities

July 2018

1 Introduction 1

Part I Civil Society and Distributive Rules 2 Overview of the Problem: Socioeconomic System and Distributive Rules 7

2.1 Introduction 7

2.2 Subjective Factors: Motives for Social Behavior 13

2.3 Objective Factors: Social Conditions for Behavioral Rules 13

2.3.1 Deciding Subject—from Individual to Group 14

2.3.2 Deciding Manner: From Compulsion to Consent 15

2.4 Object of Distribution 16

2.4.1 Change of Object: From Products to Natural Resources 16

2.4.2 Cause of Change: Productivity Change 17

2.5 Object Subject View 18

2.5.1 Direction: Toward a Certain Extent of Equality 18

2.5.2 Cause: Determinants of Extent of Equality 18

2.6 Chapter Conclusion 22

3 WHO? Deciding Subject: Critical Development of Rawls’ Theory (1) 29

3.1 Introduction 29

3.2 Problem Situation Surrounding the Deciding Subject of a Contract 30

3.2.1 Recognition of Similarity 31

3.2.2 Influence of Movement Between Occupations 32

3.2.3 Recognition of Equality of Strength 32

3.2.4 Difficulty in Forecasting the Future 32

xiii

3.3 Examination of Rawls’ Theory: On the Character

of Contracting Subject 33

3.4 Critical Development of the Character of Contracting Subject in Rawls’ Theory: To Groups 41

3.5 Chapter Conclusion 43

4 HOW? Criteria for Determining Rules: Critical Development of Rawls’ Theory (2) 45

4.1 Introduction 45

4.2 Value Judgment and Object Subject View 47

4.3 Equilibrium of Power as the Substance of Fairness 51

4.4 Chapter Conclusion 52

5 FOR WHOM? Object Subject in Distributive Rules 53

5.1 Introduction 53

5.2 Two Object Subject Views: Society and the Individual 54

5.3 Utilitarianism as a Form of Selfishness 56

5.4 Modern Significance of Utilitarianism as an Object Subject View 60

5.4.1 Essence of Utilitarianism 60

5.4.2 Significance of Utilitarianism as an Object Subject View and Its Transition 61

5.5 Search for New“Object Subject View” After Utilitarianism—from Smith to Sen 68

5.5.1 Smith, Marx, and Keynes 68

5.5.2 Rawls and Sen 74

5.6 Chapter Conclusion 79

Part II The Market Economy System and Three Distributive Rules 6 Restructuring of Distributive Rules of Natural Resources (1): Land 85

6.1 Introduction—Land Issues in the Distributive Rules of Natural Resources 85

6.2 Position of Land Problems in Economic and Social Structure 88

6.3 Arguments on Land Distribution Rules—Focus on the Formation and Development of Civil Society 91

6.4 Future Direction of Land Distribution Rules 97

6.5 Chapter Conclusion 99

7 Restructuring of Distributive Rules of Natural

Resources (2): Education Fees 101

7.1 Introduction 101

7.2 Benefit and Payment—Social or Private? 103

7.2.1 Social Positive Effect: Stronger Bonds? 104

7.2.2 Social Negative Effect: Unfair to the Lower Income Group? 104

7.2.3 Private Positive Effect: Difficult to Measure the Effect? 104

7.2.4 Private Negative Effect: Diminishing Birthrate? 105

7.3 Social Benefit—Peace and Education 105

7.4 Arguments on Education Fees in Japan in Detail 109

7.4.1 Private Universities and Budgetary Constraints Since the Meiji Era 109

7.4.2 Related to the Constitution and the Basic Act on Education 110

7.4.3 Related to the Ratification of the International Covenant 111

7.5 Rapidly Rising Tuition Fees Since the 1970s and the Underlying Reasons 114

7.6 Who Is to Pay or Who Is to Benefit? 119

7.7 Chapter Conclusion 125

8 Restructuring of Distributive Rules for Products (1): Profit and Wages 127

8.1 Introduction 127

8.2 Problem Setting 128

8.2.1 Market Economy and Dominance Relationship 128

8.2.2 Distributive Criteria in the Market Economy—“Contribution” Criterion and“Contract” Criterion 131

8.3 Market Economy and Degree of Contribution 133

8.3.1 Exchange Ratio of Goods—What Is the Value of Goods? 133

8.3.2 Distribution of the Value of Goods and Degree of Contribution in the Market Economy—Profit, Income of the Employers, Versus Wages, Income of the Employees 136

8.4 Degrees of Contribution by Labor in General and of Entrepreneurs Together with Current Profit and Wage 138

8.4.1 Contents of Entrepreneurs’ Labor and Essence of Their Contribution 138

8.4.2 Measurement of Contribution of Entrepreneur’s

Labor—Examination of Marginal Productivity

Theory 140

8.5 Chapter Conclusion 159

9 Restructuring of Distributive Rules of Products (2): Social Security 161

9.1 Introduction 161

9.2 Rawls and Human Fellowship 165

9.2.1 Human Fellowship and the Necessity of Principles of Justice 167

9.2.2 Human Fellowship and Structuring of Principles of Justice 173

9.2.3 Human Fellowship and the Reality of Principles of Justice 178

9.3 Self-love and Human Fellowship 181

9.3.1 Viewpoint of the Balance Between Self-interest and Human Fellowship 181

9.3.2 Critical Argument of the Perspective of Sociobiology—Another Argument Regarding the Balance of Two Motives 182

9.3.3 Policies for the Recovery of the Balance in Modern Society 186

9.4 Chapter Conclusion 190

10 Conclusion 193

Afterword 197

References 201

Index 207

List of Figures

Fig 2.1 Social structure and human circulation 8

Fig 8.1 Clark’s idea 146

Fig 8.2 Contribution of the entrepreneur 150

Fig 8.3 Independent producers’ society 150

Fig 8.4 Corporate society (1) 150

Fig 8.5 Corporate society (2) 151

Fig 8.6 Production function diagram 152

Fig 8.7 Comparison of entrepreneur’s contribution and realized profit 153

xvii

List of Tables

Table 2.1 Overview of the factors for constructing a society

and their trend 14Table 8.1 Arrangement of entrepreneurs’ logic of recognition 155Table 9.1 Compensation principle and difference principle 179

xix

Chapter 1

Introduction

Abstract This book focuses on the market economy and the overall structure of

modern civil society Particular attention is paid to the economies and politics ofdeveloped countries Today, most countries in the world have adopted a marketeconomy to attain high productivity However, Government is another major part.The former provides individuals with goods on which to live, and the latter providesthe framework for their behaviors in the form of rules In examining these twomajor parts of a modern society, we observe the totality of society from a bird’seye This book utilizes economic rules, with a further focus on two major fields inmodern economic activities: natural resource distribution and product distribution.The former includes questions of (1) how to distribute land and (2) how to allocate theburden of education or who shall bear it, particularly higher education in this book.The latter, product distribution, includes the distribution of firm income betweenprofit and wages, as well as why we are driven to help those less fortunate and whatmotives drive us so

This book focuses on the market economy and the overall structure of modern civilsociety Particular attention is paid to the economies and politics of developed coun-tries I use here the word “developed” in the sense that they have high economicproductivity and a democratic political system Today, most countries in the worldhave adopted a market economy to attain high productivity It is a powerful engine forproduction and distribution and a major arena where goods are traded and thus sup-ports people’s lives However, it is only one part of overall society, along with otheraspects that comprise society Government is another major part It works throughdifferent principles than does a market economy, which works through individuals’free will In contrast, government works through popular consensus The formerprovides individuals with goods on which to live, and the latter provides the frame-work for their behaviors in the form of rules These rules or consented decisionsalso include the provision of various public goods Consensus here usually means amajority decision When this consensus is made through a democratic process, thecorresponding society is called democratic

© Springer Nature Singapore Pte Ltd 2018

H Tsukada, The Market Economy as a Social System,

https://doi.org/10.1007/978-981-13-1837-5_1

1

2 1 Introduction

In examining these two major parts of a modern society, we focus on two points The first is to understand or observe the totality of society from a bird’s eye,overarching view There are many ways to perceive a society, and this book focuses

view-on ecview-onomic rules, with a further focus view-on two major fields encompassing moderneconomic activities: natural resource distribution and product distribution The for-mer includes questions of (1) how to distribute land and (2) how to allocate the burden

of education or who shall bear it—higher education in particular The latter, productdistribution, includes the distribution of firm income between profit and wages, aswell as why people are driven to help those less fortunate and what impels them to do

so This question is important as it relates to our fundamental motive of self-interest

as well as considers how social security provisions have grown to be a big part ofgovernmental budgets

In Part I, we consider the structure of our modern society from a bird’s-eye view.First, an overall snapshot of society is presented It aims to show our moderncivil society through the analogy of a building three stories high plus two basementlevels Using this model, we can also “zoom in” to look at an individual’s life course(Chap.2)

Having this overview in mind, we next examine each floor First, we focus on thesecond basement floor, the politics field, a discussion that runs for three chapters.Here, we consider the basic structure of rulemaking, which is a construction ofsociety itself The essence of politics is the design of society We examine how thisdesign is determined by focusing on who decides it, individual or group, in Chap.3,how in Chap 4, and for whom in Chap 5 The understanding obtained throughthese discussions give us an overview of how and in what direction the social rules,particularly the economic ones that are the focus of this book are determined.Based on the above understanding, Part II examines important questions andproblems in economic distribution, including the distribution of productive factorssuch as natural resources as well as the distribution of outcomes, i.e., products

We examine two important productive factors related to natural resources: land andhuman abilities Two questions are asked, namely, how to distribute land (Chap.6)and how to distribute education expenses (Chap.7) We then examine product dis-tribution Chap.8asks how to distribute the outcomes of firms between profits andwages or between employers and employees, and Chap 9 examines motives forsocial security systems This last question is asked because the future of a society’ssocial security system is partly or highly dependent on how society members feelabout helping each other or the needy It therefore sheds interesting light on people’smotives of self-interest and human fellowship

These questions considered in Part II are some of the most important and pressingones today Furthermore, all of them are actually centered on the issue of fairness

or justice in distributive behaviors Our behaviors based on human fellowship mayseem to be born indifferently from matters related to fairness or justice, being based

on self-interest But the performance of the former can actually be affected by thelatter; for example, if we act following a sequence of fairness or justice first andhuman fellowship second, wide income differences may be the result, which, in turn,may leave smaller space for actual redistribution motivated by human fellowship In

1 Introduction 3this sense, fairness or justice has a significant position in the social structure, and so,whether related to punishment or the distribution of burden or benefit, it is arguablythe most important factor in sustaining human relationships It is involved when

an object, e.g., money or products, is distributed among individuals within a groupwhose opinions differ regarding an equitable division In such a case, we need a rule

to determine a distribution that everyone agrees to or at least obeys Such is the role

of justice and fairness The questions in Part II are related to the framework of ourbehaviors in distribution and thus affect our modes of production and distribution ineveryday life These behaviors are pervasive and highly significant in this sense thattheir composition could bolster or destroy our will to sustain our society itself.Attitudes toward justice or fairness seem to be growing harsher by the day intoday’s rapidly globalizing world To give an example, today, world trade is rapidlyexpanding through a global market mechanism; however, ironically, it perturbs thestructure of industries within each country more than before, thus creating unstableemployment conditions It may also be undermining traditional domestic mutual helpsystems because countries compete with each other by lowering tax rates to attractcorporations—behavior that may well decrease government income and thus socialsecurity resources Such developments serve to increase the pressures that peopleface in their everyday lives Under such circumstances, the difference between thehaves and have-nots seem to be increasing, creating conflicts that may destabilizesociety

To survive in such conditions, we need to perceive the problem clearly: what ishappening, where, and to whom The problem today seems to be a substantial one,encompassing the entire social structure of many modern civil societies as well asthe international order In such a trial, two goals must be sought: broadness andprecision Studies of this kind seem few And when we work on this subject, eachpiece of study will probably be more or less focused on either broadness or precisionalthough trying to integrate them as much as possible The study in this book presentssuch an attempt, with more effort being placed on grasping the total structure of theproblem along with discussing some significant, concrete questions Further on, weexamine the problem’s structure, pose some critical questions, and thus try to obtainanswers As the first step, we start with an overview of the problem in Chap.2

Part I Civil Society and Distributive Rules

Chapter 2

Overview of the Problem: Socioeconomic

System and Distributive Rules

Abstract This chapter organizes the framework and topics involved in

contemplat-ing the factors that regulate the distributive structure, distributive rules, and theirmodern direction The following points are raised to constitute such a framework forthis book (1) Human beings cooperate in production to ensure survival An importantcondition for cooperation is the existence of rules regarding the distribution of laborburden and products and people’s consent to these rules (2) An important factor thatregulates distributive rules lies in the survival instinct of each individual, i.e., theirdrive to survive and reproduce (3) The deciding subject of the distributive rule haschanged from the individual to the group, and the decision criterion has changedfrom compulsory to voluntary agreement (4) In this process, distributive objectshave changed from products to those containing resources (5) Distributive rules forresources and outcomes are thus moving toward “some degree of equality.” (6) Thisdegree of equality is defined by three factors: changes in the object subject view,changes in deciding what is “fair,” and increasing request for distribution according

to need and mutual security

2.1 Introduction

What distributive rules to make is a major economic and social problem for anysociety For a society to function, it must have stable structures and rules amongits members concerning how to distribute labor and products These structures andrules also require sufficient legitimacy to be accepted, which gives them stability anddurability, which in turn benefits society and further enhances their legitimacy in thesense that people accept them as being fit for their purposes In this sense, any humanbeing in any society lives under the influence of a social distributive structure First,

we examine the structure of modern societies (Fig.2.1)

This image illustrates a modern civil society In the following discussions, thisstructure serves as the baseline reference It shows the structure as well as the circu-lation of human lives

© Springer Nature Singapore Pte Ltd 2018

H Tsukada, The Market Economy as a Social System,

https://doi.org/10.1007/978-981-13-1837-5_2

7

8 2 Overview of the Problem: Socioeconomic System …

Employ- Medicine Old age Old age

Social Insurance Premium Premium Premium Premium Human

Capabilities training support support

Land Social

State land

Politics

in Distribution of in Production in Distribution of

(Profit, Wage) Kindness

in Distribution of Products by Human fellowship (Social security)

Fig 2.1 Social structure and human circulation

2.1 Introduction 9First, in terms of structure, it has two basement floors with three upper stories.The lower basement floor is politics, where the above structure is discussed anddetermined This society is democratic The political decision-making process, i.e.,regarding who, how, and for whom, influences the results of the discussion in societyabout politics and so is examined first in Part I (Chaps 2 5) Part II focuses ondistributive rules and how they affect the production and distribution of goods andproducts The upper basement floor is state land It is literally the ground of societyand its border is determined through agreements or conflicts between countries.The upper three stories depict the life cycle of a human in this society First, a baby

is born, and it inherits certain advantages and/or disadvantages from its parents This

is indicated by the first part of the stairway outside the upper three stories The firstdifferences in fortune among individuals arise from these birth circumstances Land

is usually included in this fortune, but as it is fundamentally a part of natural resourcesthat no one created, we need to make rules for how to deal with the possession ordistribution of land at first Problems of land distribution are discussed in Chap.6.The second flight of stairs stands for education Whether a child is able to receiveeducation for free or not creates a big difference in lifetime opportunities Inheritednatural abilities are supposed to belong to each human, and this fact could lead tothe rule of paying the education expenses by each one; however, much education ispublicly funded today Why is it? This question is discussed in Chap.7

After education, people reach the third floor, which represents working lives.People participate in the production process and receive products in the distributionprocess These activities are either done privately through a market economy mecha-nism or publicly by the government People pay money to a seller to obtain goods inthe private sector and pay money in the form of taxes to the government to fund and

be eligible to receive public goods Public goods in this figure only consist of socialsecurity in the second and first floors and public education in the second flight ofstairs Of course, other public goods exist, such as roads and various public buildings;however, they are omitted here In the production process, efficiency in production

is prioritized and the market economy highly rewards it through competition amongfirms The distribution of product or sales incomes between employer and employee

in private firms in the shape of profit versus wages is examined in Chap.8

To address the possibility of being unable to work, being discharged, or havinghealth problems, people have developed social security systems: social insuranceand social welfare The former is paid by insurance premiums and sometimes by aspecial tax and the latter by tax alone Regarding the latter, because it serves as a form

of redistribution between the haves and the have-nots, its extent reflects the motives

of society in terms of how they view work, the role of society, and one another Inthis study, I am interested in the aspect of altruism or kindness (human fellowship,fraternity, compassion, etc.), which is examined in Chap.9

Above is the first image of the structure and circulation of goods together with lifeevents of individuals in modern civil society In explaining them, we have touchedupon the main intentions of this book: (1) to overview the social and economicstructure today (the whole picture), (2) to examine and clarify the political processesthat determine distributive rules (second basement floor), and (3) to examine several

10 2 Overview of the Problem: Socioeconomic System …important elements of their distributive rules or factors, such as the distribution of landand education (inheritance and education) and that of products between employersand employees (third floor and firms), and supporting motives for the social securitysystem (second and first floors).

Below in the picture is shown the structure of the principles underlying the iors that support each part of the structure Fairness is applied to the distribution ofnatural resources and products Kindness or human fellowship is also important inthe distribution of products, particularly in the scene of redistribution Efficiency issought in production Although productivity is itself an important issue, e.g., in thefood production problem in conjunction with population growth and energy prob-lems related to global warming; however, they are not discussed in this book Weonly focus on the problems related to the distributive and cooperative side of oursociety

behav-The right-hand side depicts our motives, namely, self-interest and human ship They are often involved in our everyday life but also create complications When

fellow-we consider such problems or questions about distribution as mentioned above, it

is because we want to achieve our purpose in life to the fullest extent possible Inturn, our goals or purposes are born from our internal motives, a balance betweenself-interest and human fellowship Therefore, whenever we seek to better under-stand our behaviors, we need to first clarify our goals and thus our motives Yet,

as we recall our experiences, we probably notice that it is not easy to clearly ceive our own motives Such self-blindness emerges in the redistribution of goods,

per-an importper-ant field of our behaviors, per-and therefore happiness We are often happy toeat but are sometimes happy to share our food with others, for example, with needypeople However, this possible happiness from kindness is not stable in the sense that

it depends on the situation, such as how deprived they are or how affluent we are.Thus, we may not yet have a clear understanding of it or a simple rule to follow Dif-ferences among individuals also exist, and people often behave differently in similarsituations It also complicates the question

This question of balance between self-interest and human fellowship is probablynot inconsequential, nor should it be overlooked It drives our concern regardinghow much, how often, and in what circumstances we should share our bounty withothers When we see people in trouble, even if they are strangers begging for money

at the roadside, we often feel distressed Although we may pass them by most times,

at other times, we may stop to help, particularly when they are poor children or areheavily disabled Thus, our behavior may change depending on the situation, which,

in turn, also changes, both in our lifetime and also over longer spans (of centuries)

as society’s modes of interaction and perception change Our behavior when welive close to each other in a small village may differ from that when we live in asmall, isolated apartment in a big city Thus the question of self-interest and humanfellowship needs to be asked continually because it also reflects historical changes,progress, and evolution Chapter9makes an attempt, probably a modest one, to askthis question via key words such as the selfish gene, nobility, and human fellowship,dealing with them from the perspective of social structure, particularly that of thesocial security system

2.1 Introduction 11The distributive structure—and any associated changes—have substantial influ-ence on people’s lives It determines how people live and the extent and causes of theirsatisfaction Throughout history, this strong influence of distributive structures hasled people to fight or negotiate for more advantageous structures, and thus a variety ofapproaches exist today This strong influence means that we should always considerpossible improvements and other possible changes, as well as their direction.Generally, the world today hosts various types coexisting distributive structures.Furthermore, these structures also are relatively new in that from a historical per-spective, a certain kind of law of change seems to exist, e.g., from a feudalistic to acivil society Although such a law of change does not operate at the same speed or

in the same direction in all societies, there is no doubt that the distributive nism’s structure can be changed according to changes in awareness among members

mecha-of society We must therefore ask the following questions: how does this awarenesschange? How does this change induce changes in the actual distributive structure?

To answer this latter question, we must first clarify the factors that lead to changes

in distributive structure or rules and learn how they function

Since the formation of civil society, this question of distributive structure has longbeen discussed for example, by Locke,1Smith,2Marx,3and Keynes,4among others.John Locke, for example, addresses the question of land distribution:

The same law of Nature that does by this means give us property, does also bound that property too … But how far has He given it to us – “to enjoy”? As much as any one can make use of to any advantage of life before it spoils, so much he may by his labor fix a property in Whatever is beyond this is more than his share, and belongs to others (117, paragraph 30) 5

Locke further argues that in such a state, inequality of private property did notoccur nor did disputes among people However, since the invention of money madethe accumulation of excessive products (in the form of money) possible, peopleentered into unlimited competition to acquire property in the form of land Lockedid not formulate a clear criticism; however, phrases such as “disproportionate andunequal possession of land” (125, paragraph 50) indicate that he felt that someproblem existed in this regard

It can be said that the core of the problem here is the distributive structure/rulesused to allocate natural resources and social products Karl Marx took an evolutionaryperspective of human societies wherein the distributive structure changes in a rule-like manner along several major stages that include feudal, capitalist, and socialist

1John Locke, 1969, Two Treatises of Government, Hafner Publishing Company, sections 31–51.

2Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, Randam House,

Inc.1937, Book I, Chaps 5, 6.

3Karl Marx, Das Kapital, Erster Band, Dies Verlag, Berlin, 1962, Siebner Abschnitt,

Vierundzwaizigstes Kapitel, 7, Geshichitliche Tendenz der kapitalistishcen Akkumulation.

4J M Keynes, The General Theory of Employment, Interest and Money, Macmillan & Co Ltd.,

pp 373–374.

5John Locke, Two Treatises of Government, from the Works of John Locke, A New Edition,

Cor-rected Vol V 1823 Retrieved from http://www.yorku.ca/comninel/courses/3025pdf/Locke.pdf ,

2017, September 14.

12 2 Overview of the Problem: Socioeconomic System …However, the direction of change predicted by such an understanding attempts todelineate human nature, a subjective factor, along with its objective factors and thenatural and social environments, based on the author’s current understanding of thatperiod, and therefore needs to be renewed continuously As long as human nature andnatural and social environments continue to change and as long as our discussions andspeculations regarding the next direction of change can only perceive the distributivestructure according to the characteristics of the present period, it can be said that theproblem has to be newly reconsidered in each era; each change in the distributivestructure both reflects changes in our understanding of it and causes further changes

to that understanding, creating a cycle of continuous reassessment with each iteration.Recent economic situations also provide another spur toward considering dis-tributive questions today Since the beginning of the 20th century, people in advancedindustrialized countries have more or less been driven by a preoccupation with eco-nomic growth and production efficiency, and issues of distribution had far lowerpriority However, in recent years, the emergence of the Rawls’ theory, together withthe lower growth of industrialized countries since the 1970s, broader attention hasbeen paid to distributive structures Rawls’ focus is on the fairness of distributivestructures.6Ultimately, he questions the legitimacy of societies’ economic distribu-tive rules These rules require agreement within civil society or a politically equalsociety regarding the best way to distribute burdens and outcomes in the first place.Humans rely on two main methods to attain a good, secure quality of life: (1) increas-ing productivity with a constant distributive structure or (2) changing the distributivestructure with constant productivity In both of these approaches, the distributivequestion is important, particularly in the era of lower rates of economic growth.When productivity growth is low (thus making change through the first methodmentioned above more difficult to achieve), people’s interest must inevitably turntoward the distribution structure, i.e., the second method

Factors defining distributive structures and their problems can be considered asbeing either subjective or objective Distribution is integral to human social behavior

as evidenced by its centrality to many social behaviors, norms, and institutions.Social behavior emerges from each individual’s personal motivation The question

of how individual motives define the distributive structure takes us into the realm ofsubjective factors Objective factors, in contrast, consist of the external conditionsthat define a specific realization of those subjective motivations Further on, wediscuss two factors that gravely impact distributive rules in these two fields Withregard to the subjective factors, we consider our fundamental motives; in terms ofobjective factors, we examine the social conditions that affect our decisions when

6John Rawls, 1999, A Theory of Justice, Harvard Univ Press, revised edition According to Yuichi,

Shionoya, in orthodox economics, opinions on distributive justice have been regarded as a subject beyond the scope of discipline, but today it is regarded as something to be positively considered (Japan Economic Policy Association, 1980, p 7) K E Boulding vigorously worked on “grants economy” and Paul A Samuelson in his later years also paid much attention to the existence of

“free lunch” (his book of 1983) These topics are also included in the question of distribution but are rather closer to the topic of human fellowship dealt with in this book in Chap 9

2.1 Introduction 13creating distributive rules This discussion mostly relates to the second basementfloor, politics, and gives us a more detailed overview of this element.

We briefly look at the issues concerning these factors in Sects.2.2and2.3 This

is merely a simple sketch describing their characteristics and supposed directions ofchange They are discussed in much greater detail in Chaps.3 5

2.2 Subjective Factors: Motives for Social Behavior

The most important human social behavior is our distributive relationships with otherpeople Indeed, these relationships of social cooperation can be considered to be thefoundation of human societies Each individual’s fundamental goals are survival andbreeding.7 Because these aims are difficult to achieve in isolation, humans mustcooperate, which gives rise to society

However, the specific form of survival that each person respectively seeks takesvarious forms, and such forms change with the times More specifically, individualscan vary in terms of what they consider “a good quality of life” that reflects differentpriorities At the same time, larger social perceptions of “good” and “bad” quality

of life also change because of, for example, technological change From a modernperspective, ancient ways of life, even those of the wealthy, would seem primitive anddeprived, and today, with basic needs met for most people, meeting a certain level

of today’s “cultural standard” is usually seen as being necessary for a “good life.”Humans are strongly influenced by these evolving cultural standards and can evenfeel that their lives are almost worthless if they fail to attain them This way, althoughthe behavioral motive of human beings is basically to survive and reproduce, eachera’s “historical cultural standard” specifies how these drives are expressed Suchbehavioral motivation is the basic “object view,” or “purpose view”, which is thebasis of the “object subject view,” or whose and what condition of life we regard asour goal in life, discussed in the next section

2.3 Objective Factors: Social Conditions for Behavioral

Rules

As mentioned above, this section examines the social conditions that affect ourdecisions when creating distributive rules The term “social conditions” refers tothe conditional factors within society that impact the process of determining itsdistributive rules When we create social rules, we do so within a certain frameworkthat has been constructed historically and that shapes our thoughts and choices To

7Such a view is contained in Adam Smith’s The Theory of Moral Sentiments, edited by Raphael

and Macfie, 1976, p 87, in his statement outlining “the two great purposes of nature, the support

of the individual and the propagation of the species.”

14 2 Overview of the Problem: Socioeconomic System …

Table 2.1 Overview of the factors for constructing a society and their trend

1 Deciding subject—From individual to group

2 Deciding manner—From compulsion to consensus

3 Object of distribution—From products to natural resources; By productivity change

4 Object subject view

4.1 Direction: Toward certain extent of equality

4.2 Determinants of extent of equality

4.2.1 Expansion of self in subject view

4.2.1.1 Necessity of others by the development of division of labor

4.2.1.2 Productivity growth and increasing contact with others

4.2.1.3 Productivity growth and appearance of joint project

4.2.2 Changes in fairness view—Growth of distribution by contribution

4.2.3 Growth of social security—Growth of distribution by need

examine this framework, we ask four questions, namely, who, what,8for whom, andhow: (1) Who decides the distributive rules? (2) How or by what criteria are decisionsmade? (3) What are the objects to be distributed? (4) For whom are they decided;particularly, how are other people included in the object subject of ourselves? Thesefour factors affect the creation of an era’s distributive rules and thus the contents ofthat period’s distributive structure

This section addresses the decision makers, decision criteria, distributive objects,and the object subject Issues related to these factors can be summarized as follows.Deciding criteria, expressed below as the deciding manner, and here seen as thecriteria, can be dealt with as reflecting compulsion versus consensus (Table2.1)

2.3.1 Deciding Subject—from Individual to Group

Distributive relationships and distributive rules are determined through negotiationbetween two or more people It is reasonable to conclude that the character of thesenegotiators, i.e., “who” they are, affects the substance of the decided rules

Although the decision-making body for distributive rules originally included allmembers of society involved in distribution, individuals often create common interestgroups that try to change the distributive rules to ones that would allow them tomaximize their own interests The first common interest groups that emerged werefamily members, with a variety of other interest groups following

8 The word “what” is also used in the title of this chapter, which refers to what is discussed in Part II; the term “what” here is used to refer to what is to be distributed in a narrower sense.

2.3 Objective Factors: Social Conditions for Behavioral Rules 15The early emergence of family as an interest group reflects the fact that in mosteras, humans have been closely enmeshed in kin relationships and that family mem-bers have been central to people’s “self-interested” view Family could extend beyondtheir immediate kin to more distant relatives With the development of higher produc-tivity, human associations grew beyond kin relationships In modern society, these

“wider associations” are now at an unprecedented level, often having a global reach.Furthermore, these relationships are no longer geographically bound An individualcan belong to various interest groups simultaneously today; a person belongs to afamily, kinship group, local neighborhood group, nation, firm, sports club, religiousgroup, class, etc

These different interests are components of identities that combine in differentpatterns in different people It is common today to refer to economic status, i.e., rich

or poor people, or age group, i.e., older or younger generations, and feel some kind

of common interest with the group to which we belong Even at the national scale, agroup of millions or billions of people, we can feel strong common interest through,for example, a social security system, which humans have created in the past century.Under such circumstances, common interest groups have a definitive impact onpeople’s choice of social rules, particularly distributive rules Thus, the way relatedgroups act is of significant interest and this behavior will explain the reasons for theappearance of certain groups and the superiority of some over others, etc.9

2.3.2 Deciding Manner: From Compulsion to Consent

Whether the decision-making entity is compelled to accept a certain distributivestructure or can participate in the decision-making process is a major factor definingthe distributive structure of a society; in the former case, the voices of the compelledare ignored In a modern democratic society, social rules—including distributiverules—are determined through a democratic decision-making process and are thusaccepted as being fair This decision-making method is relatively common in themodern world

However, democratic decision making only becomes possible after the formation

of civil society It did not exist in slave-holding societies or in late-stage feudalsociety, in which, although resting on a mutual contractual relationship between thelord and serfs, as protection and labor in return, respectively, the serfs were notable to influence or exit the process Moreover, even after the establishment of civilsociety, the right to participate in deciding the distributive rules was not guaranteed

to all members of society due to constraints such as the amount of taxes paid or landowned or even one’s gender

9 If we can answer these questions, it will help us determine how welfare expenditures should be structured Fundamental questions such as what is social welfare and how much and whose welfare

we wish to achieve can then be answered after we have obtained a clear view of the whole distributive structure of the society, including the state of our object subject view.

16 2 Overview of the Problem: Socioeconomic System …However, in civil society, the right to engage in the deciding process of society’sdistributive structure has continued to expand, and today, most adults have this right

in most countries Such an expansion of participation rights constitutes a major factordefining the contents of modern distributive structures Because these contents aredetermined by majority choices, to discern the direction of change and improvementsmade to existing distributive structures, it is necessary to clarify the common interests

of the majority and the convergence of their interests in reality.10

According to Rawls, “unanimous consent” on the basic principles of distribution

is needed to guarantee the stability of society However, in real societies, it is usuallydifficult for many people to reach unanimous consent Thus, if unanimous consent

is in fact necessary in reality, or how to attain it becomes an important issue (seeChap.9, Sect 9.2.2 Human fellowship and structuring of principles of justice)

2.4 Object of Distribution

2.4.1 Change of Object: From Products to Natural Resources

The next problem is identifying the object of distribution In civil society, the tributive objects can change from centering on products to also including naturalresources Here, natural resources consist of not only external products of nature butalso the internal resources of individuals’ minds and bodies

dis-Natural resources, such as land, served as the most critical factor of productionuntil the feudal age However, after feudalistic property rights were abolished andpeople’s welfare largely depended on employment by entrepreneurs, wages, not land,engaged interest as the primary object of distribution Following the civil revolutions,land redistribution only occurred from the former ruler to the new group of leaders,

a process not necessarily carried out through a democratic process or the agreement

of all members of society11(see Chap.6)

In the early developmental stages of self-understanding and subject understandingprevalent in early civil society, it was rather natural for ordinary people to pursuetheir goals by focusing on the distribution of product results At the time, people were

10 Related to this question, there is a view that utility is incomparable across individuals and so

determining social choice is difficult (Confer K J Arrow’s argument in Social Choice and Individual Values, 1951) This is true when we try to compare them with rather high precision, such as, the

utility of a cup of coffee for me versus that for someone else, but not so in the realm of politics We are usually content with determining policies by casting votes This method regards each person’s utility as equal, represented by one vote, and thus we are actually comparing each person’s utility.

In voting, we usually follow this straightforward manner and do not vote by ordering each option.

As far as we are content with social choice through such a simplified way, our choosing process will not be confronted with difficulties.

11 See, for example, Kazutoshi, Kato, 1990, p 30 He refers to Gerrard Winstanley, who protested against the result of the Puritan Revolution where lands of the old owners were sold to the new leaders and the peasantry system was continued as it was.

2.4 Object of Distribution 17starting to consider the equality of human beings for the first time in history propelled

by the Renaissance, which was the reconstruction of the ancient philosophy of civicequality and the propagation of religious reforms advocating original equality underGod Humans who had long lived under feudal human and social relationships, at thecollapse of these relationships, were determined to depart from feudalistic controlbut were not well aware of what to create instead For example, regarding the slogan

“equality,” although they could only talk about the concept of abstract equality as arough direction, specific steps in terms of rules and institutions were unclear.However, in the development of civil society, the hardship of wage-dependentemployees has become increasingly apparent Facing this new and serious issue,labor movements since the 19th century, joined by socialist ideology and Keynesianpolicies in the 20th century, have argued for compensatory policies Adding increas-ingly larger proportions of civil society members to the political decision-makingprocess promoted the above movements As for the effect of the Keynesian policy,the maintenance of high employment by demand creation resulted in the strongerbargaining power of workers, which in turn promoted this movement In this process,the understanding of the distributive object, which had been limited to the result ofproduction, or products, is changing to one that includes natural resource allocation

as it is now understood to significantly affect the distribution of outcomes.12

2.4.2 Cause of Change: Productivity Change

Another factor behind the expansion of the distributive object to natural resources isthe growth of productivity In the early stages of civil society, the division of labor waslow and most people were engaged in farming or other occupations that were stronglylinked to land or water In this situation, people only required access to land that wassufficient for them to acquire resources to ensure their and their family’s survival.However, as the division of labor became more specialized and much higher stages

of productivity emerged, more complicated use and allocation of natural resourceswere required It is not sole personal use of tracts but collaborative and social use ofresources that is necessary Not only fair distribution among individuals in terms ofproducts but also the joint use of natural resources is needed to increase the amount

of products obtained and therefore to be distributed Thus, it becomes necessary toadd resources to the consideration of distributive objects

12 For example, the 1919 Weimar Constitution stated that property rights accompany an obligation that the property’s use should serve public welfare (article 153) and that the state can confiscate private firms suited for socialization (article 156) Also in France in 1936 and in the US in 1937, similar articles were added (Watanabe 1985, pp 73–81).

18 2 Overview of the Problem: Socioeconomic System …

2.5 Object Subject View

2.5.1 Direction: Toward a Certain Extent of Equality

With regard to the question of the direction of rule changes, the most fundamentalquestion is regarding the purpose of distribution, i.e., to whom products are being dis-tributed This question expresses the object subject view, that is, who is the recipient

of products (subject) and the purpose or object for which people work The tive structure and distributive rules underlying civil society in terms of outcomesand resources seem to be progressing toward strengthening equality when comparedwith feudal society For example, rising incomes and living standards in the economicsphere, various pieces of legislation protecting workers and the socially vulnerablethat have accompanied the development of democracy in the political sphere, andprogressive income tax systems in the financial sphere show a trajectory of greaterinclusion and equality This trend seems to suggest an answer to the above ques-tion concerning the object subject, implying that our current perspective is somehowrelated to equality among humans Why did such a movement come about? How farwill this equalization proceed?

distribu-2.5.2 Cause: Determinants of Extent of Equality

Any change in the distribution structure fundamentally reflects a perceived need

to adapt to changes in the survival environment to maximize self-interest becausethe distributive rules themselves exist as part of the survival strategy of each ofthe individuals constituting society A major feature of this survival strategy is thechange from ensuring the survival of individuals by personal and isolated meanstoward ensuring it by collective means

Productive power increases through the division of labor To maintain high ductivity via collective cooperation, it is necessary to harness each individual’s fullpotential, which is higher when acting in a voluntary capacity than under compul-sion, a distinction supported by low productivity and even resistance and riots inancient slave-based societies In addition, under circumstances of compulsion, whenhumans have Hobbesian equality13(the attitude of denying obedience based on theroughly equal power of mind and body), the ruler must also contend with the dan-ger of constant rebellion To avoid such losses, realize peaceful cooperation, andincrease participant willingness, it is first necessary to fairly distribute products in

pro-a mpro-anner thpro-at people freely pro-accept, which cpro-an be cpro-alled “distribution pro-according to

13 In the first half of the 17th century, Thomas Hobbes pointed out the equality of human abilities such that the difference is small and weaker people can, by conspiracy or by collaboration, prevail over the stronger (1968 edition, 183) He also stated that conflicts are inevitable but rationality and the fear of death will enable people to make convenient agreements called “the Laws of Nature” (188).

2.5 Object Subject View 19contribution.” In addition, guarantees of survival for socially vulnerable people withlower labor abilities encourage people to work to a higher capacity because theyalleviate anxiety about the future This leads to greater equality in the distribution ofsociety’s production output compared to the feudal age.

Then, how far will this equality of distribution proceed? This problem finally fallsunder the scope of political judgment If the equality of distribution is promoted bythe necessity of productivity increases and thus the need for voluntary cooperation

as above, we need to examine these factors

In recent years, the ideas of “welfare restraint” and “self-supporting” have gainedtraction as opposed to the “equalization of distribution (of products or incomes)

to some extent,” which had been more or less prevalent until the 1970s in manyEuropean welfare states

In addition, as factors that define the degree of equality, changes in perceptions ofobject subject, fairness, and mutual security awareness can be identified as follows

2.5.2.1 Expansion of Self in Object Subject View

As mentioned earlier, as merely another species of animal, or more fundamentally,

as an organism, humans have fundamental drives to ensure self-survival and duction “Self” here is the object subject, which usually connote not only the isolatedperson but also families and those who are very “close” to that individual althoughwith less importance In terms of the distribution of goods, the survival of these

repro-“other” people rather than the specific individual may also be included therein Thisreflects our capacity for emotion as indicated by the words “love,” “compassion,”

“pity,” etc., in Christianity, Buddhism, and so forth Our motives for helping otherpeople are either (1) selfish because such acts are promised a reward of happiness

in the “Hereafter,” which may be included in selfish motive or (2) altruistic, whichtake the form of satisfaction gained from such kind acts in the present time The for-mer purpose aims at one’s own happiness and does not include that of other people,whereas the latter aims at the happiness of other people

Furthermore, in modern times, many philanthropic acts have been undertaken inthe form of “social welfare,” which we could call “contemporary empathy,” apartfrom religious motivations However, what is not yet fully understood is how thiscontemporary empathy arises from the motive of survival and reproduction ingrained

in the most fundamental self Why and how do acts of social welfare or attention toothers expressed as charitable acts occur? On the one hand, such acts may originatefrom a selfish motive as a form of mutual aid, yet on the other hand, it contains aspectsthat can only be regarded as selfless altruistic acts Even wealthy individuals who havelarge personal assets and who do not need to rely on mutual aid schemes voluntarilyparticipate in this system Perhaps the motivation to engage in such voluntary actionscan be described as being in the “expanded self,” which also includes the existence ofothers for the helping people’s own survival purposes It seems that the tendency ofself-expansion to consider others helps regulate one characteristic of the distributiverule toward a certain level of equality

20 2 Overview of the Problem: Socioeconomic System …Why, then, does self-expansion, i.e., a change in direction toward including others

as object subjects, occur? Possible causes include the following: (1) division of laborrequires other people, (2) increases in contact with other people strengthen a species’feeling of closeness, and (3) changes in the natural and social environment make itnecessary to increase cooperation with others for survival These possibilities arediscussed below

2.5.2.2 Necessity of Others in the Division of Labor

The change in humanity’s survival strategy from self-sufficiency to the division oflabor can lead to changes in the object subject understanding We argued above that

in a society with division of labor, distributive rules that can realize some degree

of equality, such as distribution according to contribution degree, are needed tomaximize each individual’s voluntary willingness to engage in work In addition,because relationships based on the division of labor inevitably assume the existence

of others who will contribute their abilities, the survival of others, i.e other peoplemust be part of each individual’s object subjects Thus, to secure self-survival, thesurvival of others becomes an additional, important object

2.5.2.3 Productivity Growth and Increasing Contact with Others

With productivity increases accompanying the development of the division of labor,geographic movements due to changes of workplace, residence, leisure activities, etc.increase and so does contact with others In this process, differences among peoplemay initially be emphasized regarding the possibility of cooperation; however, asthe commonalities of human beings alluded to by the term “Hobbesian equality”above is understood more, mutual cooperation, rather than conflict, increases, throughwhich people recognize the commonality of the species more strongly This way,increases in contact with others functions to strengthen mutual awareness of people’scommonalities, which is another factor that is in line with the necessity of ensuring thesurvival of other people as being essential to the division of labor as stated above.14

2.5.2.4 Productivity Growth and Appearance of Joint Projects

The emergence of common issues of survival that require many members to pate is another factor that encourages self-expansion In the process of forming civilnations, strong common issues concerning survival often appeared in the form ofwar between countries Under the so-called total warfare system, social constituents

partici-14 But many industrially developed countries seem to be facing a tendency of individuals becoming isolated The shift from large to small families may contribute as well This tendency may be a minor one compared to that toward larger recognition of commonalities.

2.5 Object Subject View 21could not help but recognize all social members of one country as “compatriots.”This perception weakens with the end of a war and probably did after the end ofWWII in modern history However, wartime experiences are so impactful that thiseffect usually continues for a considerable period afterward.

Furthermore, the expansion of productivity under civil society has created new,common problems These include the threat of nuclear war, although today it maynot be as likely as it was during the Cold War, and global warming Previous warsbetween ethnic nations created countrywide fellowship recognition; however, thefear of nuclear warfare risks the extinction of humankind and makes the whole ofhumanity feel the necessity to unite to lessen this risk This factor weakened withthe collapse of the Cold War structure but has not completely vanished; hence, thatfellowship consciousness it imparted will continue to maintain a certain level ofvalidity In addition, a common factor threatening survival on a global scale is that ofenvironmental problems It is clear that this fact inevitably makes all of humanity’scooperation necessary and can thus nurture deeper feelings of fellowship amongpeople

2.5.2.5 Changes in Fairness View: Growth of the Principle

of Distribution by Contribution

The second major factor that determines the degree of distributive equality is a change

in the definition of fairness used in distributive rules With regard to this, we arguethat the unfair distribution of products, such as that in the feudal age, was the startingpoint for social reformation and revolution This is, therefore, an example at oneextreme The question then becomes one of defining the fair distribution of products

As the feudal example shows the acquisition of products without labor, humanityhas understood that a basic principle in this distribution should lie in the oppositedirection However, the denial of a negative example does not provide a new answer

It is a complicated question concerning the products of civil society: who is to divide,what is to be divided, how it should be divided, and among whom it is to be divided,

as mentioned before

Empirically, three types of distributive criteria exist today: (1) ownership (rentfrom the ownership of productive goods), (2) merit (compensation according to thedegree of contribution), and (3) need (distribution according to necessity) In feudalsociety, distribution by ownership was fundamental, and in civil society, contribution

is the main criteria Although distribution by ownership does exist in civil society(for example, rent for land, interest on capital provision, etc.), because distribution bycontribution is recognized as being fair, such distribution by ownership is structured

to fit with the principle of contribution Heavier tax on capital gains is an example.Consequently, previously existing great distribution gaps due to property ownershipdisparities may shrink and the equality of distribution may increase This book dis-cusses the question of how to measure contribution in the field of income distribution

of profit and wages in Chap.8

22 2 Overview of the Problem: Socioeconomic System …

2.5.2.6 Growth of Social Security: Growth of Distribution by Need

The division of labor in the market mechanism increases productivity as a whole Italso encourages active movement between occupations and thus higher mobility ofresidences, leaving individuals with greater possibility of suffering short- or long-term unemployment than that in the past In order to cope with this, social security,including social insurance and social welfare, was created as a mutual insurance sys-tem This serves to help ensure more equality in distribution From the perspective ofmotivation, participation in social insurance system is based on self-interest, aiming

at security for insurance subscribers through a system that offers it in time of need.Another factor of distribution by need is based on a one-sided other-regardingfactor: altruistic motivation This is assistance to others who cannot be expected

or anticipated to offer such distribution in return Part of this arises from the expansion phenomenon mentioned earlier; however, determining its strength remains

self-an issue From the perspectives in this book, it assumes importself-ance when we examinethe motives that support social security systems and their future (Chap.9)

2.6 Chapter Conclusion

The task of this chapter was to organize the framework and topics involved in sidering the factors regulating the distributive structure, distributive rules, and theirmodern direction We can summarize the following points made in this chapter:(1) Human beings cooperate in production to ensure survival An important condi-tion for cooperation is the existence of rules regarding the distribution of laborburden and products and people’s consent to these rules

con-(2) An important factor that regulates distributive rules lies in the survival purpose

of each individual, i.e., each individual’s drive to survive and reproduce.(3) The deciding subject of distributive rule has changed from the individual to thegroup, and the decision criterion has changed from compulsory to voluntaryagreement

(4) In this process, distributive objects have changed from products to those taining resources

con-(5) Distributive rules for resources and outcomes are moving toward “some degree

of equality.”

(6) This degree of equality is defined by three factors: changes in the object subjectview, changes in the fairness view, and increasing requests for distribution byneed and mutual security

The following chapters consider each of these issues in detail Part I considersthe basic structure or framework of distributive rules Who decides the rules or theproblem of the deciding subject of the rule is addressed in Chap.3 Chapter4discusseshow societies decide upon these rules, that is, the problem of the decision-making

2.6 Chapter Conclusion 23criterion Chapter5explores the issue regarding the entity for whom we decide, that

is, the object subject problem

Part II examines four important problems concerning modern distributive rules at

a more concrete level Land distribution as a problem of natural resource distribution

is discussed in Chap.6 Chapter7analyzes education fees as a distributive problem

of natural resources Chapter8explores profit and wages as a distributive problem

of cooperative products Finally, Chap.9considers social security as a distributiveproblem of our motives of self-interest and human fellowship Thus, Part I, containingChaps.2 5, discusses the general determinants and their possible impacts on socialdistributive rules, that is, mainly the political sphere at the second basement floor.Meanwhile, Part II, containing Chaps.6 9, discusses some issues introduced in Part I,the actual forms of and problems with several important distributive rules today fromthe perspective of the superstructure—from land to social security motives—focusing

on the direction of change and the reason why they are subject to change

Supplement to This Chapter: On the Significance of the Development of ProductivePower as a Factor of Social Change: Critical Analysis of Marx’s and Engels’ ViewMarx considers several issues related to changes in distributive rules concerningnatural resources and products He pays much attention to class structure and pro-ductivity as their determinant factors In the following, as a supplemental discussionregarding the problem of distributive rules, we consider Marx’s understanding ofcapitalist ownership on the basis of his primitive accumulation theory and surplusvalue theory He arrives at the inappropriateness of capitalist ownership, the privateownership of productive goods, on the basis of these theories; hence, they requireexamination as a leading, competitive idea with respect to the types of social structure

in civil society

1 Unfairness Problem (1): Primitive Accumulation Theory

Marx refers to the necessity of reform to the capitalist distributive structure Hisargument proposes two theories that offer a different perspective on the necessity ofreform: primitive accumulation theory and surplus value theory These theories aim

to state the inappropriateness of the origin of the capitalist contractual relationship

as well as its consequences The unfairness of its origins and the unfairness andinefficiency in the production process are supposed to serve as proof of the necessity

to reform the social system, particularly the distributive structure of society.Primitive accumulation theory, which argues that early capitalists ejected farm-ers from their land with help from the government, contests the legitimacy of theresource ownership structure that forms the basis of the existing distributive structure

by blaming this government’s intervention at civil society’s initial institutional ing point However, this discussion is offset by Marx’s own understanding of eithersocial development itself or the necessity of historical developments in productivity.According to him, the social transition from a feudal system to a capitalist one andthen to a socialist one is inevitable to realize the economic goal of humankind, which

start-is the development of productivity increase and also the more equal dstart-istribution of

24 2 Overview of the Problem: Socioeconomic System …its fruits For him, this transitional sequence is a historical rule, while a capitalisteconomy effectively works to increase productivity better than any previous sys-tem—through harsh competition on the market Thus, it accomplishes its historicalrole despite being accompanied by problems of unfairness.

Thus, the early-stage accumulation theory formulated by Marx may be viewed

as a critique of the unfairness of this process but cannot provide a strong appraisal

of the social system itself This process may support demand for some kinds ofcompensation so long as historical evidence permits it, but as a long time has alreadypassed, it will probably not effect a revolutionary change of the system

Therefore, why not try another theory of critique—that of surplus value? Such

a theory should be stronger because this problem seems to have continued to workthrough the capitalist process of that system until the present day If a majority of thepeople today, mainly workers, regard unfairness as serious enough, the battlefieldcan be changed to a new one—whether a socialist system or some other kind Wewill examine this theory next

2 Unfairness Problem (2): Surplus Value Theory

In Marx’s arguments, surplus value theory aims to show both the unfairness andinefficiency of the capitalistic production and distribution system Regarding unfair-ness, the system is based on the “distribution according to contribution” principle,which would be chosen by anyone However, Marx points out that it does not work

as implemented because of another principle, that of “freedom of contract,” whichenjoys superiority in the market economy mechanism because of bargaining powerdisparities These are of advantage to the employer or entrepreneur, creating unfairdistribution of income between them and employees Marx calls this uneven distri-bution “exploitation.” He considers this metamorphosis of freedom into exploitation

to be inevitable in a society with a market mechanism Exploitation destroys the ciple of distribution according to contribution, which is supposedly a higher levelprinciple, which can motivate people to protest and even revolt Thus, he shows thatthe fairness of distribution is necessary for social transformation

prin-This problem of unfairness worsens as the number of employed people rises, thusincreasing their power Marx posits the emergence of another factor, economic cyclesthat harm everyone, most of all the working class As such downturns grow larger,more people are harmed or come to recognize the potential for harm and thus support

a socialist system instead, he thinks

In his transformation theory, the inefficiency of production and unfairness indistribution plays important roles in spurring a socialist transformation

Unfairness and inefficiency were supposed to grow together in Marx’s idea Inretrospect, however, both factors are ameliorated today under policies addressingbusiness fluctuations and providing social security A question thus arises Moreconcretely, first, regarding the extent of these factors, their unfairness or inefficiency,and the type of reformation they relate to Second, regarding the weight the two factorshave in shaping the reformation As for the latter, if either one lags in influencing theformation of the will, would the transformation not occur?

2.6 Chapter Conclusion 25Thus, the question remains with Marx as to how to gage the importance of therecognition of unfairness or inefficiency as a trigger for the transformation of society

or distributive rules If people could recognize the problem clearly enough, would itnot happen before the last days in the stepwise reforms? This question is not whollydealt with in this book; however, Chap 8 considers profit and wage distributionproblems concerning the recognition of fairness in distribution in the market economymechanism

Regarding the above argument, another problem awaits an answer, namely, thequestion regarding actual choices made in the process of reformation Is there nopossibility of a majority of the people in society deliberately choosing from theirown free will “the system of exploitation as having unfairness, the capitalist society”after careful consideration?

This is a possible problem even if the working class constitutes the majority ofsociety The possibility of consciously choosing a capitalist society may seem con-tradictory to the working class’ own interests; however, in reality, it is not necessarily

so The assured standard of living in a society and the magnitude of possible mobilitybetween the poor and the rich are factors that shape people’s choices When these twofactors are sufficiently high, would not social members, and possibly the workingclass that constitutes the majority, choose a regime that allows exploitation becausethey perceive that the risk of “falling into the poor” is alleviated and “the possibility

of rising to the rich” exists? However, because “exploitation” is allowed, if a societymember is an employee, they cannot obtain a “rightful” reward for their own work.Nevertheless, if people are at or above an acceptable minimum standard of living, arethey not likely to choose such a society as their own survival strategy? The answermay depend on how risk-averse an individual is and how risky the society is Thisquestion is not dealt with in this book but may be worth noting when studying Marx’stransformation theory against the backdrop of today’s conditions

3 Inefficiency Problem: Development of Productivity and Changes in SocietyMarx and Engels describe the basic factors of social change and the meaning of thetwo major classes in capitalist society as follows: “The bourgeoisie, historically, hasplayed a most revolutionary part”,15and adds “And for manufacture and the earlieststage of development of big industry, private property was the only possible propertyform; the social order based on it was the only possible social order”.16

15Manifesto of the Communist Party by Karl Marx and Frederick Engels February 1848 Written:

Late 1847; First Published: February 1848; Source: Marx/Engels Selected Works, Vol One, Progress Publishers, Moscow, 1969, pp 98–137; Translated: Samuel Moore in cooperation with Frederick Engels, 1888; Transcribed: by Zodiac and Brian Baggins; Proofed: and corrected against 1888 English Edition by Andy Blunden 2004; Copyleft: Marxists Internet Archive (marxists.org) 1987,

2000, 2010 Permission is granted to distribute this document under the terms of the Creative Commons Attribution-Share-Alike Lic, p 15.

16 Ibid., 48.