Stephen Metcalf has a must-read essay in Slate about Robert Nozick and the libertarian idea that market outcomes are morally inviolable:
Nozick writes:"Wilt Chamberlain is greatly in demand by basketball teams, being a great gate attraction. (Also suppose contracts run only for a year, with players being free agents.) He signs the following sort of contract with a team: In each home game twenty-five cents from the price of each ticket of admission goes to him. (We ignore the question of whether he is "gouging" the owners, letting them look out for themselves.) … Let us suppose that in one season one million persons attend his home games, and Wilt Chamberlain ends up with $250,000, a much larger sum than the average income and larger even than anyone else has. Is he entitled to his income? Is this new distribution D2 unjust?"...
[W]hile clever, the Wilt Chamberlain argument is maybe a little too clever—i.e., what seems on first blush to be a simple case of freedom from interference is in fact a kind of connivance. Anarchy not only purports to be a defense of capitalism, but a proud defense of capitalism. And yet if Anarchywould defend capitalism unashamedly, why does its most famous argument include almost none of the defining features of capitalism—i.e., no risk capital, no capital markets, no financier? Why does it feature a basketball player and not, say, a captain of industry, a CEO, a visionary entrepreneur? The example as Nozick sets it out includes a gifted athlete (Wilt Chamberlain), paying customers (those with a dollar to see Wilt play)—and yet, other than a passing reference to the team's "owners," no capitalist!
In Nozick's example, we know what portion of every ticket (25 cents) represents the monetary equivalent of every paying customer's desire to see not the game itself but Wilt Chamberlain play in it. Bearing in mind that all thought experiments beg our indulgence without requiring our stupidity, notice that, in order to abstract out this allegiance from allegiance to the team, to the sport, etc., and give it a dollar figure, Nozick has assigned what amounts to a market price to Wilt's talents while also suggesting the price was achieved by negotiation between Wilt and the owner. Now, here we must pause, and note that "price" is not an incidental feature of a libertarian belief system—it is what obviates the need, beyond enforcing the basic rule of law, for government. To a libertarian, price is, in effect, the conscience of society finding its highest expression in every swipe of the debit card. Just as the thought experiment, "If there were purple cows on the moon, they would certainly be purple" tells us nothing about the moon, cows, or the color purple, assuming a world in which labor and management arrive at gentleman's agreements—and in which those agreements capture the precise value, down to the penny, of labor's marginal product—tells us very little about justice.
Put another way, Nozick is cornering us into answering a ridiculously loaded question: If every person were a capitalist, and every capitalist a human capitalist, and every human capitalist was compensated in exact proportion to the pleasure he or she provided others, would a world without progressive taxation be just? To arrive at this question, Nozick vanishes most of the known features of capitalism (capital, owners, means of production, labor, collective bargaining) while maximizing one feature of capitalism—its ability to funnel money to the uniquely talented. In the example, "liberty" is all but cognate with a system that efficiently compensates the superstar.
As it happens, Peter Whoriskey has written an excellent report in the Washington Post nicely complementing Metcalf's point. Woriskey, citing a detailed examination of tax records, shows that superstar athletes, media personalities, and other Chamberlin-like figures account for just a tiny share of the richest 0.1%. Overwhelmingly, the rise in inequality is a phenomenon of rising executive pay. Whoriskey details what the rise in inequality actually does look like:
It was the 1970s, and the chief executive of a leading U.S. dairy company, Kenneth J. Douglas, lived the good life. He earned the equivalent of about $1 million today. He and his family moved from a three-bedroom home to a four-bedroom home, about a half-mile away, in River Forest, Ill., an upscale Chicago suburb. He joined a country club. The company gave him a Cadillac. The money was good enough, in fact, that he sometimes turned down raises. He said making too much was bad for morale.
Forty years later, the trappings at the top of Dean Foods, as at most U.S. big companies, are more lavish. The current chief executive, Gregg L. Engles, averages 10 times as much in compensation as Douglas did, or about $10 million in a typical year. He owns a $6 million home in an elite suburb of Dallas and 64 acres near Vail, Colo., an area he frequently visits. He belongs to as many as four golf clubs at a time — two in Texas and two in Colorado. While Douglas’s office sat on the second floor of a milk distribution center, Engles’s stylish new headquarters occupies the top nine floors of a 41-story Dallas office tower. When Engles leaves town, he takes the company’s $10 million Challenger 604 jet, which is largely dedicated to his needs, both business and personal. ...
Dean Foods offers a better comparison than most because fundamentally it hasn’t changed.
The dairy business is still the root of the company; it was on the Fortune 500 by the late ’70s and remains there today. It grew then and more recently through acquisition.
Moreover, both chief executives — Douglas and Engles — could boast records of growing the company and profits.
From 1970 to 1979, while Douglas was the chief executive, sales at Dean Foods tripled and profits increased tenfold, to $9.8 million, according to company records. Similarly, from 2000 to 2009, sales at what would be Dean Foods had roughly doubled, and so had profits, to $228 million. (Engles became chief executive after the company he led bought Dean Foods in 2001 and adopted its name.)
Yet there are vast differences in the way the two men were paid, even when you adjust for the effects of inflation.
In the late 70s — 1977, 1978 and 1979 — Douglas made about $1 million annually in today’s dollars. The largest part of that was a salary; some came from a long-term incentive based on the stock price that would not mature until he retired.
By contrast, in the late 2000s — 2007, 2008 and 2009 — Engles averaged $10.5 million annually, most of it in stock and options awards and other incentive pay, according to proxy statements. After ’09, which was a particularly bad year, Engles’s compensation dropped to $4 million in 2010.
If one wants to mount a Nozickian moral defense of unvarnished inequality, these are the sorts of facts one ought to explain. Why is Gregg L. Engles that much more worthy than Kenneth J. Douglass, despite having presided over less impressive growth?