Abstract

The idea that pushing for more equality comes at a cost in terms of economic efficiency is widely accepted. Underpinning this idea is the premise that some of the most productive members of society will work less if we lower their pay. If this is true, some argue, it justifies paying the most productive a premium to work, provided doing so benefits everyone. This chapter argues that the standard version of the incentives argument suffers from two important blind spots. First, it assumes that the comparative advantage of the most productive members of society is rooted in their natural talents, that is, in a factor exogenous to the production process. Second, it adopts a static framework to analyze the bargaining process in which incentive payments are negotiated, where static means taking all informational inputs from the same moment in time. The chapter uses the debate between John Rawls (1999) and G.A. Cohen (2008) to illustrate the normative repercussions of making these two assumptions. The chapter qualifies as unjust incentive payments that reward individual productivity due to specialization rather than to natural talent. In addition, it argues that individuals would not be in a position to obtain such incentive payments if bargaining took place before rather than after the acquisition of specialized skills. Finally, the chapter discusses the objection that eliminating this type of incentive payments would be inefficient.