1 See, for example, Foot, Philippa ‘Morality as a System of Hypothetical Imperatives,’ in her Virtues and Vices (Berkeley, CA: University of California Press 1979)Google Scholar.

2 Hereafter all references will appear in the body of the text.

3 Leviathan, chapter 15, paragraph 41 of the 1650 edition.

4 I discuss this gesturing in ‘Two Faces of Contractarian Thought,’ forthcoming in Peter Vallentyne, ed., Contractarian Moral Theory: Essays on Gauthier. See Leviathan, chapter 15, paragraphs 23 and 24 on equity.

5 See Gregory Kavka’s review of Gauthier’s book forthcoming in Mind which essentially makes this point.

6 I would argue that this notion of partiality is not an exclusively capitalist idea; it is at the heart of Marx’s argument using the labor theory of value that the laborer is exploited by the capitalist.

7 David Copp has suggested an interesting response to this argument: Consider that Mabel couldn’t earn the $20 without Abel’s help, but could only earn $10. This means the cooperative surplus is $10. Isn’t it fair to split it, so that her final share is $15 and his is $5- exactly the MRC division? This way of looking at the example is revealing. Abel is trying to argue that his $400 should be ‘counted’ in determining his share of the profits more than once if his partner contributes more than he does. Abel is saying to Mabel that his $400 not only allowed her to reap high profits from her $400, but that it also allowed her to reap profit from her $200. Whenever Mabel increases her investment share, Abel smugly points to his initial contribution to argue that it played a role in the return which that share was able to make. But while it is true that Mabel could not have earned the $20 without Abel’s help, it is equally true that she could not have earned it without the help of her own $400 contribution. So why does Abel’s $400 investment entitle him to claim a portion of the profit from the additional $200, whereas her own $200 investment yields no such entitlement?

8 Consider the following argument by Mabel for yet another principle dividing up cooperative profits: ‘While it is true,’ she could say, ‘that from an investment of $400 from Abel and $600 from me, $50 is the cooperative surplus, and while it is true that both of us are equally necessary to securing this surplus, we do not play equal roles in securing the amount of this cooperative surplus. My contribution yields 2/3 of that surplus, and Abel’s yields 1/3. Hence, of that cooperative surplus, I should get $33.33 (2/3 of $50) + $30 (what I could have made on my own), and he should get $16.66 (1/3 of $5) + $20 (what he could have made on his own), or $63.33 for me and $36.66 for him.’ Note that on this way of determining profits, Abel receives less and Mabel more than they would receive from either the MRC principle or the proportionality rule. So now we have a third rule of distributive justice, which is defended by an argument which has the same ’ring of fairness’ as the arguments for the other two principles.

9 See David, Braybrooke ‘The Maximum Claims of Gauthier’s Bargaining: Are The Fixed Social Inequalities Acceptable?’ and 1nequalities Not Conceded Yet: A Rejoinder To Gauthier’s Reply’ (Dialogue: Canadian Philosophical Review 21 [1982]411-30, 445-8)Google Scholar.

10 For example, see Hirshleifer, Jack Price Theory and Applications, third edition (Englewood Cliffs, NJ: Prentice-Hall 1984), 176-7.Google Scholar

11 See Ostrow, Joseph M. ‘The No-Surplus Condition as a Characterization of Perfectly Competitive Equilibrium,’ Journal of Economic Thought 22 (1980) 183-207;CrossRefGoogle Scholar and Makowski, Louis and Ostrow, Joseph M. ‘Vickrey-Clarke-Groves Mechanisms and Perfect Competition,’ Journal of Economic Theory 24 (1987) 244-61CrossRefGoogle Scholar.

12 The core is a notion in game theory defined as a set of agreements among players which (1) is Pareto-optimal; (2) cannot be bettered, from the point of view of any one player, by going it alone; and (3) cannot be bettered, from the point of view of some proper subset of players, by leaving the agreement set and forming an independent coalition. Note, therefore, that in the core each individual player and each coalition must receive its non-cooperative maximin payoff. For a more complete discussion, see Michael Bachrach, Economics and The Theory of Games (London: Macmillan 1976), 124ff. One might diagnose Gauthier’s mistake in his contractarian methodology as one of ignoring (3) above; the rational solution to a bargain depends not only upon how much each could get by herself, but also upon how much each could get if she joined alternative coalitions.

13 See Nozick’s Anarchy, State and Utopia (New York: Basic Books 1974), chapter 2, and my Hobbes and the Social Contract Tradition (Cambridge: Cambridge University Press 1986), chapter 6.

14 However, despite its market orientation, Gauthier may dislike my reinterpretation of the contract problem, since in his book he restricts his analysis to the situation in which an individual only has the option of joining one society (although he admits the possibility of having more than one option in ‘The Social Contract: Individual Decision or Collective Bargain?’ in Hooker, Leach and McClennan, eds., Foundations and Applications of Decision Theory, vol. II (Dordrecht, Holland: D. Reidel 1978]47-67). In terms of my discussion above, this would mean that individuals would be prevented from forming alternative coalitions of cooperators, with the result that there could be only one societal investment opportunity for each individual. But why should we restrict the contract problem in this way? To do so is to disallow the possibility of an obvious market solution to the problem of division in cooperative situations. Nonetheless, suppose we accept Gauthier’s unargued-for restriction. It is still the case that the MRC division is in trouble, because even within one society people have multiple cooperative opportunities, and are thus in a market. To see this, suppose Mabel is irritated by the Gauthier division and hears about another person, called Gable, who has $400 and who wishes to invest it with the help of a partner in another money market fund which also requires at least $700 to be established. (Again, suppose for the sake of argument that Able and Gable are prevented from pooling their resources, and no person other than Mabel can or will invest with either of them.) She reasons: I can invest $300 with Abel and $300 with Gable, and receive more interest in total than I would receive had I invested all $600 with Abel. (She receives $10 more.) She receives more because she is now the lower-investor relative to each of them, and is thus able to enjoy some of the benefits produced by their higher investments. Given the advantages which the MRC principle gives to lower contributors, people will find it rational, whenever possible, to distribute their investments such that contributions to cooperative endeavors are equal. And to the extent that people succeed in this strategy, they will be mimicking the distribution according to the proportionality principle because whenever people invest with others on equal terms, distribution according to the MRC principle and distribution according to the principle of proportionality are the same!

So if people in Gauthier’s contract situation believe that they will have competing opportunities to engage in cooperative endeavors (as he defines them) in the only society which they are allowed to join, then a market for cooperators in non-market situations exists for them, and the large investors, in virtue of their resources, will be highly valued in this market. The large investors can use this fact to gain bargaining clout. Specifically, they can say to the lower contributors: ’1ook, you might as well accept our proportionality principle because, given the existence of this market, we have a strategy for ensuring that we get (at least) what it would distribute to us (and maybe more) even if the MRC principle is selected.’

15 This idea grew out of correspondence with Robert Sugden.

16 In this paper, all references to Rawls’s views are to those put forward in A Theory of Justice. His Dewey lectures (Journal of Philosophy [1980]) and certain recent work contain modifications of his views which make it doubtful that he continues to endorse the meta-ethical proposals of the book.

17 See TJ 253; and see, in general, section 40.

18 See my ‘Contracts and Choices: Does Rawls Have A Social Contract Theory?,’ Journal of Philosophy 77 (1980) 315.

19 In Rawls’s words, ‘…it is clear that since the differences among the parties are unknown to them, and everyone is equally rational and similarly situated, each is convinced by the same arguments. Therefore, we can view the choice in the original position from the standpoint of one person selected at random’ (TJ, 139, my emphasis).

20 See Gauthier’s ‘The Social Contract, Individual Decision or Collective Bargain?’ in Hooker, Leach and McClennan, eds., Foundations and Applications of Decision Theory, vol. II (Dordrecht, Holland: D. Reidel 1978), 47-67.

21 I am indebted to Thomas Nagel, who pointed out this possibility to me.

22 See Rawls’s ‘Justice as Fairness: Political not Metaphysical,’ Philosophy and Public Affairs 14 (1985) 223-51.

23 I want to thank David Copp, Carl Cranor, Peter Danielson, David Dolinko, Christopher Morris, Stephen Munzer, Joseph Ostrow, Robert Sugden and especially David Gauthier for their comments and help during the writing of this paper. (I hope to reciprocate.)