Chapter ǴǶ: Kirzner on the Morality of Capitalist Profit ȃȀȄmirages. John Rawls (ȀȈȆȀ) may have been wrong in writing about rec-
tification of the natural distribution and in setting forth his “difference
principle” of distribution, but he was not writing nonsense.
Let us milk the Wilt Chamberlain example further. Chamberlain’s
large income flows from no special moral merit; he just enjoys the good
luck of possessing talents that happen to command a high price. We might
further complain about the bad taste among fans that confers big rewards
on not particularly meritorious sports figures.
InĻe Constitution of Liberty(ȀȈȅǿ, chap.ȅ) F.A. Hayek does face
the criticism that a free-market economy confers material rewards in an
unjust way. Ļe market values of the services of people and their property
depend on many circumstances and seldom correspond to people’s moral
merit. Some defenders of the market system deny the charge, replying
that the market does indeed, if only in a rough and ready way, distribute
rewards in proportion to merit. Hayek warns against this reply:
Any attempt to found the case for freedom on this argument is very
damaging to it, since it concedes that material rewards ought to be made
to correspond to recognizable merit and then opposes the conclusion
that most people will draw from this by an assertion which is untrue. Ļe
proper answer is that in a free system it is neither desirable nor practicable
that material rewards should be made generally to correspond to what
men recognize as merit and that it is an essential characteristic of a free
society that an individual’s position should not necessarily depend on
the views that his fellows hold about the merit he has acquired. (ȀȈȅǿ,
pp.Ȉȃ–ȈȄ)Hayek goes on to examine the concepts of value and merit. He con-
siders the advantages (connected with information and incentives) of let-
ting market values guide people’s decisions about how to use their creativ-
ity and their other abilities. He asks what institutions would be required
for trying to implement the alternative principle of distribution according
to moral merit. He explores the psychological consequences of a state of
affairs in which material rewards were supposed to be clear indicators of
moral merit. His exercise in comparative-institutional analysis leaves the
thoughtful reader recoiling in horror at the consequences of radically non-
market-oriented methods of distribution. His whole chapterȅis worth
pondering at length.
On ethical grounds, nevertheless, a critic might question whether a
person is truly entitled to whatever he has created through alert discovery