“Rescuing Justice and Equality” vs. Rescuing Wall Street: Too Big To Be Unfair

by John Holbo on January 31, 2009

Like Chris, I don’t find a lot in Chapter 2 of Cohen’s book that I didn’t already find in Chapter 1. It seems an attempt to make the basic argument more sharp and technical, without actually making it more plausible or clear. No harm done, I suppose.

So let me try to make a different sort of connection, ripped from the headlines. Cohen is concerned that a certain sort of ‘kidnap’ case makes trouble for Rawls. Basically, the trouble is this: you might describe a policy of paying off kidnappers as prudent – wise, rational – but you wouldn’t call it just or fair. There is a problem using actual kidnap cases to illustrate, because they tend to get lurid in irrelevant ways. And it may seem tendentious to port conclusions about kidnap cases directly over to the tax and social policy system. It invites the question: are you just assuming that capitalism amounts to mass kidnapping? It occurs to me that our contemporary bailout worries provide better and clearer illustrations of what Cohen is really getting at. So here goes.

Why throw taxpayer money at these undeserving fatcats? The ‘too big to fail’ argument is always going to be: yes, it’s unfair; but circumstances being what they are, the little guy will be even worse off if we don’t.

Let’s just suppose you accept this as economically factual, in a given case. (Even though this is obviously not obvious, in these very complicated cases.) Let’s suppose, also, that you accept that some given, candidate litter of needy fatcats got into this mess with the best will in the world. They weren’t planning on forcing everyone else to pay bailout ransom; weren’t intending to sneakily socialize the downside of risk while keeping the upside comfily private; weren’t setting out to leverage the fact of their status as ‘too big to fail’. They didn’t mean to kidnap their own fat selves, in effect. It’s a big, terrible accident. In fact, no one could have seen anything like this coming. (Really this is the very antipodes of obvious, obviously. But suppose for the sake of argument that you believe it. I am coloring the situation in better than the best possible light, from Wall Street’s perspective. The point is to show that even the best light isn’t going to be good enough.)

Cohen’s point: you might decide the best thing to do is bail out Wall Street. Again, on the strong assumption that the little guy will indeed be worse off, otherwise. Prudence and self-interest demand it, and if it really was just a totally unforeseeable accident that makes it even easier. But you wouldn’t call it fair or just. Most everyone is willing at least to consider ‘too big to fail’ arguments’, but no one even bothers to make ‘too big to be unfair’ arguments about policies that disproportionately advantage the already wealthy. When you think about why that is, you understand what Cohen is saying.

This seems like a small point but it seems to me it does cut pretty deep against Rawls. It doesn’t necessarily show he is wrong to advocate the difference principle (nor does Cohen think otherwise). But it does show that the difference principle can’t be about what Rawls thinks it is: namely, the character of justice and fairness. At best, the difference principle points out a correct (plausibly appealing) policy path in an environment in which you can’t get justice or fairness. More specifically: it points out a correct path in an environment in which securing justice and fairness would be prohibitively costly in terms of other genuine values.

The difference principle may tell you how not to get either justice or fairness while still doing the right thing. This is so different from what Rawls thinks he is giving us that it is really striking.



Doctor Science 01.31.09 at 4:26 am

I admit to being one of those people so confused by Rawls’ premises that I cannot evaluate his conclusions. Or rather, not so much confused by his premises as unable to see how they correlate to reality as I know it.

Social and economic inequalities are to satisfy two conditions: (a) They are to be attached to positions and offices open to all under conditions of fair equality of opportunity

— which obviously means “no significant inherited wealth”, right? So Rawls must be already thinking of his “original position” as being nothing much like the society I live in, especially in its attitude toward property. And the fact that he calls it an “original position” makes me imagine he’s thinking of what you might call the natural human condition, living in small groups of hunter-gatherers and not having much inequality because there’s not much to own.

So I get confused, throw up my hands, and say, “whatever.” Philosophically.


Chris Bertram 01.31.09 at 7:47 am


Matthew Kuzma 01.31.09 at 8:51 am

This is tangential at best, but I’m looking for a solid argument in support of the bank bailouts, at least in principle. Most such arguments tend to talk about institutions that are too big to fail, but there isn’t a clear discussion of what that means, in more familiar terms. How exactly would it have been worse for the American economy if some of these companies had been allowed to collapse? Can you point me to any good material on this issue?


john holbo 01.31.09 at 10:37 am

Ah, so you did, Chris!


HH 01.31.09 at 11:22 am

You might just as well apply philosophical niceties to the behavior of Caligula as to the Masters of the Universe of Wall Street. The US government is attempting desperately to avert a massive economic collapse while preserving a corrupt political system that is manifestly unstable.

The grossly illogical attempt to keep the US banks in private hands is motivated by the fact that those private hands were passing out massive political donations to America’s coin-operated Congress. There is nothing “efficient” in an industry that destroys itself. Preserving this private banking system will simply invite another massive failure, because the next wave of regulation will be undone by a subsequent wave of corruption.

The existing financial/political system is grossly unjust in its fundamental workings: concentrated wealth undermines political restraints on further concentration of wealth. It is ludicrous to speculate on the “just” approach to preserving this corrupt monstrosity.


Marco 01.31.09 at 2:52 pm

@HH: well put and +1.

Too many musings on the financial crisis ignore the basic corruption at the heart of it, the prolific law-bending and -breaking that contributed to the situation that’s “affecting the little guy.” The collapse is a sign of a fundamentally broken system that sells itself as an eminently fair distribution of resources, when the only thing separating it from all other systems invented by humans for transferring resources, wealth and labor from the poor to the rich is that it has far better marketing. In that sense, the capitalist democracy orthodoxy is the most successful religion the human race has ever seen.

Philosophical considerations of fairness and justice to the side, it would be silly for those 99% of us not benefitting from the current system to even consider any solution that puts things back to the way they were. We should instead focus on accepting only solutions that take us towards a place where huge chasms between rich and poor are dampened and eliminated before they happen. If it takes yet more of our hard-earned money to achieve this, then so be it. But, let it go towards a useful goal; throwing our hard-earned money into a solution that gets the fatcats back on top with the poor in just enough comfort to prevent revolution is counterproductive. Inevitable, perhaps, but nonetheless counterproductive. If the rich want to continue to dominate us, let them do it on their own. We can at least prevent our hard work from helping them subjugate us.


lisa 01.31.09 at 3:55 pm

As someone who never quite accepted the difference principle (or at least the inequality-justifying apparatus right next to it), I find this example more dismaying than I would have expected. I want to jump to the defense of the DP and say that the DP *itself* still arises out of a fair process, and that’s what matters. It’s what it would be rational and fair for people to choose, etc. When spelled out, it could license Joe having a sailboat just because otherwise he would refuse to work hard enough for Schmoe–who doesn’t have the money even to rent a sailboat or take a vacation–to live in clean public housing rather than a hovel. What’s specifically fair about the difference principle is how it comes about rather than the details of how it is upheld.

I think if you read (through) the difference principle to: What’s wrong with inequality? Well, it leaves some people very badly off through no fault of their own. In fact, no one should be very badly off with respect to anyone else. So “inequalities should be arranged…” Yay! Everyone’s OK.

But then you’ve got the rest of it where it turns out that you *can* have inequality. You can have rich bankers, as Lefty said. To be charitable, I think you could argue that the bankers don’t have to be so *very* rich. We find the Paulson plan unsavory or all of this saving of bankers unsavory but is it all that different than these incentives we are hostage to anyway, the ones that require inequality. That is, the situation of the Paulson plan isn’t all that different from the status quo in a certain sense.

People tend to be sanguine about inequality, because they are so steeped in it perhaps.

I suppose this could just be a restatement of Cohen’s point. I’ve always thought the problem was the effects of inequality or the equal worth of liberty thing but maybe the core of the apple is a bit rotten.

(As for Pancho and Lefty I guess the bankers could say: The computers did it! And also: We didn’t know! Really we didn’t!)


John Emerson 01.31.09 at 6:38 pm

My understanding of “too big to fail” is “Tom and Daisy always win”. Tom an Daisy smash up things and creatures and then retreat back into their money or their vast carelessness. Tom and Daisy are ontologically necessary, like gravity or the conservation of matter and energy. The problem is that too often we think of them as contingent, and beat on, boats against the current, borne back ceaselessly into the past.


Jon Mandle 01.31.09 at 6:59 pm

As I interpret it, the difference principle tells us the terms in which a democratic society should debate the permissibility of a basic policy or structure that will likely result in an inequality in income or wealth. This is not as clear as it should be because some of Rawls’s statements may suggest that an inequality that satisfies the difference principle is required by justice. Still, in Justice as Fairness he speaks more or less consistently of “permissible inequalities.” So, given all of the assumptions that color the situation in “better than the best possible light” – including the assumption that the bailout will do more for the least advantaged than any other arrangement or policy – the conclusion should be that it is permissible (from the point of view of justice). Again, given the assumptions, that seems correct to me – I would say that the bailout is not unjust.

Now about those assumptions – the difference principle is supposed to apply to basic institutional schemes and policies. If there has already been – or continues to be – an injustice or an unjust scheme, we might be justified in adopting policies that would not be justified otherwise. But the difference principle is supposed to tell us to focus on the underlying institutions and structures that give rise to the injustice in the first place. So, to make the example work, you need to hold something like this – even though the existing financial system (including the scheme of regulation, taxation, etc.) results in meltdowns from time to time that require shifting trillions of dollars from taxpayers to fatcats, any other system (of regulation, taxes, etc.) would result in the least advantaged being even worse off. It may reflect the narrowness of my reading, but I don’t see anyone saying that. At most people say “what’s past is past” and “mistakes were made” and given the mess that we are in, we should throw money at the problem. Whatever the merits of that argument given where we are, this argument takes the institutional structure as given, whereas the difference principle is supposed to be evaluating exactly that.


quesaisje 01.31.09 at 8:06 pm

I think Jon Mandle has put his finger on exactly the aspect of the argument against the difference principle that has been troubling me. The examples given (the kidnapper, Lawson tax law, and the bailout) all start from an unjust situation (a crime, institutional wealth inequality, gross negligence) and fault the difference principle as applied within the givens of the particular situation. Why should I expect the difference principle to apply when dealing with a criminal, the institutionally advantaged, or the irresponsible? I thought the idea behind the difference principle was that it was to be used to craft policy and institutions in a negotiation carried out by honest, fair-minded citizens behind the veil of ignorance. It is not surprising that it performs shabbily when the negotiation is conducted among entrenched interests or after the injustice has been perpetrated.


JoB 01.31.09 at 8:23 pm

I’m with Lisa and John here, at least as far as they seem to actually want to understand the difference principle and what Rawls meant by it rather than go all emotional about it in some kind of nostalgia for the charitas-kind of fuzzy-warm morality (which led to much less egalitarianism than even the most brutal form of capitalism). I don’t, by the way, buy everything Rawls said but he deserves better than this; at least he tried to do something original.

The representation of bail-outs as a simple giving to the rich by collectivizing risk and keeping profit private is a gross simplification. There are 2 quite separable aspects of these bail-outs: preservation of the continuity of the institution & distribution of both downside and upside of these actions. Most current bail-outs do not, in fact, make this separation and as such the rich do indeed gain most from it. But it’s not because this is the fact of the moment that it couldn’t be done otherwise. It is perfectly possible to be bailing out the institution by nationalizing it and even financing the nationalization by a fiscal charge aimed at those that have profited from the huge profits of the pre-crash years which we now know to be nothing else than the fraudulous income of the biggest pyramid game ever (guilt doesn’t even have to come into this).

If so, the question is what the application of the difference principle would guide us to? Undoubtedly, I think, it would guide us to nationalization at least partly paid by profits made by private capitalists in the past 5 to 10 years. Their wealth is not only not at all helping anybody except that tiny minority – no it has been built up by violating a basic fairness (increase in income gap accompanied by the decrease of lowest incomes). The fact is that, as far as I can see, this is what Rawls would say: the present form of most of bail-outs is unjust because unfair (it is also what most economists not at Davos say).

Even more: a next question is what to do with the nationalized institutions? Also here I think Rawls indicates a path clearly distinct from the present one: break them up into a lot smaller units because big concentrations of power are bad for us for their intrinsic risk of putting a happy few in incomes unfairly high (and this is so whether communist or capitalist environments are the background).

The pathos of individual morality and ‘sins’ to some ‘feeling’ of justice just doesn’t get into it. If it would we would be having to endorse some comprehensive doctrine with some kind of ‘revealed’ absolute norm of personal morality which is precisely what we needed to escape after the Cold War and all of the wars before and after it.

(Lisa, I don’t think your sailboat example is correct – Joe’s higher income is just as it enables Schnoe with the distinct talent for working on sailboats, to earn a good living in a profession of his liking)


Sam C 01.31.09 at 8:26 pm

Dr Science at 1 said:

So Rawls must be already thinking of his “original position” as being nothing much like the society I live in, especially in its attitude toward property. And the fact that he calls it an “original position” makes me imagine he’s thinking of what you might call the natural human condition, living in small groups of hunter-gatherers and not having much inequality because there’s not much to own.

This is a common mistake, and totally understandable given the way Rawls’s thought is tangled up with the social contract tradition. But the original position isn’t any kind of human society at all: it’s a thought experiment designed to dramatise unbiased choice between possible human societies. So no, Rawls isn’t thinking of egalitarian hunter-gatherers. He’s trying to get us, people who live in and in many cases benefit from modern capitalist societies, to think about how we’d choose to live if we weren’t being distracted by what we personally get out of unjust arrangements. I don’t myself much like the answer he gives, but the question is surely the right one: What, impartially speaking, would be for the best? The OP is an investigative technique designed to help us answer it.


roy belmont 01.31.09 at 9:19 pm

“Too many musings on the financial crisis ignore the basic corruption at the heart of it”
Is it only there, or is that corruption endemic to the whole civilized ball of wax? Is it just the banks and their remora, or is it everywhere now?
My loopy two cents is the inequality of the natural world, cold and heartless as may be, will tend to reflect a natural order, and a larger harmonic imbalance. And if we can live within that harmonic imbalance, as we did for hundreds of thousands of years, with pretty much constant tension between the altruistic and immediate self-interest, we’ll be okay as long as the system is okay. But self-interest to the exclusion of all else is now the single-most prominent feature of modern humans. It’s the inequality of the natural world, yes, but without the human singing that kept us together all this time.
Once we’ve interrupted that harmonic imbalance with anthro-centered efforts at equality and stabilization, and unremitting dominance, any return to the field will reflect not just the original natural order but a filtered version of that dominance.
So skewing everything toward equality has allowed the marginal and unaltruistic to get into the center, from whence they now call for a return to the inequality of the natural order.
This won’t make any sense if you think of nature as simply chaotic and unordered.
Thwarting the Darwinian organizing of evolution, as we’ve done more more and successfully until now we’re basically running our own evolutionary path, and then opening things back up to the Darwinian as if that held the key to healthier living may look and sound like a return to that larger natural paradigm, but it isn’t.
It’s Darwinian evolution miniaturized, and adulterated, and controlled. So that the nastiness and inhuman greed of the money kings is not a return to savage nature etc, but a scam within a scam, masquerading as not being a scam.


virgil xenophon 01.31.09 at 9:57 pm

The dilemma I see for those advocating the “breaking up” of the larger institutions ala JoB@11 and the reinstatement of the Glass-Steagall Act, for example as others have at times proposed (which I favor, btw) is that the driving force behind gigantism in our financial institutions comes from outside the ability of our national government/society to control, i.e., foreign institutions whose size and heft threatened to gobble up all the smaller US financial competitors pac-man style, in defense against which was the creation of equally large omnibus US institutions to fend off such a possibility. The sale of Merrill Lynch to Bank of America would not have been possible without such the repeal of Glass-Steagall and other inhibiting regulations, for example, and was touted as laudatory (i.e., the creation of an even LARGER financial institution) in order to preserve jobs and stabilize the financial system. This is a problem for those who would apply Rawls’ concepts of fairness
to institutions only within our own borders.

I also think that JoB’s recommendation for monetary re claima from the beneficiaries of the profits generated from this financial house of cards prior to it’s collapse–however meritorious in abstract theories of “justice” and moral equity–would run afoul of not only hundreds of years of anglo-saxon case law, but of congressional approved statute law as well–the repeal/modification of which is well neigh politically impossible. So much for the tensile strength of the link between the real world and philosophy–political/social or otherwise.


virgil xenophon 01.31.09 at 10:14 pm

roy belmont/

Although I disagree with some of your conclusions, I see what you are driving at, and am not inhospitable to your argument, fwiw–an argument and line of reasoning not dwelled upon nearly enough by nearly enough, imo.


jholbo 02.01.09 at 3:06 am

“As I interpret it, the difference principle tells us the terms in which a democratic society should debate the permissibility of a basic policy or structure that will likely result in an inequality in income or wealth.”

I get it, but I think it doesn’t really cut against Cohen’s argument. Either the situation is ‘permissible’, in the sense that it is basically fair and just, or else the permission doesn’t concern fairness and justice, but some other consideration.

Pointing out that the principle concerns permissions rather than positive obligations blunts the point, but does not stop it from still being very sharp.


Chris Bertram 02.01.09 at 8:15 am

Cohen actually discussed the recent financial crisis in some passing comments at the Oxford conference, pointing out that some people blame the institutions and some people fault the dispositions of the greedy bankers. The trouble is, (and I can’t remember if I’m channelling Cohen beyond this point) that both of these aspects are part of any proper explanation of a big social phenonomenon. Rawlsians just ignore this and act as if outcomes can simply be read off from the incentive structure embedded in the instututional design with individuals (and their reasons, dispositions, attitudes) having no role to play.


Matt 02.01.09 at 2:56 pm

Are there any Rawlsians who say that, Chris? It would seem pretty simple-minded to me, and of course Rawls both thinks that the structure of society has a large impact on people’s sense of justice and their willingness to cooperate, and this this will tend towards cooperation in a just society. The argument for this is controversial, long, and in the sections of Theory that most people don’t read, so I don’t doubt that Cohen can get away with saying this, but it seems to me to be a pretty bad account of Rawls and also fitting with his patter of two annoying traits, first, acting as if the Difference Principle were the only egalitarian principle or aspect in Rawls and secondly acting as if the present system were in some way close to a fulfillment of a Rawlsian society or if we at least can’t know otherwise. Both are pretty sloppy, at best. I don’t think that that remark is one that’s really worth taking very seriously.


engels 02.01.09 at 2:57 pm

some people blame the institutions and some people fault the dispositions of the greedy bankers

An ecumenical suggestion: blame the greedy bankers who (with their mates in the Labour party) designed the institutions.


mpowell 02.01.09 at 4:46 pm

I don’t know. This is a pretty crappy criticism of Rawls. As in 18, Rawls spends a lot of time investigating what he thinks a society that followed his principles of justice would look like. You can’t theorize some very unlikely premise, somehow assume they hold in a Rawlsian society and then criticize Rawls based on the unsavory conclusions you draw from that.

The difference principle only needs to truly feel right in a society at least approximating Rawls’ ideal. I’m not sure our situation is hopeless, but we are definitely not there yet. To require that it not only give wise results but also just sounding ones in all possible circumstances is not really fair.


JoB 02.01.09 at 4:46 pm


What Matt-18 said, indeed! Why are you so passionata about personalizing all of this? As if there would be such a thing as ‘Rawlsians’ &, sorry for the Matt-repeat, as if Rawls can be accused as if the world order of the financial crisis was anywhere near the world order that he would have approved of.

But more importantly: whatever you & I believe of the dispositions of bankers is quite besides the point. Are we to give them mandatory brain surgery to remove this human trait in them? Or should we rather devise institutional means that prevent their greed to blow up in all of our faces. As much difficulty I have with the Original Position, it is at least not so naïve to ask human beings to enter into it as some kind of idealized type of Godly Being that is neither greedy, nor … Again, one of the assets of Rawls’ thought experiment, whatever elxe can be said about it, is that it avoids putting yet another of these comprehensive doctrines in place that can be used for passionate wars.


You’re undoubtedly right and more knowledgeable than poor non-Anglo-Saxon me ;-) I don’t expect BHO to come up with either of these things, not even in his 2nd term.

I am however of the persuasion that thinking about how we could handle this better is not invalidated by the fact the outcomes of that thinking could not be implemented in the short term. If, as some (not you) have suggested here, we would limit ourselves to a practical-only view of things: well we’d have to vote conservative over & over again. In fact, not changing the system at its core is surrendering to the massive corruption (our Reaganomy has become the biggest pyramid-game ever) that keeps itself as the fittest by making sure the system remains such that it plays into their strengths (maybe this is what Roy wanted to say).


rea 02.01.09 at 6:35 pm

A corporation is a tool, like hammer. You don’t melt down a hammer because it has been misused–you take it away from the person who misused it. We should be bailing out the banks–they’re useful tools and we need them to make the economy work–but we ought not to be bailing out the people who ran the banks into the ground, if we can avoid it.


Chris Bertram 02.01.09 at 7:19 pm

Matt #18 asks “Are there any Rawlsians who say that, Chris.”

Well yes. Here’s Thomas Pogge:

bq. One main reason for laying stress on the institutional structure is that while liberal values make demands both on institutions and on the conduct of actors (citizens, officials, associations and governments), the latter is in turn very largely determined, at least probabilistically, by the institutional scheme of penalties and incentives (the
“payoff matrix”) which these actors confront. Thus, for example, the extent to which basic rights are actually enjoyed in some society will depend on its legal system, on the organization of its police forces, and so on. Similarly, the distribution pattern of income and wealth, and thus the incidence of dependence and poverty, will depend on
economic arrangements such as the system of land tenure and the tax structure. The emphasis on institutions is then supported by the statistical fact that different institutional arrangements engender very different (and rather stable)
levels of crime, apathy, political and economic inequality, and so forth. (p.68)

Pogge, Thomas. “Liberalism and Global Justice.” Philosophy and Public Affairs
15, 1: (1986) 67–81.


Chris Bertram 02.01.09 at 7:25 pm

Oh and yes, Matt, Rawls does say all those other things too, which is why Cohen can press the charge of inconsistency against him. Hard to see, btw, that your comments have relevance to the matter at hand, which is whether Rawls makes the assumption that, _in their economic life_, people act as (law abiding) rational utility maximizers. The fact that the institutional structure also tends to socialize them so as to support those (putatively) just institutions is simply beside the point here.


roy belmont 02.01.09 at 8:10 pm

rea #22:
Like a hammer. Like a hammer that was used to jack some hard-working demi-shlub out of his life savings.
A hammer made of out of melted-down gold teeth purloined by resurrection men in the dead of night.
A hammer which has got an intentionally crooked handle.
A hammer which is rented out for more money than it’s worth, for more money that it will ever return no matter what.
A hammer whose peening surface is so pitted from ill use it poses a danger to innocent bystanders if used again.
It is a hammer which no longer fits the hands or meets the needs of the people for whom it was ostensibly manufactured.


Matt 02.02.09 at 12:36 am

Chris- I figured, soon after I posted, that you probably had Pogge in mind. I tend to think that Pogge is quite bad in his presentation of Rawls, and know that many others think that as well, but he is usually thought of as a Rawlsian so you’re right- there is at least one such person. I don’t think it’s a required reading of Rawls, the best one, or even the most common, though.

As for the “inconsistency” charge, I think it’s silly. To have a complex view that requires balancing a number of different aspects, which seems to me to be the better way to think of what’s going on in Rawls, is hardly to have an inconsistent one. It seems to me that what Cohen has done (and what you’re doing here) is to give your own particular reading to one aspect of the view, taken in isolation, to then see that your interpretation of that one aspect is, on this contentious reading, “inconsistent” with other aspects of the view, and then charge inconsistency. A more plausible interpretive approach, though, is to think you might be mistaken is your reading of the first aspect and to see if the various aspects can be made consistent, or so it seems to me. I think it can, as do many others. (Obviously this cannot be show in a blog comments. I think Norman Daniel’s paper, “Rawls’s Complex Egalitarianism” in the Cambridge Companion to Rawls is perhaps the best fairly short attempt at showing how this might be done and recommend it to people.) But, unless you can show that the other interpretations are implausible or that there is still inconstancy, the charge looks more like bad reading than anything serious. This is obviously, again, too much to do in a blog post, let alone a comment, but it seems clear to me that Cohen doesn’t do what would be necessary to show “inconsistency”, or make any serious attempts at it, in his published work before the current one. I don’t know if he tries to do more in the book under discussion- I’ve not read it- but I don’t think he makes even a plausible attempted in the earlier papers and book that the current one draws on heavily. So, the “inconsistency” charge seems to me to be a bad one.


Lisa 02.02.09 at 1:31 am

(Lisa, I don’t think your sailboat example is correct – Joe’s higher income is just as it enables Schnoe with the distinct talent for working on sailboats, to earn a good living in a profession of his liking)

Off topic, but I want to put in a little plug for collectively owned sailboats. Also, collectively owned shipyards. Because oh, what the hell.


Chris Bertram 02.02.09 at 8:22 am


You might want to look at the earlier thread


especially Chris Armstrong’s comment on Nagel and my response. Nagel isn’t Rawls, of course.

I’m not clear from what you write whether you:

(a) Deny that Rawls ascribes a different motivation to citizens when they act within the institutional framework to when they act to shape that framework, or

(b) Agree that he does, but deny claims of incoherence, inconsistency etc.



JoB 02.02.09 at 11:11 am


I’m sure that Matt is better informed than I am but let me respond non-technically.

(1) surely (b); there is nothing mysterious about citizens acting with a different motivation in a different circumstance. I, staunch atheist that I am, organized a catholic burial for my mother because I was confident that that is ‘what she wanted’

Rawls’ thought experiment is a very problematic part of his theory as far as I’m concerned but not because it asks humans to do something inhuman – we continuously act ‘as if’, the ability to make abstraction of our own particularities is exactly what makes us human.

(2) even if you would have a point on incoherence; it still doesn’t follow that you’re entitled to blast all of it (some conclusions hold good even if they’re wrongfully obtained from errors and false premises), and certainly not on the basis of a current state of affairs which is anything but the state of affairs that would pertain if Rawls’ conclusions were upheld


Chris Bertram 02.02.09 at 11:24 am

JoB (and mpowell for that matter): I really can’t see what your objections amount to. Are you trying to say that Rawlsian ideas simply have no relevance in non-ideal circumstances?


JoB 02.02.09 at 12:46 pm

Chris, sure they have relevance – it is not because an argument starts from an ideal setting that its conclusions are de facto irrelevant in real-life application (& I repeat: I’m not a big fan of Original Position & Veil of Ignorance thought experiment – the reason being that I think it is possible to get to the conclusion with less of a contractarian premise).

Is everything Davidson said irrelevant because he used thought experiments as a device? Does Swampman have to actually live for his point to be taken seriously?

Tell me: why are your answers always isolating one point suitably rephrased to support your innuendo? Many people above said very specific things in defense of Rawls and you can only come up with the blanket charges of incoherence and irrelevance? e.g. I answered your point directly & from a real-life example – why not point out why my answer fails, on your view, to address your charge? Maybe it does fail and if you show me: I would have learned something and that’s why I came over here.


JoB 02.02.09 at 12:51 pm

Ah yes, maybe that’s what you wanted to convey: the present non-ideal circumstances are not those of Rawls so what basis would you ever have to criticize the latter based on the former as they simply fail to connect. If there were a society adopting Rawls’ rules then the facts of that society could be used against his theory, for sure – so find us one and in the meantime let’s not condemn a bit of innovative thinking ‘as if it is the policy’ – or – ‘just because it has not become widespread policy’.


dsquared 02.02.09 at 12:57 pm

But more importantly: whatever you & I believe of the dispositions of bankers is quite besides the point. Are we to give them mandatory brain surgery to remove this human trait in them? Or should we rather devise institutional means that prevent their greed to blow up in all of our faces

But doesn’t this show exactly how there’s a real problem with the assumption of rational utility-maximisation in the original position? If it were the case that bankers were rational utility-maximisers, then the state of financial regulation in the USA pre-2008 would be more or less as good as it gets, because no banker on earth had any rational self-interest in blowing up the whole system. If it turns out that people are actually myopic, prone to wishful thinking and chasing short-term profits, then you need an entirely different financial system. And, importantly, if the kind of people that you attract into the financial services industry depends on the kind of institutional arrangements you have, then I think there’s a serious problem here.


JoB 02.02.09 at 2:07 pm


At the risk of being identified with something I have issues with (Original Position): no, that is not an issue for the Original Position argument as far as I can see. You and Rawls seem to be in agreement that we need another financial system. You and Rawls seem to agree that a financial industry is needed with institutional arrangements that are safe from myopic interests. So – on this basis how are you going to determine what changes are needed? By making abstraction of the specific myopic drives in specific situations and putting yourself in the other’s shoes. With this method you can rationally explain even to the myopic idiot that he’s better off if not being run by myopic idiots (assuming he cannot know on beforehand that he’ll be the myopic idiot in charge).

What’s your alternative? If not brain surgery, some kind of ‘Ten Commandments’ of how ‘the good person’ should behave?

At bottom there’s nothing very mysterious about the Original Position. We’re all in some type of it when we buy insurance (collectively or privately): we know we don’t need it NOW – but we are convinced that if we ever were in a position like THAT we’d want to have it THEN. That is not a rational purchase if we restrict ourselves to the NOW because it’s money out with nothing in but it still is the rational thing to do (for sure our actual insurance purchases are not rational in all details, Nobel prizes have been won on that score, but that does not mean that we cannot be rational about them if we take the time to think it through)


engels 02.02.09 at 2:30 pm

What’s your alternative? If not brain surgery, some kind of ‘Ten Commandments’ of how ‘the good person’ should behave?

You mean we’re not allowed to do both?


dsquared 02.02.09 at 2:41 pm

You and Rawls seem to be in agreement that we need another financial system

Just first up – unless you’re talking to him through a ouija board, or you come from a Twin Earth where “John Rawls” refers to Paul Krugman, can we be agreed that you can’t make such definite statements about what Rawls would or wouldn’t have said about synthetic CDOs?

With this method you can rationally explain even to the myopic idiot that he’s better off if not being run by myopic idiots

No, not at all (and by the way, if you start from the premis that the people who built up the financial structure of the USA were idiots, then you’re really not going to understand anything). What if there are some people who are very good at producing financial services, but who are much less risk-averse than the average? It could very easily be the case that you couldn’t at all justify to them that they were better off not being allowed to trade CDOs. What if working under one set of institutions actually changed peoples’ tastes in risk aversion?

The point here is that the “rational, self-interested” criteria in the original position are there for a reason, and the reason is to abstract from a lot of very difficult questions about actually existing bounded rationality and attitudes to risk. Once you start letting those in, a lot of the intuitions supporting the Difference Principle as a sensible way to organise anything get a lot weaker.

for sure our actual insurance purchases are not rational in all details, Nobel prizes have been won on that score, but that does not mean that we cannot be rational about them if we take the time to think it through

No that’s not right. Some risks are genuinely uninsurable.


Chris Bertram 02.02.09 at 2:52 pm


I don’t think that the rationality assumptions of the OP are relevant here since the matters under discussion concern the behaviour (a) of persons committed to justice in the “well-ordered society” and (b), to some extent, of people in the actual world. Sticking with (a) the issue concerns whether there is a psychological coherence to Rawls’s view that whilst citizens have duties to uphold just institutions (to see to it that those institutions realize principles of justice, to obey the law etc), their duties within those institutions are to obey the law but that, providing they do so, they have a permission to realize the best outcome for themselves without worrying about others (the institutions do the worrying for them, as it were).


quesaisje 02.02.09 at 2:59 pm

Why is it necessary to assume people are rational utility maximizers as part of the original position? When devising institutions from the original position isn’t it necessary to understand human beings as they are not as they ought to be? If it were otherwise, we wouldn’t need criminal justice. Isn’t it possible to devise just institutions while understanding that there is a spectrum of human behavior: rational utility maximizers, altruists, and greedy idiots? It is always easy to imagine a more just arrangement if the timber weren’t so crooked, but that doesn’t get us very far.


JoB 02.02.09 at 3:02 pm


We can be agreed so we can also be agreed that you don’t know that Rawls defends the present system. So that’s that then.

So bounded rationality is what you were referring to. Yes, that poses a problem but not to the extent that you earlier made it out to pose a problem (remember: I have issues with OP). If an institution has been contemplated with some distance by the contemplators the conditions of bounded rationality are not satisfied – that’s the point of critical thinking without which it even is impossible to make the point of bounded rationality in the first place. You underestimate all human endeavour, it seems.

Why do you quote a byproduct of a challenge and omit the challenge? I really don’t know if it’s factually true that some things are uninsurable but I do know that any insurance requires some kind of participant’s thinking that is at least close to the original position. And I do know that it is factually true that there are insurances.


dsquared 02.02.09 at 3:15 pm

Chris: so to make this concrete, under a), someone could be completely consistent with the duties of justice if he spent every single day working on ways to help Enron shift its liabilities off-balance sheet, or to design schemes which allowed large companies to reduce their corporation tax liability? Is that the sort of thing that’s being criticised here (in actual fact, the actually existing structured finance industry does always help itself to something like this sort of argument when defending itself in court cases).


harry b 02.02.09 at 4:23 pm

As long at is legal, yes. But, and this is a big but, Rawls is operating at the level of ideal theory, and says nothing about how we should act under non-ideal conditions (which I assume we are actually under). So, the answer is that if, in a just society, the behaviour described in #40 is legal, for Rawls we have a prerogative to pursue it. What the limits are of our prerogatives in our actual, unjust, society he just doesn’t say anything about.


dsquared 02.02.09 at 4:33 pm

I don’t think that’s going to make much of a difference; whatever the ideal tax code, then it’s going to have things like capital allowances in it (and thus there will be a tax-efficient and a tax-inefficient way to finance several important kinds of investment), and therefore there’s going to be a role for people whose job it is to minimise a tax liability. Accounting rules similarly – or what about someone like Alastair Campbell whose job it also is to present other peoples’ decisions in the best possible light?

(I wonder what the Law of Peoples would say about international tax treaties; on a cursory reading it would seem to me that Rawls wouldn’t recognise a duty for the Cayman Islanders to sacrifice their domestic financial services industry just in order to allow the USA to collect income tax).


Watson Aname 02.02.09 at 4:41 pm

If it turns out that people are actually myopic, prone to wishful thinking and chasing short-term profits.

If it turns out? That seems about as uncontroversial position as one might take on human nature.


Chris Bertram 02.02.09 at 4:44 pm

Yes, I’d go along with Harry’s way of putting it. The difficulty here concerns the extent to the institutional design of the just society incorporates assumptions about self-seeking behaviour by the talented. If it does and they then advantage themselves as legally permitted, Rawls will say that the resulting distributive outcome is just. Cohen will disagree.


Matt 02.02.09 at 4:57 pm

I think that (what Chris says) is a bit too fast (though mostly right) since of course just institutions can be undermined over time by means not seen when they were set up. People, in Rawls’s account, have a duty (and usually a desire) to maintain just institutions. So, if before the development of credit derivative swaps or whatever (nothing special about them, just picking an example) the financial markets were part of a just institution, but then someone figured out how to do certain transactions, CDS, say, and these allowed them to accumulate large amounts of money that both or either the difference principle wasn’t met anymore, fair equality of opportunity was undermined, or the fair value of the political liberties was not maintained, then it seems the correct response would be not that “it was legal so it was just” but rather that we had a less than fully just system since it wasn’t self-maintaining. now, no system will be perfectly just- we’ll always have to make modifications over time to maintain background justice. (I’m pretty sure Rawls says this somewhere but I don’t have any books with me.) Whether we call the actions of those developing and using fancy financial tools just or not will, I think, depend on a number of factors, but even if we don’t want to say the actions were unjust (we might or might not, I think) we can afterwords decide that the resulting modification to the financial system leads to injustice and have cause to change it.


Chris Bertram 02.02.09 at 5:18 pm

I think you’re thinking of “Basic Structure as Subject” Matt.


JoB 02.02.09 at 6:50 pm


I checked: the Law of Peoples doesn’t address it (at least not if the Index & my notes are enough to go by.

This being said maybe it’s not in the cursory reading but in the example itself that we have to find the detail-devil. The financial industry in tax paradises obviously isn’t a result of natural circumstance; it is the result of lack of regulation in US, Europe and elsewhere such that the wealthy can get away with things inaccessible to the many. If so it is the duty in the latter countries to avoid these sneaky ways. Sure, that would be bad for The Cayman Islands but, as you say, e.g. the US have no obligation to support their economies (unless they become so poor of the collapse of the financial industry that they need the help to be able to sort their stuff out).


Jon Mandle 02.02.09 at 7:25 pm

As I understood John’s example, it was supposed to illustrate how the best social policy might be recommended by the difference principle, but where that policy was not just – thus refuting the claim that the difference principle is a principle of justice. Now we’re asking not about the justice of a social policy but about the justice of individual conduct. And I’m not sure why Rawls is thought to hold that the only standard for evaluating the justice of individual conduct is its legality.

Cohen holds that the principles for evaluating institutions must be the same as those for evaluating individual conduct (if the difference principle applies to the one, it should also apply to the other). Rawls disagrees. But this is not to say that we can’t evaluate individual conduct at all or that the only standard is legality. For Rawls, however, any evaluation that we make of individual conduct must recognize the fact that there is a diversity of reasonable though incompatible values that people may permissibly pursue. That is, they cannot be expected fully to justify their goals and values to one another. Still, they do have to meet some threshold, and legality is surely part of it. But I don’t see why it is thought that Rawls holds that it is the only standard. (Admittedly, he doesn’t pursue “rightness as fairness” and spell out the standard for individual conduct in any detail. But then again, neither does Cohen beyond saying that the principles must be the same for institutions and individual conduct.)

So, as Daniel says, a just tax code will create various incentives, and I can’t imagine what would be unjust about a company simply hiring someone to figure out how to respond to those incentives. On the other hand, if they are exploiting some loophole in the tax code, even if legal, why shouldn’t Rawls say that doing so is unjust? Obviously, in concrete cases, there may be disagreement about whether some action is exploiting a loophole or just responding to an incentive. I don’t know whether Enron’s shifting its liabilities off-balance sheet was objectionable in this way, but it sure sounds sneaky – the kind of thing that very well might not be able to be publicly justified in the way I’m imagining, even if legal.

One more (somewhat pedantic) point to add to Matt’s example (#45). The parties in the original position are supposed to choose the principles to be used in evaluating social institutions. They don’t choose institutions directly. So as new financial instruments are invented and economic circumstances change, the same principles chosen by the parties (including the difference principle) may require different institutions, laws, regulations, etc. These kinds of transitions will expose loopholes that may not have existed or been noticed before.


dsquared 02.02.09 at 7:52 pm

On the other hand, if they are exploiting some loophole in the tax code, even if legal, why shouldn’t Rawls say that doing so is unjust?

Well let’s bring this down to a brass tacks example – I am pretty sure that Cohen would say that a plain vanilla tax-driven leasing transaction is unjust, Rawls as just.

The nature of this transaction is such –

1: the tax code recognises tax depreciation at a rate of 20% per year (pretty standard and likely to be a part of any fair tax code, otherwise industries that use capital assets are heavily disadvantaged).

2: Easyjet has profits of $0 (because it’s a startup) and wants to buy an A300 for $100m. The A300 is to be paid for in 5 annual installments of $20m, to keep the numbers really clear.

3: I have a personal income (from managing my hedge fund or something) of $20m.

4: Assume the rates of both corporation and individual income tax are a flat 25%.

5: British Airways has profits of $1bn and also wants to buy an A300.

Now, if leasing isn’t allowed, the effective cost of the aeroplane to British Airways will be $100m minus the tax saving = $16m per year (BA pays $20m to Airbus, but its tax bill is reduced by 25% multiplied by the tax depreciation). Easyjet would have to pay $20m.

But we can do a bit better than that. If I buy the jet, I can reduce my tax bill by $4m per year. If I lease the plane to Easyjet for $17.5m per year, I come out well ahead of the game.

There’ s a decent public policy rationale for allowing a leasing transaction like this – it stops the playing field from being tilted away from stratups like Easyjet without having to design all sorts of ad hoc fixes and such like into the tax system. Not only am I not breaking the law by engaging in this lease, I’m helping the tax system work as intended – the intention was always to allow a deduction for the purchase of capital assets, and there was no real intent to stop this deduction being used by companies that happened to be unprofitable in the current tax year. I don’t think anyone, even the HMRC and IRS would refer to a plain vanilla lease like this as a “loophole”; it’s a perfectly legitimate piece of tax planning.

But what would Cohen say about someone like me who’s a bigshot hedge fund manager who makes a point of going round doing lease after lease in order to reduce his total income tax liability to zero? Isn’t there another intuition (maybe right, maybe wrong, but defensible) that if I act too aggressively in carrying out certain kinds of transaction which can all individually be justified on clear justice’n’fairness grounds, but which have the cumulative effect of helping me personally at the expense of everyone else, then I’m not really playing within the spirit of the laws? But is any liberal at all, Rawlsian or otherwise, really going to say that I’ve got the right to carry out legal transactions, as long as I don’t exercise that right too successfully, with the taxman allowed to say ex post what counts as too successful?

(If this example hasn’t pushed it far enough and you still think I’m not being unfair as a leasing mogul, consider the case of a guy who does nothing other than grub around the world looking for companies in the position of Easyjet, in order to bundle up their capital investment programmes and sell them to rich men who are looking for a tax loss. Are we still going to say that he shouldn’t attract any opprobrium in polite society? But what’s he doing wrong? Certainly nothing that we’d want to change the institutions of society to prevent; after all, he’s helping a lot of startup companies get cheaper finance)


Watson Aname 02.02.09 at 8:05 pm

dsquared, in your example what is the necessity of extending such depreciation of capital assets to an individual at all? A corporation could perform the same leasing roll, right? Thinking about the “justice and equality” side of the above, can a solid argument be made to leave all that in the domain of corporate interests. I’m probably just being ignorant or missing something here.


dsquared 02.02.09 at 9:54 pm

Well, you could do that, but corporations are owned by people so it would be child’s play to structure round, and the only way to stop it would be to prevent corporations being owned by people. Basically, either Easyjet aren’t going to get their capital allowances, or someone’s going to pay less tax, and since people, as the Public Choice school always reminds us, are the ultimate incidence of every tax, it’s going to be a person who pays less tax.

Personally, I think leasing’s a good thing, but I think I’d have a hard time defending it as just to someone who thought it was burden-shirking. And the problem here is exactly the one that Chris and John have been discussing; someone, somewhere is basically going to refuse to put up his savings for investment in physical capital assets unless he’s given a tax break for doing so.


Watson Aname 02.02.09 at 10:06 pm

But if you literally can’t pull it out of a corporation without getting hammered on tax, does that not fundamentally shift the incentives a bit? Unless I’ve missed something, basically you’re arguing that certain people, by virtue of getting paid vast sums, are as individuals playing a role that is quite needed to ease capital expenditures for small companies. But part of the reason they get these vast sums in the first place is that they can bury the tax in ways like you describe. So it seems a little chicken and egg to me; if the money stays in a corporation of some sort there is no reason that it couldn’t be used in exactly the same way for leasing, is there? If you literally can’t pull it out of the corporation without a tax hit, people will get around that to some degree by utilizing corporate assets personally, but on the other hand they can’t shield it from liability (or probably they can in practice with the proper dance, but that could be addressed too). How is this inferior to what you describe? And from a justice point of view, it seems (but I’ve probably missed something) that this makes it much harder for said hedgie to walk away from an utter collapse with 10s of millions in a bank….


dsquared 02.02.09 at 10:29 pm

But if you literally can’t pull it out of a corporation without getting hammered on tax, does that not fundamentally shift the incentives a bit?

Not really; as long as you’re paying tax at the corporate level, you’ve got an incentive to avoid that tax; either you avoid the tax altogether or you reduce the extent to which you’re double-taxed. Also the same Rawls/Cohen issue arises – people aren’t going to put their savings into a corporate vehicle if the tax treatment is so onerous and that will have effects on the equilibrium rates of investment and therefore growth. Actually, the more I think about it, the more it makes sense to think of the incentives/compensation debate in Chapter 1 in terms of savings rather than labour income.


JoB 02.03.09 at 3:59 pm

Chris, Matt, Jon, Harry,

I learned something in your exchange above. It helps me to put my finger on the quarrel I do have with Rawls’ thought experiment. The quarrel is that it’s static and therefore too close to the original contractarian views, therefore open to challenges of ‘legalism’ and therefore also unable to deal with the evolving issues posed in a dynamic world.

One way to deal with this would be to put an obligation of individual moral conduct on each & everyone of us. If I understand correctly that’s what Chris is argueing, on behalf of Cohen – or so it seems. This can’t be the right solution for the reason Jon gives on behalf of Rawls quoted below.

Jon: For Rawls, however, any evaluation that we make of individual conduct must recognize the fact that there is a diversity of reasonable though incompatible values that people may permissibly pursue. That is, they cannot be expected fully to justify their goals and values to one another. Still, they do have to meet some threshold, and legality is surely part of it.

Such obligations are part of comprehensive doctrines and comprehensive doctrines are the 1st thing to get rid of if we are to satisfy the basic principle of a liberal society. We can’t expect the Christian and the atheist to subscribe to the same full justification for moral action (but we can expect them to have different full justifications for actions in an overlapping consensus).

So we have to find another way. I think (but have never been able to think it through) that this idea of overlapping consensus is more powerful as it can be something dynamic, evolving over time (allowing maybe the right place for the inescapable Darwinian element as well). Even then the issue remains that the principles, including the difference principle, are not as such part of what can be allowed to evolve (although the exact legal translation of the difference principle is something that would be allowed to evolve). But that’s something that maybe can be saved w/o static original positions as it can be seen as a precondition (environmental context) of what the boundaries for permissible evolution are.

Muddy waters (at least for me).


I am pretty sure that Cohen would say that a plain vanilla tax-driven leasing transaction is unjust, Rawls as just

Just can’t let go of that ouija board now, can you? ;-)


Sebastian 02.03.09 at 5:16 pm

“But if you literally can’t pull it out of a corporation without getting hammered on tax, does that not fundamentally shift the incentives a bit?”

But people don’t have to put into a corporation intitially if the tax burden is going to hammer them too hard. Now for you, perhaps that is a feature rather than a bug.


Pete 02.03.09 at 11:05 pm

Cohen and Rawls disagree on the fundamental point of the focus on the basic structure, and we’ll get to this topic next chapter. But I’ve had the nagging worry that Cohen’s arguments against Rawls so far don’t find any purchase against Rawls’ actual view of the sorts of things the difference principle would justify in a well-ordered society, even setting aside the issue of the focus on the basic structure.

Take someone who has been naturally gifted with ability. Such a person might choose to be a doctor, a business leader, a philosopher. Let us say that there is a shortage of doctors in this society, such that the most socially useful purpose that the individual could direct her efforts towards is medicine. How are we to get her, and others like her, to be doctors? Certainly this choice of career path must be within the personal prerogative—if she wants to be a philosopher because she thinks this is a valuable life, this can’t be mere self-absorption just because society needs doctors more than philosophers. If we reject coercion as a mechanism, as we should, we are left with incentives. So, a current doctor, offering a justification of the higher pay rates of doctors to one who occupies the least well off social position has a much different argument to give than the one Cohen attributes to him. He can justify this inequality on the grounds that it is necessary to encourage sufficient others to undergo the long training and education necessary to become a doctor, rather than to pursue some other career path as is their prerogative.

This is exactly the sort of justification Rawls has in mind. He says, “The function of unequal distributive shares is to cover the costs of training and education, to attract individuals to places and associations where they are most needed from a social point of view, and so on” (277 revised, and very similar things on pages 87, 136, 269, 274). He also means the difference principle to apply to unequal distributions of authority, not only of wealth and income, so that we might give special authority to a group of legislators to make laws that other citizens don’t have (as every modern large democracy does), if such a system benefits the least well off. This also justifies allowing differences of authority within firms, so that some may have greater managerial authority than others, if allowing such inequalities benefits the least well off. It might, due to an increase in productive efficiencies, but this does nothing to justify the current massive levels of imbalance of power in, for example, many US firms.

I’m not aware of Rawls ever arguing that (as Cohen held in the previous chapter) incentives are needed to make the already well-off work harder. This same line of thought I believe works against Cohen’s claim in this chapter that if we can move from an equal distribution of primary goods, at D1, to an unequal distribution, at D2, where the least off do better, then we can also move to D3, where the better off give back part of their earnings to the least well off, once again creating a condition of equality, but one in which everyone is better off than the least well of were in at D2. We cannot, because of what I think is a morally unobjectionable need for incentives to induce those with natural talent to pursue career paths that would be optimally socially beneficial rather than other perfectly acceptable career paths (as would be their personal prerogative), and the related reasons.


Watson Aname 02.03.09 at 11:42 pm

But people don’t have to put into a corporation intitially if the tax burden is going to hammer them too hard. Now for you, perhaps that is a feature rather than a bug.

Sebastian, it’s neither a feature nor a bug for me, as I’m not taking a position just trying to sort out the implications of what was said. I don’t see that what you’ve said follows though, because in the example the wealth was created in a corporation originally, it wasn’t anyones to put in initially. Turning it into salary might not make any sense under some conditions, granted, but we could play around with the parameters. I just didn’t see initially why giving the 20 million to someone who turns around and purchases a plane to least is different (except for that someone) than the corporation doing it directly, from the point of view of making this stuff available. In other words, I saw dsquareds points about the value of having this sort of lease available, but not why it was important to encourage individuals to exercise it.

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