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C00002 00002	THERE SHOULD BE A SOCIAL CONTRACT
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THERE SHOULD BE A SOCIAL CONTRACT


	Much of  the strife in our society arises from groups jockeying
for advantage.  The amount of strife is accentuated by the following
circumstances:

	1. Only some of the circumstances determining the position of
and individual or group are subject to influnece by that individual or
group.  Thus an employee can influence his wages either by the market
mechanism of making himself attractive enough so that his employer
must pay more or lose him, or by collective bargaining through unions.
However, he has much less ability to influence the prices he pays
and the services that are made available to him.

	2. To the extent that people are free to change their
occupations and to change their suppliers, the market mechanism
regulates prices and wages in a reasonable way.  However, a person
cannot change his talents and often cannot change his skills or
cannot change them with any assurance of the results of such
change.  Besides this, there are many situations in which there is
one or only a few effective buyers and sellers.  In these cases,
there is not a unique price but only a range of prices in which
it pays the buyer and seller to come to an agreement.

	Take as an example the wages of policemen, especially policemen
of considerable experience.  An experienced policeman with no other
guaranteed marketable skill might find it to his advantage to take
say 2/3 of his present pay before he would find it worthwhile to
quit and look for another job.  Likewise, society needs policemen
and would still employ them even if they cost double what they
now cost.  Where the salaries of policemen will be in the range
of possible salaries is determined by a number of factors.  In the
case of policemen, the relevant factors are probably a tradition
about the relative incomes of policemen and other occupations,
the ability of policemen and the friends of policemen to influence
local political processes, and, finally, the direct baragaining
powere of organisations of policemen.  All this goes into a process
that is also influenced by the income of the city and the strength
of other groups with claims on this income and the strength of the
taxpayer interests that would like to pay less.

	3. One theory is that these difficulties only reflect imperfections
of the market mechanism or interference with it.  The idea is that
it is possible to so perfect that mechanism that all bargaining will
be eliminated and all prices and wages will be determined by the
intersection of supply and demand curves.

	My opinion is that the market mechanism is fine where it works,
but it cannot, even in principle, work in all cases and that other
mechanisms are required.  I will not argue the point here, because
the view is in fact the most common one, and others have argued
the point better than I could.  I merely announce it as a basis
for what follows.