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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 influence  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.