Fairness Is an Emergent Self-Organized Property of the Free Market for Labor

The excessive compensation packages of CEOs of U.S. corporations in recent years have brought to the foreground the issue of fairness in economics. The conventional wisdom is that the free market for labor, which determines the pay packages, cares only about efficiency and not fairness. We present an alternative theory that shows that an ideal free market environment also promotes fairness, as an emergent property resulting from the self-organizing market dynamics. Even though an individual employee may care only about his or her salary and no one else's, the collective actions of all the employees, combined with the profit maximizing actions of all the companies, in a free market environment under budgetary constraints, lead towards a more fair allocation of wages, guided by Adam Smith's invisible hand of self-organization. By exploring deep connections with statistical thermodynamics, we show that entropy is the appropriate measure of fairness in a free market environment which is maximized at equilibrium to yield the lognormal distribution of salaries as the fairest inequality of pay in an organization under ideal conditions

Evolution of the global inequality in greenhouse gases emissions using multidimensional generalized entropy measures.

Given the cumulative consequences of climate change, global concentration of greenhouse gases (GHGs) must be reduced; being inequality in per-capita emissions levels a problem to achieve a commitment by all countries. Thus, the evolution of carbon dioxide (CO2) emissions inequality has received special attention because CO2 is the most abundant GHG in the atmosphere. However, it is necessary to consider other gases to provide a real illustration of our starting point to achieve a multilateral agreement. In this paper, we study the evolution of global inequality in GHGs emissions during the period 1990–2011, considering the four main gases: CO2, methane (CH4), nitrous oxide (N2O) and fluorinated gases (F-gases). The data used in this analysis is taken from the World Resources Institute (2014) and the groups of countries are constructed according to the quantity of emissions that each country released into the atmosphere in the first year of study. For this purpose we use the multidimensional generalized entropy measures proposed by Maasoumi (1986) that can be decomposable into the between- and within-group inequality components. The biggest fall in inequality is observed when we attach more weight to the emissions transfers between the most polluting countries and assume a low substitution degree among pollutants. Finally, some economic policy implications are commented.The authors thank the Ministerio de Economía y Competitividad (Project ECO2013- 48326-C2-2-P) and the Ministerio de Educación, Cultura y Deporte (FPU13/02155) for the partial support of this work

Fairness Is an Emergent Self-Organized Property of the Free Market for Labor

The excessive compensation packages of CEOs of U.S. corporations in recent years have brought to the foreground the issue of fairness in economics. The conventional wisdom is that the free market for labor, which determines the pay packages, cares only about efficiency and not fairness. We present an alternative theory that shows that an ideal free market environment also promotes fairness, as an emergent property resulting from the self-organizing market dynamics. Even though an individual employee may care only about his or her salary and no one else's, the collective actions of all the employees, combined with the profit maximizing actions of all the companies, in a free market environment under budgetary constraints, lead towards a more fair allocation of wages, guided by Adam Smith's invisible hand of self-organization. By exploring deep connections with statistical thermodynamics, we show that entropy is the appropriate measure of fairness in a free market environment which is maximized at equilibrium to yield the lognormal distribution of salaries as the fairest inequality of pay in an organization under ideal conditions.