Sunday, August 7, 2011

Veil of Ignorance

An architect at a discussion about ethics complained about contracts written in such a way that they hold the architect liable even if not involved or responsible for a particular aspect of a project. A developer in the room asked what is unethical about that, arguing that if the architect is willing to sign such a contract, that is their decision and that it has nothing to do with ethics.

The boundary between laissez-faire and unfair competition can appear fuzzy at times. If an architectural firm willingly signs a contract that holds them liable for more than what they have responsibility for, that may not be wise, but it also doesn’t seem unethical, especially if the firm made the decision freely and fully knowledgeable of its implications. The firm did not have to sign the contract or it could have negotiated a better deal for itself, and if it didn’t, then it has to pay the price should something go wrong.

Such a view, voiced by the developer in the discussion, implies a reduction of ethics to just a few obvious wrongs, such as murder, theft, or other violations of the law. Almost everything else, from this perspective, constitutes healthy competition in the marketplace: caveat emptor, let the buyer – or in this case, the signatory of the contract – beware.

That reductive view of ethics misses its point. Ethics does not just help us determine right and wrong; it can also help us see obligations and the implications of our actions that we often overlook, often to our detriment. In his book A Theory of Justice, John Rawls argues that in any situation involving the allocation of benefits, we should act as if there exists what he calls a “veil of ignorance” that prevents us from knowing our “original position” – whether or not we have more or less power or money, say, than anyone else. Not knowing that, Rawls observed, we would always act in ways that ensured that the least advantaged – which might be any one of us – benefit as much as possible.

The “veil of ignorance” may sound like a nice theory, but one that has no bearing in reality. In real life, people do know their position vis-à-vis others and who has the upper hand and who doesn’t or who would benefit the most from a law or contract and who would not. But Rawls’s theory is anything but theoretical. It turns out that we are always operating behind a “veil of ignorance” and that our not recognizing that fact leads to a lot of unintended and self-inflicted harm to ourselves as well as others.

For example, that developer may see no harm in demanding contracts with consultants that unduly shifts his risks and responsibilities onto them. If they want the work, they have to sign the agreement or he will find someone else who would. The developer may see himself as a tough competitor and may pride himself in his negotiating skill, but he seems also profoundly ignorant of his true position.

He might be at the top of his game now, but what if the market sinks and he finds himself – like many developers these days – underwater financially, with too much unsold product and way more debt than he has revenue to cover? All of sudden, he would find himself, in Rawls’s example, not the most advantaged, but among the least advantaged person at the table, having to rely on others to help him out or perhaps even to ask others to share in his losses through foreclosure or bankruptcy.

At that moment, his reputation for unfairly shifting his responsibilities onto others comes back to bite him: who wants to help someone who did so little to help others? Which is precisely Rawls’s point. In addition to literal contracts, we have a “social contract” with others based on fairness and justice. Someone can uphold a literal contract, but violate the social contract and find themselves bereft of the very benefits that accrue to those who have recognized and respected our collective compact.

The irony of the veil of ignorance is that those most ignorant of it remain most veiled from it, and – as we can see in the case of this developer who sees nothing wrong with unfair contracts – potentially the most harmed by ignoring it.

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