Institutional foundations for a just society

The author distinguishes between fundamental justice and incremental justice and argues that the Harsanyian/Rawlsian, ex ante, concept of justice is the only concept of justice relevant to the design and evaluation of institutions. Unlike incremental justice for which a concensus as to what constitutes justice is generally not possible the conditions that satisfy the Harsanyian/Rawlsian concept of justice are derived from the assumptions of rationality and aversion to large risks, and the postulate of fairness. A concensus occurs not fortuitously but inevitably. The paper develops eight principles of institutional design that contribute towards a just society and that follow logically from these assumptions and postulates. The paper argues that these principles are by and large needed for social welfare maximization, so that justice is generally consistent with efficiency. The paper applies the theory to the concept of exploitation, crime and punishment, as well as labour market and social security, to illustrate the working of the principles developed.