In the version in Theory Rawls describes the "main problem" of distributive justice as being the choice of a social system. By a "social system" Rawls is referring to the way in which a basic structure is regulated and how its major institutions come together. The central conception of pure procedural justice has been the mechanism of regulation promoted by justice as fairness. Since the main point of the second part of Theory is to work through the understanding of institutions the setting of the principles of justice are here being displayed in such a way that the basic structure really does reflect their precepts.
In this section Rawls looks at the means by which 'background' institutions are reflective of the principles of justice both in terms of private ownership and in relation to more socialistic systems. In the first type of system we have a constitution that guarantees the priority of liberty and fair equality of opportunity applies. When looking at how the background institutions are to be governed so that these principles are reflected Rawls reaches for the theory of branches of government articulated by R.A. Musgrave. This theory is quite different to the classic ones of Locke, Hobbes, Rousseau or Kant since it does not concern the 'separation of powers' but rather an account of public finance.
On this theory of public finance government is seen as having four branches which don't neatly fit administrative categories but are instead descriptive of functions. The first function is allocation which concerns, in a market economy, keeping prices competitive and undercutting tendencies to prevent this. Allocation is also part of the business of ensuring efficiency is met in relation to social benefits and costs.
By contrast to the allocation branch, the stabilization branch is concerned with bringing about "full employment" and works with the allocation branch in terms of ensuring market efficiency.
The "transfer branch" has responsibility for the social minimum which involves taking account of needs, something the competitive price system alone has no concern with. Competitive determination of total income alone would ignore the claims of need so it is rational to insure oneself against this alone setting the standards of living. The difference principle further mandates that these standards are addressed and it is the point of the transfer branch to see to this. Above the minimum the rest of income can be met by the price system assuming that the latter is efficiently governed.
The last branch is the distribution branch. It concerns how distributive shares are provided by means of taxation and regulation of ownership of property. From here comes taxes that concern inheritance in order that the dispersal of property is consistent with fair value of equal liberties. This is one of the places where Rawls makes a 'luck egalitarian' point arguing that the distribution of intelligence is no more just in its distribution than that of wealth. Hence distribution of the goods accruing to those with a greater than average of the former have also to be governed by application of the difference principle.
One of the points of the discussion of the difference principle is, however, to suggest that the institutions of fair equality of opportunity are put at risk when inequalities of wealth exceed a certain limit. One of the effects of that happening is, further, that political liberties have less worth for many than is otherwise the case. If one part of the distribution branch is concerned with taxation and regulation of property the other part concerns raising revenue. The raising of revenue itself can be undertaken by different means since the taxation of consumption is as available to government as the taxation of income and has more chance of being progressive in application particularly if it includes exemptions for dependents. However, the precise questions of policy here are not specifically part of the theory of justice.
The two parts of the distribution branch relate to the two principles of justice as taxation of inheritance and income and regulation of property secure the institutions of equal liberty (at least in a property-owning democracy). Taxes are the means by which public goods are provided and this aspect of the distribution branch works with the transfer branch to meet the second principle of justice. There are questions here concerning how taxation is itself to be regulated involving precepts such as apply to ability to pay that arise from what Rawls terms "common sense" and indicate an intuitive element is here thought of as applicable though the question of the status of such precepts is not investigated in this section.
One of the points of the general description of the private property system described in the way Rawls has given is to prevent too restrictive an ownership of wealth, thus intending to mitigate the effects of capitalism that socialists complain of. However, after raising this point, Rawls refers to the notion of "liberal socialism" suggesting that it has two ways of meeting the principles of justice. The first would be to assume the means of production were publicly owned and thus that collective decisions were made about the general features of the economy. The "liberal" part of this notion is that it still allows firms to be engaged in competition with each other albeit with such competition only covering one of the functions of prices.
The point of such remarks is to suggest that a place for the market does not entail that people are unmoved by altruistic concerns. In stating this Rawls does, however, recognise the automatic and impersonal character of market mechanisms and the way they abstract from individual decisions. One of the reasons is that the theory of justice is not intended to shape a basic structure that is entirely governed by altruism.
Rawls entertains a possible further branch of government, the exchange branch, that is a special body that takes note of social interests and preferences for public goods and looks only at the latter separately from what is strictly mandated by the principles of justice. The description of this further branch does, however, take the discussion into technicalities that are less evidently of foundational constitutional significance. One of the reasons why this is so is that this further supposed branch does not arise out of the principles of justice themselves.
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