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Outcomes and opportunity

December 17th, 2003

Among the many comments lost (temporarily I hope) in the great database disaster was a discussion of the old distinction between equality of outcomes (like life expectancy) and equality of opportunity. This distinction has long been a staple of debates between market liberals and social democrats, and now defines a central point of distinction between supporters of a Third Way (such as Blair) and modernising social democrats (such as Gordon Brown), who may be indistinguishable on issues like privatisation that formerly acted as litmus tests.

A look at the evidence suggests that a position supporting equality of opportunity while accepting highly unequal outcomes is not sustainable. The most important observation is that, contrary to popular belief, there is less mobility between income classes in the United States than in European social democracies. A good, and fairly recent study in this is The Real Worlds of Welfare Capitalism by Goodin, Headey Muffels and Dirven, which I reviewed here, along with Barbara Ehrenreich’s Nickel and Dimed.

There’s plenty of other evidence suggesting that high levels of inequality naturally perpetuate themselves, most obviously through unequal access to education, but also through more subtle channels like health status – Ehrenreich gives plenty on the plight of the uninsured working poor in the United States, but this isn’t only a US problem.

Turning to the theory, a good starting point is Richard Arneson’s article in the Stanford Encyclopedia of Philosophy. As is appropriate for an encyclopedia, the Stanford encyclopedia generally seems to encapsulate the conventional wisdom, and its accessibility on the web makes it an ideal subject for blogging.

Arneson starts with what he calls ‘formal equality of opportunity’, which prohibits things like nepotism in the distribution of public office, and racial or gender-based discrimination. Arneson asserts that a market-based economy is a natural setting for formal equality of opportunity (though not the only possible one) but defines out of existence the central problems that arise in such an economy as a result of inequality of wealth. He wants to ignore, as a ‘private’ matter, nepotistic appointment practices by private businesses, while perhaps prohibiting racial or gender-based discrimination.

To summarise, in Arneson’s treatment “formal equality of opportunity” means, primarily, the absence of officially sanctioned discrimination on the basis of group membership . This is important, but it is not equality of opportunity.

The discussion here is blurring two different concepts. One is the notion that requirements for formal equality of opportunity apply only in relation to the state. The other is some sort of distinction between different types of legitimate and illegitimate discrimination. For example, nepotism is OK in the private sector but not in the public sector.

To sharpen up the analysis, consider the case when public offices are sold, with any qualified person being able to bid. This was the case, for example, with commissions in the British army in the 19th century. This is, I think, a breach of formal equality of opportunity. Suppose then that instead of filling the relevant offices by, say, competitive examination, the government privatised the appointment function, taking a lump sum cash payment from the buyer, who then acquired the rights to sell the offices as they saw fit (perhaps subject to rules about racial and gender discrimination). This would make no difference to the actual inequality of opportunity, but would, at least arguably, satisfy the requirements for formal equality of opportunity.

But the problem doesn’t arise only, or most severely, in employment. If places in schools or universities are available only, or preferentially, to those able to pay for them, equality of opportunity is clearly not present. The same is true if ownership of businesses is passed on by inheritance. The idea that these are not ‘formal’ violations of equality of opportunity makes sense only if market wealth inequality is taken as, in some sense, natural. Although never explicit, this assumption clearly underlies Arneson’s discussion.

An obvious implication is that the smaller the economic role of the state, the smaller is the scope of the notion of formal equality of opportunity. In a fully privatised state, everything that was formerly a public office or service would be the subject of private property rights, and therefore heritable, and yet formal equality of opportunity would apply by definition. This is essentially the ideal position favored by Nozick

The really interesting part of Arneson’s discussion relates to “substantive equality of opportunity” and particularly the notion of “equality of fair opportunity” due to Rawls, which is satisfied if “

any individuals who have the same native talent and the same ambition will have the same prospects of success in competitions that determine who gets positions that generate superior benefits for their occupants

This is the only definition considered in the article that seems to correspond to a reasonable notion of equal opportunity. However, as Arneson points out, achievement of substantive equality of opportunity appears to require substantial and intrusive government intervention to prevent parents passing on advantages to their children.

The crucial unstated assumption here is that social outcomes are substantially unequal. The more equality prevails among parents, the less intervention is required to ensure a substantive equality of opportunity among children.

The complementarity between equality of opportunity and equality of outcomes is particularly important when we move from ideal definitions to practical possibilities. It is, no doubt, impossible to achieve perfect equality on either definition. But,social-democratic states can get reasonably close, and have done so, though something close to full employment is needed. I have some ideas on this, but not for this post.

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  1. stephen bartos
    December 17th, 2003 at 08:22 | #1

    and of course we have built a legal system based on an assumption of equality of access, haven’t we. As Anatole France said, “The Law, in its majestic equality, forbids the rich, as well as the poor, to sleep under the bridges, to beg in the streets, and to steal bread. “

  2. Don
    December 17th, 2003 at 09:36 | #2

    Elizabeth Anderson’s article ‘What’s the point of equality’ is one of the most interesting things I’ve read on the subject of equality.

    You can read Arenson’s response to it here along with a reply from Anderson:


    Jon Elster’s work on ‘local justice’ and Michael Walzer’s idea of ‘complex equality’ are worth reading.

    On these accounts different institutions work off different justice principles. For example, a social democratic health system might distribute services based on need and capacity to benefit while the higher education system might distrubute places based on academic merit. Conscription might be done by lottery.

    When thinking about different instituions people are likely to have different institutions about what equality is (Intensive care beds distributed by lottery?).

  3. December 17th, 2003 at 10:11 | #3

    The meaning of equality of opportunity as used by market liberals has now (I believe) been highjacked. So I no longer call for equality of opportunity, but now simply call for equality under the law. That is – equal rules.

    Equality of opportunity as it’s incrasingly being used effectively requires equality of outcome – because you don’t have the same opportunities unless you have the same resources. While true in some sense… it obviously isn’t what was originally meant.

  4. Tyler
    December 17th, 2003 at 11:41 | #4

    Equality of opportunity comes down to free high-quality public health and education and full employment, all of which are anathema to the right wing agenda of our current world leaders.

    It strikes me that absolute equality, as in the communist states, and extreme inequality, as in third world nations such as Guatemala and Honduras, have both been proved empirically to be economically inefficient. There must be a level of optimal inequality somewhere in between that will provide the greatest economic efficiency. I’m surprised that there’s been no research in this area (that I’m aware of) and no discussion of just where this level might lie, because obviously, in purely economic terms as opposed to moral terms, this level is what we should aim for.

  5. December 17th, 2003 at 11:49 | #5

    can pr q cite links, preferably journo rather than academic, comparing the degree of social mobility/equity of opportunity in the US:

    over time eg against FDR-LBJ

    accross space eg against the EU

    Also, would Pr Q concede that the US situtation in regards to social equity is not comparable to the EU, on account of masses of minorities with different cultural standards:

    African-Americans: slave-descendants post-1865

    Hispanic-Americans: immigrants post-1965

    The race problem raises the equity bar for the US, comparable to the EU and it’s own history, since it is harder to bring poorly educated people “up to scratch”.

  6. PK
    December 17th, 2003 at 12:50 | #6

    What we need is everyone to be equally rich.

    Every person should be given an Ivy League education, access to the world’s greatest doctors, access to well-qualified lawyers whenever they need it, a good well-paid job and a range of other fantastic benefits. This should all be paid for by the government. This will be easy to do as everyone will have good well-paid jobs, as stated previously, so there will be plenty of tax money available.

    Entreprenuership and business should be greatly discouraged as their use will certainly lead to unfair outcomes. We won’t need them anyway, as everyone will already have what the want as outlined in the first paragraph.

    The market economy should be abolished and replaced by a government “production committee”. Surveys will be taken asking the population what it wants. The government “job-creation branch” will then direct people on how to produce these goods. Of course, you will have to ration the output as you don’t want anyone getting more than their fair share. There should be plenty for all anyway, so nobody will mind the rationing.

    Then, we’ll all live happily ever after.

    Is this the type of thing you all have in mind?

  7. Don
    December 17th, 2003 at 14:06 | #7

    Yes PK, you’ve got it!

    But you forgot to explain how the government would match people with jobs without forcing anyone to do things they don’t want to. Let’s get Dr Leete to explain it to us:


    “The supply of volunteers is always expected to fully equal the demand,” replied Dr. Leete. “It is the business of the administration to see that this is the case. The rate of volunteering for each trade is closely watched. If there be a noticeably greater excess of volunteers over men needed in any trade, it is inferred that the trade offers greater attractions than others. On the other hand, if the number of volunteers for a trade tends to drop below the demand, it is inferred that it is thought more arduous. It is the business of the administration to seek constantly to equalize the attractions of the trades, so far as the conditions of labor in them are concerned, so that all trades shall be equally attractive to persons having natural tastes for them. This is done by making the hours of labor in different trades to differ according to their arduousness.

    [from Edward Bellamy's Looking Backwards]



    So simple! So reasonable! I’ve no idea why we bother with markets and all their nastiness and inefficiency. Bellamy had the whole thing sorted more than a century ago.

  8. Dave Ricardo
    December 17th, 2003 at 14:12 | #8

    Relax, PK, we can have entrepreneurship and true equality of opportunity. How? By having large and enforceable death duties.

    This won’t discourage entrepreneurship, since this tax will apply to the entreprenuers only when they die (and let’s face it, you don’t really need the fruits from your endeavours you are dead, nor are you likely to start up a new venture).

    It will mean that the children of the entrpreneurs won’t get their hands on their parents money, but there’s nothing to stop them from becoming entrpreneurs themselves, and making their own money.

    It will also mean the dead entrepreneurs money can be directed to educate and keep healthy those people born with diasadvantages not of their making, which will enable them to become entrepreneurs, instead of, say, becoming welfare recipients like their parents and grand parents, which is what we get now.

  9. December 17th, 2003 at 14:26 | #9

    Dave, the term “death duty” is misleading. You are not taxing someone for dying, but taxing the unearned income provided by an inheritance.

    Don, I’ve noticed you’re commenting a lot more around the place. Any chance the Dead Cat will get started on one of its spare lives?

  10. PK
    December 17th, 2003 at 14:36 | #10

    Of course! Everybody knows that businesspeople don’t give a damn about their children. They’d probably eat them given half a chance.

    Investment, entrepreneurship and business will flock to Australia when they realise what a great system we have. Why send your children to an expensive Swiss school when your money can go to educating them and 10m others upon your death?

    Who’d want to live in a country where you pay for healthcare when all the dead suckers will do it instead? And if you’re one of the dead suckers, well too bad for you for being too dumb to see it coming and not go live and invest somewhere else.

    It’s brilliant! I’m off to write a book.

  11. Dave Ricardo
    December 17th, 2003 at 14:53 | #11

    PK, I’ll say it again, in words of as fewc syllables as possible, for your benefit

    1. You don’t need your money when you are dead.

    2. You can’t use your money when you are dead.

    3. Your children have no moral claim on your money after you die because they didn’t earn it.

  12. Dave Ricardo
    December 17th, 2003 at 14:58 | #12

    This is, incidentally, also the view of Warren Buffett β€” a very successdful entrpreneur β€” who has decided not to beqeath anything to his children, and to instead leave his billions in trust, where the earnings will be spread amongst the population.

    Bill Gates β€”the most successful entrepreneur in modern history β€” has also said that he might do the same.

  13. PK
    December 17th, 2003 at 14:59 | #13

    From a moral point of view it sounds great. Of course if I was rich, the first thing I would do is go and live somewhere else.

    Some people want their children to get their money really, really badly. Why should they hang around waiting for the government to get it’s grubby hands on it? Why try and create wealth in Oz if you know you can’t pass it to your children?

    Sorry Dave, it’s just not going to work.

  14. PK
    December 17th, 2003 at 15:01 | #14

    No problem with Bill and Warren doing it voluntarily. I’d be interested how many others would be up for being forced into it though. Do you think, say Mudoch and Packer would?

    I certainly wouldn’t.

  15. December 17th, 2003 at 15:14 | #15

    Inheritences are fun to squander.

    As for Gates, I think he’s going to leave something like 2 or 5 % of his money to his kids, so the little Gates will still be farting through silk.

  16. Dave Ricardo
    December 17th, 2003 at 15:23 | #16

    PK, your objection is that rich people will find a way to avoid the tax, which is why I began by specifying that they be enforcable death duties.

    Practicalities, like whether the tax will be avoided, are important if you are actually going to try to do something, but John’s post was about the principle of equal opportunity and how it could be achieved.

    In any case, your objection is vastly exaggerated. People care about their children but they also care about themselves. A society which allows enterpreneurs to keep the rewards (apart from taxation to finance necessary government functions) from their endeavours while they are alive, where these rewards have been gained from a genuine equal opportunity starting point, should have no trouble attracting and keeping the necessary talent.

  17. Dave Ricardo
    December 17th, 2003 at 15:32 | #17

    “As for Gates, I think he’s going to leave something like 2 or 5 % of his money to his kids, so the little Gates will still be farting through silk.”

    No problems there. His kids will have all the money they could possibly need to buy whatever they want for the rest of their lives, so Gates can die with a clear conscience if that’s what he cares about, and society benefits from the 95-98% that he leaves it.

    Let’s say he leaves $500b in trust to provide a first rate university education to poor people. if the trust earns 5% per year, that’s $25b. If the cost of the education is $25,000 per year, that will send educate 1,000,000 poor people per year.

  18. December 17th, 2003 at 16:57 | #18

    Your children have no moral claim on your money after you die because they didn’t earn it.

    But you do have a moral claim on your money because you did earn it. And that moral claim entitles you to spend your own money however you might please, including leaving some or all of that money to your (undeserving) children.

  19. Dave Ricardo
    December 17th, 2003 at 17:49 | #19

    “But you do have a moral claim on your money because you did earn it. And that moral claim entitles you to spend your own money however you might please, including leaving some or all of that money to your (undeserving) children.”

    That argument fails two ways. First, if I inherited the money myself, I didn’t earn it. So I don’t have the right to do what I want with it. Second, even if I did earn it, why does it automatically follow that I can do what I like with it after I am dead? Since when do the dead have rights?

  20. December 17th, 2003 at 18:07 | #20

    First, if I inherited the money myself, I didn’t earn it. So I don’t have the right to do what I want with it.

    I’m not sure why this is the case. You seem to agree that if someone works and earns money, he has the right to do with it what he wants. But why is this true for contractual exchange but not true for gifts? Why am I not entitled to what is given to me in the same way I am entitled to what I trade for?

    Second, even if I did earn it, why does it automatically follow that I can do what I like with it after I am dead? Since when do the dead have rights?

    Who said anything about doing something with your money after your dead? The whole point of a will is that it is written before death and the inheritance is transferred upon death. No rights are exercised after death.

  21. Jill Rush
    December 17th, 2003 at 18:45 | #21

    The argument about children’s inheritance is a side issue. Some parents are busy spending their children’s inheritance – other’s want their children to have the benefit of their good fortune.

    The issue is that there is no coherent understanding of what is meant by equal access or outcomes and under the current Federal government it varies to suit the purpose of the day.

    There is no clear ideological base but in general terms the government will favour private arrangements over public – however it is determined by relative power of particular groups. Thus at the moment is appears that the government, having pandered to motorists by removing indexation of petrol taxes, is now intending to tax natural gas to recoup some of the loss because the outcome is votes not environment.

    In education the focus is on a limited number of outcomes rather than focussing on the input – or focussing on the idea of auspice neutrality such as the amount of money per child you put into education rather than looking at all the inputs – and discussion of giving parents choice whilst ignoring the fact that choice is not there for those without wealth.

    Private schools argue that they have poor children and that state schools have the children of rich parents but the relative levels bear out the anecdotal evidence that in general – except for rabid religious groups- the children of the poor and middle class congregate in state schools and those who are rich don’t.

    Then schools and teachers are blamed for lack of outcomes ie Tertiary entrance – despite the market distortion created.

    What is measured matters – but what matters is determined by the politicians of the day.

    In true market terms if there is market failure such as lack of childcare places in a poor area and this is a desired social good then it will be achieved – but the government deliberately ran down community centres in the poor areas and let them close and now is paying private providers to set up in the areas of least profit.

    They are not funding community groups in the same way as this doesn’t create a profit. In this instance profit is what matters. Meantime there is plenty of handwringing about the importance of the early years but if there is failure it is sheeted home elsewhere. The outcomes measured will only be the number of places for childcare – not how the quality of the childcare on offer impacts on children.

  22. December 17th, 2003 at 18:46 | #22

    the inheritance is transferred upon death. No rights are exercised after death.

    What a wonderful contradiction!

    The act of dying occurs in life. During that process, no inheritance is transferred. Upon death, one is no longer living; one is dead. At that point, the money is transferred. The “right” is excercised in death.

  23. December 17th, 2003 at 19:03 | #23

    I’m not an expert on inheritance law, but I believe the way inheritance works is that it is transferred instantaneously when a person dies. At no point does a dead person exercise a right, or even own any property. Further, the choice of who should recieve the inheritence is clearly made before death; it is only the transfer that occurs upon death. In other words, I would argue that the right to give your children money is excerised whenever a person writes a will, but the actual exchange of property occurs later.

    If this is the best argument you guys can come up with to justify confiscating people’s hard earned money after they die, well, that’s pretty sad.

  24. observa
    December 17th, 2003 at 19:22 | #24

    The case for wealth taxes for the rich is the reverse end of the spectrum for social security top ups for the poor. They make Rawlsian sense. However death duties can be planned for and largely avoided, hence the need for gift duties. Also the problem of unanticipated death produces ineqities, of which the breakup of family farms and businesses, were the reason for death duties demise in Aust. Also the leakage problem of migration of capital, would need to see cooperative wealth taxes across MDCs.

    The answer to the problems of a large once off, event tax, like death duties, would be overcome by annual net wealth taxes across MDCs.(they could be spread quarterly like PAYG) Now the case for regularised wealth taxes assumes a strong correlation with the higher income necessary to pay them. This may not be so due to life cycle effects(eg retirees) or circumstances(eg unemployment or disability). Hence you would need a degree of sophistication for such regular wealth taxes, in particular a relief system from them for as long as you invested in the most important resource this planet has. Pristine wilderness investment gains you an amnesty for as long as you hold your wealth in its shares, which are traded on the stock market. The logical countervailing market force to investing in its destruction(eg ostentatious negatively geared housing)This solves the equity side of the taxation problem.

    Coupled with social security top ups for the wealth and income poor, a green, flat rate consumption tax, is the only other important revenue raiser required. All other taxes could be ditched for the simplicity of a resource recycling tax on goods only, in particular heavy carbon taxation. This tax would apply equally to all, whether you purchase the good for business, religious or private use, whether you finance its purchase or not. Notice there is no tax on savings(no tax on the interest earned or FID or BAD taxes), as you only pay tax when you consume actual resources. With a tax only on consumption of the resources inherent in a good, societies would automatically produce goods of great quality and durability, because locked into their cost would be the cost of their recycling. If you cast away any good, it would be pounced upon for recycling, due to the higher cost of extracting new resources. A world of Zen and the Art of Motorcycle Maintenance, where quality not quantity was paramount.

    Notice also that such a simple taxation regime, with no payroll or PAYE taxes whatsoever on labour, shifts the inherited constitutional market back in labour’s favour. In fact it taxes the very lifeblood of capital which is fossil fuels. You would expect such a shift in costs to cause the demand for labour to soar accordingly. I’ll leave the reader to imagine the impact on decentralisation effects of such a tax regime.

    Essentially, much of the negative outcomes of our consumer society can be sheeted home to the simple realisation that it is not market forces that are bad for us, but the bad constitutional framework of our marketplace. We have a poor inherited framework, due to incrementalism and the science of muddling through from our past. Supply and demand analysis is a theory of relative prices and not absolute pricing. We can choose to sell petrol for 2cUS a litre as Iraq does, or 60c as we do, or $60 if we choose.

    Essentially we can control the price of a good or its quantity, but not both. You can ban disposable plastic shopping bags or simply price them beyond contemplation. You can legislate to force installation of solar hot water services in new houses, or you can price fossil fuels so you don’t have to. There is a Third Way, the moment you recognise we live in a society where ‘The Price is Wrong’

    Just imagine for a moment, back in the 1970s, after the oil shocks and stagflation. Our govt, with the notion of ‘Spaceship Earth’ fresh in its mind after the Apollo moon landing, decided to challenge the world to a Green Olympics. It begins to introduce the green tax system I outline. The challenge is taken up by the Scandinavian countries first, quickly spreads to Europe and across the Atlantic. The MDCs agree to coordinate their efforts with implementing the new regime. They will impose heavy import duties on goods from countries that try to circumvent the policy. They cooperate on tracking the wealth of their citizens and exchange information to prevent wealth tax evasion. They have by now, come to the rigid universal stance, that anyone who can identify undeclared wealth(especially Swiss bank accounts)will be rewarded with half that wealth, while the Govt takes the other half into revenue. On the other hand our current PM Bob Green has just presented the annual net wealth tax payee awards, to the top 100 payees, a highly sought after listing.

    To all you leftist/green quantity control freaks out there, who presumably want to move on to Gladwrap after the great shopping bag war, suck on that from this Market Green. Get the bloody price right!

  25. PK
    December 17th, 2003 at 19:39 | #25


    Would you put your plan to the electorate? Or actually multiple electorates, as you’re talking about implementing this internationally.

    Do you think the voters would buy it? Or would it need to be introduced by force by “Green” Berets?

  26. observa
    December 17th, 2003 at 23:02 | #26


    Somewhere sometime a country has to start the ball rolling and I believe nothing succeeds like an idea whose time has come. For example, if I ask the following of people I know- ‘Do you believe that, if all the countries of the world were as successful as Australia, at converting their natural environment for their consumptive wants, the world would be a better place?’ the answer is an uncomfortable silence followed by no. This of course is the attraction of the current Green movement. They are pointing out that our current emperor has no clothes, but of course they currently offer the ludicrous, if somewhat uncomfortable sight, of a few individuals piddling into a cyclone. That is the crux of the problem. No individual can fight the overwhelming odds of our current consumer society, no matter how idealistic or motivated. We need planned group action(in the form of a democratically agreed constitutional marketplace), but we must still plan for the benefits of competition. The command route is a proven recipe for disaster socially. The Soviets were the most successful and committed at it for half a century, with some fairly unpleasant side effects.

    If the world is to take on the problem of a finite Spaceship it will need leadership. Where would you expect that leadership to come from? Logically the MDCs and most likely a country like ours. It is time this country showed the world the way, even if it means closing our economy to the world to begin with, in order to start the ball rolling. We have the intellect, the resources and wherewithall to make the adjustments required. For example, when you envisage a smaller consumptive pie, it is axiomatic you will have to tackle the equity issue. I am not pessimistic that the wealthy in this country, will see the self interest and benefits of a fair go Australia again. They certainly must be having some doubts about their world at the moment. In any case wealth is a relative state and the push for a greener, fairer society must necessarily be lead by its most able citizens. At any rate, as first cab off the rank, we will of course gain an advantage in the new technologies and systems required in this greener world.

    In the final analysis, I suppose the blogworld is a convenient place to throw a constitutional marketplace on the table for questions and suggestions. First question is do you like the skeleton and where would you like to see some more flesh?

  27. Norman
    December 18th, 2003 at 04:03 | #27

    Quite a deal of material here; but little attention paid to the underlying principles on which this “equality” would be based. The starting point is not so much a moral or economic decision, as a mqtter of defining what you are dealing with. You need to work within a framework in which acknowledges that:

    1]People are NOT born innately equal.

    2]No matter what you do, they’ll never be able to be made equal in their various capacities.

    3]Reducing all innate would entail quite significant discrimination against most citizens, be against the overall interests of a society, be incredibly costly, and wouldn’t be able to be achieved anyway.

    4]Even when we move away from the question of innately determined limits, equal opportuniy is still unattainable, so the real issue becomes the question of the extent to which we’re able and/or should, and/or willing, to reduce the extent of the various inequalities that will always be with us.

    It’s more fun, of course, to “forget” these parameters, and simply rabbit on regardless.

  28. December 18th, 2003 at 11:32 | #28


    I don’t entirely agree with your solution, but I applaud your bravery in putting it forward. I’m also glad to see you have some idea that your policies have to be grounded in reality, a position many on the Green Left refuse to take.

  29. Jack
    December 19th, 2003 at 09:36 | #29

    Micha, I think the clarity of definiion gives a spuriously natural appearance to rigts over money but there is no reason they should be any simpler than say property rights which is to say not simple or immutable at all.

    Surely the overall interest of society must be shared. Someone will care if there are dogs in the mangger. From that point of view estate or inheritance taxes diminish the value of money for some people and so skew incentives but inherited wealth does just the same.

    Nor is redistribution necessarily a zero sum game in so far as it can function as insurance.

    One final point is that inheritance taxes are very effective or there would not be such a big effort to abolish them.

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