Some parts of the sentence may contain an error. The bold part of the sentence is grammatically correct. If there is no error in the sentence, choose option 5 i.e 'No error' as the answer.
While it is probably better to rely on markets rather (A)/ government to set pay levels, that doesn't means that the way (B)/ the markets set pay is a purely objective assessment (C)/ of economic contribution or that redistribution is theft. (D)/ No error (E)
The error in (A) is the absence of the word 'than' after the word 'rather.' 'Rather than' means 'used with the infinitive form of a verb to indicate negation as a contrary choice.' It should read as:'$While it is probably better to rely on markets$ rather than..'$
The error in (B) is the word 'mean' in singular form after the word 'does'. With 'does' the verb is always in plural form 'mean'. It should read as:'.. government to set pay levels, that doesn't mean $that the way ..'$
Option 2 is the correct answer.$