A just society isn’t necessarily an equal one
AEIdeas
Income inequality is a deeply contested issue in the United States today, thrust into the spotlight by the Occupy Wall Street movement’s protests against “the top one percent.” Is our national wealth improperly concentrated in the hands of a privileged few? In a properly ordered, just society, would wealth be spread more equally than it is in America today? Social scientists at Duke University and Harvard have attempted to answer this question. They argue that most Americans would prefer dramatically less inequality than currently exists. We think that they are reaching well beyond the results of their study. Here’s why.
Imagine that you can choose between living in two societies. In the first, everyone has roughly the same amount of wealth. In the second, there are people who are very rich, very poor, and middle class. If you choose the second society, you will be randomly assigned to one of the three wealth groups. Which do you choose?
If you don’t feel comfortable gambling your entire life away, then you’ll probably choose the society where everyone has roughly the same amount of wealth. The degree to which you “dislike” risk might determine which you pick, and since many people are quite risk averse, many will choose the more equal society. But does this mean that your vision of a just society is one in which everyone enjoys the same level of wealth?
Recent research and an accompanying op-ed essay argue that it does. We disagree.
The author of the op-ed in question, Dan Ariely, is a professor of psychology and behavioral economics. In a study, he and his coauthor draw on the famous philosopher John Rawls, who argued that “a just society is a society that if you knew everything about it, you’d be willing to enter it in a random place.” Rawls described this as “the veil of ignorance,” as it forces individuals to approach their decision from a neutral standpoint where they don’t know anything about themselves. Opines Professor Ariely: This is “really a beautiful definition.” Here’s what he did with it:
We described to people Rawls’ definition, the veil of ignorance and the idea they could end up anywhere. And we said: What society would you like to create? How much wealth? How would you like to distribute the wealth? And it turns out people created a society that is much more equal than any society on Earth. It was much more equal than Sweden.
So far, so good. If we were in the professor’s survey, then we would also want the more equal society. Why? Not because we believe that the more equal society is more just, but instead because “the idea” that we “could end up anywhere” is terrifying. If I could be middle class with certainty or have a chance of being either rich or poor then I would take middle class, not out of any sense of justice, but instead out of risk aversion over the fact that my wealth is being determined by random assignment.
Professor Ariely leaps a giant chasm of logic when he concludes:
So this suggests to me that when people take a step away from their own position and their own current state, and when people look at society in general terms, in abstract terms, Americans want a much more equal society.
Maybe. Or maybe they’re just afraid of being randomly assigned into poverty.
Assume for the sake of argument that under the professor’s experiment you would pick a society with equal wealth. Now let’s perturb that experiment slightly. Would you allow for some people to be a little wealthier and some people to be a little poorer if effort and hard work were rewarded? In other words, if you had some control over your level of wealth, as opposed to having it randomly assigned to you, would you be willing to create a society where not everyone had the same amount of wealth?
I don’t know about you, but we certainly would.
The vision of a just society is one which has occupied philosophers since philosophy’s beginning. It is doubtless true that Rawls made a significant contribution to the theory of justice, but to boil his contribution down to a thought experiment of this simplicity does everyone a disservice.
The veil of ignorance (which is a method, not a definition) does not eradicate individual agency. A society can be imagined with that method that allows for entrepreneurship and a labor market which rewards effort and skills. A society can be imagined – and a survey designed – with that method that does a much better job of capturing reality.
And in reality, incentives matter. So does hard work. Asking people how they feel about wealth inequality in imaginary worlds where these things don’t matter and suggesting that their answers are relevant to the actual world is at best a bit silly. If it somehow convinces people that taking other people’s stuff is the easiest path toward a better world then it crosses the line from silly to irresponsible. Rawls would have known better. We bet that the participants in Professor Ariely’s study do too.
The straw man again.
As has been pointed out on another thread, there is no time in history when people have been so productive, and have been remunerated so little for it. In terms of “hard work,” it took a lot of it to create the 40 hour work week. Today, thanks to technology, many of us are NEVER separated from our work, essentially producing or facilitating production all the time. The 40 hour week is history. So too, is the 30 year man.
Where has all the wealth created by this productivity gone? Certainly not to the producers. (The private sector is doing fine.)
http://www.ritholtz.com/blog/2012/09/liscio-report-recent-work-on-income-disparity/
The authors may also wish to consider how the average American family, with a salary of $50,000 per year, manages to feed, house and clothe themselves after paying $1200 a month in health insurance costs.
The authors use the Pethokoukis method of discourse. It posits a question no one ever asked, and then deduces it’s own outcome.
As Mr. Pethokoukis was reminded, no one has ever suggested that the deficit could be closed by tax hikes alone, but he wrote an article suggesting how futile that was.
The authors here state that some people think society must be made “equal” because they are upset about inequality. No one- not even the most craven lefties- believe that everyone having the “same wealth” is even attainable, or even desirable.
Two straw men down.
What is wealth? You seem to think that is the nominal monetary value of an individual’s assets, which is quite meaningless. A better measure is what effects those assets have an the individual’s life. And under that metric, I think that it is pretty clear that the wealth of a people has never been greater. The key is to continue to improve on that metric – which the Obama economy is failing to do.
I laugh at these people:
“And under that metric, I think that it is pretty clear that the wealth of a people has NEVER BEEN GREATER.”
“The key is to continue to improve on that metric – which the Obama economy is failing to do.”
Stand by, and one of our operators will help you…..
Max Planck – and your point is what, again?
The initial piece is positing a question the Occupy Wall Street ideology has been screaming about.
How do YOU know what “Occupy Wall Street” is screaming about?
The straw man liveth: “The federal tax take was around 20% of GDP during the Clinton era, so here’s what we’re talking about: letting the Bush tax cuts expire in a couple of years and then raising tax rates by about four or five points of GDP over the next 20 or 30 years. Done reasonably and fairly, I just don’t believe that an increase this gradual would be wildly oppressive.”
http://www.motherjones.com/kevin-drum/2011/04/reality-and-taxes
There’s no such thing as “reasonable and fair” tax hikes. Tax hikes are a perfect failure. The solution is tax cuts, deregulation, and letting the market create wealth and strengthen the economy.
The sentiment by Mr. Daly represents the pathologies that have been created in our society.
You can’t cut forever, and ever, and ever. And deregulation is what got us into this mess anyway.
Economics is a science. Not a religion.
Bush put through a big tax cut, yet we had another recession. Dr. Elephant promptly prescribed a higher dose of tax cuts. But once implemented, of course, they can never be reversed – the good doctor tells us that the withdrawal symptoms involve loss of jobs, economic contraction, etc.
Sooner or later there will be another recession, and we’ll get a prescription for a further increase in the dosage. But it won’t take many more for us to get to a tax rate of zero. Quite aside from the question of how we are going to pay for the world-dominating military that Dr. Elephant also insists we need (whatever did happen to that concern about the deficit, BTW?), how will the good doctor propose to treat another eruption of recession? Tax the poor and middle class at 90% so that the rich (excuse me, the “job creators”) can get profit-matching subsidies, since Dr. Elephant’s diagnosis is always that they need even more after-tax income to give them incentives to employ us?
The point of the survey was that prior to your birth, you have no way of influencing where in a society you end up being born.
If you have an effectively vastly unequal society, then being born into poverty or riches will vastly affect your life, no matter how much you strive. One way to mitigate this is to mitigate the inequality; another way to mitigate it is to mitigate the *effectiveness* of the inequality, for example through mandantory public schooling, free or very cheap access to university, free healthcare, food stamps, estate taxes and so on. As long as a parent’s wealth can significantly alter a child’s success, allowing vast disparities of wealth does create the circumstances that the survey tested.
Also, the results of the survey were not that the ideal society should be utterly equal in wealth, just that it should be much less unequal, so your closing paragraphs are arguing with a strawman.
First, such a contrived bit of fluff as Strain and Veuger offer here is clearly below their training and intellects. Such pandering to crass dogmatism clearly reflects the extreme lengths that PhD economists will go to in seeking employment these days.
At least they had the guts to include a link to the article and research that they’re criticizing. If one uses the link, you find the following in the BBC article;
“First of all, we asked people: how much wealth do you think is concentrated in each of those buckets?
It turns out people get it very wrong.
The reality is that the bottom two buckets together, the bottom 40% of Americans, own 0.3% of the wealth; 0.3%, almost nothing, whereas the top 20% own about 84% of the wealth.
And people don’t understand it. They don’t understand how much wealth the top have and in particular, they don’t understand how little the bottom has.”
This was a huge fact that the Strain and Veuger completely ignored.
Others have already pointed out that their impotent attacks on straw man positions, so I won’t be redundant.
I would point out, however, that the luck of the draw in life is not just about the family one is born into, it’s also about the abilities that one receives by virtue of genes and culture. We may be born equal in rights, but we are not born equal in abilities; we have widely differing IQs, athletic abilities, appearances, personalities, and talents. And the luck of the genetic lottery has as much influence over economic success as the wealth of our parents or the country where we’re born. None of this is within the control of your hard work, incentives or individual agency. So, given that we all have different levels of ability, and hard work can only get you so far, one cannot take the EXTREME position that income inequality should not matter at all to policy decisions without abdicating intellectual honesty.
Economics is a complex and dynamic system, and when you ask simple, static questions of those not familiar with how the system works you will get nonsense. Or veiled nonsense in this case.
It is critical to remember a few things about the system. One is that incentives matter. Even if a more equal society may sound nice, if the equality comes at any price of growth, in the long term it will result in vastly different levels of average prosperity. One percent difference in GDP growth and about a century leads to the difference between Mexico and the US. In other words equally poor.
The other thing to remember is the effects of feedback. If equality reduces the efficacy of feedback on the effects of our action in regards to economic growth individually or collectively, then you are really making the system less adaptive. Markets are problem solving systems, and markets with reduced feedback are substantially less effective. See above how this works out.
Finally, we need to beware the zero sum myth. Our nature is to assume that rewards for the wealthy in free makets comes at the expense of others. An economist knows that in mutual voluntary exchange, the general rule is to expect win win outcomes. Gates, Jobs and Walton got rich by making the rest of our lives better not worse.
There are 10 MPH folks, there are 25MPH folks, there are 99 MPH folks and there are folks stuck in reverse.
Got a problem with that? If so, then complain to God.
@MaxDaddyWatch – Really, I don’t have a problem with that. I do however have a problem with a select few being allowed a 99 MPH speed limit, their tickets dismissed when they exceed it, and their crashes paid for by the people who have a 25 MPH speed limit, get the book thrown at them for going two miles over, and have to pay not only for their own accidents but for the damage to their own cars caused by the recklessness of the first group of people.
I don’t believe God is responsible for that sort of inequality.
That’s not inequality…that’s stealing and abusing the law. That’s trampling on other peoples lives and rights. Those folks you described don’t know it but it is they who are unequal.