Welcome friends!
I was taking a few moments the other day to register an opinion on a news website comment page and I ventured to mention what I consider an interesting distributional issue raised by recent technological developments including e-commerce and automation. (Yes, I sometimes enjoy mixing it up a bit with the conservative trolls and comment botskies. Hey, everyone needs a good laugh now and then.) My general point was productive technology in the past may have generated a demand for a relatively large number of workers, which was great because a large number of workers with disposable cash means robust demand and hence economic growth. In contrast, recent technological change has tended to concentrate wealth in particular sectors, such as IT and technology more generally, and more than that to specific people, the owners and CEOs of certain dominant companies in those sectors. Basically technological development seems to be helping us devolve into a nation split between a rather small number of zillionaires and a very great number of impoverished fry cooks. (The ever increasing domination of our political process by the wealthy elite probably plays a role as well but I’m determined to not discuss Mr. Trump this week in honor of his impending inauguration.) So is that just fine because fate in the form of the almighty marketplace has ordained it? Or should we do something to mix it up? Should we think of some way to spread the output of our productive machine around a bit? Make work for some people? Pay some people more than a market wage? Don’t get all angry now. I never said I have the answers. Just thinking out loud. Anyway, as one might expect if one has ever ventured into such places I was immediately set upon by an army of conservative trolls incensed at my use of the word “distribution,” which I suspect they translated in their minds to the version more familiar to conservative ears “re-distribution,” which like “socialism” is something they’ve been trained since childhood to rage against. One of the specific charges lobbed in my direction was that I apparently supported picking the pockets of hard-working billionaires to facilitate poor wastrels sitting on their assess doing nothing all day. Another was that I had a nerve talking about other people’s money as though I had anything to do with it. Being familiar with the dispassionate discussion of distributional and other economic issues from my days at the academy I was rather taken aback. I’ve said for a long time on this blog I think one of our great weaknesses as a society is our inability to calmly and rationally discuss distributional issues and here was that exact problem not only rearing its ugly head but trying to take a big bite out of my backside. So this time I thought I’d backtrack a bit and just go over some basics about distributional issues broadly conceived.
All economic systems function in part as distributional systems. That is to say, they not only bring people together to co-operate on making things but they provide some mechanism by which those things are then distributed to people to use. Even if we determined to not make a distributional system we’d still have one. It’s called the guy with the gun economic system. I think many places around the world actually use that system. Fortunately given today’s political and economic rhetoric we don’t really have to decide whether to make one or not. We’ve got one. And it didn’t fall from the sky one day or rise up from the center of the earth. We made it the old fashioned way through the crafting and enforcing of laws. Remember Adam Smith and that lot? They were writing the way they did because at that time they still had to convince some other people of the value of certain types of market arrangements. The rudimentary market systems of Mr. Smith’s day were supplemented and hedged about by remnants of the old feudal system, which basically involved the king and other nobles and I suppose the church as well appropriating things at sword point more or less and then assigning it to their minions this way or that. Some people liked it that way. Not everyone was on board with the sort of market institutions we have today. Someone had to make the case. Anyway, it seems many people must have eventually found the case persuasive because market systems obviously became more and more dominant. Of course, we subsequently learned market systems work best when regulated and supplemented in various ways by purposeful interventions of democratic government leading to the mixed system one finds in most places today but that’s neither here nor there for this post. And yes guys with guns enforce our system but at least it’s something we’ve agreed upon the democratic way.
I’m pointing this out right now because I think many conservatives are prone to a certain distortion of perception in which supporting the status quo distributional system is thought to raise a fundamentally different set of issues from arguing for changes in the status quo distributional system even though the two sets of issues are entirely the same. In other words, the conservatives incensed I would presume to pronounce upon distributional issues apparently did not recognize that they themselves are implicitly doing exactly the same thing, the only difference being I implied the possibility of supporting a distributional system other than the one we have now while they support the current one. I suspect this is related to a common misperception of the conclusions of neoclassical economic theory I’ve alluded to a number of times over the years: the peculiar notion one is being neutral between two Pareto optimal market results if one uses their supposed equivalence to argue in effect one should stay at one or the other. The true implication of an inability to compare such outcomes would of course be agnosticism with respect to staying at one or moving to the other. Pretending it implies staying at one because one has no reason to move to the other seems quite similar to me to the notion we can avoid the issues associated with distributional systems by just sticking with the one we have and not discussing changing it. In the language I’ve used in many other posts: resolving interpersonal conflicts of desires is going to happen one way or the other as long as humans live together in a society. It doesn’t disappear if no one talks about it.
For conservatives who recognize we’ve already created a distributional system and the same general sort of issues are raised by retaining it or changing it the next level of concern is the potential ethical issues associated with changing it and in particular how unfair it would be to change the rules in the middle of the game so to speak. I certainly get that argument. Imagine one based one’s life on the desire to become phenomenally rich and possibly made some awkward decisions and difficult tradeoffs along the way only to find later in life someone decided the distributional system was a little out of whack and slapped a great whopping tax on you at least ostensibly to spread things around a bit? I imagine you’d be rather annoyed. Seems like something we’d all like to avoid. But the problem is we’re always in the middle of the game for someone. And I really doubt the wisdom of painting ourselves into a corner by saying the inevitable implication is we can never revisit the issue again. When we developed our current system we changed the rules in the middle of the game for the old nobility or someone anyway. And I mean let’s face it, we change laws all the time. Some or perhaps many of those changes have financial consequences for at least some people. The only thing different about the scenario I just mentioned is maybe it has a relatively larger effect on one’s finances than some other changes. It’s not really a difference in kind. But I do think if ever we agreed upon any such changes we could try to find some way to do whatever it was gradually and with the least amount of sudden economic dislocation and ill will as possible. Anyway, we’re nowhere near that point now so I suppose little reason to get into the detail of how one would actually ameliorate the shock of adjusting a distributional system.
Having set that aside let me just say a few words about this notion that changing the distributional system in some way, the dreaded (by conservatives) re-distribution, means taking money from hard working productive people and giving it to people who prefer to sit on their asses all day long doing nothing. This I think sums up pretty well a common conservative take on why anyone would discuss these issues but it is all a bit of a straw man isn’t it? Our current system is already set up to allow rich people to sit on their asses all day doing nothing and yet earn a heck of a lot more money than many hard working productive people. Yes, I hate to get all awkward about it but once one gets a certain amount of money one can invest it, have the earnings taxed at a much lower rate than an equivalent amount of earnings generated the old fashioned way, and do quite well for oneself. In some cases getting the money in the first case may involve some respectable level of effort but honestly I don’t know if it really adds up to the lifetime of work some less financially fortunate people put in. I’m not arguing it’s illegitimate. Not in this post anyway. I’m just saying I think it’s pretty clear our current system is rewarding some things beyond “hard work” and “not sitting on one’s ass.” Let’s have an example. Say I write a successful blog and make a few million dollars. (I’m partial to counterfactual thought exercises. If you’re a realist and just can’t think that way just say I write a bit of code or whatever.) I then proceed to sit on my ass doing nothing the rest of my life and live quite nicely on the returns from my investments. As I just suggested I’m perfectly fine if you have an argument of why that makes sense but if it involves the notion that overall I worked harder than let’s say my elderly neighbor who’s been getting up at six in the morning the past fifty years to work in the old salt mines I’m bound to say I’m not sure you’re speaking in earnest. And in my example at least I did something myself at some point in my life. Conservatives in the US have long desired and are now in a position to do away with the estate tax (that would be the death tax in their own parlance) so increasingly the rich person sitting on his or her ass making more money by doing nothing than working people will be in that position because he or she had the good sense to be born to wealthy parents rather than anything he or she may have once added to the world.
What’s my point? Pretty much the same as always I suppose. I think we should be able to talk about distributional issues objectively and dispassionately and get past the knee jerk keep your hands off my stack Jack conservative mentality. We’re going to be in for a bumpy ride if we can’t even manage that. I’ve discussed how I feel about our current distributional system in the past and I’m not sure there’s much point of going over it again just now but the short version is I don’t think it’s all it’s sometimes cracked up to be. Here are a few random thoughts on the subject. There’s no mechanism in a market system to automatically ensure sufficient jobs let alone good jobs for the available population of prospective workers. The distribution system I’d like to see would provide people willing and able to work and contribute to do well enough. Yes, we need incentives to encourage people to go the extra mile or get into things they would otherwise not be inclined to get into but we probably don’t need to go overboard in that area. Not sure we need to reward people being born to wealthy parents. We should find a way to ensure the development of labor saving technology improves everyone’s lives and if that technology means some people lose their jobs we should do something about it and help them out in some way. If we find our population is suddenly out of whack with the demand for labor we should do something until we get back to some sensible equilibrium. I don’t think we just tell people they’re superfluous and maybe they’d like to go somewhere and drop dead. The population is to me a separate issue we would then have to address in some way if that proves to be a problem. In short, we shouldn’t just accept whatever happens on the market as though it were the result of some natural law we can neither assess nor alter. Markets are meant to serve us; we’re not meant to serve markets. But it’s fine with me if you have other notions. Let’s talk about it. Because you know not talking about problems has never yet made them go away. They just fester in silence until funny things happen. And I don’t meant ha ha funny. Let’s not let the all too pervasive greed and egotism of the human race be our downfall.
