Citizen Economists » equality

Laziness and Equality

Simon Grey — Wed, 11 May 2011 19:50:19 +0000

From ASI:

Some say this is unfair because it offers the rich more options than the poor. But to stop people from being able to pay for places just to bring them down to the level of the poor is completely backwards – we should be trying to see how we can raise the poor up to that level. Equality for its own sake shouldn’t be the objective; what we want is to improve people’s lives. So how could we do this? Quite simply: by making sure that student loans are available to everybody with the grades needed for these places, and allowing universities to raise their fees to reflect the supply and demand for places.

Destroying wealth in the name of equality is the lazy man’s way of ensuring fairness because it is incredibly easy to destroy. If one man makes $20,000 a year and another man makes $30,000 a year, it is easier to take $5,000 from the better-paid man and give it to the lesser-paid man.

The more moral thing to do, however, would be to help the lesser-paid man find a way to earn $30,000 a year. Not only would there be equality, as was true with the prior scenario, but there would also be an increase in aggregate wealth. Additionally, neither man would have his wealth destroyed or taken from him. Of course, it is more difficult to help pull someone up than it is to push someone down, and so future attempts at ensuring equality will largely consist of destroying wealth instead of creating it.

Are People Who Live in Welfare States More Tolerant?

Winton Bates — Mon, 24 Jan 2011 21:05:46 +0000

I am not sure why I ever thought that people who live in welfare states would tend to be more tolerant than people in countries with smaller governments. It might have something to do with all the talk about social solidarity and social cohesion by those advocating collectivist policies. Rather than thinking about egality and fraternity I should have been thinking about liberty – and the historical links between respect for the rights of others and civility.

World Values Surveys ask a relevant question about the people respondents would not like to have as neighbours. People were asked to choose from a long list including drug addicts, heavy drinkers and people with criminal records. Reluctance to live next to people belonging to some of these groups may have more to do with safety concerns than with intolerance. Three groups that seem to me to provide a fairly neutral test of levels of tolerance in different countries are people who have aids, immigrants or foreign workers and homosexuals.

As in other recent posts on differences in values between people living in countries with relatively big and relatively small governments (here and here) I have focused on14 high-income countries with broadly similar European heritage for which data is available from the most recent World Values Survey (WVS 2005 – 2008). These countries have been ranked by size of government, using government spending as a percentage of GDP as an indicator of size of government (OECD Economic Outlook data on general government outlays as a percentage of nominal GDP, averaged over the three years 2005–08).

In the table below the five highest percentages for each variable are shown against a red background and the five lowest percentages are shown against a blue background.

Apart from Swedes, it seems that people who live in countries with big governments are relatively intolerant about who they want as neighbours. Social solidarity apparently does not include people who are perceived to be different.

What Distribution Principle Would you Choose Behind a Veil of Ignorance?

Winton Bates — Mon, 11 Oct 2010 11:23:36 +0000

In his book, ‘A Theory of Justice’, John Rawls considered what principles of justice would be agreed upon by all behind a veil of ignorance in which no one knows their place in society – their wealth, their class position or social status, their intelligence, strength, state of health etc. One of the principles that Rawls argued would be agreed upon is the ‘difference principle’ – that social and economic inequalities should exist only insofar as they benefit the least well off members of society.

I think the veil of ignorance thought experiment is useful to consider public policy issues from a perspective that is broader than my own perceived interests. When I do this thought experiment, however, I don’t endorse the difference principle (sometimes referred to as the maximin principle). The principle I come up with is to maximize the opportunities of any person chosen at random, subject to provision of a safety net to protect the well-being of the least well off members of society. I expect that some critics would say, however, that I get this outcome because I am not doing the thought experiment properly.

A study undertaken by Hörisch Hannah a couple of years ago does not seem to have the same potential for personal bias to influence the results obtained. Hannah implemented the Rawlsian veil of ignorance in a laboratory experiment using variants of the dictator game (see: ‘Is the veil of ignorance only a concept about risk? An experiment’, Munich Discussion Paper No 2007-4). In the first experiment, one player, the dictator, decides how much of the pie will be received by the other player, given an efficiency loss of 50 percent for units that are transferred from the dictator to the receiver. The veil of ignorance is implemented by requiring each player to decide how much to give to the other player before being assigned the role of dictator or receiver (with equal probability). The second experiment is the same as the first except that the role of receiver is not actually assigned to a person so the outcome can be interpreted as a self-interested response to risk.

Only a minority of subjects opted for the maximin principle under either experiment. The vast majority of male participants perceived the veil of ignorance as introducing only risk. Among women participants, however, impartial social preferences were a second significant motivation that induces stronger concern for equality.

Although I think the results of the study are extremely interesting, they can hardly be presumed to reflect universal values. The study is quite small, with only 167 participants (all university students). There may be potential for bias because about two-thirds of respondents have studied some economics. It would be interesting to see results for similar studies, for people of different ages and backgrounds in different countries.

It would also be interesting to know whether there is any link between the values that people display when they play this game and their political views. Are the views of individual voters strongly influenced by principles that they support irrespective of their own perceived interests? If so, then perhaps politicians are whistling the wrong tune (or whistling to the wrong dog) when they are seen all the time to be responding to rent-seeking by narrow interest groups.

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Authoritarian Politics and Economic Growth

Rok Spruk — Thu, 09 Sep 2010 14:27:47 +0000

Dani Rodrik argues (link) that political dictatorship is damaging to economic growth since democracies not only outperformed countries with flawed political regimes in the dynamics of economic growth but also in terms of greater civil, economic and political liberties and investment in education that help enforce better public policies and yield better prospects of economic development.

“Democracies not only out-perform dictatorships when it comes to long-term economic growth, but also outdo them in several other important respects. They provide much greater economic stability, measured by the ups and downs of the business cycle. They are better at adjusting to external economic shocks (such as terms-of-trade declines or sudden stops in capital inflows). They generate more investment in human capital – health and education. And they produce more equitable societies.”

The Immorality Of Egalitarianism

Dan McLaughlin — Fri, 26 Dec 2008 20:34:41 +0000

Egalitarianism is the ideal that everyone should be equal. It does not mean equal in the sense of equal treatment under the law, regardless of skin color, height, gender, religion or level of wealth. It means that everyone ends up the same. It means that everyone finishes the race together, even if that entails placing heavy weights on the faster runners. Many assume that egalitarianism is the moral high ground, that inequality of conditions is inherently bad, and that equality equals justice. To the contrary, however, egalitarianism is the repudiation of reason, of all of economics, of morality, of human intelligence and of life itself.

It is quite evident that no two situations are alike. Someone who chooses to live in the desert will have certain resources that are available and specific limitations as to what he can produce. The same person doing the same thing in fertile valleys or in a rain forest or in the arctic tundra will have a different set of resources and limitations. Obviously, geographical location will give certain advantages and disadvantages, unequal productivity and unequal wealth for identical people in each of those situations. That is neither bad nor good. It just is. To say it shouldn’t be is like saying gravity shouldn’t exist.

When you consider the vast differences in intellect, native talent, size, dexterity and a thousand other attributes of human beings, the large differences due to geography are magnified. Some people are exceptionally bright, some are exceptionally dull. Again, that is not good or bad, it just is. It is nature, it is life.

Some people in society get to be surgeons. No matter how bright the individual is, that doesn’t happen accidentally or automatically. A surgeon becomes so by making a decision and paying the very high price to get there. While the economic cost is high, there are far more important costs to take into consideration. It takes many years of grueling study, hard work, long hours and unpleasant conditions to make it to the point where a doctor can excel at his or her work. That is true, to some extent, for almost any profession. There are many capable people who choose not to pay the personal price and, in so doing, choose a lower paying career.

Some unfortunate souls who have paid the price find out after the fact that the ongoing personal cost is not worth the higher pay. I know an engineer, for example, who was successful, but didn’t want the rat race. He gave up an engineer’s salary to become a farmer. His income was less and farming was harder physical work and required longer hours, but to him, it was worth it. He made a tradeoff because he believed that some things were worth more than a high salary. Not everyone agrees with him.

Thus, we can see that much more enters into the picture than just innate abilities or geography. All humans make tradeoffs in their daily lives which affect the future. Students at all levels of education take actions each day that affect their future, their careers and their lives. There are some who are not exceptionally intelligent, but they work very hard and become exceptional. There are others who have a high level of native intelligence and skill, but they choose not to use them for whatever reason. It is reasonable to expect that the economic results of those two will likely be significantly different. In general, those with higher intelligence, those with specific innate skills and those who work harder and longer will earn more money and be able to do things that those less intelligent or skilled or hard working will not. That is very good because it rewards people for being productive, and thus contributing to society.

What is bad is when someone takes something that does not belong to them. Theft and physical aggression, whether actual or threatened, are almost universally thought of as bad. Throughout history, morality has centered around respect for the life and property of the individual. Further, what is immoral for one person to do is also immoral for presidents, congressmen or any collection of people to do. The biggest, most effective predators in modern times are large centralized governments, who use the flag of equality to cover their sins and to justify massive legalized theft and interference in the lives of citizens. It is past time for thinking people to take back the high ground and recognize the inherent immorality of egalitarianism.