I have an essay, mostly inspired by Cosmides and Tooby at a Cato panel a while back. I begin by saying that
my goal is to make each side’s arguments intelligible to the other. I want Ayn Rand’s partisans to understand Karl Marx’s partisans, and vice-versa.
I conclude [link fixed],
I think that it is beyond debate that capitalism is imperfect. However, the more interesting question concerns how to try to improve it. There, a lot hinges on how one interprets the frequent failures of socialism as well as the failures of less-drastic forms of government intervention. To opponents of capitalism, these failures suggest a need to try harder to implement reform correctly. To proponents of capitalism, these failures suggest a need for reformers to back off. In that regard, I admit to being on the side of the proponents.
Read the whole essay before commenting.
Both links in this post go to the Cato panel; there is no link to the essay.
Here is the link to the post:
http://www.econlib.org/library/Columns/y2016/Klingcapitalism.html
As someone more on the Ayn Rand/defender of capitalism side, one counter argument that I have more trouble with is the “the people at the very top are so rich they won’t miss it” argument.
So, even if we’re in effort village, and people aren’t lying or cheating to get to the top, or using their wealth for political purposes. I think a lot of the Karl Marx types would still be in favor of redistributing wealth, with the argument that it goes much further or provides more utility in the hands of the poor, and more, that the rich don’t really need it or would miss it anyway. I think that’s what posts like this get at, comparing CEO and worker salaries and invoking prices of high end vs standard appliances.
https://rortybomb.wordpress.com/2009/08/06/how-much-refridgerator-can-you-buy-autonomy/
I think the counter-counter-point to this could be (1) to point out how charitable the very wealthy are (Gates Foundation, Buffett, etc), and how that likely helps more people than the government confiscating money that they would likely spend more inefficiently. There’s also (2) the argument about the difficulty of redistribution and the changes in incentives. Or maybe, (3) an argument about freedom, and — if they’re not cheating and acquired wealth through effort — people should have the freedom to spend their wealth however they want.
Would be interested in hearing other thoughts though.
Studying Warren Buffet cured me of any residual sympathy for that argument. If Warren Buffett didn’t want money I’d still prefer him allocating capital over the alternative of handing it over to the most enlightened democratic institution (even though he doesn’t apear to unDer stand this himself). The problem is the system of incentives and its resultant rapacious institutions, and of course current democratic institution are rapacious and mostly just less productive than for-profit ones that we could also improve.
Aside from the anecdotal evidence of Buffet and Gates, is it really correct that the wealthy/rich are more charitable? I’d be curious if anyone has good statistics on the frequency of donations by the wealthy and also as a percentage of income / wealth.
I’m skeptical that you’re typical lawyer or banker is more generous with money than anyone else.
The fundamental problem with inequality discussions is that they start with a global perspective rather than a local perspective. Inequality is by definition relative and in context. The needs of a person who is engaged in keeping up with the Joneses depends on those Jones fellows.
The main issues of inequality are not related to material need (Maslow low) but social standing (Maslow high) and mimetic desire. Once we understand this, the problems become issues of personal aspiration, character, belonging and marginalization, and all sorts of issues which are completely absent from the typical policy debates.
You also have to consider failures of the market and whether you are just replacing big government with big business, monopolies occurring naturally as well as government made, and the successes of government, as sacrilegious to some as that may be, from fighting monopolies among others. There is a tendency for arguers to declare only final solutions as success and anything less as failure, but there are no permanent solutions and failures are only when we quit trying. Avoiding a problem no more brings about a solution than trying harder will bring about a permanent one. A more pragmatic approach is to face that we can ameliorate the worst for a time while being humble about what we can accomplish, but not avoid the better because it is not perfect and final, and know that all changes and will have to change.
Another problem I have with it is growth is good, but while total equality may lower incentives and growth, too much inequality can do likewise, the idle rich, depriving others of opportunities, turn towards preservation rather than gain, and dampen incentives and growth.
The other critique I would offer is the talk of ‘we’ without consideration of how ‘we’ arises. Most would readily see it in conjunction with a village, not so much in conjunction with the world. The natural scope is the nation which bears the burden, exerts control, and provides for the common good. What makes a ‘we’ is integral to the discussion.
> The other critique I would offer is the talk of ‘we’ without consideration of how ‘we’ arises.
I agree, this (what I call “source of collective identity”) is something that has come up in my political discussions regular over the years.
However, I’m not convinced that the nation is the only or even the primary source of collective identity. Local governments (state, county, city) and social institutions (neighborhoods, parishes, professional associations, families, corporations, fan clubs) often provide a stronger sense of belonging and purpose than the nation state can (among other things).
When my liberal friends and relatives say they perceive a lack of community spirit and compassion among conservatives, what I see is rather that my liberal friends and relatives lack an appreciation for these varied sources of collective identity.
Conservatives are good at forming ‘we’, liberals at expanding ‘we’, and libertarians at ignoring ‘we’.
Well said. For conservatives you could also say “preserving ‘we'” or something like that, but I think the essence of the idea remains the same.
Isn’t inequality an effect in economics and a cause in politics?
I like the luck village/effort village framing. But, like Arnold, I am proponent of markets, which leads me to be suspicious of its neutrality. Are opponents equally comfortable with the framing, or would they see it has somehow tipping the scales against them? Next — one obvious implication of the framing is that we should treat the ‘effort village’ as an ideal and try to organize societies to move in that direction. Would opponents of capitalism agree?
If I were to say the primary of pro-libertarian/capitalism failures, is their divisions of culture and economics. Isn’t the division of goods, services and labor one of the most important aspects of culture? Of course, libertarians will state the problem of culture, inner city ghettos or the continued diminished WWC neighborhoods, but they do little to improve the local institutions. I hear Roy or Brooks stating the importance of local churches but where is the actual participation?
Anyway, between foreign nation economic issues and the sudden labor shortage, I expect US wages to increase.
Even in the Luck Village frame I don’t support forced sharing. To me, it seems wrong to take from the lucky, and being “lucky” is not enough of a justification. I’m not a Randian, though I have read Rand’s works.
We don’t redistribute happy families, good looks, height or health, but those are all partly a matter of luck. We don’t take all the winnings from lottery winners even though that is a matter of luck.
As you might suspect, this means that I do not agree at all with Rawl’s _Theory_of_Justice_ either.
After studying the topic of inequality for the last few years I am convinced that we are conflating at least four different frameworks under a common term.
1). Rule egalitarianism — Equal rules for all.
2). Rewards commensurate with contribution — such as commissioned sales, or proportionate taxes.
3). Rewards regardless of contribution — how families often distribute goods. This implies equality of outcomes with no consideration of risk, effort, or value contributed.
4). Rewards commensurate with need.
Most of the discussion on inequality revolves around the 3rd framing (income inequality which is regardless of potential variance in effort or contribution). It just assumes that this is the appropriate type of inequality.
In reality each is appropriate in certain situations. In addition each has pros and cons. For example types 3 and 4 tend to discourage effort and contribution and foster free riding. Type 2 can lead to self amplifying feedback loops. The problem is throwing out the generic term inequality without clarifying which one and which potential pros and cons go with it.
I honestly see little downside to type 1, but note it can in theory be applied to any of the other three as a meta rule, and that evaluating a system which operates on, say type 2 by its results as a type 3 could actually be used to undermine the meta rule. One could use redistribution to undermine the fairness of a type 2.
In summary, inequality is an overly broad word which can conflate at least four distinct definitions of equality and fairness and what is equal to what. Until we clarify what type of inequality we are speaking of, and what its benefits and baggage is, we are just obscuring the situation.