Manzi's Questions on Inequality

Besides being a brilliant guy, Jim Manzi is to my “right” politically, which I think makes his worries about inequality particularly interesting. He has kindly taken the time to read my paper and has some questions. I’ll take them in turn.

1. Let’s assume that the social mechanisms that produce some highly skewed income distribution do not violate any norms of justice. Can a sufficient degree of inequality be itself a violation of a norm against very high inequality? If our minds are evolved instruments, and have evolved to regard such an outcome as inherently wrong, then is it valid in Will’s philosophy of justice to declare a norm against it?

I think there is good evidence that there is an evolved sense of “fairness” relevant to questions of distributive justice. But distributive justice, in the first instance, deals with the distribution of the gains from cooperation in small groups. It’s not clear that this capacity has any relevance to questions of the pattern of holdings in the vast populations of contemporary nations states–questions light-years from any posed by life on the Pleistocene savanna. And, in any case, that a capacity evolved, and was adaptive at some point in the history of the human lineage, does not even establish a presumption of normative authority for the outputs of that capacity. So, my answer is a very strong No.

2. Given my views on social science, I think that it would be all but impossible to build a convincing analytical case for any non-obvious phenomenon that can not be subjected to controlled experimentation because it extends across all of society over a long period. So I agree that an analytical proof that sufficient inequality will lead to a political dystopia does not exist and will not be forthcoming. But that is different than saying I do not believe it to be a problem. Is it Will’s judgment that, in our current social and political context, current levels of economic inequality are not dangerous?

First, let me emphasize that a main point of my paper is that real material inquality is much lower than nominal income and consumption measure lead many people to think. The reason is that these measures aren’t measures of real material inequality. I argue that there is good (though not drop-dead) reason to believe that standards of living have become more equal over time. That said, given my views on social science, I think it’s wrong to think of levels of inequality, measured anyway you like, as a cause of anything in the absence of auxilliary hypotheses about the relation of the inequality level to real mechanisms of social change. As I argue in the paper, inequality and other very bad things often have a common cause. For instance, places with a great deal of corruption and political predation often have, for those very reasons, extremely high levels of economic inequality. When distribution is determined primarily through political means, there will be a great deal of conflict over control of the state. So these kinds of places tend to be marked by strife and instability. And thus you will in fact find a reasonably strong correlation between income inequality and instability across countries. But inequality doesn’t drive the instability. Rather, the causes of instability also drive up inequality.

So, to answer Jim’s question, (1) real material inequality in the U.S. is lower than most people think and (2) the level is not dangerous. (3) Some part of the level is surely driven by dangerous mechanisms (e.g., political redistribution with little perceived legitimacy), but then the injustice and danger lies in the mechanism, not in the mechanism’s knock-on effects on equality.

3. To put my cards on the table, I think that inequality, as it interacts with other facts about contemporary American society, is a problem. But, I think that, even more fundamentally, it is an indicator of a much more severe problem. As globalization continues inexorably (in practical terms, this has very little to do with McDonald’s in France, and almost everything to do with the economic rise of Asia), U.S. income inequality is a demonstration that many — probably most — Americans don’t have the capabilities required to maintain anything like their current standard of living in competition with a global labor force. Does Will think this is accurate, and if so, is it a problem?

I don’t think this is even close to accurate. I see most signs pointing in the direction of a rising standard of living for most Americans. The worry makes sense only if you (1) see world economic growth as a zero-sum game, which it most certainly is not, or if you (2) think the standard of living of most Americans is, like the standard of living of Michigan autoworkers, a result of direct of indirect subsidies that cannot be sustained in the face of increasing global competitiveness, which it is not. Globalization does squeeze out the kind subsidies that do prop up many people’s wages. Maybe a declining standard of living due to disappearing subsidies is a source of social instability–or at least a source of new demand for inefficient protectionism. This is, in fact, why some scholars think “trade adjustment assistance” and other forms of redistribution are so important. But then, again, inequality is a symptom here, not the disease. If people get out the pitchforks when their subsidies are removed, inequality per se has nothing to do with it. What people are angry about is a declining standard of living. (And, yes, some people care about relative decline, but their frame of reference is generally local, not national.) If some other form of subsidy is needed to buy civil peace and/or buy out resistance to good trade policy, then that might be a good reason for redistribution. In my view, to see it as an issue of inequality is simply to lose focus.

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68 thoughts on “Manzi's Questions on Inequality

  1. “A problem”, please. These guys all seem to think about the issue as if America existed in a vacuum.Show me a society that doesn't conform to the Pareto principle, that is above the level of bare subsistence, and then we'll talk about inequality being a “problem”.Income is, has always been, and will always be subject to a power law distribution. It's just the way of things.

  2. Material inequality exists everywhere and attempts to minimize or eradicate it inevitably lower everyone's standards and/or opportunities. Considering the rise in obesity coupled with the explosion of cable/satellite TV and huge flat screen TVs, the U.S. number one ranking of 686 cars per 1000 people, and the U.S. number two ranking (behind Switzerland) for median household income, it would appear that the delta between the very rich and the average have-not is the problem. I also think that Will's point (When distribution is determined primarily through political means, there will be a great deal of conflict over control of the state) about political economic engineering is spot-on. Of course any society has conflict over control of the state, but “sharing the wealth” is a nice selling point to the folks who don't have a shiny mercedes or a house on the water.

  3. Material inequality exists everywhere and attempts to minimize or eradicate it inevitably lower everyone's standards and/or opportunities. Considering the rise in obesity coupled with the explosion of cable/satellite TV and huge flat screen TVs, the U.S. number one ranking of 686 cars per 1000 people, and the U.S. number two ranking (behind Switzerland) for median household income, it would appear that the delta between the very rich and the average have-not is the problem. I also think that Will's point (When distribution is determined primarily through political means, there will be a great deal of conflict over control of the state) about political economic engineering is spot-on. Of course any society has conflict over control of the state, but “sharing the wealth” is a nice selling point to the folks who don't have a shiny mercedes or a house on the water.

  4. sure, but you can change the degree. I may be wrong but I would guess that cuba has lower inequality than the US..

  5. Yes, but that hurts economic growth and tends to leave most people worse off:GDP – per capita 2007Cuba – $11,000USA – $45,800I'll take the US's relative income inequality over Cuba's relative income equality.

  6. Are you kidding? Have you seen the pictures of Castro's private island, vs. the standard of living enjoyed by the typical Cuban on the mainland? Cuba is an island where inequality is determined entirely by your connections within a central power structure, rather than your luck in the marketplace. Either way, inequality is inequality, and frankly I find Cuba's rigid, militarily imposed one to be far more unjust.And “you” can't really “change” anything; because putting it that way implies there's a decisionmaker who's making a conscious choice concerning the “degree” of inequality. Inequality is something that occurs; it's simply an outcome; some people end up better off than other people, in specific measured senses. Some people have more money, some people have more friends. Saying you can “change” that isn't really coherent unless you can explain the process by which this “change” takes place, and who exactly gets to decide what the correct “degree” of inequality is, and what criteria they are using.

  7. Manzi definitely made a stronger argument than he had to in his third post – his point would be well-served merely to argue that globalization will result in growing income inequality, not necessarily an absolute decline in living standards for many – the rebuttal that one shouldn't conflate income inequality with standard of living would still be fairly made here. But without positing an alternate instrument or index for standard of living, it strikes me as too easy to hide behind vague assertions that things will get better for most people, by some definition. Does Will have a preferred measurement of living standards which he'd assert will not fall in the medium-term future?I think it's fair to say that inequality is overstated by looking purely at income differences, but I think it needs to be argued that inequality-induced unrest is instilled by the poor lacking whatever is defined as a “necessity” in life rather than catchphrases of how the top X% of the population controls Y% of the wealth. In the current context, if inequality is going to cause unrest, is it more likely to be because we have 40 million Americans without health insurance, or because the Gini coefficient is just unacceptably high?

  8. This quote captures my main difference with Will:

    I think there is good evidence that there is an evolved sense of “fairness” relevant to questions of distributive justice. But distributive justice, in the first instance, deals with the distribution of the gains from cooperation in small groups. It’s not clear that this capacity has any relevance to questions of the pattern of holdings in the vast populations of contemporary nations states–questions light-years from any posed by life on the Pleistocene savanna. And, in any case, that a capacity evolved, and was adaptive at some point in the history of the human lineage, does not even establish a presumption of normative authority for the outputs of that capacity. So, my answer is a very strong No.

    In a nutshell Will feels that he can validate (or negate) the evolved feelings of others.Do you suppose there is a genetic bias for that, or is it simply cohort? I suppose that in my “young man making his place in the world” phase I'd be more likely to lean that way. (Throwing some elbows.) In my older “such is the world, let's make it work as well as we can” phase I'm actually less willing to call anyone else's hardwired humanity “wrong.”

  9. Shorter: We can perhaps be justifiably frustrated when someone reasons to, and then holds, an irrational position – but surely when we see that an irrational position has organic roots we should be more accepting.I am a human being, and willing to do things that are good for human beings.

  10. “In my older “such is the world, let's make it work as well as we can” phase I'm actually less willing to call anyone else's hardwired humanity “wrong.””Do you think killing people not part of your in-group is OK? Would you consider “Forty year-old men had sex with fifteen year-olds all the time in the Pleistoscene” a sufficient defense against a statutory rape charge?

  11. A pleasant, reasonably phrased and clearly articulated collection of unevidenced nonsense that fits right in with the, um, curious folks in the comment section who seem to believe, using metrics and data they have carefully gathered by making things up, that wealth inequality is “the same everywhere”.As I argue in the paper, inequality and other very bad things often have a common cause. For instance, places with a great deal of corruption and political predation often have, for those very reasons, extremely high levels of economic inequality. When distribution is determined primarily through political means, there will be a great deal of conflict over control of the state. So these kinds of places tend to be marked by strife and instability. And thus you will in fact find a reasonably strong correlation between income inequality and instability across countries. But inequality doesn’t drive the instability. Rather, the causes of instability also drive up inequality.Right. As a logical argument, this is cute and coherent and articulable and all. I suppose I should be grateful for that much. But I'm not. You're taking a correlation between income inequality and and instability that you *Admit exists* (again, credit, I suppose), and hypothesizing that the correlation between A and B is instead caused by third factor C. Why exactly should we believe you? Shouldn't you be able to come up with examples where A and B *don't* correlate? According to Occam's Razor, correlations are causative until proven otherwise.And that doesn't begin to address the rather obvious relationships between income inequality and the very thing you claim causes income inequality – “corruption and political predation”. It's simple mathematical logic that the more wealth is concentrated in the fewer hands, the more effective they will be in achieving corrupt outcomes, since there are fewer coalitions that can match / neutralize them in spending money to lie on television. Similiary, political predation is obviously going to be more common when lawmakers are unafraid of accountability – which is easier when they only need the support of a smaller number of rich people to keep their financial stability, as the odds of avoiding a stastical probability of weakening support are smaller in the smaller sample.2) think the standard of living of most Americans is, like the standard of living of Michigan autoworkers, a result of direct of indirect subsidies that cannot be sustained in the face of increasing global competitiveness, which it is not.Dude, real wages have stagnated in America over the past 30 years in a manner unprecendented in the past 200 years. What's your alternative explanation? You don't seem to have one. Instead, you have a bunch of semantic handwaving about what the sources are of US standard of living. I don't really care what you think is or is not significant about the real wages number. I want your explanation as for why 180 years of progress have come to a halt. Ready?It doesn't take a lot of complex math to understand that as labor competition and thus supply increase globally, rises in the price of labor slow to a halt and begin to fall. You don't seem to be denying that – you just blow a lot of smoke and then say, okay, if we have to bribe people to accept globalization, fine – but the “bribes” are the only thing standing between the explicit purpose of increasing global labor competition and its inevitable outcome – massive concentration of wealth and the fall of median living standards across the globe even as average living standards stay the same.And of course there's different net social outcomes if a tiny elite stay very rich while labor suffers – for the same reason that we have different social reactions to hurricane-based impoverishment and theft-based impoverishment. You seem to be attempting to flatly deny the realities of entire branches of modern neuro-psychology. We're programmed to hug if everyone gets hurt together – and to start fucking riots if most people get hurt and a few people make off like bandits. That's the instinct of self-defense – you'd think a libertarian would get it.

  12. Hi Glasnost,”According to Occam's Razor, correlations are causative until proven otherwise.”This is false. Anyway, it's proven otherwise. Controlling for average income, inequality is uncorrelated with instability. “real wages have stagnated in America over the past 30 years in a manner unprecendented in the past 200 years.”This is also false. The median real wage has increased steadily over the long and short term. Go ahead and type “real wage” into Wolfram Alpha to see a graph of the last five years. If memory serves, standard methods of estimating inflation produce an estimate of real wages for men at the lowest quintile that is largely stagnant. Globalization plays some role, as does low-skilled immigration, and also the shift of the economy away from manufacturing toward services, and low levels of growth in educational achievement. Your basic economics about increasing labor supply is confused. Wage levels are dominantly explained by worker productivity. You're committing the “lump of labor” fallacy. Why do you suppose U.S. wages didn't plummet as its population has soared?

  13. 16 yeah. It's natural for men to want to have sex with a 16 year old.If women can get behind the wheel at age 16, then I say they should be able to drive their bodies at the same age.

  14. What worries me is that it is much too often true that children have to pay for the sins of their (absentee) father. If this is a common enough sentiment, people might decide to vote for politicians who promise to divide the spoils of cooperation through political means. If the ultimate source of the productivity of wealthy laborers is their upbringing, then market mechanisms are simply punishing and rewarding people based on who their parents were. That seems quite unfair. When people refer to Latin America they are probably thinking that it is a place where most people think that one's life chances are determined by birth, not merit, and so view politics as coming closer to distributing wealth according to desert than the market. The fear of course being that, slowly but surely, such a view is taking hold in the U.S. and will result in favorable attitudes toward political distribution of wealth.

  15. Will,In your reply to Manzi, you write that “the level [of real material inequality] is not dangerous”. I think this is wrong for the following reasons. First, notice that you've incorrectly lumped Rawls in with the proponents of what you call the 'Inequality Road to Serfdom'. The worry expressed in the Inequality Road to Serfdom is that of a lock-in of policy that favors the wealthy: the wealthy have a disproportionate degree of control over the political sphere and tend to support policies that favor their interests. However, Rawls's worry that income inequality undermines the fair value of political liberties is quite different: his worry is that income inequality undermines the poor's autonomy in the political sphere since the wealthy have a much greater ability to make their voices heard or to amplify voices they agree with (e.g. through the use of their own money to support their own political campaigns, or through the funding of think tanks). Now, the important point is that your main argument against the Inequality Road to Serfdom – viz. that the wealthy often support redistributive policy – does not affect Rawls's claim that income equality undermines the fair value of political liberties. The reason is that even if the rich support redistributive policy, the rich still speak louder than the poor (you concede as much on pp. 18-19), and therefore the rich exercise greater control over the political sphere than the poor. Consequently, you have yet to formulate an argument against Rawls's claim that income inequality is a problem since it undermines the fair value of political liberties.Now, you go on to claim that a focus on the fair value of political liberties might actually be counterproductive: “The issue is improving the welfare and opportunity of the poor” (p. 20), but as you rightly note, the poor are not in the best position to advance their own interests due to lack of information and education. But the problem with this argument is that any reasonable calculation of the welfare of the poor will take account of their autonomy in the political sphere (one reason for this is the connection between autonomy in the political sphere and self-respect). Consequently, improvements in equality of voice may very well be improvements in the welfare of the poor whether or not the poor are capable of advancing their economic interests. The idea is that equality of voice is not merely an instrumental good, it is good in itself: we value autonomy in the political sphere not simply because we are often in the best position to determine what's best for us, but also because there is value in deciding things for ourselves. To deny this is to fail to appreciate why paternalism is a bad thing (indeed, your emphasis on the fact that the rich support the interests of the poor suggests a major neglect of the problem of paternalism – I might also add that your neglect of this problem is out of character: your other writings suggest great concern with the non-instrumental value of democracy and public reason, which are closely connected to the non-instrumental value of autonomy in the political sphere). Thus, supporting equality of voice may very well not be counterproductive, assuming that the non-instrumental value of autonomy in the political sphere is sufficiently high to offset the loss in material well being caused by the poor's ineptitude in advancing their material interests. However, you also argue that supporting equality of voice requires advancing the material interests of the poor (p. 20). This is certainly correct, but it is important to note that there are ways to improve equality of voice without improving the material well-being of the poor: for example, mandate public financing of elections. But even any real gains in equality of voice require gains in material well-being, the Rawlsian point remains that the current levels of income equality are very dangerous since the poor currently lack the safeguards (e.g. public financing) and material conditions (e.g. education) necessary to secure the fair value of political liberties. Granted, this is not an argument against high levels of income inequality per se (the reason is the above noted safeguards and material conditions are compatible with high levels of inequality). Rather it is an argument that given current conditions – e.g. given the lack public financing and access to education – the current level of income inequality is dangerous because it undermines the fair value of political liberties. Thus, you should reconsider your answer to Manzi's question: “Is it Will’s judgment that, in our current social and political context, current levels of economic inequality are not dangerous?”

  16. “Controlling for average income, inequality is uncorrelated with instability.”I must be misunderstanding something in your previous comment.When you said, in your original statement, “And thus you will in fact find a reasonably strong correlation between income inequality and instability across countries.” I thought those words meant, “there is (thus “you will find”) a correlation between income inequality and instability across countries.”I'm no scholar of the English language, but your quote in your reply to me seems to directly contradict your original quote. Care to clear this up? Right. Moving on.”The median real wage has increased steadily over the long and short term.”It sure is frustrating to have arguments with even polite people when we don't agree on basic facts.http://www.workinglife.org/wiki/Wages+and+Benef…These folks claim to be using U.S. Dept of Labor statistics, and according to them, your statement here is false. Admittedly this only goes through 2004 but I really, really doubt the last couple of years mark a dramatic change in this picture. I'm open to your LINK – not your Voice of God assertion to the contrary – citing statistics that prove otherwise.”Your basic economics about increasing labor supply is confused. Wage levels are dominantly explained by worker productivity. You're committing the “lump of labor” fallacy. Why do you suppose U.S. wages didn't plummet as its population has soared?”Well, once upon a time returns to labor rose with worker productivity, but sometime in the 70s we began to see a rather serious divergence between those two lines. Are you really going to make me dig out the data on this? I don't claim to be an economist; you must be well-informed enough to have already seen such data yourself.Again, not being an economist, I'm just curious – are you *denying* that increasing the supply of a commodity will cause, all other things being equal, a drastic decline in the price of that commodity? Because that's what I remember from my economics 101. I also remember that labor is treated exactly like one of those commodities in many cases. I would guess that what kept wages from not plummeting as US *labor force* was the relatively high transaction costs of relocating work areas 100 years ago, creating relatively closed local economies only loosely connected by interstate and international trade. Of course, said transaction costs have been steadily declining.So either you don't think that the basic rules of supply and demand apply to labor prices – you haven't explained why – or you would focus on “all things being equal” and argue that some exogenous third factor was presenting (or, for you, “presents”, present tense, since you're still in denial about the data) that basic rule from forming the expected outcome.Hey, but if you don't agree, why don't you fill in the blank and tell me why real wages are in the tank while US worker productivity has done nothing but rise since 1964? Since, you know, that's the number that “controls” wage prices.Yes, I am willing to come back, get the net total rise in US worker productivity here, compare it to the net rise in real wages over that period, compare to prior eras, and so on just to make you look dumb if you take another stab at denying it. Don't think I won't. So, your best bet is to just start ignoring my replies. That's what usually happens right about now on other websites.

  17. “The median real wage has increased steadily over the long and short term.”You've really got some nerve in posting this. I refuted this with BLS data in my last post, but I keep looking to see if I misunderstood something, or if there was some technical reason how your statement could be accurate, and I just keep finding more info reinforcing my prior belief that this is completely inaccurate.You're a professional. You're not supposed to be wrong about basic facts.http://www.dailykos.com/story/2009/5/21/733001/…Don't you dare get on me about the daily kos origin, because the attached graph is from the St. Louis Fed.Just in case you can't interpret it, real wage growth is when the orange line deviates from the blue line. There's been almost absolutely none of that since 1974.Gaaaaaah! I sort of respected you. You know, you're polite. And stuff. But either you have an alternate set of statistics you can link to, ideally using official data, that shows how wrong I am and confused about these basic facts – in which case I apologize for my rudeness – or you're making grossly inaccurate assertions about these same basic facts, and you should apologize to your damn audience.

  18. Would you have been happier– or at least less of an asshole about your unhappiness– if Will had said “compensation” instead of “wages”?

  19. Obvious cheap shot, but also a bit backwards.I'm saying that I try to accept the standards and morals of those around me, even when I might judge them as hardwired and irrational.I'm not suggesting anything controversial, certainly not the quite ugly actions you paint me with.Now, you want a closer (actual) example, consider global warming. I think the rational and responsible action is to engage with it. I think that people who refuse are doing so because they are hardwired to be irrational about problems that are out of sight and out of mind. For 1,000,000 years the lion in front of us (or not) was more important than the lion 10 miles away.(If GW were just a lion, a local and not global threat, our old hardwiring would be appropriate.)

  20. BTW, with respect to age of consent, both impulses (attraction and protection) must be part of us. That the protective instinct is so strong across cultures speaks well of our hardwiring.

  21. Pingback: All Things Equal And Unequal « Around The Sphere

  22. “Wage levels are dominantly explained by worker productivity”Will, you should do a post explaining how you've resolved the Cambridge capital controversy.

  23. I saw your Diavlog with Ezra and I think I basically agree with you at least in theory. Whenever we see inequality as a harm itself the inevitable result is to favor a world where Bill Gates is poorer while nobody else is any better off. That said I think that social inequality is a real concern. We don't want to live in a world where rich people are considered better than poor people or where white people are considered better than black people. Usually when people complain about inequality what the are really upset about is that our society seems to weight their harms less than other peoples harms. Where I think you might miss the boat is that wealthy people have more influence over the political process and so our society really does weight their harms more. This kind of inequality is something worth measuring and even designing policies around..

  24. These are some relatively interesting links. Your above statements were still inaccurate, but that's the beginning of a case along the line of Paul Zrimsek's statements above. The time series is kind of limited. And I have serious doubts about whether the increase in health benefit payments that makes up most of the increase in total compensation reflects anything except a type of inflation that we're not yet smart or honest enough as a species to correct for the way we correct for inflation as a whole. But you've got something, even if only a fig leaf, for that claim. Nice.I'm still interested in your resolution of your two completely contradictory statements as per my original part I:“Controlling for average income, inequality is uncorrelated with instability.I must be misunderstanding something in your previous comment.When you said, in your original statement,”And thus you will in fact find a reasonably strong correlation between income inequality and instability across countries.”I thought those words meant, “there is (thus “you will find”) a correlation between income inequality and instability across countries.”I'm no scholar of the English language, but your quote in your reply to me seems to directly contradict your original quote. Care to clear this up?I'm not particularly nice. (Paul, here's your answer).On the other hand, I haven't called you any names, either, just haven't tried to disguise my feelings. You're a complete stranger whose research slash ideological speculation, if widely popularized, probably threatens what's left of certain fundamental values in my society. You don't appear to have demonstrated evidence for your views and you're trying to fly in the face of correlations that work against your point. Also, you make inaccurate statements when defending yourself. It's not my job to be nice. In some small way, this stuff either fixes or ruins the world, and if it can be run down by a damn anonymous blog commenter, it deserves to be. Telling people that inequality has no negative public policy implications is like telling soldiers as they march into a war that bullets won't hurt them; i.e, mythology with gruesome consequences if believed. Unless, of course, you're right. Can't be ruled out, but there's not much here except philosophy to back the idea up.I count four or five arguments from my prior statements left unrebutted. I'll be sure to bring them back up when this topic is discussed until they're dealt with.

  25. From all the bellowing you did about real wages, anyone would think you put some trust in the CPI-U they use to derive them from nominal wages. So when someone shows you a trend in real compensation based on that selfsame CPI-U, you need a better reason to reject it than some feeble handwaving about how maybe we don't know how to measure real trends after all. Failing that, you need to at least consider the possibility that the people who ignore your replies at those other sites do it because you're a waste of time.

  26. Now that Will's resolved the CCC, I wish he'd dispose of Zeno's Paradox for us. Phlogiston theory can wait until next month.

  27. The point of my possibly ill-chosen examples was supposed to be that the CCC is of no practical significance; no one should care too much whether it's been resolved or not.

  28. No, that's not true. The CCC undermined marginal productivity theory; Paul Samuelson even conceded as much. But since the antagonists (Sraffa and Joan Robinson) all died off everybody just pretends it never happened. The accuracy of “wage levels are dominantly explained by worker productivity” is still up in the air.

  29. For all I know that may be true– for academics who are deeply invested in that sort of thing. To the rest of us it looks like a case of “it works in practice, but will it work in theory?”

  30. The only thing that an economist can logically say about inequality is that the market, always tending toward equilibrium, always tends toward the inequalities that will bring it about, and that any attempt to reduce them, like any interference with the market, will be completely counterproductive, and not reduce but increase them.

  31. Hold on a minute. Real compensation deflated by the same index as real wages? Why not deflate the increased health care benefits by a specific index of health care costs?

  32. The lump of labor is only a “fallacy” under assumptions of perfectly competitive labor markets and mobility of labor and only in the long run. In other words, it's not a fallacy at all but a transitory condition of real life. http://econpapers.repec.org/article/tafrsocec/v…Certainly, one doesn't want to make long-run projections on the basis of a lump of labor assumption any more than one wants to assume immortality. In the long run we are all dead; but in the short run the supply of labor can outrun the demand for it and often does. It's called “unemployment”.

  33. Taking from the rich to give to the poor doesn’t just draw money but manpower downward upon the hierarchy of production and the social scale. For there must be a line between rich and poor, and, at that line, but one penny of income separating them. So, when you take it from the one to give to the other, you reverse their positions. The poor become rich and the rich poor, attracting manpower from the former occupations of the one to those of the other.To restore the manpower allocations it had preferred, the market must bid the net wages of the formerly rich back up and of the formerly poor back down. But, anticipating increasing rates of redistribution, and compensating not just for the current but for the greater anticipated rates, it bids the net wages of the formerly rich to even higher levels and of the poor to even lower levels than before, for differentials greater than before.Which is why taking from the rich to give to the poor can not reduce but only increase inequality and “social injustice.”

  34. Income inequality is problematic if that inequality was produced in a situation that was unfair.The powerful institutions in the U.S. (government, Media, universities, etc.) all feature exclusive access, usually maintained by financial barriers. If some Americans have better access to those institutions, and those institutions are instrumental in wealth aggregation, then that system is unfair.In short, the game is rigged. In a society this wealthy, we should not allow an economic system that let's people go hungry, homeless and risk early death. These are the moral problems of inequality.

  35. Putting poor people in large high-rises tended to make them poorer and worse off in the 60s-80s. That's just one example.

  36. Instead, we should just give people shit for free and act like incentives don't matter.Please.

  37. Get over yourself, lesvic (and you too, uknowbetter). First you need to learn to distinguish between an ideal, a law and reality. Maybe your ideals are lovely (or maybe not). Calling them laws is wishful thinking. Assuming those imaginary laws govern the outcome of events in the real world is delusional.The laissez faire utopia — like the socialist utopia — is a utopia. It exists nowhere and never will because it is a dream… a scheme… a moonbeam.dg lesvic's explication of “the line between rich and poor” with “but one penny of income separating them” was beautiful like a soap bubble — a delicate, transparent hymen of surface tension between air and air. It was an unintentional satire that took notions of hierarchy and entitlement to the “end of the line” and burst them. Anthropomorphic markets with 'preferences'? Please, draw the cartoon!

  38. Bologni Slicer,Ceteris pariblus, which means, all other conditions constant, price goes up as quantity demanded goes up. That's a law of economics.Taking from the rich to give to the poor can not reduce but only increase inequality. That's another one.If the “laissez faire utopia” could never exist, why must you outlaw it?Simple question:Is there a line between rich and poor?Simple question: at that line, does more than a penny of income separate them?Prediction:We won't get a simple answer.

  39. Simple answer 1: No. A line? Are you kidding?!! (prediction falsified)Simple answer 2: Since there is no “line” there is no “penny”.PS: see Sorites Paradox. Anyway it is quite possible for a “poor” person to have a higher income than a “rich” one.But, let's get back to something we can agree on. I would be suspicious of “taking from the rich to give to the poor” because who is going to do the taking? The rich! There's no need to outlaw a laissez faire utopia. It doesn't exist and it won't. There is only a need to distinguish between a wish, a law and a delusion.

  40. Bologni Boy,Let me put it to you this way: are there rich and poor, or are we all equal?What difference does it make that a poor person may have a higher income than a rich person. The rich person may have no income at all. He may live entirely on his savings, and without even any interest on it. But that doesn't change the fact that taking from the rich to give to the poor makes the poor poorer.You wrote:I would be suspicious of “taking from the rich to give to the poor” because who is going to do the taking? The rich! What difference does it make? Whoever does the taking, it will make the poor poorer.I don't recall how the question of laissez faire got into this. For the sake of discussion, let's grant everything you've said about it. The question remains: does taking from the rich to give to the poor make the poor reduce or increase income inequality?

  41. I didn't mean “make the poor reduce or increase income inequality. That was a typo. Of course, I just meant “reduce or increase…”

  42. I suppose we could do that if for some reason we wanted things like 401(k) matches and DB pension contributions deflated by an index of health care costs too.

  43. If, as it appears, we all agree now that taking from the rich to give to the poor cannot reduce but only increase inequality, what more must be said about it?

  44. “what more must be said about it?”Only this: that the idea of “taking from the rich to give to the poor” is not the only way to approach the problem of inequality. Giving to the poor is ineffective to the extent that it doesn't change their standard of living. Now “standard of living” is a complex notion that can't be reduced to level of consumption or expenditure. It has to do with habits, customs and beliefs. Taking from the rich is a misnomer because it is the rich who do the actual taking and who they take from is the median income people (who are commonly referred to as “middle class”) , not the rich.It is, in fact, possible to do something about inequality without taking from the middle class and giving to poor. But it requires an understanding of economics quite different from the “rational actors with given preferences maximizing their utilities” hocus pocus. It requires, if you'll pardon the expression, a more conservative understanding of economics. By more conservative, I don't mean the right-wing, free enterprise, laissez faire Utopian success story clap trap that has mesmerized American know-it-alls and know-nothings at least since the gilded age. That more conservative view would readily dismiss the fiction that the predatory New Bureaucracy of CEOs who award themselves multi-million dollar salaries and bonuses are somehow being rewarded by “markets” (although I'm sure the boys and girls at Goldman Sachs would like you to keep believing that's true).Let's establish that there are some inequalities of income that are fruitful in that they create incentives and rewards for effort and achievement. Let's also admit that their are other inequalities that simply reflect the pecuniary predation of slick operators. The key to reducing (unjust) inequality is to first distinguish between the two. Second, it is to discover what everyday habits of ordinary people contribute to the aggrandizement and institutionalization of the second kind of inequality. Thugs succeed not because they are tough and cynical but because people look up to their image of toughness and cynicism.

  45. Baloney Boy,You can refute any thoerem on your own terms, but the test is to refute it on the author's.Mine again: taking from the rich to give to the poor can not reduce but only increase income inequality.If you can not refute that, and must accept it, on its own terms, the question remains: what more need be said about inequality?

  46. The whole problem with your view has to do with your confusion of market processes with political processes.The manpower (or any other resource) allocations that a given market “prefers” depend on the existing patterns of distribution that the market operates within. If you change the distribution patterns, the market's “preferred” allocation changes too. If under one pattern of distribution there is a large allocation of resources devoted to the gold plating and diamond encrusting of urinals there is no “market preference” for this state of affairs. A change in the pattern of distribution might lead the market to re-allocate urinal enhancement resources to flood prevention instead. There is no “preference” inherent *in the market itself* for an allocation oriented towards luxury toilets just as there was no “market preference” pushing allocation away from that before the change in distribution. Distribution is a reflection of the political fight over the returns to various factors of production (not just wages, which you seem fixated on in your original comment), not a reflection of market “preferences”. The shape of any particular distribution will largely influence the shape of the allocations observed in the market but, again, markets, since they don't have minds, are indifferent to those particulars. Humans, on the other hand, are very concerned about distribution and the allocations that flow from it and spend a huge amount of time and energy trying to influence it.The appeal of just so stories about markets that explain huge disparities in circumstance as natural outcomes of impersonal and uncontrollable forces is undeniable, but it turns out that these outcomes are actually amenable to alteration by human decisions that have moral significance. Sorry about that.

  47. I can't understand what you're saying, so, let me try to translate it into what I could understand.You wrote,”The whole problem with your view has to do with your confusion of market processes with political processes.”What confusion? There are market wages and political distortions of them. Period.You wrote,”The manpower (or any other resource) allocations that a given market “prefers” depend on the existing patterns of distribution that the market operates within.”The manpower allocations that a market prefers depend upon its preferences.You wrote,”If you change the distribution patterns, the market's “preferred” allocation changes too.”If you rob Peter to pay Paul, the market will be forced to cater more to Paul and less to Peter's demands than previously.You wrote,”If under one pattern of distribution there is a large allocation of resources devoted to the gold plating and diamond encrusting of urinals there is no “market preference” for this state of affairs.”I cannot translate that into anything that makes sense to me. It seems to me that you're saying that if there is one state of affairs, there will not be that state of affairs.You wrote, “A change in the pattern of distribution might lead the market to re-allocate urinal enhancement resources to flood prevention instead.”Robbing Peter to pay Paul may result in different demands upon the market.You wrote,”There is no 'preference' inherent *in the market itself' for an allocation oriented towards luxury toilets just as there was no 'market preference' pushing allocation away from that before the change in distribution.”There is no inherent market preference for one thing over another. You wrote, “Distribution is a reflection of the political fight over the returns to various factors of production (not just wages, which you seem fixated on in your original comment), not a reflection of market “preferences”.I understand and agree with that just as it stands.You wrote, “The shape of any particular distribution will largely influence the shape of the allocations observed in the market…”Again, I agree.You went on,”but, again, markets, since they don't have minds, are indifferent to those particulars. Humans, on the other hand, are very concerned about distribution and the allocations that flow from it and spend a huge amount of time and energy trying to influence it.”If markets are not comprised of human beings, what are they comprised of, apes?You wrote,”The appeal of just so stories about markets that explain huge disparities in circumstance as natural outcomes of impersonal and uncontrollable forces is undeniable, but it turns out that these outcomes are actually amenable to alteration by human decisions that have moral significance. Sorry about that.”Market forces are uncontrollable but are controllable. Sorry about that.You should be.

  48. dg: I can't understand what you're saying…Why don't you take proverbial your fingers out of your metaphorical ears, then, dg?Of course you “can't understand” what DMonteith is saying, dg. Although it is perfectly lucid, it doesn't fit into your prefabricated categorical boxes. Instead of translating what DMonteith said into the opposite of what he said (e.g. your “market forces are uncontrollable but are controllable”) why don't you try emptying your mind of preconceptions, objections, rebuttals, come-backs and all the other obstacles to listening and… simply… listen. Even entertain — for the sake of argument — the idea that something you KNOW must be wrong might be right.

  49. What's there to refute? There is no theorem (or “thoerem”). You made an assertion that is not a logical deduction from agreed, self-evident or established premises. You offered no evidence for your assertion. If you find such a procedure persuasive, there's no way I could convince you otherwise using logic and evidence. Let's not play games about “on its own terms.”

  50. dg lesvic 5 days ago:To restore the manpower allocations it had preferred, the market must bid the net wages of the formerly rich back up and of the formerly poor back down.dg lesvic today:If you rob Peter to pay Paul, the market will be forced to cater more to Paul and less to Peter's demands than previously.My job here is done.

  51. Congratulations! You have indeed revealed a contradiction in my thinking. Even though it was my intention to interpret your statement rather than express my own thinking, my own thinking did creep into my interpretation of your statement, and it was indeed contrary to my previous thinking. My considered opinion, in light of all this, is the previous, not the later one.Thank you for your help.Let's keep working together..

  52. My considered opinion, in light of all this, is the previous, not the later one.Knock yourself out. Don't let any of the following stop you:-a confusion of wages with wealth; -a charmingly naive belief that political realities/social norms are “distortions” rather than essential components of market prices;-the lack of a logical/plausible theory of market behavior;-the absence of any empirical evidence that redistribution always exacerbates inequality the way you claim it does.To the extent that you're willing to let these considerations influence your position, I'm willing to keep working together on this.Cheers!

  53. Let's take my sins one at a time:”a confusion of wages with wealth”I have to plead guilty to that one. I do believe that wages are a component of wealth.”a charmingly naive belief that political realities/social norms are “distortions” rather than essential components of market prices”Again, if I understand you correctly, I must plead guilty. How could “political realities” and “social norms” at odds with market valuations and prices not distort them? “the lack of a logical/plausible theory of market behavior”How about this? The market, always tending toward equilibrium, always tends toward the optimum state of affairs, and, any interference with it, tending toward disequilibrium, tends toward a less than optimum state of affairs.How about this? Interference with the market is always counterproductive, bringing about the exact opposite state of affairs aimed at.How about this? For every action against the market, there is an opposite and more than equal reaction.How about this? Taking from the rich to give to the poor can not reduce but only increase income inequality and “social injustice.”My theory is that the market always tends toward equilibrium, that equilibrium is the “the absence of any empirical evidence that redistribution always exacerbates inequality the way you claim it does”Again, I plead guilty, inasmuch as I am not an historian but an economist.Jeers!

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