Saturday, September 02, 2006

Nozick, As Usual, Was Right

Brad DeLong argues in favor of redistribution to assuage envy: Bill Gates's wealth makes everyone else unhappy because it makes them feel poor, so we can make most people much happier by taking wealth away from the rich. Greg Mankiw articulates the argument in more formal economic terms, and expresses distaste. Tyler Cowen responds, as does Jane Galt.

The core of DeLong's argument is that we can equalize status, so low-status people don't feel unhappy. I see three problems with this. First, unless everyone has the exact same income, there will still be status, and richer and poorer people. The people at the bottom of the income distribution will still be at the bottom, even if the distribution itself narrows. If the source of envy is relative positions, merely narrowing the ramge of wealth isn't helpful.

The second problem is that equality of income doesn't translate to equality of compensation or of position. P.J. O'Rourke once commented that even in hyper-egalitarian Sweden, "someone alwasy turns out on top":
All salaries in Sweden may come out, after taxes, somewhat the same. But who gets the room with the view? Who flies off to European Union cheese-food milk-fat-content subcommittee negotiating sessions on the sunny isles of Greece? And opera tickets are heavily underwritten by the Sweedish government. What a relief to the working stiff. "Bundle up the kids, Helga, we're all going to see Claude Debussy's Pelleas et Melisande! [Your author here would like to interject that regulations on performances of Debussy surely appear in the Geneva conventions somewhere.]

I had dinner that night in another expensive restaurant, and in the men's room, there was a rack of reading material, all of it annual reports. I don't think anyone had evr been in there who wasn't—like me—on an expense account, except, of course, for the fellow, probably an immigrant, who cleans the toilet.

If companies can't compensate their executives and top workers with cash, they'll find some other way to compensate them. It's possible that DeLong would find this preferable, if it causes the average person to notice and therefore envy less. But the deadweight loss and lack of transparency concern me.

But the third and best problem with the politics of envy comes from Robert Nozick's Anarchy, State and Utopia. Sadly, I don't know where my copy is at the moment so I can't give a direct quote. But Nozick points out that there's an infinity of ways I can compare myself to other people. "I'm not as athletic or rich as Michael Jordan," I can say, "but I'm smarter, so he should envy me." Because we can compare ourselves in so many ways, no one has to come out on the bottom of the status distribution; people decide which dimensions they value how much, and tend to value what they're good at more (or perhaps tend to be better at what they value). These different weightings allow two people to look at each other and each say, "I'm better off than he is."

If we follow DeLong's policies, we start eliminating ways for people to compare themselves. The end result is that people are more likely to feel inferior and worthless, because it's less likely that there's a weighting that advantages them relative to everyone else (since there are fewer dimensions of comparison, there are fewer degrees of freedom in constructing a weighting system). So paradoxically, making people more equal, even if successful, actually exacerbates perceived inferiority and increases welfare loss from status comparisons.

Update: Jane Galt is really smart. I think she hit everything I said here, and writes better to boot. Someone should make her stop blogging so we inferior bloggers don't feel so bad.


Anonymous MichaelW said...

It's even worse than that! Somebody must be in charge of deciding what comparisons are made and how they are valued (and so forth). That translates directly into political power. The more political power any individual person has (and group of people -- I'm sure you get the picture), then the more influence they have to wield. In economic terms, power becomes currency.

"Egalitarian" is a utopian word only useful in ... er, Utopia. For so long as there are differences in ability and will, there shall be differences in outcome. Whenever we try to affect a different outcome, it must necessarily come at the expense of superior ability and/or will (which of course can only be retarded so much). Therefore we all lose (see, e.g., the former Soviet Union).

If we could all recognize what is gained from allowing natural ability and will run its course, we would all be better off -- Kaldor-Hicks efficiency.

September 03, 2006 10:41 PM  
Blogger Jadagul said...

I have a commenter again. Yay!

And you're right, of course. There will always be some sort of differentiation. I read a comment a few days ago that we can compensate our elite with wealth, as we do here, or with power, as in the USSR. Either one leads to inequality; one leads to oppression as well.

September 04, 2006 12:17 PM  
Anonymous Anonymous said...

sorry that the past people who commented where not as amusing to you -

September 07, 2006 6:40 AM  
Anonymous Imgonnagetyou said...

This comment has been removed by a blog administrator.

October 04, 2007 3:14 PM  
Blogger Jadagul said...

While I appreciate that someone cared enough about what I write to respond, I might prefer to encourage a slightly higher class of commenter. There's nothing ispo facto wrong with profanity, I suppose, but it would be nice if you had something else there as well.

October 04, 2007 3:29 PM  

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