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.