Notes to self:
Increasing wealth concentration and income inequality need to be explained. Are they metamorphic? Entering adolescence, children start to go their separate ways and divergences arise in not only their material lives, but also their intellectual and artistic/emotional lives.
Inequality, long ignored by economists, is now a hot topic: Angus Deaton, “Economics in America: an immigrant economists explores the land of inequality”; Branko Milanovic, “Visions of Inequality: from the French revolution to the end of the cold war”; Thomas Piketty “A Brief History of Equality” (“different inequalities have persisted at considerable and justified levels, but since the end of the 18th C there has been a real, long-term tendency toward equality, but it is nonetheless limited in scope”); Ingrid Robeyns “Limitarianism: the case against extreme wealth” argues extreme wealth exhausts those with it; Darrin McMahon “Equality: History of an Elusive Idea” notes how the far right uses asperation for equality to bolster inequality. Fascists prommissed to satisfy egalitarian aspirations of the masses while venerating hierarchy and domination.
Anthony Atkinson, the Inequality Turn: Great compression of wages in previous decades was ending in the 1970s with the coming of the neo-liberal agenda.
Epidemiologists Richard Wilkinson and Kate Pickett consider inequality a “social poison” that erodes empathy, a sense of security, trust in one another”
Ideally wealthy individuals would feel sufficient social responsibility to support a social safety-net and income redistribution to those in need. To a large extent charities and religious institutions do this, especially in the US, which leads the world in charitable giving. But to the extent private charity doesn’t support sufficient income redistribution, government must step in to the extent this would reflect the citizenry’s wishes. Even private charity involves government because it benefits from tax deductions. Government is already involved, consciously or not, and thus has a role to play, supplementing private charity and income redistribution and subsidizing it and is ultimately responsible for the resultant distribution of income and level of the safety net.
Government thereby faces the moral question of determining an appropriate safety net and income redistribution. How does and ideally should governments make these determinations? At present, representative politicians reflect the wishes of those citizens and that pool of funds that put them in office. Ideally, the wishes of only the voting citizenry, but not raw capital in the form of campaign contributions, would influence that determination.
Philosophy gives us only meager tools with which to determine what’s fair, what would be a fair sharing of the fruits of the economy. As we learned in graduate school, economic tools address resource efficiency and can be used to make the pie bigger, but have nothing to say regarding how it’s to be divided. This is a “political” issue. What’s fair is in the eye of the beholder; it’s a matter of individual opinion and judgment, and the best we can hope for is that politicians somehow reflect collective opinion and judgment in their determinations.
But John Rawls makes the point that the marginal utility of increasing income and wealth diminishes, and so wealth transfers from rich to poor raise the collective level utility. On the other hand, to the extent such wealth transfers reduce the incentive to earn income, to this extent they can reduce collective utility. Rawls uses a thought experiment to gain insight as to what’s fair, asking individuals to imagine that they were to be dropped into society at some unknown position on the income/wealth spectrum, including the possibility that they might be made destitute. In such a thought experiment, what level of income/wealth transfer would they advise as appropriate for such a society? Given the risk of finding oneself at the bottom of society, and recognizing the greater utility of income and wealth to someone at the bottom rather than top of society, a person would rationally advise a minimal safety net level commensurate to the risk of finding oneself destitute or sufficiently comfortable to support such a safety net. Fairness is evaluated from the perspective of those on the bottom of society, because they are the ones for whom the marginal utility of income and wealth are greatest.
There arises the practical problem that if a strictly defined minimum safety net is provided to all below a certain standard of living, then there is little incentive to earn one’s way to a slightly higher standard of living where no such assistance would be forthcoming. A negative income tax would address this problem, progressively assisting those below a certain living standard and taxing those above it, preserving some incentive to work one’s way out of poverty, and that progressivity could be determined experimentally to balance the disincentive to work with the efficiency of targeting those most in need with the greatest marginal utility of assistance received.
Some advocate a guaranteed basic income (GBI) of say 1k/month. This is of course an expensive way to help those in need because it also helps those without need, but the espoused advantage is that it does away with any stigma attached to receiving assistance. This strikes me as a hugely expensive way to provide that safety net, with insufficient benefit beyond the more efficient means of employing a negative income tax, even taking into account the externality cost any stigma involved.
The only other tool I’m aware of for analyzing what’s fair is the Aristotelian argument that for citizens to be able to discuss public affairs and participate democratically, they need to be inhabiting the same society, and that when income and wealth disparities become too great, then they no longer inhabit the same world. Aristotle took the position that the relative income/wealth of rich and poor in civic life should be no more than 10:1 (5:1?) to assure that issues could be addressed by all from the perspective of serving the common good. Income/wealth disparity between rich and poor in our modern world far exceeds such ratios, and argues the need for more income/wealth redistribution and/or safety net, for the common good.
Progress would solve big problems like income inequality and unafordable housing. The solutions are clear, but goverment is too broken to fix things. A negative income tax would immediately address the income inequality. A Georgist land tax would address the housing shortage by taxing unimproved land on the same basis as improved land, i.e. not taxing the improvements. This would be an incentive to add improvements and a disincentive to keep land unimproved, in both cases encouraging housing. If the land tax is high enough, the cost of carrying unimproved land becomes a real burden, and the incentive to build lots of improvements becomes that much greater.