Inequality and Redistribution

Continuing the discussion on inequality and what might be done about it, here's Paul Krugman:

Economics and Morality, by Paul Krugman: ...Eric Schoeneberg ... argues that the right is winning economic debates because people believe, wrongly, that there’s something inherently moral about free-market outcomes. My guess is that this is only part of the story... Still, Schoeneberg is right about the tendency to ascribe moral value to market values, and the need for a counter-narrative. I’m going to think about that; but right now, let me describe how I see the US income distribution in terms of justice or the lack thereof.

The first thing one should say is that our system does reward hard work, up to a point. Other things equal, those who put more in will earn more.

But a lot of other things are, in fact, not remotely equal. These days, America is the advanced nation with the least social mobility (pdf), except possibly for Britain. Access to good schools, good health care, and job opportunities depends on lot on choosing the right parents.

So when you hear conservatives talk about how our goal should be equality of opportunity, not equality of outcomes, your first response should be that ... they must be in favor of radical changes in American society. For our society does not, in fact, produce anything like equal opportunity (in part because it produces such unequal outcomes). Tell me how you’re going to produce a huge improvement in the quality of public schools, how you’re going to provide universal health care..., and then come back to me about the equal chances at the starting line thing.

Now, inequality of opportunity is only one reason for the inequality in outcomes we actually see. But of what remains, how much reflects individual effort, how much reflects talent, and how much sheer luck? No reasonable person would deny that there’s a lot of luck involved. ... So ... the social and economic order we have doesn’t represent the playing out of some kind of deep moral principles.

That doesn’t mean the order we have should be overthrown: the pursuit of Utopia, of perfect economic justice, has proved to be the road to hell, while welfare-state capitalism — a market economy with its rough edges smoothed by a strong safety net — has produced the most decent societies ever known. The point, though, is that anyone who claims that transferring some income from the most fortunate members of society to the least is a vile injustice is closing his eyes to the obvious reality of how the world works.

And, in a follow up:

More Thoughts on Equality of Opportunity, by Paul Krugman: ...I think there’s a bit of an intellectual trap lurking here. As I pointed out, the typical conservative line about equality of opportunity, not results, really implies the need for a radical restructuring of our society, which doesn’t offer anything remotely resembling equal opportunity. At this point, however, there’s a tendency to think about what that restructuring would involve — and because it’s basically impossible, to throw up one’s hands.

The point is that you don’t, in fact, have to be that radical once you drop the rigidity of the conservative position. If you admit that life is unfair, and that there’s only so much you can do about that at the starting line, then you can try to ameliorate the consequences of that unfairness.

My vision of economic morality is more or less Rawlsian: we should try to create the society each of us would want if we didn’t know in advance who we’d be. And I believe that this vision leads, in practice, to something like the kind of society Western democracies have constructed since World War II — societies in which the hard-working, talented and/or lucky can get rich, but in which some of their wealth is taxed away to pay for a social safety net, because you could have been one of those who strikes out.

Such a society doesn’t correspond to any kind of abstract ideal, whether it’s “people should be allowed to keep what they earn” or “from each according to his ability, to each according to his needs”. It’s a very non-Utopian compromise. But it works, and it’s a pretty decent arrangement...

That decency is what’s under attack by claims that it’s immoral to deprive society’s winners of any portion of their winnings. It isn’t.

My point here is that economic inequality is growing, so we need to consider enhancing programs that can stop or at least attenuate the growing divide between those at the top and everyone else. But, instead, we appear to be headed in the other direction.