Tuesday, June 10, 2014

Envy and Greed

Income inequality creates real problems for modern economies, especially when it reaches the levels that we see now in the U.S.  The most serious probably is the effect that income inequality has on equality of opportunity. When education, especially higher education, is tied so closely to family income, it is hard to trust that opportunity is really equal.

But there is more. We have the impressive evidence from the work of Wilkinson and Pickett that inequality has serious effects on public health, on crime, and other dimensions of well-being like social mistrust and drug abuse. We also have the disturbing reality that the extremely wealthy have more and more control over our sources of information and our political discourse.

In the face of all these real problems associated with inequality, it has become a habit of some scholars, pundits, and commentators on the right to assume that the only possible reason for concern about inequality is envy. The trend reaches from a major article of the most recent issue of the scholarly journal Faith and Economics to the rants on Fox News. This is puzzling. It is certainly the case that most of the scholarship and commentary about problems of inequality has come from people who are themselves quite well off, and have no particular cause to be envious. In almost all cases, they are writing about the problems of people much worse off than themselves. Certainly poor people can be envious, but in such cases it can be hard to distinguish real, poisonous envy from a modest desire for greater opportunities for their children, and for a somewhat easier life. So on its face, the envy charge is not plausible.

The claim is sometimes made that envy is improper because in the labor market, people get what they deserve. The only serious argument for this comes from the libertarian position, which claims that since all trades are voluntary, everyone benefits, and everyone gets what they agree to. This does not reckon with the possibility of unequal power in the marketplace and the possibility of exploitation. Neoclassical welfare economics claims that in perfectly competitive markets, wages and incomes will be efficient, but it makes no claims about justice. In real labor markets, even the efficiency claim cannot be sustained. Utilitarians tend to think that if you are willing to make interpersonal utility comparisons, more equal distributions would yield higher social welfare, because maximizing total cardinal utility (“social welfare”) requires equal marginal utility of income for every person. Christian social thought calls for a floor on incomes at the “family wage” or the “living wage.” The claim is that it is unethical to pay a full-time worker less than it takes to provide a family with a respectable living.

One thing that we know for sure is that the distribution of wages does not correlate well with differences in education, skill, intelligence, effort, or anything else that we can hope to measure. Wages are far less equal than the distribution of any of the characteristics we think are related to productivity. Experimental evidence suggests that differences in effort can account for as much as a ten-fold difference in productivity, but wage differentials are much greater than that.

It often seems, to the critics at least, that this attribution of all concern about inequality to envy, dismissing any serious reasons, is simply meant to discredit concern about the issue by attributing it to a morally unworthy, emotionally founded motive. It is an ad hominem argument of the most transparent kind, meant to break a stalemate over the causes and consequences of inequality.

The critics sometimes make a similarly ad hominem argument, claiming that support for inequality is based simply on the greed of those in lucrative positions in our market economy, who want to be able to keep raking it in, without feeling any pressure to support higher taxes or to give more to charity. This is also a morally unworthy, emotionally founded motive. But it is consistent with the argument about incentives made by the defenders.

Of course, the wealthiest in our society have no particular cause to be greedy. The people at the pinnacles of the business, entertainment, and professional fields make more money than they can possibly spend on themselves or their families. They often claim that they only want more money only because “that is how we keep score.” But if keeping score is the only motive, why the resistance to higher taxes? It should be pre-tax income that determines the winners, not post-tax income. And why are more wealthy people not eager to advertise their income or net worth? How can anybody tell who wins? In fact, the players indulge in conspicuous consumption to advertise their wealth. Many want more wealth not for consumption, or for keeping score, but as a ticket to political and social influence. This influence is also a positional good, with competition steadily ratcheting up the price. So the argument that greed is behind the defense of inequality has a certain plausibility that the envy argument does not.

Personally, I am a critic of economic inequality, because I find the critics’ arguments persuasive, and because I believe strongly in the Christian teaching that all of us are equally creatures of God and are loved by God, and therefore have equal dignity and worth. But whatever side of this issue you take, I think the time has come to lay aside the attribution of motives and the ad hominem arguments. It is time for us to be clear and honest and respectful towards each other as we address one of the great issues of our time.

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