In some recent posts I’ve seemed to imply that our entire policy-making apparatus (for controlling AD) is behaving stupidly, and thus we are getting what we deserve. But on another level, this sort of argument is kind of, well . . . stupid. I’m with Karl Smith, the entire concept of “just deserts” is rather dubious. None of us asked to be born into this perplexing universe. And even if we’re glad to be alive, we certainly didn’t choose the way our brains were wired, the families that raised us, or the cultures that shaped us.
Let’s take a few examples. I pointed out that we Americans refused to hold accountable the officials responsible for determining aggregate demand, particularly the Federal Reserve. Instead we blame bankers. Another example might be the Greek public. I recall reading that Greeks were much less likely than the Irish to admit that they were mostly responsible for their own debt crisis. Instead they blame outsiders. Tyler Cowen recently linked to a third example, from an essay by Tim Parks:
Responsible for one of the most stupid shipping accidents of all time, not to mention the death of thirty or so passengers, Schettino was nevertheless greeted in his home town of Meta di Sorrento (on the south side of the bay of Naples) by a crowd waving banners in his favor and complaining, priest included, that the man’s bad press was the result of a general prejudice against their community. “Every Italian,” Giacomo Leopardi dryly remarked in 1826 “is more or less equally honored and dishonored.”
Kahneman once said:
Nothing in life is quite as important as you think it is while you are thinking about it.
I’d add that no cultural flaw is as bad as it seems when we are thinking about it. The average American would probably lower his opinion of the Greek and southern Italian culture when hearing the two anecdotes I just provided. But they won’t reduce their view of their own culture nearly as much when hearing about our flawed approach to AD, because we know much more about our own culture, and thus this flaw seems (relatively) much less important. It doesn’t fill up our image of ourselves, in quite the same way those snippets of information can begin to dominate our views of Greece and Naples, unless we are careful.
So here’s where I end up. The Greeks, Neapolitans and Americans don’t deserve to suffer. No one does. But as long as cultures avoid accountability, and look for scapegoats, then one should expect disappointing economic outcomes. That’s the nature of the universe we happen to live in.
Karl Smith has an excellent post on why he doesn’t buy the standard view of just deserts:
Why does this matter: Well on one level I simply appeal to the aesthetic. We try to understand our world and our intuitions about it in a consistent way because doing so is beautiful.
In practice I would say it puts an increased focus on the ability of our technology to support the deserving poor without encouraging fakery.
In a very practical sense it might suggests that programs which depend on 1-1 relationships should be given high levels of moral praise as poverty elimination systems. So, that might mean local charities and organizations with the discretion to support individuals or not based on a long history of working with them should been seen as working a special good.
. . .
Is this just more Pity-Charity Liberalism: Yes. And, I think it’s an ethically more meaningful enterprise than getting up in arms about failures of the meritocracy. I don’t know any moral reason why the talented deserve to prosper and the untalented to fail and so the leveling-of-the-playing-field is of purely instrumental importance. It matters if it makes a more productive society or increases personal fulfillment, but it is not a moral cause unto itself.
Karl is saying that there are traditionally two arguments against redistribution, the disincentives argument and the just deserts argument. And he’s saying that the just deserts argument is bogus. I agree.
That doesn’t necessarily lead to progressive liberalism, rather it leads to liberalism broadly defined, including the classical liberalism of Bentham (or the University of Chicago.) And it doesn’t even weaken the argument against redistribution as much as you might think. As soon as you pull out the rug from under just deserts arguments, you force people to take “disincentive effects” arguments more seriously. Indeed even our scolding of lazy people can be seen as a way of incentivizing them to work harder.
I consider myself a moderate on the inequality issue. Once you remove just deserts, it’s pretty hard to argue that zero redistribution is optimal, as our intuition strongly points toward sharply falling MU of an extra dollar at high incomes. On the other hand the Kahneman quote may tell us something about the unhealthy obsession with “income inequality” that you see among many progressive economists. Let’s grant the need for government to provide access to goods like health care and education. And to have a better demand-side policy for smoothing the business cycle and promoting a healthy labor market. Then ask yourself the following question: Of all the poor, middle class, and rich people you’ve known during you life, how much of their unhappiness was due to pure income inequality (other than lack of health care, poor education, and unemployment?) And how much was due to psychological issues and various ailments? In my view the group in America most disadvantaged by pure income inequality is migrant farm workers, and perhaps low skilled immigrants more generally. They often suffer despite having: a job, good health, and a good outlook on life. But they are also a group that greatly benefited from being able to immigrate to America. And that’s exactly the argument that people like Bryan Caplan use against redistribution—open borders can do much more good for the poor than welfare. And we can’t have both.
The debate over consequentialism vs. just deserts is interesting, but it has surprisingly little to tell us about redistribution policy. Philosophy is hard. But social science is much harder.
PS. There is only one exception to Kahneman’s maxim: NGDP.
PPS. Jesus understood.