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October 12, 2007
The Why Is Not The What
Matt hits one of my favored hobby horses in the inequality debate today, arguing, completely correctly, that the "why" doesn't much matter. Whether inequality is a result of skills-biased technological change or low marginal tax rates or Wall Street or the inequality gnomes is really neither here nor there. The fix to the problem is very unlikely to have anything to do with the root cause. If inequality really were a function of higher returns to education -- and, sorry folks, but it's not -- we wouldn't respond by demanding everybody get dumber. We'd change the tax code around a bit, institute some progressive social programs, put seed money into asset programs for the poor and working class, and so forth.
Indeed, you sort of see this with the constant invocation of education. Saying this is about skills -- as if hedge fund managers have been studying since 1690 -- is a way of justifying it. Saying we need more and better education is a way of doing nothing, as that's much too grant a task to undertake as a response to inequality and, in any case, it wouldn't work. College graduates have seen their wages stagnate for the last six years. This is about distribution. And distribution can be rejiggered without digging deep into the everyday workings of the economy.
October 12, 2007 in Inequality | Permalink
Comments
I said it there (as did numerous others) and I'll say it here: the "Why?" does matter, because it informs the remedy. If you think, as I do, that the decline of union influence has a lot to do with it, it clearly suggests certain remedies.
Posted by: David in NY | Oct 12, 2007 10:57:49 AM
Ezra,
This is shockingly oversimplified.
The "why" doesn't matter and its just about distribution?
To the degree that wage stagnation signifies opportunity stagnation (stuck in same job, less entrepreneurial activity, etc.) giving people more money via favorable tax treatment just isn't enough, Ezra. People are looking for more in their lives than just the money they make.
Would you be content if government distribution policies allowed you to meet your financial objectives for the next three decades but you didn't actually progress any further in your career than you have today? Neither is anyone else.
The "why" does matter.
Posted by: wisewon | Oct 12, 2007 11:05:40 AM
yes, I was just thinking this too while listening to a rather astounding (and refreshing) brief NPR newsbite about the growing inequality of the economy. They described it without excusing it, which was nice, and also mentioned the new numbers of hedge fund remuneration. For NPR it was a steop up that they didn't try to wish the information away with blather about how the economy as a whole is growing or whatever. On the other hand, they did ascribe the inequality to the "fact" that our economy is "switching to a service economy" and that people need more skills. but they didn't ask why the skills to pay ratio has taken off for some and not for others. Or talk about the fact that while the working class is really doing badly, the educated, skilled, pushing ideas class is doing badly too. And that everyone's "doing" is incredibly fragile. We are definitely upper middle class, and I wouldn't say we are one paycheck away from disaster, but we are certainly *one job* away from disaster. And if there were not to be another job for my spouse if somethign happened to this one? Or something happened to my spouse (g-d forbid)--we'd take a rapid fall in income because despite my high skill set I'm not in a marketable section of the economy.
aimai
Posted by: aimai | Oct 12, 2007 11:13:58 AM
Matt's wrong. It's like saying I'm going to write some code to fix a bug even though I have no idea what causes the bug.... not a recipe for success.
Posted by: DM | Oct 12, 2007 11:19:40 AM
If the goal is to reduce end-state inequality, which seems to be the goal of progressives such as yourself and Matt, then no, the why doesn't matter.
If the goal is to ensure that everyone has a fair opportunity to acquire wealth, which is the more conservative position, then the why matters a great deal.
Since it's blatantly obvious that children of very rich parents have more and better opportunities to acquire wealth, a lot of progressives end up arguing about the causes of inequality. Really the arguments should be about the effects of inequality. What are the consequences of growing inequality? Do we want to live in a society like that?
Posted by: TW Andrews | Oct 12, 2007 11:22:21 AM
TW, I would extend your point to:
If the goal is to reduce end-state inequality, which seems to be the goal of progressives such as yourself and Matt, WITH LITTLE OR NO REGARD FOR THE CONSEQUENCES [my addition], then no, the why doesn't matter.
Posted by: DM | Oct 12, 2007 11:25:59 AM
The why does matter. This is the principle of optimal policy assignment: figure out the source of the problem and correct that, rather than the symptom. Correcting the symptom is apt to have odd side effects because it is related to other systems in ways that you and I don't understand. But if you can understand the source, then you can target the problem.
Posted by: Isaac | Oct 12, 2007 11:31:05 AM
Of course the why matters to some degree. If income inequality is due to a lack of opportunity, I would be much more likely to want to address it than if it were due to the result of concious choices (i.e. "I could make more money, but I want to have a better quality of life, I like the low-paying job more, etc.).
Posted by: Hans Moleman | Oct 12, 2007 11:40:21 AM
If your goal is to defend the current trend of growing inequality as if it's a result of the natural laws of the universe, which seems to be the goal of conservatives such as DM, WITH LITTLE OR NO REGARD FOR THE CONSEQUENCES, then the why doesn't matter either.
Posted by: KCinDC | Oct 12, 2007 12:03:23 PM
"seems to be the goal of conservatives such as DM"
Really?
KCinDC – are you really of the opinion that the "why" doesn't matter or where you just looking for a “conservative” to poke? I can't think of a single case of problem resolution where it doesn't matter, whether it is technical, medical, social, etc. But maybe such a place exists; maybe somewhere out there you can make blind changes successfully, with little adverse affect.
Posted by: DM | Oct 12, 2007 12:16:24 PM
DM, I agree that the "why" matters, and if you'd confined yourself to making that point then I wouldn't have poked.
Posted by: KCinDC | Oct 12, 2007 12:20:33 PM
In fact, your capitalized addition is an attack that has nothing to do with whether the "why" matters, since even people who don't care about the consequences of reducing inequality would need to pay attention to the reasons for it if they actually wanted to reduce it.
Posted by: KCinDC | Oct 12, 2007 12:26:38 PM
"your capitalized addition is an attack"
Ahhh, this wasn't meant as such. I just wanted to point out my addition. My bad.
Posted by: DM | Oct 12, 2007 12:32:37 PM
No, the "why" does not matter.
The people claiming it does go on to mumble about "wage stagnation" or "figuring out the source of the problem", paths of thought into the Forest of Totally Lost. None of this comes anywhere close to describing the incredible changes of the last century that have upset the American applecart.
Most of us can't conceive of a world without inequality or wouldn't want it if we could. But we can see that the inequality we have is a bad thing, because if things go on as they have, the rich will end up owning everything, and they're obviously too stupid to do that well.
Figuring out the "root cause" is bunk. In health care, for example, finding and dealing with the root causes of 45 million uninsured is like trying to make your '72 Caddy run right. The city elders of Gordia promised the kingship to any man who could untie the Gordian knot; Alexander cut the knot because he saw clearly that the offer of the kingship to the man who could untie the knot was a trick.
I myself spend 2-3 hours each night reading history. The most scholarly volumes are often remaindered at a fraction of what it cost to print them. If you do this for 20-30 years you will eventually realize there is way too much "why" out there to form, except in the most reflective sense, the "how" or "what" or "when".
When I was about four years old, my dad showed me how a perpetual trust would eventually end up owning the world. He coupled this with a few choice remarks on how the nobility of Europe had inbred themselves into imbecility, and the fact that buying something did not give you a right to destroy it, and considered his pedagogic obligations as largely discharged.
Of course, at that time everyone favored public education, and he expected that I would naturally avail myself of the opportunities society had made available.
Ezra's right, the question of why it happened is insignificant compared to the question of what is to be done.
Posted by: serial catowner | Oct 12, 2007 1:08:15 PM
I once worked for an accountant who did many people's taxes and so knew how much money people made, and he always said that the only education that makes money is medical education. He liked to point out how much people who owned auto repair shops made.
My take thought is slightly different schooling does not matter education is very valuable. Knowledge of the miracle of compounding interest is valuable indeed but they do not teach the valuable stuff in school. I call schooling the long test. IMO it is more for grading humans than for educating them.
Posted by: Floccina | Oct 12, 2007 2:10:58 PM
Patent law
copyright law
assortive marriage
devorce
differences in values
percived need
saving
the return on capital
zoning=>housing prices
asset ownership => asset bubbles
tax policy
regulation
Posted by: Floccina | Oct 12, 2007 2:17:19 PM
The thread has a truly Alice-in Wonderland quality because nobody wants to mention the real reason for 'income inequality', which is greed. The rich- the 1% taking 20% of the pie- got that way by taking stuff.
The wealth of the Walton's does not rest on the 15 minutes or 20 minutes of unpaid work extorted from the least skilled workers- it rests on the attitude that dictates taking whatever you can, no matter how unimportant it might seem to be, until someone forces you to stop doing that.
Heck, look at Bill Gates, dropped out of college to found a fortune on the surer principle of greed. His background is not generations of computer entrepreneurs, his background is people extremely good at the practice of law, and in America the law is a sort of invisible machine for taking stuff 'legally' that grinds on as quietly as your refrigerator- most of the time you don't even know it's running!
Most of the people in the world would agree with this fairly obvious point, but if you have more education than the average, you may wish to demonstrate that fact by arguing it.
Posted by: serial catowner | Oct 12, 2007 2:40:44 PM
I know this person who did drugs, dropped out of high-school had 3 kids by the time she was 20 but yeah, the "why" doesn't matter. Down with The Man! Down with The System!
Posted by: abw | Oct 12, 2007 2:44:21 PM
"The thread has a truly Alice-in Wonderland quality because nobody wants to mention the real reason for 'income inequality', which is greed. The rich- the 1% taking 20% of the pie- got that way by taking stuff."
People have always been greedy and will always be greedy. Rich and poor alike business men and politicians.
Posted by: Floccina | Oct 12, 2007 3:39:12 PM
OK, let's play this game for a moment. Let's assume that the only technique left to re-equalize society is that we tax the bejesus out of the top end of the scale and disburse the proceeds until we engineer the distribution curve that we, in our infinite wisdom, have decreed to be "just."
But what happens if the top end of the curve keeps running away, making more and more money, messing up our numbers? What if the global economy is such that it has an endless appetite for highly trained professionals, and further that the more of them there are, the bigger the economy gets and the more money they make? Since a good-sized chunk of the population simply lacks the talent to be a high-end professional, there are people left behind. Are we still all happy and equal? Or do we jack up taxes some more? Do we continue to do this until we hit a 100% marginal rate?
If you tell me that there are quality-of-life issues for the middle and lower class, I'll agree with you and we can have a substantive discussion about how to fix that problem. But if you tell me that we ought to be redistributive in perpetuity because you think that some folks don't deserve the amount of money they're making, I'll dismiss your argument as garden-variety class warfare and lose interest.
Posted by: TheRadicalModerate | Oct 12, 2007 4:34:20 PM
abw and Floccina are illustrating pretty well the learned helplessness and self-abnegation of our 'educated classes'.
Obviously people have always been greedy and probably always will be. That is why we have governments and laws- to protect us against that side of human nature. In a democracy it's up to the people to form those governments and pass those laws.
Now, for six years we've had a government that basically said the way to get people to act right is to have them reform their natures and be good Christians. That, they claimed, was the only real way to prevent drug addiction, teen pregnancy, incorrigible idleness, or the music of Satan.
How has that worked out for you? They asked the question of 'why', decided the answer was Man's Fall From Grace, and set out to cure the problems by attacking the root causes. People have been doing that for centuries, but the big discontinuous jolts of improvement in our welfare have come when common people said "Enough already- let's change this!"
Posted by: serial catowner | Oct 12, 2007 4:44:15 PM
I worked for 10 years at a Big 4 accounting firm that had NO women partners in the particular office I worked in for the entire 10 years I worked there. Did that have to do with the 50% of the women who worked there not having the proper education? No, it was the same. It's a greedy, rich helping rich world and always will be.
I'm not for taking all the rich people's money away, but there should be ENOUGH redistribution so that I don't have to worry myself sick about whether or not I'll have a job tomorrow or if I will be able to be sick without losing everything I have worked for during my entire life. It is NOT unreasonable to ask the more fortunate to chip in - either monitarily or otherwise to help the rest of us survive to the point where we can be happy doing our chosen professions, whatever they are. Rich people need mechanics and yard crews. Why shouldn't they pay fairly for it? It's a justice issue.
Posted by: Steph | Oct 12, 2007 4:46:15 PM
I sumbmit the the inequality problem is not a problem at all. As long as all income groups get richer over time, what difference does it make if one group gets richer faster than the others.
The liberals are proposing a fix for a perceived problem that doesn't really exist.
Posted by: Kevin | Oct 12, 2007 5:13:29 PM
I would have figured that if anyone understood why the 'why' matters, it would be Ezra the policy wonk. Truly, you need to know why to formulate future policy. Plus, I don't think anyone really believes that this is 'natural'. It's the policies of the right that created these circumstances, and they deserve to pay a price for that.
Posted by: soullite | Oct 12, 2007 5:23:32 PM
As long as all income groups get richer over time, what difference does it make if one group gets richer faster than the others.
Indeed. Roll on the Sao Paulo-ification of America, where the wealthy commute to work and visit friends in chartered helicopters, flying from tower-block heliport to tower-block heliport to avoid having to go on the streets.
It makes a fuck-load of difference. The gap is the problem. There are rich people in poor countries where the poor get marginally richer over time. They live in ever-more-sequestered luxury. This is basic high-school social geography.
Posted by: pseudonymous in nc | Oct 12, 2007 6:30:28 PM
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