Economic Inclusion and Economic Inequality
Chris Hayes and I touched on a lot of thorny issues in our diavlog. As always, Chris performed very ably — he is an exceptionally articulate spokesperson, and also an insightful, creative thinker. As for me, I failed on a number of fronts. First, I’m pretty sure I did too much talking, in part because I worry that the “conservative” perspective on inequality and the changing nature of the economy is commonly misunderstood. Second, I’m bummed about many of the issues we didn’t manage to cover.
One commenter notes,
Does he [i.e., Reihan] really think that what we liberals think is inequality is just a matter of different, equally valid, choices people make? That for some reason I like to live in a house that I own, and is warm in the winter, and has plenty of room for my family and any friend who want to come over, and my low-income clients for some reason that we might not understand, prefer to live in a falling-down house with broken windows, inadequate heat, with floors they can’t keep clean and doors that don’t provide either safety or security?
I certainly don’t think that’s true. But I do think that in a post-scarcity society, defined loosely as in Brink Lindsey’s excellent The Age of Abundance, a lot of people are choosing not to maximize their cash income. Is this true of ex-offenders living on the edge of poverty, who are subject to punishing marginal tax rates and intense employment discrimination? Well, no. Chances are these guys are trying to maximize, or at least increase, their cash income, and they are having a damn hard time. That’s a big part of why I favor large-scale wage subsidies. But is this the defining aspect of American inequality? It’s certainly not what Robert Frank focuses on, and for good reason — the inequality picture is far larger and far more complex, and it reflects choices about intimacy, geography, leisure, household production, and a lot of other spheres that while not perfectly in the hands of individuals — gender stereotypes, caste distinctions, powerful norms that fuel positional arms races, all of these factors play a role — really do allow a lot of room for agency. And we can’t just dismiss this out of hand. This isn’t to say there is no room for mitigating the resulting inequalities through collective political action. But of course there are real costs to doing so, and we need to weigh the costs and benefits.
Like a lot of right-wingers, I think the inequality we ought to care about isn’t upper-tail inequality but rather lower-tail inequality. Moreover, I think we should care a lot less about inequality than about poverty and, more precisely, economic exclusion — the effective exclusion of substantial numbers of Americans from the so-called mainstream economy, an exclusion that exacerbates many social ills, and that empowers the worst, most violent, most destructive elements in our society. So to the extent measures that mitigate inequality increase economic exclusion, I oppose them. For those who care about economic exclusion, the prison system is an obvious target. But so is the payroll tax. My hope is that an economic inclusion agenda would be embraced by the political right and left, and that it would allow us to bracket some of the more controversial questions surrounding inequality.
Another commenter directed me towards this terrific David Mamet essay, which I strongly recommend.
I think I’d like for you to better define what you mean by “choosing not to maximize their cash income_.” I don’t want to criticize you for things that you don’t intend to say. I suspect that you are making an appeal to poverty-stricken people “delaying gratification”, which is problematic, at best. But I don’t want to judge without the relevant info.
— Freddie · Mar 12, 02:48 PM · #
I like what you are saying about focusing on lower-tail inequality. Add in middle-class income volatility – which is impacted from a divorce culture as well as globalization, and conservatives can make strong arguments for stronger families.
But for the upper-tail, market conservatives should be making a case. It seems very clear that (a) many CEO have taken over their own pay process. It is also a fact that (b) hedge fund employees do not pay income taxes given the structure of “carried interest.” Both things are bad for pareto-efficiency – it gives too much of a work incentive for hedge fund employees when they pay significantly less % in taxes than, say, a cop or a teacher (or, their janitors, for that matter). It also forces CEOs to not bear costs for their actions (bad year still equals big payday). Both radically effect inequality measures – given how statistically sensitive inequality measures are to the uppermost tail (the two cases just measured), but should be fought even if they didn’t.
If people preferences have changed so that they aren’t choosing to max(cash flows) you should see statistically significant decreases in the amount of hours worked (increase in leisure time). I don’t believe that’s the case, though I’m not familiar with the data.
— Mike · Mar 12, 06:24 PM · #
Reihan,
in the bhtv thing you mentioned Rosen on tournament models. while Rosen was the first to describe the superstar effect and deserves acclaim on that basis, you should take his stuff on tournament models with a grain of salt. specifically, Rosen’s models tend to be very optimistic about the ability of tournaments to accurately sort by quality so that right-tail returns are disproportionate but fair in an ordinal sense. in contrast, a lot of the empirical evidence on cultural markets implies that sorting has more to do with stochastic cumulative advantage processes that are only loosely tethered to skill. for instance, Salganik’s Columbia music experiment showed that success in pop music is essentially random and likewise Hamlen found only weak correlations of voice quality with record sales.
ok, so what?
well, the take home is that if tournament success is random, you can fiddle with the tournament by things like confiscatory taxation without much decreasing superstar quality and therefore consumer welfare.
— Gabriel · Mar 12, 07:46 PM · #
Freddie: I’m talking about middle class people who choose work they find interesting, fulfilling, socially beneficial, fun, etc., over work that maximizes their cash income. This phenomenon is very big and underdiscussed. I’m kin of baffled by how people have interpreted my remarks.
— Reihan · Mar 12, 09:57 PM · #
Reihan, I’d like to turn you on to this website and think tank: http://www.inclusionist.org/
They come at the issue from the left obviously. I hadn’t seen someone advocate for discussing inclusion over inequality from the right. any suggestions for further reading on the conservative case for inclusion?
I agree with Mike, though for different reasons. Shouldn’t we be just as concerned about upper tail inequality because what drives consumption in a post-scarcity society is not just a drive for self-fulfillment but a desire for status? Robert Frank points this out – expenditure cascades. increased stratification in the upper tail influences spending downscale. Home sales is an interesting example. You get upper middle class folks buying larger houses to keep up with those just a peg above them even though their own wages haven’t increased all that much.
— Josh · Mar 13, 11:14 PM · #