A Facebook friend recently posted something sympathetic with Occupy Wall Street and related concerns about inequality. I commented that inequality seems to me utterly irrelevant. If a wealthy person becomes even more wealthy at my expense, I have reason to be upset. If that person thrives without disadvantaging me, however, I see no reason to complain. In fact, it seems to me I should prefer that situation, since it is Pareto preferable to the original: the wealthy person is better off and I am no worse off.
My friend thought I was joking. I pointed out that I was expressing the same intuition that led John Rawls to his lexicographic ordering principle—there is no reason to object to inequality per se. Injustice for Rawls is an inequality that comes at the expense of the least advantaged. Inequality that does no disadvantage anyone is morally unproblematic. Indeed if it benefits the least advantaged it is morally preferable on grounds on distributive justice. That people on the left no longer accept that intuition—indeed find it unintelligible—says a lot about how the left has shifted in a more extreme direction since the publication of A Theory of Justice 41 years ago.
Several recent articles add important additional dimensions to the issue of inequality.
- Andy Kessler points to consumption equality. The lifestyles of the rich and famous are in many respects not very different from the lives of the middle class. “For the most part, the wealthy bust their tail, work 60-80 hour weeks building some game-changing product for the mass market, but at the end of the day they can’t enjoy much that the middle class doesn’t also enjoy.” It’s absolutely true. I have some friends who are multi-millionaires. Their houses are bigger and more impressive than mine. (One is a replica of a Habsburg palace!) But beyond that there isn’t much to differentiate us. We have pretty much the same appliances, consumer goods, etc., at least in functional terms. (My Frigidaire keeps things as cold as their SubZeros.) They have BMWs; I have a 20-year-old Miata. But they all drive well. (In fact, my car is more fun to drive and it’s more reliable. I wouldn’t trade.) I remember noticing consumption equality even when I was a poor graduate student. My wife and I were able to live well on a very modest income. The difference between rich and poor, I learned then, is security, not lifestyle. It’s what you have in the bank—in what you could spend if you had to—not in what you can afford day-to-day. Kessler identifies why: “Just about every product or service that makes our lives better requires a mass market or it’s not economic to bother offering.”
- Victor Davis Hanson notes the same thing. “I drove down to Los Angeles in my Accord again not long ago. And once more I was amazed at what people pay for comparable rides in imported luxury cars. For some reason, I got stuck on the 99 behind a new BMW for 50 miles. My car is probably now worth $20,000, the other driver’s probably $75,000. We went the same speed. I had heating; so apparently did he. My windshield wipers worked as well. My exhaust was as clean as his.” My car is worth about $2,000, but the same is true of mine. The additional money the BMW driver spends buys something, presumably, but it’s not clear what it is, or why someone without it suffers anything with which morality or public policy ought to be concerned.
- In other matters, such as education, it’s much the same. Hanson observes that the Classics program at Cal State Fresno compares well to top programs at private universities. Three of the top five philosophy programs are at public universities (Rutgers, Pittsburgh, and Michigan), and UCLA, North Carolina, Arizona, Berkeley, CUNY, and Texas are all in the top twenty. Philosophy majors at any of them are better off than philosophy majors at much more expensive private schools such as Duke, Penn, Johns Hopkins, Northwestern, Dartmouth, Emory, Rice, Williams, Haverford, Swarthmore, Wesleyan, Pomona, and many more. Need-based financial aid makes a first-rate education available to almost anyone. Technology further equalizes opportunities: as Hanson notes, ”we live in an unacknowledged age in which a poor man with a laptop who taps into a free signal at Starbucks has more information at his fingertips than did the Regius Professor of Greek at Oxford just forty years ago.”
- Greg Mankiw points out that differences in income trace, to a substantial degree, to differences in the importance people place on income. “In other words, one reason that people differ in their incomes is that some people care more about having a high income than others. To put it in geekspeak, preferences over pecuniary goods (say, consumption) and nonpecuniary goods (say, leisure) are heterogeneous.” How much would I give—in labor, say, not to prejudice the issue—to have a new BMW rather than a 20-year-old Miata? Nothing at all. How much time would I be willing to spend working if I were able, by so doing, to double my income? Some, but not very much, and that only because I have a daughter still in college. My rich friends work incredibly hard. They don’t have time to blog, write music, play piano and bass guitar, sing Baroque music, homeschool their children, and lots of other things I do or have done. Nor do they have time to explore wide areas of their own fields.
- As Mankiw notes, that makes the case for redistributive taxation much weaker. There’s an argument for redistribution based on the diminishing marginal utility of money. But it depends crucially on people having the same utility function. Without that assumption the argument goes nowhere.
All of this makes the “1% vs. 99%” discussion of inequality we’ve been hearing, and are about to hear much more of from the Obama campaign, rather ridiculous.
Why, in fact, does it have any resonance at all? Partly, times are tough, and some people like to have someone to blame. Partly, it’s artificial; the left needs class conflict to distract from its abysmal economic record. Partly, I think, it resonates with media types and policy makers who live in New York, Washington, Philadelphia, and Chicago where divides between rich and poor are dramatic and easily discerned. People who live in Raleigh, Charlotte, Austin, or Phoenix see no such divide. The idea that, as John Edwards used to put it, there are “two Americas” looks absurd on its face from most places in the United States.
“The very rich… are different from you and me,” said F. Scott Fitzgerald. Ernest Hemingway is said to have responded, “Yes. They have more money.” That’s a difference, all right. But it arguably matters less now than at any time in history.