How Not to Argue Against Inequality
posted by Frank Pasquale
Like his previous work, Robert Frank’s new book Falling Behind makes much of “happiness surveys” to demonstrate that once a country reaches a certain level of prosperity, one’s relative position in the economic hierarchy may do more to determine one’s happiness than one’s absolute level of buying power. As he stated in a 2001 piece coauthored with Cass Sunstein,
Such surveys have found that happiness levels within a country at a given moment are strongly positively correlated with relative position in the country’s income distribution. But the same studies find only weak long-term trends in average reported happiness levels, even for countries whose incomes have been growing steadily over time.
Sunstein and Frank argue that such studies demonstrate the importance of equality, or at least of collective action designed to prevent “arms races” for relative position.
This is perhaps the most controversial of Frank’s arguments for equality, and for good reason. As Gregory Besharov has argued, the most important question here is “what is the relevant group to which people compare themselves?” Certainly I might resent my neighbor’s purchase of a $10,000 gas grill when I can only afford an aluminum charcoal plate on a tripod. But should I really be comparing myself to him? Why not just be grateful that I have a BBQ apparatus at all?
Gregg Easterbrook’s book The Progress Paradox makes that point compellingly:
Our forebears, who worked and sacrificed tirelessly in the hopes their descendants would someday be free, comfortable, healthy and educated, might be dismayed to observe how acidly we deny we now are these things.
In short, mere subjective feelings of resentment oughtn’t count for much in the social calculus–a point Rawls made foundational in his treatment of the original position in A Theory of Justice. Many spiritual traditions counsel against resentment. Though Frank is often at pains to discuss the objective bases of the dismay of those at the bottom of the economic pyramid, those objective problems (such as suffering a higher likelihood of injury in a car crash when they can’t afford the larger cars driven by wealthier drivers) are what really matters. As I have argued elsewhere, the reverse finding–that “happy slaves” are perfectly satisfied with preventable injustices done to them–should not count in favor of a social system.
Ultimately, Frank’s subjectivism is part of a larger, and disturbing, trend in philosophy: an emphasis on brute feelings where our true concern is with the rightness, the appropriateness, of such feelings.
July 25, 2007 at 2:10 pm
Posted in: Behavioral Law and Economics, Economic Analysis of Law, Philosophy of Social Science
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Responses (6)
Brett McDonnell - July 25, 2007 at 3:57 pm
It seems to me that Frank’s argument is still critical if the following three points are true:
(1) Economists (and fellow travelers) have mainly defended a policy emphasis on encouraging economic growth with arguments based on how growth increases individual welfare conceived of as satisfying personal preferences;
(2) The economists’ arguments in (1) are the leading and best-developed, albeit not the only, justification for growth-focused policies; and
(3) The happiness effects Frank discusses have a deep biological basis, so that whether or not they are morally appropriate, they are unavoidable.
If (3) is right, then the preference-based arguments for growth (point 1), beyond a certain level, are very considerably weakened. If (2) is right, that then means that the prevailing arguments favoring a focus on growth as opposed to other desirable goals, such as reducing inequality, are considerably weaker than we believed. Thus, at a minimum, Frank’s arguments, if true, have an important negative effect of calling into question many of the leading arguments for focusing on economic growth rather than reducing inequality.
Frank - July 25, 2007 at 8:04 pm
You’re right, the happiness literature must at least be recognized by macroeconomists who axiomatically consider preference satisfaction their summum bonum.
Your point reminds me of an essay by Dupre & Gagnier called “The Ends of Economics,” where they remark on how bizarre it is that “most economists believe that the core of economics can be developed with no assumptions at all about what an economy should aim to provide.”
Patrick S. O'Donnell - July 26, 2007 at 8:08 am
Cf. the following from Sen’s essay, “Conceptualizing and Measuring Poverty” in Grusky and Kanbur, eds. Poverty and Inequality (2006):
“The connection between income and capability is…made more complex by the relevance of relative deprivation. As Adam Smith noted, the social capabilities may depend on a person’s relative income vis-à-vis those of others with whom he or she interacts. A person’s ability to be clothed appropriately (or to have other items of consumption goods that have some visibility or social use), given the standards of the society in which he or she lives, may be crucial for the capability to mix with others in that society. This relates directly to relative income vis-à-vis the general level of prosperity in that community. A relative deprivation in terms of income can, thus, lead to absolute deprivation in terms of capabilities, and in this sense, the problems of poverty and inequality are closely interlinked. For example, being relatively poor in a rich country can be a great capability handicap, even when one’s absolute income is high in world standards. In a generally opulent country, more income is needed to buy enough commodities to achieve the same social functioning. [….]
Some implications of Smith’s focus on relative income in assessing poverty are worth separating out because of their extensive reach. First, because the absolute deprivation of social capabilities depends on relative deprivation of incomes, clearly the assessment of poverty in the space of capabilities cannot be divorced from the extent of income inequality. This connection indicates that the increasingly common global tendency in public discussion (and sometimes in public policy analysis) to argue in favor of an exclusive concentration on poverty removal, rather than being concerned also about inequality, is intellectually hard to sustain. Although it is easy to see that income poverty and income inequality are distinct phenomena, nevertheless capability poverty relates inseparably to income inequality. An often-articulated political attitude, which takes the form of saying, ‘I do care about poverty, but don’t give a damn about inequality,’ not only reflects a remarkably narrow approach to morality but also raises issues of inconsistency, given the causal linkages that make inequality and poverty interdependent.
Second, Smithian reasoning indicates why poverty is hard to eradicate just by raising the average level of income, without also addressing issues of inequality of incomes. In particular, the phenomenon of poverty in rich countries can be better understood through the perspective of relative deprivation. Adam Smith analyzed the relevance of relative position vis-à-vis others in society in the following way:
‘A linen shirt, for example is, strictly speaking, not a necessity of life. The Greeks and Romans lived, I suppose, very comfortably, though they had no linen. But in present times, through the greater part of Europe, a creditable day-labourer would be ashamed to appear in without linen shirt, the want of which would be supposed to denote that disgraceful degree of poverty which, it is presumed, nobody can well fall into without extreme bad conduct. Custom, in the same manner, had rendered leather shoes a necessity of life in England. The poorest creditable person of either sex would be ashamed to appear in public without them.’
Similarly, today, a person in New York may well suffer from poverty despite having a level of income that would make him or her immune from poverty in Bangladesh or Ethiopia. This is not only because the capabilities that are taken to be minimally basic tend to change as a country becomes richer, but also because even for the same level of capability, the needed minimal income may itself rise, along with the incomes of others in the community. [….]
Thus even the same minimal capability has varying commodity demands and divergent requirements of minimal income in different societies, involving systematic connection with incomes of others in the community in which a person lives. One further implication of this linkage is that given the peer pressure that operates in favor of social capabilities (often at the expense of other needs), even physical deprivation, such as undernourishment, can occur in richer countries at levels of family income at which elementary nutritional deprivation would be very rarely seen in poorer countries. [….]
Third, the pivotal role of the consumption patterns of others in the same community, or in a group with which a person interacts, also indicates why poverty cannot be assessed in purely individual terms. The understanding that no person is an island is quite central to the assessment of poverty, and correspondingly, to the appropriate evaluation of the bite and reach of inequality.”
Patrick S. O'Donnell - July 26, 2007 at 8:08 am
Cf. the following from Sen’s essay, “Conceptualizing and Measuring Poverty” in Grusky and Kanbur, eds. Poverty and Inequality (2006):
“The connection between income and capability is…made more complex by the relevance of relative deprivation. As Adam Smith noted, the social capabilities may depend on a person’s relative income vis-à-vis those of others with whom he or she interacts. A person’s ability to be clothed appropriately (or to have other items of consumption goods that have some visibility or social use), given the standards of the society in which he or she lives, may be crucial for the capability to mix with others in that society. This relates directly to relative income vis-à-vis the general level of prosperity in that community. A relative deprivation in terms of income can, thus, lead to absolute deprivation in terms of capabilities, and in this sense, the problems of poverty and inequality are closely interlinked. For example, being relatively poor in a rich country can be a great capability handicap, even when one’s absolute income is high in world standards. In a generally opulent country, more income is needed to buy enough commodities to achieve the same social functioning. [….]
Some implications of Smith’s focus on relative income in assessing poverty are worth separating out because of their extensive reach. First, because the absolute deprivation of social capabilities depends on relative deprivation of incomes, clearly the assessment of poverty in the space of capabilities cannot be divorced from the extent of income inequality. This connection indicates that the increasingly common global tendency in public discussion (and sometimes in public policy analysis) to argue in favor of an exclusive concentration on poverty removal, rather than being concerned also about inequality, is intellectually hard to sustain. Although it is easy to see that income poverty and income inequality are distinct phenomena, nevertheless capability poverty relates inseparably to income inequality. An often-articulated political attitude, which takes the form of saying, ‘I do care about poverty, but don’t give a damn about inequality,’ not only reflects a remarkably narrow approach to morality but also raises issues of inconsistency, given the causal linkages that make inequality and poverty interdependent.
Second, Smithian reasoning indicates why poverty is hard to eradicate just by raising the average level of income, without also addressing issues of inequality of incomes. In particular, the phenomenon of poverty in rich countries can be better understood through the perspective of relative deprivation. Adam Smith analyzed the relevance of relative position vis-à-vis others in society in the following way:
‘A linen shirt, for example is, strictly speaking, not a necessity of life. The Greeks and Romans lived, I suppose, very comfortably, though they had no linen. But in present times, through the greater part of Europe, a creditable day-labourer would be ashamed to appear in without linen shirt, the want of which would be supposed to denote that disgraceful degree of poverty which, it is presumed, nobody can well fall into without extreme bad conduct. Custom, in the same manner, had rendered leather shoes a necessity of life in England. The poorest creditable person of either sex would be ashamed to appear in public without them.’
Similarly, today, a person in New York may well suffer from poverty despite having a level of income that would make him or her immune from poverty in Bangladesh or Ethiopia. This is not only because the capabilities that are taken to be minimally basic tend to change as a country becomes richer, but also because even for the same level of capability, the needed minimal income may itself rise, along with the incomes of others in the community. [….]
Thus even the same minimal capability has varying commodity demands and divergent requirements of minimal income in different societies, involving systematic connection with incomes of others in the community in which a person lives. One further implication of this linkage is that given the peer pressure that operates in favor of social capabilities (often at the expense of other needs), even physical deprivation, such as undernourishment, can occur in richer countries at levels of family income at which elementary nutritional deprivation would be very rarely seen in poorer countries. [….]
Third, the pivotal role of the consumption patterns of others in the same community, or in a group with which a person interacts, also indicates why poverty cannot be assessed in purely individual terms. The understanding that no person is an island is quite central to the assessment of poverty, and correspondingly, to the appropriate evaluation of the bite and reach of inequality.”
Patrick S. O'Donnell - July 26, 2007 at 8:12 am
Oops! The quote from Adam Smith should read: ‘…would be ashamed to appear in public without linen shirt….’
Patrick S. O'Donnell - July 26, 2007 at 8:12 am
Oops! The quote from Adam Smith should read: ‘…would be ashamed to appear in public without linen shirt….’
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