1. Ken Rhodes - August 7, 2011 at 7:48 pm

   “Preserving the Bush tax cuts for the wealthy” has been justified by a myth — that raising taxes produces a disincentive to investment and/or additional work.

   That myth must have originated relatively recently. I am old enough to remember the top tax brackets of the Eisenhower and Kennedy administrations. I am also old enough to remember that those high taxes never kept the rich from trying to get richer.

2. rapier - August 7, 2011 at 8:03 pm

   Such observations and opinions have yet to garner only the tiniest bit of assent by the citizenry and zero by our elites. In other words no political response based upon them has even begun. Even if it were to begin it’s beyond imagining it could possibly result in actions, for years.

   Events in the financial and economic world will take their course now with politics as they are. If the managers can keep their system intact is impossible to say. The general trend is that most all are going to be poorer. Even if ‘our’ side would win, which it won’t but if it did then still we would be poorer. For the foundation of so much of our ‘wealth’ is based upon debt and we have borrowed too much. Too much to pay back in dollars and too much from the planet. On the matter of ‘wealth’ a reckoning is due.

   http://www.nybooks.com/articles/archives/2009/apr/09/the-way-of-all-debt/

3. mls - August 7, 2011 at 9:42 pm

   I clicked on the link to understand the claim about “zero marginal product workers.” A quick read suggests that they were not making the point you imply, namely that some workers should be regarded as valueless to the economy. Quite the opposite, in fact.

   Now I am sure that you have a genuine disagreement with the economic views expressed in the link. But instead of explaining what it is, you are choosing to argue on the level of the political attack ad.

   I suppose most people won’t notice.

4. Frank - August 7, 2011 at 11:35 pm

   MLS: I linked to the critique because I don’t believe the ZMP theory; I believe the critique. If you’d like the unpacked explication of the theory, followed by a “but see,” law reviews will probably follow that form.

5. Orin Kerr - August 8, 2011 at 2:36 am

   Frank,

   I worry this might be a little off-topic, but I’m interested in what your view is towards increasing wealth at the top that has no impact on wealth elsewhere. In particular, let’s imagine, just as a hypo, that one year 400 people get extremely rich and no one else’s income changes. Because of this change, the wealth has become more concentrated: A greater percentage of society’s net wealth is held by a very small group of people. But no one is poorer for the change: the only change in wealth is the 400 people, who are now extremely rich. In your view, would this change be a net positive, a net negative, or a net neutral?

6. Mls - August 8, 2011 at 4:01 am

   Ok I followed the link back to someone named Tyler Cowen, who I gather is the “conservative thought leader” responsible for the ZMP theory. I can’t say that I can follow the economic jargon surrounding the debate over this theory. I get the general gist of the theory, and that you don’t agree with it. From what I can discern, he is arguing that many of the unemployed were in positions where they added little or no value to the firms they worked for- thus one should not expect that those jobs will return as the economy improves.

   Is your point just that Cowen is wrong (if so, you haven’t explained why) or that his advocacy of this theory is either insincere and/or a sign of moral corruption? Because it sounds like you are saying the latter.

7. Joey Fishkin - August 8, 2011 at 5:54 am

   Orin,

   I can’t speak for Frank. But I’d say two things. One: if you change “wealth” to “well-being,” the question becomes a genuinely interesting intuition pump for teasing out whether one is an egalitarian, a prioritarian, etc.

   Two: However, there’s a reason it’s important to make that change to your hypo and talk about well-being instead of wealth, which is that there is no plausible real-world scenario in which the assumptions of the hypo work for wealth. In the simplest case, inflating the nominal income of 400 people by some huge amount, without changing any other variables about the economy such as its real size, just inflates prices so that everyone else is proportionately worse off. (If we live on an island and use shells for currency, and suddenly a few of us discover a massive cache of shells, then obviously, prices just went up and it’s not a good day for the rest of you.) If we forget nominal income and change your story to “real economic growth occurs, but all of it is captured by the top 400 people,” then the question is slightly more interesting, but I still think you need not read beyond this blog post by Frank to see some reasons why we might expect real results to differ from “no one is poorer for the change.”

   With much greater wealth comes much greater ability to lock in wealth, status, and opportunities for one’s cronies, family members, and descendants, thereby making class mobility less possible for everyone else. And indeed this is the dime version of what we see when we compare countries with very high inequality with countries with lower inequality. There is much more class mobility in Sweden than the U.S., and much more in the U.S. than in, say, Chile, an extremely unequal society, in large part for this reason.

   The bigger the gap — in terms of money, power, social distance, physical geographic distance, etc. — the harder it is to bridge and the less possible it is to have a democratic society.

8. PrometheeFeu - August 8, 2011 at 10:08 am

   “400 people control more of the wealth than 150 million of their fellow Americans,”

   That is a misleading statistic. Bill Gates may have very roughly 100 million times the amount of assets that I have, but it is highly unlikely that his quality of life and the amount he values what he owns is 100 million times higher than mine. Comparing incomes and wealth is a good approximation for well-being most of the time but past a certain point it is no longer a relevant measure of well-being.

   “the average middle-class family has seen its income stagnate over the last 30 years while the richest 1 percent has seen its income rise astronomically.”

   Again this is misleading. The “middle-class” of yesterday is not the “middle-class” of today. A lot of people have come to the United States in the past 30 years. Most of them come at the very bottom of the income ladder which drags down the average without hurting the growth of middle-class income. If you look at panel data, you see that the people who were in the middle-class 30 years ago are today much richer and better off than they were back then.

   “That appears to be the approach of the Heritage Foundation, which thinks poverty is grossly exaggerated in the US. “[T]he typical household defined as poor by the government had a car and air conditioning,” the Foundation gripes.”

   The problem is that the political rhetoric is misleading. When most of us think of poor people who need help, we do not think of people with cars and air-conditioning units. Those people often live better lives than the “rich” of 50 or 60 years ago. This very much weakens the case for using redistribution under the threat of violence. If you want to help them, I would suggest you instead consider going the private-charity rout which does not threaten violence to those who refuse to participate.

   “One solution is to employ people whose health care is provided by the state, and who are guaranteed to show up on time for wages less than an dollar an hour: prisoners.”

   Please provide some statistics on the extent of the use of prisoners in the production of goods and services in the conditions you are describing. Furthermore, given the fact that prisoners must be guarded which is very expensive and are generally very low skill, they would not make good workers as a general rule.

   “A zero-sum economy like ours”

   Please provide evidence of the economy being “zero-sum”. Last I checked, both my employer and myself are better off from our trade. My grocer is very happy to sell to me and I am very happy to buy from him. My landlord is quite delighted to be able to rent out his apartment and I am quite delighted to be able to rent said apartment. None of my economic transactions are ever zero-sum. I don’t think I have ever heard of a voluntary economic transaction that is zero-sum. Sure, there are some actors who commit fraud etc, but that is a very small portion of our economy.

   “Five percent of the world’s population can’t continue to consume 25% of the oil, or be home to 40% of the world’s listed shares (compared to, say, India’s 1%!), or maintain outsized “ecological footprints” we leave on the planet. Fairness demands that those who benefited most from our long hegemony contribute the most toward easing a transition to global parity.”

   This point is a common misconception which is that resource management is a zero-sum game and that if the rest of the world consumes more oil, we must have lost out. That would be right if we consumed “oil”. But nobody actually consumes oil. We consume all sorts of things which are derived from oil in some ways such as light, transportation, computing, entertainment etc… But technological changes in the production of those goods and services means that we keep getting more and more out of a barrel of oil. For instance, according to the bureau of transportation statistics (http://www.bts.gov/publications/national_transportation_statistics/html/table_04_23.html) in 1980 the average US passenger car could travel 16 miles per gallon. In 2009 it can travel 23.8 miles per gallon. What that means is that in the past 20 years, we could have (roughly) reduced out consumption of gasoline by 33% and not changed our driving habit one bit. That does not take into account the developments in refining technology or the development of alternate energy sources which are freeing up some oil. There is no “transition to parity” where the US is loosing out to China and India. China and India are getting better and so are we.

9. Orin Kerr - August 8, 2011 at 10:16 am

   Joey,

   Your sense of what is a plausible argument may be different from mine, but I’m curious as to how you would address the counterarguments as to why having a few people get really wealthy actually help the well-being of others. Here are perhaps the two most common counter-arguments:

   First, the billionaires tend to be the ones who give away hundreds of millions of dollars to charitable causes, sponsoring medical research, the arts, and the like that benefit the rest of us. They build the buildings at major research universities, put on the great art shows, sponsor the innovative school programs, and create the foundations that give out money (think the Ford foundation, Gates foundation, etc.) or sponsor causes (think George Soros). Of course, not all of them do, but a good number do. And that helps all of the rest of us.

   Second, it’s the wealthy that provide much of the tax base that pay for many government programs that help others. For example, my understanding is that the top ten percent of wage earners pay about 65-70% of the total income tax collected. Of course, it may be that the wealthy have tax breaks and the like that they use to get out of the taxes that they should pay. But still, as a rule, when people start making lots of money, they start paying more taxes that go into the U.S. treasury and can be used to pay for items for everyone else.

   Are you at all convinced?

   Also, as to cost, what’s your response to the counterargument that the rest of us benefit from the ability of the wealthy to invest in new technologies and pay the high costs that come along with being an early adopter? The prices then fall over time and bring the products within reach of others. Or so the argument runs: I’m curious about your perspective on it.

10. A.J. Sutter - August 8, 2011 at 11:23 am

    Orin, @#5: A net negative. When some people have so much wealth and most don’t, there will be certain important classes of goods and services that won’t be available to most people. I’m not talking about yachts, I mean that, say, people who work in the shops in Palo Alto or wherever can’t afford to live there, because the price of houses and everything else is so high. (I couldn’t afford Palo Alto even with a 6-figure income.) There’s a reason Pareto was the favorite teacher of Benito Mussolini (and why Pareto accepted the love).

    Apropos of #9, if the political right would countenance making tax rates really redistributive, then maybe your argument would hold water. Top 10% of “wage earners” is not necessarily pertinent: what about the 10% with the highest income? (The importance of capital gains as a source of income isn’t evenly distributed among wage earners.) And what’s the share of total income of the wealthiest 10% of Americans? Without that figure, the % of tax they pay is a red herring.

11. Daniel S. Goldberg - August 8, 2011 at 11:31 am

    Orin,

    Although health is best conceptualized as a dimension of well-being rather than the definition of it (see Powers and Faden 2006), you might also consider the wealth of evidence showing that the larger the socioeconomic inequalities in a given society, the less healthy everyone in that society is (including the affluent).

    Thus, even if one wanted to challenge the normative claim that a society which encourages massive and growing wealth inequalities is an unjust society, one might have to grapple with the fact that such a society would be significantly less healthy. Perhaps more importantly, the burden of that poor health would be disproportionately and overwhelmingly borne by those lower on the social gradient (which is what we find anywhere we care to look).

    Thus, the idea that billionaires provide social benefits that “trickle down” is demonstrably untrue WRT health. Rather, the evidence overwhelmingly shows that it is macrosocial conditions, chiefly animated by political economies and power gradients along lines of wealth, class, race, gender, etc. that shape health and its distribution among human populations. If we care to improve population health and compress health inequalities, increasing wealth inequalities is absolutely one of the worst things we could possibly do.

    In short, if we compressed wealth inequalities not only would we all be better off, but those suffering the largest burdens of deprivation, disease, and premature death would be helped the most. This doesn’t in and of itself establish a normative claim regarding what a just social order should do, but it does suggest that the empirical claim that vast wealth inequalities are actually beneficial for a society is utterly wrong, at least in terms of health.

12. Orin Kerr - August 8, 2011 at 12:01 pm

    AJ:

    ********
    When some people have so much wealth and most don’t, there will be certain important classes of goods and services that won’t be available to most people. I’m not talking about yachts, I mean that, say, people who work in the shops in Palo Alto or wherever can’t afford to live there, because the price of houses and everything else is so high. (I couldn’t afford Palo Alto even with a 6-figure income.)
    *********

    I don’t think I follow. If everyone wants to live in Palo Alto, but only a fixed number of people can live there, there must be some way of figuring out who gets to live there and who doesn’t: Living in Palo Alto will always be unavailable to most people. Plus, Palo Alto is really nice in large part because wealthy people have built lovely houses and attracted lovely stores for the wealthy people to spend their money: There’s no Palo Alto as we know it without them.

13. PrometheeFeu - August 8, 2011 at 1:10 pm

    @Daniel S. Goldberg:
    You write:
    “Although health is best conceptualized as a dimension of well-being rather than the definition of it (see Powers and Faden 2006), you might also consider the wealth of evidence showing that the larger the socioeconomic inequalities in a given society, the less healthy everyone in that society is (including the affluent).”

    I for one would like to see that evidence. Less developed countries often have corrupt institutions which enhance the inequality by insulating the powerful from market forces and slows growth including in the development of healthcare. I’m not sure how you could eliminate such multi-correlations from your data-set.

    “If we care to improve population health and compress health inequalities, increasing wealth inequalities is absolutely one of the worst things we could possibly do.”

    Well, I don’t think anyone would say that health inequality is divorced from wealth inequalities. After all, healthcare is a service which can be purchased using wealth. However, I would argue that in the long term, wealth inequalities can improve overall health outcomes as rich people purchase expensive healthcare goods and services paying for the initial development costs and later allowing others to benefit from those same healthcare goods and services.

    Hm… I see that Orin Kerr already made that argument above.

14. Bruce Boyden - August 8, 2011 at 1:28 pm

    Orin, I think you’re asking good questions, but here’s a hypo back at you. Suppose a member of your faculty (not you) suddenly has their annual salary boosted to $1 million. Plus they are given a fancy new corner office that is twice as big as anyone else’s. That person is selected by the dean, and the selection is entirely within the dean’s discretion. No one else’s salary changes, and no one else moves offices. Are you better off, worse off, or about the same?

15. Joey Fishkin - August 8, 2011 at 2:31 pm

    Orin,

    You are certainly right that having some people get very wealthy can have positive externalities as well as negative externalities. I wouldn’t suggest otherwise. The basic question is how much inequality a society ought to have. It is a question of balance, where the relative sizes of the the positive and negative externalities will differ depending on the level of inequality. No one who thinks carefully about it should want to render everyone’s incomes exactly the same. Nor, I think, should we want to become Chile. I think Frank’s basic point is that we have moved quite a distance in the past half-century in the U.S. in Chile’s direction, with significant net negative consequences.

    There is a social and political reality that underlies the mechanisms you identify by which wealth has positive externalities, and moving far enough out on the spectrum toward extreme inequality erodes that reality and undermines your mechanisms. For example, a democratic society will generally try to tax its wealthy people. This provides benefits to others. But if the wealthy become TOO wealthy and powerful (i.e. when disparities become too extreme) they may not tolerate this anymore, and will have so much concentrated power that they can have the tax laws rewritten to exempt most of their gains from higher tax rates. Some would argue this describes our current situation. The “tax breaks” you mention are not just something that happens; they are a product of a political economy whose dynamics shift as wealth disparities become extreme. Philanthropic works, too, depend on some sense on the part of the wealthy that they are obligated by bonds of common citizenship to help the rest of us. When disparities become too extreme, those bonds fray, so that at some point, the wealthy are no more likely to help the poor people in the impoverished parts of their own country than they are to help people in some other starving corner of the globe. Also as disparities become extreme, the wealthy tend to expend more of their own resources sealing themselves off from the poor masses who surround them (see, again, Chile or a number of other Latin American examples). This does not redound toward seeing the positive externalities, but instead, increases the negative externalities.

    It seems to me that libertarians and others who defend large inequalities of wealth have to answer two questions:
    1. Do you agree that there is some point, some amount of inequality, beyond which additional inequality is on the whole a net negative?
    2. Given how much more inequality we have today than, say, 50 years ago — we are headed rapidly toward Gilded Age levels — how can you be sure we are not already at that point?

16. Orin Kerr - August 8, 2011 at 3:13 pm

    Bruce,

    I’m much better off, as now I have a new basis for salary negotiations with the Dean: I can now compare myself to the $1 million professor and explain that I will look to leave for another school if I don’t myself receive a whopper of a raise. That’s an incredible benefit to me: If you know some way of making it happen, then I beg you to make it happen.

    Now, perhaps your point is that some people are player haters: some people feel bad just knowing that somewhere someone has more than them. You may be right that some people feel that way, but that instinct strikes me as a poor basis for social policy.

    Joey,

    I think most libertarians would answer: 1. No, and 2. Because of the answer to 1.

17. mls - August 8, 2011 at 4:00 pm

    If the answer to Bruce’s hypothetical were “worse off,” then it would follow that reducing the salaries or offices of other professors would make Orin better off (whether or not they were better compensated than he to begin with). Is that a sensible assumption for social policy?

    If it is true though, everyone who doesn’t own stocks should be pretty happy today.

18. Bruce Boyden - August 8, 2011 at 4:47 pm

    Orin, sorry, there’s no other money for raises. Just that one. Are you going to carry through on your threat to leave?

    If you do, that strikes me as indicating that you see yourself as worse off. You weren’t looking before. Now you’re looking, and considering the disruption of a move not occasioned by an opportunity to move up the ladder. Perhaps on your part it’s only to send a signal to your *next* dean: the next time huge boatloads of money are handed out I’d better get some. (Although given the low probability of such an occurrence, is sending such a signal really worth the cost?) For others in your shoes I think it might also be because they view themselves as worse off: the sudden increase in one professor’s indicators of social status dilutes the status of everyone else. Which is true; social status is positional.

    More tangible than that, and not really captured well by my hypothetical, money can translate to power. With greater wealth inequality comes a greater power disparity–power to buy things, power to get into good schools, power to outbid people for Palo Alto real estate, influence with government officials, etc. I’m not sure 400 more very wealthy individuals really tips the scale too much in a society the size of the U.S. But there’s at least some cost to it, and at some point before you get to the Eloi and the Morlocks it becomes on net negative.

19. PrometheeFeu - August 8, 2011 at 6:51 pm

    @Joey Fishkin:

    No, there is no such point where inequality is bad in and of itself. The only way in which I can see it being bad would be because of social instability. If the inequality was large enough, it might because preferable for the less fortunate to break down society and re-try. Another way to put it is that right now, I would rather nobody take my stuff rather than have a chance at taking Bill Gates’ stuff. But if Bill Gates was much more wealthy and I was much poorer than currently, I might change my mind. I think however, that we are quite far from such a situation.

    I think your comparison to Chile is not really applicable. There are many reasons to not want to look like Chile that don’t have anything to do with inequality in wealth.

    @Bruce Boyden:

    I would say the reason why someone might react as Orin did has to do with the fact that income is generally a signal of some underlying market forces, not some completely random event. So I would act as Orin did because my understanding from this situation would be that I can ask for more money and get it. If it is obvious that this change is the result of completely arbitrary discretion of the dean, I might leave on the grounds that decisions are being made in an arbitrary way and I might not feel like I can trust the establishment with which I am contracting.

20. F Fisher - August 8, 2011 at 8:38 pm

    The other side of this coin is that as the wealthy become more powerful at keeping what they consider to be theirs (and co opt the government to do the enforcement), they stifle innovation. The one strategic advantage that always pulled the US out of stagnation before may no longer be there to save us.

    I think that black hole consumes more than all the “charitable” giving and early adoption support the rich can take credit for.

21. PrometheeFeu - August 8, 2011 at 8:48 pm

    @F Fisher:
    “The other side of this coin is that as the wealthy become more powerful at keeping what they consider to be theirs (and co opt the government to do the enforcement), they stifle innovation. The one strategic advantage that always pulled the US out of stagnation before may no longer be there to save us.

    I think that black hole consumes more than all the “charitable” giving and early adoption support the rich can take credit for.”

    That seems to me to be a very good reason to limit the scope of government. If we limit very strictly the areas in which the government is allowed to intervene, it will be much harder for the rich (or more generally the politically powerful) to co-opt the government’s power to further their own ends at the expense of others. However, that will be hard to do if such broad missions as limiting inequalities are created/extended.

22. A.J. Sutter - August 8, 2011 at 9:29 pm

    Orin, there might be no Palo Alto as you know it without them, but actually many of the homes in Palo Alto and other peninsula communities had been built for the middle class: the so-called Eichler homes, built by Joseph Eichler’s firm from the 1950s-1970s. The two Eichlers currently listed in Palo Alto are going for $1.2 and $1.75 million bucks. They were already sky-high in the late 1990s. Even in quite distant areas such as Foster City (built on landfill) and Willow Glen (a downtown neighborhood in San Jose) they were going recently for ca. $800K. During my first stint in P.A. at the outbreak of the 1980′s yuppie boom, the community was starting to “gentrify” but was still more mixed — and BTW it was nice anyway.

    Nor is the fact that that enclaves of wealth are nice, and that many people would like to live there, an adequate justification for inequality. The deeper question is, why does there have to be a scarcity of nice places for people to live and work? One can turn your Palo Alto narrative around, and say that inequality at least exacerbates such scarcities.

23. A.J. Sutter - August 8, 2011 at 11:32 pm

    @PrometheeFeu, #8:

    1. Apropos of “In 1980 the average US passenger car could travel 16 miles per gallon. In 2009 it can travel 23.8 miles per gallon. What that means is that in the past 20 years, we could have (roughly) reduced out consumption of gasoline by 33% and not changed our driving habit one bit”:

    You’re neglecting the rebound effect, first described in the 19th Century by Stanley Jevons. The fact is, people do change their driving habits (and many other habits) as a result of improved efficiency. Please check federal highway statistics: http://www.fhwa.dot.gov/policyinformation/pubs/hf/pl10023/onh2010.pdf. You’ll see that indeed from 1980, the average annual miles traveled per licensed driver increased from about 10.5K in 1980 to over 14K from the mid 1990′s to today (more than a 33% increase). As the same document shows, the number of licensed drivers has increased from about 150 million in 1980 to over 200 million today (another 33% increase). So despite efficiency improvements, US gasoline consumption for automobile transportation has gone up. Similarly, flat-panel display TVs are more energy efficient than the older CRT sets of the same size — but people are buying gigantic FPD sets, which wipes out the energy savings. This rebound effect for energy and other efficiency improvements is observed in many other countries as well.

    2. Apropos of “Comparing incomes and wealth is a good approximation for well-being most of the time but past a certain point it is no longer a relevant measure of well-being.”

    The issue isn’t just well-being. It’s also an issue of power, in economic and political senses. The disproportion need not be a linear function of net worth to be unjust or damaging to society as a whole.

24. Orin Kerr - August 9, 2011 at 1:06 am

    Bruce,

    If by hypothesis my salary is fixed, and the colleague’s salary cannot in any way influence my own salary, and I am not in any way allowed to bargain for any aspects of my employment based on my colleague’s salary, then I suppose I am neither better off or worse off from my colleague’s good fortune. It’s like my colleague won the lottery. I suppose I might be a tad jealous about my friend’s good fortune, but again, it strikes me as a bad idea to base social policy on such instincts. “Misery loves company” may be human nature, but it’s not a helpful theory of government.

    A.J.,

    You ask the key question: “[W]hy does there have to be a scarcity of nice places for people to live and work?” If you don’t mind me being more precise, though, Palo Alto isn’t just nice. It’s absolutely incredible. It’s one of the most desirable places to live in the United States, with extraordinary weather, wonderful culture, great food, arts, access to one of America’s best cities, some of its best beaches, and one of the world’s best universities right in the middle of it. So the real question is, why is there a scarcity of such incredible places to live? And I think the answer is that the conditions of creating such incredible places are very hard to satisfy: It requires fortuities of great weather and natural resources, a specific kind of economy, a great base of human talent, and a great deal of luck. That just won’t happen so often, so there will only be so many Palo Altos and not everyone who wants to live there will be able to do so.

25. PrometheeFeu - August 9, 2011 at 10:43 am

    @A. J. Sutter:

    My point was not that energy consumption has gone down (it has not). My point was simply that it is a mistake to think of the earth’s resources as a shrinking pie that must be divided between the inhabitants. That pie is actually growing. Also, I would argue that it is a mistake to think of the energy savings having been wiped out by greater consumption implying that they have disappeared. I think it would be more accurate to say that they have been spent on goods and services which people want.

    The problem of unequal political power is relatively easy to solve by reducing the amount and concentration of political power to go around. Politically powerful groups are politically powerful because we give them avenues to exercise such power. If we reduced the scope and influence of the government and diluted its power by breaking it up into smaller pieces, politically powerful groups would face an absolute nightmare attempting to influence the political process since instead of having to capture an agency or two, they would have to capture dozens of little government units none of which would be able to do much anyways. The incentive to play the lobbying game would be strongly diminished for all groups. Having fewer rich people would just shuffle the power around between politically powerful groups.

    The unequal economic power is not an actual problem. The spending of Bill Gates or Warren Buffet is a drop in the ocean of daily transactions in the US. As for the combined wealth of those less rich, for the most part, they can only stay rich by satisfying market demands. So their power is severely constrained.

26. john chung - August 9, 2011 at 1:45 pm

    this is a response to the hypo where a few make much more, but everyone else remains the same.

    suppose college tuition at the leading schools rises to $100,000 per year. law profs at elite schools make too much to qualify for financial aid, and must pay full fare. However, the college charges $100,000 a year because it knows hedge fund and private equity managers can easily pay this; they make over $100 million. Has the law prof been hurt?
    suppose further that admission chances to the leading schools with their new $100,000 tuition are boosted by summer experiences like european adventures and round-the-year private tutoring. Elite law profs can probably do this as well, but what’s left of their household budget?
    So, is it the case that no one is hurt as long as middle class incomes remain the same?
    But because I am not an elite law prof, I may not know what I’m talking about.

27. Orin Kerr - August 9, 2011 at 3:03 pm

    John Chung,

    In your hypo, universities are suddenly flushed with cash, and would now have tons of money to do things that today they can’t afford. So the question becomes whether I would be willing to pay the extra money (or take out a loan to pay for it) to get the benefit of all the things that school could do for my child. But I can’t answer whether I would be hurt by that or helped by it unless you tell me what those benefits are.

28. john chung - August 9, 2011 at 3:22 pm

    what if the benefits are the pipeline into goldman sachs or bridgewater hedge fund. there was recently a brouhaha at Dartmouth regarding recruiting by Bridgewater there. btw, the head of Bridegwater makes more than $1 billion a year. or else the elite school is a pipeline to the elite law schools and then on to the cushy life of a tenured prof at an elite law. also, this not really a hypo. i read middlebury is now basing admission decisions on ability to pay full fare.
    orin, this is not meant as criticism of your hypo, which I view as a thoughtful exercise. also, i’m a fan of your work, but i guess we disagree on the effects of growing wealth inequality.

29. Andrew - August 9, 2011 at 4:58 pm

    Many comments miss a couple of important points about human nature and money in general.

    First, well-being is always relative. One is less well-off if others become better off, regardless of how that well-being compares to one’s well being 20 years ago or 100 years ago. One who says that someone is not less well-off when their state hasn’t improved but that of others has doesn’t understand the human psyche. There would be no demand for stainless-steel appliances or granite countertops if this were not the case.

    Second, money is a public monopoly that represents control of real assets. Governments create laws that protect those who control money and the real resources that money represents. These laws aren’t rights inherent in living, they are rules that protect control of resources. The fact that the laws and systems exist and were created in a democracy doesn’t make them moral.

    Any argument that suggests that some people deserve to control those assets at a rate so substantially above those of others fundamentally misunderstands the value of community to human beings. What possible justification or benefit can there really be to have one person control a certain tract of productive land simply because his father controlled that same land? Or a house in Palo Alto? Is there any reason that limiting one’s income is any more or less moral than insuring some level of income for all? Is the hoarding of more resources than one needs (that’s what excessive wealth is) ethical when others are in need? Is there a good reason that foreclosed houses should sit empty and deteriorate when families need homes? Should a community need to wait to have a decent research university until someone rich wants to do a good deed and have their name on a building?

    One will have a very hard time defending the current system on moral grounds, unless your morals are very different from mine. Talk of innovation, drive, and ambition as justification for the current system falls flat. We progress because we learn, we learn because human beings want to learn and because we have created a community environment in which people have the freedom and opportunity to progress. Freedom without opportunity is a just a platitude, and a sad one at that.

30. Bruce Boyden - August 10, 2011 at 1:07 am

    “One who says that someone is not less well-off when their state hasn’t improved but that of others has doesn’t understand the human psyche.” Or that person is defining well-being in a way that does not include emotional responses to the circumstances of other people. You can argue about whether that is a good way to define well-being (and I have been!) but it’s not so obvious a question that it’s clearly wrong to hold a different view.

31. Seth Finkelstein - August 10, 2011 at 1:16 am

    While much of the discussion above has focused on abstract, mostly positional arguments – occasioned by that initial assumption – can I point out in the non-hypothetical world, in the world in fact right now – the reality is extensive unemployment, with social safety-net cuts proposed for old, sick, and poor folks, while the top ultra-rich enjoy a growing amount of wealth and power? And the situation is getting worse.

    I don’t view the original hypothetical as a “thoughtful exercise”. At best, it’s trivial, of the sort “If you could stop a nuclear attack by torturing to death a rapist child-molester terrorist, would you do so?” At worst, like that hypothetical, it’s an implicit rhetorical defense of something in practice quite different.

32. Orin Kerr - August 10, 2011 at 2:07 am

    Seth,

    I think your perspective makes sense if all of us look at these issues in the same way. If all of us agree on the issues, then it’s kind of silly to debate what the problem is: It’s just abstract denial of our shared reality, after all. But as the thread suggests, there is a genuine and entirely good-faith disagreement on the fundamentals here.

    I find understanding that disagreement to be invaluable, as I don’t know how we can make any progress without understanding where we differ. But I realize that you disagree.

33. Seth Finkelstein - August 10, 2011 at 2:47 am

    We might also disagree on the issues but not want to debate trivialities (not that there’s anything intrinsically wrong with that, like wondering how to save the world with a genie which grants wishes, but practicalities matter). In fact, such “disagreement” is often better served by grappling with the realities which exist. But in my experience, it’s typically not difficult to get to the basics of where people differ. In the article’s topic, commonly, some people think massive inequality trickles-down overall, others think it leads to those below getting dumped on. That’s not too hard. And, to a good approximation for this simple framework, one is correct and another is not (I assume you’d agree for the example of “Some people believe capitalism is better, others believe communism is better”, even though of course that covers a huge amount of ground). Or there’s an esoteric view that even if inequality does hurt the non-rich, that’s the moral outcome or just life.

    But this is gone over so many times in so many different ways that I can’t see it being the bottleneck of making progress. Here I do differ with a certain conventional wisdom, in my oft-expressed view, that very few social problems are going to be solved by more punditry.

34. Orin Kerr - August 10, 2011 at 10:41 am

    Seth,

    You and I appear to differ in what we find useful and engaging. I’m sorry to have wasted your time on a subject that you don’t find interesting.

35. Frank - August 10, 2011 at 10:43 am

    By the way, I am sorry to have failed to respond yet. I think the whole comments conversation merits another post, which I’m working on. Lots to think about.

36. Orin Kerr - August 10, 2011 at 11:10 am

    Thanks, Frank!

37. Ken Rhodes - August 10, 2011 at 12:09 pm

    Frank, don’t be sorry. In a cyber-world filled with extremists, name-calling, and shouting/arm-waving, you’ve created a civilized discussion of an important issue about which intelligent folks have widely divergent opinions.

    Not a bad weekend’s work.

38. Seth Finkelstein - August 10, 2011 at 12:27 pm

    Frank, great post, by the way. This is one of the longest comment threads, if not the longest thread, that I can recall seeing on this blog.

39. Andrew - August 10, 2011 at 3:07 pm

    Bruce,

    Any other interpretation of being “well-off” inevitably leads to absolutes and finger pointing, where one who has can always suggest that one who has not should be perfectly satisfied with their current fortune. Heck, plantation owners probably felt that their slaves should have been happy to have been provided with a shack and food.

40. Danielle Citron - August 11, 2011 at 10:14 am

    Thanks so much for your thoughtful post (as always) and the conversation that followed. Danielle

41. Joseph Slater - August 12, 2011 at 9:17 am

    Some interesting thoughts on why the sort of extreme and growing income & wealth inequality the U.S. is currently experiencing is bad for wealthy folks too, here:

    http://www.salon.com/news/opinion/glenn_greenwald/index.html?story=/opinion/greenwald/2011/08/11/income_inequality

42. Jim / Random Arrow - August 16, 2011 at 4:45 pm

    Frank Pasquale,

    I dig your work. Please know I’m not trying to make a political-theology response. A diverse group at my blog (attorneys, battered women shelter caregivers, counselors, a judge, medical doctor) are undertaking Levinson’s, “Legal Revision and Religious Renewal in Ancient Israel.” And Levinson’s foray into analogues to Living Constitution.

    And a debt-relief question already came up. Alas.

    Frank, I’m more in agreement than disagreement. One dissent from me to you (as a “see also,” not as a, “but see”) is this – yes, we’re in an epiphenomenal phase of the rich harvesting more wealth unto greater inequality. In dissent – the poor are complicit in this epiphenomenon. See my profile and professional bio.

    I’m linking your blog. Perhaps promiscuously. In a private rage now over, “Zero Marginal Product Worker.”

    Twisted in-house humor – as a clinical practitioner, I’d like to think that academics are “Zero Marginal Product Workers.” Not so in your case. So thanks.

    Also, at – http://randomarrow.blogspot.com/2011/08/legal-revision-and-religious-renewal-in.html.

    Cheers,

    Jim

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