Wednesday, August 21, 2013

Taranto on Income Inequality

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In a post on the Washington Post's Wonkblog, Mike Konczal of the Roosevelt Institute makes a rather sweeping claim about his ideological adversaries: "Conservatives don't really get that some things are 'public,' and it's hurting their ability to handle the challenges of the early 21st century."
What does he mean by that? He acknowledges the term is ambiguous, then settles on a definition from a leading early-20th-century progressive intellectual:

One can spend an entire lifetime debating the distinction between "public" and "private," but for this post let's use an approach from John Dewey. In "The Public and Its Problems" (1927), Dewey argued that the public is involved wherever an action between two people has consequences "that extend beyond the two directly concerned." Given "that they affect the welfare of many others, the act acquires a public capacity." And as such needs a public response. And conservatives reject this.
This paragraph is either artfully or sloppily ambiguous. What exactly is "this" that "conservatives reject"? Dewey's expansive definition of "public capacity"? Or the conclusion that any act with a "public capacity" requires "a public response"--which Konczal takes to mean a governmental one?
In any case, even Konczal's take on Dewey is sufficient to knock down his straw-man conservatism. One may reject either proposition--that is, one may consider Dewey's definition of "public" overbroad or believe that not every "public" action calls for a governmental response--without categorically denying that "some things are 'public.' "
The specific examples Konczal cites are of two types. The first: libertarian arguments, offered by the journalist Tim Carney and the social scientist Charles Murray, that voluntary efforts to alleviate poverty and associated underclass behavioral problems are "better" than coercive ones. But libertarianism's actual first principle is not that nothing is "public." It is that coercion is morally objectionable.
He also fails to make the distinction between this objection to welfare-state policiesin principle and practical objections to them on the ground that they are ineffective or counterproductive or have other unanticipated ill consequences. The latter is the thrust of much of Murray's empirical work.
Konczal's second set of examples consists of mainstream conservatives' objections to the contemporary left-liberal claim that, as Konczal puts it, "inequality is a public problem." Tellingly, he doesn't think to specify inequality of income; it becomes clear that's what he means when he goes on to quote extensively from a speech in which President Obama offered various arguments for the proposition.
None of these arguments are actually necessary if you accept the Dewey-Konczal definition of a "public problem." Why? Take a simple example: Mr. A and Mr. B work for Mr. C. Mr. A makes $40,000 a year, and Mr. B makes $60,000. Let's stipulate further that the income differential is "fair"--that B's contributions to C's business are exactly half again as great as A's because he works harder, or has superior skills, or is a more loyal employee, than A. That is to say, B is not getting rich at A's expense.
We've set up the example in such a way that, at least within the closed universe of our three-man company, the pay scale appears to be a genuinely "private" transaction as per to Dewey-Konczal. A's salary is of no concern to B, and vice versa. Each worker's pay level is between him and C.

But wait. That changes as soon as you introduce the idea of inequality of income, which defines each man's income in terms of the other's. A makes only 67% of what B makes; B makes 1.5 times what A makes. These ratios get "worse"--the "inequality" expands--if B gets a raise or A gets a pay cut while the other man's pay stays the same, even if the change in pay is made purely on the merits and has nothing to do with the other worker.

Debates over "inequality" usually deal in statistics, not individual comparisons, but we can illustrate that even with our micro-example. A's earnings are 20% below average, and B's are 20% above. Again, these proportions change if one employee's income does, even if it is for reasons unrelated to the other employee.

Ah, but we haven't accounted for C. Let's say C turns a profit of exactly $50,000, making that the median as well as the average income. Suppose the following year he's hit by the cost of complying with some new regulatory burden, so that after making payroll (with no salary cuts, but no raises either), his profits are only $10,000. Now B is making a whopping two-thirds more than the average income of $36,000, and even A is comfortably "middle class," earning exactly the median income and 11% more than the average!
Or maybe not so comfortably. A few more years like that, and A, B and C will all be looking for new jobs.

The example illustrates two points. First, by the Dewey-Konczal definition, the assertion that "inequality is a public problem" is a tautology. Merely conceiving of income in comparative terms makes everyone's income everyone else's concern and therefore, according to Konczal's reasoning, justifies any "public response"--any governmental intervention that affects income.

Second, "equality" is an arbitrary goal--one that may come into conflict with other goals, such as the long-term viability of a business (as in our example) or the overall economy. Further, even the idea that equality of income is just flies in the face of common sense. If you really believed it, you'd have rejected as false by definition our stipulation that B deserved his higher pay.

It turns out Konczal doesn't really believe it either. To see why, look at what he presents as his most central argument:
[Obama] describes "an even more fundamental issue at stake." And here is the idea that "gaping inequality gives the lie to the promise that's at the very heart of America: that this is a place where you can make it if you try." Stagnation, entrenched multi-generational inequality, and runaway incomes reflect an economy where a rising tide doesn't lift all boats and the rising from one class to another is next to impossible, causing a problem for everyone.
Implicit in the Obama quote is a rejection of equality of income as an ideal state. Income inequality is not only consistent with "the promise that's at the very heart of America" but a necessary result of its fulfillment. If everyone earned the same income as everyone else every year, nobody could ever be said to "make it."

True, the president qualifies his statement by limiting it to "gaping" inequality, whatever that means. Konczal refers to the "entrenched multi-generational" kind and to "runaway" incomes. Thus this passage turns out to be heavier on adjectives than on thought. As to Konczal's complaint that "a rising tide doesn't lift all boats," that's mathematically impossible when the altitude of each boat is being measured relative to the other boats!

In short, Konczal's whole argument collapses into vagueness and incoherence.

None of this is to deny that there are some genuine public problems behind the statistical construct of "gaping inequality." In particular, the problem of the underclass--of persistent poverty, seems to us to merit a governmental response. But note that even Carney's and Murray's libertarian positions, whatever one may think of them, are consistent with that concession. Rolling back the welfare state would certainly be a governmental response.

Konczal mocks Charles Murray for arguing, in "Coming Apart: The State of White America," that "a private solution of elites shaming the poor is better than any government response to the trials faced by working-class whites." (To clarify, while most of Murray's data are specific to whites, that
 argument is not.)It may be that Konczal's muddled thinking about "inequality" is the product of his reluctance to grapple with the implications of his own first principles. For if taken seriously, the Dewey-Konczal argument about "public" problems leads in directions that would make most of today's liberals highly uncomfortable.
It seems to us that Konczal has identified a genuine weakness of "Coming Apart," which we read and with which we were generally impressed. Murray's faith in the power of elite moral suasion struck us as unrealistic (though we imagine it would be a lot less harmful and costly than whatever "governmental solution" Konczal would propose).

But when you consider the social problems Murray identifies--problems that are worse among nonwhites than among whites--a lot of them implicate what most liberals would consider private decisions: decisions, that is, about sex, marriage and reproduction.
Aren't these decisions "public" by the Dewey-Konczal definition--particularly under a welfare state? Most obviously, a decision to have sex can produce a child; a poor woman's decision to have sex outside wedlock greatly increases the likelihood that the child will be a burden on the public fisc.

But it's not just poor people whose sexual, reproductive and marital decisions have effects beyond themselves. Sexual-marketplace theory teaches that prevailing mores and expectations are not simply handed down by "elites": They are an effect of individual actions (in the aggregate) as well as a cause.

Nor is the public effect of reproductive choices limited to those poor enough to be on what we usually think of as "welfare." Declining fertility threatens the long-term solvency of the middle-class entitlements, Social Security and Medicare. Thus every person's sexual behavior, every decision to marry or not, every woman's decision about whether to have children has a public effect.

You may object that the public effect of any such individual decision is too negligible to justify government intrusion. But in the realm of commerce, the left rejects that claim. In Wickard v. Filburn (1942), the landmark New Deal case, the U.S. Supreme Court held that the government could regulate a farmer's use of home-grown wheat on the basis of just such an aggregate effect: "That appellee's own contribution to the demand for wheat may be trivial by itself is not enough to remove him from the scope of federal regulation where, as here, his contribution, taken together with that of many others similarly situated, is far from trivial."

How, then, can sexual and reproductive liberty--the very soul of contemporary liberalism--be justified in Dewey-Konczal terms if economic liberty cannot?

Source: James Taranto, "Is Any Thing Private?" from Best of the Web Today, The Wall Street Journal, August 21, 2013

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