Harvard economist Greg Mankiw’s paper in defence of current levels of income inequality have been widely attacked:
Jon Chiat skewers him as effectively as anyone here and here.
But there’s one particular piece of Mankiw’s argument that intrigues me.
Mankiw, like Robert Nozick before him,
attacks utlilitariansim on the grounds that a perfectly utilitatian society
would be a horrible place. But this
argument completely fails to grasp the nature of society. We might like to maximise welfare
(utilitarianism); we might also like to maximise economic growth, protect
property rights, and free people from oppressive government. The problem is that some of these goals are
contradictory. Growth that benefited
only a few, and impoverished everyone else, would hardly be desirable; absoulte
property rights create a tyranny of the property owners over everyone else;
even Nozick accepted that a world without any government would be a Hobbesian
nightmare, where the war of all against all prevailed and life was nasty,
brutish and short. Indeed, compared to
these models, Mankiw’s arguments appear to be arguments for ultitarianism in
the form of Churchill’s famous argument in favour of demoncracy; horrific but
less so than any of the alternatives.
But in fact, we’re not in such a bad
shape. This is because we can aim for a
compromise society, where we balance our different objectives. The argument for a certain level of additional redistribution is based on the notion that the current imbalances of wealth in
our society are (i) not widely beneficial and (ii) that the downside of doing
so is outweighted by the upside. As practically no-one is arguing for 100% top
tax rates, the point that a perfectly utilitarian society would be unwelcome is
completely irrelevent. Alternatively,
one can think of this as a form of meta-utilitariansim, in which among the
benefits to be maximised include growth, property and freedom, as well as
wealth; the case for limits to redistribution can also be seen in ulititarian
terms.
The strange thing about Mankiw’s argument
is that the notion that individuals choose between alternatives, and how much
more of something we might want depends on how much of it we already have (and
how much we are lacking in our other desires) is one of the most basic
principles of economics. You get a pay increase
and you buy a car; once you have a car, you spend your next pay increase on a
better house, or nicer food, and so on. Mankiw’s argument (that a little
utliitarianism is bad because you wouldn’t want a wholly utilitarian society)
is like saying you shouldn’t by a car with your pay rise because you wouldn’t
want to spend all your money on automobiles. Indeed, it’s hard to see how
economics can work without some sort of (opportunity) cost – benefit going on,
the sort of calculation that Mankiw derides as impossible to perform. One of
his arguments is that you can’t show redistribution actually increases welfare,
because the benefits cannot be measured – whereas the whole basis of economics
is that people are capable, at least approximately, of personal utility
maximalisation.
Nozick has been here before Mankiw, and I
think that some of the explanation of the apparent idiocy lies in the heart of
libertarian politcs. The appeal of libertarianism is based on its logical
consistency: take one principle, the primacy of property, and extend that to
constructing a vision of a coherent society.
But human society is a complex place, and its arguable that no simple
principle is alone sufficient to describe the sort of world in which we might
actually want to live. Showing extreme utilitarianism is logically absurd,
whereas extreme libertariansim is not, might appear to be a victory to those
aiming to reduce ethics to logic. But
the theoretical possibility of a purely libertarian world does not make one desirable; except
to those who crave intellectual certainty where none exists; and also, of course, to the owners of property
who stand to benefit the most from having their rights recognised as absolute.
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