Mobility is no answer to dispersion
Lots of times in conversations about inequality, mobility is cited as a potential remedy. What matters, according to this argument, is not how much inequality there is, but whether there is opportunity for people anywhere in the wealth/income spectrum to rise. American politicians of both parties, loathe to tackle actual inequality, have made a religion of the phrase “equality of opportunity”.
It is easy, and accurate, to counter the “equality of opportunity” fetish on practical grounds. “Equality of opportunity” echoes another famous phrase in American politics, “separate but equal”. Even if one concedes the theoretical point (which one should not), neither sort of equality is achievable in a real-world social context. The schools into which an impoverished and oppressed minority are herded were never going to match those offered to children of the affluent and well-enfranchised. Children born to parents who can barely afford even to be present themselves will never have the same opportunities as kids tutored for hundreds of dollars an hour and groomed for internships by well-connected professionals.
But if you are a utilitarian, the case for social mobility is incoherent even on theoretical grounds. Under ordinary assumptions of diminishing marginal utility and a social welfare function that aggregates individual utilities, for any distribution of wealth, overall welfare is maximized when each individual knows her place with perfect certainty from the start. A person who expects to land on the bottom of the distribution might prefer that some uncertainty be added into the mix, but that benefit will be more than balanced by the cost to someone near the top of the distribution facing downward mobility. If we augment standard utility functions with plausible notions of habit formation and social reference group comparison, the case against mobility grows even stronger. The cost and shame of downward mobility dramatically outmatches the potential benefit of upward mobility. If that sounds abstruse and theoretical, it shouldn’t. For example, I don’t think you can understand the United States response to the financial crisis without taking into account the genuine sympathy of policymakers and other influencers for the plight of people within their social communities who faced banishment to dramatically lower stations under theoretically superior policy alternatives. A functional polity values rising fortunes across the wealth spectrum, but it fears and resists falling fortunes much more strenuously. I would go so far as to claim this is a universal social fact, a characteristic of all polities that endure. Capitalism is always crony capitalism — and socialism tends towards crony socialism! — not because of corrupt bad actors but because human lifestyles are sticky-downward. Large social divergences can in practice be remedied smoothly only by convergence upward from the bottom. The wise course is to prevent extreme divergence from emerging in the first place. Once it has, the only way out is to hope for growth, and to direct the fruits of growth towards the bottom of the distribution.
These issues are glaringly obvious at a global level. The United States and Europe are full of people who tut and cluck about poverty and misery in the erstwhile Third World and elsewhere. But no one imagines that “mobility” in the sense used in domestic politics would be an acceptable answer. If we are honest, do we want, would we even remotely tolerate, any sort of political change that gave our children “equality of opportunity” with children born in Gabon today, holding the global distribution of outcomes constant? Obviously not. We might embrace a fig-leaf “level playing field”, where advantages we can reliably provide would ensure our kids the 90+ percentile lifestyles we consider civilized despite some self-aggrandizing formal equality. (All hail the meritocracy!) But we would resist with the full horror of our armaments any reform that meant our kids should face anywhere near the probability of deprivation and poverty implied by a fair lottery of the global distribution of outcomes. At a global level, we will either have “stability” that is really ossification (or expansion) of present divergences, or convergence via rise from beneath. Convergence from the top, downward absolute mobility, is simply unthinkable.
The first-order utilitarian costs of social mobility outweigh the benefits, full-stop. Obviously, there are more complicated stories you can tell about why social mobility is a good thing, desirable to some degree. Perhaps the prospect for social mobility creates incentives for individuals that cause the distribution of outcomes for the full population to shift upwards. Perhaps concerns about justice (however we define that) should supervene to some degree the utilitarian cost of social mobility. I buy all that. To some degree.
But if you fancy yourself a utilitarian, you have to acknowledge that mobility, like the inequality that renders it possible, is attended by first-order costs to social welfare. Those costs may be outweighed by second-order “dynamic” effects over some range, but that’s a case you have to work to make that goes well beyond conventional utilitarian analysis, well beyond most models that economists actually write down and use. And it’s a case with built-in limits. The first-order costs of inequality and mobility will eventually overwhelm whatever second-order benefits we wish to ascribe to them.
The case for both inequality and social mobility is very much like the case for patents and copyrights. Patents and copyrights are first-order economic distortions, grants of monopoly power by the state. But we claim these particular distortions also “promote the progress of science and useful arts“. So we face a trade-off. We accept and even encourage the distortions, within limits. But we understand (or we should understand) that we are playing with fire, that there is only a narrow range within which these prima facie bad ideas might be redeemed by more complicated virtues. I favor inequality, but not too much of it, just as I favor copyrights for strictly limited terms. But in this era of Mickey Mouse protection acts and rent extracting oligarchs, those limits have been exceeded and the bad ideas are just bad ideas that need to be pared back.
Update: Unsurprisingly, Alex Tabarrok and Tyler Cowen at Marginal Revolution were miles ahead of me on this, see Stasis, Churn, and Growth. My mind is a device which operates by so thoroughly confusing unoriginal thoughts that I can no longer identify their provenance.
- 24-Nov-2013, 1:50 p.m. PST: Added pointer to Marginal Revolution piece, which remarkably echoes my own, 14 months in advance…