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.
Update History:
- 24-Nov-2013, 1:50 p.m. PST: Added pointer to Marginal Revolution piece, which remarkably echoes my own, 14 months in advance…
The way I’ve looked at it for quite some time is that I’m far more concerned about what the reality of being at the bottom of the inequality distribution looks like, as opposed to the degree or extent of the inequality itself. It seems we could arrest or reverse the growth of the top of the distribution without necessarily improving anything at the bottom – the two ends aren’t as tightly bound up in a zero-sum struggle, to my mind at least.
Meanwhile I have a hard time envisioning what particular valuable and necessary things, in the future, are going to somehow manage to stay as expensive as they are now. So my vague, and yes perhaps naive, hope is that just about everything necessary and useful will ultimately distribute itself downwards. But even that rosy future leaves open what do we do about the way things are right now.
That being said, I’d be very interested to know anything and everything you’ve thought would genuinely help deliver those fruits of growth towards the bottom of the distribution. I haven’t heard much of anything that seems promising- either plausibly feasible or blue-sky – aside from Universal Basic Income.
October 12th, 2013 at 8:00 pm PDT
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Capitalism is always crony capitalism — and socialism tends towards crony socialism! — not because of corrupt bad actors but because human lifestyles are sticky-downward.
———
Every system tends toward cronyism, and every system that survives survives has features to police it.
October 12th, 2013 at 8:06 pm PDT
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I think you’re being a bit too sanguine about the costs of social rigidity in your utilitarian analysis. A happy minority living atop a suppressed majority eventually get murdered by that majority. A key second-order benefit of mobility is long-term survival; a rather important benefit that, I should think, rather does outweigh the alleged first-order benefits.
I don’t buy this. There will be a social hierarchy (there always is) and you’re positing that it be cemented for all time. I’m a strong believer that the human ape gets jealous independent of how well he “knows his place”, and jealousy pushed far enough turns to rage. I do not think the lower 80% will be happier in a static scenario, and that even a remote chance of winning a lottery would be preferable.
I don’t think there is any helpful simple analysis; what you play with here is too simplistic by far. I grew up in poverty, so I have a lot of sympathy for the equality of opportunity idea, and I resent that, having grown up, I now know of many other paths I could have taken when I was younger that would have left me much better off, had I even known of their existence. I was a boy fumbling in a dark room while others had guides that knew the way. But I’m very wary of government using its monopoly on legitimate violence to reshape society. What ought to be cannot be because of what we are made of, an evolved greedy machine.
October 12th, 2013 at 11:49 pm PDT
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The things you’re missing go by names such as “status” and “esteem”; they’re always valuable, scarce by definition, and absolute lack of them leads to suicide or violence.
October 12th, 2013 at 11:52 pm PDT
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Jules Pitt@1, I worry that it is all too easy to imagine a dystopian future where energy, water, food and materials all become unaffordable. There are already billions of people who don’t have the opportunity to make the best use of their potential. I don’t think we should be complacent about the danger that even more people could also end up thwarted, economically excluded, left sitting on the sidelines. The whole world has the tragic potential to adopt the Haitian economic model and at times it seems as though we are hell bent on heading in that direction.
You ask how we could ensure less inequality- I’m taken with the idea of replacing existing taxes with an asset tax – taxing what we own instead of what we do.
October 13th, 2013 at 3:30 am PDT
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[…] at 4:16 on October 13, 2013 by Mark Thoma Sticky Wages and the Macro Wars – Paul Krugman Mobility is no answer to dispersion – interfluidity Abundance & revolution – Stumbling and Mumbling […]
October 13th, 2013 at 4:16 am PDT
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[…] Mobility is no answer to dispersion Interfluidity […]
October 13th, 2013 at 6:56 am PDT
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RE: inequality:
Why does anyone have to EARN their exsistance, anyway? There are
sufficient resources so that there COULD be enough for everyone to at
least have their basic needs met. It is simply a matter of
distribution.
In other words, if we all could just get over our fears about the
ILLUSION of scarcity, we would be able to have utopia.
But what it takes to get over all fears is the replacement of fear with PLAY!
We all need to believe in the value of LIMITLESS PLAY, by turning ALL
work, ALL labor, into play. We CAN do this by getting all the
government, all the bureaucracy, even all the “LAW”(which is really
F/LAW-GUFFAW lol) to be done by ROBOTS and let all the HUMANS (those
who ARE humans, that is, instead of HUMAN-BOTS) play!
Some may say: “I don’t WANT to play!” To these I say, “Can you say
that without the negative? Can you say what you DO want to do, instead
of, or in addition to, what you DON’t want to do?”
All our negativity, and thus all our limitations, (yes even time,space
and gravity, etc.,) may stem from the defensiveness of being
indoctrinated by parents, etc.,to “justify our existence”.
Once we free ourselves from that external,(external-turned-internal0
message we unconsciously, subconsciously tell ourselves, we can begin
to collect LIMITLESS PLAY LIFE (FLOW?) ABSOLUTE EXPERIENCES, instead
of substituting LIMITED AS-IF-LIFE (RELATIVE) PERFORMANCES.
After so many years of just “surviving”, because it took me so long
to undo the negative messages of my youth (namely my mother telling me
repeatedly “I wish I never had you!”) I have finally found
alternatives to living in fear. Now I live in PLAY! I focus on NOW
because that is all I have, though, granted, still, sometimes NOW HAS
ME lol)
I enjoy, I play, I sleep, I eat, I drink, I teach,I write for RSN.ORG.
What I mostly trying to do, is to transcend ALL my identitities, which
IMHO ARE my limitations. If transcending all my identities is
impossible, I will try,(and I am trying) to turn all the STIGMAS of
any and all my identities into FIGMAS of my imagination!
To this end, I am trying to entrepreneurally innovate a new kind of
economy, where PLAY becomes currency, a NATURAL RESOURCE, a commodity
that will be seen as equivalent, or even superior, to money, gold,
oil, etc.,
Just imagine, play, and imaginative play at that, as an alternative to
the necessity to EARN the right to exist, so we all get to “PAY” for
our existence with PLAY “currency”!
Let’s all be like children, and let the robots “be” the “AUTHORITIES”!
This can all be accomplished through CLASSICAL TECHNOLOGY! We have the
ability to do this, so LET”S PLAY LIFE, NOW!
October 13th, 2013 at 7:50 am PDT
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Is SRW somehow coming round to a view like mine – a view that no matter *what* constructions are made, the elite will arrange for advantage for themselves and their children? You might change who the elite are, but not the per force fact that there will be “an elite.”
An oppressed majority murdering a minority doesn’t seem to ever produce a more even social structure, rather, it just produces a different elite minority.
One must remember, that regardless how horrified one may be at awful circumstances somewhere, the real world is driven by various selection functions (natural selection being the most famous, but various laws of physics applying as well.) These functions mean that there will, by definition be a top and a bottom, and over time basically everbody must “contribute” to the ecosystem, or find themselves in rather difficult circumstances, by at least some measure.
You can change the scoring, you can’t change the reality of inequality, and can have relatively little effect on its scale. Better to focus on the absolute physical reality of the masses, for the sake of civil order.
October 13th, 2013 at 3:04 pm PDT
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And here’s a thought to keep people awake at night.
Suppose that quality of parenting, quality of schooling, quality of opportunity, were arranged to be very nearly equal. And then it turned out that status by whatever measure was either (a) totally random and most people have unremarkable status or (b) largely determined by genetics and most people have unremarkable status. Now what do you do?
Reprogram hummanity so that “status” is always equal? Could that be done? Will the society that resulted actually function? On a global basis?
October 13th, 2013 at 3:13 pm PDT
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”
“status” is always equal? Could that be done? Will the society that resulted actually function? On a global basis?
”
Some organizations have greater need for a “chain of command”, a hierarchy if you will. Others function well with a sort of status churning. Major league baseball is a constant churning of the ratings, but the US Army runs strictly by the chain. Could we eliminate a substantial chunk of power purchase? Eliminate the use of power to liberate funds for one’s self? Power from cash? Cash from power? Break the chain of power > money > power? Such mechanisms are inefficient, wasteful. Banks buying lobbyists — lobbyists buying legislators — Do the indigent also waste resources? By overpopulating?
One abortion today could prevent 4 abortions in 22 years but 16 abortions in 44 years. Over time the benefit is compounded. Abortions have ROI, return on investment. The wealthy need to help the poor with their attempts at population control. Help the poor with their education, By definition, half the people in the World live on less than the median income, a salary of $1.49 per day. We could be doing lot and lot more for them. We shall whenever CP, congressional personnel stop gobbling up our profits, whenever CP allows us to get our heads above water.
Hope for the better
!
October 14th, 2013 at 12:40 am PDT
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Inequality isn’t an ex-machina, first-order economic distortion it’s a first-order economic reality. So, if anything it’s the opposite of the case for patents/copyrights.
October 14th, 2013 at 12:32 pm PDT
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My problem with mobility isn’t that it sucks for the people on top who might not stay there, it’s that what might have been is no consolation for whoever it is that ends up on the bottom. When I hear someone say that equality of opportunity is what matters, not equality of outcomes, I think of the game Monopoly. Its economy is designed to funnel money into fewer and fewer hands until one person is crazy rich and everyone else is broke. But everyone starts with the same chance at becoming rich. We would be very lucky to have an economy with the equality of opportunity of the game of Monopoly. But we wouldn’t be lucky to have that economy. I don’t think an economy full of poverty with a handful of billionaires could ever be a good one, even if we could plausibly the poor that they could have been the billionaires and that their children have as much shot as anyone at being the next billionaires (very little).
October 15th, 2013 at 1:10 am PDT
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[…] Mobility Is No Answer to Dispersion Steve Randy Waldman, Interfluidity […]
October 15th, 2013 at 9:00 am PDT
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[…] Mobility Is No Answer to Dispersion Steve Randy Waldman, Interfluidity […]
October 15th, 2013 at 1:21 pm PDT
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The problem with all of this – the blog itself and the dialog through at least #14 – is that it presumes a linear mobility: people go up, down, or stay where they are along a single line, presumably measured by money. That’s ridiculous. We have multiple measures of multiple options, and it’s only fools who measure mobility ONLY by cash-on-hand. For that matter it is usually foolish rich folk who measure mobility by money in any sense. Mobility, as only Barry Kelly even implies, has multiple measures: Is Gates more “powerful” than the Pope? To some, for sure, but to others just as surely not.
This whole dialog bespeaks the naive presumption that “the market” exists in some concrete reality: ownership, money, and even power are social constructs with serious cultural baggage. Some cultures have no concept of “ownership,” and others make religion a life and death passion. Those who flew into the World Trade Center, for example, had no interest at all in any kind of mobility other than faith. I was brought up in one of the wealthiest communities in the wealthiest country on the planet, have, in effect and in fact, been “downwardly mobile” for over 50 years, yet have plenty far to go before encountering despair. In a word, “Chill.”
October 15th, 2013 at 8:20 pm PDT
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[…] Interesting: […]
October 16th, 2013 at 12:00 am PDT
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