Tuesday, July 02, 2013

We care about fellow-Americans and not about Indians or Ethiopians because ...?

One of the serious essays that I read after the Costa Rica trip was this essay by Greg Mankiw, in which he lays out his defense of the one-percent.  I am surprised not with his wanting to defend the one-percent--after all, he has always been in the Bush and Romney camps--but with the approach that he took.  Mankiw seemed to offering a kind of unsophisticated moral and political philosophy interpretation that might be expected only from half-baked pseudo-intellectuals like this blogger!

I wouldn't be as harsh as Jonathan Chait, but I am on his side when he writes:
Mankiw — perhaps admirably, or at least bravely — ventures completely outside his area of expertise, economics, into moral philosophy. The result is — well, there’s no other way to put it. It’s an embarrassing piece of ignorant tripe.
Yet, I admire Mankiw for admitting, for acknowledging, that debates and discussions on income distribution in society cannot be simply resolved via econometrics:
fundamentally normative conclusions cannot rest on positive economics alone. 
If only economists would make this clear to the public every single time they convey their research findings.  If only they would stop claiming that economics is a science that can help in public policy decisionmaking! If only Mankiw himself would recite it every time.

And, yes to Mankiw when he makes clear up front:
At the outset, it is worth noting that addressing the issue of rising inequality necessarily involves not just economics but also a healthy dose of political philosophy. We economists  must recognize not only the limits of what we know about inequality’s causes, but also the limits  on the ability of our discipline to prescribe policy responses. Economists who discuss policy  responses to increasing inequality are often playing the role of amateur political philosopher (and, 3 admittedly, I will do so in this essay). Given the topic, that is perhaps inevitable. But it is useful to keep in mind when we are writing as economists and when we are venturing beyond the boundaries of our professional expertise. 
Give the man his due, I say, for stating that loudly and clearly.  We can then at least agree that income distribution discussions come down to how much we are able to persuade the audience.  Can we convince them that our way of thinking about it is correct?  Econometrics is only as good or as bad a tool as simple rhetoric can be.  Yes, I am channeling D. McKloskey here.

Anyway, in that essay, Mankiw writes:
Some of the largest income disparities are observed between nations. If a national system of taxes and transfers is designed to move resources from Palm Beach, Florida, to Detroit, Michigan, shouldn’t a similar  international system move resources from the United States and Western Europe to sub-Saharan  Africa? Many economists do support increased foreign aid, but as far as I know, no one has  proposed marginal tax rates on rich nations as high as the marginal tax rates imposed on rich  individuals. Our reluctance to apply utilitarianism at the global level should give us pause when  applying it at the national level.
Exactly. We are ok with California and New York sending in more dollars to DC in taxes than they get back from Congress.  Alabama or Mississippi are examples at the other end--they get more from DC than they remit as taxes.  Such national-level redistribution is considered acceptable, but not if we extend the courtesy to Ethiopia.  Even though Ethiopians are immensely poorer than the poorest in Alabama.

The tribal behaviors of the past, when humans helped out only their group are understandable.  But, we now live in a world in which people effortlessly seem to take on new identities.  I am an American citizen who came from elsewhere.  This entire country is full of such narratives; if not first-hand, then one only needs to go back a few generations to find out where the people came from--with the exception of the Native Americans, who are now a minority in their original lands.  Yet, we so easily defend not caring about the rest of the world even when we are ok with massive internal income distribution, to individuals and geographic areas alike.

It is so arbitrary a line that we draw, a political boundary. We then defend it with words and with guns. We then even claim that Indians and Chinese are taking away "our" jobs, as if "we" are the only ones entitled to those jobs and incomes.  But, really, do "they" not bleed when pricked? If tickled, do they not laugh?  If poisoned, do they not die?

So, yes, income inequality and redistributing incomes and wealth really does come down to our own versions of moral philosophy and how we justify them.

We use our own yardsticks to continue to define and re-define the tribes to which we belong and we want to make clear the us-versus-them distinctions.  Income inequality is merely one such example in which we demonstrate this tribalism.

We humans are a very strange life form on this planet.


Ramesh said...

Of course its also about moral philosophy. No discipline, and economics is no exception, can claim to have a monopoly in dictating public philosophy.

The left has always had an obsession about income inequality. I submit that frankly it does not matter and should actually find a very small place in public policy, but with one big rider.

If income inequality arises from illegal or immoral behavior, from corruption, from rent seeking, etc etc, then I am all for a heavy handed societal and government approach to it. If not, public policy should let it be and not meddle.

I believe public policy should restrain itself to ensuring a minimum safety net for all - nobody should starve, they should have something to wear, should have basic medical care. This can easily be achieved by prevailing levels of taxation.

Beyond that public policy should restrict itself to giving as much opportunity to everybody as possible - lots of investment in education. After that, it is an unequal world. Luck, genetics, and all sorts of considerations play in your ultimate success. Equality is an utopian dream. It is impossible to achieve.

There is an example that I am quoting ad nauseum in this debate - China. In China there is great anger at public officials who have garnered riches through corruption, But there is little envy of successful businessmen or professionals who have become rich. They are more looked upon as role models as everybody aspires to get rich.

So facilitate economic growth and advancement. Provide a basic safety net for everybody (which does not include free birth control pills). That's the best societies, and governments, can do.

Sriram Khé said...

But, even within what you suggest, tough questions come up:
1. Why is a basic safety net ok for my fellow-countrymen but not for others?
2. What should the basic safety net look like?
3. When Brankovic notes with data that citizenship (the country we are born in) and the family in which we are born into pretty much are the income determinants, then what role does society have in equalizing opportunties? BTW, did you watch the video? His book is awesome, with an interesting format of vignettes--the way I like them.

We can ask more and more questions. When people are asked in simple language, it turns out that they end up preferring a lot more progressive policies than we have ever had in the US. Even about the external kind of income distribution--foreign aid. Surveys repeatedly show that when asked what percentage of the federal budget should be spent on foreign aid, respondents come up with percentages far higher than what is in place.

In other words, even the minimal framework you propose, if left to the people, will actually be a lot more generous than what we have.

But, we have strong lobbies creating a rent-seeking environment from which they benefit and they convince most of the Johns and Janes that anything else will be worse for the Johns and Janes. The insane military allocation is one such example.

So, it is a tough discussion for which we need engaged and thinking citizenry. That won't happen as long as people are, ahem, watching ball games all the time, and entertaining themselves to death.

BTW, you feel so strongly against income redistrubtion and yet found Charles Murray's comments offensive? ;)

Ramesh said...

Oh, this is a debate after my heart and if you are so inclinded, perhaps we can bandy words for a couple of comments more.

Without a doubt, I am on your camp in the America vs Ethipia debate. So no argument there.

Basic safety net is what I described. Nobody starves. Nobody goes naked and there is basic healthcare (we can debate what is basic, but in my book nobody dies on the street without care by a medical professional). After that it is optional based on the society you live in - the French will always define it much higher and the Americans not that much higher.

Sure, the luck of the draw on your birth is the biggest determinant. But I am a big proponent of good, low cost education for all. I am myself a beneficiary of that - we weren't born into rich families or privileged positions - but what we got was good cheap education; neither me nor my parents went into debt to fund my education. That is what has given me the opportunities in life that I have had.

Well, I am watching ball games aplenty and , with some stretch of imagination, entertaining myself to death, but I am also doing something. I am debating with you :):):)

There is a difference between being against income distribution and being heartless. Showing a finger against somebody down and out , for me, deserves a kick.

Sriram Khé said...

My point in bringing up Murray was this: the discussion comes down to where to draw that line. Along a continuum, you don't want to be where Murray is, and want the safety net a little higher and stronger. I want it a tad more higher and stronger than what you propose. And thus the continuum extends all the way to a Democratic position to a French one to a Greek one to ...

Now, why would Murray be wrong and you right? Why not the other war around? Why not the Democratic Party position and not yours? In reality, there is no way we can convince all that where we draw the line is the correct approach.

Income inequality, according to some researchers, is worse in China than even in the US. In fact, I think even Milanovic had some data on that. Obviously you are a supporter of that model. Will I want to live in that society? Hell no. And that is not because of income inequality either. I.e., we have to contextualize income inequality against some of the larger sociopolitical issues.

Even the education thing you mention is not anywhere near the equalizer of opportunity that we think it might be. You and I lucked out because we went to school in Neyveli. If we had been in school in some economically backward district in TN, our stories might have been very differnt. As I have mentioned often in my blog, as a kid I was shocked at how awful some of the schools were compared to our JHSS. We were in a highly privileged setting, on top of being born into a privileged Brahmin class. Yes, you and I didn't waste the opportunties that came our way within these, but we can't casually ignore the contexts within which we grew up.

Here in the US, public schools can be awful in exactly the areas where they will benefit from great teachers and great facilities. And public schools are awesome in affluent middle and upper class neighborhoods.

Here is another way to think about this:
On an average, "you are better off being born rich regardless of whether you go to college than being born poor and getting a college degree."

Now, I don't have anything to propose as a framework at all. Because, I am convinced that there is no correct answer to this and we can only come up with an answer that we are comfortable to live with. All I know is that I don't what to be aligned with Murray's position, nor with the French/Greek/old Soviet models. As logn as we democratically develop an answer that is somewhere in the middle of this continuum, well, so be it.

So, there ... that is my rejoinder. The ball is now in your court, you ballgame watcher ;)

Ramesh said...

Ah; I can't let you get away with that; so more bandying about until I pick up harassing you on another post :)

You can't chicken out of defining your place in your "continuum". State your position and defend it Khe ! Arguing for "democratically devloping an answer that is somewhere in the middle" is a cop out.

And I don't believe we were "privileged" in Neyveli. We didn't own an automobile, we had no "vacations", our families stretched things on the 25th of the month although they would never show us that, and we were not at Presentation Convent (your favourite school !). Yes you can always find somebody in a worse position and claim privilege, but by any abolosute standard of that day, we were not so. Sure Jawahar was a good school and we got lucky, but most of our mates from NLC Boys High School have done very well too. It was all due to education and the fact that it was cheap - we did not start life with debt.

Nothing will erase the luck factor - if I had been born as the Chairman's son, sure I might have been better off. But I am not too badly off now, and that is entirely due, after lots of luck, to education.

By the way I didn't watch any ball yesterday. These days I am cycling along with the Tour de France everyday. I would highly recommend this to good Professors of Geography !!

Sriram Khé said...

Seriously, watching cycling? What is the excitement in watching a bunch of cycles going round a curve or up a hill? I have the same question about Indy 500 too ... I mean, watching the paint dry will be more exciting, I think. Or watching the lawn grow. Or, ... ;)

You and I are not far off in our respective positions on income redistribution, nor on our personal stories. For example, in Neyveli, we didn't have a fridge at home. I could not understand how we didn't have the money for it when so many other classmates had one at home. I clearly remember lying, when in class VII or VII, to my classmate, Sridhar, about the awesome camera my father had at home, when in reality there was no camera at home. I always felt bad for my father when as a senior engineer in town, his vehicle was no different from mine--a bicycle. It was always hysterically funny when as a family we sat down to do the accounts--we kids had the task of counting the rupees and paise, while the parents itemized all the expenses and balanced the books to the paisa. Sometimes they spent quite a few minutes trying to figure out the missing expense. And it would end up as a "miscellaneous." Very, very tight budget those days, yes. A couple of years ago, I scanned through a couple of those family account ledgers at home. Was wonderful to be reminded of those days.

Now, all we three siblings are, in comparison, living the life of kings and queens. Not because we won the lottery or married into wealth either.

The difference between your position and mine on redistribution is that I remain convinced about the privilege with which I grew up. In those contexts, we picked up a number of traits that helped us with navigating the world and becoming who we are.

At the unversity where I teach, I see students coming from successful middle class background, and those coming from less fortunate circumstances. From families with college experience versus those without. The differences are huge.

I don't see myself as chickening out when I don't define my place in that continuum. I truly believe that in a self-governing society, that place will be something that has to be worked out as a compromise. (In China, as a contrast, it is not anywhere near a self-governing society that the US is, or even India is. ) And, I don't care about any one position over another. Perhaps also because right from when I was a kid, earning money never mattered to me, and I was confident that I would be able to get just about what I might like to have. So, sorry bud, there is no rule that I can propose here ;)

BTW, what was that about Presentation Convent as my favorite? When I was a JHSS lifer!!!! When all three siblings were only at JHSS!!!!! I think watching the cyclists go round the bend made you dizzy and you ..... muahahaha
Convent School?????????

Ramesh said...

Watch it my friend. Cycling is not like Indy 500. Watcing the breakaway get reeled in by the peloton, the sprinters organising their trains, the lead in, the peel aways and the final burst at 70 kmph (yes 70 kmph on a cycle ). Its an incredible sport. And good for geography lessons - the land of France has some claim to being amongst the most beautiful in the world.

Willing to go with your not proposing a rule. Loved the debate - you are one of the few people with whom a rational debate is even possible and at the end of which you feel good and energised. Hopefully you feel the same too.

You were the one who referred to Presentation Convent a few posts ago. I know you fell in love with all the pretty girsl there - so you can't slide easily over that one :)

Sriram Khé said...

Oh well, if watching cycling makes you happy, go for it. You have an inalienable right to pursue happiness that does not infringe on my right to happiness ;)

Yes, enjoyed the discussions. Too bad you live far away. If not, we can have coffees and dinners and talk about a whole bunch of things ...

Hey, are you referring to my post where I mentioned Church Park? Ah, now it all makes sense. BTW, our school had quite a few pretty girls ... so, why would I have even wanted to look elsewhere? (And I didn't!!!)

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