Wednesday, October 05, 2016

Empathy and the social contract

First, read the following excerpt:
It is impossible to imagine Bill Gates’s wealth without Bill Gates’s ingenuity and effort. But it is far easier to imagine Bill Gates’s wealth being produced by someone other than Bill Gates within the institutions of modern American economic society than it is to imagine Bill Gates generating Bill Gates’s wealth in a different time and place – in France in the 1700s, or in the Central African Republic today – in which society was or is less tolerant of entrepreneurial capitalism and the accumulation of personal billions, and where the community of engineers that gave rise to and became America’s tech sector is absent. Indeed, at some point in Microsoft’s history it was Microsoft the information-processing organism that was more critical to Bill Gates’s wealth accumulation than Bill Gates himself. People, essentially, do not create their own fortunes. They inherit them, come to them through the occupation of some state-protected niche, or, if they are very brilliant and very lucky, through infusing a particular group of men and women with the germ of an idea, which, in time and with just the right environment, allows that group to evolve into an organism suited to the creation of economic value, a very large chunk of which the founder can then capture for himself.
That paragraph can easily be used as some kind of an ideological  Rorschach test.  Upon reading that, one can get pissed off and defend Gates's gazillions, or one might applaud in agreement that Gates has been unfairly hogging it all, or ... whatever.

To me, what makes that paragraph standout is this: The author, Ryan Avent, is senior editor and economics columnist at The Economist.  You might remember him from one of my earlier posts?  One of the many reasons why I have been a long-time reader of the Economist is this: It is not an ideological outfit.  It is not like the Nation or the Wall Street Journal.  There is a sensibility that reflects a much broader understanding, which Avent also displays in his essay.

In the essay from which I had excerpted that paragraph, Avent makes an argument that will certainly make one sit up:
The wealth of humans is societal. But the distribution of that wealth doesn’t rest on markets or on social perceptions of who deserves what but on the ability of the powerful to use their power to retain whatever of the value society generates that they can.
His follow-up sentence?  "That is not a radical statement."

After quoting Adam Smith and the wonderful advantages of trade and specialization, Avent writes:
Secure in the knowledge that societal growth would not reduce redistribution (and could indeed increase the value available for redistribution by increasing global output) the incentive to draw the borders of society tightly would be curtailed. The challenge, of course, is to create the broad social interest in an encompassing redistribution. How to do that?
Isn't that the challenge that I have been struggling with all my adult life!  How do we create the broad social interest in redistribution that is needed along with the open borders, trade, and specialization?  How do we develop a social contract that will include redistribution, which the ideologues from the right hate, while also allowing for free trade that the ideologues from the left hate?

Avent writes that Adam Smith the philosopher wrote about that too.  "The force of human empathy can be made to serve either openness or societal mercantilism."  Here again the problem is that we are far more empathetic to people like us, but not towards people completely unlike us.  We conveniently forget that deep down we are all humans, but only view each other through nationalistic or religious or ethnic, or whatever divisive lens we want to use.
There is a better answer available: that to be ‘like us’ is to be human. That to be human is to earn the right to share in the wealth generated by the productive social institutions that have evolved and the knowledge that has been generated, to which someone born in a slum in Dhaka is every bit the rightful heir as someone born to great wealth in Palo Alto or Belgravia. ...
Rich societies can find ways to justify their great wealth relative to others: their members can tell themselves stories about the great things they did that others could not have done that made them wealthy beyond imagination. Alternatively, they could recognize the wild contingency of their wealth, cultivate human empathy, and do what they can to extend the wealth of humans to everyone.
If only we had more empathy.  If only we spent at least as much time thinking about what it means to be human as we spend on entertaining ourselves.  If only ...


Ramesh said...

A rich post full of ideas that can be thought about and debated.

I understand the comment about Bill Gates but will not necessarily agree with the rather sweeping implication that it is morally wrong for all that wealth to go to him. Of course all employees in a company contribute to the wealth creation that the company does. But Bill Gates in his capacity as a shareholder certainly deserves the wealth. In any case, whichever side of the argument anybody is in, it is far better for Bill Gates to have got that wealth than anybody else.

You and I have significantly different views on redistribution of income or wealth. And it is not necessarily correlated with empathy or concern for fellow humans. India has become one of the more redistributive societies , especially over the last 10 years. A number of programmes of the government redistribute on a scale that would stun you as compared to even a decade ago. And yet greater prosperity for many Indians has come not from the redistribution at all, but from wealth generation.

I also have significant problems with the relative needs of different groups when it comes to redistribution. I am completely against redistribution to the elderly, which is what a lot of programs are - defined benefit pension, unlimited Medicare / NHS , etc. I am totally for redistribution to children - subsidised education for example. Your views on who wealth must be redistributed to will be very different. In the end, each group will vociferously demand its rights for being the beneficiary. How do you ever resolve this.

I totally endorse your view that redrawing the borders to encompass all of the human race. The "like us" syndrome is very real.
And yes, you are right in that all of us should think about this more. But that doesn't mean that we should not watch basketball either. Or read Nabokov !!! To each his own poison :)

Sriram Khé said...

First a correction: I never wrote that one should stop watching basketball--2 hours of entertainment should be matched by 2 hours of thinking about what it means to be human ;) "If only we spent at least as much time thinking about what it means to be human as we spend on entertaining ourselves" is what I had written.

Second, another correction: Basketball is poison, yes. Not Nabokov. ;)

As for what is an appropriate level of redistribution ... we will always disagree. The good thing about you (haha) is that you at least acknowledge the need for redistribution, and it is in the "how much" that we disagree.

Finally, I am not a fan of redistribution to the elderly either. We agree on that. The existing social contract that diverts so much of its resources towards the older folks and away from the investment that we need to make on the young is a huge intergenerational theft and a crime. But, unless the youth revolt--which they won't--the elderly will continue to suck the system dry. In a matter of few years, I too will become one of the older people pushing my walker and yelling "keep your hands off my Medicare" ;)

Anne in Salem said...

Why redistribute? Perhaps I need better understanding of redistribution. If a person earns a lot of money, why should he not be allowed to keep it? Just because his parents were rich or because he was able to afford Harvard? He should be penalized for having a brilliant idea and working hard for many years? If a person works hard, spends wisely and saves carefully, he should be allowed to keep whatever money he generates. Notice I am not addressing inherited wealth.

Is philanthropy part of wealth redistribution? Is the Gates Foundation's support of educational initiatives similar to subsidizing education for youth? Does the anti-malaria campaign play a part in redistribution? What about more immediate needs of those to whom you (I suppose) wish to redistribute the wealth - contributions to food banks, homeless shelters, job training programs?

We have a moral obligation to care for each other. Handouts are not the way. There is so little dignity in welfare when compared to the satisfaction of a full day's work and wages earned.

Sriram Khé said...

When you come at it questioning the very need for redistribution, all I can do is merely re-direct you to the essay from which I had excerpted all that.

Anne in Salem said...

I have read the article in full and haven't changed my opinion.

If a person works hard and is rewarded as such, why must he be forced to hand over more of his hard-earned money? He already pays income taxes, payroll taxes perhaps, other business taxes perhaps, property taxes, etc. He gives raises and bonuses as well as medical insurance and other benefits to his employees. He undoubtedly donates to a variety of charities. He is already redistributing his wealth. He is already contributing to society.

Avent says that since all people contribute to rich societies all people deserve a share of the benefits. Fallacy. Not all people contribute; some are parasites and deserve to be poor (contrary Avent's later statement). They do not deserve a share of any benefits if they are not willing to contribute.

Regardless of his level of contribution to society, every American already shares in the benefits of that society. Every American can attend school through 12th grade at no cost. If he does well, he can attend community college for free. They have police and fire departments, safe interstate transportation, safe food and medicines, a fair justice system, a military for protection, etc. They have a ridiculously generous unemployment program. There is Social Security and Medicare (we hope) when they are older. Isn't this sharing in the benefits of a rich society?

All people, rich or poor, have an obligation to care for everyone else. It is not the government's job to force citizen to do so or to define in what ways and to what level.

Sriram Khé said...

I will concede this much--you have articulated your version of the social contract between the society and the individual.

I want to get back to the example that Avent uses. Bill Gates has made gazillions. Could Gates have amassed that wealth if he were in the Central African Republic? The answer is easy--he could not have. Could Gates have made it that big back 200 years ago in France. He could not have.
Which means, there is something special about the very specific time period over which Gates was able to make his gazillions. Are we in agreement until now?

The question then is how much Gates owes society for the special circumstances in which all these were possible.

Bill Gates, his wife, and to Warren Buffett, have all made it abundantly clear--through their interviews and speeches over the years--that they fully recognize how lucky they were to have been in this special circumstances that made possible their gazillionaire status. Buffett refers to even being born in the USA as having won the "ovarian lottery." In addition to their humanitarian views, this is also a reason for them to turn almost all of their wealth over to the foundation that then spends it on various domestic and international projects.

My point is this: We might want to believe that it is our hard work that earned us what we have, and it the lazy people who don't. All one needs is to travel to developing countries where people work incredibly harder than most Americans do. Yet, their earnings are peanuts compared to here. They are poor, or poorer, not because they are lazy but because they are working in circumstances that are very different from the circumstances in which Gates's gazillions could happen.

Now, perhaps you are ready with, "if Gates could make it, then people from his age could have also made it." A simple example would suffice here: The context in which a young teenage black boy grew up in Alabama were very different from the context in which the teenage Gates grew up. It is almost like the teenage boy in Alabama was in a different country altogether. Heck even the teenage white boy in Spokane would have been in a "foreign" country compared to Gates's context.

We can keep building scenarios like this. It is not as simple as you make it out to be, at least in your comments. After all, even all public schools are not created equally, which is why parents even try devious tricks to get their kids to a better public school in the same city, right?

At the end of the day, we perhaps will disagree, whether we are parasites or not.

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