Quote of the day: Amartya Sen on inequality

By Matt Nolan 05/09/2013

I am currently reading “Inequality Reexamined” by Amartya Sen, as I’ve never read his books – only his papers.  This suits my current binge reading of inequality, income distribution, and methodology of economics and econometrics books I’m trying to read (albeit too slowly for my own liking).

Anyway, the prologue immediately neatly summarises a point worth noting.  I was reading a little way into the book, and decided that the stuff in the prologue served as a neat “taster” and that I wanted to share it.  So here we go!

The central question in the analysis and assessment of inequality is, I argue here, ‘equality of what?’

Not only do income-egalitarians (if I may call them that) demand equal incomes, and welfare-egalitarians ask for equal welfare levels, but also classic utilitarians insist on equal weights on the utilities of all, and pure libertarians demand equality with respect to an entire class of rights and liberties.  They are all ‘egalitarians’ in some essential way.

This is incredibly true, and put more succinctly than I ever could have imagined!  Everyone, especially those who are more extreme in any given “political dimension” cares about equality of something – and the underlying reason why there are trade-offs stems from (as Sen discusses in the book) the heterogeneity of individuals!

This is a beautiful point.  And it reinforces, in my mind, why I am fatigued from seeing people claim the ‘labels’ of freedom, social capital, and egalitarianism.  Instead we should be honestly discussing our views on what is morally important and what trade-offs exist.

For many people out there writing on blogs and tweeting they are certain that their argument is what is essentially morally right – but I argue that you have a moral obligation to try and view your opponents argument in the best possible light, and to figure out why you differ.  Virtually no-one out there is supporting things which they believe are “unfair”, and by forcing yourself to understand their argument you learn more about your own views.

We all want and desire to help make the world a better place.  But we only do this by reaching some form of moral consensus between us, and a relative willingness to admit and deal with trade-offs – not by labeling people who disagree with our judgments as something relatively meaningless (neo-liberal, communist, Nazi) and ignoring their views.  Instead of labeling ourselves as focused solely on the basis of one factor we likely can’t explain (such as inequality, levels of social capital, or productivity – note that even highly trained economists can only give conditional statement, covered in caveats, about these issues) why not admit where your current focus on equality lies so we can have a data and theory based conversation of the costs and benefits that are part of that!  Who knows, such an experience may change your mind, or may change the views of those you are discussing the issue with.

An over-willingness to “fight the fight” instead of critically analysing our views merely makes us tools to the madness of popular ideology.  And remember, the intention of our ideas is not what is important, the likely outcome on people is what matters.

Note:  Some may view the above link to Noah Smith’s blog and see themselves more like Krugman.  You are not, and have not researched these issues in enough detail to be able to justify the Krugmanesque style of arguing.  No-one in New Zealand has analysed these issues in the same sort of detail we get overseas – and the general data work I have seen has been significantly different from what people are saying.  Furthermore, even when Krugman discusses this issue instead of macro I would argue he is less on the direct attack and more talking about considering equity (here and here).

For example, in NZ we can’t say that the current focus is inequality is self-evidently true – from where I’m standing the obsession with ‘inequality’ is very much the wrong one. As a starting point our data is very different from the US, and the policy solutions being touted aren’t necessarily consistent with why we may care!

The real issue I’ve heard about in terms of endemic poverty often has to do with education, social stratification for specific migrant groups, and the oft ignored issue of mental illness.  Saying we need to ship more funds to the middle classes to get our inequality measures down because it will “somehow” help these guys might sound grand to NZ’s large middle class – but it is so far away from dealing with real issues that I have to bite my tongue in conversations to ensure they remain civil … the only “problem” we seem to be directly targeting with such transfers is that the middle classes want more stuff, and this isn’t really a problem in my mind but a typical example of Director’s Law in action.

Also, what is with all the 1950′s-1970′s nostalgia I’m hearing from people – yeah it must be really disappointing having always functioning power, modern computers and appliances, less sexism, less racism, an acceptance of alternative lifestyle choices … could this nostalgia all be rose tinted glasses?

And if anyone asks, I haven’t watched the Mind the Gap show yet – I will watch and write about when I get a chance.  This is more responses to the strange lines of questioning I’ve been getting over the last week.  For example, people saying things to me about how the middle third of the income distribution pays 70% of the tax … which they don’t (eg here and here).  I noted that the actual tax figures can be taken a bit far if we don’t take into account price changes, but we need a pretty extreme view of price changes to get this result … one which would suggest redistribution is incredibly costly by the way.

However, if the claims made in this review are true (including its focus on the Spirit Level which I found to be an incoherent mess) then I suspect my comments on the show are not going to be positive.  I will keep this in mind and try to be as balanced as possible – as my issues with the Spirit Level were about factual and data issues, not about the idea of redistribution in of itself (which is societies choice not mine).

To bring this back to the point of the post – Sen’s comments suggest we need to think more carefully about what it is we actually value before demanding policy achieves it.  I think this is a necessity – and when it comes to issues as diverse as inequality and productivity, this is exactly what our Treasury department (and associated government departments such as MBIE, the Productivity Commission, and MSD) are trying to do.  If we want to be informed, the best thing to do is to keep an eye on all the work they are providing where they try to objectively discuss trade-offs – then armed with that you should tell people what you think … and just try to remember society as a whole may disagree with you, just as it does with me :)