28 November 2012

Does complaining about inequality harm people by making them feel more unequal?

EconLog | Garett Jones | How do you Sustain the Second Freest Economy in the World?

In an excellent Singapore econ-travelogue, Scott Sumner writes:
My theory is that leftists don't really mind a place where income is unequal, they don't like places where income looks unequal.
If this is a good theory, then leftists should spend much more time praising the pro-consumer side of capitalism. I wish I saw more pieces like Sebastian Mallaby's recent WaPo column "Progressive Walmart. Really."*

(* One very, very minor criticism of Mallaby's piece. His conclusion begins "Companies like Wal-Mart are not run by saints." He is right. But I wish he would have mentioned that no organization is run by saints. Not Walmart, not PIRG, not the AFL-CIO, not the USPS, not your local school board, not the Red Cross, not the the Boy Scouts, not the Church. None of them.)

If Sumner's theory is correct, we should also see leftists embracing studies which show inflation measures overestimate prices paid by low income people. Instead I tend to see the mood affiliation running the opposite direction.

They may in fact prefer societies in which income is unequal but looks equal, but in my experience they wish to talk about society as if it were even more unequal than it is. Doing so gives them more political ammunition for their favored reforms.

Jones links Sumner to Mickey Kaus:
This is close to what pioneering blogger Mickey Kaus has been pushing for since, oh, the invention of the New Democrats. I've never read his 1992 book The End of Equality, but after 13 years of reading Kausfiles I think I've got the main idea: Higher income inequality is inevitable, let's get used to it and let's respond by increasing civic equality, social equality. His idea is to tinker with the state so that people feel equal in civic life even if money inequality is high.
If we wanted to pursue this, it should be people most concerned about inequality who push all the statistics about money not mattering much in elections. Instead we see the opposite. A leftist following Kaus' playbook should be downplaying the effects of Citizens United, not screaming about the "end of democracy."

I think it also agitates for de-coupling housing purchases from education spending, (ie school choice) since doing so would increase social equality without affecting income equality. (At least not for a generation or more, and even then would do it without redistribution.) Again, we see the opposite from most of the Left. Is this because they disagree with Kaus, or because they are more concerned with the minor inequality experienced by unionized school employees than the major inequality experienced by poor students?

Returning to Jones:
Here's a sentence Kaus likes from Reagan's 1992 GOP convention address:
Whether we come from poverty or wealth... we are all equal in the eyes of God. But as Americans that is not enough — we must be equal in the eyes of each other.
This is an essentially meaningless quote, because it can mean completely contradictory things based on how we choose to define "equal."

I suspect this is precisely why it appealed to Reagan. If you read what follows in his speech, it's all inspirational pablum. 'Crime is bad! Education is good!' The only actual policies he calls for are a balanced budget amendment and a line item veto. Otherwise it's just 'Hooray for Freedom! Hooray for Prosperity! Hooray for America!'

It is the cheap cloth, the cheap cotton and rayon fabric, boots, motorcars and so on that are the typical achievements of capitalist production, and not as a rule improvements that would mean much to the rich man. Queen Elisabeth owed silk stockings. The capitalist achievement does not typically consists in providing more silk stockings for queens but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort.
— Joseph Schumpeter, Capitalism, Socialism and Democracy (1950)

What's great about this country is that America started the tradition where the richest consumers buy essentially the same things as the poorest. You can be watching TV and see Coca-Cola, and you know that the President drinks Coke, Liz Taylor drinks Coke, and just think, you can drink Coke, too. A Coke is a Coke and no amount of money can get you a better Coke than the one the bum on the corner is drinking. All the Cokes are the same and all the Cokes are good. Liz Taylor knows it, the President knows it, the bum knows it, and you know it.
— Andy Warhol
I'd like to see much more emphasis on consumption inequality than on income inequality. Warhol was no reactionary. Neither was Schumpeter, for that matter. They both managed to recognize how markets can help everyone, not just the rich. I wish more people recognized that, not just because it's the truth, but because like Sumner and Kaus say, it would make for a healthier, less envious society.

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