Arnold Kling  

An Envy Tax?

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The Economics and Philosophy o... Resolving the Sibling Paradox...

Catching up on a week's worth of blog reading, the best thing I missed appears to be this post by Will Wilkinson.


Richard Layard points out that one's perceived position in the income distribution is a better predictor of self-reported well-being than one's absolute income level, given that a certain minimum income threshold has been reached. So, every time you move up in relative income, someone else moves down. This makes you happier, but makes everyone with a diminished relative position less happy, even though their absolute income has not changed, or may even have increased, but less than yours.

Layard interprets your gain in relative position as a straightforward negative externality -- in the book he actually calls it "pollution" -- and prescribes a straightforward Pigovian tax to minimize its harm.

...Consider the Jim Crow American South, or apartheid South Africa. Suppose it was the case that any increase in income among blacks leads to a reduction in self-reported subjective well-being among whites, a reduction that totally swamps the utility gain to blacks. Suppose further that a reduction in income among blacks causes a increase in "happiness" among whites that totally swamps the utility loss to blacks. If "we should set our other policy instruments at whatever level is optimal for the state of mind which currently prevails," then it is pretty obvious that an immiserating tax on blacks is optimal for the state of mind that prevails. Racist oppression is obligatory.


I like the point that taxing Jones merely to make Smith feel better puts you on quite a slippery slope, since there are any number of reasons for which Smith may resent Jones.

But Wilkinson's post says quite a bit more. Read the whole thing.



COMMENTS (6 to date)
Deb McAdams writes:

I'm not sure what the point of the Jim Crow-Apartheid references were in this argument.

The argument seems to be that given racist political systems, policies aimed at reduction of envy will be racist.

In what libertarian fantasy do we take racist political systems as a given?

Is it really impossible to construct an example using political systems that actually exist today?

Dan Landau writes:

Posner states that increasing utility is an illegitimate basis for public policy. Not only many some people get utility from others being worse off, perhaps the majority gets utility from murdering certain individuals. If maximizing utility is the goal of public policy, they should be murdered.

James writes:

Deb,

I think the point of Will's example using racism was to show that advocacy for compensating envy on utilitarian grounds may lead to unacceptable conclusions and thus cannot be applied universally. The implication is that a utilitarian argument for redistribution of wealth to manage envy is not sufficient to justify the practice. And so it falls on people who make such arguments to say why utilitarian envy management is appropriate to a given circumstance, since it's not sufficient to motivate wealth redistribution in all circumstances.

He certainly could have provided a more current example of the advocacy for utilitarian envy management leading to unacceptable conclusions, e.g. modern welfare states. But this would presuppose that the modern welfare state is an unacceptable conclusion. Since only one side agrees with this, people on either side of the issue would then be stuck talking past each other.

For purposes of showing that utilitarian envy management is not a universal justifier of redistribution, an example from any time or place would have done the trick. Using an example where envy management leads to a conclusion that nearly everyone finds unacceptable just ensures that his argument can stand or fail on its structure rather than for lack of common premises.

Deb McAdams writes:

Guns are bad under Apartheid. Steel is bad under Apartheid. Computers are bad under Apartheid. Apartheid can make anything bad.

The examples do exactly the opposite of what you think he's trying to do.

If you start with Apartheid and you add utilitarian management of envy you get a universally understood bad outcome.

If you start with a non-libertarian democracy and add utilitarian management of envy you get an outcome that libertarians think is bad and non-libertarians disagree.

It follows from these examples that utilitarian management of envy is neutral, and the perception of the outcome depends on other factors.

If that's really your point, that under some circumstances some people would think utilitarian management of envy is bad and others wouldn't. That's not too devastating a point. Bleeding heart liberals would gladly concede that, hardly able to figure out why they should care.

Right now you are the side arguing against the status quo. The argument that it would be bad if we lived under an Apartheid system is not much of an argument at all.

John P. writes:

Jim -- Well put.

James writes:

Deb,

You write,

"If that's really your point, that under some circumstances some people would think utilitarian management of envy is bad and others wouldn't. That's not too devastating a point. Bleeding heart liberals would gladly concede that, hardly able to figure out why they should care."

You'd think that as much as bleeding heart liberals talk about the importance of dialogue, they'd have no trouble at all figuring out why they should care. Assuming that his intent is to persuade others, he should care that the particular argument he's chosen depends on a premise not shared by both sides of the issue.

The moral realists among their ranks should care because utilitarian envy management isn't some universally applicable principle as Layard seems to presuppose. For Layard's statement of his argument to work, it would have to be universal, or alternately he should show that it's applicable now due to some characteristics of the present. I doubt that he (or any leftist) would do this, since it would commit him to opposing utilitarian envy management if those relevant characteristics of the present ceased to be the case.

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