David R. Henderson  

Noah Smith on Redistribution

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Is Average Over?: Two Equivoca... Another disappointing reaction...

If you read blogs much, which, presumably, you do, you know two things: (1) bloggers are often rude to each other, and (2) bloggers often talk past each other or refuse to answer each other's questions. That's why I think it's worthwhile to give Noah Smith his due. We were both polite and I asked him a question to which he gave a categorical answer.

First, the background. Noah had written a post advocating that we show more respect to people in low-pay and low-status jobs. I wrote a post in which I concurred and pointed out that one of the implications that Noah should be aware of is that if people are more respected in such jobs, their supply curve to such jobs will shift to the right and their pay will fall. (I should have also pointed out what co-blogger Bryan pointed out, namely, that Noah should have argued for an increase in respect, not a redistribution of respect.)

I wondered what Noah's response was and so I tweeted him. Here's our back and forth.

David: Hey, Noah, good piece on respect. Here are my thoughts [with a link to my post.]

Noah: I think this [fall in pay] might happen higher up the income scale, but at low incomes, the effect will likely be very small.

He didn't say why he thought it would be very small but there's only so much you can do on Twitter. I was going to reply that if the increase in respect he's calling for is really valued by the people he wants it for, then he could not be sure that the effect is small, but then Noah made what I saw as a more important statement.

Noah: I want to redistribute enough wealth to save people from deprivation, but I don't care about wealth inequality per se.

David: Thanks for clarifying. In that case, it makes no sense for you to talk about wealth inequality, right? Just deprivation.

Noah: Right. But remedying that still requires some wealth redistribution.

David: It might. But if you could be convinced that that could be done without wealth redistribution, you would oppose redistribution?

Noah: definitely.

David: Thanks.


Comments and Sharing


CATEGORIES: Income Distribution



COMMENTS (15 to date)
Roger McKinney writes:

Nice exchange. Honesty and politeness is rare everywhere, not just on blogs.

I've had a similar discussion with the guys at Acton.org. My question: How much is enough? Someone had asked if I could point to a time when private charity was not enough. I said I have no idea what enough would be.

Noah mentions "deprivation" but he needs to be more specific. The World Bank and many international organizations are very exciting about China and India lifting 500 million people above $1/day. Is that our standard? We could have a real discussion if Noah would give us a dollar figure for what is enough redistribution.

Roger McKinney writes:

PS, common sense would tell us that their is an optimal amount of redistribution of income. After all, does not the principle of diminishing marginal returns apply to redistribution?

I worked in quality control for a while and learned that you first have to determine what system is capable of achieving before setting upper/lower control limits. Setting limits without determining the capability of the system would likely result in attempting the impossible and causing greater variation.

Proponents of redistribution don't understand this. Inequality as measured by Gini fell until 1973 then started climbing again, and that was after the New Deal and Johnson's Great Society, both massive increases in redistribution.

Is it possible that by 1973 were were attempting the impossible? Is there a natural rate of inequality and if we try to go below it we actually make things worse?

B. Fewell writes:

David, always nice to have civil debates. As a lawyer in an increasingly selfish and self-centered society, as we know civility has become more the exception than the rule. Another blog where civility between political opposites is promoted and reward is Dan Kahan's blog over at Yale. www.culturalcognition.net/blog Dan's scholarship is focused on human cognition and irrationality in our public discourse and decision-making, with a focus on science. Dan is a political lefty but he values a robust but civil debate with those having another political persuasion.

Not sure what it says about the state of society when we have to go out of our way to point out what should be valued and widely-practiced behavior.

TallDave writes:

Define deprivation. The poorest decile in the United States lives better than at least half the humans alive today and has living standards comparable to the median 1950s American household.

By the standards of 1900 United States, "deprivation" would probably be essentially zero today even absent any coercive redistribution. Those 1900 living standards would certainly seem a terrible hardship to us, but remember they were at the time the highest living standards any human society had ever achieved.

Civility is valued when the intent is to communicate.

Rajat writes:

I'm not sure that is much of a concession from Smith. 'Deprivation' is an even more malleable term than 'poverty', which itself can be viewed absolutely or relatively. The poor in most developed countries like the US are not deprived by the standards of most people in third world countries nor by the standards of many people in developed countries a mere 60 years ago. Yet Smith still supports redistribution and seems to regard it as obvious that there is widespread deprivation. I doubt he could ever be convinced otherwise.

Harold Cockerill writes:

It's really comforting to know there are really smart people who know what the distribution should be.

Pajser writes:

Civility is enormously important. Noah Smith shouldn't be so shy about redistribution. Equality matters. It is not accidental that almost all people practice communist distribution in their families.

Norman Maynard writes:

Roger McKinney said "Is it possible that by 1973 were were attempting the impossible? Is there a natural rate of inequality and if we try to go below it we actually make things worse?"

I would be very interested to see a model which generates this. What sort of conditions would need to hold for there to be this type of lower bound on inequality (namely, the type such that policy-based redistribution designed to push inequality below that level actually increase the level of inequality)? That would be a fascinating read.

ColoComment writes:

"I want to redistribute enough wealth to save people from deprivation...."

This "deprivation" that you speak of, is that before or after the multiple welfare programs already in place, which are estimated for 2014 to transfer $0.6 TRILLION to welfare recipients?

http://www.usgovernmentspending.com/current_spending

Does "deprivation" include or exclude the refundable tax credits already in the IRC, which may result in low income earners being net gainers at tax time?

As others have asked, how much is enough? Give us a number that, after it's attained, no one will ever ask for more?

You can't. Because (in the words of Bill Voegeli), it will never be enough.

Chase writes:

I appreciate the civil discussion as well. I do have to disagree with the idea that increased respect will shift the supply curve and lower wages. I believe that even if it happened it would be an unnoticeable amount. I think respect for a profession, at least in the US, is at the bottom end of reasons for aiming at a specific profession. I think foreign aid workers garner a lot of respect, but I don't think that is a saturated labor market. I think brain surgeons have enormous respect, but again I don't know that their supply is bursting at the seems as a result.

Even at the lower end you are faced with a large portion of those jobs that make minimum wage and therefore have a floor on wage depression. restaurant servers make below minimum hourly wage due to tips and with increased respect they are likely to get higher, not lower tips. So, I would advocate increased respect and would not expect much wage impact as a result.

Harold Cockerill writes:

How about the other side of the discussion? There is a huge disrespect jobs "flipping hamburgers". Does it make it easier to justify giving money to people that don't work when the job they qualify for is labeled demeaning?

Seth writes:

Great exchange. I wish we could see more of that.

A note on respect. It depends. I have a lot of respect to a 16-year-old burger flipper for having good work ethic and initiative. I may not for a 36-year-old burger flipper, unless she happens to be flipping burgers in her own restaurant that could be featured on Triple D.

@Chase - "I do have to disagree with the idea that increased respect will shift the supply curve and lower wages."

I don't believe anything you wrote after this actually refuted a supply curve shift. For example, you wrote "I think foreign aid workers garner a lot of respect, but I don't think that is a saturated labor market." A shifted supply curve and saturated labor market are not necessarily the same.

Chase writes:

Seth,

My comment on saturation was definitely meant sarcastically, but I agree with your statement that a supply curve shift does not mean saturation. However, my references to the fact that increased respect is unlikely to 'shift' more people to that profession given its low value in the decision making process for professionals was definitely meant to refute the idea of a supply curve shift. Minimum wage floor is also a definite argument against the idea of wage suppression from a supply curve shift in lower end careers.

R Richard Schweitzer writes:

Are there presently existing systems of distribution?

Of course there are.

Do some (many?) function to ameliorate some concepts of "deprivations" (or "victimizations")?

Of course they do.

If we change (further) or add to the existing systems of distribution will we create other deprivations, such as eliminations of opportunities for entry to enterprise, for innovation, for mobility, for individuality and more.

Of course we will. We always have.

Seth writes:

@Chase - Teachers and firefighters seem to be examples where respect has some value.

Is your argument that respect doesn't shift the supply curve or that it isn't material? I do two jobs for free. The respect I get from doing them does factor in a great deal to my willingness to do them.

"Minimum wage floor is also a definite argument against the idea of wage suppression from a supply curve shift in lower end careers."

I don't understand. Can you elaborate?

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