Annals of anti-egalitarian hyperbole

by Chris Bertram on June 16, 2013

Remember when Robert Nozick wrote in Anarchy State and Utopia that income taxation is akin to forced labour? Well it turns out that that is far far worse than that. Taxing the 1 per cent would be like the state forcibly ripping out their spare internal organs! At least that’s what Gregory Mankiw thinks. His paper, forthcoming in the Journal of Economic Perspectives also includes a thinly-disguised rehash of the Wilt Chamberlain parable, but no proper acknowledgement to Nozick (suprising that the referees or editors at JEP didn’t make this point).

{ 106 comments }

1

Tony Lynch 06.16.13 at 8:56 am

Promethean liver?

2

Navin Kumar 06.16.13 at 9:49 am

Oh look. There’s Chris Bertram. One more person who doesn’t understand the point of analogies in ethical philosophy. Shocking.

The argument goes like this: we might think that it’s okay to transfer resources from one person to another, yet we wouldn’t kill one person to provide organs to 5 others who will die without them. Resolve this dilemma.

FWTW, I don’t agree with this analogy. I think the reluctance to kill comes from some notion of the sanctity of a person’s body, or a desire to not be an active killer. I don’ agree with taxation-is-theft crowd, and support progressive taxation (subject to not crossing the optimal) purely on the principle that the rich have the lowest marginal utility for money. However, I’d try to understand an argument before I dismiss it. This kind of dismissal is cheap.

3

Ingrid Robeyns 06.16.13 at 10:03 am

So what should political philosophers do who read this paper, and who notice (a) the lack of engagement with an entire literature in political philosophy and (b) have good grounds to find the ‘political philosophy part’ of this paper very badly argued for? (actually – it’s at least two philosophical literatures – one substantive on theories of distributive justice, and one methodological or meta-theoretical on justification/ legitimate thought experiments).

Ignoring a bad paper by an unknown person is easy, and generally signals it a paper not worth bothering with.
Ignoring a bad paper by a famous person may too easily be taken as saying that he was right (since we have no objections).
Reacting to a bad paper by a famous person may give it attention it doesn’t deserve.

I think this poses a dilemma for those who are very critical of this piece. Incidentally, it’s a dilemma that happens more often – I think another relatively recent Harvard based product (also on the ethical/political acceptability the outcome of markets) poses the same dilemma.

4

Frank Ashe 06.16.13 at 10:19 am

Every time Mankiw made an assertion in this paper I found myself telling him that he couldn’t say that! Or that were at least 3 other things that would be equally as arguable.

Take his kidney argument. Rather than have a contract that says everybody would want an agreement that they should get at least one good kidney, isn’t it much more the case that his argument says that people would want a universal health system?

5

Mike Huben 06.16.13 at 10:40 am

“If imagining a hypothetical social insurance contract signed in an original position does not supersede the right of a person to his own organs, why should it supersede the right of a person to the fruits of his own labor?”

This has all the intellectual rigor of “if you saw how sausage was made, you wouldn’t eat it.”

The fact is that humans have an emotional “ick” factor for entrails. But we also have a positive emotional factor for sharing. (Both of which can be overcome by training, as we see in sausagemakers and economists.)

It is this neglect of basic scientific anthropology that makes ideologues like Nozick and Mankiw so obviously and stupidly wrong in many of their arguments. Because they are either indulging in a naturalistic fallacy or ignoring the well-known scientific facts.

6

Mike Follett 06.16.13 at 11:07 am

CEOs should be paid for the value that they can be shown to have created? Isn’t Mankiw straying uncomfortably close to the Labour Theory of Value? Perhaps he has been ‘listening to the Left’ even more than he thinks he has.

7

Mao Cheng Ji 06.16.13 at 11:09 am

“The argument goes like this: we might think that it’s okay to transfer resources from one person to another, yet we wouldn’t kill one person to provide organs to 5 others who will die without them. Resolve this dilemma.”

But your kidney is nothing like these resources you supposedly ‘own’. One is a biological fact, the other (together with taxation, incidentally) is a purely social phenomenon. Where’s the dilemma?

8

Chris Bertram 06.16.13 at 11:35 am

Hmm. I’m perfectly happy discussing analogies, even outlandish ones. But sometimes other responses are more fitting. The recent Landsburg photon-rape example (coincidentally another economist) also seems a case where engaging with the merits of the argument was the wrong move.

9

Peter Murphy 06.16.13 at 11:40 am

I feel uneasy with an article that starts with the hypothetical:

Imagine a society with perfect economic equality.

And then starts talking about matters such as “income” and “lump sum tax”.

Within 10 seconds, I imagined two types of societies with more or less perfect economic equality: hunter-gatherers like the ǃKung, and post-scarcity civilizations like the Culture. The second may be fictional (if something to aspire to), but the first exist. Neither of these societies need “lump sum tax” to thrive, or for that matter, “income”.

Mankiw doesn’t sound like a very imaginative man to me.

10

Neil Levy 06.16.13 at 11:46 am

Navin Kumar, you do know that Chris Bertram is a philosopher, right? And that the kind of analogy you mention is philosophy 101? I think you might try to think before telling someone that they’ve failed to understand how analogies are used in philosophy. Lest you be accused of a cheap dismal based on a failure to understand.

11

Dan 06.16.13 at 12:37 pm

I think Bertram’s misreading the argument. First of all, I don’t even see where Mankiw is attempting to make the claimed analogy. His argument is not “economic egalitarianism is like forced organ redistribution”, and it’s not even “the reasons for economic egalitarianism are reasons for forced organ redistribution.” He’s saying: the veil of ignorance would appear to mandate organ redistribution; but we’d react to this by invoking a set of rights which block such transfers, and so who’s to say that we can’t invoke a similar set of rights which block economic transfers. Obviously it’s not a very novel, well argued, or substantive contribution to the literature on distributive justice, but at least get it right before condemning it.

12

rageahol 06.16.13 at 12:53 pm

not having read the paper, maybe those who’ve read it could answer:

Is this a realistic organ-donation analogy where there are substantial costs to selecting donors, transplantation process, and followup/maintenance, and the organs thus donated have a relatively short lifespan once donated (much shorter than allowing them to remain in the original owners’ bodies, anyway)? Or is this a more facile analogy whereby it just happens without saying anything about the infrastructure and resource costs required to sustain such a program?

Because if the former, I might have to go out of my way to read it.

13

Jacob T. Levy 06.16.13 at 12:56 pm

Also not appearing in the paper: the phrase “separateness of persons,” which one would think might be relevant for someone engaging in pretend-arguments about the utilitarianism that would supposedly result from a Rawlsian contract.

14

Warren 06.16.13 at 12:57 pm

I believe that the Journal of Economic Perspectives is not peer-reviewed, hence no referees to catch any Mankiw recycling of Nozick. There is an interesting post related to this at an economics blog

http://cherokeegothic.com/2013/04/29/peer-review-it-still-matters/

(in the context of the Rogoff Reinhart JEP article)

This leaves the JEP editor, Tim Taylor. He seems to be a pretty nice guy (in the technical research-seminar-attending sense of “non-arrogant”). Why not ask him? He might even be willing to write a Crooked Timber guest contribution, perhaps on Ingrid’s question of “So what should political philosophers do who read this paper?”

conversableeconomist@gmail.com
http://conversableeconomist.blogspot.com

My own guess is that few economists take many philosophy courses beyond a 101 introduction (unlikely to include Nozick), and that Brad deLong doing an inter-disciplinary major is unusual for undergraduates planning to go on to economics graduate school. But the JEP is designed for a non-specialist audience. Perhaps as a general principle it doesn’t wish to burden the text with references.

15

rootless (@root_e) 06.16.13 at 1:00 pm

The fundamental weakness of Mankiw is his unwillingness to admit the role of the state in markets. The financial sector depends on state subsidies and guarantees, yet he wants the state to keep its hands off the returns earned in this sector. Why someone “laboring” in a hedge fund to buy and sell government bonds and government guaranteed bonds, using loans from government guaranteed banks that rely on short term government loans for liquidity should get a specially low tax rate on his income is not addressed.

16

LFC 06.16.13 at 2:01 pm

At least Mankiw admits in the passage on bottom p.2 and top p.3 that he is playing role of “amateur political philosopher.” (Very amateur, apparently.)

17

LFC 06.16.13 at 2:02 pm

correction:
“the role of…”

18

Grumbles 06.16.13 at 2:12 pm

I’m beginning to wonder if our fair essayist isn’t a liberal plant. If that’s the best a Harvard economist can do to support the notion that redistributionist policy is flawed, well, those of us on the other side of the argument barely have to get out of bed.

I mean, really. I was waiting for a stoned 3AM dorm room hypothetical like, what if the trolley hurtling at the pedestrians could only be diverted by a bond trader who was going to lose money that might save a passel of needy orphans? But we didn’t even get that far before organs.

19

Salient 06.16.13 at 2:38 pm

the veil of ignorance would appear to mandate organ redistribution

The veil of ignorance doesn’t mandate organ redistribution. Your body is a priori yours and only yours; products of human labor don’t even exist a priori; the whole damn point of distributive justice is determining ideal ways to distribute products of human labor that may come into being; QED.

So, uh, how well-respected is the JEP? LVanity publication?

20

R. Porrofatto 06.16.13 at 2:39 pm

Sure it’s a fine analogy, kidneys are obviously just like profits. Of course I prefer such finely honed arguments as Steve Schwarzman’s view that raising taxes on “producers” such as himself is akin to the Nazis invading Poland. Or Grover Norquist’s moral equivalency between the Estate Tax (“the tax where they come and look at how much gold is in your teeth”) and the Holocaust (“that’s the morality of the Holocaust. ‘Well, it’s only a small percentage,’ you know. ‘I mean, it’s not you, it’s somebody else.’”)

I knew Mankiw’s argument was going to be the usual tortuous bullshit by the second paragraph, where his 1% are entrepreneurs, exemplified by Steve Jobs (as always), J.K. Rowling and Steven Spielberg. He says he is not “convinced” by Joseph Stiglitz’ view that rent-seeking is a primary driving force behind the growing incomes of the rich. And when he finally does get around to the finance industry, where the likes of John Paulson can glom more in one year rigging the Wall St. casino than McDonald’s entire global annual profits, he says this: it makes sense that a nation would allocate many of its most talented and thus highly compensated individuals to this activity. On the other hand, some of what occurs in financial firms does smack of rent seeking…

Some… smacks of. Take my kidney. Please. Just shoot me first.

21

David Woodruff 06.16.13 at 2:41 pm

Ingrid’s post is really important. In general, writing superficial things that ignore previous scholarship seems to be a no lose proposition for prominent scholars. All the critiques seen to accomplish is drive up their citation count. In general, I think there’s been a real debasement of the culture of scholarship emanating from economics, but infecting political science as well, in which grappling with the tradition of thought on a topic appears to be a positively bad career strategy.

22

dsquared 06.16.13 at 2:53 pm

This does look like a minor scandal to me; as Chris says, at the very least there has been a colossal failure of refereeing to allow an article which is basically about the Nozick/Wilt Chamberlain question to not even cite Nozick. If a student produced a paper in which one of the most famous arguments in philosophy was presented as if it was the student’s own work, they could be in all sorts of academic trouble, couldn’t they?

23

Grumbles 06.16.13 at 3:05 pm

Mankiw needs to write a paper composed entirely of footnotes to his paper.

I wish I weren’t serious.

24

adam.smith 06.16.13 at 3:39 pm

What dsquared @20 says – I’d drag a student in front of an academic honesty committee for the first page of the paper. Not that I think there is any hope of that happening here.

And it really is at a (bad) undergraduate level: He doesn’t even understand Nozick’s point in the Chamberlain example, which is really directed at a very specific, quite narrow (and I’d argue quite strawmanish) argument about justice as Julian Sanchez (a Nozick fan) explains here http://www.juliansanchez.com/2011/06/21/nozick-libertarianism-and-thought-experiments/

25

Rakesh 06.16.13 at 3:49 pm

Stopped reading at about pg 7-8 where Mankiw suggests that the poor have, to some extent, inherited genes for their inferiority. The editors allowed those claims to be advanced without a serious interrogation of the problems of measuring (and even defining) heritability and the limits of twin studies. We can see here about Richwine made it through Harvard so easily. Mankiw also does not mention his colleague Richard Freeman’s analysis of how the doubling to tripling of the labor supply in relation to capital as a result of globalization has exerted downward pressure on labor’s share of income. Moreover, Mankiw does not mention how a more adverse policy environment for labor has impacted income inequality.
Perhaps there are problems later on in the philosophical side, but the problems earlier seem to me more egregious.

26

Rakesh 06.16.13 at 4:07 pm

Maybe Mankiw has heard of James Heckman (one of them has a Nobel Prize)? He wrote recently in the Boston Review:

“How do these early and persistent differences in abilities arise? Some people think that the explanation lies primarily in our genes. In The Bell Curve (1994), Richard Herrnstein and Charles Murray trace differences in adolescent achievement test scores back to genetic differences. If the primacy of genetics is correct, we should be skeptical about the efficacy of any interventions.

But the test scores Herrnstein and Murray used have been shown to be caused in part by schooling and family environments. More broadly, evidence from epigenetics, which studies how environmental factors affect gene expression in ways that are heritable, suggests that the gene-environment distinction that shaped The Bell Curve and so much other discussion about the origins of inequality is obsolete (as is the practice, common in social science, of additively partitioning outcomes due to “nature” and “nurture”). An extensive recent literature suggests that gene-environment interactions may be central to explaining human and animal development. For example, neuroscientist Avshalom Caspi and his colleagues have shown that the adverse impact of the absence of one gene—a particular variant of the Monoamine Oxidase-A gene, which has been associated with antisocial behavior and higher crime rates—is triggered by growing up in a harsh or abusive environment. Geneticist Mario Fraga and his colleagues have shown how life experience substantially differentiates the genetic expression of adult identical twins: their experience gets under their skin—and stays there. Related research shows that isolation affects the expression of genes that moderate adverse health outcomes, and that environment has a powerful role in determining heritability of IQ.

The precise impact of these gene-environment interactions on the life course of individuals remains to be determined. But they undermine purely genetic arguments about outcomes and require that we look to the social environment—especially the families—in which children are raised.”

The only political philosopher I know that who attended to the misuse of heritability estimates is Brian Barry in Why Social Justice Matters.

27

john c. halasz 06.16.13 at 4:11 pm

@8:

Landsburg.

[thanks, fixed. CB]

28

chris 06.16.13 at 5:29 pm

CEOs should be paid for the value that they can be shown to have created?

If you’re suggesting a massive pay cut for CEOs, I’m right there with you. Although we should probably pay them the minimum wage even when they can’t be shown to have created any value (on average, half the time they will have destroyed value rather than created it, and even when they have created value it won’t always be provable).

At least it would be a step forward over asking their friends how much they deserve to be paid and taking their word for it (and then asking them how much their friends deserve to be paid etc.), which is basically the current system. Conflict of interest doesn’t begin to describe the current state of corporate governance.

his 1% are entrepreneurs, exemplified by Steve Jobs (as always), J.K. Rowling and Steven Spielberg.

It’s worth pointing out for the benefit of people who missed the point (which apparently includes Mankiw) that Rowling’s work, like Chamberlain’s, would never have reached the number of people it has without the efforts of hundreds, probably thousands of less famous and less well paid others. Spielberg’s wouldn’t even *exist* without them.

Jobs’s very early work may be more like Rowling than like Spielberg (in that he could have created the work itself in isolation and possibly even did), but most of what he is rich and famous for now is largely designed — and *definitely* made, distributed and marketed — by people who aren’t him. The structure that allows him to control and profit from their efforts is created and sustained by the not at all invisible hand of the state.

Attributing the result of a complex, multi-person effort to the most proximate or visible person or the one with the most authority is a common error, but that doesn’t make it any less stupid. People who claim to be practicing an academic discipline ought to be capable of a little more discernment.

29

Robert 06.16.13 at 5:40 pm

“coincidentally another economist”

I doubt it is a coincidence.

By the way, the (misnamed) Journal of Economic Perspectives is the second flagship publication of the American Economic Association. It was introduced not too long ago to address complaints that the articles in the American Economic Review had little too with looking at actually existing economies.

30

Paul 06.16.13 at 5:49 pm

Shorter Chris @ 20: they didn’t build that.

Papers like this just reinforce the argument of conservatism as a justification for selfishness. Still wondering when we can create libertarian/conservative reservations and let these people build the perfect societies they dream of, unfettered by the grasping hand of the state.

31

Paul 06.16.13 at 5:50 pm

Sorry, it was Chris @ 27…

32

P O'Neill 06.16.13 at 5:50 pm

Among the sentences that need footnotes —

By contrast, the educational and career opportunities available to children of the top 1 percent are, I believe, not very different from those available to the middle class. My view here is shaped by personal experience. I was raised in a middle-class family; neither of my parents were college graduates. My own children are being raised by parents with both more money and more education. Yet I do not see my children as having significantly better opportunities than I had at their age.

33

Bob W 06.16.13 at 6:03 pm

The analogy, and how the author intends it, is not the real problem. On a quick reading (skimming) of his article he appears to ignore the political decisions that go into creating a good part of the income inequality we now see. The crony capitalism in the US may not explain all of income inequality and disparate real contributions to growth and well being certainly explain some of it. But to ignore the role of government and political abuse and manipulation in creating inequality is at this point shameful.

34

Robert 06.16.13 at 6:08 pm

Mankiw’s examples in his Nozick plagiarism are all of entrepreneurs that depend on intellectual property for their income, that is, on “political decisions” that may have something to do with “the income inequality we see”.

Does Mankiw deliberately try to write stuff as stupid as possible?

35

Plume 06.16.13 at 6:34 pm

The problem with Nozick and others is that they seem completely blind to the fact that the capitalist system is built entirely on “economic transfers.” It can’t function without them. It transfers the wealth created by workers to the top of the pyramid owned by business interests. It constantly engages in the redistribution of organs — the forced redistribution.

Workers for Company X create X amount of value. Owners of Company X then redistribute (steal, in reality) the value created by those workers into their own pockets. They derive their own compensation and additional profits by radically underpaying workers for the value they create.

It’s one thing to be compensated for the work you do. It’s another to be compensated for your work AND that of the workforce. And by doing so you guarantee that the workforce never receives just compensation. That is the capitalist model in a nutshell. And, yes, certainly you should be compensated for your capital investment along with your own input/labor. But not eternally. There is a point where you’ve been paid for your investment and should stop removing that “rent” from your workforce in the form of reduced wages. Endlessly.

People like Nozick start out with the bogus premise that only egalitarians engage in “redistribution” or even “social engineering.” In reality, it is the capitalist who does this with abandon, and without morality or ethics to support the transfers.

36

Chris Bertram 06.16.13 at 6:36 pm

that Rowling’s work, like Chamberlain’s, would never have reached the number of people it has without the efforts of hundreds, probably thousands of less famous and less well paid others.

Rowling, of course, is very happy to acknowledge that she pretty much owes her survival to the welfare state, as I’ve blogged about before:

http://crookedtimber.org/2010/04/14/j-k-rowling-on-welfare-and-patriotism/

37

Plume 06.16.13 at 6:38 pm

Of course, to make their (the Makiws and Nozicks) complaint all the more ridiculous, we’ve never had egalitarian redistribution in any nation state. Never. But every day, 24/7, virtually everywhere on the planet, capitalist redistribution takes place.

As Norman Mailer once said in the pages of Dissent, Capitalism follows us everywhere. But no one whines more about its supposed persecution than capitalists — who dominate the globe.

38

Chris Mealy 06.16.13 at 6:40 pm

I’m not going to bother with Mankiw, but isn’t the Nozick thing kind of dumb? I’m not a philosopher but I’m pretty sure the problem of people’s self-interested behavior leading to outcomes that none would have chosen is pretty well known. There’s no reason to assume something is benign just because it’s emergent or spontaneously organized.

39

Plume 06.16.13 at 6:43 pm

Bob W,

Wealth and income inequality is baked into the capitalist pie. If it’s left to its own devices, it will create economic apartheid. That’s its nature. If we just look at profits, and forget massive executive compensation, every capitalist transaction automatically involves a winner and a loser, or there can be no profit. You can never have a “fair trade” in capitalism, if profits are to be made. By definition. And you can never have “fair wages” if ownership seeks profits and large compensation for themselves. There is simply never enough surplus to pay fair wages and generate profits and large compensation at the top. The math doesn’t work.

A business owner can make a living and pay fair wages and engage in fair trade. But she or he can never make a killing. The only way to make a killing in business is to radically underpay workers or radically stiff trade partners. The former is the usual model. There’s much more money to be made through cheap labor.

40

Plume 06.16.13 at 6:53 pm

Jobs couldn’t have made his billions without shipping tens of thousands of jobs overseas to places like Foxconn in China, where they make 70 cents an hour. Apple routinely sends 9 out of 10 manufacturing jobs to cheap labor, no regs nations.

If he had kept all of those jobs in America, he might have made millions, given the 400 to 1 ratio of ownership to rank and file — which is unconscionable — but he wouldn’t have made billions. He needed those slave wage numbers to steal his billions.

41

engels 06.16.13 at 6:59 pm

So what should political philosophers do who read this paper

I think the best response would be to get an article published in a political philosophy / global justice journal putting forward a garbled version of the theory of comparative advantage, say, without mentioning Ricardo.

42

adam.smith 06.16.13 at 7:13 pm

Chris Mealy @37 -
Nozick’s point is rather narrow. He is taking on one particular conception of justice – he calls it “patterned”. According to this view, whether a society/social order is just depends on a specific distribution of wealth. IIRC one of the problems of Anarchy, State, and Utopia is, that he seems to believe that this view is much more common than it is – e.g. I think he believes Rawls ToJ is much closer to the patterned view than it is (I think it’s a bit of a strawman), but he a) doesn’t believe that it’s the only conception of justice and b) doesn’t believe his Chamberlain example addresses anything but this very specific conception of justice.

So he says to his patterned strawman – I give you your perfectly just society. You get to pick whichever initial distribution of wealth you want. And now that distribution changes through entirely voluntary exchanges – how do you justify taking money from the ones who benefitted in those exchanges? One can still argue with that, but it’s a pretty good argument. It is, of course, not at all, an argument against redistribution in general, and Nozick realized that. It’s bitter that Manikw doesn’t.

43

Chris Brooke 06.16.13 at 7:35 pm

e.g. I think he believes Rawls ToJ is much closer to the patterned view than it is

Yes.

Rawls is absolutely clear that his theory is one of what he calls “pure procedural justice”, and it was this aspect of his argument which led Hayek, on first reading A Theory of Justice, to observe that “we agree on what is to me the essential point”.

44

Eli Rabett 06.16.13 at 7:37 pm

The Wilt Chamberlain parable appears a bit thin even for when it was proposed. Sports team payrolls today structured to cover a percentage of receipts. Sports unions have always had the goal of obtaining as large a percentage as possible of the receipts.

So how far off the turnip truck do you have to fall before realizing that the price you pay for a ticket pays the contracts of the players? (NCAA excepted of course. There you are providing a couple of bucks per ticket to the coach)

In short, if this is a meaningful parable for libertarians they are commuting from Mars, but we knew that, yes?

45

Layman 06.16.13 at 8:09 pm

I’m surprised no one has pointed out this bit from Mankiw:

“If a national system of taxes and transfers is designed to move resources from Palm Beach, Florida, to Detroit, Michigan, shouldn’t a similar international system move resources from the United States and Western Europe to sub-Saharan Africa? Many economists do support increased foreign aid, but as far as I know, no one has
proposed marginal tax rates on rich nations as high as the marginal tax rates imposed on rich individuals.”

It seems to me that if you’re looking for a reason why we don’t impose higher marginal tax rates on individuals in other countries, the obvious answer is because we lack any facility to impose higher marginal tax rates on individuals in other countries; and the lack of that mechanism has nothing whatsover to do with the efficacy of progressive tax rates. Am I missing something?

46

ezra abrams 06.16.13 at 9:15 pm

I can’t see why anyone would read past the first few paragraphs; it is so obviously a silly econ trick – posit an imaginary state of affairs that would never occur, and then deduce logical theorems.
And even in that Alice world, Mankiw is alogical; he says that if we all give 100 dollars to Apple, it is voluntary so we are all better off…surely, any smart college junior should be able to rip that to shreds.

And if you are unable to see that, then the almost pathological avoidance of class as an issue should make the reader pause.
eg , top of page 9, mankiw: I was raised by middle class parents without college education; my own children have no more opportunities.
yeah, right

47

Jerry Vinokurov 06.16.13 at 10:02 pm

An amusing parallel to the AVR thread a few days ago. If someone critiques an economics paper on the grounds that it makes unjustified assumptions, they’ll hear no end of complaints about how you missed the technical details. “But it’s the asymmetrical equilibrium that really matters!” the responders will howl, with “you idiots” implied. Somehow, that never seems to stop economists themselves from blithely annexing whole disciplines to their own needs, without needing to become the slightest bit conversant in the discipline, or, indeed, even to cite the people who originated their argument. Weird how that happens.

48

Terence 06.16.13 at 10:10 pm

OMG – page 2 (and that will be as far as I get):

“In my view, this thought experiment captures, in an extreme and stylized way, what has happened to US society over the past several decades. Since the 1970s, average incomes have grown, but the growth has not been uniform across the income distribution. The incomes at the top, especially in the top 1 per cent, have grown much faster than average. These high earners have made significant economic contributions, but they have also reaped large gains.”

Significant contributions? They turned financial markets and then the housing market into a gambling racket…

49

Jim Henley 06.16.13 at 11:58 pm

“We are born with as many kidneys as we will ever have. Similarly, we are born with all the money we will ever earn.”

Okay, first draft’s done. Man, I love it when the words come almost faster than you can keep track of. Should I review? Nah, not at these rates. They’re lucky to get a piece from someone of my eminence anyhow. Hopefully there’s nothing too dumb in there. Time to watch Hoarders!

50

Eli Rabett 06.17.13 at 12:02 am

Oh yeah, and how many sales folk work on commission. Nozick was a waif, Mankiw is an idiot.

51

adam.smith 06.17.13 at 12:30 am

Jerry @46 – if anything the reaction of political philosphers like Ingrid should maybe make you more sympathetic to the economists’ (or econ-affine) reactions in the AVR thread. Some* (!) of the criticisms leveled against AVR are very similar to what Mankiw does in his paper: Starting from a position of normative outrage, do a cursory reading of the paper, don’t bother to understand anything about the broader literature it is placed in and go.
Now, this is obviously much more OK if you’re commenting on the blog than if you’re writing a presumably peer-reviewed paper, but both are frustrating for people invested in the field.

*To be clear – I think the AVR paper is bad and some of the criticism in the comments as well as people like Yglesias, Kenworthy, Thoma, Smith pretty effectively took every section of it apart. But I think that several commenters – including the initial bleg/post – do completely misunderstand the role of theory in economics. The problem of the paper as a piece of academic economics is _not_ that it “sneaks in” an “unrealistic assumption”.

52

Rakesh Bhandari 06.17.13 at 1:20 am

Here’s the real comparison with Robinson and Acemoglu…well, at least, from a Gramscian perspective.

. Mankiw’s approach fails in the project of bourgeois hegemony. That can’t be established by telling those who feel invisible in the shadow of the 1% that they have no economically or morally valid criticisms to make. That is a school-boy exercise; it comes across as vulgar apologetics, worse than Nassau Senior.

Robinson and Acemoglu’s work will however prove to be more effective as they make a sweeping, entertaining and plausible case that the institutions that serve one class (namely, finance capital which requires the inclusion of the entrepreneurs that they finance even when these entrepreneurial upstarts challenge extant industrialists) over, and the expense of, other classes are actually the best institutions for the nation as a whole, given the possible (extractive) alternatives.

Mankiw is not really contributing to bourgeois hegemony, and may actually damage it. But you make arguments like Mankiw’s when you have lost confidence in the project of bourgeois hegemony; Mankiw can’t even resist social Darwinism. A sure sign of a period of reaction. The progressive spirit of the bourgeois revolutions actually does animate Acemoglu and Robinson’s work even to the point that they defend the revolutionary violence of the Glorious and French Revolutions. Marx actually thought bourgeois apologists would obscure the role of revolution in the establishment of bourgeois institutions in order to discredit any further such activity. Acemoglu and Robinson prove Marx wrong on this point.

Of course Acemoglu and Robinson do not recognize Robert C. Allen’s argument that the Russian Revolution was necessary to destroy Tsarist institutions and make possible relatively high living standards. There are limits on their support of revolutions.

I’ll continue to read Acemoglu and Robinson, not Mankiw (though I think Martin Feldstein’s analysis of the state of the economy is often helpful).

53

Jay 06.17.13 at 1:21 am

54

John Quiggin 06.17.13 at 2:58 am

What’s truly bizarre is that Mankiw’s kidney argument applies much more directly to the proposal that poor people should be able to enter into enforceable private contracts to sell their kidneys, something that his intellectual allies (Barro, for example) routinely advocate.

55

Plume 06.17.13 at 3:41 am

Mr Quiggin,

I purchased and thoroughly enjoyed your Zombie Economics. Do you plan a follow up?

And have you read David Harvey? I think putting together your work with his amounts to a very broad and useable approach to our economic system. Have also learned a lot from the folks at Monthly Review, and ecosocialists like John Bellamy Foster and George Monbiot. Am intrigued by the work of Gar Alperovitz as well.

I gather from your writings that you basically sit on the center-left, roughly in the Social Democratic sphere. Tony Judt would have been a close ally, I imagine. I loved his Ill Fares the Land. But I find myself thinking we need stronger medicine to cure what ails us, which is why ecosocalism rings so true for me.

P.S: Nozick and right-wing libertarianism strike me as nothing more than a very elaborate attempt at rationalizing selfishness. Several decades of reading propertarians has convinced me of this.

56

Pat 06.17.13 at 6:33 am

The thing I always wondered about Nozick’s point is, why doesn’t he get that the person who actually makes money in his pretend scenario isn’t Wilt Chamberlain, or any of his teammates, or even the guy who runs or manages the team, but the fellow who figures out how to build a fence around the court and exclude people who don’t pay admittance money? That is to say, I may have wondered whether Nozick’s point would seem a heckuva lot more logical if an economist rather than a philosopher had made it.

Along comes Mankiw to disabuse me of my suspicions.

There’s a certain symmetry, however, in the economist Mankiw not getting what even the philosopher Nozick would have recognized (Salient at 19 got this first), namely that under the veil of ignorance, the typical participant in society would not choose to live in a society wherein he or she would be subject to random forcible organ harvesting. Kind of a big miss, that.

57

roger gathman 06.17.13 at 8:02 am

It seems to me pretty clear that if someone has 2 kidneys and somebody else has one billion kidneys, we would be ubercomfortable with forcing the billion kidney dude to give up kidneys to the two kidney dude whose kidneys failed. In fact, probably we would find the fact that people were walking around with a billion kidneys a big health problem.

58

Tony Lynch 06.17.13 at 9:23 am

As I said at the start. Promethean liver. And now the Eagle.

59

Zamfir 06.17.13 at 11:48 am

P.S: Nozick and right-wing libertarianism strike me as nothing more than a very elaborate attempt at rationalizing selfishness. Several decades of reading propertarians has convinced me of this.

Propertarians in general, sure. Nozick in particular, I don’t know. He strikes me as a true believer, someone who extrapolates his freedom-logic to infinity and concludes that that should be the goal, however unattractive it sounds. Of course, from a safe position where he doesn’t have to fear living in his own ideals.

Rather different from, say, a Mankiw or Friedman, who seem also quite happy if their sketched ideals would fail, as long as the failure mode includes low taxes for rich people.

60

Steve LaBonne 06.17.13 at 12:18 pm

I think it would be a great idea to rip out ALL the internal organs of a few 0.1 percenters. Pour encourager les autres, you see.

61

chris 06.17.13 at 1:44 pm

namely that under the veil of ignorance, the typical participant in society would not choose to live in a society wherein he or she would be subject to random forcible organ harvesting.

Actual people probably would choose that, but it wouldn’t be on the basis of rational self-interest weighing all possible outcomes; since the harvestee has multiple organs which presumably would all be used, you’re more likely to have your life saved by an organ harvest than become the victim of one, and you’re more likely to have a friend/relative’s life saved by an organ harvest than have a friend/relative become a victim of one.

The whole reason the concept of organ harvesting is so paradoxical in the first place is that it clearly *would* be a net benefit to the welfare of the society, yet people would and do emotionally reject it anyway. Heck, we don’t even forcibly harvest the organs from people who are already dead for other reasons but have usable organs remaining. Which isn’t all that paradoxical if you’re used to the idea that human beings have various irrational hangups, but it sure does shatter those neat models based on idealized rationality.

The parallel between irrational opposition to organ harvesting that actually does more good than harm and irrational opposition to taxation that does more good than harm might actually not be that bad, once you think it through (although being taxed is unlikely to kill you, but receiving tax-funded services actually can save your life, so the cost/benefit balance is probably more favorable for taxation overall). But it’s being done backwards and in bad faith, to try to transfer the irrational emotional response from one target to the other, rather than using the familiar to understand the strange.

62

MPAVictoria 06.17.13 at 1:58 pm

Jay at 53: Magnificent!

63

Ian S. 06.17.13 at 2:46 pm

Hardly surprising, coming from the guy who wrote this:
http://www.nytimes.com/2010/10/10/business/economy/10view.html

This is when he lost a lot (though not all) of my esteem.

64

vasvas 06.17.13 at 5:28 pm

“why should it supersede the right of a person to the fruits of his own labor?” Isn’t there enough evidence to show that the exhorbitant rewards are not the fruits of one’s own labor? Is Mankiw seriously claiming that a billion dollars yearly income is the fruit of the hedge fund manager’s own labor? For what definition of the word “labor”?

65

Substance McGravitas 06.17.13 at 5:45 pm

I think it would be a great idea to rip out ALL the internal organs of a few 0.1 percenters. Pour encourager les autres, you see.

What a vicious and barbaric thing to write when you could simply have written of subsidy via invasive asset transfer. You know, euphemasia.

66

jake the snake 06.17.13 at 5:53 pm

Mankiw fails to make the point of why it would be a bad thing if he did not work as hard, and what that would entail. Would the quantity of his nonsense decrease, or would the quality (if possible)? Would he write less, or would he spend less time developing his glibertarian arguments? Enquiring minds really don’t care if they know or not. As far as I am concerned, the argument that Mankiw advances is based on the
questionable hypothesis that it would be a bad thing if the rich worked less hard.
I have always heard that no one is irreplaceable. I suppose the “job creators” could be an exception, but personally I doubt it.
No offense to the economists, but to me a large part of what they do is to create a thought experiment and apply it to real economic activity. Being a long time fan of
science fiction, I am well acquainted with application of thought experiments to
everyday life. However, too many economist seem to actually believe that their thought experiments are the way real-life economies actually work, or at least pretend they do. Somehow, I doubt the Schrodinger actually thought he had a cat that was both dead and alive at the same time, nor did Frederik Pohl think that a future economy of plenty would work out as he postulated in “The Midas Plague”.

67

mpowell 06.17.13 at 9:39 pm

Chris @ 61: Just to be clear since the start of your comment is unclear, the veil of ignorance is not a clever intellectual way to justify a system of utilitarianism. If something seems really wrong and we can all agree that it is really wrong, then we can also agree that the veil of ignorance approach to justice would also indicate that it is really wrong. This simple and basic fact really undermines any attempt to argue, “well, taxation is the same as slavery, therefore Rawls advocates actual slavery”.

68

David 06.17.13 at 11:14 pm

The drive to justify wealth inequality on the basis of genetic determination is identical to kings trying to trace their lineage to deities

69

UserGoogol 06.18.13 at 6:11 am

Plume @ 35: That’s kind of a misrepresentation. It’s not that they’re blind to the transfers, but that they very explicitly don’t think of that as being redistribution, but as a trade. The worker voluntarily exchanges their labor for a wage, so no problem. Socialists consider this sort of exchange to be inherently unjust, (and even liberals tend to think it’s rife with abuse without proper regulation) but Nozick-style libertarianism considers the legitimacy of such trades to be pretty close to axiomatic.

I guess it wouldn’t be particularly difficult to formulate a labor theory of value-style argument in Nozickian terms: to say that the act of labor is not merely a service being provided for the capitalist but as a collective act of “homesteading” the newly created property. (That wouldn’t apply to service-sector work, but I guess you could generalize it.) But still, Nozick’s problem isn’t blindness, but a fundamentally different way of looking at the situation.

70

LFC 06.18.13 at 11:29 pm

Layman @45 quotes this from Mankiw:

“If a national system of taxes and transfers is designed to move resources from Palm Beach, Florida, to Detroit, Michigan, shouldn’t a similar international system move resources from the United States and Western Europe to sub-Saharan Africa? Many economists do support increased foreign aid, but as far as I know, no one has
proposed marginal tax rates on rich nations as high as the marginal tax rates imposed on rich individuals.”

1) I’m fairly sure that some people have proposed, if not precisely “marginal tax rates on rich nations as high as the marginal tax rates imposed on rich individuals,” then something reasonably close to this. Mankiw simply hasn’t read them.

2) Anyway, Mankiw’s point here is flawed on its own terms, since there are significant differences between intranational and international redistribution. In the former case, for one thing, it’s easier to ensure that the redistributed money ends up in the hands of those whom it is intended to benefit. So there might very well be good reasons for approaching the two sorts of redistribution a bit differently. Thus, considered admittedly out of context, this quoted passage is rather silly. It’s probably equally silly even when read in context of the whole paper.

71

LFC 06.18.13 at 11:30 pm

Sorry, italics in second graph above are a mistake.

72

Plume 06.19.13 at 4:19 am

Usergoogol,

I think they’re blind. They don’t see it as a transfer. They see it at a voluntary transaction, with two winners, typically. Conservatives and right-libertarians tend to have this rose-colored, pie in the sky, incredibly romanticized, almost edenic vision of commerce. Everyone agrees to all of it willingly. There is no coercion. There is no unequal power involved that could make a mockery out of the idea of voluntarism or lack of force. Everyone apparently freely chooses to forge a contract and it’s always mutually beneficial.

Nonsense.

In reality, the laborer in a capitalist system has the choice only in the sense that they can starve is they choose not to accept the terms of employment. Or, in the sense that they can move from one exploiter to another.

It’s kind of like smoke-filled bars. You want to go to a bar, but you hate cigarette smoke. So your right-libertarian friend says you’re “free” to go to another bar. But they’re all smoke-filled!

That’s their idea of “freedom.”

73

adam.smith 06.19.13 at 5:31 am

Plume – in Nozick’s thought experiment there is no a-priori “capital” or “labor” since everyone owns the same resources. Criticizing this as “unrealistic” kind of misses the point of a thought experiment. When we’re discussing Trolley Problems we also don’t get all upset that the mechanical details on how to stop a trolley might not work as described.

To say this again – the problem with Nozick’s thought experiment is that the point it demonstrates is so narrow as to be almost meaningless. Hardly anyone – if anyone – actually holds the type of theory of justice that the thought experiment seeks to de-legitimize (but in his defense it’s also only about 10 pages in his 200p book). And one of the many, many problems of Mankiw’s paper is that he actually thinks that this “thought experiment captures, in an extreme and stylized way, what has happened to US society over the past several decades.”
which is just insane on so many levels.

74

Robert 06.19.13 at 5:59 am

Chris Hayes’ Twilight of the Elites: America after Meritocracy is a better treatment of the 1%. I know economists will be derisive. Hayes is more empirical than Mankiw, which is not hard, since Mankiw provides basically no data whatsoever.

75

reason 06.19.13 at 9:03 am

I sort of wonder about Mankiw.

Since he worked for Bush he has become a pariah amongst Democrat supporting economists, in a way he clearly wasn’t before. And his response has been to burn his bridges and speak only to true believers. Is he going mad?

76

Eli Rabett 06.19.13 at 2:43 pm

So Adam, how does Nozick deal with the fact that sales folk almost exclusively work on commission, that is either a percentage of the purchase price or a fixed amount per sale?

77

adam.smith 06.19.13 at 3:46 pm

How does Judith Jarvis Thomson deal with the fact that a) you probably couldn’t throw a fat man off a bridge and b) doing so would almost certainly not stop at Trolley?
http://en.wikipedia.org/wiki/Trolley_problem#The_fat_man

Thought experiments in moral and political philosophy are meant to illustrate/elucidate a specific point. They’re not intended to be an accurate depiction of the society we live in.
Specifically to your question: Nozick’s point here is that a definition of economic justice that is focused exclusively on the pattern of distribution of wealth is flawed. The way people in sales are paid is a question of process, something the thought experiment isn’t meant to cover.

78

Wonks Anonymous 06.19.13 at 4:36 pm

I remember that Julian Sanchez essay after the Slate article on Nozick and the Chamberlain example (which it argued was relying on his race to generate sympathy or something). Was Mankiw unaware of that? I doubt it. He was probably hoping people too young to remember Nozick or Chamberlain would have some positive associations with Steve Jobs. Mankiw really adds nothing to Nozick’s example, and being an amateur philosopher makes it worse.

rootless_e, no Mankiw says the government provides public goods which enable people to build wealth, and brings up the idea that taxes should be proportional to benefit. That’s why in his conclusion he claims to favor progressive taxation. But he also has intuitions about desert which prohibit very high levels of taxation. The exact boundaries of what his intuition permits are not made explicit.

Bryan Caplan did a better job of arguing taxation=slavery than the kidney example in “Distributive Justice in a Pure Service Economy”:
http://econfaculty.gmu.edu/bcaplan/service

79

Plume 06.19.13 at 4:39 pm

Adam,

I wasn’t talking about his thought experiment. I was talking about his thought in general, and propertarian thought in general.

People like Nozick are almost worse than their far less intelligent followers. They lend an air of credibility to horrible ideas, because they can clothe them in enough jargon, elaborate twists and turns, and shiny objects as to make people forget the original roots.

I think Galbraith is right on the mark. But add right-libertarians to this as well:

“The modern conservative is engaged in one of man’s oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.”

80

UserGoogol 06.20.13 at 1:14 am

Plume@72: I suppose it depends on what sort of coercion you’re talking about. Nozickians do not consider the fact that people who do not work for capitalists will starve to death to be coercion, since the capitalists aren’t actively causing people to starve, they’re just passively allowing them to starve. I think this is stupid primarily because I think the doing/allowing distinction is bullshit, but I don’t think someone can legitimately embrace the distinction without being blind. On the other hand, there are instances where capitalists do actively cause people to starve by taking away their alternatives. (Privatizing commons people depend on, for instance.) This would be a situation where Nozickians are just plain being blind.

81

UserGoogol 06.20.13 at 1:15 am

Do think someone can embrace the distinction, I mean.

82

LFC 06.20.13 at 1:46 am

reason @75
Since he [Mankiw] worked for Bush he has become a pariah amongst Democrat supporting economists, in a way he clearly wasn’t before.

I don’t think working for Bush, in itself, would have made him a pariah. Also, why should he care? He has a tenured professorship and he has a textbook which — even if he is the only person who assigns it, will still make him money (and I’m sure he isn’t the only person who assigns it). He’s laughing all the way to the bank. I’m sure at this point he doesn’t much care how the profession views him — not that I know what that view in fact is.

A glance at this paper suffices to suggest that it is risible rubbish — see the ridiculous

83

LFC 06.20.13 at 1:48 am

[oops -- continuation]

…quote highlighted by Layman @45 (and repeated by me @70). No economist in his or her right mind, who thought about it for 2 seconds, cd possibly write that. Which suggests that he didn’t think about it…

84

roger nowosielski 06.20.13 at 2:26 am

@3 Ingrid Robeyns

I haven’t read all of the comments on this thread, let alone with a kind of scrutiny they may possibly demand, except for noting an overriding criticism of the author and his piece. And I wonder why.

To fly in the face of conventional wisdom, I should think it rather refreshing for an economist, an economist by profession, to introduce and to be guided by philosophical considerations, however naive or misguided we may think them to be. It’s a rare thing indeed, and the author should be lauded for having done so rather than put down, minimized, and generally speaking, relegated to irrelevance. As a philosopher, I’m certain you appreciate that point even if others don’t. Nuff said!

And let’s face it. What is the main objection, the cardinal sin of the author, the theme that runs through and though most every comment critical of him? Is it simply because he hadn’t got it right, that his conclusions fail the litmus test of political correctness, more importantly perhaps, that they’re wrong?

What’s being lost in the shuffle, I’m afraid, is that the author had arrived at his conclusions honestly. The argument is not only clearheaded but also clearly presented. If there be fault with it, fault him for the assumptions. Interestingly, however, not many interlocutors on this thread had gone the full route, and this is precisely which I find most suspect about their treatment of the author: they share the very same assumption as he, those which come with vulgar utilitarianism. No wonder, therefore, that most everyone is up in arms against the author of the piece, for the simple reason that he’d come to a diametrically opposite conclusion than they would have, and mind you, from essentially the same set of premises.

Go figure! But that’s the liberal mind for you.

85

adam.smith 06.20.13 at 4:10 am

roger -
To start – I don’t think the average commenter here is a liberal. My guess would be that social democrats like JQ or me are probably towards the right of the spectrum.

Then, most people here don’t engage with the essay because it’s so obviously terrible.
It’s not just the political philosophy that’s bad, but even the stuff that’s closer to home is ridiculous – the claim that educational opportunities don’t vary by class, untenable claims about IQ/achievement relationship that are contradicted by recent research (as noted above by Heckman who is a conservative economist himself), ignoring any of the literature on CEO pay (like Bebchuck’s rent-seeking paper, the most cited article on the topic) that doesn’t fit with his view – or for that matter any of the literature in polisci and economics that points to reasons other than “skill-biased technological change” for increasing inequality.

The reason people focus on the political philosophy part is that while writing a terrible paper is something that just happens in academics, using Nozick’s example without any attribution at a minimum smells of academic dishonesty – I think there’s a pretty good chance that a Harvard undergrad would be suspended for a year doing this in a term paper. That type of blatant disregard for scholarly norms is _not_ common, even among hacks. And that an economists thinks he is so smart that he should not engage with the political philosophy literature on re-distribution at all when writing about this is part of a larger problem of arrogance among economists who not infrequently make rookie mistakes because they think they don’t need to engage with subject specialists (cf. e.g. Levitt on climate change, Oster on missing women, Summers on women in STEMS etc.) so that’s also a general sore spot.

86

David Gordon 06.20.13 at 4:28 am

I don’t think it is correct to connect Mankiw’s argument with Nozick’s Wilt Chamberlain example. Mankiw argues for what he calls a “just deserts” principle of distribution, in which everyone’s income depends on his or her marginal productivity. (See p.21 ff of his paper) That theory is an example of what Nozick calls a patterned theory. In Mankiw’s account, the government would have to assess how closely actual income corresponded to marginal productivity and would if necessary intervene to correct for deviations from this pattern. Nozick used his Chamberlain example against all patterned theories, not just egalitarian ones.

Incidentally, it’s surprising that Mankiw does not cite John Bates Clark, The Distribution of Wealth, as a predecessor of his proposal, along with Wicksell and Lindahl, whom he does cite.

87

roger nowosielski 06.20.13 at 5:21 am

I believe most of the errors that have been attributed here to Mankiw do stem from but a few unwarranted assumptions, Adam: bad judgment calls, may be a better term. But the culprit, the main culprit, is the utilitarian view of moral/ethical/political philosophy which, much to my surprise, is still very much alive in this circle. Which, to my mind, explains the kind of nitpicking to which the author has been subjected (not that these points aren’t valid). in order to conceal the fact that the critics subscribe to the same major premise.

I’ll comb through the text to provide you with concrete examples, but this will have to wait some.

88

adam.smith 06.20.13 at 7:07 am

David Gordon – you’re misunderstanding the stipulated connection. It’s not that Mankiw makes the same argument as Nozick, it’s that he uses the exact same thought experiment as part of his (indeed rather different and much less sophisticated) argument.

roger – I’d be curious about that and I’m not sure I understand what you mean by “utilitarian” in this context. Rawls, who most liberals at least nod to in their political philosophy, was very clearly and explicitly anti-utilitarian.

89

reason 06.20.13 at 7:33 am

LFC @82
You seem to have internalised the “economic man” in a way that any Freshwater economist would envy. But I do think that Mankiw is instead a real human and probably is affected by the distain of formerly cordial colleagues.

90

Robert 06.20.13 at 11:28 am

Many economists have told that John Bates Clark was mistaken about marginal productivity, and that economists have long since discarded that point a view. Mankiw cannot even get the economics correct.

91

Chris Bertram 06.20.13 at 1:19 pm

Mankiw refuses to respond to critics and quotes from his fan-mail:

http://gregmankiw.blogspot.co.uk/2013/06/in-defense-of-me.html

92

Limericky Dicky 06.20.13 at 3:31 pm

O masterful Gregory Mankiw,
I cannot sufficiently thank you.
A fool in my vanity,
you schooled me in sanity.
Now would you permit me to wank you?

93

Barry 06.20.13 at 5:35 pm

LFC: “I’m sure at this point he doesn’t much care how the profession views him — not that I know what that view in fact is.”

At this point it doesn’t seem like too many Harvard economists care about how they are viewed by the profession. Or that they feel that there’s something unethical they could do which would actually be cared about by other economists. See ‘Inside Job’.

94

mds 06.20.13 at 6:00 pm

chris @ 28:

Jobs’s very early work may be more like Rowling than like Spielberg (in that he could have created the work itself in isolation and possibly even did)

As was briefly referred to in the recent Shirky Bleg, not so much. Or, to get more specific, Plume @ 40:

Jobs couldn’t have made his billions without

Steve Wozniak. FT, as the young people say, FY.

Layman @ 45, quoting Mankiw:

“… Many economists do support increased foreign aid, but as far as I know, no one has
proposed marginal tax rates on rich nations as high as the marginal tax rates imposed on rich individuals.”

In fact, forty years ago the eminent economist M. Python made the assertion, “I would tax all foreigners living abroad.” Mankiw really needs to review the primary literature.

Jim Henley @ 45:

“We are born with as many kidneys as we will ever have. Similarly, we are born with all the money we will ever earn.”

If Mr. Henley would provide wiring instructions, his awarded internet will be transmitted to him forthwith.

Substance McGravitas @ 65:

What a vicious and barbaric thing to write when you could simply have written of subsidy via invasive asset transfer. You know, euphemasia.

… Well, crud, and here I am, fresh out of internets. Perhaps we can appropriate a foreign nation’s internet through taxation.

Professor Bertram @ 91:

Mankiw refuses to respond to critics and quotes from his fan-mail:

So, we could read Mr. Nowosielski’s comments in more than one venue?

95

roger nowosielski 06.20.13 at 11:39 pm

@ 88

Here’s for openers, adam.s

Whatever the merits of Mankiw’s thought experiments which introduces his controversial paper – and I’m not concerned now with whether he’d borrowed it from another scholar with or without giving credit when credit is due – the first glaring inaccuracy (which seems to have escaped the watchful eye of most of the commenters) concerns the experiment’s applicability, and I quote here from the opening paragraph on page two:

“In my view, this thought experiment captures, in an extreme and stylized way, what has happened to US society over the past several decades. Since the 1970s, average incomes have grown, but the growth has not been uniform across the income distribution. The incomes at the top, especially in the top 1 percent, have grown much faster than average. These high earners have made significant economic contributions, but they have also reaped large gains. The question for public policy is what, if anything, to do about it.”

The first inaccuracy is a factual one: it’s debatable whether average incomes in US have in fact grown since 1970; Richard D. Wolff, for one, would argue to the opposite conclusion, namely, that since the mid-seventies, the (old) working class (which surely comprised the bulk of the middle class back then, which assumption, in turn, assures me that I’m not too far afield insofar as talk of “average incomes” is concerned) has experienced an unprecedented wage stagnation; and that set a whole bunch of other factors into play – the growing consumer debt so as to make up for stagnant of shrinking income being the most important – with we all know what consequences. We can quibble, of course, about the actual percentages, but I’m yet to remain convinced that Mankiw’s representation of facts squares with reality.

The second, concerning “significant economic contributions” (on the part of the top 1 percent), even if it were quantifiable, is an unwarranted claim (especially in light of the financial sector boasting close to forty percent of GNP in recent years). How does one measure “significant economic contributions” anyhow? And even if that hurdle could somehow be overcome, there’d still be room for divergent philosophical opinions as to what counts as “significant economic contribution”: a mere addition to the GNP or GDP or that plus an element of the “social good.”

I find it surprising, therefore, that Mankiw wasn’t taken to task on those two points, for if he were, the entire thought experiment he starts out with couldn’t get off the ground.

96

adam.smith 06.21.13 at 12:07 am

roger – I don’t think many people here disagree with any of what you write. See e.g.
http://crookedtimber.org/2013/06/16/annals-of-anti-egalitarian-hyperbole/comment-page-2/#comment-470752
and
http://crookedtimber.org/2013/06/16/annals-of-anti-egalitarian-hyperbole/comment-page-2/#comment-471044
for two comments that cite the exact same passage you do.
There are few people here who aren’t aware of declining median real wages in the US since the 1970s – this isn’t some obscure fact unknown to many, but something that has been covered extensively in both opinion and non-opinion journalism and in mainstream outlets like the NY Times, Slate, TNR, or MSNBC.

The reason most people here don’t engage with the paper in a rigorous fashion but rather pick out passages to poke fun at or discuss the details of Nozick vs. Mankiw is – I’d assume – that it’s just so ridiculously and obviously bad. Even economists think it’s a laughingstock
https://twitter.com/Noahpinion/status/346853962739240960
It just doesn’t call for serious debate, it calls for being ridiculed.

97

LFC 06.21.13 at 1:13 am

mds @94:

Layman @ 45, quoting Mankiw: “… Many economists do support increased foreign aid, but as far as I know, no one has proposed marginal tax rates on rich nations as high as the marginal tax rates imposed on rich individuals.”

In fact, forty years ago the eminent economist M. Python made the assertion, “I would tax all foreigners living abroad” [ha ha]. Mankiw really needs to review the primary literature.

Monty Python jokes aside, you, mds, and Layman are both misreading this quote, I believe. At least when taken on its own (ie I haven’t read most of the paper, I’m just going on the quote), it has nothing to do w taxing rich foreigners.

Rather, Mankiw in the quote is trying to make an argument of this form: ‘Look, if we want to tax rich individuals in the US to redistribute to poor people in the US, then we shd tax rich countries such as the US at the same rate to redistribute to poor countries. But no economist supports doing that, although some do support increased foreign aid. Therefore this suggests we shdn’t do redistribution much at all, period.’ I think that’s the argument he’s trying to make here.

As I tried to point out in my comment @70, this argument contains an elementary error: it analogizes intranational redistribution to international redistribution. They are not analogous, for reasons I pointed out @70. The argument is so flawed that one wonders whether a first-year student in Mankiw’s Ec 10 course would make it w a straight face.

As I mentioned earlier, it is easier to ensure that money redistributed within a country will get to its intended recipients than to ensure that money redistributed internationally will get to poor people in poor countries. That is
not a good argument vs international redistribution but it is a reason to avoid facile comparisons of domestic and international redistribution of the sort that Mankiw advances in the quoted passage.

A secondary, separate point is that there have long been calls for some sort of taxing of rich countries (but Mankiw is evidently unaware of this). For instance, as long ago as ’77, Barbara Ward published a newspaper op-ed titled “Taxing the Rich Countries to Aid the Poor” (Wash. Post, Dec. 18, 1977).

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Bruce Wilder 06.21.13 at 4:40 am

Mankiw wants “marginal” to do an awful lot of work.

Receiving one’s marginal product sort of defines his just desserts frame, and marginal taxes are bad, because those taxes will tend to reduce total output as part of the cost of redistributive taxation.

The classic retort, in economics, would be to analyze the role of economic rents, the portion of factor income, which doesn’t respond at the margin, and is morally “unearned”. Mankiw obliquely side-steps the problem of economic rents, by referring only to “rent-seeking”, which term he uses as a synonym for “predatory behavior”.

I’ve seen several commenters say they don’t think Mankiw believes anything like this claptrap. I think he might believe it, or something very much like it.

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Lee A. Arnold 06.21.13 at 5:00 am

Yes, it looks like a fundamental error in equating a person’s “marginal product” with the value of his or her personal contribution to the supply that is demanded. Suppose everyone were perfectly equal in brains, skills, physical strength, looks, athletic ability, etc. No difference between individuals. Do economists believe that in the resulting economy, everyone would have equal income and wealth? I imagine instead that in an economy with private ownership, some people would be closer to the rentable centers of the initial generators of value: specifically, mass manufacturing, financial paper markets, sociopolitical power hierarchies (even athletics), and/or geographic centers (which were more influential in another era of history). There is a “positional” aspect to this, and not everyone can fill the top positions.

100

Katherine 06.21.13 at 9:43 am

O masterful Gregory Mankiw,
I cannot sufficiently thank you.

Now I know how to pronounce Mankiw. I would never have guessed correctly.

101

Bruce Wilder 06.21.13 at 3:33 pm

I always mispronounce his name, as a sign of my deep respect for the great man.

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mpower69 06.21.13 at 4:30 pm

I didn’t realize the top 1% of income earners weren’t taxed at all. That doesn’t seem fair. The highest earners should be taxed the most, like a 35% or 40% income tax rate or perhaps higher… this would establish the proper incentives to achieve and succeeed. The more you earn, the less you keep.

The bottom 50% of income earners shouldn’t be taxed at all. In fact, real wages are declining these days so the bottom 50% should probably receive public assistance of some sort. Again, this would provide the proper incentives for people to remain in the lower/middle class and not make trouble.

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adam.smith 06.21.13 at 4:48 pm

In case s.o. is still reading – here is an example of an economist engaging with moral philosophy in a productive way http://www.wcfia.harvard.edu/sites/default/files/Sandel_final200213.pdf just published in the Journal of Economic Literature. This still isn’t great political theory, of course, but he takes Sandel’s argument seriously and relates it to what economists – rather than their caricature – actually think about markets.

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Bruce Wilder 06.21.13 at 8:19 pm

The article by Timothy Besley, which Adam Smith cites above, is certainly an example of a less ridiculous style than Mankiw’s, but, putting aside whether Besley takes moral philosophy seriously, I think Besley is still vulnerable to the criticism of not taking economics, or its egregious faults, seriously enough. There are conceptual problems with economics, which drive the ideologies of conservative libertarianism and neoliberalism and their deleterious effects on the political discourse and policy choice. Besley politely and diffidently acknowledges problems with the ideologies, without really tracing any responsibility back to the core doctrines. In fact, he appears to think the cure would be for economics to issue more generic poisons by extending the existing apparatus (market design!), possibly to be distributed under the same ideological brand names.

The other day, Mark Thoma had a column in Pete “let me steal your Social Security, please!” Peterson’s Fiscal Times, which was titled, Seven Important Examples of How Markets Can Fail. On his blog, he added as a preface to the title: Free, Unregulated Markets are Not Always the Answer: Thoma is no right-wing ideologue; he presents himself as having slightly left-of-center political sentiments and mainstream views on economics. The theme of his blog is to highlight the middle or consensus range of well-informed or authoritative mainstream views, as informed by academic economics thinking and teaching. And, his article presents a consensus view: that competitive markets are an emergent phenomenon, liable to a canonical list of “market failures” identified by theoretical analysis, which failures can be imperfectly remedied by government interventions, designed to move the failing markets “toward” the competitive ideal. I imagine Besley would mildly acknowledge that this is a common, and common textbook view, but might object that, surely, there are more advanced and sophisticated assessments — that’s how Besley avoids accepting more than the most minimal and grudging responsibility for the failings of economics as a profession or doctrine. And, so Thoma’s formulation remains the hand-waving, which, in other, somewhat more polemical contexts, becomes either Friedmanite libertarianism or neoliberalism.

rootless @ 15 identified the fundamental flaw with Mankiw: “The fundamental weakness of Mankiw is his unwillingness to admit the role of the state in markets.” And, we can trace that flaw to Thoma’s clichéd formulation of competitive markets as an ideal, with no state in sight, until one of those “failures” can be identified. It is utter nonsense: perfectly competitive markets never exist; they are a logical impossibility, useful, perhaps for clarifying concepts, but having no factual existence and can hardly form an “ideal” useful as a practical guide*. Markets cannot exist without the public goods structure provided by the state. Markets and the public-goods providing state are co-emergent; politics and economics together, neither logically antecedent to the other.

As soon as one admits that “private” markets require “public” goods to exist or function, then you are confronted with the problems of paying for the public goods as well as the implications of an economic structure of markets and hierarchies. Structured markets means that there are never markets in everything; there are always numerous structural constraints, and not just the deus-ex-machina constraints of Technology, but the political structuring of hierarchical organization, in which private selfishness lives alongside the public spiritedness and enlightened self-interest in a peaceful, safe and cooperative society. Wilt Chamberlain’s income consists in the largest part, of an economic rent, which is unearned, and which creates a cushion which dampens to non-existence the effect of marginal taxes on his income — even a 70% tax on Chamberlain’s income isn’t going to have him forego basketball and the life of fame, luxury and sexual debauchery, which it affords him, for some other occupation, where his marginal productivity isn’t amplified by the technologies of arenas and television broadcasting. (Television broadcasting, we might note in passing, distributes a “natural” public good through the commonwealth of frequency spectrum, in a way that generates vast “private” business incomes, because of a complex and elaborate political infrastructure.)

None of what I wrote in the paragraph above is any kind of radical or original departure from the core of “orthodox” economic thinking. It is colored a bit by my personal values, but the logic and acknowledgement of reality is not some bit of heterodox esoterica; this is, or should be, orthodoxy, and acknowledged by economists across a spectrum of personal values. Besley, Thoma and Mankiw simply do not see any reason to be bound by sound economic thinking — they may think they take it seriously, but they don’t. No idea is ever really wrong, no identification of necessary and sufficient factors forms a boundary, which cannot be breached by willful speculation or a comfortable truce among colleagues in the cafeteria. Mankiw is more ridiculous, more frequently than most polemicists with a Chair at Harvard, but the abuse of privilege is commonplace in the economics profession, and just as evident in Besley’s or Thoma’s mild-mannered weakmindedness, as in Mankiw’s ridiculous incompetence.

*There’s a well-known doctrine of the second-best in economics that would seem to tell against this prescription to move toward an unobtainable “ideal” like perfectly competitive markets, but Thoma, characteristically, does not feel constrained by his awareness, and even acceptance in other contexts, of the doctrine of the second-best.

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Fu Ko 06.22.13 at 5:27 am

It just so happens that it was vendors of operating systems, rather than the manufacturers of the personal computers, who were in the best position to capture the value of the personal computer revolution. The OS vendors had vendor lock-in, which allowed them, essentially, to capture the value of all of the application software. (When Microsoft sells a copy of Windows, it’s actually selling you access to the work of thousands of application developers who are not paid by Microsoft. Indeed, not just the work of the application developers, but the work of application users, is part of the value Microsoft gets to monetize. If you want to be able to print a .doc file, you don’t pay the author of the file — you pay Microsoft.)

But it was obviously the advance of the Integrated Circuit that created the real value behind the PC revolution. And the IC cannot even be attributed to any solitary genius. It was merely the culmination of continuous advancement in physics and engineering. It was even invented simultaneously and independently at two different companies.

The only way to conclude that Steve Jobs and Bill Gates created the value they captured from the PC revolution is to start with a premise that says whoever made the money created the value.

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Fu Ko 06.22.13 at 6:52 am

Why do we say that Wilt Chamberlain created the value of the millions of dollars he received? It does not take a PhD in economics to observe that there were no millionaire sports stars before the invention of broadcast; whereas afterwards, there have been thousands of them. It seems to take a PhD in economics to ignore it.

The value-creation is attributed to Chamberlain, and not Marconi, because Chamberlain made the money, and Marconi did not. If society were so structured as to allow Marconi (and his descendants) to capture all of the profits from broadcast advertising, Nozick would not have become an activist demanding redistribution of money from Marconi’s estate to Chamberlain. He would have just used Marconi in his example instead of Chamberlain.

At the bottom of this circular logic the literal complete absence of any rational-technical criteria of value-added.

This is absolutely necessary, since the application of any remotely plausible criteria other than income would quickly lead us to the realization that our entire society — that is, every person currently alive — has added a tiny portion of the total value of what exists (and therefore of what can be owned). We ourselves, the living, as an entire society, can take credit at most for the advance in standard of living between 2013 and (approximately) 1900. From our dead ancestors, we inherit the advance in standard of living between humans living in 1900, and wild chimpanzees.

Technology and knowledge accumulate. No one adds more than a lifetime of labor to the millions of lifetimes of labor inherited. But some inherit much more than others.

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