Income, welfare, convergence

by Chris Bertram on January 27, 2011

Doug Saunders has “a blog post”: about Branko Milanovic’s new book “The Haves and the Have-nots“: . I haven’t read the book, but, according to Saunders, it denies that there is a convergence in living standards between Western workers and the Chinese. Here’s the reasoning:

bq. “If the U.S. GDP per capita grows by 1 per cent, India’s will need to grow by 17 per cent, an almost impossible rate, and China’s by 8.6 per cent, just to keep absolute income differences from rising,” he observes. “As the saying goes, you have to run very, very fast just to stay in the same place. It is therefore not surprising that despite China’s (and India’s) remarkable success, the absolute income differences between the rich and poor countries have widened.”

bq. And they have: Even as the Chinese worker has gone from $525 per year to $5,000 in two decades, the average American worker has gone from $25,000 to $43,200 – meaning that the income gap has widened from about $25,000 to $38,000, and, he notes, “of course so has the absolute gap in welfare between the average American and the average Chinese.”

Spot the non-sequitur. Even if the dollar income gap has widened in absolute terms there’s no reason to believe that the welfare gap has similarly widened, for the simple, and obvious reason of the declining marginal utility of income. On any plausible picture, the $525 to $5,000 transition is life-changing, whereas the $25,000 to $38,000 change is merely nice (especially if enough other people get the same increase and much of the increase goes on bidding up the price of inherently scarce goods).

Saunders continues:

bq. You may think of the United States as a place of extremes of wealth and poverty, and it is. Nevertheless, at the moment, the very poorest people in America, the 5 per cent with the lowest incomes, have better lives and more purchasing power than the top 5 per cent of income earners in India and the top 10 per cent in China.

Well I won’t quibble with the “more purchasing power” point, but “better lives” is really pretty dubious, since we know that by many objective measures “poor black men in the US do worse than even some poor people in India”:

Information Feudalism

by John Holbo on January 27, 2011

Matt Yglesias writes:

A lot of our politics is about symbolism. And symbolically intellectual property represents itself in the contemporary United States as a kind of property—it’s right there in the name. But it’s better thought of as a kind of regulation. Patents and copyrights are modeled, economically, the same as you would model any state-created monopoly.

I think the idea that intellectual property is property is too entrenched, at this point, for this to be an effective rhetorical strategy. Furthermore, rhetoric aside, philosophically the real breakthrough would be for people to realize that defending property rights is not tantamount to defending freedom. What strong IP protection generates is not a free market but something more like information feudalism: a market-unfriendly clusterfuck of fiefdoms and inescapably inefficient lord-vassal terms-of-service arrangements that any friend of freedom, in any ordinary sense, ought to look upon with disgust. The reason why libertarian rhetoric – defend property rights! – can underwrite feudalism, of all things, is that a certain sort of libertarianism, i.e. so-called propertarianism, really just plain is a form of feudalism. I’ve made the case at length.

I don’t see much hope of making a snappy rhetorical case that would break the unhealthy property = freedom link. But I think it might actually be possible to sidestep it by coming up with something like ‘information feudalism’ or ‘cyberfeudalism’ as a catchy term for IP rent-seeking or patent trolling. (Of course, ‘rent-seeking’ and ‘patent trolling’ are already pretty snappy.) To put the point another way, lots of folks are so averse to ‘government regulation’ that you will never get them to trade ‘private property’ talk for ‘regulation’ talk, as Yglesias suggests. But really what these folks are operating with is a kind of centralized = lots of regulation; decentralized = deregulated mental shortcut. The advantage of ‘feudalism’ would be to break that by making vivid the obvious possibility that decentralized stuff can still be too highly regulated, in effect.

UPDATE: turns out someone wrote the book already. Or at least picked a great title already.