The problem with “left” neoliberalism

The list is right as far as it goes, but doesn’t it miss the real difference? I had thought the main argument was that neoliberals lack a theory of politics. And I thought that was right.

OK, that wasn’t clear. The phrase “the real difference” doesn’t come with qualifiers.

In any case, while I agree with this post, i think you need to be careful about mixing up the arguments that we should care about distribution because relative income matters, and we should care about distribution because the absolute income of the poor matters. Because the Wilkinsons of the world aren’t wrong to say that the inflation-adjusted incomes of the poor are comparable to those of households well up the distribution just a few decades earlier. If a flat-screen tv is a genuine source of wellbeing and not just a status marker, then the case for prioritizing equality oveer growth gets a lot weaker.

So how does one solve the problem of say the Chicago public schools or public housing with money? The structural problems that lead to the city being in the state its in won’t go away because you give more money: the actors will always have different incentives from those they serve. Don’t forget that the rises in more core goods like transport, health, and shelter, that probably compensate a lot for technological growth.

Didn’t Yglesias recently write a post in response to John Quiggin saying that real income isn’t everything?

“…the fact of the matter is that the median American household has quite a lot of money compared to the median household of almost every other country. And yet, I think there are a lot of other respects in which quality of life in the United States falls short. We spend a lot of time in traffic jams. We have both a frighteningly high murder rate and a frighteningly high level of incarceration. Our health care system is very inefficient. Americans work very long hours and have unusually little vacation time.”

All of these things he mentions overwhelmingly affect poor people, and aren’t much cured by increasing their real income at the margin. I think you’re exaggerating the differences between you and “left-neoliberals”, if that indeed is what Yglesias is.

This post is a promising sign that intra-left (for U.S. values of left) blog arguments might actually be going somewhere interesting, which I’d pretty much given up hope on.

Cranky, I think you can tie that fairly directly to inequality again.

The personal service job depends, inherently, on massive inequality. The existence of your hypothetical $70k/year personal maid job relies on the existence of people with earnings dramatically higher than that.

On the other hand, if I have a job in a toilet factory, then my continued employment depends on a more-even distribution of goods. The Prince of Wall Street stockbroker doesn’t buy dramatically more toilets than the autoworker in Detroit. The factory worker benefits more if income gains are distributed over more households, as that is more likely to increase demand for those goods.

If the best way to improve the real well-being of the worst off is to incentivize the talented (thereby increasing inequality) then that’s the right thing to do.

This is just too vague, even if we do accept that only the absolute income matters. Should the CEO be incentivized by getting paid twice as much as the janitor? Or should he be incentivized by getting paid 1000 times more? Why don’t they produce the multiplier that maximizes janitor’s income, and then we’ll see. I suspect, it won’t be very high.

Chris, this is an excellent post and clarifies a lot of things, at least for me. Would it be fair, in your mind, to rephrase the distinction between the two positions as follows: Your position — which, if I understand it correctly, I share, for the most part — presumes that inequalities matter because they generate power differentials between rich and poor (and everyone in between) that can be and are exploited in such a way as to have a real impact on the well being of those further down the ladder (I’m still unclear if that consequence for well being is what you think matters about those inequalities or if it’s just one of many things that matter, and is maybe even not the most important consequence; also unclear if you think the neoliberal position is open to that possibility but is just skeptical that it’s an actual consequence). The worker/employer relationship is of course the classic instance of this. The neoliberal position looks at income/well being of individuals in isolation from each other. Not entirely, of course: to improve the lot of the worst or the worse off, you have to establish that they are in fact worse off in relationship to someone else. But that’s mostly it: it’s an index of where to target your policies, but it doesn’t see those at the bottom or beneath in any kind of dynamic relationship to those who are above. It essentially presumes that we live our lives in isolation, and if we can just have enough of the good things in life, we can be on our way to enjoy them. Whereas I — and I think you — don’t believe that’s how these things go. Inequalities of income and resources generate inequalities of power because we do live and act in relationship to others. At work, in the home, at the level of the state, and elsewhere. Or am I misunderstanding your argument and/or pushing it in a direction you don’t want to go?

it’s simple: matt doesn’t believe that he can use his opinions to rally people. he uses arguments to correct misstatements or bad policies, not to spur action. (ie the public option was always dead because his logic told him so, etc)

a matt y that’d passionately argues positions that can never ever pass, while not describing the realities of a 60-vote senate for the millionth time? that would be awesome. social movements aren’t started by carefully describing the world as it is and adjusting your positions accordingly. they are brought about through arguing for a world that should be, despite the overwhelming evidence to the contrary.

> If we can sum up the neoliberal position as “grow and
> redistribute” I don’t see the problem.

I haven’t seen the modern (generally young) neoliberals defining their position as that. Generally I have seen the Slashdot formula with a slight modification in the payoff line:

1) Lots more growth, primarily by implementing libertarian theories [1]
2) Profit!
3) ?????
4) Happier, more just, higher-welfare, Pareto-optimal society!

As always it is that undefined step 3 that is the problem.

Cranky

[1] Hippie punching optional.

For any desired level of income equality, there is a progressive income tax that will get you there.

Except that’s not even remotely how the world works.

So how does one solve the problem of say the Chicago public schools or public housing with money? The structural problems that lead to the city being in the state its in won’t go away because you give more money: the actors will always have different incentives from those they serve.

Is the educational architecture available for poor Chicago schoolchildren better today than it was in 1940? Yes. Is the educational architecture available to poor Chicago schoolchildren better than it was in 1900? Yes. Is the educational architecture available to poor Chicago schoolchildren better than it was in 1850? Absolutely.

So what changed, in economic terms? Oh yeah, that really obscure thing called “real income.” Real income is higher today than it was in 1940, it is higher today than it was in 1900, it is higher today than it was in 1850. Income is fungible; more income overall means more can be re-allocated from other areas to education.

And better education results.

The inability and unwillingness of people to make intertemporal comparisons (which are the best comparisons there are if you want to talk about real income) is just silly.

Add to these concerns some worries about the natural and social environment. If you think that neoliberal policies are also often associated with an erosion of the natural environment and of the social commons (I do) then you’ll have further reason to believe that rises in inflation-adjusted income don’t give you the true picture about real levels of well-being.

The first carbon tax in all of North America (and probably the entire Western Hemisphere) was implemented by a centre-right Liberal (and proudly neoliberal) government in Canada (in the British Columbia province). I believe it is actually set to rise in a periodic manner. So I think your point is pretty soundly refuted at least in the environmental department.

I haven’t seen the modern (generally young) neoliberals defining their position as that. Generally I have seen the Slashdot formula with a slight modification in the payoff line:

Step 3, at least for Yglesias-style neoliberals, is “redistribute downwards.” See, for example, Matt’s neoliberal coming-out post (third result on google for “Pas D’Ennemi à Gauche”). Here is his policy agenda quoted from the post:

— More redistribution of money from the top to the bottom.
— A less paternalistic welfare state that puts more money directly in the hands of the recipients of social services.
— Macroeconomic stabilization policy that seriously aims for full employment.
— Curb the regulatory privileges of incumbent landowners.
— Roll back subsidies implicit in our current automobile/housing-oriented industrial policy.
— Break the licensing cartels that deny opportunity to the unskilled.
— Much greater equalization of opportunities in K-12 education.
— Reduction of the rents assembled by privileged intellectual property owners.
— Throughout the public sector, concerted reform aimed at ensuring public services are public services and not jobs programs.
— Taxation of polluters (and resource-extractors more generally) rather than current de facto subsidization of resource extraction.

I see nothing on this list that is incompatible with even radical egalitarianism. Now you can argue that neoliberals have no good political plan for achieving this outcome. But the policy agenda is clear enough.

> Is the educational architecture available for poor Chicago schoolchildren
> better today than it was in 1940? Yes. Is the educational architecture
> available to poor Chicago schoolchildren better than it was in 1900? Yes.
> Is the educational architecture available to poor Chicago schoolchildren
> better than it was in 1850? Absolutely.

I’m not going to get into this byway on this thread, but my big-city public school diploma is twisting my arm to post the query: do you have any idea what your words “yes” and “absolutely” are trying to accomplish in your paragraph? Do you have any idea about the number, average quality, and percentage of high performers that the big-city school districts turned out between 1880 and 1970 (and some, such as NYC and Chicago, still do to a lesser extent)? Do you have any idea what the loss of essentially free labor in the form of college-educated women denied employment elsewhere did to public school budgets and the “architecture of learning”?

Also, have you ever looked at the percentage of children who are students in public school students in big-city vs. suburban vs. exurban districts over the last 40 years?

I’d like to be charitable but I have to suspect the answers to those questions are “no”.

Cranky

> Explain? Do you think Nordic-style redistribution is
> problematic in this regard?

Explain? Do you think the German policy of maintaining reasonable amounts of tangible goods jobs, skilled labor, and product quality standards while using social pressure and legal/tax nudges to keep ruler:ruled compensation & wealth ratios in reasonable alignment is problematic in this regard?

Cranky

u = A + ln(i/c)

But there utility still rises without limit in income. I want one where the limit of u(i) is finite as i goes to infinity. I know Sen uses a utility function like that somewhere, but I couldn’t find it so I just wrote the simplest one I could think of.

Right now (as always), it’s time embiggen the pie. At an undefined future date, the pie will be so big that nobody will oppose redistribution!

Yup. That’s it in a nutshell.

Allowing the vast majority of the wealth and concomitant power in a national society to collect in the hands of a very few (whether that is 10%, 1%, or 0.1%), then “redistributing” some of that via confiscatory taxation[1], cash payments, and cheap big-screen TVs is not compatible with even basic concepts of decent work and self-sustaining (ie non-charity) economies much less radical egalitarianism. Again, neoliberals simply won’t address those points whether in the concept of a theory of politics or not.

Yes. It’s what Mike Konczal calls “pity-charity liberalism.”

Thanks for the clarification, Chris. So to follow up, do you think part of the problem with the left neoliberal view — the reason why it is skeptical that inequality has an impact on well-being (even though it’s open to that argument) — is that it doesn’t really understand individuals as living and acting in relationship to one another, relationships that often involve differentials of power? Again, my sense — admittedly from afar — is that what allows left neoliberals to see improvements in income and well being at the bottom rungs as consistent with galloping inequality is that they don’t understand those in the bottom tiers as in any kind of relationship with those above them. It’s that vision of individuals in isolation — i.e., just grow the economy, redistribute through transfer payments, and all will be well — that allows them not to think much about inequality and its impact on well-being. Or no?

Allowing the vast majority of the wealth and concomitant power in a national society to collect in the hands of a very few (whether that is 10%, 1%, or 0.1%), then “redistributing” some of that via confiscatory taxation[1], cash payments, and cheap big-screen TVs is not compatible with even basic concepts of decent work and self-sustaining (ie non-charity) economies much less radical egalitarianism.

Yes, this is worth repeating. That’s their “third way” idea in a nutshell: the top 1%, the aristocracy, incentivize themselves up the wazoo, while the rest 99%, the sheep, the peasants (un-licensed barbers, cab drivers, and yoga instructors), they live mostly on handouts, supplementing those (mythical) massive transfers with 50c/hr wages.

Neoliberal strategy of ‘grow and redistribute’ is being critcised for lacking a theory of politics. But consider the resilience of programs with a significant redistributive component like Social Security, Medicare and how difficult it has been for its opponents to make cuts in these programs. Even the Republicans opposed Medicare cuts temporarily for political points. These programs create a strong constituency which defends them.

The main problem, if anything, seems that these programs dont go far enough and cover everyone. If there was a program which would give a basic income (of say, 1/4 the mean income) to everyone, then this program would be very difficult to remove, once passed. Everyone not just poor people should benefit from the program, both because of marginal tax issues, and more importantly it creates a far broader base of support rather than just the bottom 10% of the population. Welfare programs which were diminished in the 90’s suffered from this political problem.

The political problem, here, seems to be a one time issue – of how to get it passed initially and not a sustainability problem. With increasing unemployment and automation of many common jobs, there is a chance that an opportunity opens up just like when bills like Social Security where passed. IMHO, direct redistribution this way seems more doable and valuable than a more indirect way of using unions to increase labor power.

If you take an historical perspective, neoliberal market economies have a long and impressive track record in bringing benefits to the least well off in societies where it is practiced (and to more and more countries where it is adopted). Nobody does it better than Hans Rosling:

http://www.youtube.com/watch?v=jbkSRLYSojo

http://www.ted.com/talks/hans_rosling_and_the_magic_washing_machine.html

If you think that neoliberal policies are also often associated with an erosion of the natural environment and of the social commons (I do)…

I just can’t imagine holding that position given the appalling record of communist countries as compared to western countries with respect to the environment. It seems pretty obvious that as wealth produced by neoliberal economic policies rises, demands by citizenry for a cleaner environment and preservation of natural areas increase. It also seems clear that democracy is essential for allowing citizens to freely press those demands (as, for example, they are not yet fully able to do in China). So wealth and democracy gives you a clean environment, and neoliberal policies have proven themselves compatible with this formula.

But consider the resilience of programs with a significant redistributive component like Social Security, Medicare

True, but those programs are under attack, and those attacks have already been somewhat successful — the increase in the Social Security age is a substantial cutback in benefits. Whereas in the postwar era where pretax/pretransfer income was more equally distributed, redistributive programs were being substantially expanded, instead of just being (barely) preserved.

And if temp, I suppose, thinks that the Nordic model of redistribution is completely independent of the fact that those countries have the highest union density in the world.

I continue to think that while the normative arguments Chris makes here are right, and important, the political untenability of left neoliberalism is the really decisive strike against it.

the top 1% have 20% of income but pay 38% of federal income taxes

This is a meaningless statement. Of course the tax system looks progressive if you pick out the one progressive component of a system that includes progressive, flat and regressive components. Might as well say that the top 1% have 20% of the income, but pay 100% of the taxes paid by the top 1%. (Confiscatory!)

The relevant question is the share of total taxes paid. In fact, the top 1% have 20% of income, and pay 21.5% of total taxes. There is no significant downward redistribution through the tax system.

Cranky: If you’re asking whether I prefer the Nordic to the German model the answer is yes.

In the last thread on this topic (or perhaps the one before that), it was claimed that Germany was the epitome of neoliberalism. Growing economy, highish taxes, high quality universal services, and in particular high quality, directly-useful education available for the non-academic. But minimal inequality-addressing transfer/insurance payments, at least by European standards (famously less than Greece).

So I think some definition of terms may be in order.

I think this is a useful article in this context, especially in how the mention of the same Amartya Sen paper is used.

http://mondediplo.com/1999/09/06poverty

“Explain? Do you think the German policy of maintaining reasonable amounts of tangible goods jobs, skilled labor, and product quality standards while using social pressure and legal/tax nudges to keep ruler:ruled compensation & wealth ratios in reasonable alignment is problematic in this regard?”

No, it’s not problematic per se. But it’s far more effective in Germany than it would be in the U.S. because German culture is far more comfortable with authoritarian/communalist governance than American culture is.

Alright, Mr. Chris Bertram. I do not convince easily, and you have convinced me that you are right and your view is more sophisticated and humane than the left neoliberals’, not to mention better describes the human condition. What do I have to read to understand your position on the level that you do, so that I’m not just taking your word for it?

Lemuel, The cuts might be somewhat successful, especially when facing a budget crisis, but I am trying to make a smaller claim – ‘Grow and redistribute’ policies can have very strong political forces supporting them even if these forces sometimes fail. Politicians are afraid of being seen to be cut these programs. Going back to MY’s point, is it clear that the other strategies like unionization are stronger and more successful? Of course, one strategy doesn’t exclude the other.

@Norwegian guy: Because one may have more costs then the other. If your goal is reducing inequality, there may be ways you don’t choose because of that. Or to put it a more polemical way: by accepting that we are going to reform capitalism, we remain within its logic, and so have to deal with all the effects of our policies. In effect, we’ve created a situation in which an apolitical technocratic rule becomes the best means for our political goals to be achieved, which doesn’t bode well for anyone.

@Norwegian Guy: Part of the disagreement is that neoliberals don’t see inequality as inherently bad. Oftentimes, they argue that inequality is instrumentally good, with the argument that inequality drives growth and that the larger total economy will admit larger redistribution to everybody who loses out.

I don’t know if they make it explicit, but they don’t support redistribution that would actually reduce inequality or reallocate shares of income.

I believe the principle is that while the bottom quintile get 3.5% of total income now (using Lemuel Pitkin’s numbers from #45), neoliberals intend to (for example) double the real per-capita GDP while shaving the bottom quintile’s share down to 2% of the larger total. They consider this acceptable (and even desirable) because the amount of income has grown.

I don’t know if they would agree with that phrasing, but it’s clearly implied.

@elm: Shouldn’t we all agree to that situation as an alternative to the present? I would prefer the bottom whatever get 5% with 2xGDP, but I’m not sure why I should care about inequality as compared to inadequacy of certain things.

I believe the principle is that while the bottom quintile get 3.5% of total income now (using Lemuel Pitkin’s numbers from #45), neoliberals intend to (for example) double the real per-capita GDP while shaving the bottom quintile’s share down to 2% of the larger total. They consider this acceptable (and even desirable) because the amount of income has grown.

Which comes back down to the definition of who or what is neoliberal and/or left-neoliberal. Because clearly CB is:

1. claiming Blair and New Labour were one or the other
2. acknowledging they did succeed in doing better than the above on _relative poverty_.
3. counting them as, nevertheless, failing by his own standards.

What I am not quite clear about is exactly on which grounds he is claiming they failed. I am seeing at least five distinct arguments, not all of which are strictly contradictory, but seem unlikely to all be equally valid:

1. a house built on sand: GDP growth was created, but that was more or less illusory, and that fake growth has to be deliberated reverted by budget-balancing austerity measures before real growth, and so redistribution, can resume. Presumably this is the position of any economic literate leftist who still supports the Lib Dems.

2. income inequality directly matters: even when it doesn’t correspond to relative poverty (e.g. Championship vs. Premiership footballer).

3. absolute rather than proportional inequality matters: so if everyones income grows by an equal percentage, then the poorest are worse off.

4. theory of politics: the political process that led to New Labour winning elections and governing are not replicable in the USA, and may not be repeatable in the UK.

5. have you seen Merthyr?: the numbers are in some way wrong, true relative poverty did increase in a way not captured by the statistics

6. something else.

“Both Egypt and Taiwan undertook land redistribution policies at around the same time. Why was it that in one case inequality dropped, and in the other case, inequality remained largely the same?

Why is Venezuela such a repressive and corrupt place? I posit that it’s because Chavez is addressing inequality without a large faction of the population having accepted the need.”

No causal mechanisms mentioned at all here. No history or sociology of either of those countries taken into account.

In my opinion, the problem of inequality is not posed from the correct angle:
Suppose that there are some jobs that pay me 10, and other jobs that pay me 100.
Why should I settle for a job that pays me 10?
In a stalinist country, someone shows up and beats me with a big bat until I agree to work for 10. But we are more civilized, and thus use unemployment: since I need to eat something and have some shelter, if I can’t find nothing better I will settle for the job that pays 10.
Extreme levels of inequality thus can exist only as long that there is a form of soft coercion called unemployment that can force workes to settle for low wages; otherwise workers would ask higer wages, that would cause inflation and eat up unequality. This is the idea that there is some “moral hazard” in paying high unemployment subsidies and in similar forms of help to the poor.
In this sense, the idea that we can have a sistem with big inequalities because it permits faster growth[1] and then tax and redistribute is wrong, because such a system could not work in reality.
This idea seemed to work during the “great moderation” for two (interconnected) reasons:
1) we live in a world economy, in which many people in developing nations had an still have wages close to subsistance level
2) many financial umbalances had been papered over through an increase of leverage.
At least the second condition seems to be no more possible.

[1] I am not so sure that an increase of inequality is so useful or necessarious for growth.

@60…

What I’m getting at is that there was an actual evolution in thinking in about economic matters that happened here. The jury is out on whether it’s right or now, but I generally consider the attitudes present by CT writers to have very little flexibility in terms of engaging with newer economic thinking. For example a common meme throughout these threads is that of “nudges”. However, the concept by Sunstein isn’t engaged with any depth at all, and less than the treatment that Charles Stross’s new book Rule34 does (in a total conspiratorial fashion, of course). Furthermore, Sunstein has incorporated a pretty deep vein of intersectionality between agency, politics, and economics. I think that Sunstein is much more easily able to empathize with what Bertram, Quiggen, et al is trying to argue, than the inverse relationship, therefore, I do not think Bertram can easily hang with Sunstein in a no-holds-barred debate–not because Bertram is dumber, but because he seems to be much more constrained in understanding what fields of decision/probability matters, how they intersect, and the values of juggling different value systems in applying different intellectual architecture towards a real-world problem. It strikes me that he’d see David Romer’s “work” on fourth downs in American football in a way that is too flat, 2-D, and would only make the obvious connects to the broader society.

Moreover, I’d see the way that Amartya Sen is used in this blog-post, and I’m like, no, but HELL NO–Sen would be firmly on Yglesias’ side here. I have not read that particular article, but Sen is fundamentally about how raw poverty constrains choices, in my mind. Inequality is part of the story, but basic material inadequacy enables political and economic inequality just as much as it’s caused by inequality. It’s things like this that makes me think that Bertram et al sometimes have serious trouble following the various flows of power, politics, economic, whatever. There are zillions of feedbacks everywhere, that goes every which way and there are tons of theories, by many really smart people, like Al Hirschman, that get modded by present day thinkers. I don’t really perceive Yglesias as thinking about issues in a way that’s fundamentally different from Cristina Romer, if you read her papers. Of course, one could say that it’s evil neoliberal thinking that’s infected Yglesias. I would say it’s because we’re all reading a certain generation of books and thinkers and I think they have substantial influence, not because they are charlatans waiving around a new fad, but because they are empiricist who are seriously anti-Green Lantern, and who are able to adequately attack the concept of The Big Move.

Personally, in my readings, I’ve argued and ranted against people. I bet within 5 minutes of meeting Ernst Fehr, we could have a beautiful feud going. I’ve bought books like Reputation and International Cooperation by Tomz, which I was totally disappointed by (and learning that I really have to be careful about ambitious dissertation by far too young people). I’ve read Findlay and O’Rourke’s Power and Plenty, and totally caught on to the change of themes right when the chapters that talk about living memory occurs. I am just really familiar with the brands of neoliberal thought that I *do* despise, and I am familiar with their characteristics. I think other people do, too, and that “left neoliberalism” as it is understood by me is *really* unfairly painted. Then again, agency and politics and history, and all that crap is really, really messy.

But social solidarity is already undermined today. (I’ll admit we are now changing what we are talking about). Painting the egalitarian 1960’s as a socially harmonious time in the US is not going to fly. Besides, does political equality affect my well-being except in the services I am provided? Does social solidarity ever matter except when I need to fall back on society? An argument could be made (and is definitely a reasonable one) that extreme inequalities in wealth and power lead to neglect of the lower class without the capacity for organization in the present moment. If you’re worried about the effect not having work has, then how about we eliminate work as a socially orienting category? (What made Riders of the Purple Wage a horror story was the welfare state. Its the lack of this that makes the Culture a utopia)

Bullshit Artists. Forgive me, but I just watched a short clip of Ezra Klein, one of Matt’s pals, try to explain what America must do to save the economy. Matt majored in philosophy as an undergraduate and is, by all accounts, bright. That alone, IMHO, doesn’t qualify Matt to pen a tome on foreign policy, which I believe he has. Nor do I think Matt has enough work experience or training in economics, foreign policy, or political science to understand these well enough to wax eloquent on these topics in public discourse. I know I don’t.

Like it or not, the left is losing the war of public opinion on many fronts. Right now, as I tap, ratings agencies have just downgraded US debt. It’s extremely difficult for me to see how employment numbers are going to rise in the near or middle term. I work as an adjunct and tip-toe back and forth between academia and the private sector. I can assure that it’s scary out here. Really scary. And we are relatively well situated. Yet, in the midst of all the madness we have people without training or the special knowledge required to understand complex problems telling people who do that they are wrong. John to his credit is both gracious and unbending.

Watching, reading, and listening to Matt and Ezra reminds me most of sitting in grad seminars with students who haven’t done the readings wax forth. Matt is a professional propagandist at Think Progress right now, I believe. (Sorry, to single him out.) In that sense, he’s a lefty, one of the choir. However, he shouldn’t be a soloist, without additional training and experience, and his place is probably in the pews. Ditto Ezra.

The challenge for the liberal left is daunting. The academic left needs to do a much better job of reaching out and educating the very people many here profess to loathe, those frightened individuals terrified of losing the way of life they hold dear. Namely, the tea party and its supporters. Instead, the left offers sneers. Doing better is a necessity, not an option. And part of doing better job of educating the public and winning the public debate is re-establishing the authority of the well-educated. Matt, Ezra, (and I) simply aren’t in the same league as Henry, Chris, and John and others here, when it comes to questions of political science and economics, theoretical or applied. No shame in that.

I see more tribalism than a willingness to engage and bond, with rare exceptions. We simply can’t reduce the concerns of people fearful of losing their homes to “racism” and then expect the same people to listen to us again. Ever. That’s us shooting ourselves and the poor in the face.

We face enormous challenges. I frankly don’t see us making any progress until we sit down with the folks so frequently belittled here and elsewhere. They need to be engaged and challenged on a personal and intellectual level. As do we. We’re in this together, like it or not.

I’m not, btw, suggesting we lecture “our intellectual, moral, and social inferiors” to eat their peas. Many already do and enjoy the dish. Nor am I holding my breath, however.

“Because one may have more costs then the other. If your goal is reducing inequality, there may be ways you don’t choose because of that.”

When that’s the case, the commonsensical solution is to pragmatically do a bit of everything, not to go all-in for one particular solution. But what costs are we talking about? After all, neoliberalism has been extremely costly for the world economy.

This whole discussion is premised on a hypothetical question:

“the bottom quintile get 3.5% of total income now (using Lemuel Pitkin’s numbers from #45), neoliberals intend to (for example) double the real per-capita GDP while shaving the bottom quintile’s share down to 2% of the larger total. They consider this acceptable (and even desirable) because the amount of income has grown.”

i.e. that more equality leads to less growth. What if this is not the case? The thought experiment is then rendered pointless. And lo and behold, real world data indicate that neoliberalism has been disastrous for growth.

What if one were a mere utilitarian without differential weighting? How different would one end up?

Probably still in favour of prioritising the material and other needs of the poor. Or, at least, you will if you believe that the marginal utility of income decreases as income increases. (i.e. beleive that earning an extra $10 a week will do more for the happiness of someone earning $100 a week than for someone earning $100,000 a week). If this seems plausible to you then, everything else being equal, you would believe that optimal policy will focus on increasing the income of the poor for the simple reason that this is a more efficient way of maximising overall utility than increasing the income of the rich.

The idea that the marginal utility of income decreases as one gets wealthier is intuitive. It’s also supported by almost all the available evidence. See for example this paper by Kahneman and Deaton [pdf]

Of course, everything else may not be equal. Maybe high levels of inequality are the price we must pay for economic growth, which itself will help the poor if it increases their incomes. However, even here the best available evidence suggests that <i>high</i> levels of inequality don’t foster rapid growth and that, in fact, they impede it (see this paper by William Easterly [pdf]).

shah8, colorless green ideas sleep furiously. Perhaps you could clarify your position by linking a relevant (and comprehensible) short piece, written by Yglesias or Sunstein?

elm @59: “Part of the disagreement is that neoliberals don’t see inequality as inherently bad.”

Well CB hasn’t really argued that inequality is inherently bad in the OP either AFAICT. He argues that left neoliberals underplay a set of non-economic instrumental disvalues of inequality.

When you say ‘effects (actually not just non-economic) on individual well-being’, do you mean ‘national level political mechanisms that will tend to cause miscellaneous large scale bad things (poverty, environmental decay, war, etc.) ‘, or ‘personal level psychological/social mechanisms that will tend to cause small scale bad things (bad health, poor career choice, Daily Mail reading, unhappiness)’?

I think those two things are different enough that any political plan of action to attempt to address one or the other would have little in common.

Cranky Observer: Neoliberalism has only existed since around 1985

Since the beginning of the industrial revolution, the policies associated with neoliberalism have been in effect most of the time. In U.S., they were really only (partly) out of fashion for decades between 1930 and 1975. Here, neoliberal reforms began not under Reagan, but Carter — including major deregulation of trucking, airlines, and telecommunications industries. Carter was also the president who signed the bill legalizing home brewing, eventually resulting in the explosion of microbrewing in the U.S. Clearly that part of the neoliberal deregulation still has a ways to go:

http://www.huffingtonpost.com/2011/08/03/rawsome-raid-_n_917540.html

http://www.acresusa.com/toolbox/reprints/Salatin_Sept03.pdf

A college friend of mine founded a software startup. (In an area of the country that does not abound in CS/software opportunities)

5 years later, he had about 80 people working in it, most of them making considerably more than the median wage in the US. Then he sold the company to a bigger fish for 300 million dollars or so.
He made millions on his stocks, his workers’ options were worth mostly in the low six figures.
(The product is still being developed, and the acquiring company has actually added positions to the facility.)

Obviously, the inequality between my fiend and his former workers skyrocketed, but it would be odd to claim that they are worse off.

@david, can you elaborate your plan to make everybody rich on software stock options? And did the janitors of the company get 6 figure sums?

Well the arrow of time argument shows that it can’t be mere correlation. It has to be either causation, or wrong (i.e. ‘screwing up the study’). Failing to control for parental social status would be the most obvious way of doing so: hopefully any real error would actually be more subtle, as the report’s author doesn’t appear to be an obvious hack:

http://www.ucl.ac.uk/ucl-iris-project/iris/staffprofile.php?ref=MJKIV95

@David

I can take that anecdote as supporting my point. Assuming it happened as described, that was a good thing, and is not made otherwise by it’s effect on meaningless aggregate metrics.

The mistakes of the last decade were more in the opposite direction: just because something isn’t influencing an aggregate in a way you would, in the abstract, prioritise, _doesn’t mean it isn’t a problem_.

You wont get far with ecology by looking at ‘total biomass’, or some similar aggregate. You need to at least talk about predators and prey, summer and winter, herds and nests. Once you get that structure right, you can measure the elements of the structure. Not before.

Well, yeah, mw, as a library drudge in a public institution, I wouldn’t have begrudged Andrew Carnegie the big bucks, but I never would have agreed that his intrepid contributions to the general welfare, or even his libraries, could justify putting down the Homestead Steel strike. Just how does entrepreneurial stress justify dissing a Wall*Mart greeter who can’t afford to go to the doctor, teaching your kids that poets aren’t worth feeding, or kissing Robert Rubin’s bum.

@Henri: But the only way to do that is to abolish capital, not through some regulation. The employees knew they would not be receiving the full value of the company. They sold their labor to the employer and in doing so alienated themselves from its products. No ones work was stolen: everyone received an amount mutually agreed upon for their efforts. The employees could have taken less in wages and more in options or more in wages and less in options by moving to more or less established firms (given the competitiveness of the industry for workers, this is a reality right now). Or should we force all employees to take lower wages in the hope that the company might be worth more?

@93: yes, that logically _might_ be true. But the effect they are talking about is of a similar size, and in exactly the same cohort (mid-ranking UK civil servants), so it does seem to strongly undermine the case that it actually _is_ true.

And I would think political decisions should generally be taken on the latter basis.

@96: The thing to be beware of here is the kind of voodoo economics that says ‘startups increase inequality, so if we increase inequality we will increase startups’.

Case in point: the plan of the current UK conservative government, worried about anaemic growth and balancing the budget, to _cut the top rate of income tax_. How could they possibly come up with a story that enables that without people going round preparing the case by talking about hypothetical moral trade-offs between growth and equality?

National level metrics are almost always acausal, so meaningless, simply not something that can be involved in a trade-off. Sentences that talk about them have negligible potential truthiness, like arguing whether or not a particular wine tastes of liberalism.

What matters are class-level numbers, like:

how much land reform will the landowners tolerate before they start forming goon squads?

what level of services need to be provided to the middle class before they systematically start evading tax?

what level of income needs to be available for someone with minimal skills before they abandon the job market?

@Henri, yes, by arguing that the 80 should have instead formed a partnership. I pointed out that in the employment market for programers this is already a possibility. 87 and 92 are not arguing the boss’s $300 million payout is essential for those working at the startup, but rather that the workers decided to not take a risky $3.75 million and instead receive a salary. When the workers were negotiating with the boss that $300 million did not exist. It could easily have not materialized. The boss could easily have decided to take on additional founders to shed risk. He chose to retain that risk, but had to compensate by paying higher salaries since employes do include stock options as benefits. Would you want to tie a significant amount of your compensation up in the fortunes of your employeer, particularly if your employeer has a nontrivial risk of going bust?

> mw @ 12:46
> Since the beginning of the industrial revolution, the policies associated
> with neoliberalism have been in effect most of the time. In U.S., they
> were really only (partly) out of fashion for decades between 1930 and 1975.

That is an interesting reading of US economic history, particularly of the early Industrial Age and Gilded Age vs. the 1950s, but you are really going to have to cite some substantial works – dozens of them in fact – to support it. Because such a theory requires quite a bit of retconning and very large leaps of, well, leaps of something not found any standard reading of political economy.

Cranky

A couple of points:

1. I’m not sure everything on Yglesias’ list is egalitarian – his emphasis on reducing licensing for “skilled” trades could very well lead to a slump in wages of those trades, causing unskilled workers to move sideways instead of forward while decreasing the incomes of those skilled workers (a parallel could be seen in the mechanization of textiles: low-wage agricultural workers became low-wage factory workers, skilled weavers’ wages decreased in their new employment). Likewise, “concerted reform aimed at ensuring public services are public services and not jobs programs” harms the ability of government to expand public sector employment to fill the employment gap and especially hammers one of the few sources of living wage jobs in the African-American community.
2. Just to push Bertram’s point about neoliberals’ lack of a political strategy a bit further: I think we can also hypothesize that pre-tax interventions on inequality increase the likelihood of pro-equality politics beyond social movements. In part, this is about decreasing the load that redistribution has to carry – if you have more unions/etc., not only do you have pro-equality social movements going on, but you’re more likely to have more wage compression, meaning you have less inequality to redistribute. Likewise, in the realm of political identity (as opposed to mobilization), if you have wage compression, you are more likely to see recognition of commonality across professions/skills/classes, etc. leading to support for universal policy as in the Swedish model.

This brings me to temp at 18 – while it’s true that theoretically, you can just redistribute the inequality away, in addition to Bertram’s point that inequality makes the politics of redistribution harder, there’s also the issue that inequality makes you have to do more redistribution than would otherwise be the case. It means that policy is swimming ahead of the current, instead of with it.

redis at 39 – the problem with basic income is that it runs head-on into deep cultural beliefs. Americans (and I’ve seen the same results in U.K research) HATE gmi with a passion – even poor Americans who would benefit from it. Here, it’s not just a question of coverage; GMIs don’t accord with deeply held beliefs about the importance of work, reciprocity, etc. Those same people are much more positive about Guaranteed Annual Wages or Job Guarantees.

cranky at 42 – I think 1985 is too late for an emergence of neoliberals. From my own research, I’d say a starting point has got to be in the 1970s.

sha8 at 69 – you give way too much credit to nudge as an innovation. It’s nothing new, and it runs into the same political problem that Bertram alludes to. Namely – if it’s invisible, you don’t generate a constituency for its continuation.

kidneystones at 73 – Tea Partiers are likely to be conservative Republicans from middle class/upper middle class backgrounds, not disaffected working class. Why should we waste energy in trying to win their votes?

@StevenAttewell: At least in chicago the patronage system is doing tremendous damage to schools and hospitals, because the politicians target the least powerful to receive the worst services. You raise a good point in your reply to temp, but I’m not sure we can cleanly separate government support for unions from government support for redistribution. They had very different effects, but both depended on the government.

107
Watson Ladd – I guess what I’m saying is that there’s a difference between treating government as a jobs program and corruption. For example, there were plenty of good government types in the War on Poverty who felt that expanding civil service employment (the Post Office, etc.) would be a good way to help out unemployed people of color – and it’s one of the few things they were right about.

I’m not saying that you should “cleanly separate government support for unions from government support for redistribution” – I think one feeds into the other.

mw @ 5:49,
I think it is quite clear from the thread what claims you have made and how they have changed as they have been challenged due to weaknesses and inconsistencies. Please answer the challenges posed upthread; then if still necessary we can continue the discussion.

Keep in mind that the topic of the last 3 discussions has been neoliberalism as currently defined, which didn’t exist before 1970 at the very earliest, and also the modern form of neoliberalism which I claim came to the forefront in the Age of Bl0gging (2002 forward). The topic is /not/ what carefully cherrypicked features of the Gilded Age can be matched up to carefully cherrypicked features of today’s political economy.

Cranky

Henri Vieuxtemps: ‘Founders & investors’ could be 10 million people investing 10 bucks each.

Investors, yes — founders, no. So go over to Kickstarter.com and make some investments. Maybe ‘crowdsourced’ venture capital is the wave of the future. But even if it is, the founders with the big idea are going to insist on holding onto a bigger share of the equity than each of their countless $10 micro-investors. And the employees (as opposed to investors) will continue to get their paychecks, but not equity unless they also make investments (or unless stock or options are negotiated as part of their pay). As it should be.

People who invent things and spend 10 years to promote it most likely are not motivated by the big payoff. If all you want you is money, you should probably quit messing around with frisbees and just go and rob a bank.

And just how did you determine that inventor/entrepreneurs are not motivated by the money? Robbing a bank doesn’t tend to result in a multi-million dollar payoff (which inventing and prom0ting and selling rights to the frisbee ultimately did) — or the freedom to enjoy it.

Did I miss anything? Read some Scott Adams.

Yes, you did. Startups are not the bureaucratic, sclerotic organizations that Scott Adams satirizes. Eventually, those older companies tend to get their asses kicked by newer, nimbler, more efficient companies (Blockbuster meet Netflix, Borders meet Amazon). At that point, the older companies either get their acts together or fade away as countless formerly large tech companies have in recent decades — DEC, Nortel, Sun, and many others — you may be able to add RIM and Nokia to that list before too long. Today’s giants all live in fear of the same happening to them (or at least they should — the well-managed ones do, anyway).

Cranky Observer: I think it is quite clear from the thread what claims you have made …

Uh, yeah, I’m never really up for the silly ‘if you don’t know, I’m certainly not going to tell you game’.

We’re really in uncharted territory since capitalism was previously countered on the right by various traditional power groups such as land owners and on the left by socialist and communist movements. It will be interesting, if only in the sense that witnessing the vivisection of a live human being is interesting, to see what capitalism without an effective opponent turns out to be.

StevenAttewell @ 105:

My claim wasn’t that everything on Yglesias’ list was egalitarian, just that it was compatible with egalitarianism. Do everything on the list and then implement a progressive income tax and you’ve got whatever income distribution you’d like. Supposing that Chris is right about the difference between him and Matt, and supposing he convinced Matt to change to his position on equality, what would Matt actually have to change about his policy agenda? As far as I can tell, all he’d have to do is emphasize point 1 more–instead of redistributing X downwards, redistribute Y, with Y some amount greater than X. He wouldn’t have to change his list at all. And we’d still call him a neoliberal.

My point is that the defining difference between left-neoliberals and other leftists is not on the desired level of equality. It’s how to get there.

>> Cranky Observer: I think it is quite clear from the thread what
>> claims you have made …

> mw
> Uh, yeah, I’m never really up for the silly ‘if you don’t know, I’m
> certainly not going to tell you game’.

mw, you made a number of specific claims. Such as your 7:47 PM where you claim that neoliberalism defeated Soviet Communism. When I pointed out that neoliberalism (note the “neo”, as in “new”) didn’t exist until some time between 1984 (my version; Gary Hart’s Presidential run) and 1970 (other posters’ assertion) and therefore could not possibly have had anything to do with the collapse of Sovietism (which is generally thought to have been done in by competition with social democracy) you pivoted into an incredible claim that neoliberalism has existed since “the dawn of the Industrial Age”. When I asked for some citations to that heretofore unknown theory of the political economy of the 1800s you put up another smokescreen. Please – have some basic respect for the ability of those participating here to read and remember what you posted just 20 entries up the thread.

Cranky

Like a lot of conservatives, that is.

In this example, I bring up specific problems with the Spirit Level data and offer specific cites to research contradicting it. That data and research is dismissed with “I’m unsurprised and unimpressed by the fact that the friends of inequality (and any number of conservative and libertarian think-tanks and pundits) are resistant to its findings.”

I’ve learned a lot — certainly I have a lot of new questions to ask about policy — from reading the comments here. But I was hoping to learn much more about ways thoughtful economists might address issues about well-being that, although fully implicated in issues about income and power (in)equality, can’t be reduced to questions about different individuals’ income or access to capital.

Beyond taking as given that eating, being housed, and having access to basic healthcare are necessary for every person’s well-being (let’s leave eccentrics like Socrates and the Cynics to the side), and beyond the arguments about, say, how best to measure the distribution of wealth in relation to health or how best to incentivize software designers…. What about measuring well-being in terms of things like time? Time for friends and family, time for civic engagement, time for hobbies, for reading, for going to ball games or concerts, for preparing home-cooked meals, for fishing, for scratching one’s ass? (I always figured time was an area of Economics. Julie Shor’s work comes to mind, but there are plenty of more conventional economists who worry about time, no?) What about the presumption of mobility (people will flow where the jobs are), when that mobility is disruptive or even destructive of family, friendships, community (cf. CB’s “social solidarity”)? (Didn’t Adam Smith himself recognize the problems with the presumption of mobility?) What about women, who for some time to come, I assume, will be bearing children and taking most of the responsibilities for early care, at the very least? Are marriage and raising children still of great value to most people, male and female, including those who themselves don’t marry or raise children? (At the very, most crass least, somebody has to produce and socialize future producers and consumers.) I heard questions like this lurking in CB’s post — maybe he’ll be taking them up later. Did so many comments go elsewhere because the questions I’m raising can’t so easily be addressed with measurements of number? Maybe in part, but I think something else may be up.

“especially when you aren’t in a position to review and assess the evidence personally for whatever reason.”

Chris, come on. You’re very interested, obviously, in the subject of inequality, and you’re sophisticated enough to be able to review and assess statistical evidence. “The Spirit Level” is a much-cited text by advocates of the “inequality is bad for people” position that you’re taking as a baseline in this post. Sebastian’s critiques of “The Spirit Level” seem pretty straightforward (in the sense that they’re making factual statements that are true or not) and not all that difficult to assess. Yet your response was essentially “I’m not going to respond to this comment because it repeats things that friends of inequality say.” That seems weak at best.

At the very least, why do you think Hong Kong and Singapore look very similar in spirit-level terms to Japan, despite having much higher levels of equality? Does it bother you that South Korea was excluded in favor of Portugal, given the fact that if you’d done the opposite, the book would have find no correlation between equality and health results, social cohesion, etc.? Do you really think the Nordic countries’ high levels of community trust are a replicable consequence of lower inequality? Surely all these questions are important if you want to know if your statement that high levels of inequality are bad for people’s “real well-being” and undermine social solidarity is actually true, rather than simply a blind statement of faith.

“The points about the inclusion and exclusion of certain countries are well-addressed by W&P at their website. You can go there and look up their responses. (The specific cases you refer to are straight out of the attack literature btw).”

If you don’t want to talk about TSL, that’s fine — I’ll shut up after this comment. (Although if you or anyone else does have a response, I’d be very interested.) I’ll only say that the points about the inclusion and exclusion of certain countries are certainly not well-addressed by W&P at their website, which is why I asked about them here. South Korea and the Czech Republic are among the 50 richest countries in the world, and have populations greater than 3 million people. They’re both richer than Portugal. (The same can be said of Hong Kong.) Yet W&P leave them out.

I also don’t understand the failure to control for absolute levels of income, or to control for cultural variables. That is, I don’t understand how you can demonstrate that inequality causes lesser well-being if the only variable you’re controlling for is inequality. And again, I don’t think W&P have adequately answered this objection.

Actually I have no idea who Snowden is. I got much of it from Tino Sanandaji’s work on it where he goes through the individual regressions.

I think we’ve just witnessed a major breakthrough in artificial intelligence. The technology has advanced to the point that AIs can comment in blog comment sections.

@Walt Not really, I could make a Doolittle script pretty easily. Just a mashup of racist, sexist, bromides that had nothing to do with the topic at hand. It couldn’t pass a Turing test, but neither could Doolittle.

It seems ironic, Curt, that you’re so sure of your ethnic paradise idea at exactly the moment when this is happening:

On Saturday night, more than 250,000 protesters across Israel demonstrated while waving red flags symbolizing old-time socialist political movements, and chanting for “social justice” and a “welfare state.”

Wait, is this the same *Sebastian* that used to troll Calculated Risk?

This and the previous post simply make me more aware of the utter inadequacy of economics as a way of looking at socio-political issues. Inequality and its impacts are – as Chris points out – much more than a matter of relative income. And incomes as measured in dollars are not the whole story either – it also matters what the money signifies and is used for. The issue is not to even out dollar incomes, but to nudge societies towards political and social structures that minimise the tensions, waste and miseries that flow from the more egregious kinds of inequality. And it seems to me the more we look at this through the lens of economics, the more we lose sight of this aim, or of any associated possibilities. The kind of thinking exemplified by Meredith’s comments above strike a different and richer note.