In a previous extract from my book-in-progress, Economic Consequences of the Pandemic, I argued that unequal incomes arise to a large extent from luck rather than merit. Unequal incomes are regularly justified by claiming that high incomes reflect a larger contribution to society. This has never been true as a general proposition.
Some high incomes, like those of skilled surgeons, reflect a contribution well above the norm. Others, like those of entertainers and sports stars, reflect services that are highly valued by our society whether or not they make it a better place.
Others on high incomes make only marginal contributions to society or cause active harm. The massive growth in the number and incomes of lawyers and finance professionals over the past forty years has not been matched by any obvious improvement in justice, financial security or the rational investment of capital.
The majority of people in these professions are, at least, attempting to earn an honest living in the system as it currently stands. But a substantial minority, exemplified by Donald Trump and Jeffrey Epstein, make their money by exploiting the loopholes in the system, and by campaigning to keep those loopholes open and widen them as far as possible. These are people for whom paying debts and obeying the law are options to be adopted when it is necessary for business purposes, and evaded whenever it is profitable to do so. And they have a legion of well-rewardd assistants – the Roy Cohns, Michael Cohens and Allan Dershowitzes all play their part.
By contrast with the highly visible upper end of the income distribution, many workers who make a vital contribution receive far less payment or recognition. The pandemic has reminded us how much we depend on workers we may never see and who work in difficult and sometimes dangerous conditions. Cleaners, meatworkers, grocery store packers and many others ensure that the goods and services we expect are delivered, even under the crisis conditions of the pandemic. Low-paid hospital workers are just as essential to the functioning of our health system as the most skilled surgeons.
The continuing appeal of the idea that high incomes are generally deserved stems largely from wishful or even magical thinking, of the kind that is reflected in the ‘Prosperity Gospel’ and the writings of Norman Vincent Peale. We want to believe tht the universe, or at least the country we live in, is inherently just and that only in exceptional cases do bad things happen to good people.
But the universe doesn’t care about us; the rain falls on the just and the unjust alike and, if there is a divine plan for justice, it doesn’t manifest itself in this life. Certainly, there is nothing in the pandemic that suggests its depredations have anything to do with justice.
As for justice in human affairs, it doesn’t simply happen. Justice comes only from a long struggle and can only be kept up with more struggle. The pandemic has done the greatest damage to the poor and low-paid whose efforts keep society running while leaving Wall Street and the professional classes largely unscathed.
Most defenders of inequality are unwilling to abandon the belief that high incomes go to those who deserve them. An important exception is Hayek, who argues that what should be rewarded is the value people create for each other, regardless of whether that value is the result of merit or luck.
This argument works only on the assumption that the return someone can secure from our existing market arrangements is a measure of the value we create for others. But it’s obvious that all of this is contingent on those existing arrangements: a different society would value contributions differently. Even within the limits of market capitalism, changes in things like intellectual property and bankruptcy laws can make valuable claims worthless and vice versa.
Stripped of the rhetoric of ‘value’, Hayek’s claim can be more simply stated as follows: a free market economy rewards luck as well as merit, so, if we want to maintain the free market economy, we must accept that income will not, in general, reflect merit. But looking at the outcomes of last few decades, they do not seem positive enough to make Hayek’s argument work. The market economy as it now exists is not such a boon that we should tolerate the inequities it generates.
{ 24 comments }
CHETAN R MURTHY 10.01.20 at 6:31 am
A long time ago, at a very large computer company, a certain chip designer who was well-regarded and had done excellent work, went to the director of research, and demanded to be paid a small percentage of the value he’d added to the company (which was quite considerable, and easily measured-to-be quite considerable). The director of research replied that this was impossible: that compensation increased logarithmically with contribution, because otherwise there would be (and I quote) “mass starvation”.
People who don’t recognize this simple fact and act on it, commit a certain kind of ceteris paribus fallacy: they believe that if they are paid commensurate with their contribution (and let’s assume that it’s accurately and fairly measured) that that will not destroy the basis of society, even though if everybody was (and now we go to the inaccurate and unfair measurements we actually get), society would fall apart. I read someplace that all the various familial and social structures that libertarians and other market fundamentalists assume to exist, in order to allow companies and individuals to act in an entirely selfish manner, are predicated on people possessing enough free time and spare income, to build those structures. And again, you impoverish people and those support structures go away. And then the assumptions underpinning the entire market economy go away.
And all of that, all of that, doesn’t take into account that the least-qualified nurse’s aide adds more value to our society than entire floors of workers in hedge funds. Entire. Floors.
Peter T 10.01.20 at 8:18 am
As I pointed out some time ago, it is quite impossible to accurately measure any the value of any individual’s input to a system of cooperative production. If the surgeon drops dead, some people will not get surgery. If the cleaner drops dead, the whole hospital falls sick. If the accountant makes a mistake or the storeman misplaces a part than, depending on redundancy and a few other things, the boiler blows up or the meals don’t arrive. If the sterilisation tech gets it wrong, the surgeon is left without instrumensts and the operation does not happen.This is why military systems – subject to deliberate attack – stress multiple redundancy and overlapping competencies.
We pay people based on prestige, established practice, their bargaining leverage and their proximity to cash flow. We can’t do otherwise, because we have no way of determining their ‘value’.
Hidari 10.01.20 at 8:18 am
‘The continuing appeal of the idea that high incomes are generally deserved stems largely from wishful or even magical thinking, of the kind that is reflected in the ‘Prosperity Gospel’ and the writings of Norman Vincent Peale. We want to believe that the Universe, or at least the country we live in, is inherently just and that only in exceptional cases do bad things happen to good people.’
CF Just World Theory, a fantastic psychological theory that would get far more publicity if psychology weren’t dominated by Steven Pinker and those who think like him.
https://en.wikipedia.org/wiki/Just-world_hypothesis
CF also the Good Book, which Conservatives sometimes pretend to have read.
“I returned, and saw under the sun, that the race is not to the swift, nor the battle to the strong, neither yet bread to the wise, >strong>nor yet riches to men of understanding, nor yet favour to men of skill; but time and chance happeneth to them all.”
William Meyer 10.01.20 at 11:37 am
Per Greg Mankiw, this theory of “merit” can be describe as “just desserts.”
“An alternative to the social insurance view of the income distribution is what, in Mankiw (2010), I called a “just deserts†perspective. According to this view, people should receive compensation congruent with their contributions. If the economy were described by a classical competitive equilibrium without any externalities or public goods, then every individual would earn the value of his or her own marginal product, and there would be no need for government to alter the resulting income distribution.”
Even if, for the sake of argument, we concede this argument, that still leaves a gaping hole in society’s arrangements: the lack of a massive welfare state for children. After all, no one would maintain that the standard of living for children is the consequence of the children’s “just desserts”–rather, it is obvious that the unequal provisioning of children’s nutrition, healthcare, education, exercise, environment, etc. clearly would undercut or swell their adult ability to create his or her “marginal product.”
And yet, supporters of this “just desserts” theory never quite get around to discussing this massive “flaw” in our social arrangements and proposing the complex social interactions necessary to deliver the rigidly egalitarian childhoods their own theory would prescribe. Perhaps the argument is not being offered in entirely good faith?
reason 10.01.20 at 11:50 am
Mmm. I’m missing a reference here to two simple ideas.
1. People are rewarded for doing what rich people want under capitalism
2. Creating value and extracting value are two different things.
And what peter t. Said.
Tm 10.01.20 at 12:01 pm
The Covid crisis has made public opinion sympathetic to the argument that many of our economic priorities are wrong, and that the way status and pay are apportioned in this system is both unjust and inefficient. The question now is whether this situation can be turned into actual change. Unions and progressives in many countries are mobilizing to this effect. Have there been concrete successes? In some countries, health workers have gotten small bonuses but that’s all I know of in terms of concrete consequences, which is rather disappointing.
Matt 10.01.20 at 12:29 pm
Low-paid hospital workers are just as essential to the functioning of our health system as the most skilled surgeons.
I was a very modestly paid hospital worker for about three years, while I was in college, working as a “technician” in the in-patient pharmacy of one of two large hospitals in a modest sized city. My jobs included gathering all the medicines prescribed by doctors, sending them to the floors, preparing the “standing” prescriptions” patients for the next day each night, making a few medicines up when they were things we didn’t have pr-packaged, and, a bit later, preparing IV medicines for patients, among other things. This was a job somewhat higher in prestige than being an orderly, and maybe slightly higher paid. (I’m not sure – I never asked an orderly what they were paid, but it could not have been massively less than what I was paid.) When I was hired, it was taken as a plus that I had a modest background in chemistry, but really, all that was required was an ability to read, to do very basic arithmetic, and to be able to follow fairly simple directions. I note this to say that, while it is true that a hospital can’t function without people doing jobs like the one I did, and others, it’s also the case that you can find people who can do those jobs very easily. By the end of my first week I could do most of the tasks of my job without mistakes, despite having literally no background. I could do the more “sophisticated” parts w/in a couple of months, with minimal training. Surgery, and other forms of being a doctor (or a pharmacists) are not like this, of course. This doesn’t have any implications for the moral worth of the people. (Many of the doctors I met were in fact fairly bad as people – arrogant, rude to subordinates and patients, and worse at their jobs than they would have been if they had been better people.) But it seems to me to be unhelpful to at least not note that, even if all of these jobs need to be done, some of the jobs can be done by nearly anyone, and some of them take, at the least, very significant amounts of training and skill.
MisterMr 10.01.20 at 12:47 pm
OP: “An important exception is Hayek, who argues that what should be rewarded is the value people create for each other, regardless of whether that value is the result of merit or luck.”
I can’t say what Hayek actually tought, but for what I can understand the idea that markets reward “merit” work this way:
1) Suppose that in country A some people make shirts and some others make throusers.
2) Suppose that there are too few throusers and too many shirts; as a consequence the relative price of throusers will go up and the relative price of shirts will go down.
3) As a consequence throusermakers will make more money (they are rewarded) than shirtmakers (they are punished); this doesn’t imply a moral judgment about shirtmakers and throusermakers in themselves but about the usefulness of their production GIVEN THE RELATIVE QUANTITIES.
4) Ideally, some shirtmakers get tired of making small money and start making throusers instead; this is the actual “invisible hand” that restores the correct proportion of produced stuff.
5) As the market reaches the correct proportion of produced stuff shirt become more expensive and throusers less expensive, so that in the end, if all goes well, EVERYONE MAKES THE SAME MONEY.
For some reason, conservatives who are pro free markets ignore steps 4 and 5.
Now as inequality is steadily increasing, it is evident that something is not working very well: either there are big distortions in the market so that the “restoration of the correct proportions” doesn’t happen (rents) or the relative share of output between labor and capital is not regulated in the same way that the relative price of stuff is regulated (this would be the classical VS neoclassical conundrum in economics).
Apart from this, I think it makes no sense to say that a neurosurgeon “merits” higer pay than, say, a pub bouncer: if the neurosurgeon makes more money, to the degree that it happens because of the aforementioned mechanism, this is because there are too few neourosurgeons and too many bouncers, so the correct answer would be to subsidize education for neurosurgeons until there are enough neurosurgeons that they make the same money than the bouncers.
And on the other hand it makes no sense to say that the bouncer (or al lawyer, or whomever) has less “merit” than an “essential worker”: as productivity goes up, the share of production that goes into “necessities”, susistence goods basically, will fall relative to the share of production that goes into luxury goods (including luxury goods consumed by the working class), so automatically less and less people will become “essential workers”, but this has nothing to do with merit.
Ebenezer Scrooge 10.01.20 at 1:01 pm
I generally believe in attacking an (intellectual) enemy’s stronghold, not their weaker defenses. “Merit” is the weak defense of the Mammon crowd. Their stronger defense is that income inequality is necessary to provide incentives to work hard and take risks.
There is some truth to this, I think, especially with the risk-taking part. But not as much as the Mammonists think, and some of it is particularly perverse. Smart poor hardworking kids go for sure things that are useful to society, like engineering and accounting. Smart rich hardworking kids go into entertainment or politics. More income equality might create more engineers!
CHETAN R MURTHY 10.01.20 at 7:52 pm
Scrooge @ 9:
“Their stronger defense is that income inequality is necessary to provide incentives to work hard and take risks.”
Even this is remarkably weak. high compensation and income inequality provide incentives, but to do WHAT? It’s pretty well-documented that almost all financial-sector activity is a zero-sum game, after all. The wondrous advances in “ad(vertising) tech” have succeeded in killing off ournalism, bravo! So much winning, and all because “the incentives are right and people are working hard and taking risks!”
Matt @ 7 describes doing a pretty low-skill job, and he argues that the doctors who made much more money than him did jobs that require far more skill and training. But this is also true of the nurses and nurses’ aides: their jobs require skills and training, as well as nearly-infinite amounts of compassion and human caring. And (IIRC) patient outcomes in hospital are directly correlated with amounts of time spent by nurses with those patients. And yet, nurses and (esp.) nurses’ aides are paid a fraction of what doctors are paid.
But really, it all comes down to what reason @ 3 wrote. Brad Delong wrote about this, citing Takeshi Negishi: https://www.bradford-delong.com/2016/08/must-read-welfare-economics-and-existence-of-an-equilibrium-for-a-competitive-economy-negishi-2006-metroeconomi.html
[Delong goes on to cite from Negishi’s paper]
Scrooge, you’re right to argue that this is the “strong” position of Market Fundamentalists: that The Market Cannot Be Rrong, and Is The Only Path To Salvation. And it’s completely bankrupt.
Orange Watch 10.02.20 at 3:36 pm
Peter T@2:
This is why military systems – subject to deliberate attack – stress multiple redundancy and overlapping competencies.
It also reflects strongly in how dramatically militaries put in the charge of MBAs aiming to created “lean efficiency” have suffered to the degree that they have – and why the MBA’s panacea of contracting civilian specialists to provide just-in-time solutions for competencies that were “streamlined” doesn’t really offset it.
William Meyer@4:
And yet, supporters of this “just desserts†theory never quite get around to discussing this massive “flaw†in our social arrangements…
The typical dodge in this regard is to refuse to acknowledge that developmental outcomes are impacted by anything but the child’s instilled or innate character, with the former reflecting the parents’ virtue and the latter reflecting the child’s innate virtue. The copious research demonstrating how deep links between circumstances and outcome run simply don’t resonate deeply enough in public discourse, not least because public discourse as amplified by media has gatekeepers whose jobs/bottom lines depend on pleasing people who want to believe their success reflects meritocracy. I’m reluctant to ascribe bad faith to most of these people when intellectual laziness and a disinclination to look past personally satisfactory superficial conclusions explains it roughly as well.
steven t johnson 10.02.20 at 5:57 pm
My “something is wrong on the internet” button got pushed. The aptly named Ebeneezer Scrooge@9 wrote “…income inequality is necessary to provide incentives to work hard and take risks.” Having excess property is required to be able to take personal risks with your chattels. But capital investment by government from taxes or other revenue can be done without gross inequality. The implication that the invisible whip of starvation is needed to make people work hard is cheap cynicism. The idea that hard work is more productive is itself a sample of just world thinking. Collapsing the distinction between unequal incomes and unequal property makes it meaningless. Maximum income of twice or thrice the minimum is as likely to promote hard work. And there is no evidence whatsoever that unequal property makes anyone work “harder.”
There is something disheartening about an economist who accepts the language of “privilege” while claiming to reject the language of “merit.” There is no distinction whatsoever. But both imply an acceptance of earned privilege, aka “merit,” while substituting moral condemnation of the privileged on the most absurd grounds. The animus against the underprivileged is their personal failures, their personal responsibility for their lack of privileges, their unworthiness of merit.
One can object to how miraculous it is that if our friends and relatives are down on their luck, and get unearned privileges like welfare. then they finally get a little of their own back from the losers who’ve been sucking on the public tit, but they are actually meritorious. And we can object that it’s white people who get more benefits, and we can object that the others aren’t really any less meritorious and maybe even less responsible (but careful on the irresponsibility cant, that rhetoric is also misused.) But as much as we may object that’s now what we mean, once we’ve accepted the principle, we’ve given away the game.
For a simple instance, we have nothing to say once we concede a white hospital worker in a low paid job like sterile supply for the OR is privilege. Everyone will interpret just desserts, merit, privilege as they will. Only arguments presuming equality, relying on the signal failure over the centuries of all theories justifying inequality* can categorically refute any conclusions as to merit/privilege. Suffice it to say, it is not at all clear that economics accepts such a radical proposition as, all men are created equal.
Again, the sad truth I fear is that once you’ve acceded to the privilege/merit concept, it’s like accepting the principle of opportunity cost: In practice, you’ve conceded all argument, and the rest is mere detail.
*The proposition that centuries of science have consistently exploded all theories of inequality and therefore the default knowledge is that people are basically equal (equal=/=identical in this context!) Equality is not a priori assumption, but ex post generalization. This contradicts the theories of “science” of Popper and Hayek. Here I will only say, Popper
John Quiggin 10.03.20 at 12:24 am
Risk and reward, coming up next!
J-D 10.03.20 at 12:24 am
There is a problem in that the word meaning ‘that which is deserved’ is a homophone but not a homograph of the word meaning ‘sweet dish served after the main course’ and a homograph but not a homophone of the word meaning ‘place lacking available water’.
English, you incorrigible prankster!
steven t johnson 10.03.20 at 1:45 am
This seems to be random abuse of people not mentioned here, totally unrelated to the post. Please, nothing more from you on this thread – JQ
mpowell 10.03.20 at 2:34 pm
My feeling on this is that you are absolutely right to be concerned about the social value of certain conspicuous high earning jobs. But I also agree with Hayek that if you want to get the benefits of a free market, you have to accept that the rewards will not always go to the most deserving. But that doesn’t mean we can try to do better with regulated markets! Probably the US should reform it legal system so that the premium on good lawyering is not as valuable. Maybe we can adjust the way financial markets function so that fancy trading algorithms that bring little value to the market efficiency are not so richly rewarded. But if you want to apply a crude bar of a much higher marginal tax rate to the upper portion of the income spectrum, I think you have to do a lot more work than these anecdotes to make your case. I would be really interested to see a much richer literature on who the richest 1% of Americans are. It is really an under-researched topic given the significance of the topic.
Bob 10.04.20 at 12:54 am
“Some high incomes, like those of skilled surgeons, reflect a contribution well above the norm. Others, like those of entertainers and sports stars, reflect services that are highly valued by our society whether or not they make it a better place.”
First, I think I know what you mean, John, by “value”–i.e., the market income that the entertainer or surgeon is able to earn. But what do you mean by “contribution,” as a unit of “something good” for society, such that one can calculate a “norm” and therefore an “above” and “below” the norm? It seems nebulous, like “utility.”
Second, shouldn’t we drop the idea of looking for morals in income distribution altogether? Isn’t the real point that the only justification for income inequality is to ensure that jobs that require a lot of training, or risk or unpleasantness will get done, such that we all benefit from the inequality? From this perspective, many people with high incomes are, for various reasons, earning rents–i.e., incomes that exceed the amount that would be necessary in order for them to be willing to perform the service, so we can tax them without consequences. If someone is taking home, say, $1 million US , and we tell them that next year they will “only” take home $900,000, is it really plausible that they are just going to sit in a funk all year doing nothing?
J-D 10.04.20 at 3:52 am
All markets operate within a framework of regulation of some kind. In the absolute sense, there’s no such thing as an unregulated market: the expression ‘unregulated market’ only makes sense in a context where some particular form of regulation is under discussion, and it then may be meaningful to distinguish between a market subject to that particular form of regulation and a market free of that particular form of regulation. There aren’t such things as markets absolutely free from the effects of any form of regulation. The choices that actually have to be made are not about whether markets should be regulated but about what kinds of regulation there should be.
It’s difficult to relate this part of the comment to the earlier part. Either taxation of income is considered a form of regulation of markets or it isn’t. If it isn’t, then it’s impossible to found any opinion about it on an opinion about the regulation of markets; if it is, then to accept any taxation of income whatever (regardless of the rate) is to accept regulation of markets.
notGoodenough 10.05.20 at 11:45 am
An interesting series of posts from John Quiggin, raising some important topics. To conflate a few of my (relatively uninformed) ideas into one post:
Luck is, to a large extent, a factor in everyone’s daily lives. Even in terms of daily successes – for example, when I’m synthesizing materials, I might just happen to try the best conditions first try (it does happen) or it might take quite a few different runs. Acknowledging this does not denigrate my hard work and expertise, it is merely pointing out the practicalities of how things work.
Many institutions – particularly universities – respond to this by making a competitive approach, so that the “lucky†individual is rewarded materially. In some extreme cases, this is deliberate fostering of competitiveness (I know of one professor who made a point of assigning two PhD students to the same project, with the “first across the finish line†getting the credit and the other nothing). My current institute tries to minimize this (we have an emphasis on fostering collaboration), so while the “lucky†individual may well be “first author†(which grants bragging rights, and a bit of an edge on the CV when applying for other jobs), we try to ensure all contributors are acknowledged. Moreover, the job assessment is based largely on your ability to collaborate, contribution of ideas, etc. – and while papers and patents are a metric, all contributions count equally (i.e. there is no difference between being a 1st or 5th author). To extrapolate this to a society, there are a number of options for how one handles “luck†– and a society which mitigates the effect of this (by, for example, reducing the reward for being “luckyâ€) will, perhaps, be one which is arguably more meritocratic.
Of course, “merit†is also problematic. Other commentators have mentioned that it is difficult to measure such a fuzzy concept, and that the impact on society will also be tricky to evaluate. That may well be true (I won’t venture an opinion as it is outside my lane). But surely a reasonable response is that we can then just reduce the disparities? Even though there still may be “unfairnessâ€, it won’t be as excessive as it currently is.
From my perspective, I don’t think people particularly mind if a bin man earns 1.01 x the salary of a janitor, or even if a neurosurgeon earns 5x the salary of a janitor (though whether they should or not is a different question). The objection becomes more pronounced as one approaches the extremes in disparity.
Even setting aside the examples of Zuckerberg, Bezos, and the like (though it is worth keeping these in mind as good examples for consideration), it seems that average CEO vs. worker salary represents a considerable gap. It would be interesting to see how much it has widened over the last couple of decades (most data I’ve seen seems to suggest a quite considerable increase in this inequality over the last 50 years), and to see how average salary vs. “job level†within typical organisations varies (I’ve not been able to find systematic data, but I suspect it is not linear). While I suspect most people wouldn’t necessarily begrudge a CEO earning more than their average employee, it is likely rather dependent on whether it is 5x, 10x, 100x, etc…
Given that it would be hard, I suspect, to argue that CEOs are vastly more valuable now than they were 10, 20,…50 years ago, it would seem to me somewhat tricky to justify this increasing disparity. Indeed, the main reason would seem to be that these are the salaries of the people who have considerable power over deciding the salaries – so, one can’t help but feel a certain degree of bias may be involved.
In short, while all societies may be unequal, some are more unequal than others – and while it may be reasonable to conclude that a truly “fair†system may be impossible to achieve, that does not necessarily preclude having a more “fair†system.
Just a thought.
reason 10.05.20 at 12:22 pm
MisterMr,
“For some reason, conservatives who are pro free markets ignore steps 4 and 5.”
In my experience conservatives are not pro free market, they are pro business. Not the same the thing. In perfect competition profits => zero.
mpowell 10.05.20 at 8:45 pm
J-D @ 18, there is an unfortunate typo in my comment. I meant to say there is no reason we cannot try to do better with regulated markets. My recommendation is to look for regulatory intervention into particular markets that you feel are the most dysfunctional, but I would recommend studying the problem closely before quickly concluding, “these people are making a lot of money and I don’t like, let’s shut it down”.
J-D 10.06.20 at 3:50 am
As far as I can tell, John Quiggin is not advocating shutting anything down, and neither is anybody else in this discussion.
notGoodenough 10.06.20 at 6:28 am
mpowel @ 21
I realise you are responding to J-D, so please only answer if you care to do so, but I would like to make a brief response.
“I would recommend studying the problem closely before quickly concluding, “these people are making a lot of money and I don’t like, let’s shut it downâ€.â€
With respect, I’ve read through JQ and J-D’s comments a few times now, and I’ve yet to see anywhere where they’ve concluded anything as reductive or simplistic as “these people are making a lot of money and I don’t like, let’s shut it downâ€. Perhaps you can quote the text that makes you think this is a fair summary of their positions? If not, then may I suggest that attributing such motivations to people arguing against inequality is somewhat presumptuous and unhelpful to the discussion, borders on an ad hominem logical fallacy, and does little to actually advance the discussion.
While I cannot speak for others, of course, but my own position is not “these people are making a lot of money and I don’t like, let’s shut it downâ€, but rather “there is increasing inequality, this is typically a bad thing which leads to considerable societal problems, it would seem reasonable to address thisâ€. That is less about personal jealousy – which seems to be what you are attempting to imply – and more about not wishing to live in a society which strongly resembles the worst excesses of the gilded age/pre-revolutionary France/etc.
“My recommendation is to look for regulatory intervention into particular markets that you feel are the most dysfunctional,”
I would note that the tax rates on the highest earning categories have substantially decreased in the UK, where increasing from 45% to 83% would simply be returning to the 1970s (and to 60% would be a return to the 1980s). And, while similar data is more difficult to elucidate for the US, it is also perhaps worth considering that the data seems to suggest the average CEO:Worker compensation ratio has dramatically increased [1], and that there has been a significant failure in corporate governance.
My personal suspicion is that a broad suite of tools and approaches will be necessary to ensure a stable society with a reasonable degree of wellbeing. And while I would by no means assert I have expertise sufficient to determine the best approach, I am unclear as to why you appear to have ruled out all other tools than regulatory intervention – perhaps you would care to elaborate?
[1] Such values are tricky to measure, and numbers are approximate, but the EPI suggest from 200:1 over the last 4 decades:
https://www.epi.org/publication/ceo-compensation-2018/
https://www.epi.org/publication/ceo-compensation-surged-in-2017/
MisterMr 10.06.20 at 3:42 pm
@reason 20
I agree, but, as the OP says: “Unequal incomes are regularly justified by claiming that high incomes reflect a larger contribution to society”.
I’m merely pointing out that even under this point of view, large and continuous disparities of income prove that the system is not working as advertised, and that evidently large and continuous disparities of income cannot reflect differences in the level of social contribution.
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