In an article in the Herald it is suggested that the separation of economics from moral philosophy is morally abhorrent, and as a result we should ignore what economists say about tax.
I will put the tl;dr up first: Economic theory is “descriptive” – which in turn allows us to discuss how economic theory is actually a very useful thing for discussing these issues. In my opinion it is important to make these trade-offs that are described transparent – and that is all economists are trying to do. In that context, economists don’t actually seem morally abhorrent 😀 . Furthermore, by showing a willingness to discuss and identify trade-offs, we can find some issues and facts that seem to get slightly missed in the article 😉
Discussion of article
First let me go through some of the areas where I felt the article did not give the full story.
The article begins by discussing Mill and Smith, very good. They were incredibly thinkers, and their writing is extremely readable. And they are pretty much always right.
However, the article talks as if the principles of progressivity are being violated, and as if government has abandoned everyone. This ignores the facts that:
- The tax system is progressive
- Governments share of GDP is historically high – and it is MILES higher than it was in the time that Mill and Smith were making the case for more intervention.
As a result, they are being quoted in a context that is inappropriate.
One could be forgiven, in the light of the jargon of government-appointed tax working groups and welfare working groups, for believing that the main tax policy objective is to stop tax dodging and the main redistribution issue is to end welfare bludging. That’s how dumbed-down and myopic the New Zealand discussion on tax and distribution has become.
Making the tax system more efficient, and making it face an issue that society feels strong about (people they feel are unwilling to work) is not dumbed down and myopic – it is democratic. In essence these groups were discussing the trade-offs involved with policy, no economist can tell us what choice should actually be made.
Economists are like thermometers – great at giving you useful information, but they can’t directly tell you what to do with it.
This (a minimum living standard) is an inalienable right, not one conditional upon meeting the work-ready tests or whatever the latest set of eligibility hurdles or inquisition practices the Welfare Working Group recommends. It is a human right.
Morally, I agree 100%. However, I don’t agree that this is something we need to hold society up to ransom for. If society believes you HAVE to be willing or unable to work to get a minimum income, then society can have that – someone that is unwilling to work can be seen as removing themselves from society and the “social contract”. This is a well known philosophical viewpoint that is still consistent with the UN – and we can’t just ignore it, or pretend that society may not feel this way.
How ironic that GDP, the modern economists’ yardstick of worth, doesn’t even recognise the contribution of these people. How insulting, how absolutely bereft of any values economics has now become.
GDP – like the unemployment rate – is a specific measurement we use to understand something quite specific, it is not a full measure of value.
I would also note here that value of “unpaid work” is not taxed – so it is implicitly subsidised by society. We can argue whether the subsidy is enough, but we cannot say that it is degraded and ignored.
And those people in the streets of Tottenham don’t have to be materially poor, either. Social or financial alienation is sufficient to inspire such reactionism. An economic model that increasingly serves the interests of the few to the exclusion of the many is not sustainable. Polarisation promotes its own impoverishment.
During the riots, everyone used them of evidence of their prior viewpoint – since there has been no investigation yet, this is another case of that. As a result, I don’t think this portion is really appropriate to focus on.
Our tax and welfare policy is in urgent need of reconstruction so it ensures equal opportunity for all to participate and fully realise their potential in society in its widest sense – whether it be the paid or the unpaid workforce.
I am ignoring the bits on consumerism, as they are irrelevant – after all, who am I to tell people what they value 😉
The statement about ensuring equality of opportunity is true – but if that is the goal, why attack economics and the tax working group. As we will discuss below, what economics does is in fact the very thing that helps us do just that.
If economics is going to be mentioned, I should mention what economics is – and that can be found here.
Economics is the study of the allocation of scarce resources in society. It is descriptive, it aims to explain “what is” not to say “what should be”. Given the description of these trade-offs, policy makers can apply their judgments about what is right/moral and then come to an informed decision.
The tax working group did this, I read their pieces and they did a fine job – the attack on them in this article is completely unwarranted. And the title attacking economics is also a bit out of place.
The reason why economists focus on the description is because they do not believe they know what is best for society – they just want society to know the trade-offs so it can make its own choices (hopefully through democracy).
When we come to “unpaid work” we need to think why it is unpaid – it is unpaid because there is no need to pay wages for supply and demand to meet. Why is that? Well people may value doing the work, people may not really value the job very much, or the bargaining position may be such that the wage rate is zero. In this context there is no actual problem, at all. If we believe there is some “social value” the argument should be that we subsidise it – not a complaint that GDP doesn’t measure it.
The hard thing for me is I agree with many of the personal value judgments (a minimum income for all, a value in community integration) but the refusal to admit the trade-offs, and the implication that the author can “tell society what is right” just bring this article down for me.
However, it also makes it a great example of how the “focus” of economics can get a little mixed up – economists are just “describing” trade-offs, they are not trained to prescribe to us regarding what we “should” be doing. They inform this process by providing information – but they do not know what people value and by how much.
Economics is the study of what is – and the strawman version that at times gets beaten up in this piece is not what economics is.