Quote of the day: Amartya Sen on inequality

I am currently reading “Inequality Reexamined” by Amartya Sen, as I’ve never read his books – only his papers.  This suits my current binge reading of inequality, income distribution, and methodology of economics and econometrics books I’m trying to read (albeit too slowly for my own liking).

Anyway, the prologue immediately neatly summarises a point worth noting.  I was reading a little way into the book, and decided that the stuff in the prologue served as a neat “taster” and that I wanted to share it.  So here we go!

The central question in the analysis and assessment of inequality is, I argue here, ‘equality of what?’

Not only do income-egalitarians (if I may call them that) demand equal incomes, and welfare-egalitarians ask for equal welfare levels, but also classic utilitarians insist on equal weights on the utilities of all, and pure libertarians demand equality with respect to an entire class of rights and liberties.  They are all ‘egalitarians’ in some essential way.

This is incredibly true, and put more succinctly than I ever could have imagined!  Everyone, especially those who are more extreme in any given “political dimension” cares about equality of something – and the underlying reason why there are trade-offs stems from (as Sen discusses in the book) the heterogeneity of individuals!

This is a beautiful point.  And it reinforces, in my mind, why I am fatigued from seeing people claim the ‘labels’ of freedom, social capital, and egalitarianism.  Instead we should be honestly discussing our views on what is morally important and what trade-offs exist.

For many people out there writing on blogs and tweeting they are certain that their argument is what is essentially morally right – but I argue that you have a moral obligation to try and view your opponents argument in the best possible light, and to figure out why you differ.  Virtually no-one out there is supporting things which they believe are “unfair”, and by forcing yourself to understand their argument you learn more about your own views.

We all want and desire to help make the world a better place.  But we only do this by reaching some form of moral consensus between us, and a relative willingness to admit and deal with trade-offs – not by labeling people who disagree with our judgments as something relatively meaningless (neo-liberal, communist, Nazi) and ignoring their views.  Instead of labeling ourselves as focused solely on the basis of one factor we likely can’t explain (such as inequality, levels of social capital, or productivity – note that even highly trained economists can only give conditional statement, covered in caveats, about these issues) why not admit where your current focus on equality lies so we can have a data and theory based conversation of the costs and benefits that are part of that!  Who knows, such an experience may change your mind, or may change the views of those you are discussing the issue with.

An over-willingness to “fight the fight” instead of critically analysing our views merely makes us tools to the madness of popular ideology.  And remember, the intention of our ideas is not what is important, the likely outcome on people is what matters.

Note:  Some may view the above link to Noah Smith’s blog and see themselves more like Krugman.  You are not, and have not researched these issues in enough detail to be able to justify the Krugmanesque style of arguing.  No-one in New Zealand has analysed these issues in the same sort of detail we get overseas – and the general data work I have seen has been significantly different from what people are saying.  Furthermore, even when Krugman discusses this issue instead of macro I would argue he is less on the direct attack and more talking about considering equity (here and here).

For example, in NZ we can’t say that the current focus is inequality is self-evidently true – from where I’m standing the obsession with ‘inequality’ is very much the wrong one. As a starting point our data is very different from the US, and the policy solutions being touted aren’t necessarily consistent with why we may care!

The real issue I’ve heard about in terms of endemic poverty often has to do with education, social stratification for specific migrant groups, and the oft ignored issue of mental illness.  Saying we need to ship more funds to the middle classes to get our inequality measures down because it will “somehow” help these guys might sound grand to NZ’s large middle class – but it is so far away from dealing with real issues that I have to bite my tongue in conversations to ensure they remain civil … the only “problem” we seem to be directly targeting with such transfers is that the middle classes want more stuff, and this isn’t really a problem in my mind but a typical example of Director’s Law in action.

Also, what is with all the 1950’s-1970’s nostalgia I’m hearing from people – yeah it must be really disappointing having always functioning power, modern computers and appliances, less sexism, less racism, an acceptance of alternative lifestyle choices … could this nostalgia all be rose tinted glasses?

And if anyone asks, I haven’t watched the Mind the Gap show yet – I will watch and write about when I get a chance.  This is more responses to the strange lines of questioning I’ve been getting over the last week.  For example, people saying things to me about how the middle third of the income distribution pays 70% of the tax … which they don’t (eg here and here).  I noted that the actual tax figures can be taken a bit far if we don’t take into account price changes, but we need a pretty extreme view of price changes to get this result … one which would suggest redistribution is incredibly costly by the way.

However, if the claims made in this review are true (including its focus on the Spirit Level which I found to be an incoherent mess) then I suspect my comments on the show are not going to be positive.  I will keep this in mind and try to be as balanced as possible – as my issues with the Spirit Level were about factual and data issues, not about the idea of redistribution in of itself (which is societies choice not mine).

To bring this back to the point of the post – Sen’s comments suggest we need to think more carefully about what it is we actually value before demanding policy achieves it.  I think this is a necessity – and when it comes to issues as diverse as inequality and productivity, this is exactly what our Treasury department (and associated government departments such as MBIE, the Productivity Commission, and MSD) are trying to do.  If we want to be informed, the best thing to do is to keep an eye on all the work they are providing where they try to objectively discuss trade-offs – then armed with that you should tell people what you think … and just try to remember society as a whole may disagree with you, just as it does with me 🙂

  • Phil Sage

    Great post. Don’t you sometimes wish politicians sometimes got stuck with Jim Carrey’s liar affliction and were forced to admit an opposing point of view had valid points.
    It really does come down to a simple comparative moral choice.
    Now what are the economic arguments for framing questions, discussion and consideration of different views openly?
    What is the implication of recognising the desirability of setting out and rebutting an opponents moral choices rather than simply using and winning arguments through caricature?

    • “What is the implication of recognising the desirability of setting out
      and rebutting an opponents moral choices rather than simply using and
      winning arguments through caricature?”

      Strawmen are disappointingly common AND persuasive. And there is no “final solution” where your argument is clearly and fully described to everyone. As a result, having areas of open dialog and clear descriptions of trade-offs are an essential part of communication – and as a result a central part of helping society make good policy choices.

      And this is one of the roles of economics, economics language, and the method of analysis that economists use. Economics is both a tool for all, and a field that really has “many” fields within it tbh – making the term “too vague” to really use as well. I remember my brother making this point to me about a decade ago when he was talking about why he’d decided to study public policy instead.

      In of itself, the idea of what economists have the incentive to analyse is an interesting one. Coase who just passed away was pretty certain that economists have been twisted too much towards government and too far away from providing services from business due to the returns involved – and this has influenced the questions economists ask and the advice they give!

  • VMC

    There is a lot I like in this post – especially ” but I argue that you have a moral obligation to try and view your opponents argument in the best possible light, and to figure out why you differ.” But I couldn’t agree with “We all want and desire to help make the world a better place. ” because we don’t – there are tons of greedy selfish people out there who are only looking to make things better for them, and who couldn’t give a toss about “the world”

    • Bill Patterson

      Don’t those people argue that through self-interest the market functions best, which in turn improves the world through innovation and so forth, and that people thinking collectively are in fact getting in the way of improving the lives of the disadvantaged? It’s a self-serving argument but if you’re willing to take the stance that you view all sides of an argument dispassionately, it’s probably true in ways.

    • It is fair enough that perhaps not 100% of people have positive intentions in mind – but I think it is a useful way to try to understand peoples arguments. I strongly believe many people are arguing a point of view because they think it is in the interest of a certain broad group (eg a nation) that deserves it.

      Distilling down the group, and the argument, helps us have a conversation – and I think sometimes everyone (including me) can be too quick to decide that the “other dude or dudette” is arguing something because of poor intentions, rather than because they have a different view about the trade-offs that exist and what they mean.

    • Phil Sage

      VMC – Using Matt’s/Sens logic those exceptions you name are those who believe the world would be a better place with themselves at the top of the pile as part of the elite. It does not rebut the logic at all. You simply demonstrate there is a likely bell curve of moral motivations.

      Churchills decision to allow the bombing of Coventry could be seen as “unfair” by the inhabitants of that city, but in protecting the secret of Enigma it served the greater good.

      • Bill Patterson

        I wrote a similar reply to VMC, but I think it’s also worth pointing out from a historical perspective that most places in history haved been ruled without consent of the governed (or however you’d like to put it), and so the problem has been the concentration of power. Reducing that concentration of power used to be a far more effective way of improving the lives of a lot of people, and so to say those rulers simply had a different but equally legitimate way of thinking about how the world ought to be ordered, is laughable. Matt’s post is far more relevant in a modern context.

  • Bill Patterson

    I would love to see some good work on successful strategies to achieve a reduction in tribalism, if it exists. The Krugman technique to “get heard at all” through forceful rhetoric just makes it sound like a feedback loop getting worse, and it has the added incentive of making him a star. There’s also some evidence that higher intelligence is often not a great mitigating factor in reducing bias. eg: http://psycnet.apa.org/psycinfo/2012-14753-001/
    Larry Summers is another one consistently criticized for being overly confident in all his arguments, which makes it sound like his personality is getting in the way of his talents.

    I watched the “Mind The Gap” programme and the point about the middle third paying 70% of the income tax claimed to be from a 2011 Bill English speech in parliament, I think.

    • I think tribalism is something that is unavoidable in a world where it is impossible to process ALL information – in many ways it is a form of heuristic. It is in that context that I am more positive about “dealing with” tribalism when it comes to policy – as once we start moving towards policy, the value of information and rational discussion rises. Maybe I’m being an optimist though 🙂

      “I watched the “Mind The Gap” programme and the point about the middle
      third paying 70% of the income tax claimed to be from a 2011 Bill
      English speech in parliament, I think.”

      Yar, that is what my mum told me when she chatted to me about the show. I told her I’d try to watch it before this weekend, so I could try to discuss where the figures come from and some others that compare. I find it strange English would say that, given the figures would have been from the first of the papers I linked to from above when mentioning that – and I can’t pick how that could have come from it!

  • VMC

    Have just been reading an article by Joseph Stiglitz (A guy whome I admire) and he says

    “Americans have seen how financial firms put their own interests ahead of those of the country – and the world. The vulture funds have raised greed to a new level.” Read more at http://www.project-syndicate.org/commentary/argentina-s-debt-and-american-courts-by-joseph-e–stiglitz#XXQKlcoFDUSMQSpJ.99 So while it might be nice to think that people want to make the world a better place – there are plenty of counter-examples. Furthermore, the prime narrative from economists would generally be that people want to make themselves better off, as Bill picked up earlier.

    • Stiglitz is great – but I don’t share his view of other human beings in that way.

      Economics assumes people make choices, and they do so in a way of “self-interest” indeed. But this doesn’t, and shouldn’t preclude valuing others. However, even when it does (undeniably the value we place on others is lower than the value they place on themselves after all) the key point is that much of the time when people are discussing the costs and benefits of policy, there is a tacit belief that what they are suggesting is for the betterment of society in some way.

      Both the left and the right have a fundamental belief that what they are suggesting is in the interest of what their “conception” of society is – and this quote from Sen about equality nicely incapsulates this idea.

      In economics there are often “many” explanations for a phenomenon, and we are trying to figure out which one appears to be the most believable given data and theory. At the bottom of the choices often lies a “change in preferences” – this is not because a change in preferences is the most unlikely, but because such as view is “trivially true”. As a result, in order to make sure we give other arguments sufficient chance to show their best hand, we discount this view to justify research.

      In the same vein, stating that there is disagreement between two groups because the other group “doesn’t care” is a trivial way of getting difference – by giving them the same credit for caring about society in some sense, and trying to flesh out how and why (and the trade-offs they are trying to make) we can get a fuller idea of their argument. Even in the case where these people do not care, this knowledge can only help – not just in terms of learning about the other side, but in terms of truly understanding our own views.

      I’ll be honest, when I see someone demonise the other side of the argument instead of reason about why, I immediately use that as a signal they have not thought through the issue in as much detail as they are pretending. I have yet to be disappointed from my conversations with people who do so – given one of the most common comments I get from them when trying to have a discussion about central parts of their arguments is “look I just don’t have the time to think about those things” 🙂

  • Shamubeel Eaqub

    Matt, a great post. I really like that book. It questioned many of my own beliefs and assumptions. I am only half way through, you have reminded me to pick it up again.

    • I figured I’ll just throw up another quote from it on Monday, as I won’t have any time to write this weekend – it is gold 😛

      I’m surprised I’ve never thought to read any of his books given how much I’ve enjoyed his papers – with a Kindle I had no excuse, and I’m definitely enjoying it.

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