You have seen me say that some inequality is “good”, and you have seen Shamubeel say that inequality is “natural”. It was with this in mind that Shaz told me to post about this comment from Boris Johnson.
Despite calling for more to be done to help talented people from poor backgrounds to advance — including state-funded places at private schools — Mr Johnson said some people would always find it easier to get ahead than others.
He said: “I don’t believe that economic equality is possible; indeed, some measure of inequality is essential for the spirit of envy and keeping up with the Joneses and so on that it is a valuable spur to economic activity.”
I fear that people think the value judgments espoused by Johnson are similar to the ones economists hold when discussing inequality – this is not the case.
When economists discuss equality of opportunity, we are actually thinking about people’s ability to create satisfaction – not their ability to build GDPs. People like Johnson confuse the two, and this is why they end up with crazy comments like saying keeping up with the Joneses is a GOOD thing … seriously what the actual frik.
An economist would, as a starting assumption, work from the idea that someone endowed with a lower ability to produce has no less inherent worth than someone with a greater ability to produce. As a result, there is some justification for whipping out our equity-efficiency trade-off, and redistributing through the tax system from those with greater ability to those endowed with lower ability is “fair”. Now, people can come in and change that value judgment if they like – economists just like to start with the prior that we “do not treat people differently in terms of intrinsic worth when we view them as a dispassionate observer”. The inequality that is good comes from different PREFERENCES for consumption/leisure – and the inequality we live with stems from there being an equity-efficiency trade-off given the different inherent productivity of workers etc etc. Confusing the two and acting like the dispersion of wealth based on peoples capacity to produce is what SHOULD happen is confusing description and prescription 😉
Now equality of opportunity is important – here we agree. Reducing barriers, and changing endowments so people can make life choices starting on a level playing field is a good thing – I agree. However, then adding the value judgment that people who are endowed with less ability at sitting an IQ test [something Statschat takes to task], or speaking with the right accent, are worth less is something I – and many economists – explicitly disagree with.
Wait, what was that about keeping up with the Joneses
Keeping up with the Joneses, or the “spirit of envy”, is a concept that states we value things through our “relative position” – and as a result, we end up consuming/producing certain things solely for this reason. Yes, this increases our GDP measure. Yes, this increases measured
happiness income (awful typo!).
But as we’ve been saying in recent posts, we only care about income etc insofar as it bears a functional relationship to well-being/satisfaction/happiness. Keeping up with the Joneses is a prisoners dilemma, this implies that at best this type of competition is a waste and underlying satisfaction is no different. At worst, the existence of the “spirit of envy” makes us worse off.
This is not what we mean when we say “competition is good” and it is not what we mean when we say “some inequality is good”.
I have to ask here, is this type of view popular in Britain? Because it is actually abhorrent. Thank goodness that isn’t a view that is popular in New Zealand 🙂
Update: Good (as always) from Stumbling and Mumbling.