Mayor De Blasio fails to understand how markets work: his latest idea to raise pay for ridesharing drivers is evidence of this.
This plebian reviewer read Professor Sir Anthony Barnes Atkinson’s Inequality: What Can Be Done? so you wouldn’t have to. Inequality inadvertently persuaded me that its topic is even less important than I’d thought it was when I began. But make no mistake, Atkinson’s a celebrated lion of the Left—the economist whom Thomas Piketty called “the Godfather of historical studies on income and wealth.” If he can’t persuade us inequality is a problem, no one can.
There are at least three questions a book written against inequality can ask and answer: First, there’s the question of whether inequality is bad. Second, whether inequality exists. Finally, there’s the question of whether or not, if inequality is bad and actually exists, there’s a solution to inequality that isn’t worse than the inequality itself. Inequality: What Can Be Done? fails on all fronts.
Is inequality bad? Atkinson thinks so. He broods (presumably with furrowed brow) over the “voluntary exclusion” of “rich people” who “opt out of state provision into private schooling and health care.” There’s even inequality at the grocery store: “As societies have become richer, shops may have ceased to stock cheaper varieties or qualities of products.” Hmmm. Does it make me terribly wicked if I don’t see why the Whole Foods in West Hollywood should carry Hot Pockets, or why parents who can afford to send their children to private school (via the tuition they pay) even as they help others send their children to public school (via the taxes they pay) should think that what they are doing is a form of “voluntary exclusion”?
Atkinson obviously thinks inequality causes greater problems. “Social evils, such as crime and ill-health, are attributed to the highly unequal nature of societies today,” he tells us, without—in a book replete with footnotes—giving any reference to statistical data supporting such a claim. But sticking to Gini coefficients—a measure of inequality that he explores at length (and at times very helpfully)—the United States has a higher Gini coefficient than Afghanistan, and Israel has a higher Gini coefficient than Iran. It isn’t really a stretch to suggest that the United States and Israel are better places to live from a crime and health point of view. The social case against inequality is inadequate.
Nor is there a moral argument against inequality, though Atkinson thinks there is a moral problem: “And there are those, like me, who believe that the present levels of economic inequality are intrinsically inconsistent with the conception of a good society.” The book offers no way of accounting for the moral rightness and wrongness of inequalities, much less a “conception of a good society.” Atkinson tells us male and female college graduates were the same for people born in 1910 and earlier. Does he think social conditions were better for women in the late 19th century? I assume not, but he never offers even a sketch of how to understand these things from a moral point of view.
Anyway, how significant is income inequality? Here the famed economist’s exhaustive knowledge of the subject matter is helpful, but his honesty (a commendable attribute, certainly) works against him. Consider the following example from Inequality:
Today there is a profusion of data-sets. This represents a great improvement and is a tribute to the substantial effort of statistical offices and individual researchers. At the same time we risk being overwhelmed. Just to give one illustration, the December 2012 issue of the Journal of Economic Inequality includes one article that starts from the observation that income inequality is higher in the US than Japan . . . and goes on to provide an explanation. But a reader of the Journal would be puzzled that another article in the same issue uses a dataset that shows no real difference in the Gini coefficients of the two countries.
So let’s be clear: The same issue of a journal devoted to economic inequality offers two different assessments of income inequality. Question: Are Japanese more or less equal to one another than Americans? Answer: Who knows? To be fair, in a footnote, Atkinson tells us the articles use two different data sets (321n2), but I don’t see how that bolsters our confidence in expert judgments on this subject.
Who counts as poor varies from country to country, and some measurements guarantee the existence of poverty by definition. In the United Kingdom, for example, “the percentage living in poverty . . . is the percentage of individuals who live in households with equivalised disposable income below 60% of the UK median.” The poor you will always have with you. Median incomes in Britain could rise to an astonishing level—say a million pounds a year—and there will always be, by definition, people below the median, for example, the poor schmucks laboring away in social isolation for a mere three hundred thousand.
Are people counted individually or as families? Atkinson notes the problems of pursuing either course. Consider an adult child living at home who, after taking a first at Cambridge, decides to work as an artisan woodworker for a year before starting his banking career. His parents bought him a new car and let him live rent free in their spacious central London home. Count him as an individual, and he’s utterly destitute—but it’s hard to think he’s poor. Atkinson sees these thorny issues as problems to be solved, but to this reader, they show just how messy everything is.
One could object that it isn’t fair to demand arguments for what the author forthrightly assumes. “I start with the pragmatic concern that current levels of inequality are too high,” he writes. Also: “This book has been written in an attempt to answer the question, If we wish to reduce the extent of inequality, how can this be done?” But here’s the problem: If inequality is so obvious, and so obviously bad, then it’s clear that radical—even destructive—proposals should be considered. But if inequality is stubbornly hard to measure and we can’t articulate why it’s bad, taking a wait-and-see approach is the most rational course.
Now Atkinson by his own admission offers such “radical proposals” that “require us to rethink fundamental aspects of our modern society”—proposals that “at first sight appear to be outlandish and impractical.” He lists them, along with ideas to pursue, on pages 303 and 304. They are not for the libertarian faint of heart. Before he presents them, he freely admits, “I can already hear critics dismissing them as either boringly familiar or wildly utopian.”
If inequality is indeed the economic equivalent of Stage Four cancer and we know—that is, with a certainty that has so far eluded us—that we are there, then the political chemotherapy of guaranteed public employment at the minimum wage and the alternative medicines of a minimum inheritance and a global tax regime may be the best we can do, even if problems of implementation abound. If, however, inequality is as stubbornly difficult to measure as he indicates—if the experts themselves have competing conclusions and differing data sets—then we ought to be cautious.
We can certainly ask whether the cure is worse than the disease. Atkinson forthrightly (and commendably) recognizes the problems inherent in his proposals, but I think he believes both that the tradeoffs won’t be too costly and that inequality has gotten so perilous that many other social evils should be permitted to combat it. In fact, he says so. The fact that “there are losers as well as gainers is not a decisive argument against redistribution. If governments are serious about reducing inequality, then there have to be trade-offs.”
When it comes to analyzing these tradeoffs, though, he becomes cavalier. For example, he recognizes the explicit concern that people will work less if taxed more, and that employers will hire fewer people if forced to pay more. Then he writes: “But there is no general conclusion that this is the case. Each situation has to be considered on its merits.” That strikes this reader as something akin to a cigarette company saying that, sure, one brand may cause lung cancer, but let’s not jump to any conclusions.
When Atkinson does offer specific responses to objections, they resemble appeals to magic more than anything else. For example, if someone implements a “significant rise in the national minimum wage,” employers will see that “by paying more they get greater productivity.” Just like that. Shazam! To be fair, Atkinson does say partial monitoring and higher wages will “induce workers to choose to work hard, the threat of the loss of the better-paid job acting as an incentive not to ‘shirk.’” But this analysis ignores, astonishingly, the context of his argument: There will be no “threat of the loss of the better-paid job,” if people are already working in the better-paid job not because of market forces but because of the significant rise in the national minimum wage forced upon corporations by the government.
It would seem the author doesn’t care about the particular results of his proposals, because he thinks the problems are so grave. Take his word for it:
Even with considerable leakages, through corruption and diversion of funds, aid ‘works’ if some part at least trickles down to those whose current consumption is so far below that of the typical OECD taxpayer.
But this ignores, as Frédéric Bastiat would say, what is unseen. If corrupt and oppressive regimes subjugate their peoples only because foreign aid allows them to do so, aid doesn’t work—or even “work.” Additionally, foreign aid obscures the true solution to global poverty and economic isolation: growth.
That’s what’s curiously absent from the worldview of Sir Anthony Barnes Atkinson: economic growth. He doesn’t expect it at all, offering asides such as this one: “If we now expect the growth of average incomes to be slower, or nonexistent, as we seek a sustainable path . . . ” Though he says he’s “not totally pessimistic about our economic future,” he focuses his hopes on governments and on cooperation between governments. He certainly doesn’t look to growth. “The expectation for the future,” he writes, “is one of slower growth in household spendable income than we have seen in the past.”
Marvelously, Chinese farmers being lifted out of poverty by global free trade and African entrepreneurs hustling to bring goods to market do not have time to listen to such pessimistic balderdash. Innovation, entrepreneurship, and growth feature neither in Atkinson’s hopes nor in his analysis, but I’m glad they’re still active in some corners of the world. May that always be the case.