Wealth Distribution and the Free Market

September 7, 2013 12:29 PM

Wealthy Entitlement: Income inequality undermines the fairness of a free market
posted by stp123 (28 comments total)

This may be "duh" science, but it's still important.
posted by BrotherCaine at 12:46 PM on September 7, 2013

I don't have wifi at the moment, so I will have to read the article later, but just from the title, giving the free market a charicteristic of "fair" is odd. "Fair" is sideways to socialism.
posted by Brocktoon at 1:23 PM on September 7, 2013 [2 favorites]

...Piff says, “the rich are way more likely to pri­or­i­tize their own self-interests above the inter­ests of other peo­ple. It makes them more likely to exhibit char­ac­ter­is­tics that we would stereo­typ­i­cally asso­ciate with, say, assholes.”

Science!
posted by BlueHorse at 1:26 PM on September 7, 2013 [3 favorites]

"Fair" is sideways to socialism.
Whoa The Ministry of Truth is fast these days!
posted by elpapacito at 1:31 PM on September 7, 2013 [3 favorites]

there is something about wealth that gives rise to a sense of entitlement, a sense that one deserves more good things in life than others

Well, yeah. Increased wealth means you have better things.

it does not really matter whether the relationship between wealth and entitlement is causation or correlation.

So the why of your thesis is completely irrelevant? There's soft science and soft sciences but this is absolutely flaccid.

Given the assumptions of a free market, no market failures, and redistribution of allotments, we can expect the economy to produce any fair and efficient outcome that we desire.

All mousetraps are created equal in the eyes of customers? All personal proclivities and interests are equally distributed when it come career choosin' time? What does this even mean?

Income inequality undermines the fairness of a free market

Anyhow, income equality could only be guaranteed by an unfree market. Oh wait the word fairness is in there. Why would a free market baqsed on the individual wants, needs, and aspirations of hundreds of millions necessarily be fair? Who writes this stuff, Lit majors?
posted by codswallop at 1:52 PM on September 7, 2013 [5 favorites]

giving the free market a charicteristic of "fair" is odd. "Fair" is sideways to socialism.

I don't know what that means.

Giving the free market a characteristic of "free," however, is a bald-faced lie.
posted by Sys Rq at 1:55 PM on September 7, 2013 [4 favorites]

Piff gives inter­est­ing insight into a pos­si­ble solu­tion. Piff told Psy­Post, “sim­ple inter­ven­tions can reduce nar­cis­sism among the wealthy, sug­gest­ing their nar­cis­sism is nei­ther innate nor fixed. When wealth­ier par­tic­i­pants in one study were asked to think about three ben­e­fits of treat­ing oth­ers as equals, they sub­se­quently became less nar­cis­sis­tic. Egal­i­tar­ian val­ues can reduce nar­cis­sism. The impli­ca­tions of this are fairly profound.”

I'm kind of amazed that 1) something so simple can have that effect, and 2) the implication that these people didn't even think about the benefits of treating others as equals previously. From the study's abstract: "inducing egalitarian values in upper-class participants decreased their narcissism to a level on par with their lower-class peers".

That's a stunning result for simply posing a question, and I wonder how much the positive framing is key - "think about how equality helps" vs "think about how inequality hurts". The latter is hard to escape thinking about, it seems to be the predominant framing of that discussion.
posted by jason_steakums at 1:55 PM on September 7, 2013 [4 favorites]

The first and sec­ond fun­da­men­tal the­o­rems of wel­fare eco­nom­ics are per­haps the most impor­tant jus­ti­fi­ca­tions for the idea that free mar­ket out­comes can reach fair and effi­cient results. Roughly, the first fun­da­men­tal the­o­rem shows that all out­comes of a free mar­ket are effi­cient (putting aside the pos­si­bil­ity of a mar­ket fail­ure), and the sec­ond the­o­rem says that any effi­cient out­come can be achieved by redis­tri­b­u­tion of allot­ments. Given the assump­tions of a free mar­ket, no mar­ket fail­ures, and redis­tri­b­u­tion of allot­ments, we can expect the econ­omy to pro­duce any fair and effi­cient out­come that we desire.

I think the author gives too much credence to free-market economics here. What "efficiency" actually means to welfare economists has no relationship to ordinary notions of fairness. It's a delusional fiction that works by redefining folk concepts like "fairness" and "efficiency" to precise, mathematical meanings that have little relationship to common usage and making bizarre assumptions about the distribution of wealth. Even without market failures, welfare economics claims that the utility derived from a transaction is proportional to the price paid - for example, it assumes that a multi-millionare derives more utility from a second mansion than a homeless person would derive from it, simply because the multi-millionare is willing to pay more. In a free market, goods go to the person willing to pay the highest price, and then welfare economics assumes that because the buyer paid the market price, he or she derives the more utility from it than anyone willing (or capable) of paying less. This falls apart completely when there's income inequality and a decreasing marginal utility to wealth - i.e., in the world we actually live in, and the article glosses over point that welfare economics assumes "redistribution of allotments." Even though in some sense the math "works," such a naive model is dangerously misleading, and intellectually bankrupt to use for policy-making. See Cosma Shalizi's explanation for more.

Also worth reading is economist Uwe E. Reinhardt's, "How Economists Bastardized Benthamite Utilitarianism"
posted by Wemmick at 1:55 PM on September 7, 2013 [10 favorites]

It does not mat­ter whether becom­ing wealthy cre­ates enti­tle­ment or whether the enti­tled become wealthy, the impor­tant point is that the enti­tled can be expected to fight against redis­tri­b­u­tion. Even if redis­tri­b­u­tion is the­o­ret­i­cally pos­si­ble, it will not hap­pen because the wealthy will pre­vent it from happening.

As the article says, this is hardly news, but it does show rather starkly why "the free market" is pretty much a myth. The system is so easily co-opted that it more or less exists only as a point of near theological speculation.
posted by GenjiandProust at 2:41 PM on September 7, 2013 [7 favorites]

Marx had it down cold. In a world where exercising rights (or just surviving in the first place) requires real concrete resources, abstract rights without access to those real resources are dead letters.

If we want to be free, we need more than rights. We need things.
posted by You Can't Tip a Buick at 3:06 PM on September 7, 2013 [20 favorites]

The system is so easily co-opted that it more or less exists only as a point of near theological speculation.

So does that mean an ideal gas is the hot air coming out of lobbyists?
posted by Talez at 3:47 PM on September 7, 2013

This is not a call for radicalism.

Maybe not, but radicalism is what is called for.
posted by double block and bleed at 4:28 PM on September 7, 2013 [6 favorites]

If we want to be free, we need more than rights. We need things.

Well, more than things, we need a significant say, a seat at the table in proportion to our numbers. A critical failure of the US Labor movement, it seems to me, was/is a focus on things rather than a share of power. A raise doesn't help you if you can't stop the factory closures and outsourcing....
posted by GenjiandProust at 4:34 PM on September 7, 2013 [9 favorites]

I dunno. I have an antipathy to the rich that makes me too inclined to believe this sort of thing on insufficient grounds.
posted by Fists O'Fury at 5:49 PM on September 7, 2013 [1 favorite]

When a market includes the necessities of life such as clean air, potable water, nourishing food, basic shelter and adequate health care are among the "things" to which the highest bidder should have preferential access that market is neither free nor fair.
posted by islander at 6:13 PM on September 7, 2013 [5 favorites]

I'm thinking of going into the guillotine manufacturing business, but I'm just afraid when the day comes that the market really takes off, my products will be expropriated by the mob and I won't be compensated. What should I do?
posted by George_Spiggott at 6:15 PM on September 7, 2013 [2 favorites]

Claim your guillotines as a tax write-off?
posted by islander at 6:19 PM on September 7, 2013 [1 favorite]

Guillotine tech support!
posted by jason_steakums at 6:20 PM on September 7, 2013 [6 favorites]

People in power make the rules. People with money are in power. They make rules that reflect their biased sense of entitlement. They respond appropriately when you point it out to them.

Let me test this theory:

Social Scientist: Sir, did you realize that the land you built your house on was stolen from its previous inhabitants?

Wealthy Entitled Person: Oh, my goodness. Well. That's unfair, isn't it? Let's give it back.

Social Scientist: Sir, you made your money by creating a market system that exploits the masses...gee, it looks like you've done this on a global scale.

Wealthy Entitled Person: Oh, gracious me, I hadn't noticed. Well, I shall redistribute this money to those who need it more than I do. And while we're at it, let's change these unfair rules immediately!

There. FIFY.
posted by mule98J at 6:48 PM on September 7, 2013 [3 favorites]

"Redistribution" is the new commie-slamming epithet. It's totally nonsensical; it makes the giant blunder-of-an-assumption that the existing "distribution" is somehow natural and preordained by the universe. It's nothing of the sort, of course. It's the direct result of the system we employ at the moment.

Selfishness and disdain for others explains it completely.
posted by Benny Andajetz at 7:47 AM on September 8, 2013 [3 favorites]

Entitled behavior is built-into human nature; it just seems more obnoxious when the rich exhibit it.
posted by ZenMasterThis at 8:01 AM on September 8, 2013

Even if redis­tri­b­u­tion is the­o­ret­i­cally pos­si­ble, it will not hap­pen because the wealthy will pre­vent it from happening.

Even if it were to happen, whatever was redistributed would in short order flow away from the majority and towards a minority. Maybe not the same minority, but still - a minority.
posted by IndigoJones at 8:56 AM on September 8, 2013

Indigo: Correct. A feature of systems where transferable resources are allocated by "free" choice is that, all else being equal, resources will tend to flow downward toward where there's a lot of other resources.^* This is why we have to use the awesome power of the state to continually pump money out of the depths of the 1% and back up to the 99% who need it.

oh whoa I think I finally explained to my own satisfaction why I'm a socialist instead of an anarchist. Go me.

When I'm feeling moderate, I argue that the way we should pump that money back upwards is by establishing an unconditional basic income, funded out of taxes on wealth and financial transactions. Every year every person in our nation should receive their share of the nation's wealth as their birthright.

When I'm feeling radical and extreme and unreasonable, I start thinking that maybe I wouldn't mind living under Borges's Babylonian lottery, or at least I'd mind it less than what we have now.
posted by You Can't Tip a Buick at 9:16 AM on September 8, 2013 [4 favorites]

whoops, left off my footnote by mistake. It's a neat trick, what the rich have done to our language for money flows. In most situations money's described as acting like a liquid, but the place that liquid money flows toward is typically described as the "top," because the moneyed are powerful and up is privileged over down in our society. As such, when we refer to the 1% as occupying the "top" positions in society, we're treating money as if it were some sort of weird anti-gravity liquid that flows upward. This flatters the egos of the rich, because it makes it seem like they got to their positions by heroically scaling a mountain or something, instead of just by standing at the bottom and waiting for the money to flow down.
posted by You Can't Tip a Buick at 9:27 AM on September 8, 2013 [2 favorites]

> Even if it were to happen, whatever was redistributed would in short order flow away from the majority and towards a minority.

History seems to contradict you.

The twentieth century saw a huge redistribution of wealth from the rich to the middle and lower classes - and in most countries other than the United States, the middle and lower classes have done a pretty good job at retaining those gains over long periods.

Even in the United States, the poor and middle classes are better off than they were a century ago.

Yes, there will always be inequities due to skills, talents, and luck, but that doesn't mean we have to accept the current distribution as unfixable.
posted by lupus_yonderboy at 2:50 PM on September 8, 2013 [6 favorites]

To follow up on Lupus_yonderboy's comment, I would add that the movement towards greater income inequality in the United States and the United Kingdom did not happen naturally. It was driven by ideologues with a vision of what they thought would be a better, more conservative world.

Think tanks like the Heritage or Cato Institutes are, of course, not neutral bodies at all - they are there to push a political line. Similarly, the University of Chicago's economics department has long been known to be dominated by a quite right-wing anti-regulation, anti-labor school of economics; before he worked there, Milton Friedman was allegedly a lobbyist for the real-estate industry:

"What the Buchanan Committee discovered was that in 1946, Milton Friedman and his U Chicago cohort George Stigler arranged an under-the-table deal with a Washington lobbying executive to pump out covert propaganda for the national real estate lobby in exchange for a hefty payout, the terms of which were never meant to be released to the public. They also discovered that a lobbying outfit which is today credited by libertarians as the movement’s first think-tank — the Foundation for Economic Education — was itself a big business PR project backed by the largest corporations and lobbying fronts in the country...

Before bringing back Milton Friedman into the picture, this needs to be repeated again: “Libertarianism” was a project of the corporate lobby world, launched as a big business “ideology” in 1946 by The US Chamber of Commerce and the National Association of Manufacturers. The FEE’s board included the future founder of the John Birch Society, Robert Welch; the most powerful figure in the Mormon church at that time, J Reuben Clark, a frothing racist and anti-Semite after whom BYU named its law school; and United Fruit president Herb Cornuelle.

The purpose of the FEE — and libertarianism, as it was originally created — was to supplement big business lobbying with a pseudo-intellectual, pseudo-economics rationale to back up its policy and legislative attacks on labor and government regulations."

This comes from an interesting article here. (Although I would not necessarily endorse everything Alternet writes).

Some other interesting historical titbits:

- In 1971, corporate lawyer and judge Lewis Powell wrote a famous memo in which he laid down the structure of the "alternative" institutions that the right would have to evolve to challenge the left.

- Adam Curtis on the downright weird history of think tanks in the UK.

- Recently, memos from a right-wing movement called "Groundswell" were leaked, attempting to organise a "thirty front war".

Not all of these movements have been particularly competent, but over time they have pushed the political discourse significantly to the right. And this is not including the growth of the Conservative media machine. There is a huge amount of money and time and the efforts of some quite talented and intelligent people invested in making sure that the current distribution remains unchanged (or that even more money is diverted away from public goods and into private pockets).
posted by lucien_reeve at 4:26 AM on September 9, 2013 [4 favorites]

When I'm feeling radical and extreme and unreasonable, I start thinking that maybe I wouldn't mind living under Borges's Babylonian lottery, or at least I'd mind it less than what we have now.

Although Borges takes it to an extreme, "sortition", i.e. selecting people for certain political offices by lot, is a perfectly reasonable thing to do.

- we already do it for jury service.

- it was done by the Athenians, the world's first great democracy, for many public offices (not some - e.g. generals, for obvious reasons)

- nobody really likes career politicians and this would effectively do away with that.

- it would need to be combined with strong rules against lobbying - but it would mean that a politician was no longer beholden to special interests, whether unions or big business - politicians could no longer be "bought" by paying for their campaigns.

It's an interesting thought. It might well be more "democratic" than what we have at the moment.
posted by lucien_reeve at 4:29 AM on September 9, 2013 [1 favorite]

In 1971, corporate lawyer and judge Lewis Powell wrote a famous memo in which he laid down the structure of the "alternative" institutions that the right would have to evolve to challenge the left.

Wow. Not famous enough, that thing needs to be in front of as many eyes as possible.
posted by jason_steakums at 10:58 AM on September 9, 2013