In these tumultuous economic times, I have been thinking a lot about possible meanings of economic fairness. I shared some of my thoughts about economic fairness in my previous blog post, Life as Poker. In that post I pointed out that the notion of fairness in games such as Monopoly depends on everyone starting out with the same resources. But in real life, we do not start out with the same resources. Some of us are blessed with genes that incline us toward traits that increase our chance of success in life: intelligence, energy, a cheerful disposition, self- discipline, composure and resiliency, and creativity. If we are extra-lucky, we are also born to parents with the resources, interest, and ability to care for us and help us live up to our highest potential. And we grow up in a safe and supportive neighborhood with a good educational system that further facilitates our success in life. On the other hand, some of us are born with genes that incline us toward low intelligence and psychological disorders, are raised in dysfunctional families, and grow up in crime-infested neighborhoods with marginal schools. If Monopoly were like real life, some players would start out with $1500 dollars and other players would start out with $15.
Our disparate starting points create problems for the concept of meritocracy, the idea that fairness occurs when the wealth you get out of a system is proportional to what you put into the system. Most people recognize meritocracy as a fair form of compensation. If you are smart, creative, willing to work long hours, and therefore produce something of great value, you should be rewarded accordingly with significant wealth (see Hing, et al., 2011). But the problem is that we all begin with different levels of intelligence, creativity, self-discipline, etc., due to our different genes, families, and early social environments. The playing field is inherently unlevel.
The question is whether we can make the playing field more level in a way that is fair to everyone. Note that this is actually two questions: (1) Can we actually increase positive traits such as intelligence, creativity, and self-discipline by spending money on interventions that improve parenting, the school systems, the livability of neighborhoods, and employment opportunities? and (2) Can we fund these interventions in a fair way? Social progressives answer both questions in the affirmative. They believe it is fair to use the wealth of those who are well-off to help impoverished parents and to improve dangerous neighborhoods and faulty school systems. Thus, we have the recent cry to "Tax the Billionaires!"
Tax opponents have doubts and reservations about the efficacy of social programs and the fairness of taxes used to fund such programs. Welfare too often enables complacency and idleness, they say. Money funneled into public school systems does not really improve education, they claim. And what is fair about involuntary redistribution of wealth from those who have earned it through hard work to those who are not earning it? Not necessarily heartless, fiscal conservatives favor helping the unfortunate through voluntary charity.
The question of how well social programs actually work is difficult to answer. Researchers are working hard to answer that question, but I would like to focus on the main topic of this post, fairness. Liberals might say that much of the wealth possessed by the affluent was not earned by hard work. Rather, it was inherited from rich parents, acquired by striking deals with politicians, multiplied through interest and exotic financial instruments, or obtained by other methods of wealth acquisition that do not seem fair. One could argue that if you did not really earn your wealth fairly, then it is not unfair to redistribute it. Furthermore, some claim that fiscal conservatives are greedy and that we cannot trust them to voluntarily donate to charity. We have to force them to help the disadvantaged by taxing them.
In response to the last charge, you might be surprised to find that conservatives donate more money and time to charitable causes than liberals. A study by Dr. Arthur C. Brooks found that conservatives donated 30 percent more money annually to private charities, despite the fact that liberal families in his study averaged six percent more in annual income. Maybe it's just me, but there's something disconcerting about people wanting to spend other people's money rather than their own money to address problems. As Mahatma Gandhi said, "Be the change you want to see in the world."
But let's get back to the question of whether the rich have acquired their wealth fairly in the first place. Do our current laws about inheritance, political donations and lobbying, and permissible financial transactions really reflect fairness? My suspicion is that they do not, but I think that a more definitive answer will require some research. Five months ago I presented a paper that described a research program for better understanding economic fairness. I would love to get more feedback on it.
As important as I think it is to gain a better understanding of economic fairness, I think that we will need far more than research on fairness to better our current economic situation. Even if we could come to an agreement that it is fair to tax the rich, this will not be enough. Even if you took all of the existing wealth of the rich-not just tax them, take all of their wealth-it would not fund what the U.S. government spends in one year. We have some serious cash flow problems in the United States. The compromise that was finally reached to avoid default calls for reducing future deficit spending by a trivial amount over 10 years, which means that the already massive national debt will continue to grow. How long can this continue? Do we need a radically different alternative to the current market-based economic system?
Son Hing, L. S., Bobocel, D. R., Zanna, M. P., Garcia, D. M., Gee, S. S., Orazietti, K. (2011). The merit of meritocracy. Journal of Personality and Social Psychology, 101, 433-450. DOI: 10.1037/a0024618