economics, equality, freedom, justice, philosophy, poverty, work

Universal Basic Income as the Foundation of Freedom

free money

I favor a Universal Basic Income (UBI) because it offers financial security and predictability, which in turn provide freedom from necessity. This “freedom from” is required for any meaningful “freedom to“. By allowing people to effortlessly and foreseeably pay for the material resources that they need for a minimally decent life, a UBI liberates them to pursue the goals they have set for their lives – or even set these goals in the first place. Life’s pursuits all too often get pushed aside by urgencies, necessities and bouts of bad luck. The struggle to survive may even imply an incapacity to formulate goals.

What matters … is not only the protection of individual rights, but assurances of the real value of those rights: we need to be concerned not only with liberty, but, in John Rawls’s phrase, with the “worth of liberty.” At first approximation, the worth or real value of a person’s liberty depends on the resources the person has at her command to make use of her liberty. So it is therefore necessary that the distribution of opportunity – understood as access to the means that people need for doing what they might want to do – be designed to offer the greatest possible real opportunity to those with least opportunities, subject to everyone’s formal freedom being respected. Philippe Van Parijs (source)

There’s another type of “freedom from” that a UBI would achieve: it would liberate us from alienated labor (to use a strong term). I personally believe that the alienating characteristics of our current system of work are sadly ignored (read this and this, or – better still – buy this wonderful book). A basic income gives people the freedom to turn down unattractive work and to start cooperative ventures that are more rewarding, in the sense of more pleasant but also more in line with the goals people have set for their lives.

As a pleasant by-product, we would be able to shake off some recurrent criticisms of our existing welfare systems:

  • No more discussions about welfare queens, social security fraud, the undeserving poor, a culture of poverty, etc.
  • No more government intrusion in the private lives of welfare beneficiaries, no more means testing, fraud investigations, social security inspections, income audits, family structure controls etc.
  • We would be able to implement drastic reductions in the level of regulation, legislation and government bloat inherent in our current social security systems. A smaller government, suitably defined, may also lead to an increase in the overall level of freedom.
  • Healthcare consumption would become more wise and efficient since people have to use their basic income to pay for all of their non-catastrophic health problems. (Perhaps this rationalization could offset some of the fiscal criticism leveled against a UBI).
  • Unemployment would no longer be a problem: the concept of unemployment would become meaningless.

Some additional advantages of a UBI:

  • We would no longer be fixated on economic growth since the main justification of growth is its perceived role in the reduction of unemployment. Hence we would perhaps be able to meet some environmental concerns.
  • Increased gender equality. Wives, often still the main caregivers within families, would be less economically dependent on husbands if they have a basic income. With less dependence comes more freedom and equality. Women – as well as caring men – could even use their basic income to start up cooperatives for the caring function, making use of advantages of scale and becoming more economically active outside of the home. That as well would increase their independence.
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economics, work

Let’s Get Rid of Wage Labor

cooperation by Francesa Miller

Cooperation, by Francesa Miller

I’m serious: make it illegal. But not before we have a universal basic income. A UBI will encourage self-employed or cooperative ventures freely chosen by those who engage in it. In the absence of a UBI, many of us have a job not because the activities associated with the job allow us to pursue our goals, but because the job comes with a salary and because this salary can buy the necessities of life. We then either pursue our goals during our leisure time, or convince ourselves that the goals of our jobs are somehow also our own goals (the burger-flipper telling himself that “making kids happy is all I want”).

A UBI has to cover the costs of the necessities of life: a decent place to live, sufficient food, clothing, basic healthcare (catastrophic healthcare costs would be paid for by a fund for which people are forced to buy insurance), transportation and some appliances, machines or utilities (a car, a washing machine, a fridge, a cell phone etc.). Because it covers the costs of necessities, a UBI liberates us to pursue the goals we set for our lives, goals which all too often get pushed aside by the urgencies of the daily struggle to survive, to have a decent house and to have some savings for when times get bad.

Would a UBI not be sufficient to allow people to pursue their goals? Why also prohibit wage labor? A UBI indeed loosens us from the system of wage labor – it provides a financial cushion that removes the risks inherent in abandoning a job and pursuing our “true destiny” – but it doesn’t go far enough. It gives us the freedom to turn down unattractive work but the pursuit of life’s goals often requires cooperation. Only the prohibition on wage labor makes cooperative ventures more common. A UBI by itself only pushes us towards more satisfying jobs and leaves some of the drawbacks of wage labor intact:

  • Wage labor means that the ownership of the means of production is in the hands of a minority. It’s this minority that determines the goals of labor, and they hire workers to achieve these goals. The workers themselves have no say in this and end up pursuing other people’s goals. Control is a distant dream for most if not all wage laborers. The owners have few incentives to organize production on a cooperative basis because cooperative labor would mean that they lose their right to unilaterally decide the goals of their organization; it would also mean sharing the proceeds of the organization with the workers.
  • Wage labor is inherently authoritarian rather than cooperative, not only with regard to the ultimate goals but also on the level of the means. People who generally detest authoritarian political structures nevertheless submit every morning of every working day to the authoritarian rules of their employers.

wage labor

(source)

A prohibition of wage labor might look like a revolutionary proposal. What are some of the risks we take?

  • Do we have to expropriate the owners of the means of production? After all, it’s no use setting people free to engage in cooperative ventures if they can’t freely use the means of production. However, there’s little dispute about the undesirability of large scale expropriation. So what do we do? To some extent, cooperative ventures will produce their own means of production, and in an economy that is increasingly focused on services and the internet, the category of means of production loses some of its meaning. We can also look at how taxes on means of production would set some of them free for communal use.
  • The biggest risk, I think, is a reduction of economic activity. If that happens, we’re not going to have an economic basis large enough for the required level of taxation necessary to fund the UBI. However, I’m tempted to assume that people will want to be economically active and that the UBI combined with the end of wage income will set loose a lot of initiative and ambition, but all that is hard to predict. Maybe I’m being too optimistic. The “entrepreneurial” spirit in the common man may be lacking, or may have been destroyed by ages of wage dependence. Maybe most people just want to work for an income, no matter which kind of work, as long as they don’t have to take responsibility for their own freedom. Or maybe many of us will use the opportunity to do what we always wanted to do when we can no longer work for a wage and when we have the cushion of a UBI. The additional advantage that we can share the proceeds of cooperative ventures – proceeds which now go to the owners of the means of production – will make it even more exciting to do something.
  • If people can’t work for a wage, many of the “dirty jobs” may not get done anymore. I can list many activities – toilet cleaning, waste disposal, mining etc. – which probably won’t be organized in voluntary cooperative ventures if there’s no longer a possibility to pay people a wage to do them. But then perhaps we’ll be forced to clean up after ourselves. And perhaps automation will help as well. In any case, every rule has exceptions.

Indeed, we may have to settle for policies that discourage rather than prohibit wage labor, one sector at a time. However, if even this is deemed unrealistic or undesirable, then at least let us agree to make work more democratic. If privately owned large corporations continue to exist and dominate the market, and if therefore wage labor persists, then the employees should be given a larger say in how these corporations are run and what their ultimate purposes should be. Corporate democracy, combined with a UBI that allows people to change jobs easily, can make it more likely that people are able to pursue their goals. Which is what all this is about, after all.

More here.

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economics, poverty

Poverty and Sadness

I know poor people and I know rich people. There are sad and happy ones in both groups. However, in general and on average, higher levels of self-reported happiness correlate with higher income and wealth. This also corresponds to intuition. Poverty is a burden – both financially and psychologically. Being poor means being anxious about the future, about your children and about your self-worth. This anxiety is a form of unhappiness. Money can buy happiness, not in the sense that having money causes you to be happy, but because having money means that poverty related anxiety is mitigated, if not completely eliminated (although of course your feelings of apprehension, self-doubt and vulnerability may have reasons unrelated to poverty). Money also allows you to “buy away” some of the more specific causes of unhappiness associated with poverty, such as ill health, vulnerability to crime, a bad job etc.

A look at the data confirms all this. For example, it seems to be the case that people living in rich countries are happier than those in poor countries.

We establish a clear positive link between average levels of subjective well-being and GDP per capita across countries, and find no evidence of a satiation point beyond which wealthier countries have no further increases in subjective well-being. We show that the estimated relationship is similar to the relationship between subject well-being and income observed within countries. Those enjoying materially better circumstances also enjoy greater subjective well-being and ongoing rises in living standards have delivered higher subjective well-being. Betsey Stevenson and Justin Wolfers (source)

This study, based on two cross-country happiness surveys (one by Pew and another by Gallup in which people report their own levels of happiness), found that richer countries are happier than poorer ones, and that this is reflected internally in countries (rich people are happier than their poor compatriots).

life satisfaction and real gdp per capita pew

life satisfaction and real gdp per capita gallup

These data are confirmed by another study by Lane Kenworthy, based on the Penn World Tables (for cross country analysis) and the General Social Survey (for U.S. data):

happiness and income cross country

happiness and income

(source)

Additional confirmation by Angus Deaton:

gdp and happiness

(source)

If you look carefully at some of these graphs, then they seem to contradict the Stevenson/Wolfers quote given above. It looks like there is a satiation point beyond which wealthier countries or individuals have no further or slower increases in subjective well-being: higher income is positively associated with happiness and life satisfaction but the association may be curvilinear in the sense that more income means greater happiness but less so at high levels of income than at low levels. This has been called the Easterlin paradox, but Wolfers and Stevenson argue against it (somewhat technically: a lot hinges on the type of scale used, namely a logarithmic one).

On the other hand, there is this survey showing that countries which report themselves as being the happiest tend to be poor and middle-income countries, while the gloomiest are rich countries:

happiness and gdp

(source)
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economics, equality, income inequality, poverty, work

Income Inequality (31): The Strange Case of the Rising Middle and the Hollowing Out of the Center

There’s an interesting contrast between what’s happening to income inequality at the global level on the one hand and the inequality trends in most countries on the other hand. Apart from many Latin American countries and a few elsewhere in the world, income inequality has been increasing, including in some of the wealthiest countries - as you can see in this graph for example:

evolution of gini

(source)

Income inequality for the total population of the globe, however, has been trending downward, albeit ever so slightly:

global inequality and country inequality

(source)

The first phenomenon – increasing inequality in many countries – has a series of different causes: taxation, globalization, unionization, wage setting, technology etc., with a different mix of causes and importance of causes for different countries. One cause has given its name to the phenomenon itself, even though it’s probably not its main cause: the hollowing out of the labor market in certain developed countries. Mid-level jobs are disproportionately hit by automation. And if the middle drops, then the extremes become relatively more important and inequality rises. Hence inequality itself has become known as the “hollowing out”.

Here are two graphs showing how US employment in high- and low-skill positions has risen substantially relative to middle-skill jobs, resulting in a distribution of wages that is similarly polarized and more unequal than it used to be:

hollowing out

(source)

jobgrowthbyskill

(source)

And the recession of 2008-2010 hasn’t helped:

NELP-Analysis-640x451

(source)

Something similar happened in many other countries. As to the second phenomenon – decreasing global inequality – this is what it looks like:

world income distribution

(source)

There’s a clear shift to the right, towards higher average incomes, resulting in a rise of the middle – quite the contrary of the hollowing out in many individual countries. Someone came up with a catchy name for previous and current world income distributions: from a camel to a dromedary shaped distribution of world income. And if you squint you can see the respective animals in this animation:

world income distribution

This rise of the middle has led to the observed decrease in global inequality. The underlying reason of the rise of the middle is poverty reduction in large developing countries such as China and India. Around 20% of the world’s population is now poor in the sense of earning less than $1 a day (red lines in the graph above), compared to 75% in 1820. Poverty reduction often went hand in hand with increasing national inequality (in particular in China and India), but the effect on global inequality has been positive.

Additional reading: a blogpost by Bryan Caplan, and a paper by Branko Milanovic.

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activism, economics, human rights ads, work

Human Rights Ads (99): Made With Child Labor

BnnCzTFIMAAFpN1

This is about child labor on tobacco farms in the United States. Children are exposed to nicotine, toxic pesticides, and other dangers. Read the whole story here.

More on child labor (specifically on tobacco farms), and on how outlawing it may not always be the best option. Some numbers. And more human rights ads.

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citizenship, international relations, poverty

Migration and Human Rights (51): “Tsunami of the Poor”?

World-War-Z-special-effects-wall-12

scene from World War Z

Arguments against open borders or relaxed immigration restrictions are often economic in nature, at least on the surface. One such argument points to differences in prosperity between countries. Opening borders would cause a “Tsunami” of poor people. Prosperous countries would be overrun by masses of citizens from the developing world who, understandably, seek a better life. A better life is not what they’ll get, however, since they’ll end up in countries that are destroyed economically by the fateful decision to open the borders.

Now, take one of the largest free movement zones in the world, the EU. Wealth differences are quite high between countries of the EU, especially since the recession and the Euro crisis. And what do we see? Very low levels of migration:

[F]reedom of movement with[in] the EU remains a remarkable achievement. Half a billion people now have the right to work and reside anywhere within the union. This has not resulted in catastrophe. Indeed, it has not even resulted in mass migration. Only 2.5% of the EU population lives elsewhere within the EU. And when relatively large numbers have migrated, as occurred after the last major enlargement in 2004, the trend has been temporary and followed by return migration. Kieran Oberman (source)

Emigration costs money, and moving from the developing world to the West is especially expensive (if not lethal). So it’s not the poorest of the poor who move. Here‘s a paper by Michael Clemens showing that emigration is more common in relatively well off developing countries:

stocks_hires

(source)

More posts in this series here.

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causes of poverty, economics, poverty

A Primer on Poverty and Economic Growth

Both China and India have seen their economies grow at breakneck speeds over the last decades. At the same time, the number of poor people residing in these two countries has been reduced substantially, although somewhat less spectacularly in India compared to China:

global-poverty-decline

(source)

Other indicators of wellbeing point in the same direction. Life expectancy in India is now 65 years as opposed to 42 in 1960; in China the numbers are 73 and 42 respectively. The number of Indian children dying before they reach the age of 5 is now about 60 for every 1000, compared to almost 200 in 1970. In China: about 20 for every 1000 now versus more than 100 in 1970.

It’s not outlandish therefore to assume that there’s a link between good economic growth and large reductions in poverty rates. Given the fact that some other potential causes of poverty reduction - such as foreign aid and good governance – have not been prominent in those two countries (to put it mildly), the growth hypothesis is even more persuasive.

Take a look at these correlations for a larger set of countries:

(source)

economic growth reduces poverty

(source unknown)

Here’s the example of Africa, where growth and poverty are almost absolute mirror images:

one dollar a day poverty and gdp growth in subsaharan african

(source)

However, does this mean that economic growth is a sufficient condition of poverty reduction? I don’t think so. A growing level of GDP per capita in an economy means that the average person is better off, financially as well as on some other dimensions given the strong correlations between GDP and other indicators of wellbeing. But improvements for the average person can go hand in hand with stagnating or even worsening poverty rates. A lot depends how the proceeds of high growth are distributed among the citizens of a country; distributed either

  • intentionally by government policy: through taxation and welfare policies that can be more generous in a richer economy
  • or automatically by some form of trickle down effect: more aggregate national income or production means more jobs, better paid jobs etc., at least in theory.

Trickle down economics has been somewhat discredited of late, so perhaps the causal effect of growth on poverty reduction must pass through government redistribution, at least in part. The anti-poverty efforts of India’s successive governments are well-known. Less well-known is the fact that in China as well governments have implemented a strong although probably insufficient social security system. (Insufficient because inequality has risen dramatically in China, and somewhat in India. Greater inequality dampens the poverty reducing effect of growth).

The crucial role of government led redistribution has been confirmed by this paper in which Lane Kenworthy compared growth and income data for 17 developed countries. Specifically, he looked at the ways in which the incomes of people in low to middle income groups benefit from economic growth. The nature of government transfer systems is the reason why the effect of growth on the incomes of the poor is not the same in all countries.

[W]hen households on low incomes got better off, it was due most often to a rise in net government transfers. Where net transfers increased, incomes tended to increase in concert with economic growth. Norway, the UK, Sweden, Finland, and Denmark illustrate this pattern. Where net transfers were stagnant, income trends were decoupled from growth of the economy. We observe this in the United States, Canada, and Switzerland. This is an important finding. It means that, as a general rule, growth has not trickled down to low income households through wages or employment. And it means that, when government transfers haven’t grown, wages and employment haven’t stepped in to take their place. (source)

So we can conclude that economic growth, although important, is probably not a sufficient condition for poverty reduction, at least not in all cases.

A final remark: it’s interesting to note that poverty reduction is one of the drivers of growth. So the causation goes both ways, as is often the case in correlations.

Policies that are effective in increasing the incomes of the poor–such as investments in primary education, rural infrastructure, health, and nutrition–are also policies that enhance the productive capacity of the economy in aggregate. (source)

Some other interesting studies on the topic are cited here.

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economics, work

Posts About Work on International Workers’ Day

photo

I write about work now and then, so International Workers’ Day is a good excuse to bore you with some old posts:

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causes of income inequality, economics, equality

The Causes of Wealth Inequality (32): How Inheritance Not Only Perpetuates But Also Aggravates Inequality

Inherited wealth – the value of all assets (real estate + financial assets - financial liabilities) transmitted at death or through inter-vivos gifts - has become more important over time. Thomas Piketty estimates that

the annual inheritance flow was about 20%-25% of national income around 1900-1910. It then gradually fell to less than 10% in the 1920s-1930s, and to less than 5% in the 1950s. It has been rising regularly since then, with an acceleration of the trend during the past 20 years, and according to the latest data point (2008), it is now close to 15%. (source, source)

The drop between the 1920s and 1950s was caused by the Great Depression and WWII, two events that destroyed a lot of wealth.

Inheritance has always been an important cause of the persistence of wealth inequality. I guess that goes without saying. Capital is unevenly distributed in most populations, and will remain so to the extent that it can stay in the same families. It’s more interesting to look at the mechanisms through which inheritance could, under some circumstances, aggravate inequality. What are those circumstances? Here are some:

  1. Birth rates. People in developed countries have fewer children than they used to, and the children they have survive into adulthood at higher rates. As a result, those children inherit a larger part of their parents wealth. If numerous siblings no longer have to split their inheritance among themselves, the effect of inheritance on wealth inequality becomes stronger. Piketty as well has made this point in a recent talk.
  2. Higher house prices. Housing has become more expensive. This incites people to save more so as to allow their children to buy a house, which has a ripple effect across generations: the biggest savers are those who enjoyed an inheritance because if you’ve inherited a house or the money to buy one it’s easier to save than when you have to rent or pay a mortgage. And if you can save, your children will inherit. And so on.
  3. Inheritance taxes have been reduced in most countries.
  4. Slow economic growth in most developed countries means that the wealth produced in those countries is smaller compared to the wealth inherited.

Not all of these circumstances can be brought under human control. Perhaps an inheritance tax – the dreaded “death tax” – is a realistic option. I mean, if even Nozick could get behind that, you would need to be an outright fundamentalist about property rights  in order to oppose it.

For increases in the inheritance tax to happen, however, we will need to start thinking differently. When David Cameron, for instance, promised to raise the threshold for inheritance tax to £1m he did so because he believes that people who work hard, save money, and bequeath it to their offspring are somehow doing the noble thing. But while it may be noble to work hard and save, it’s far from noble to live off of an inheritance and its often huge returns. Hard work for one results in an unproductive lifestyle for its beneficiaries. If you want to promote work and productivity, by all means impose a death tax. And if you want the best for your children, it may be tempting to give them cash or other assets, but beware that this will be self-defeating beyond a certain amount.

More posts in this series are here.

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economics, equality, income inequality

Income Inequality (30): A Primer on Inequality and Economic Growth

Countries that are more equal in income terms are also richer:

income inequality and gdp

(source)

But how about the relationship between inequality and economic growth? The classic causal story, based on work by Simon Kuznets,

Kuznets curve

Kuznets curve

maintains that there’s an inverted U-shaped relationship over long periods of economic development. As emerging economies grow they initially become less equal as the few with high financial endowments profit off of their ownership of key productive resources, like land. Then, as industrialization evolves, much more of the population has the chance to participate in higher value-added work which reduces inequality. (source)

In this argument, growth determines inequality: first growth drives inequality up, and then it gradually reduces it.

However, this Kuznetsian view has come under fire recently. Thomas Piketty for instance, in his “Capital in the Twenty-First Century“, has criticized Kuznets’ view that inequality will eventually stabilize and subside on its own given increasing growth. According to Piketty, increasing wealth concentration is a likely outcome for the foreseeable future. Kuznets findings were based on a historical anomaly. And indeed, the lines in this graph do not turn downwards to form an inverted U-shape:

gdp-vs-gini

(source)

Which is why it’s perhaps better to look at the causation in another way: maybe inequality or equality determine growth rather than vice versa. For example, there’s this study arguing that high income inequality is likely to inhibit growth, especially in developing countries:

gdp per capita growth and gini developing countries

gdp per capita growth and gini rich countries

(source)

Inequality inhibits growth, especially in developing countries, because

high income inequality can discourage the evolution of the economic and political institutions associated with accountable government (which in turn enable a market environment conducive to investment and growth); and … high income inequality can undermine the civic and social life that sustains effective collective decision-making, especially in multi-ethnic settings. (source)

This study comes to a similar conclusion. It argues that, in general, more inequality endangers the sustainability of growth. Long consistent spells of economic growth are correlated with low levels of income inequality:

income inequality and gdp growth

(source)

A growth spell in this graph is a period of at least five years that begins with an unusual increase in the growth rate and ends with an unusual drop in growth.

It may seem counterintuitive that inequality is strongly associated with less sustained growth. After all, some inequality is essential to the effective functioning of a market economy and the incentives needed for investment and growth … But too much inequality might be destructive to growth. Beyond the risk that inequality may amplify the potential for financial crisis, it may also bring political instability, which can discourage investment. Inequality may make it harder for governments to make difficult but necessary choices in the face of shocks, such as raising taxes or cutting public spending to avoid a debt crisis. Or inequality may reflect poor people’s lack of access to financial services, which gives them fewer opportunities to invest in education and entrepreneurial activity. … [S]ocieties with more equal income distributions have more durable growth. … [A] 10 percentile decrease in inequality (represented by a change in the Gini coefficient from 40 to 37) increases the expected length of a growth spell by 50 percent. (source)

Some additional support for this view: redistributive policies – which are anti-inequality policies – don’t actually harm growth:

inequality

(source, source)

Redistribution doesn’t help either, according to this graph, but maybe it counteracts the negative effect of inequality on growth given that it counteracts inequality. In that sense, it does help.

More posts on income inequality are here.

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causes of poverty, economics, poverty

The Causes of Poverty (79): Poverty Traps

BrickWallLounge_Blog

(source)

Many among us will experience short spans of poverty at some stages in our lives. I lose my job or my unemployment benefits, I have a catastrophic but transitory health problem, an extreme weather event destroys my crop, or an economic crisis forces me to declare bankruptcy. As a result, I have to live off my savings or my parents and friends will have to lend me money. Still, in time I find another job; my health improves as I benefit from cheap healthcare (perhaps provided or subsidized by the government); the weather returns to normal and I can resume my profitable farming activity; or I can start a new business under the protection of bankruptcy laws that don’t burden me with debt.

However, I may also be what’s called a “structurally” poor person, meaning that I’m poor for most if not the whole of my life. Perhaps I was even born into poverty. The reason may be that I find myself in a “poverty trap”, a self-reinforcing mechanism which causes poverty to persist. In other words, I’m poor because I’m poor. And because I’m poor I’ll always be poor. I’ll die without ever having had an “adequate” standard of living, all the while passing on my poverty to my descendants.

Here are some examples of poverty traps:

  • I have a job, but the wage is low. As with many low wage jobs, I have almost no control over my work schedule. That means I can’t take on a second job and I can’t send my kids to child care. I have to spend time, money, effort and other people’s good will to take care of my kids. My job is physically hard and so I tend to have some health problems. My life is relatively expensive and it’s hard to find a better job. My salary doesn’t really cover my spending needs, hence I’m poor.
  • I can’t afford to pay the security deposit for a rental apartment, so I’m stuck in an expensive motel or I have to live with my parents who can barely afford their own survival. I also don’t have a refrigerator or a microwave, so I have to buy more expensive food. I have to wash my clothes by hand because… you guessed it. This takes a lot of time, time that I can’t spend on wage labor.
  • I don’t have tap water or heating because those aren’t things that people have where I’m from. I use wood for fuel like everyone else. The result is deforestation, soil degradation, lower crop yields and yet more poverty. My children have to help me – which is why I have a lot of them – to the detriment of their education. My kids will probably inherit my poverty because of this.
  • A lot of the things I’m forced to do because I’m poor are illegal. The lights of my car broke down, and I got a fine. I should have made the financial sacrifice and get them replaced, but I gambled on not being caught. I couldn’t pay the fine and my car was repossessed. Now I have to take public transport but can’t pay for that either. So I often get a fine for that as well. I know some homeless people who get a fine just for being homeless.
  • My calorie intake is too low to give me the strength to work. The quality of work I’m able to offer is inadequate for obtaining the food I require, and the food I do get isn’t enough to allow me to deliver quality work. My productivity is low, my earnings are low, and ultimately I can’t even keep a job or work the farm. My low calorie intake levels lead to health problems. My inadequate housing makes those problems even worse. My ill health, caused by my poverty, makes my poverty worse. I’m more likely to catch a disease, and also less likely to recover from it.
  • Like many poor people I have a low credit rating, making it difficult to get credit. The credit I do get is very expensive, which sort of defeats the point. Now, I do need the credit because I don’t have any savings. People say that I exhibit a high discount rate, that I’m too present-oriented and that I’m unable to delay gratification. Instead of borrowing money at high interest rates as a means to satisfy my unrealistic consumption desires, I should moderate myself and save for the future. But I’m present-oriented because I live in an environment in which I can’t trust people. Better to consume what I have than to save it and lose it later.
  • People also say that my issues with gratification extend to my sex life. I was indeed a teenage mother, and my education suffered as a result. This in turn affected my job prospects and my income. But this wasn’t just stupidity on my part. Being a mother gave meaning to my life. Other meaningful options just didn’t seem realistic.

So, there you have it. I think a lot of these stories are very real, and the problems that poor people face are often self-reinforcing. Of course, I don’t want to deny human agency. There are people who, even in the face of the worst possible circumstances, can fight their way out of poverty traps. So “trap” may be too strong a word. Individual responsibility still plays a role. Yet, let’s not forget that a poverty trap is sometimes intergenerational, as I’ve said before. Some children are born into a trap, and you can’t insist on responsibility and agency when we’re talking about children. A child growing up in a poor family may suffer in its early development. Undernourishment for instance can have a lasting impact on learning ability and earnings as an adult. Children of the poor are perhaps even more affected than the parents because the latter need a minimum calorie intake to work. They have to eat first. If they choose not to eat first, they will only make the poverty of the household worse.

Just to be clear: I’m not talking about an entire economy or country being stuck in a poverty trap. If you were expecting a post about that, I’m sorry I’ve wasted your time. I’m not wading into the treacherous debate about the necessity of large foreign aid injections to break the cycle of poor nations that can’t save enough to finance investment necessary to growth.

This post seems to be going on forever, so I’ll limit myself to a description of the problem. The solution – how to get out of poverty traps – is a topic for another day.

More on poverty traps here and here. More posts in this series are here.

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activism, housing, human rights images

Protest and the City

Protests don’t have to be mass protests. Individual actions like this one can be very high profile. Or you can go subtle, like this:

A small Ukrainian flag in the middle of Red Square, Moscow

A small Ukrainian flag in the middle of Red Square, Moscow

(source)

However, I think it’s fair to say that mass protests are usually more effective, not necessarily in the sense of achieving the stated ends but in the sense of achieving something. Hence the recent spate of massively popular urban demonstrations. Maidan, Tahrir, Taksim… The list goes on and on. Someone counted the number of protests during the last couple of years and there’s indeed a steady increase:

number of protests

37 of the 834 events counted had one million or more protesters!

Analysis of these protests often focuses on the role of social media, but just as interesting and somewhat forgotten is the role of urban planning and architecture. Most mass protests take place in and around central squares of large cities and it’s easy to see why these are favorite protest spots:

  • Public squares allow large numbers of people, sometimes very large numbers to congregate at the same spot. Centrally located in capital cities, they typically have many access routes. They are also Schelling Points (“a solution that people will tend to use in the absence of communication, because it seems natural, special or relevant to them”).
  • There’s often some kind of symbolic meaning to these places (maybe they’re named after national heros). They tend to be close to the institutions of power, which isn’t merely symbolic: it’s those institutions that are claimed to be responsible for the grievances of the masses and that need to hear the message.
  • Large numbers of people are also more difficult for security forces to attack, in the sense that an attack would be very visible and public and therefore potentially embarrassing – at least for those rulers who aren’t beyond embarrassment. The importance of large numbers of protesters doesn’t lie in the fact that the police or the military have a larger force against them – they usually have the means disperse even very large groups of people and a sense of safety in numbers is therefore mostly illusory among protesters. The problem with dispersing large groups is that it doesn’t look good on TV.
  • The ease of TV coverage is itself a reason for holding mass protests in large open spaces in capital cities (reporters often don’t venture outside of the capital). Protesters need to be seen together and when they take over central squares in capital cities – places that are normally buzzing with economic activity – then the world takes notice. The choice of location enhances the impact of protests.
  • And finally, large groups enhance the intensity of the protest through solidarity, mimicry etc. Physical unity translates into intellectual unity, and physical unity is easier in large open spaces.

A particular urban setting – intentionally designed or grown over the course of history – can promote the occurrence and intensity of mass protests. It’s no surprise therefore that the urban planners of dictators try to design cities in such a way that potential protesters are discouraged. Focal points such as large squares are not designed away – a dictator needs them for the theatre of power – but they are policed and fenced. Small streets that could be used by protesters to escape and barricade are demolished and replaced by wide avenues:

December 5, 2011 in Nay Pyi Taw, Myanmar. Nay Pyi Taw is the capitol city of Myanmar, formally in Yangon until the Burmese government created a new secluded capitol closed off from much of the world until recently. (Photo by Paula Bronstein /Getty Images)

December 5, 2011 in Nay Pyi Taw, Myanmar. Nay Pyi Taw is the capitol city of Myanmar, formally in Yangon until the Burmese government created a new secluded capitol closed off from much of the world until recently. (Photo by Paula Bronstein /Getty Images)

These avenues can then be used to send in the troops if need be. For example, Beijing’s avenues were instrumental in the attack on Tiananmen square.

The model of pro-autocratic urban design is of course the rebuilding of Paris in the 1850s and 1860s. Baron Haussmann turned a medieval city full of narrow streets into a rational, centralized, geometrically ordered system with grand boulevards that would be both harder to barricade and easier for troops to march through. The hope was that this would stop the revolutionary fervor in France. Here’s a before/after image of 19th century Paris:

Before and after the renovation of the Bastille area

Before and after the renovation of the Bastille area

All dictators ever since have tried to replicate this model, if necessary by way of the construction from scratch of new capital cities in the middle of nowhere. If international embarrassment becomes less painful than a fall from power, the central squares and large avenues can be used to crush dissent. In Tiananmen the crushing took place by way of tanks, but usually the means are less extreme:

A protestor is hit by water sprayed from a water cannon during clashes in Taksim Square, Istanbul, Turkey, 11 June 2013. Police used water cannons and tear gas as they moved into Istanbul's Taksim Square, where two weeks of protests have been held, as some demonstrators threw rocks and Molotov cocktails.

A protestor is hit by water sprayed from a water cannon during clashes in Taksim Square, Istanbul, Turkey, 11 June 2013. Police used water cannons and tear gas as they moved into Istanbul’s Taksim Square, where two weeks of protests have been held, as some demonstrators threw rocks and Molotov cocktails. Photo: KERIM OKTEN/EPA

(source)
Photos of a woman in a red summer dress, being sprayed with teargas by a masked policeman, has become a symbol for Turkey's protesters.

Photos of a woman in a red summer dress, being sprayed with teargas by a masked policeman, has become a symbol for Turkey’s protesters.

(source)
Teargas at Tahrir Square

Teargas at Tahrir Square

(source)

So you have your classic double edged sword: large open spaces can facilitate protest, but also the reaction of the state.

Some bonus pictures of the Majdan protests in Kiev:

Majdan, before and after

Majdan, before and after

Majdan, before and after

Majdan, before and after

(source)
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economics, measuring poverty, poverty, statistics

Measuring Poverty (16): The Capabilities Approach and the Unstraightening of the Poverty Line

Fun_is_not_a_straight_line_by_jinchilla

(source)

We usually define poverty as a level of income or financial assets below a certain “poverty line”. This poverty line is set, often implicitly, at a level that is supposed to make the difference between decent survival and a life unworthy of human beings. The line is typically a single line, identical across all individuals – or even across nations. The best example is the $1 a day line. This is a single, universal line, adjusted only for purchasing power parity. Many national poverty lines are also fixed and identical for all citizens.

The problems with these fixed and uniform lines have been noticed by many, notably by Amartya Sen. According to Sen – and he’s right I think – being poor means being unable to achieve certain minimally satisfactory states of being and doing, for example the state of being sufficiently nourished, of being mobile, of being free of disease and ignorance, of being sheltered against the forces of nature etc. Poverty is about what people are or are not able to do and about who they are able to be. Poverty is capability-deprivation.

A poverty line only makes sense if it’s set at an amount of money, income or resources that is sufficient to guarantee the required capabilities. A first problem: it’s not at all clear that existing poverty lines are indeed set at a level sufficient to guarantee this. $1 a day in particular seems low, intuitively. Of course there are pragmatic reasons to set the line at a low level (one has to make priorities in life and help the worst off first). But then you’ll have a hard time calling it a poverty line, given the definition of poverty as the inability to achieve certain minimally satisfactory states of being and doing. Call it a survival line instead.

A second, and more serious problem arises from the fact that poverty lines are fixed and uniform. People, however, are obviously not uniform. Different people require different things in order to achieve the same capabilities. A pregnant women or a young mother needs more nutritional resources than the average person in order to achieve the state of being sufficiently nourished. A physically handicapped person needs more resources to achieve the capability of being mobile. If you focus on the average person – which is what you do with a uniform poverty line – then you’ll fail to identify some as being poor, while erroneously identifying others as being poor. And the environment also plays a role. A person living in unsanitary conditions may be forced to drink infected water. This affects his or her calorie absorption, implying a larger than average amount of food necessary to be sufficiently nourished. Cold weather means more effort to protect against the environment. And so on.

Identical capabilities require different levels of resources or income. A single, fixed poverty line obscures this reality. The only good poverty line is individually specific. However, that’s completely impractical. Differentiation across demographic groups, regions, occupations, lifecycle etc. might be more feasible, but at the cost of simplicity. Be that as it may. I would already be happy with increased awareness that there is indeed a problem. Talk of a “line” reduces this awareness, but I’m realistic enough to understand the appeal of something as simple as a line.

More posts in this series are here.

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causes of income inequality, economics, equality, work

The Causes of Wealth Inequality (31): Automation and the Hollowing Out of the Labor Market

Conventional wisdom has it that automation comes at the expense of low-skilled jobs and aggravates income inequality because of labor displacement at the bottom of the income distribution. It turns out that this is a bit too conventional, and not only because it runs afoul of the lump of labor fallacy (machines need to be built and people can go on and do other things). Mid-level jobs are also hit by automation, and perhaps even more than jobs at the bottom of the skill continuum. This has been called the “hollowing out” of the labor market:

hollowing out

(source)

This hollowing out, caused in part by automation, in turns causes an increase in income inequality. This is mere arithmetic: if the middle drops, then the extremes become relatively more important and inequality rises. Ryan Avent puts it well:

Work published in 2006 by David Autor, Lawrence Katz, and Melissa Kearney argued that employment and wage growth in America have “polarised” in recent decades, a conclusion that has been reinforced by subsequent research. Employment in high- and low-skill positions has risen substantially relative to middle-skill jobs. The resulting employment distribution generates a distribution of wages that is similarly polarised and more unequal than that which prevailed prior to this period. (source)

Why does technological automation focus mainly on middle skill levels?

Daron Acemoglu and Mr Autor pioneered a “task approach” to labour markets. Tasks can be completed by either labour or capital. The more routine a task is, the more susceptible it is to automation. But whether or not a task is automated depends upon the relative supply—and the real wage—of workers of various skill levels. Subsequent work has shown that automation and trade are responsible for displacement of routine tasks previously done by middle-skill workers, in both manufacturing and clerical or service activities, leading to polarisation of local and national labour markets.  (source)

Technological automation focuses mainly on middle skill levels because it’s relatively easy at that level, easier sometimes than at the extremes of high and low skilled tasks. “Easier” here means both technologically easier and more cost effective. Highly skilled tasks, such as teaching a philosophy course, are difficult for machines to do because they are complex (although we do sometimes see high-skilled jobs being automated, such as legal research for example). In the case of low-skilled tasks, some of these are surprisingly hard to automate, as in the case of truck driving or toilet cleaning. Even low-skilled jobs that aren’t technically hard to automate aren’t always automated because the pay-off may be too low – people doing those jobs are poorly paid so developing expensive machines to do it for them isn’t worth the trouble.

Henry Ford

Henry Ford

And then there’s the added worry that displacement of many low-skilled workers would create a permanent underclass unable to participate in the economy – unable, in other words, to buy the goods and services produced by machines. There’s a famous anecdote about Henry Ford mocking a labor union president in one of his factories, saying it wouldn’t be easy to get the robots to pay their union dues. To which the union president responded that Ford wasn’t going to get the robots to buy his cars.

The hollowing out of the labor market, driven by mid-level automation, has therefore a direct effect on income inequality, but it also a few indirect effects. For example, automation means lower production costs, and the savings or the added value go primarily to shareholders through capital gains and stock appreciation. Since stock ownership and capital income are concentrated among those already better off, income inequality is further increased.

If technology decreases the relative importance of human labor in a particular production process, the owners of capital equipment will be able to capture a bigger share of income from the goods and services produced. (source)

Another indirect effect: increasing automation of manufacturing jobs pushes unionization rates down, which in turn decreases bargaining power among low-skilled workers. This, in the end, aggravates inequality yet again.

More posts in this series are here.

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discrimination, equality, health, moral dilemmas

Moral Dilemma (24): Gender, Longevity and Healthcare

old couple

(source)

Given equal healthcare, women on average tend to live longer than men. You can see this as an injustice. Living a long and healthy life is clearly something that is generally considered to be good. Men have not chosen to be born as men. And neither have women. So why should men be burdened with such an unearned disadvantage? Compare this to a disability: people born with disability rightly have a claim to compensation or remediation. Hence, wouldn’t it be right to give men more medical attention than women to counteract – as far as possible – the natural masculine handicap? Or would giving women less medical attention than men be a case of discrimination?

Thanks for voting. By the way, I have some other dilemmas here for which I also would appreciate your vote. I repeat my promise that one day I’ll publish an analysis of the results of the votes for all those dilemmas. Just waiting for a bit more response.

More moral dilemmas are here.

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economics, work

We Need to Start Working Differently

iwdrm_modern_times_1935

Unemployment, starvation, war and unrequited love are probably more important and more urgent concerns, but the almost complete lack of serious thinking about the nature of work never ceases to amaze me. Most of us work and we spend a considerable portion of our lives doing our work, and yet how many of us do a job only because we need the paycheck? Far too often, work is a toil, not always a physical toil for us Westerners but a psychological one, because we work in systems we don’t understand, let alone control, or because we contribute an insignificant, boring, detailed part of a larger process we don’t really care about. We go to work, not to produce, be creative or self-develop, but simply to make a living, to have some cash, and in a few cases to have prestige, status, power or some other good external to the production process in which we engage or the product to which we contribute.

Work is not connected to who we are or wish to become. Who does not dream of another life? The statistics about job satisfaction and job motivation are depressing:

job satisfaction

Work should be about creativity, excellence, development and self-expression rather than wages, survival and status. How do we get there? That will be tough, but giving workers more control of their factories or businesses and increasing automation of the uninteresting parts of work would be a good start. Even if many of us – in the West at least – are no longer machine appendices in the style of Chaplin’s “Modern Times”, we’re often still tied to routine jobs that are part of a system the purpose of which is obscure to us or leaves us indifferent. Our contribution is not insignificant – or we wouldn’t get paid – and yet we are replaceable. The larger purpose of it all escapes us or doesn’t matter.

We shouldn’t forget that the division of labor into fragmented tasks in a highly hierarchical organization – and “organization” here also means markets (a taxi cab’s ride is just as much his boss) – is probably not so much a requirement of modern markets or production technologies but rather the consequence of a very specific way of viewing work relationships, namely relationships between highly qualified “managers” and simple executors. Other ways of working are possible and should be promoted.

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causes of poverty, economics, poverty

The Causes of Poverty (78): High Discount Rates and Lack of Delayed Gratification

grasshopper & ants

(source)

You talk to conservatives about the reasons why poor people are poor, and chances are that the discussion turns to lack of self-control, high discount rates and inability to delay gratification. “High discount rates” means that things in the present or near future are viewed as having a higher payoff than things in the distant future. If you have a high discount rate, you focus on immediate gratification. This in turn shows up in low savings rates, high debt, obesity, teen pregnancy, drug use, high drop out rates, low school attendance and other vices supposedly common among the poor.

Some even argue that differences between people in the apparent levels of self-control, discount rates or time preferences – which is all the same thing – appear at a very early age and are therefore probably innate. The famous marshmallow test will then get a favorable citation: you give kids a marshmallow and tell them they can either eat it now or, if they wait a few minutes, have two marshmallows. Kids who wait do better later in life.

However, recent studies have suggested that the marshmallow test does not, in fact, reveal innate (in)ability. The environment in which tests such as these take place determines to a large extent the levels of self-control revealed through them. Whether or not people are capable of delayed gratification depends not on their abilities but on their assessment of the reliability of the world around them. When the world is not worthy of trust, the best course of action is often to live for today.

This attitude towards the world and the future is probably internalized from a young age onward, which makes it hard to change. What it takes is to offer young children a reliable environment allowing them to develop levels of trust which will in turn yield low discount rates and the ability to delay gratification later in life. But in order to do that we’ll need to reduce parental poverty. Claims about lack of self-control as a cause of poverty then have things completely backward. Rather than a cause we’re dealing with an effect of poverty.

More posts in this series are here.

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causes of poverty, economics, poverty

The Causes of Poverty (77): The Lottery of Birth and the Country You Live In

mcdonalds-vegetarian-india-2

McDonalds in India

(source)

Charles Kenny explains to what extent the country you live in affects your livelihood:

[P]overty in Africa and Asia isn’t the result of something about individual Kenyans and Pakistanis, it is instead something about Kenya and Pakistan. Individuals the world over have the same drives and capacities, but the societies and places in which they live present radically different opportunities to turn that drive into wealth, health, and well-being.

That’s clear from evidence compiled by Princeton economist Orley Ashenfelter for the National Bureau of Economic Research. He looks at the wages earned by staff working at McDonald’s franchises around the world and compares what they earn to the cost of a Big Mac in that same franchise. The Big Mac is a standard product, and the way it is made worldwide is highly standardized. The skill level involved in making it (such as it is) is the same everywhere. And yet McDonald’s employees worldwide earn dramatically different amounts in terms of Big Macs per hour.

In the United States, a McDonald’s employee earns an average of $7.22 an hour, and a Big Mac costs an average of $3.04. So the employee earns 2.4 Big Macs per hour. In India, an employee earns $.46 an hour. The average Indian Big Mac (made of chicken, which is cheaper than beef) costs only $1.29. Still, the employee earns only one-third of a Big Mac for each hour worked. Same job, same skills—and yet Indian workers at McDonald’s earn one-seventh the real hourly wage of a US employee. There’s a huge “place premium” to working in the United States rather than India.

The place premium affects more than just low-end service jobs. Economist Michael Clemens, a colleague of mine at the Center for Global Development, studied a group of Indians working in an India-based international software firm who applied for a temporary work visa to the United States to do the same work in the same firm, just on the other side of the Pacific Ocean. Some of them then won the lottery by which visas were issued, while others lost. The winning workers, who were still in the same firm and still doing the same type of job on the same projects, suddenly saw dramatic differences in their pay.

The ones who moved to the United States started earning double what their colleagues back in India were earning (adjusted for purchasing power). They were earning more not because they were different from the colleagues they left behind—selection was not based on education, talent, or drive but was entirely random. And once they returned to India, they went back to earning pretty much the same as their colleagues who had never left. They briefly earned more in the United States simply because they were in the United States rather than India. (source)

Some more numbers:

place premium

(source; how much more workers in the U.S. make compared to identical workers in developing countries, e.g. Nigerians and Yemenis stand to gain upwards of 10 times as much from moving to the U.S.)

The place premium is a strong argument in favor of reducing migration restrictions: it doesn’t seem just that people’s income is determined by the good or bad luck of having been born somewhere, and the use of force to keep people in their country of birth only aggravates the injustice. However, by the same logic we can also argue for a more generous welfare state: it’s not just your country of birth that affects your income. Your parents, social class, genetic endowment, health prospects, looks etc. are also a lottery that affects your income and good fortune.

More posts in this series are here.

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causes of income inequality, economics, equality

The Causes of Wealth Inequality (30): Assortative Mating

out-of-your-league

(source)

Intuitively, it seems obvious that assortative mating leads to higher wealth and income inequality. If rich people marry each other and poor people marry each other, then family incomes will be more unequal than when people routinely marry across class divides. Hence, recent increases in inequality may be due to higher rates of assortative mating, at least in the US:

Data from the United States Census Bureau suggests there has been a rise in assortative mating. Additionally, assortative mating affects household income inequality. In particular, if matching in 2005 between husbands and wives had been random, instead of the pattern observed in the data, then the Gini coefficient would have fallen from the observed 0.43 to 0.34, so that income inequality would be smaller. (source, source)

Now, obviously we should prefer a world in which wealthy men have the opportunity to marry high earning and educated women, because such a world is one in which women have more equal opportunities. It’s also a good thing that wealthy women continue working after marriage. In addition, we shouldn’t try to manage people’s marriages, no matter how strong we feel about income inequality. I guess that goes without saying. However, what we could do is modify the tax system so that wealthy individuals do not receive additional benefits when they marry. Or we could tax them more.

Before we do anything we should be realistic about the causal effects that we try to neutralize. There are many causes of inequality, and I think – but can’t prove – that assortative mating isn’t as important as is claimed in the quote above (the authors of the cited study compare the real world to a world in which mating is random, and such a world is inconceivable). A big part of rising inequality is due to the top 1% of the income scale. The people in that bracket probably also look for partners similar to themselves, but assortative mating can’t explain the enormous income gains that they have seen over the last decades:

BfGI-JDIUAA_ysH

(source)

More posts in this series are here.

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causes of income inequality, economics, equality, trade, work

The Causes of Wealth Inequality (29): The Declining Share of National Income Going to Labor

capitalist-democracy-illustrated1

(source)

Rest assured: this post is going to be more nuanced than the image above. As usual, what I want to do here is look at a possible cause of increasing income inequality, namely the relative shares of labor and capital income. Your labor income is your wage, your pension, your bonus, your company health insurance etc. Most people have a labor income. You only have capital income if you receive dividend payments, capital gains, interest payments on savings etc.

During the last decades, the share of labor compensation in total national income has declined, and this has been a global phenomenon, occurring in most countries:

labor share in national income

labor share in national income

(source)

Can we blame this decline for the increase in income inequality during the same period? Only in part, I think, because there has also been a divergence within labor in the sense that some people, mostly high earners, have seen their labor income rise much faster than others. Income inequality is indeed, to some extent, wage inequality. The growth of the finance sector, where people are well-paid, is part of the explanation for the increasing wage inequality, at least in some countries. Tax policy, declining bargaining power among the low earners and wage competition from poorer countries – again affecting mainly low-end workers – may be other explanations for rising wage inequality, also depending on the country (unionization rates, for example, haven’t evolved in the same manner everywhere).

But I guess it’s true that not all of income inequality is wage inequality and that incomes from capital, such as profits, dividends, stock options etc. also explain something. Capital income is, compared to labor income, unevenly distributed across a population, and concentrated among the wealthy:

capital income and wage income

(source)

If capital income is more concentrated among the wealthy then a rise in capital income leads to a rise in income inequality. Part of this is just arithmetical: the flip-side of a lower share of national income coming from labor is a higher share of income coming from capital. Capital income needn’t be higher in absolute terms in order to get a larger share. If there’s widespread wage stagnation – perhaps due to international wage competition, trade and outsourcing – then capital income may rise relatively, if not absolutely. However, in some countries we also see an absolute rise of capital income. Here’s the US:

tax-rate-change-impact-capital-gains-realized

(source)

sources of income

(source)

More on capital gains here. More posts in this series are here.

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causes of income inequality, economics, equality

The Causes of Wealth Inequality (28): Political Capture and Deregulation

red tape

(source)

Does income inequality result from “political capture” by the rich? Political capture is the process by which wealth buys policies that are favorable to the wealthy, who in turn become more wealthy. Through campaign contributions, lobbying, the monopolization of discourse etc. the wealthy may be able to convince politicians to approve policies such as deregulation, non-progressive tax rates, tax loopholes, weakened social safety nets, IP etc. Policies aimed at undermining the regulation of the role of money in politics also fit the list, in a meta sort of way. “One dollar one vote” rather than “one person one vote” would obviously be a perversion of democracy, but I’ll now focus on the purely economic effects of political capture, and more specifically on how wealth-backed deregulation affects the distribution of income.

In theory, political capture doesn’t necessarily aggravate income inequality because the economy isn’t always zero sum: policies favorable to the rich, and pushed by the rich, can also have benefits for the rest. Some types of deregulation may be an example. The word “deregulation” summons images of large companies being allowed to pollute, to pay their workers below subsistence wages etc. However, deregulation can also mean getting rid of occupational licensing which often serves no other purpose than to protect incumbents and frustrate enterprising low-income individuals. Deregulation more generally – again in theory – may lead to increased competition and therefore lower prices, something that also benefits the poor.

However, in practice we see that the wave of deregulation during the last decades, especially in the financial and banking sector, has coincided with increasing income inequality, at least in the US:

financial deregulation and income inequality

(source)

This graph also makes the link:

bank regulation and inequality

(source, click image to enlarge)

It’s not just the total level of inequality that is correlated with deregulation; more specifically, wages in the finance sector show the same trend:

overbanked

(source)

Of course, correlation is not causation as people like to say on the internet. Deregulation may not have been the product of political capture, or not entirely, and may not have been an important cause of rising inequality. But the correlations shown in the graphs above do put the burden of proof on those who deny causation.

But also if you accept the possibility of causation, you’ll need a convincing story. It’s true, I think, that deregulation has increased the number of activities that financial companies can engage in, and has therefore led to a rising demand for higher skilled workers and to more performance related compensation. Financial professionals made up almost twice as much of the top 1 percent of the US income distribution in 2005 as they did in 1979. However, deregulation is only part of the explanation of the disproportionate rise in compensation in the finance sector. Stock options and tax policy are also to blame. Of course, tax policy can also result from political capture, but that just goes to show that any explanation of inequality needs to look at a variety of factors. Inequality isn’t just the product of deregulation.

Another post on the same topic is here. More posts in this series are here.

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causes of poverty, economics, poverty

The Causes of Poverty (76): Farmer vs. Hunter Thinking

caveman-hunting-illo-md

(source, illustration by Grant Coghill)

Tim Harford mentions an interesting study about the origins of different ideas about justice. Farmer cultures seem to stress desert, whereas hunter cultures believe that solidarity is the more important focus of justice. Hunters tend to share because their “incomes” are volatile: some days they catch too much, other days not enough. Luck also determines farmer incomes, but to a lesser extent. Bad weather means bad luck, but it’s also bad luck for neighboring farms. A sharing culture won’t solve that kind of bad luck in the same way as it will in the case of bad luck while hunting. Another reason why a sharing culture will be less important in farmer cultures is the fact that farm crops can be stored more easily than meat in primitive societies.

A farmer mentality will therefore stress self-sufficiency over sharing, and perhaps this will fuel desert-based theories of justice even centuries after farming or hunting has ceased to be an important social role. That may have an impact on the way a society deals with poverty. If you adopt a desert-based theory of justice then you’re normally less inclined to enact policies that reduce poverty since you believe that poverty is deserved. If people deserve their poverty then they can’t claim assistance, and if assistance were to be given anyway that would be an injustice to those whose stock of means is used as a source of assistance, because they too deserve what they have.

It’s tempting to use this farmer-hunter difference to describe the different approaches to poverty in Europe and the US. There’s more opposition to the welfare state in the US, and desert-based theories of justice are more popular there. Hard work and self-sufficiency are common topics of political talk in the US, whereas words such as solidarity and equality are more often used in Europe. Here are some data from the World Values Survey which tend to confirm these national stereotypes:

equality and incentives hard work success

And of course the US was founded as an agrarian society (Thomas Jefferson for instance was a staunch agrarian), with the South of the country remaining agrarian deep into the 19th century.

However, careful with national stereotypes. It’s not as if the whole of the US is hardhearted. It’s a matter of degree:

Beo_px5CIAA60EM

Steven Pinker has come up with a similar story, although he contrasts farmer and herder cultures.

More posts in this series are here.

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annals of heartlessness, housing, poverty

Annals of Heartlessness (54): Homeless Man Outside a Diner in Milwaukee

Homeless man sleeps outside a diner in Milwaukee

Homeless man sleeps outside a diner in Milwaukee

(source)

This is a tough one. The image nicely represents the invisibility that comes with homelessness and the casual neglect and indifference often shown by the non-homeless (“smile at the camera!”), but it’s also difficult to call this a case of heartlessness without accusing everyone of heartlessness. Who among us hasn’t been indifferent in this way?

More in the annals of heartlessness.

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causes of poverty, economics, poverty

The Causes of Poverty (75): Different Types of Colonization

colonists

Some time ago, Acemoglu, Johnson and Robinson argued that areas of the globe where early colonists did not face a high mortality risk – such as North America and Australia - are now much richer countries. Many ex-colonies in Africa and the Caribbean, on the other hand, where colonists did face high mortality rates because of tropical diseases such as malaria, are now poorer.

Why is that? AJR claim that the reason is institutional. In those poor countries, the only institutions that were created in early colonial times were extractive. If only a small elite of colonists could survive the local diseases, colonizing nations had little incentive to create durable and non-extractive institutions or provide public services like health and education to the masses of the local populations. More livable colonies could be occupied en masse by the natives of the colonizing nations. These natives required institutions and had the knowhow to create them. The societies that developed there were therefore better organized and far more equal (if you leave out the indigenous populations who were often exterminated). The early institutional built-up, the argument goes, has survived until today, and it’s commonly accepted that good institutions play a key role in development.

Make of it what you will. Perhaps it obscures more than it reveals. In the wrong hands, this argument can be used to exonerate present-day autocratic rulers. After all, it takes time to build institutions, especially in countries burdened by a long tradition of (the wrong kind of) colonialism. Path dependence can be a lousy excuse.

More posts in this series are here.

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causes of poverty, economics, poverty

The Causes of Poverty (74): Family Structure, Ctd.

single mother

The more traditionally minded among us often blame family structure for high poverty rates. Family structure is of course a euphemism hiding several very specific moral judgments about people’s behavior, about single motherhood, divorce, paternal negligence and incarceration. Those are the things that supposedly make people poor. “Family structure” just sounds nicer and more neutral.

At first sight, this does make some sense. It is a lot harder, financially and otherwise, to raise kids on your own, and if you find yourself in this situation it’s often your own fault or the other parent’s fault. Having a kid or not is a choice given the availability of contraception and abortion. Divorce is a choice. Finding yourself in prison as a parent is a choice. And even if you’re not a parent, marriage or cohabitation is just plainly cheaper than living on your own because you can share costs. You’ll have to buy just as much food as a single person, but the cost of rent, heating, internet access, the use of a car etc. can be split. A lot of consumption goods are non-rival, and marriage and cohabitation are wonderful places for non-rival goods (the park as well, but you can be lonely there).

Given the high rate of children living with single parents it’s not a priori crazy to assume that there’s a link with poverty rates. It does seem to be the case that poverty rates among single parents are higher than average:

brady-lis-single-mother-poverty1

(source)

However, we have to be careful when assuming causation. While it can be the case that your income is lower than it would have been had you (remained) married or chosen not to be a single parent, it might just as well be true that your preexisting poverty causes you to be single.

Suppose you are a single person making $9,000 a year and therefore live in poverty. Now suppose you meet someone else making $9,000 and you are considering marrying them. If you marry, the family income goes to $18,000 and is therefore above the poverty line. On a very superficial take, this seems like it would be a real improvement. But that is only if you assume your potential spouse will necessarily remain employed. If they lose their job, you will go from supporting one person with $9,000/yr to supporting two people with $9,000/yr. On the low-end of the labor market, precarity is very common and so this is a very real risk. (source)

There’s also some literature about how teenage pregnancy results from poverty: poor teenagers often see parenthood as one of the few meaningful options that are available (work, education etc. may not be realistic options).

Another point: traditionalists who make the argument that we should promote marriage in order to reduce poverty can perhaps be somewhat dishonest about their motivations. It may be that what they really want is more marriage for its own sake and just dress it up as an anti-poverty measure because arguing outright for more marriage for its own sake is just not that convincing anymore. It’s telling that cohabitation doesn’t figure as an equivalent alternative in their arguments, even though in theory marriage and cohabitation have the same effect on poverty.

And there may be another hidden motivation. Traditionalist proponents of marriage are often situated at the right of the political spectrum, and being right-wing often also implies being opposed to the welfare state. Arguing that poverty should be solved by way of increased marriage rates is perhaps just a roundabout way of downsizing the welfare state: why should we have a welfare state if marriage can solve poverty? Some make this argument explicitly, saying that welfare destroys marriage because it allows people to survive without getting married (I can’t find a citation just now).

What I dislike about the focus on family structure is not really these possible motivations, but rather the inherent simplifications and victim blaming. There are a lot of causes of poverty, and behavior is probably not the most important one. Many single parents are doing a fine job, both financially and otherwise. Low marriage rates are common in many countries, including those where poverty rates are low (see the graph above). And those single parents who struggle probably do so for other reasons than family structure. It’s also true that many working married parents are poor, whereas most celebrity divorcees don’t have a trouble in the world.

A final remark: even if higher marriage rates would be an effective anti-poverty measure, how on earth do we get more people to marry? Tax cuts? A government sponsored dating service? Flower shop vouchers? It all seems so impractical, especially given the ease of other anti-poverty measures (for example…). And not just impractical but also paternalistic and lacking in respect for people’s choices.

More here, here and here.

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economics, equality, income inequality, poverty

Income Inequality (29): The “Get Off the Couch” Solution

0407010320431dog1

(source)

When leftists complain about high levels of income inequality, their opponents on the right sometimes argue that inequality is the natural outcome of personal desert. If you’re wealthy, you should be praised for your work, and if you find yourself on the wrong side of inequality you should invest more effort and try harder to be socially mobile. If you think inequality is a problem, then in fact you blame the industrious for being industrious and you exculpate the rest. Societies like the US offer lots of opportunities to escape the social class of your parents, and many do in fact escape. So if you don’t, look at yourself first.

This view is actually quite common on the right. According to a Pew survey, 38 percent of Americans are judgmental, declaring that poverty stems from a lack of individual effort, while 46 percent does not fault the poor, agreeing that their plight is the outcome of unfavorable circumstances. A large majority of Republicans – 57 to 27 – says that people are poor because of a lack of effort.

The right-wing view has a certain prima facie appeal. We all believe that effort should be rewarded. And when social mobility is easy and people aren’t artificially held back and tied to the class of their parents, then perhaps inequality is indeed the result of unequal effort and lifestyle choices. In other words, inequality is what people deserve. If there are few or no obstacles to mobility and people have some level of equal opportunity, then they basically choose their position in society: they choose to invest effort and develop their skills, or they don’t.

However, upon closer inspection the narrative is unpersuasive. It’s not always true that individuals can simply decide to develop their skills and invest effort in their social mobility. Skills aren’t just “developed”; some people are born with more talent than other people, or with talents that yield more financial profit than other talents. True, talent requires development and effort, but even effort may be a naturally acquired capacity or a capacity that requires favorable conditions in early childhood. I think we all agree that a stable and reasonably affluent family life as well as a good education are indispensable, on average, for the development of talent and of a personal ethic that favors effort and discipline. Many people at the wrong end of inequality can offer some of this to their children, but to a much lesser degree than wealthier parents. Here are some data on so-called enrichment expenditures:

enrichment expenditures on children

(SOURCE)

And it’s not just expenses. The children of wealthy parents have other advantages compared to poor children, advantages they wouldn’t have in a less unequal society, for instance networks, internship opportunities etc. Because of extra expenses in education and other less material advantages, these children are more likely to end up in a high income group as adults. As a result, inequality counteracts social mobility. And we see that in the numbers: the more unequal a society, the less social mobility. That’s the message of Miles Corak’s famous Great Gatsby Curve:

correlation between income inequality and social mobility

(SOURCE, THE “INTERGENERATIONAL EARNINGS ELASTICITY” IS A MEASURE OF CORRELATION BETWEEN THE INCOME OF GROWN CHILDREN AND THEIR PARENTS—HIGHER VALUES SUGGEST LESS MOBILITY)

Here’s another version showing other countries:

income inequality and social mobility

(SOURCE)

If you argue that income inequality is not really a problem when there is a high level of social mobility and when people have good opportunities to become socially mobile – in other words when they have good opportunities to climb the social ladder and escape the social class or income group into which they were born – then you’re really taking things backwards. Social mobility can’t be a solution to inequality because inequality makes mobility very difficult. High levels of social mobility assume that we create more equality of opportunity. However, this is a dead end. As I’ve argued here, equality of opportunity is a highly problematic and unrealistic concept.

More posts on income inequality are here.

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human rights cartoon, poverty

Human Rights Cartoon (77): The Poverty Time Bomb

Untitled6

(source)

A powerful image, but a bit dubious in its meaning. For example, studies have shown that poverty isn’t the main cause of terrorism. On the other hand, we all share the belief that deep, widespread and longterm poverty must at some point lead to rebellion and that this rebellion can have an “explosive” nature in some cases, especially when the state tries to suppress unrest and protest. (That’s the pressure cooker metaphor, made famous by Marx). The problem is that this belief often overshadows other causal stories with a stronger basis in fact. For example, poverty and inequality are widely cited as the main drivers of the Arab Spring revolts, but they were at best only one among many causes.

More cartoons.

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citizenship, freedom, international relations, work

Migration and Human Rights (48): The Arguments Against Immigration, and How They Are Mistaken

immigration

I’m going to try to list the most common arguments against immigration, and show how they are devoid of any basis in facts. Since I’m talking facts, I’ll include some handy references to scientific evidence debunking the arguments. (The references will sometimes be found in older blogposts, so you may have to click through a few times. If you feel that I’m shamelessly overlooking some seminal papers, please tell me in comments).

1. The labor cost argument

Claim:

Immigrants are willing to work for low wages, especially the illegal ones. The result is unfair wage competition with natives who will see their wages drop as a result, or who may even be priced out of the labor market altogether. The welfare of native workers requires that we limit immigration.

Facts:

Immigration actually increases native wages because it allows native workers to move up the pay scale, for example as supervisors of the new immigrant workers. Low skilled immigrants also make it possible for natives to spend less time on non-paid, low-skilled activities that they can outsource. As a result, the latter can spend more time on paid activities, which increases their income. The wage competition claim can also be refuted by pointing to the fact that native workers and immigrants tend to take different occupations.

Not only is there a positive wage effect of immigration (with perhaps a small exception for native high school drop outs), but immigration also creates or saves jobs. The easier it is to find cheap immigrant labor at home the less likely that production will relocate offshore. More here.

2. The social safety net argument

Claim:

Immigrants come over just to cash in on unemployment and other benefits, since the income of even the relatively rich people in many poor countries pales in comparison to the welfare benefits in rich countries. This is unsustainable, since welfare benefits have to be financed, and working native populations often have a hard time producing enough tax revenue in order to support native welfare beneficiaries. Allowing immigrants to come but then excluding them from welfare benefits seems harsh and unjust. Hence it’s better not to allow them to come in the first place.

Facts:

Immigrants use welfare at lower rates than natives. The labor force participation rate for illegal immigrants in the US is higher than that of the native-born. In the UK, immigrants represent about 13% of all workers, but only 7% percent of unemployment benefits.

3. The “importing poverty” argument

Claim:

Immigrants are less well off than natives. That’s precisely why they want to migrate. Allowing them in reduces the average wealth of the destination country.

Facts:

Many immigrants are indeed less well off than the native born, even after they’ve immigrated, because they come from poorer countries and because they’re often less skilled than the native born. Hence, an increase in immigration may push up the national poverty rate. But that’s not necessarily a bad thing, since the same immigration flow will probably push down the global poverty rate: migrants usually improve their lot by migrating – they probably wouldn’t migrate if that were not the case.

4. The crime argument

Claim:

Immigrants cause an increase in the crime rate. They often come from countries with dysfunctional states and bad enforcement institutions. Hence, they have grown to be more tolerant of violations of the law. The poverty of their countries of origin also pushes them towards more crime. Less crime is a good thing, hence less immigration is also a good thing.

Facts:

Immigration is associated with lower crime rates and lower incarceration rates.

5. The lack of integration argument

Claim:

Immigrants, especially those from other cultures (and that would be most immigrants, since it’s the poor who want to migrate and the poor are almost by definition from outside the West), find it hard to fit in. As a result, there will be frictions between the immigrant population and the original inhabitants. These frictions benefit nobody, hence we should restrict immigration.

Facts:

Natives are more likely to engage in antisocial behavior like bullying, dropping out of school, domestic violence, harassment, vandalism etc. The evidence is here.

6. The cultural argument

Claim:

The local culture will not be able to survive a large influx of high fertility immigrants from completely different cultures. People have a legitimate interest in the preservation of their distinctive cultural identity. Hence immigration should be restricted.

Facts:

A cultural identity is obviously a valuable good. However, it’s not at all clear that immigration threatens the cultures of destinations countries. Those destination countries are multicultural to begin with. Most immigrants are also  willing and able to adapt (see previous point). Moreover, cultural change is not by definition a bad thing, both for those arriving and for those already there. And finally, cultural change is not always likely to happen anyway: throughout history, even those minority cultures living in highly hostile environments where the majority controls the state have been able to survive and flourish. Often a threat to a culture is the cause of increased cultural awareness.

7. The educational argument

Claim:

Immigrant children push down the quality of schools and therefore harm the education of native children. Immigrant children have different types of disadvantages: they speak the local language less well, they have cultural burdens inhibiting education, and perhaps even IQ burdens. The welfare of native children requires that we limit immigration.

Facts:

Higher rates of immigration encourage native children to study harder – to complete high school and to go to university - so that they can avoid competing with immigrant high-school dropouts in the labor market.

Conclusion

All of these claims about immigration are based on supposed harms to the population of the destination country. (There’s one argument I didn’t mention, namely the brain drain argument, that focuses on the effects of migration on origin countries, but that one is just as flawed as the rest). Not only is this a very selfish mode of argument, ignoring the clear benefits for (potential) immigrants, but – as it turns out – also a very misguided one, based on factual errors. However, even if it were the case that immigration imposes some form of financial costs on host countries, then that wouldn’t necessarily be the final argument against immigration, since these cost can be seen as a form of global redistribution and global justice.

More posts in this series are here.

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economics, law, self-defeating human rights policies, work

Self-Defeating Human Rights Policies (9): Child Labor Legislation

child labor cartoon

According to a famous model by Kaushik Basu, if governments ban child labor but fail to enforce those bans - governments in countries where child labor is prevalent often have weak law enforcement in general - then they create the wrong incentives for employers and for the families of child laborers. Employers react by continuing the practice of child labor because they can often get away with it, but at the same time they lower the wages of child workers because they except to get caught at some point and be fined. They anticipate and compensate these fines by lowering wages. (Children usually don’t have the power to resist wage reductions). The families of the children in turn react by forcing more of their children to work as a way to compensate for the lost income. There’s some evidence here that this effect does indeed occur.

Perhaps we should kick the habit of relying only and automatically on legislation in order to enforce human rights. This may be a good strategy in countries that have well-functioning enforcement systems, but in developing countries it may do more harm than good. (Perhaps this is a symptom of the much criticized shortsightedness of western international development efforts). After all, it’s not as if there aren’t any non-legislative means to promote human rights.

Here‘s another example of human rights legislation that actually leads to diminished respect for human rights. More on the difficult relationship between human rights and the law is here. Some data on child labor are here. And more posts in this series are here.

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causes of poverty, economics, poverty

The Causes of Poverty (73): Low IQ?

The brain, "the most complex human organ", and yet we think that 1 number based on a 100 or so short questions is a good measure of its ability

The brain, “the most complex human organ”, and yet we think that 1 number based on a 100 or so short questions is a good measure of its ability

This kind of reasoning is all too common: the poor are stupid and they are poor because they make stupid decisions. Unsurprisingly, it’s mostly the rich who indulge in this kind of pop-psychology, because if true it would also mean that they are wealthy because they are smart. They imagine a correlation somewhat like this:

income iq correlation

Had they cared to look up the actual data, they would have found that the rich don’t necessarily have higher IQ. There’s no correlation at all between wealth and IQ, not even a weak one:

iq and wealth correlation

(source)

And that’s not really surprising: a lot of high paying activities do not require high IQ (I’m looking at you, Sarah Palin). Conversely, it’s not uncommon for smart people to be poor.

So, if the wealthy aren’t making a living that is proportionate to their intelligence, then their wages are determined by other factors: specific skills if we want to be kind; networking, nepotism, degrees paid for by their parents if we want to be nasty. And the wages of the poor aren’t caused by their IQ either.

However, let’s just assume for a minute that the poor do indeed have lower IQ than average. Maybe all this would tell us is that the pressure and stress of poverty reduces our cognitive abilities. So, if there’s is an effect, the causation goes the other way: the poor aren’t poor because they are stupid; they are stupid – if they are indeed stupid – because they are poor.

dstupid2A more fundamental objection to the “poverty is caused by low IQ” narrative: IQ itself is a highly dubious notion. Children’s IQ scores are all over the places, changing almost overnight (up and down). Over longer periods of time, average IQ among populations rises (which is known as the Flynn effect). There is also no agreement on the heritability of IQ – the fluid nature of IQ results seems to argue against heritability. So intelligence is neither fixed nor obviously innate. Environmental factors – including education – change people’s IQ. Much has been made of the fact that African Americans score lower than European Americans on IQ test. However, when black or mixed-race children are raised in white rather than black homes, their test scores rise dramatically. And then I don’t even mention the cultural, gender or race biases inherent in a lot of the IQ test questions (for example, it’s clear that IQ tests are designed for very specific roles in a post-industrial advanced society).

Even more fundamentally: there is no one single and fixed quality or ability called “intelligence” that IQ tests could measure. What these tests do measure is one very particular type of intelligence. They don’t measure planning abilities, long term memory, creativity, emotional intelligence or any practical intelligence such as street smarts, and yet most of us would consider those abilities as essential parts of intelligence.

But again, let’s assume that the “poor = low IQ” claim is true, that the causation goes from low IQ to poverty and not vice versa, that IQ is a good measure of intelligence, that we have a good and objective definition of intelligence, and that the scientifically ascertained lack of innate intelligence among the poor is impervious to any social intervention such as education and redistribution. What would that imply? Inherited disadvantage is unfair and unjust. People should not suffer from inherited disadvantage. Even if the wealth of the rich and the poverty of the poor are the result of innate IQ, that would not lead to a conclusion favorable to the “poor = low IQ” crowd, because the conclusion would be that the poor need to be compensated.

More on poverty and IQ here. More posts in this series are here.

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economic human rights, economics, housing, poverty

Economic Human Rights (44): Homeless Man Makeover

I don’t know anything about the context of this. I do hope they didn’t just dump him on the streets afterwards but gave him something more than a new look:

According to the video, Jim (that’s his name) has now decided to enter Alcoholics Anonymous and has his own housing. Again, it can’t possibly be as easy as this, so I really hope there’s more to it than a haircut. A gimmick, or real change? Did they really help this guy get off the streets, or is it just a commercial? I can’t tell. The website of the charity behind this video is here, and it looks for real.

More on homelessness, and on the reasons why this is a human rights violations. More posts in this series are here.

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economics, poverty

Poverty is Decreasing: From a Camel to a Dromedary Shaped Distribution of World Income

Someone came up with a catchy name for previous and current world income distributions:

world income distribution

Obviously, the current distribution is better since fewer people find themselves at the left side of the graph: about 1 billion people – or less than 20% of the world’s population – are still poor in the sense of earning less than $1 a day, compared to 75% in 1820. However, let’s not rejoice too soon: 1 billion poor people is still a lot, and global inequality is still a fact. Perhaps someday we can speak of something like the hockey stick distribution.

The image above violates a number of statistical rules. For example, the y-axis isn’t labeled (it’s actually number of people), the x-axis is vague etc. But the general idea is enlightening. If you want more detail, the data are here. Similar distributions for some large countries are here.

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economics, law, philosophy, privacy, trade

The Extent of Private Property Rights

foreclosure

(source)

In some ways, a right to private property is similar to a right to privacy: a private property right is a right to control access to certain goods that you – as an individual or as a group of individuals – mark as “yours”, and access is of course also fundamental to privacy rights. Stated differently, a private property right is a right to make independent decisions about your goods (sell, keep, use, destroy, consume or transfer as you please) and to exclude interference with those decisions by other would-be users of those goods. If others attempt, without your permission, to use, transfer or modify goods that are “yours”, your right to property gives you the power to repel this kind of interference, with the help of the state as the enforcer of social rules (we don’t want people to rely on their own strength to enforce their property rights, because we don’t want to jeopardize security rights such as physical integrity).

Access control and the power to exclude are central to both property and privacy rights. One could even make the case that private property rights are a subset of privacy rights (no privacy without your own house for example). This link is probably why in the modern capitalist economy the words “property” and “private property” are usually synonymous. There are of course other types of property but, rightly or wrongly, those have lower status in modern economies. Interestingly, although other types of property such as common or collective property have their own logic and problems, issues of access, control and exclusion may also be relevant to them, as is evident from the “tragedy of the commons“.

Let’s leave the relative status of different kinds of property to the side for now, and focus on private property. There are two major problems with the claim that people generally have a right to private property: why is it a good thing to have private property over certain goods, and which goods can you claim as “yours”.

Possible and reasonable answers to the first question include:

  • “private property is necessary for privacy or some other value”
  • “it’s necessary for production, commerce, exchange and hence prosperity”
  • “it encourages responsible use of resources”
  • etc.

Possible answers to the second question:

  • “first come, first take” (so-called first occupancy theory)
  • “all existing distributions of property are just”
  • “take but leave enough for others” (Lockean proviso)
  • “equal shares”
  • “goods to which you have added value by way of your labor”
  • “none”, meaning there can only be common ownership, collective ownership or some other none-private form of property
  • plus a load of other possible answers.

private propertyHowever, let’s also leave these questions to the side for a moment. What I do want to look at now is the extent of property rights. A right to exclude others from the use of your property or a right to decide to use that property in a certain manner, may, in some cases, leave others worse off, or may even lead to their death. In general, and depending on the strength of the arguments in favor of private property (see above), you have a right to private property even if others have a greater need for the resources you own. If the needs of others would always trump property rights, then those rights wouldn’t be rights at all. It’s only when some threshold level of need is reached that the needs of others should be allowed to trump your right. Your right to property should not result in the physical suffering or death of others. Especially in the case of scarce and necessary goods, we need limits on the extent of property rights, even though property rights may perhaps only make sense when we’re dealing with such goods (why limit access to goods that aren’t scarce or necessary?). These limits are justified because we’re dealing here with a conflict of rights: property rights versus the right to life or the right not to suffer extreme poverty. As in all cases of conflicting rights, there needs to be a trade-off, and the one I’m defending here seems reasonable.

Hence, a justification of private property should never be limited to arguments about the benefits of private property but should instead find its place in a justification of rights in general, including the rights of those who are excluded, by the property rights of others, from the use of scarce and necessary resources. And any justification of rights in general needs to address possible conflicts between rights.

Access control and the power to decide and exclude are inherent in the right to private property but are not absolute powers. In this respect, the right to property is not much different from other human rights. As a society, we have to balance each and everyone’s property rights with each and everyone’s other rights, and individuals can’t demand that the state enforces their property rights – or that they themselves can enforce their property rights – when we all, as a society, have decided that in a particular case the balancing of rights has resulted in a priority of non-property rights.

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causes of poverty, economics, poverty, work

The Causes of Poverty (72): How Unemployment and the Incentive Theory Aggravate Poverty

unemployment

Not all poor people are unemployed. Even in developed countries some of the poor are “working poor“, i.e. people who have an income that is below the poverty line. Hence, if some who work for a living can’t make ends meet, it’s obvious that the unemployed are even more at risk of being poor. At best, the latter only have a temporary replacement income in the form of unemployment benefits. This income is often lower than even the lowest wage income, and in most countries it’s also limited in time. Hence, poverty is the likely result of unemployment, even in wealthy countries.

To some extent, this result is intentional: governments want to “incentivize” people and “nudge” them into the labor market. High unemployment benefits that aren’t limited in time – combined with the fact that many jobs don’t pay enough to avoid poverty – may trap some people in unemployment. Low and limited unemployment benefits, on the other hand, invoke the horror of poverty which in turn may force people to look for work.

It’s obvious why many unemployed people are poor – their incomes are just too low, and intentionally so. But why are poor people unemployed? The incentive theory tells us that poor people shouldn’t be unemployed. The horror of poverty should drive them out of unemployment. While some people are probably “incentivized” in this way, this is not something that will work for all the unemployed poor. It will only work for all the unemployed poor if jobs are abundant, and indeed that’s what the incentive theory assumes. Of course, this assumption is wrong. There’s something called the natural rate of unemployment. Even in the best of economic circumstances, there’s always some level of involuntary unemployment, and during recessions, this level is higher than normal. From the graph below you can see that during a recession (starting from 2008 in this case) more poor people than normal indicate that their unemployment is due to their “inability to find a job”.

why the poor don't work

(source, data for the US)

So, there are no conceivable incentives that will push all unemployed poor into the workforce, not even at the best of times.

Notice how the same graph shows that the inability to find a job is just one reason among many, and definitely not the most important reason why poor people don’t work. Choice (“home or family reasons”) is another reason. And that’s one which can sometimes be influenced by incentives. However, the reason that’s cited most frequently, namely “sickness or disability” cannot. The horror of poverty will not force you into employment if you can’t work for health reasons. Hence, even if we assume, unrealistically, that there is an abundance of jobs and no natural rate of unemployment, it’s unrealistic to assume that all poor unemployed people will one day join the workforce.

This has implications for the incentive theory. If you put too much emphasis on incentives, you’re likely to put unemployment benefits at a very low level with a strict time limit. After all, the closer the horizon of poverty, the more likely that people will act and look for a job. However, if there are not enough jobs or if people have other reasons why they won’t work, then they won’t work. And if unemployment benefits are stingy, then these people will become poor. Incentives don’t always work as intended. Sometimes they may even cause poverty.

Now, I do agree that work is important (I’ve written a entire book on the importance of work) and that we should therefore try to get as many people in jobs as we can (and, by the way, improve the quality of those jobs; that’s also in the book). Not only because working people normally – although not always – are less at risk of being poor, but also because work is important in human flourishing. I also agree that incentives can play a role in getting people to find work, and that the specter of poverty can be used as an incentive. However, we should be careful with this particular incentive. It may work sometimes, but often it doesn’t.

More on how unemployment benefits protect people from poverty is here. More posts in this series are here.

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annals of heartlessness, education

Annals of Heartlessness (48): “Im Not Your Real Mother”

mother-and-daughter

A Chinese woman lied to her daughter for over a decade and told her that she was not her real mother – in an effort to cultivate the girl’s independent spirit.

A woman surnamed Shen, a resident of China’s Shenyang city, married a wealthy man and had a young daughter named Cheng Cheng, Shenyang Evening News reported. Their family was well-off, and about 13 years ago, Shen began to fear her daughter was becoming spoiled and arrogant. To stop this behaviour and force her child to be independent, Shen adopted a particularly unorthodox parenting tactic.

“Your real mother died a long time ago,” Shen told Cheng Cheng, who was about to enter fourth grade at the time. “I’m not your real mother. I’m just providing for your education up until you finish university. After that, don’t count on my help anymore.” …

Cheng Cheng began studying harder, and her academic performance improved. Her arrogant traits also began to disappear, and the girl became “sensible and obedient,” the Shenyang Evening News reported. …

After graduating, her high grades earned her a spot at a software company in Shanghai. Only then did Shen reveal the truth to her daughter. (source, source)

Naturally, Chinese officials raised concerns and stressed the importance of the maternal bond in a child’s development. More in the annals of heartlessness here.

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economics, poverty

“When the Less Fortunate Are Disinvesting”, A Story of Poverty Told Entirely in Euphemisms

poverty in maine, 1982

poverty in Maine, 1982

(source)

Here it is, with bonus sarcasm in square brackets:

The poor are society’s underprivileged [all they lack are certain privileges]. They are of modest means [as opposed to "of no means at all"]. In order to make ends meet [what are those f*cking ends that are supposed to meet anyway?] they need to disinvest. In other words, the less fortunate become negative savers [as if they have any savings that they can negate]. The penniless [I'm sure they still have pennies] are in financial distress and are socially disadvantaged [they only lack some kind of advantage].

As a result of their poverty, those in dire straits [excuse me?] are marginalized [I suppose they are not in the center of attention]. They live in substandard housing [not entirely up to standard, but hey]. Or maybe they don’t have housing at all and then they are forced to become urban campers. Many of the poor have gotten the pink slip [I mean "the boot"] and are between jobs [or even "between shows"]. They are benefit claimants [yes, they claim instead of asking politely]. If they work, they work in the informal economy [they can only make a living illegally]. Their children in school have fallen in the achievement gap [forget about them]. Health conditions are a major problem ["sir, you have a serious condition"]. The uncertainty weighs heavily [much more heavily than the certainty of hopelessness].

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economics, human rights promotion, philosophy

Human Rights Promotion (14): Aggregating Rights (A Social Welfare Function Based on Human Rights)

balance

(source)

A social welfare function (henceforth SWF) ranks conceivable or possible worlds – also called  “social states” – according to the aggregate levels of welfare they produce. Each social state is given a numerical value by the SWF allowing it to be ranked. This should help policy makers and individuals to achieve the social state with the highest – or maximum – aggregate welfare. Subject of course to whatever constraints there are: technological or resource constraints, human capital or behavioral constraints etc. A “higher” rather than the “highest” welfare may be the only realistic option.

A SWF therefore describes society as a whole, but the whole is an aggregate of individual welfare scores, also called individual “utilities”, “interests” or whatever. Individuals should first order possible social states from their own point of view and their own sense of utility or preference, and then these individual orderings of social states are aggregated in some way by a SWF so as to achieve maximum aggregate welfare.

A SWF typically looks like this:

W(x) = F (U1(x), U2(x), … , Un(x))
where:
W(x) is a real number social utility value for a possible world x
U1(x) is a cardinal or ordinal utility value that is interpersonally comparable and that is yielded by some policy or procedure for individual 1 in world x
F is a function that yields a real number; F can be different things: the sum of all U’s, the average of all U’s, the product (multiplication) of all U’s etc.1
n is the total number of individuals.

SWFs are hotly contested. What should count as individual “welfare” or “utility”? And how do we measure, rank or score it? And if we have an uncontested definition of individual welfare that can be measured and ranked, then how do we compare and aggregate it across individuals? In other words: what is U and what is F?

Let’s start with the first problem. Income or wealth (counted cardinally in $) is often cited as a good proxy for welfare. When people have more money, they can pay for more goods, services or activities which give them some amount of utility in some form and which therefore enhance their welfare. Income or wealth is also measurable and interpersonally comparable. Aggregating it into a SWF should be relatively easy. Of course, F is this case should probably not be the simple sum of all income levels. Some special focus on the income of the least well off and redistribution of income from those better off would, given the Law of Diminishing Marginal Utility, increase total welfare utility (W) in a society: one extra unit of utility (income in this case) for a starving person is of greater value than an extra unit of utility for a millionaire.2

However, income and wealth aren’t really very good proxies for welfare. Welfare is clearly more than money, even though money can buy welfare. In addition, different people need different levels of income or wealth because they have different consumption requirements (think of a blind person or a paraplegic). So income looks like it’s an interpersonally comparable form of welfare when in fact it’s not: equal income may yield vastly unequal levels of welfare when welfare is understood as something more than mere income. Well-being may then have to take the place of income (well-being could account for the lower welfare of the blind and the paraplegic given equal income levels). But well-being is notoriously difficult to define, let alone measure.3

Kenneth Arrow

Kenneth Arrow

So we’re back where we came from. Perhaps a more subjective approach to welfare could do the trick. Welfare is then not what is objectively good for individuals – such as income or well-being – but rather what individuals themselves subjectively prefer. This means moving away from what Kenneth Arrow has called the Platonism or paternalism that is often part of welfare economics.4 The social good is not derived from philosophical reflection about the nature of welfare, but is instead the composite of individual preferences, whatever they are. Hence, the welfare that is to be aggregated into a SWF is abstract preference satisfaction.

The use of abstract preference satisfaction as a measure of individual welfare allows us to sidestep the problem of interpersonal comparability of more specific preferences or of other possible definitions of welfare such as income. There is no way to compare satisfaction of a preference for alcohol with satisfaction of a preference for a long life. Of course, even if we try to compare abstract preference satisfaction across individual, we’ll still have problems because

[t]here is no means of testing the magnitude of A’s satisfaction as compared with B’s.5

Hence the need to use ordinal rather than cardinal rankings for individual preference rankings. One takes individuals’ ordinal preference rankings and aggregates those, irrespective of the nature or intensity of the preferences. However, we then may have to pay the price of running afoul of Arrow’s Impossibility Theorem which suggest that individual ordinal rankings can’t produce a SWF.

Moreover, the interpersonal comparability of abstract preference satisfaction is only apparent. Let’s say you have a world with three individual, each with a set of preferences that they rank. Two of them have a high preference for the consumption of porn and rank that first. The other one has no preference for porn and instead ranks the consumption of art first. When abstracting these preferences, most SWFs would result in a ranking of possible social states where the social state in which porn consumption yields the highest total welfare is the best possible state. That is not intuitively appealing. While many of us would give priority to people’s preferences even if these preferences are not our own and even if we deem them base, most would stop at evil preferences.6

Hence a SWF based on abstract preference satisfaction is not acceptable. Perhaps we should therefore reconsider the Platonism scolded by Arrow7 (but without the paternalism). I propose to do just that and more specifically to use human rights as the Platonic good. I have good reasons for choosing this good, and I’ve defended those elsewhere. You may or may not agree with these reasons, and the reasons will inevitably be controversial. Introducing controversial elements into a SWF may make it useless, and may result in as many SWF as there are people. However, the controversial elements have always been there. The advantage of human rights is that there is widespread agreement on them – at least on the list of rights, not so much on the reasons why we need them.

Another advantage of the use of human rights as a proxy of welfare is interpersonally comparability. Thomas Scanlon, although not talking about human rights, says it better:

Scanlon by Steve Puke

Scanlon by Steve Puke

Giving up the idea that value judgments can be avoided altogether allows us to make, within moral argument, the kind of interpersonal comparison mentioned earlier. We can still pursue the aim of Neutrality by basing our moral arguments on a conception of the elements that are important in making a life good that is at least widely shared.8

Measurement of human rights is also less of a problem compared to alternative measures of welfare. People’s rights are respected or not. To some extent, this can be objectively ascertained, at least in theory. There are, of course, practical obstacles to human rights measurement, especially in oppressive environments,9 but a reasonable way out of this would be to assume that impossibility of measurement equals absence of respect. Indeed, when rights are not respected, they may be violated in degrees. A SWF based on rights should therefore be able to include measurement of measurable degrees of respect/violation of rights. Again, there is no real obstacle to do this kind of measurement of degrees, at least in the case of most human rights. Free speech for instance is already measured by degrees.10

In order to convince traditional welfare economists of the usefulness of this approach to SWFs, it’s probably best to point to the fact that human rights also encompass a notion of welfare. Traditional welfare needs such as food, shelter, rest, preservation of life, security and a basic standard of living are all codified as human rights.11 Human rights take a sufficientarian approach to these issues, meaning that the focus should be on the welfare needs of those members of society who do not yet have the means to satisfy them. Improving the standard of living of those who already have an above threshold level is not required by human rights.

This sufficientarianism of human rights suggests that the SWF should be Rawlsian, focusing on the welfare of the least well-off individual member of society. That is true for the welfare element of human rights, but not for the more traditional human rights. The members of society whose rights – welfare and other rights – are most precarious should of course receive priority as to their rights protection, but at least in the case of non-welfare rights this is only an intermediate goal. The SWF should allow us to advance the rights of all members up to a level of equal protection.

Sen’s social welfare function is even less useful in this context because it focuses too much on income and income inequality and doesn’t capture the full range of human rights. Completely useless are the Benthamite/classical utilitarian SWF: both the sum and the average are more or less indifferent to the distribution of utility among individuals (with the exception of diminishing marginal utility). Human rights are equal rights, hence their distribution is of crucial importance. Perhaps a Bernoulli-Nash SWF in which F is the product? Maybe, but that will only be the start. A complete SWF based on rights requires a lot more work than I can possibly accomplish here. For example, one element of complexity is geography: normally, SWFs are made for a single country, whereas a rights based SWF should of course encompass the whole of humanity. Human rights are rights of all human beings, and there are substantial cross-border effects on rights. I hope to flesh out this proposal another time.

A sum could be a Benthamite or classical utilitarian SWF; the product a Bernoulli-Nash SWF.
A Rawlsian SWF would then perhaps be an option. A Benthamite or classical utilitarian SWF, even though it would allow redistribution if justified by diminishing marginal utility, does not give special attention to the income of the least well off. A Rawlsian SWF allows redistribution even without diminishing marginal utility.
The capabilities approach – which argues that freedom (what people are free to do or be) should be included in welfare assessments – is one interesting formulation of well-being, but it’s inevitably controversial.
K. J. Arrow, Social Choice and Individual Values; 2012, Yale University Press, p. 23.
L. Robbins, An Essay on the Nature and Significance of Economic Science, 1932, MacMillan, p. 124.
There are numerous other problems with preference satisfaction as a definition of welfare, e.g. preference manipulation, people having preferences about other people’s preferences (as in Sen’s Liberal Paradox, etc.).
See note 4 above. One can argue that welfare economics is always and inherently normative. Disagreement about F is indicative of the ethical choices inherent in SWF thinking. See notes 1 and 2 above. In addition, the focus on individual welfare as the only source of social welfare also marks an ethical choice, namely the choice against collectivism.
T.M. Scanlon, The Moral Basis of Interpersonal Comparisons, in Elster & Roemer, Interpersonal Comparisons of Well-Being, Cambridge University Press, 1993, p. 44.
See Human Rights, the Quantitative Approach, F. Spagnoli.
10 Freedom House and others are known for this.
11 Although there is opposition to the inclusion of these rights in the corpus of human rights, especially in the U.S. See here.
(image source, image source)
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economics, equality, human rights promotion, justice, philosophy, statistics

Human Rights Promotion (13): Human Rights, Pareto Improvements, and a Difference Principle

Human rights activism is rarely zero-sum, in the sense that we can only improve the rights protection of some through the imposition of an equal loss on others. More commonly we selectively improve protection for some without reducing protection for others. For example, if a judge protects a journalist’s free speech rights against government censorship, no one else’s rights protection is proportionally reduced. (This is zero-sum in the sense that more free speech means less censorship, but it’s not zero-sum on the level of different rights).

Zero-sum rights activism does occur, but only in the case of conflicting rights. For example, the journalist’s free speech rights may require restrictions on the right to privacy of public figures (or vice versa). However, most violations or restrictions of rights are not the result of conflicts between rights but rather the result of the non-rights motivated actions of governments or private agents.

We can rephrase this in economic terms. Given an initial allocation of goods among a set of individuals, a change to a different allocation that makes at least one individual better off without making any other individual worse off is called a Pareto improvement. An allocation is defined as Pareto efficient or Pareto optimal when no further Pareto improvements can be made (source).

Vilfredo Pareto

Vilfredo Pareto

This is common in human rights activism. We regularly intervene very selectively to improve the rights of some while leaving others unaffected. This is because there’s always a lack of resources and a lack of power to intervene non-selectively.

However, even if Pareto improvements can be a way forward for rights protection, they are not the ultimate goal of human rights activism. This ultimate goal is equal rights, and that’s not something you can reach with Pareto improvements. Inherent in Pareto is that you don’t leave anyone worse off, but equal rights may require that some people give up something: an equal right to private property may imply redistribution for example.

Another reason why Pareto improvements aren’t really compatible with human rights is the lack of urgency, priority or fairness in Pareto terms. Pareto improvements can make those who are already better off even better off. If you make the richest person in society better off or improve the rights protection of the best protected person in society, this can be a Pareto improvement, but that’s hardly the best way forward for human rights. Human rights would require making first the worst placed person better off, even if this means making the best placed person a bit worse off (which, however, is often not even necessary).

Pareto efficient is therefore not the best way to achieve a society with full respect for human rights, although a society that is not Pareto efficient – in the sense that some Pareto improvements with respect to rights protection are still possible and some people may be made better off without anyone else being made worse off – obviously does not fully respect human rights.

john rawls

John Rawls

If we first need to make the worst off better off, then a better principle for human rights may be a variation of Rawls’ difference principle:

enhanced protection of the rights of those whose protection is already better is only justifiable if it also leads to enhanced protection of the rights of those whose protection is relatively worse.

For example, one could argue that a very bright person has a right to more education if it turns out that her enhanced education ultimately benefits others who are less educated (perhaps because this person will become a rights activist or because she will transmit her knowledge). Or one can argue that a higher standard of living for someone already well off will increase economic productivity which in turn benefits the poorer members of society. However, this difference principle will not, by definition, make everyone equally well off or guarantee everyone’s equal rights. But perhaps it will do a better job than Pareto efficiency.

More about human rights and zero-sum games here. More about the original difference principle here.

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aid, equality, ethics of human rights, international relations, justice, philosophy, poverty

The Ethics of Human Rights (78): Our Duties to People in Other Countries

grover near and far

Grover, near and far

If we leave aside the minority view that we don’t have any moral duties to other people, as well as the somewhat more common view that we only have duties to a very limited group of people (our tribe, family or nation for example), then we end up accepting that we owe something to the rest of humanity. But what exactly? I don’t want to discuss whether we owe human beings in general the same as what we owe the people we know or the people we are associated with. What I’m interested in here is simply the nature of our obligations to “distant” people, and the basis or reasons of those obligations. Whether they’re stronger, weaker or just as strong as the obligations to “those nearer and dearer” is not the topic of this post (I have an older post about that).

1. What should we do? What are our obligations?

I think there are basically three types of obligations to distant others:

  • we have a duty to protect their human rights; this implies both abstaining from violating their rights and assisting them in the protection of their rights when those are violated (this is a legal duty)
  • we have a duty to create a more just global order (a duty of justice)
  • and we have a duty to act benevolently (a duty of beneficence).

1.1. Protect rights

This duty is in fact a set of different sub-duties:

  • A negative duty to stop violating rights ourselves. For example, if we apply a strict policy of closed borders, we violate certain rights of people in other countries (their freedom of movement, their right not to suffer poverty etc.). Our duties demand that we stop this policy.
  • A negative duty to stop assisting others who violate human rights. For example, the oppressive government of another country violates the rights of its citizens by means of weapons supplied by us (or by firms established in our country and exporting with our approval). Our duties demand that we stop assisting this government in this way.
  • A positive duty to intervene in order to stop human rights violations. For example, the West should have intervened when the Rwandan genocide was in progress.
  • A positive duty to intervene in order to prevent human rights violations. For example, the West should have intervened when it became clear that a genocide was about to occur in Rwanda.
  • A positive duty to intervene in order to create the preconditions for human rights. For example, when the institutions in other countries are dysfunctional or absent (in the case of failed or weak states) we have a duty to assist these countries’ efforts in institution building, so that they end up with institutions capable of protecting the rights of their citizens.
  • A positive duty to intervene in order to assist people’s efforts to overcome their poverty. Since poverty is a human rights violation, this is not really a separate duty: we shouldn’t create or aggravate poverty in other countries, we shouldn’t assist when others (e.g. foreign governments) create or aggravate poverty, and we have a duty to end and prevent poverty, and to create the institutions that make it possible to end and prevent poverty. However, I mention it separately because some of the specific means of intervention are peculiar to poverty, and don’t apply to other human rights (take for example development aid).

Our duties to intervene can cover

  • either only gross violations of some human rights (crimes against humanity, emergency action to alleviate widespread human suffering resulting from war, civil war, famine, drought, natural disasters or other humanitarian crises) – also called r2p
  • or violations of human rights in general.

Gross violations may warrant specific types of intervention that are not allowed for violations in general, for example military intervention. More mundane violations require other types of intervention, such as aid, conditional aid, diplomatic intervention, economic boycotts, universal jurisdiction etc. Intervention can also be either multilateral through the UN, or unilateral. Preferably it’s a legal form of intervention, but if necessary it can also be illegal – morality trumps law.

Uncles from the People's Liberation Army! Quickly go and liberate our little distressed friends in Taiwan, 1955

Uncles from the People’s Liberation Army! Quickly go and liberate our little distressed friends in Taiwan, 1955

1.2. Create a just global order

Perhaps we should do more than just rid the world of human rights violations and extreme poverty. The world is a very unequal place, and will continue to be so even when all human rights are protected and poverty has been eliminated (given a certain definition of poverty). So maybe we also have a duty to create a more egalitarian distribution of wealth, resources and/or opportunities across countries.

However, this duty is much more controversial than the previous one (1.1). Contrary to human rights violations, there is also no legal standard prohibiting an unjust and grossly unequal global order. Hence, given the uncertainty about this second type of duty, it’s safe to argue that we should take it to be a negative duty at most. In other words, we should not make the world more unequal and more unjust than it already is, and we should try to remove or improve institutions that make the world order unequal and unjust. More specifically, we have to

  • remove unfair trade agreements or trade restrictions
  • remove the current system of national border restrictions and allow freedom of movement
  • pay reparations or otherwise correct the lingering effects of a violent and exploitative history
  • improve economic regimes that make it impossible to have equal and fair access to natural resources
  • improve international institutions, shaped by the wealthy countries to their advantage
  • etc.

Obviously, many of these actions also remove human rights violations and are therefore covered by the first type of duty. However, even when they don’t they may be required by morality.

1.3. Act benevolently

peter singer

Peter Singer

The classic description of this duty is Peter Singer’s. He gives the example of a child drowning in a pool. We all believe that there’s a strong duty to save this child, even if there’s a certain cost to ourselves – e.g. it’ll ruin our expensive suit. The equivalent of the drowning child happens all the time in distant places, and there are systems in place that allow us to save people all over the world, at a cost that isn’t much higher than the price of a suit. In many cases, all we have to do is donate some money.

This duty to act benevolently can be interpreted more widely. It can involve more than the requirement to save people from disaster. Singer claims that it implies a radically egalitarian obligation: we ought to help others until the next increment of aid would do more good spent on ourselves than transferred to others. Practically, this means helping others until we are ourselves barely better off than the rest. This is extremely demanding, and very controversial, but the narrow interpretation of the duty of benevolence is widely shared.

Again, these three different duties are not always clearly different. There are overlaps. The duty to act benevolently is partly justified by the rights of the beneficiaries: a drowning child and a starving Ethiopian have a right to life. Creating a more just global order will improve respect for people’s rights, and improving respect for people’s rights will make the global order more just. Still, there are differences between these duties and it’s interesting for human rights activists to consider the possibility that people can appeal to moral obligations that go beyond respect for their human rights.

2. Why should we do what we should do? What is the basis of our obligations?

So, now that we stated what we should do, how can we explain why we should do those things? There may be different reasons why we have obligations to help other and distant people:

  • We may be responsible ourselves for their predicament (or at least partially): we may have violated their rights, helped others to violate their rights, or established and maintained an unjust international order (for example because we have been colonizers or because the international trade system that we have imposed is biased in our favor).
  • People have rights, and these rights by themselves create a duty for everyone else to respect and to promote respect for those rights. The duty to protect other people’s rights is not a duty only for those who are responsible for violating these rights. And neither is it a duty limited to those who have a special relationship with victims of rights violations or to those whose social duty it is to promote respect for rights (e.g. judges or police officers). We all have this duty, and we have it simply because others have rights. Hence, we pay taxes that fund the legal institutions that protect citizens against others who violate their rights, that fund schools and hospitals etc. There’s no reason to think that this does not apply globally as well.
  • We may have an obligation to help other and distant people not because their rights create a moral duty to assist, but because other moral values such as justice and/or benevolence or beneficence create such such a duty. If it is in our power to do something about suffering, injustice and inequality without too much of a sacrifice of our own interests and without violating some deontological demands (e.g. do not kill), then justice and/or benevolence may require that we do it.
  • Duties to help others can also be based on enlightened self-interest: national governments have a duty to protect the rights, security and prosperity of their own citizens, and in some cases this means protecting the rights, security and prosperity of people in other nations. The poor and oppressed may become refugees; civil wars may spread to other countries or may foster international terrorism; unstable economies may harm the global economic system and the environment etc. Conversely, free and prosperous nations benefit the rest of the world because of the gains of trade, cooperation in science and culture etc.
(image source)
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economics, trade, work

What is Surplus-Value?

surplus value

It’s a concept from Marxist theory that may still have some relevance today. According to Marxism, a worker creates more value in a day than he gets paid. This extra or surplus-value is taken by the capitalist. Or, in other words: “the wages of the laborer had a smaller exchange-value than the exchange value of the object he produced” (D. McLellan, “Marx”). The object is sold by the capitalist, who buys labor and pockets the difference. “[T]he workers would produce values that exceeded the reimbursement of their labor” (ibidem).

The capitalist forces the worker to work more than the hours necessary to embody in his product the value of his labor power. For example, if the value of labor power, i.e. the wage, is $50 a day, and a worker produces a good (or goods) which is worth $100 during a full day of work, then the second half of the day would yield surplus-value, in this case another $50.

This is theft, according to Marx, because the capitalist takes something which he hasn’t produced or bought. He takes the unpaid labor and products of someone else and lives on the back of someone else, simply because he has the privilege of owning the means of production. The workers have to accept this because they depend on the capitalist. They have to sell their labor power in order to survive because they do not own means of production and hence cannot produce without the consent of the capitalists. As the workers’ energy is not depleted after their own reproduction is guaranteed – through the payment of a wage – capitalists can use it to produce more.

Karl Marx 1882 (edited)

Karl Marx

Moreover, the capitalist continuously tries to maximize his surplus-value. He uses technology and science to increase productivity and diminish the necessary labor time per unit of production. Machines allow him to produce more with less labor. If wages stay constant and productivity goes up, then surplus-value goes up.

But wages, says Marx, do not stay constant. The capitalist also tries to make labor as cheap as possible and the working day as long as possible, at least within the boundaries set by labor law. 

If labor law does not permit extensions of the working day and wage reductions, then the capitalist uses the so-called “industrial reserve army“. This is a relatively large group, constantly available but not necessarily made up of the same people. They are unemployed, desperate to work (especially when the social safety net is absent or insufficient), ready to replace the employed and ready to accept a lower wage and a longer working day. This reserve army is a millstone around the neck of the workers, a regulator keeping wages at a low level.

Why do capitalists try to maximize surplus-value? In order to survive the competition with other capitalists.

[T]he wage-worker has permission to work for his own subsistence, that is, to live, only in so far as he works for a certain time gratis for the capitalist (and hence also for the latter’s co-consumers of surplus-value); … the whole capitalist system of production turns on the increase of this gratis labor by extending the working day or by developing the productivity, that is, increasing the intensity of labor power, etc. (K. Marx, “Critique of the Gotha Program”)

The capitalist accumulates surplus-value and wealth, and the worker accumulates misery, Marx predicts. “[P]overty and destitution develop among the workers, and wealth and culture among the non-workers. This is the law of all history hitherto” (ibidem). The “immiserization” (“Verelendung”) of the proletariat is something relative:

Marx was usually wary of claiming that the proletariat would become immiserized in any absolute sense. Such an idea would not have harmonized well with his view of all human needs as mediated through society. What he did claim was that the gap in resources between those who owned the means of production and those who did not would widen. (D. McLellan, “Marx”)

Everywhere the great mass of the working classes were sinking down to a lower depth, at the same rate at least, that those above them were rising in the social scale. In all countries of Europe it has now become a truth demonstrable to every unprejudiced mind, and only denied by those, whose interest it is to hedge other people in a fool’s paradise, that no improvement of machinery, no appliance of science to production, no contrivances of communication, no new colonies, no emigration, no opening of markets, no free trade, nor all these things put together, will do away with the miseries of the industrious masses; but that, on the present false base, every fresh development of the productive powers of labor must tend to deepen social contrasts and point social antagonisms. (K. Marx, “Inaugural Address of the Working Men’s International Association”)

In this figure I tried to summarize Marx’s view on the maximization of surplus-value:

maximization of surplus-value

maximization of surplus-value

The maximization of surplus-value deepens social divisions, brings despair to the workers, and hence will contribute to the collapse of capitalism, at least that’s how Marx saw it.

What use is the concept of surplus-value for us today? Wage aren’t going down, although they are stagnating; and social divisions caused by competition and the maximization of surplus value haven’t brought down capitalism. However, inequality has increased, in part because of wage stagnation, deunionization, and tax policy favoring the “productive” and local companies facing international competition. Competitiveness and productivity have become a fetish in policy circles. Labor laws, as a result, have been somewhat eroded. Blaming all this on surplus-value maximization driven by competitiveness is surely simplistic, but not completely wrong.

More here.

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annals of heartlessness, housing, poverty

Annals of Heartlessness (40): Scatological Solution to the Problem of Homelessness

homeless

image by Reuters/Lucas Jackson

(source)

The City of Abbotsford has apologized for spreading chicken manure over a popular gathering place for the homeless [not in the image above] in an apparent bid to drive them out of the city. …

The practice of using chicken manure to drive away the homeless came to light after local advocate James W. Breckenridge wrote a column titled “This Stinks” in the Abbotsford Today community newspaper.

According to Breckenridge, the city has waged an “ongoing war on the homeless,” driving people “from spot to spot around Abbotsford like nuisance animals.”

Meanwhile, the city has failed to provide a viable housing alternative to camping for the homeless, Breckenridge says. (source)

More in the annals of heartlessness here.

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ethics of human rights, health, philosophy

The Ethics of Human Rights (77): The Case Against the Sale of Human Organs, Ctd.

anatomy internal organs

(source)

Take a look at the following conflicting facts:

1.

There are currently 113,198 [U.S.] patients on the United Network for Organ Sharing wait list for organ transplants. With only 28,535 transplant surgeries performed in the United States last year, it is clear that actions need to be taken to increase the supply of available organs. Around 7,000 Americans die each year while waiting for a suitable transplant (source).

2.

In a study of India’s kidney market, 86 percent of donors had major health issues after their surgery. … The same study of kidney sales in India revealed that 79 percent of sellers regretted their decision to donate an organ and a shocking 71 percent of sellers were married women. Because poor women in India have little power, they can be easily forced by their husbands to sell their organs. (source).

Good health and survival are human rights. Those of us who have objections to unregulated markets in human organs have to show that markets fail, on balance, to further human rights protection and that alternative systems of organ provision perform at least as well as organ markets in terms of human health and survival. It’s important to note here that the comparison of the cases for and against organ sales will have to take the human rights of all – buyers as well as sellers – into consideration, and will also have to factor in all human rights and not just the rights to health and survival if the case against organ markets can show that other human rights may suffer if markets are implemented.

The typical argument against organ sales – and, by extension, against other types of commodification and other instances of the “imperialism” of the market – consists of three parts:

  • some “things” are degraded or corrupted if turned into commodities
  • if some “things” are traded for money then the profit motive may crowd out other types of motivation, and those other types of motivation are often morally valuable
  • organ markets are typically coercive given the fact that poor people will be coerced by economic necessity to sell their organs.

The first point has been stated most clearly by Michael Sandel:

[M]arkets don’t only allocate goods; they express and promote certain attitudes toward the goods being exchanged. Paying kids to read books might get them to read more, but might also teach them to regard reading as a chore rather than a source of intrinsic satisfaction. Hiring foreign mercenaries to fight our wars might spare the lives of our citizens, but might also corrupt the meaning of citizenship. Economists often assume that markets are inert, that they do not affect the goods being exchanged. But this is untrue. Markets leave their mark. … We don’t allow children to be bought and sold, no matter how difficult the process of adoption can be or how willing impatient prospective parents might be. Even if the prospective buyers would treat the child responsibly, we worry that a market in children would express and promote the wrong way of valuing them. Children are properly regarded not as consumer goods but as beings worthy of love and care. Or consider the rights and obligations of citizenship. If you are called to jury duty, you can’t hire a substitute to take your place. Nor do we allow citizens to sell their votes, even though others might be eager to buy them. Why not? Because we believe that civic duties are not private property but public responsibilities. To outsource them is to demean them, to value them in the wrong way. (source)

Market values can indeed change how we look at things. If a human body is viewed as an organ mine, then ultimately this can destroy the dignity of the body, of the human person and of life itself. There is an inescapable incompatibility between the view that something has a financial exchange value and that the same thing has dignity. The horror of slavery wasn’t merely defined by the pain, the oppression and the lack of freedom suffered by slaves, but also by the fact that slaves were viewed as commodities rather than human beings. And although it’s unfair to compare organ trade to slavery, the same commodification and financial market logic underlies both. Commodification of the human person, whether as a whole or in part, is a failure to treat human beings with dignity and respect. Human beings shouldn’t be used as tools, instruments or resources.

Not even if it means saving people’s lives? Yes, not even if it means saving people’s lives, on the condition that there are other feasible ways of saving people’s lives. And there are. The fact that current rates of donation are not always and everywhere sufficient to meet the growing demand does not imply that all possible donation schemes are insufficient. Rather than giving up completely on donation just because current schemes don’t always work well we should focus on improving it, especially given the serious drawbacks of the market system that is hastily and sometimes lazily proposed by some.

I do understand the tendency of some to look for market solutions, especially given the success of markets in other areas of life. But there’s no good reason to assume that all social relationships should be financial ones.

The second objection to organ sales is that market values crowd out non-market values worth caring about such as altruism and solidarity. Not only is this intuitively persuasive – if people get money for things it’s likely that they’ll stop giving it away for free, and that giving in general will become rare when market values invade every part of life – but there’s also some evidence. This paper argues that donation rates would decline in a market, with detrimental consequences for social relationships. And this paper also finds evidence of crowding out.

I’ve dealt with the third objection – the coercion objection – in an older post.

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discrimination, economics, equality

Discrimination (16): When Is It OK to Discriminate?

hippies use side door

(source)

Discrimination is generally blameworthy and therefore often illegal as well. However, there are situations in which it’s acceptable to discriminate and unacceptable to legislate against discrimination. I’m not referring to rules that apply unequally to different people in order to produce a more equal outcome, such as rules regarding affirmative action (which are sometimes claimed to be a form of positive discrimination); nor am I referring to rules regarding different height requirements for male and female candidate police officers. These are two examples of rules that discriminate in order to make outcomes more equal, and they can therefore, paradoxically, be seen as anti-discriminatory. Conversely, rules that apply equally to all can have a “disparate impact“: e.g. one uniform and “neutral” height requirement for police officers would mean that fewer women will be allowed in the police force and would therefore have a discriminatory impact on women. Even if such rules are not intended to discriminate against women, they obviously do. (I’ll come back to intent in discrimination at the end of this post).

So, I’m thinking about rules like those, or rules that not only have unequal outcomes but also apply unequally (take the rules against gay marriage for instance). Can some such rules, which clearly discriminate some groups of people (given a certain understanding of discrimination), ever be justified?

I think they can. Discrimination can be unobjectionable if the benefits outweigh the harm done by discrimination. “Benefits” meaning not the benefits from the discriminator’s point of view, since those always, by definition, outweigh the harms for others – that’s the point of discrimination. We have to look at the benefits generally speaking, from a neutral point of view. For example, the safety of airline passengers and hence their rights to life and physical security outweigh the discrimination imposed on people who are not allowed to be pilots because of their bad eyesight. Another example: the importance of a good education for our children outweighs the discrimination imposed on people who want to be teachers but don’t have the qualifications. Discrimination of people with a physical disability or intellectual deficiencies is acceptable and even beneficial in these cases, not because those who can become pilots and teachers benefit from the exclusion of rivals, but because society as a whole benefits, and because this benefit outweighs the harm done to those excluded.

glassesThe downside of the consequentialist balancing inherent in these examples is that it is seldom clear what the exact harms and benefits of discrimination are. After all, every historical instance of discrimination was once defended on the basis of its beneficial consequences: equal voting rights for women was supposed to lead to irrational politics; legalization of homosexuality would lead to immorality; miscegenation would lead to the downfall of the white race etc. However, these examples don’t prove that there can’t be any forms of discrimination that can have some real and overridingbenefits, and in fact we daily assume that they have: we give good teachers a job as a teacher, we give talented people higher wages etc. because we believe that society as a whole benefits from this.

Maybe we shouldn’t talk about discrimination in cases of acceptable and beneficial discrimination. I argued here that we should probably limit the concept to those cases in which the equal rights of those who are discriminated are violated and, more specifically, are violated for no other reason than their membership of a socially salient group. The would-be pilots and teachers in the examples above don’t have an equal right to be pilots or teachers or to any other specific job. There is no such right. There is a general right to work, but that right isn’t violated since people with bad eyesight or without the qualifications to become good teachers have ample opportunities to find a job elsewhere (under normal economic conditions).

Also the second condition for discrimination is absent in these examples: the people in question are certainly not part of socially salient groups (which is another way of saying that people with bad eyesight or without the qualifications to become good teachers are not regularly put at a disadvantage in society). Hence they are not discriminated when they are excluded from certain jobs on the basis of qualifications.

If, however, the would-be pilots and teachers were black – and therefore part of a socially salient group – and if they were excluded for no other reason than their skin color, and if this exclusion would violate their right to work (or any other right), then there would be discrimination. Their exclusion would violate their right to work when they regularly face this kind of exclusion, not when that sort of things happens only exceptionally and when they therefore have ample opportunities elsewhere.

employment discriminationThis last point about alternative opportunities is crucial. Single instances of discrimination usually don’t violate people’s rights and therefore aren’t really discrimination according to the definition given here. Discrimination requires violations of people’s rights and violations based on people’s membership in socially salient groups. And violations of rights imply the absence of alternative opportunities  (I once gave the example of one lonely restaurant owner refusing to serve blacks, or the isolated landlord refusing to rent a house to Italian immigrants).

In this older post I argued that forcing some people to stop discriminating would violate their rights, such as their right to free association, to property, to religion etc. and that it can only be acceptable to force them to stop if the discrimination they inflict is so widespread and historically deep that it limits the rights and options of the targets of discrimination.

Nevertheless, this rule still leaves us with a few hard cases. The rights of discriminators may still receive priority even when the discrimination does severely limit the options and rights of target groups. Suppose there’s a general disapproval to marry “outside of one’s race” among the majority white population in a society. Most of us would not want legislation against this kind of discrimination because that would drastically limit the right to marry of the discriminators. Discrimination here severely impacts the choices and opportunities of non-whites, and yet seems acceptable. The whites in question may be immoral and repugnant, but this doesn’t render their rights null and void and doesn’t justify legislation prohibiting an exclusive preference for white husbands and wives. The reason, I think, is that it’s very difficult to do something about the actions of the whites. You can force people to hire blacks, serve them in your restaurant, admit them in your school etc. But you can’t force people to marry someone. So, the system I set up here to separate cases of discrimination from other cases isn’t perfect. It won’t solve some hard cases, but maybe those can never be solved.

A final word about intent. There’s no mention of intent in the definition of discrimination given here. That means that rules with a disparate impact can be cases of wrongful discrimination even if there is no intent to discriminate. Take again the case of height requirements for police officers: a single height requirement for both genders is not necessarily discriminatory, but when it is part of a wider social pattern of gender inequality, then it may violate women’s equal rights because the total set of gender biased rules makes it difficult for women to have ample employment opportunities elsewhere. Women are then a socially salient group. Intent is irrelevant here. Even if the height requirement is motivated by efficiency reasons, it contributes to discrimination and rights violations. The goal of anti-discrimination is equal protection of rights, whatever the causes of rights violations.

Now, imagine the height requirement isn’t part of a wider pattern of gender inequality. In that case, women have ample opportunities elsewhere and their equal right to work is therefore not violated. Hence there is no discrimination.

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economic human rights, economics, health, work

Economic Human Rights (43): Joblessness Shortens Lifespan of Least Educated White Women

unemployment line

I’ve written before about the ways in which human rights are affected by economic recessions. Here’s another result: unemployment reduces female life expectancy. Life expectancy in the US has been going down for certain groups of women for quite a while, especially in the poorer regions of the country. It now seems that unemployment is part of the reason why. One study found that

joblessness had a dramatic effect, even after controlling for factors that employment would have generated, like income and health insurance. … What is it about employment that has this huge impact on mortality, beyond the material resources it brings? … there was some evidence that having a job offered intangible benefits that could improve health, including a sense of purpose and control in life, as well as providing networks that help to reduce social isolation.

And it’s not the case that the researchers just mistook the direction of causation: they did not find evidence that people who were not working were jobless because they were sick.

Why this effect would be more common for white women rather than men or women of color, is not clear.

More posts in this series are here.

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economics, vagaries of moral progress, work

The Vagaries of Moral Progress (9): It’s a Living

wash hands

(source)

If you live in India, you can now get a job staring at a monitor that displays images of American doctors entering hospital rooms thousands of miles away. Your task is to sound an alarm if the doctor fails to wash his hands. … in practice it turns out to be very effective. (source)

I’m sure it is, and it’s potentially a huge step forward for public health in those countries that can afford such a service. Although one would prefer health progress in other countries first, this is a real benefit for people who are no longer infected by their doctors. However, what is more disturbing than benefits that go to the already well-off is the nature of the jobs that have been created here. While some of the Indians who are doing the monitoring may otherwise have been without a job or in employment that is even worse, this sounds like a truely soulcrushing occupation. But then again, any job is perhaps better than no job. There’s always an end to the working day. Progress? I don’t know.

More posts in this series.

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