Thursday, April 28, 2016

To What Extent Is Inequality Voluntary?

To the extent that people choose which professions to pursue, choose how hard to work at it, choose in which city to live, choose to avoid an education-derailing pregnancy, and make other choices that predictably affect future income, it makes little sense to complain about income inequality.

Of course the converse is true. To the extent that it’s all just luck, sheer genetics, or other people’s malice/goodwill that determines your life’s status, inequality represents unfairness. But I rarely see this pointed out explicitly. I never hear a call for, say, a progressive tax *only* on that portion of your income which is due to luck. I never hear an inequality statistic that is prefaced with, “Controlling for *and removing* the portion of inequality that is chosen voluntarily…” And on the wealth inequality side of things, I never hear it acknowledged that “X% of people in the low-wealth quantile would be in the top wealth quantile if *only* they adjusted their savings rates to match people in the top quantile.” We’re not all racing toward the goal of “maximize my income” or “maximize my wealth.” We all choose a different mix of income, leisure, and family. And we make different choices about how much of our income to save back and how much to spend.

We’re free to hold differing views on the exact proportions of “luck” and “choice” determining a person’s income. You might say it’s half and half, while I might say it’s 90% choice and 10% luck. (I would push back on any claim that posits an implausible proportion to the “luck” category, and I think 50% is close to the cutoff for what’s reasonable. I also think many things that get labeled “bad luck” are really poor decision making and poor planning interacting with *normal* luck.) But I almost never see inequality alarmists even acknowledge the element of choice, and I literally never see them try to adjust for it when producing alarming statistics or making policy recommendations. The alarmists need to take a closer look at the philosophical underpinnings of their ideology. The question of “choice vs luck” is potentially a fatal flaw in their belief system (and it’s not even the only one!), unless they are tacitly assuming something like 90% or 100% luck. Maybe they are and just aren’t saying so plainly enough. I really can’t tell. This issue needs to be brought out into the light of day where we can all examine it. Stop glossing over important parts of your argument, please. If your goal is to have a productive conversation about this topic, state your assumptions clearly.  

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