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Freedom And Inequality: Introduction and Index

Posts in this series:
Freedom and Inequality: Introduction and Index
Freedom and Inequality: Freedom From Domination Part I
Freedom and Equality: Freedom From Domination Part 2
Freedom and Equality: Relational Equality Against Social Hierarchies
Freedom And Equality: More On Equality.
Freedom and Equality: Anderson Against Libertarianism
Freedom And Equality: In The Workplace
A Primer On Pragmatism: Method
A Primer on Pragmatism: Truth
A Primer On Pragmatism: Applications
Egalitarianism And Markets
Private Government By Corporations

Introduction

This will be a series of discussions of freedom and inequality, based on works by Elizabeth Anderson, Chair of the Philosophy Department at the University of Michigan. I first heard about Anderson in this New Yorker article by Nathan Heller. Anderson explores the meaning of freedom and equality, especially in the context of work, the economy and the politics of both. Until recently, the dominant ideas were those of conservatives and libertarians, people like Milton Friedman, Friedrich Hayek, and neoliberals of both parties.

The New Yorker article says that historically everyone thought that freedom and equality are at odds: exercise of freedom would naturally lead to increasing inequality. Political domination is a natural consequence of increasing inequality. If that is true, how can democracy survive? Anderson questions the view that freedom and equality are in conflict. The relevance of this idea to our current political environment is obvious. Republicans champion inequality as an exercise of freedom, and neoliberal democrats agree, but argue that some restraints on freedom must exist to prevent too much inequality. We need a new structure to step outside this duality and protect our democracy.

Again historically, people thought of freedom in two ways: negative freedom, that is, freedom from interference, and positive freedom, the range of options available to people. Anderson adds a third idea, freedom from domination. As we saw in the series on Ellen Meiksins Wood, one major Marxist criticism of capitalism is domination of the worker by the capitalist, aided by the state.* We saw in Pierre Bourdieu a detailed study of the way dominance is embedded in social relations.** We have also seen Michel Foucault’s view of power, an idea closely related to domination. I’ll discuss the concept of freedom from domination in this series.

From the New Yorker article:

As the students listened, [Anderson] sketched out the entry-level idea that one basic way to expand equality is by expanding the range of valued fields within a society. Unlike a hardscrabble peasant community of yore in which the only skill that anyone cared about might be agricultural prowess, a society with many valued arenas lets individuals who are good at art or storytelling or sports or making people laugh receive a bit of love.

I’m particularly fond of this idea. I made a living practicing law, and on the side, I did a lot of chorus singing, mostly classical and opera. I made room in my life for voice lessons and the unending rehearsals and performances that dominate the life of the singer. I used to say that among lawyers I was one of the best singers, which seems to me to be what this quote is saying.

The New Yorker article says that one of the major influences for Anderson is pragmatism, the distinctly American philosophy, generated by Charles Peirce, Oliver Wendell Holmes, and William James. It’s leading exponent in the 20th Century was John Dewey.*** A central idea of pragmatism is the definition of “truth”:

To a pragmatist, “truth” is an instrumental and contingent state; a claim is true for now if, by all tests, it works for now.

Ideas are tools, and the truth value of a tool is related to its usefulness. This description of truth throws off centuries of effort to find a fixed point of certainty in the world. It opens the possibility of finding our way through social and individual problems not by reference to some prior version of the truth, but by our own best understandings of our own social reality. I do not currently plan on a formal discussion of this description of truth, and will content myself with pointing it out in passing. But I share that view, and I think it is apparent in much of my thinking and writing.

Reading philosophy papers is difficult for a lay reader like me. Most are presented as arguments with one or more other philosophers. This is not necessarily a good way for a layman to get a positive statement of the views of the author, especially when there are many papers and many arguments. The New Yorker article seems to be a good introduction to the themes Anderson addresses.

Finding these academic papers online is harder than finding the books I’ve been writing about. I am fortunate to have access to a university’s online library, and I can’t find all of Anderson’s work there; I have no idea if readers can find the material I’m reading through their own public libraries, though I hope so. I’ll be giving the best links I can find, for what that’s worth. And as always, I’ll try to separate Anderson’s thinking and that of the authors she discusses separate from my own views.

I’ll update this post with links to all the posts in this series. Thanks for reading.

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* Here’s an example. The index to these posts is here.

** See for example this post.

*** Lewis Menand’s The Metaphysical Club is an engaging account of the first three and their friends. Here’s a good introduction to the thought of John Dewey. Richard Rorty considered himself an heir to Dewey. For a fascinating discussion of the nature of truth in pragmatist thought, see Philosophy and Social Hope by Richard Rorty, Ch. 2. It’s worth the effort.

Additional Resources

1. Achieving Our Country by Richard Rorty. Anderson identifies as a pragmatist, and so does Rorty. He is controversial on a number of grounds, but I have learned a great deal from this and other works by Rorty. This is a short book, not theoretical and easy to read. It is an impassioned defense of small-d democracy as described by John Dewey and Walt Whitman. It counsels against despair of that ironic spectator variety of leftism, and argues for an agressive hopeful politics of the left.

2. Podcasts of the Partially Examined Life. This is a philosophy discussion group of some guys who planned to make a living at philosophy but thought better of it, as they say in their introduction. There are two that I think are of interest here. First there is a three part series including an interview with Elizabeth Anderson, Episode 199. There are several episodes devoted to Richard Rorty, listed here. I have listened to the first episode on Achieving our Country, Episode 157, and plan to listen to the rest.

3. In the posts on equality Anderson lays out egalitarian arguments against social hierarchies. For a counterpoint, Episode 157 of the podcast Partially Examined life discusses the Analects of Confucius. The second part is an effort to understand the justification for Chinese hierarchy. Confucius and his school are still influential in China today,and the discussion is a nice counterpoint to the very American ideas of Anderson and the pragmatists.

4. Elizabeth Andersonn wrote a book applying some of her ideas to the world of work. Private Government. Here’s a review in The New Yorker.

5. The Partially Examined Life discusses Peirce and James on Pragmatism in episodes 20 and 22. I have listened to the free part of Episode 20 and plan to listen to the rest.

N. Gregory Mankiw Tries to Discredit Piketty

In this paper, titled Yes, r > g. So What?. N. Gregory Mankiw tries to show that Thomas Piketty is wrong that if r > g wealth will accumulate in the hands of a tiny number of rich people. It’s short and easy on the math, perhaps because it was part of a symposium rather than a stand-alone paper. For comparison, take a look at this by Piketty and Gabriel Zucman, which requires more than a passing familiarity with math. It seems unlikely that Mankiw had read this paper before he cranked out his, because Piketty addresses the issues Mankiw raises.

Mankiw makes three arguments. First, he says we need to have r > g. Second, he claims that the generational changes and taxation will prevent dynastic wealth. Third, he disagrees with Piketty’s solution which is a wealth tax. Let’s take them in turn.

1. The idea that r, the rate of return to capital, is greater than g, the rate of growth of the economy, is common in mainstream economic theory.

If the rate of return is less than the growth rate, the economy has accumulated an excessive amount of capital. In this dynamically inefficient situation, all generations can be made better off by reducing the economy’s saving rate. From this perspective, we should be reassured that we live in a world in which r > g because it means we have not left any dynamic Pareto improvements unexploited.

Mankiw’s standard is whether the economy can produce Pareto Improvements, meaning an improvement in the wealth of one or more people that doesn’t reduce the wealth anyone else. Mankiw simply ignores the fact that fabulous wealth carries with it the ability to influence the political process to extract more wealth, which is what Piketty says. Surely Mankiw isn’t arguing that won’t happen, because it does. Take, for example, the pharmaceutical industry where the business model is to increase prices with no additional benefit to anyone.

Then look at his cure. How exactly will the bottom 60% benefit by saving less? They won’t, because they are barely saving. They cannot come up with $400 to fix a car. Most of the rest wouldn’t be able to save less; they need to save for retirement, and to pay what their kids can’t make in this rotten economy. What Mankiw means is that the very top, the .1%, would have to spend a lot more, But what are they going to buy? Expensive trips on private jets? Van Gogh paintings? That isn’t going to help the economy or make anyone’s life better. The fact is that this argument points directly to the need to hike taxes on the idle money of the rich.

2. Mankiw’s second argument is an effort to show that taxes and generational changes will decrease dynastic wealth. Mankiw doesn’t confront the detailed argument Piketty makes on those very points. I introduce it here, and link to the detailed argument for those interested. Instead, Mankiw offers a simple model that proves his point, and could be understood by anyone who read his introduction to economics textbook; for typographical reasons, subscripts are not used for cw and ck

To oversimplify a bit, let’s just focus on this economy’s steady state. Using mostly conventional notation, it is described by the following equations.

(1) cw = w + τ k

(2) ck = (r − τ − g)nk

(3) r = f ′(k)

(4) w = f(k) − rk

(5) g = σ(r − τ − ρ),

where cw is consumption of each worker, ck is the consumption of each capitalist, w is the wage, r is the (before-tax) rate of return on capital, k is the capital stock per worker, n is the number of workers per capitalist (so nk is the capital stock per capitalist), f(k) is the production function for output (net of depreciation), g is the rate of labor-augmenting technological change and thus the steady-state growth rate, σ is the capitalists’ intertemporal elasticity of substitution, and ρ is the capitalists’ rate of time preference. Equation (1) says that workers consume their wages plus what is transferred by the government. Equation (2) says that capitalists consume the return on their capital after paying taxes and saving enough to maintain the steady-state ratio of capital to effective workers. Equation (3) says that capital earns its marginal product. Equation (4) says that workers are paid what is left after capital is compensated. Equation (5) is derived from the capitalists’ Euler equation; it relates the growth rate of capitalist’s consumption (which is g in steady state) to the after-tax rate of return.

Note that we didn’t get a definition of the symbol τ, which in conventional notation means taxes. As we learn a couple of paragraphs down, Mankiw means not general taxes, but taxes on returns to capital. As he tells us, all the money from taxes is consumed by the workers (equation (1)), that is, the total amount of taxes on capital is transferred directly, in the form of grants or indirectly in the form of services, to wage-earners and none of it is consumed by the capitalists. in the real world, capitalists consume a great deal of the expenditure on taxes, whether the taxes are on capital or income or otherwise. Obviously we need to put a non-trivial number into equation (2) to show that capitalists consume a portion of the taxes, and make an appropriate modification to equation (1) if we want this model to make minimal contact with the real world.

Mankiw says that in this model, there is no steady increase in inequality.

In this economy, even though r > g, there is no “endless inegalitarian spiral.” Instead, there is a steady-state level of inequality. (Optimizing capitalists consume enough to prevent their wealth from growing faster than labor income.)

This outcome was baked into the model with equation (2). If instead, we assume the same equations, but add a non-trivial number to equation (2), then the capitalist accumulates that non-trivial amount each year, and wealth inequality increases naturally even in his steady-state economy.

Also baked into this model is the remarkable idea that “capital earns its marginal product” and the rest of the money is paid out in wages. That’s just so far from reality that it makes the whole exercise pointless. But it enables Mankiw to justify rejecting Piketty’s recommendation of high wealth taxes. Mankiw explains that if the government wants to protect capital, it pushes the tax on capital into negative numbers, and the capitalists will push wages to subsistence level. But,

Taxing capital and transferring the proceeds to workers reduces the steady-state consumption of both workers and capitalists, but it impoverishes the capitalists at a faster rate.

Taxing returns to capital hurts everyone in this model. Of course, if capitalists are taxed at the rate of their actual consumption of tax receipts, the non-trivial amount that should be added to equation (2), then you would get Mankiw’s desired outcome of a non-increasing inequality. Or you could go a bit higher, and start reducing inequality without resort to his suggestion of a consumption tax.

Mankiw’s sterile model doesn’t explain the facts documented by Piketty and his colleagues, but it does demonstrate nicely the state of mainstream economics. Obviously the American Economic Association wanted a paper from Mankiw challenging Piketty, no matter its quality. Mankiw is an established figure, and thus the beneficiary of the social structure of the field described by Marion Fourcade and her colleagues in the section of this paper headed Inequality Within, p. 96,

Second, we document the pronounced hierarchy that exists within the discipline, especially in comparison with other social sciences. The authority exerted by the field’s most powerful players, which fosters both intellectual cohesiveness and the active management of the discipline’s internal affairs, has few equivalents elsewhere.

An Auspiciously Timed Republican Meltdown

The Republican party is in a bit of a meltdown in response to the leak of Mitt’s comments about the 47% of the country he disdains. Some–mostly the pundits not facing voters in November–are embracing his claim that Democrats are moochers (ignoring that a lot of the seniors, poorer service members, and Red State working poor are actually Republican voters). Others–especially those on the ballot in November–are attacking Mitt for being such a cad.

I’m most fascinated by the Weekly Standard’s John McCormack’s attack on Mitt’s purported misunderstanding of conservatism.

The same kind of person who says, “Forty-seven percent of Americans pay no income tax. So our message of low taxes doesn’t connect…. So my job is not to worry about those people. I’ll never convince them that they should take personal responsibility and care for their lives.

These appear to be the words of somebody who doesn’t understand American conservatism and its relationship to the American idea. Conservatives don’t believe in economic determinism. Conservatives know–and explain why–their economic policies will help the poor, as well as senior citizens, working families, and our troops who pay no income taxes. Conservatives realize that the Republican party is not the party of people who want to be rich, it’s the party of people who want to be free.

[snip]

But in an interview this afternoon, he conceded yet again that his tax policies won’t appeal to half the country. “I’m talking about a perspective of individuals who I’m not likely to get to support me,” Romney told Neil Cavuto on Fox News. “I recognize that those people who are not paying income tax are going to say, gosh, this provision that Mitt keeps talking about, lowering income taxes, that’s not going to be real attractive to them.”

The strange thing is that Romney’s tax plan isn’t actually aimed at lowering taxes. It’s a revenue neutral plan that is designed to spur growth–and create jobs–by lowering rates and reducing or eliminating tax loopholes. Maybe it’s a hard plan to sell, but I’ve watched Paul Ryan persuasively makethe case to skeptical constituents that taxreform would grow the economy and create a fairer tax code.

McCormack takes Romney to task for saying out loud the poor won’t benefit from “tax reform” and blathers about how “freedom” will “spur growth.” He takes Mitt to task because he’s not as convincing as Ryan when he claims cutting taxes further will benefit everyone.

The meltdown is so delicious because Republicans don’t seem to know whether to abandon the myth that has driven the Republican Party for the last 50 years or not.

And because the Congressional Research Service just came out with analysis that it is, in fact, a myth.

Income tax rates have been at the center of recent policy debates over taxes. Some policymakers have argued that raising tax rates, especially on higher income taxpayers, to increase tax revenues is part of the solution for long-term debt reduction.

[snip]

Other recent budget and deficit reduction proposals would reduce tax rates.

[snip]

Advocates of lower tax rates argue that reduced rates would increase economic growth, increase saving and investment, and boost productivity (increase the economic pie). Proponents of higher tax rates argue that higher tax revenues are necessary for debt reduction, that tax rates on the rich are too low (i.e., they violate the Buffett rule), and that higher tax rates on the rich would moderate increasing income inequality (change how the economic pie is distributed). This report attempts to clarify whether or not there is an association between the tax rates of the highest income taxpayers and economic growth.

[snip]

Throughout the late-1940s and 1950s, the top marginal tax rate was typically above 90%; today it is 35%. Additionally, the top capital gains tax rate was 25% in the 1950s and 1960s, 35% in the 1970s; today it is 15%. The real GDP growth rate averaged 4.2% and real per capita GDP increased annually by 2.4% in the 1950s. In the 2000s, the average real GDP growth rate was 1.7% and real per capita GDP increased annually by less than 1%. There is not conclusive evidence, however, to substantiate a clear relationship between the 65-year steady reduction in the top tax rates and economic growth. Analysis of such data suggests the reduction in the top tax rates have had little association with saving, investment, or productivity growth. However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution. [my emphasis]

Thus, at precisely the moment when Republicans are beating up on Mitt for suggesting–even if inadvertently–that the poor have no self-interest in his tax cuts for the rich, the non-partisan CRS comes out and shows that, in fact, they do not (and have not, for two generations).

It remains to be seen whether any political entity will push this point home (indeed, one of the tax cut plans that CRS says would lead to more inequality is the President’s own Catfood Commission plan).

But Republicans don’t appear to know how to respond to Mitt speaking the truth, admitting that the poor have no interest in seeing rich people like him get further tax cuts, and speaking the truth in such a snotty disdain.

Our (We) Working Class Pundits

Digby has a righteous rant about a discussion between Wolf Blitzer, Mary Matalin, and Paul Begala in which they revealed their utter divorce from the reality lived by most Americans as they discuss whether the $172,000 Robert Gibbs made as Press Secretary was a sacrifice. Here’s a taste:

According to these guys [Robert Gibbs’] job is right up there with curing cancer for sheer importance to the future of mankind.

Look, you can’t blame these two. They are both glugging from the same taxpayer trough half the time and have a big investment in believing that what they do is so special and so unique that they are just a little bit better than lesser people who toil at less exalted labor.

And evidently, they truly believe regular people don’t eat lunch at their desks and work long hours and have huge responsibilities. Or if they do, they are in very important jobs like media and investment banking where people are paid what they are “worth.”

You ought to read the whole thing.

I just wanted to add two things.

First, in the discussion, Matalin argues that, when you work at the White House “you really do work three shifts a day. You work 24 hours a day.” In response to which Begala elaborates,

The President’s trying to make a point here — he’s not trying to say that 172 thousand dollars a year is not a good paycheck. But compared to what the guy could be making… And, as Mary points out, if it’s a hourly wage, then Gibbs is probably making about fifty cents an hour. [my emphasis]

If Gibbs’ $172,000 annual salary were broken down into hourly salary, Begala says, with the assumption that he was working 24 hours a day 365 days a year,  then his hourly wage “is probably … about fifty cents an hour.”

Ahem.

There are 8,760 hours in a 24/7 year. Gibbs’ $172,000 salary for those 8,760 hours would work out to be $19.63 an hour. For someone working 40 hours a week, 50 weeks a year, that works out to be a yearly salary of $39,260. Which for household salaries–not individuals–falls in the middle quintile of yearly income in this country, and less than $3,000 less than what Wolf says is the “mean” salary in this country (he actually means “median” and he may be using just full time workers).

Gibbs needs a break, Obama says, and Begala and Matalin agree, because even assuming he’s been working 24/7, he’s been working as hard for the same money as half the country. So we should feel sorry for him.

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