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The ethics of inequality

The ethics of inequality

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One of the areas Thomas Piketty's book Capital in the 21st Century does not address, at least in much detail, is exactly why (economic) inequality is a problem. Piketty worries that inequality may be undemocratic, as those with large fortunes influence the political process; he also worries that inequality may create social and political tensions; and he argues that a dominance of inherited inequalities may suck the life out of capitalism. On the other hand, he states that some inequalities may be desirable in order to promote entrepreneurship and achievement.Yet he never explicitly spells out his political position on why, when and how much inequality is desirable, or indeed why it should be considered a problem in itself. In the hopes of filling this void, I will present a case below for why inequality may not be ethically justified.

What is inequality?

Inequality is a situation where certain people have access to things - places, goods, services - which others do not. Historically, inequalities have often been enforced by fiat, such as aristocracies and guilds, or perhaps based on group characteristics, such as apartheid or slavery. In capitalist societies, we typically use property rights to restrict peoples' access to resources. A poor man who walks into a store and tries to take something without paying will be prevented from doing so by security or the police, while a rich man who pays will not. The same applies to private schools, expensive social clubs or fine works of art. Unless you have a sufficient number of vouchers (money), you are legally and socially restricted from access to the overwhelming majority of resources in society.

Justifying inequality therefore entails arguing why some deserve more of these vouchers, and hence greater access to places, to goods and services, to social opportunities, than others. Defenders of inequality typically rely on one of 3 ethical arguments: just deserts, voluntarism, and grow the pie. I will consider each of these arguments in turn.

Just Deserts

The premise of this theory is straightforward: if you created something, you are entitled to it; that is, you are entitled to exclude others from using it (or to employ a third party to do so). The ethic behind this is intuitive and widely shared in western societies - after all, if you've worked to produce something, whose is it other than yours? However, despite being intuitive, the desert ethic can easily be shown to conflict with other widely shared ethical concerns. This is easy to demonstrate even in the type of stylised island analogy to which libertarians so often appeal.

Suppose there is an island inhabited only by Geoff, Steve and Steve's child. Tomatoes are the only source of sustenance, and each of the three need a tomato a day to survive. Only adults are able to pick tomatoes, which will spoil overnight. Now suppose that one day, whether due to luck, hard work or skill, Geoff picks 3 tomatoes while Steve only manages 1. Is Geoff justified in forcibly preventing Steve from taking one of his extra tomatoes to feed his otherwise starving child? Note that the only person initiating force is Geoff: Steve can take a tomato without harming Geoff, either directly or by proxy. Note also that Geoff could have chosen not to pick 3 tomatoes. In other words, there is no compulsion exercised by anyone other than Geoff in this example.

My guess is that most people, if they were cast as Geoff, would probably give Steve one of their extra tomatoes. Most would regard Steve or his child starving while Geoff sat on his pile of tomatoes - all the while preventing either of the former from accessing them - as intrinsically wrong. And while this analogy is obviously limited, it does communicate the point that 'just deserts' does not unequivocally override other ethical objections: even if we accept that someone has 'earned' their claim over resources, it might be desirable to shift this claim to others to achieve other ethical goals. These goals could be extreme, such as the starvation example, or they could be more subtle and hard to define, such as relative poverty or equality of opportunity. In any case, the defender of inequality sees fit to impose restrictions on a respective resource for everyone but the person who produced it. Opponents of inequality advocate shifting these restrictions to alter the distributive outcome. The question of which concern is more important is a case by case matter with no definitive answer, and there's no reason to conceive a piori that the desert ethic trumps any other.

Not only this, but determining what people have individually 'earned' in modern society is a fool's errand, since so many intertwined factors contribute to national income. First, there is always the contribution of nature - this is especially clear in our island example, but contemporary societies still rely heavily on land and natural resources. These things were created by noone, so it is hard to argue anyone has the right to exclude others from them based on deserts. Second, there is the contribution of public services such as the rule of law, infrastructure and health and education: like them or not, these things help all of us almost immeasurably, both within the economic sphere and without. In fact, there's a case that corporations and the wealthy benefit considerably more from these things, since they use roads to transport goods, employ educated and healthy workers, and have far more property protected than your Average Joe.

Even if we could imagine a world where nature is negligible or shared equally, and there were no public services, many jobs don't even have a clear output which we can measure to determine 'productivity': it's almost nonsensical to try and measure the productive contribution of accountants, social workers and writers. Even physical production, which is more amenable to this kind of measurement, is often done in teams - what is the productivity of each of the men carrying a large box when neither could do it alone? Note that simply defining someone's productive contribution as equal to their wage is circular reasoning, since we have not used an independent criterion to measure their productivity. Finally, there are always things such as 'organisational capital', 'trust' and 'knowledge/technology' which are completely intangible, often originate from past generations and belong to noone, yet clearly benefit everyone. When it's not possible to define individual contributions, the desert ethic falls apart and large inequalities seem quite arbitrary.

Voluntarism

For many libertarians, conversations about productivity are irrelevant. Since the exchanges which led to an unequal distribution were voluntary - people consented to the transactions, therefore they consented to the resultant outcome - altering this outcome goes directly against peoples' choices. In fact, it is outright compulsion.

The voluntarist ethic is simple and compelling, but it is also incredibly limited. Exchanges are only 'voluntary' to the people taking part in them. For everyone else, each exchange results in restrictions on pieces of the world to which they have not consented. The compulsion is done by those who impose these restrictions in the first place: a compulsion-less world is one where people can freely choose to take whatever they want. Changing the outcome from that resulting from a voluntary exchange merely results in a different set of restrictions to which some have consented and some have not. Once more, the idea we should afford any sort of special status to those engaged in the transaction must be counterweighted against other ethical concerns. Voting, for example, is one way of people signalling consent for a different set of restrictions to the one which resulted from voluntary transactions.

What's more, the notion of 'voluntary' presupposes an existing social reality. Given initial (or prospective) endowments - whether these endowments are equal for everyone, determined by just deserts or what have you; given a set of rules - whether these rules are property rights, contracts or other regulations; given numerous other environmental factors, such as location, information and social norms, people choose to make decisions. But if these factors are changed, the decisions in the new environment do not become any less 'voluntary', save for outright bans. Whether or not people's actions are 'voluntary' in this sense does not tell us anything about how social reality could be changed to achieve certain outcomes.

Grow the Pie

A final argument used to defend inequality is 'growing the pie', which argues that granting some superior legal status will result in more wealth and opportunities for everyone. That is, at any one point in time some may be more restricted from accessing certain pieces of the world than others, but these people have more such access in the long run than they would if the restrictions were altered. It could be argued that my analysis above is implicitly zero sum - it assumes that there are a given set of resources we can distribute between people without altering the total available.

Now, it's worth pointing out that at any given time, the total resources available are zero sum. So if there is some ethical concern that can be satisfied by redistributing resources right now, the reasoning used above is entirely valid. Furthermore, the prevalence of positional goods or goods in fixed supply means that some things are zero sum over any time frame: luxury antiques and social clubs with limited members are not going to grow with the size of the economy; only their prices will. In these cases, even evenly shared growth is likely to result in a higher degree of restriction for those with low incomes, since a percentage increase will be higher for those higher up the income scale. In fact, since there is an element of status to a lot of modern consumption - people emulate those above them - increases in total income may have this kind of effect, at least partially, with a number of consumption goods. A bigger pie could mean those with the largest share having increasing access to goods that confer higher status, while those who do not actually experience a relative status decline.

Nevertheless, when addressing this question head on we enter the realm of the empirical. If the growth of the pie argument were true, and inequality resulted in higher growth of everyone's' incomes, this might be a powerful argument for a degree of inequality (status effects notwithstanding). However, this is simply not the case: evidence suggests that while absolute equality may negatively affect growth, lower inequality is generally associated with higher growth. In particular, large degrees of inequality result in lower growth of incomes for the poor. The story is not so much one of growing the pie as it is of inflating one slice at the expense of the others. This is consistent with evidence that policy does not affect long term growth: the primary question policy can answer is not the level of growth, but how it is distributed. 

Conclusion

None of this is to say the ethical arguments above are completely invalid. There's a case that certain professions deserve to earn more than others, if only to encourage people to choose those professions (doctors being the go-to example). There's also a case to be made that the promise of fortune might encourage some entrepreneurship. There's a case for respecting peoples' individual agency within a given social system. Nevertheless, since any degree of inequality represents a situation where some people are more restricted from resources than others, this decision must be justified. I've purposely not endorsed any particular ethic or pattern of distribution here, because the degree and justification of inequality is a matter for further debate. The above ethics may feature in this debate, but they do not have the final say.


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