Is equality indispensable?
A reply to Nathan Robinson and some musings on the capitalism vs. socialism divide
I want to talk about the ethical relevance of equality. The immediate trigger is that I read an article from socialist writer Nathan Robinson titled "Why Equality is Indispensable", itself a reply to Steven Pinker’s book Enlightenment Now. I have been reading lots of Robinson’s writings lately, and I thought this piece neatly encapsulated much of the socialist worldview. So I figured replying to it could help identify where I fall in this debate.
I don’t completely disagree with Robinson. In fact, I am more-or-less a utilitarian, a philosophy which his argument rests upon. It’s not so much that his argument doesn’t make sense; it just fails to respond to its best counterarguments, and I think he could do better (something I also found to be true of his book). I’ll explain.
How indispensable, exactly
Indispensable means “absolutely necessary”, so I assumed Robinson would take the position that social equality—and particularly, equal access to resources—should take precedence over all other values. This ethical theory is not a strawman; it actually exists and has some followers, like Larry Temkin. So it might be worth first explaining why I don’t buy it.
The main problem with radical egalitarianism is what’s called the leveling-down objection. In short, suppose we could make everyone more equal by making the best person worse off, and at the same time no one better off. Radical egalitarianism suggests that we should take this action. It’s in this sense that radical egalitarianism recommends an “equality of misery” over an inequality of prosperity.
Egalitarianism’s recommendation in this case is obviously absurd, though. Clearly an action cannot be the right thing to do if it only makes someone worse off, with no compensating gain for anyone else. Nathan Robinson agrees with this critique of radical egalitarianism, but doesn’t think it has many practical implications,
It’s easy to object to this, as some have, by suggesting that however fascinating it may be theoretically, in practice it is irrelevant. If the correct focus is not strictly on “making everybody equal” but “making poor people less poor,” then it’s still valid to criticize rich people for getting richer in a world where there is considerable poverty.
His core argument is simple,
Every dollar that goes to the CEO is not going to the workers, even if everyone’s salaries are creeping up, and what critics of inequality object to is the fact that so much wealth goes to those whose “marginal utility” from each additional dollar is very low, rather than those for whom it is very high.
In other words, why is it right that a rich person should buy a yacht, when there are many on Earth who starve? The rich person might not be directly responsible for the fact that people starve, but by buying a yacht rather than donating to people in need, they are directly allowing poverty to persist.
Utilitarians like myself appreciate this argument because it reflects our intuition that we shouldn’t make an ethical distinction between causing harm and allowing harm to exist. I’ve long been skeptical of those who think that, so long as you don’t your hands dirty and commit harm yourself, it’s perfectly acceptable to be ungenerous and not help people in poverty.
The main issue with this argument become more apparent when we consider how to actually meet our egalitarian goals. To make society more equal, we must have some way of redistributing resources. As a socialist, Nathan Robinson favors abolishing private property, and allowing people to decide how the economic pie is distributed via democratic means.
However, as much as utilitarians would prefer equality, there’s another goal that seems to demand a higher priority. In the last few centuries of human history, standards of living have risen dramatically worldwide. And the primary force that has raised standard of livings has not been the existence of massive wealth redistribution programs, but rather, economic growth.
Growth usually trumps redistribution
Consider 18th century England. Theoretically, the English could have then adopted a version of socialism that made everyone have access to equal resources. But according to Our World In Data, GDP per capita back then was only about 2000 pounds.
That means that even given perfect redistribution of resources, everyone in 18th century England would have still been very poor indeed.
So what, you might say? Under this scheme, people might not have been as rich as we are today, but at least most people would have been better off, right? Unfortunately, it might be too difficult to fully disentangle redistribution from growth.
Economic historians generally attribute the massive spike in GDP per capita after the 1700s to the industrial revolution, which is widely considered to have started in England. Now, opinion is split on the matter, and this is by no means a consensus opinion among experts, but many economists believe that what allowed England’s living standards to skyrocket during and after the industrial revolution was its commitment to property rights.
Property rights are important because they provide incentives for people to produce goods and services. The reason is simple: it doesn’t make sense to start a factory in the hopes of selling your product if thieves could just walk up and take over your factory. Most people don’t want to work for free, and this includes people who start businesses. Private property rights are a way of promising that successful business owners get profit from their entrepreneurship—thereby providing incentives for people to start businesses in the first place.
Property rights don’t just benefit rich business owners, either. They also raise worker wages. To understand why, one must first understand what determines wages in a market system.
The main factor determining a worker’s wage is their productivity. The logic goes as follows: as the owner of a business, you won’t want to pay a worker more than the amount they contribute to your bottom line, because otherwise, hiring them would make you lose money. In a simple model of wage negotiation and competition, this argument implies that workers will be paid the marginal product of their labor. This model isn’t fully accurate, but it’s accurate enough to explain why engineers get paid more than fast food workers.
In a society that respects private property rights, “capitalists” play a crucial role by delaying their consumption and making up-front investments in capital goods, like machines, computers, and buildings. Capitalists make these purchases in order to make their own businesses more successful, but it also has a favorable side effect for the workers. Since worker productivity is determined in large part by the equipment made available to them during their jobs, simple economic theory predicts that worker wages will also go up when capitalists make good investments.
The main downside of property rights is that, by inducing growth, it also induces inequality. That’s because when rich people get richer at a rate faster than the poor get richer, you’ll observe a drop in equality, even if everyone is better off.
Should we fix that? To answer, we can’t just appeal to Robinson’s old argument about the marginal utility of wealth being higher for poor people. Abolishing private property might make things more equal, but it would also sacrifice growth, which ultimately means that most people would be made worse off in the long run. In that sense, the person who wants to abolish private property rights—so long as they don’t have an alternative that performs even better—really is like the radical egalitarian who thinks we should make some people worse off even if that wouldn’t help anyone else.
In fairness, Robinson is at least aware that this argument exists. He’s responding to Steven Pinker, after all, who makes roughly the same case.
Robinson’s counterclaim is that there is no such trade-off between equity and growth. How does he reach this conclusion? By imagining a scenario on 3 islands where there is no such trade-off. No seriously, read the full article if you think I’m misrepresenting him here.
He compares three different hypothetical societies on islands 1, 2 and 3. On Island 1, people establish an equality of misery. On Island 2, people establish property rights, which leads to prosperity but with great inequality. He explains,
Pinker, the lord, and John D. Rockefeller would all make the same argument: look at the two islands. One shows communism, the other capitalism. Under communism, everyone is equal but not really, and the standard of living stays low. Under capitalism, there may be inequality, but people are getting better off all the time. Isn’t capitalism great?
However,
But then we find out what happened to the members of Group 3: they landed on their own island and managed to establish a genuine egalitarian society. It’s not that everybody was the same, but they followed the “from each according to his ability, to each according to his need” rule: everyone contributed as much as they could and was given as much as they required. Some people ended up with a bit more here and there, but because people weren’t servants or slaves, and were all given an equal chance to fulfill their potential, they innovated together and expanded the collective wealth of the island over time.
The argument that libertarian socialists have always made is that we do not face a choice between Islands 1 and 2, and the existence of greater brutality Island 1 doesn’t serve as a justification of the slightly lesser brutality on Island 2. You don’t measure against what is or what has been, you measure against what could be.
The problem here is that Robinson merely proposes we create a “genuine egalitarian society” without giving details for how it will achieve both the equality and prosperity he promises. And to be clear, I’m not expecting him to outline his entire political philosophy in one short article. But his book doesn’t really answer this question either!
His fundamental argument seems to be that there may exist some set of institutions consistent with socialism that provide the best of both worlds, while leaving it to the reader to wonder which ones or how. The burden of proof he sets for those who disagree is unreasonably high,
So it’s not enough to do what Pinker spends countless tiresome chapters doing in Enlightenment Now, and providing chart after chart showing that people are better off now than they used to be. You would also have to provide a persuasive explanation for why it’s impossible not to have democratic workplaces and universal prosperity.
Needless to say, I don’t think it’s necessary that we prove such a case with certainty—only that we show that it’s probable.
Is capitalism really the best system for growth?
Now here’s the part where I become more sympathetic to Robinson.
Above, I outlined some reasons for thinking that private property rights are great institutions for encouraging economic growth. In fact, the case for this thesis is not as clear as I might have made it seem, but not because of the arguments that democratic workplaces might do better.
To reiterate, I showed how property rights induce people to create capital, which raises worker productivity and produces greater aggregate wealth for all. But capital is just one part of the equation here. Economists have pointed out that worker productivity has historically gone up even in cases where the amount of capital available to them has declined. The fundamental reason for this fact is technological progress, which allows our society to produce more goods and services given a certain aggregate level of capital and labor inputs.
The procedure used to measure technological progress in this respect is called growth accounting, and the metric that economists use to show it is called total factor productivity, or multi-factor productivity. There have been many estimates over the years about what fraction of total economic growth is attributable to technology as opposed to increases in labor or capital accumulation (such as Robert Solow’s estimate of 80%), but most economists agree that it’s at least the large majority.
Now, capitalism could also be the best system for spurring technological development. There are arguments for and against this position.
The reason to think that capitalism will spur technological innovation is that businesses will invest in R&D that increase their profits. After all, look around you. Nearly all the technology we have was at one point designed by a capitalist firm for the purpose of making money.
So-called endogenous theories of economic growth try to understand this process. Overall, it is true that businesses care a lot about improving technology. But might there be a better way?
The main argument against this positions is that once you create an innovation, your competitor can steal the idea, and leave you no better off. Governments try to solve this problem by creating patents, but not all innovations are patent-able. In particular, we should expect advances in basic science to be especially underfunded.
To use the standard economic jargon, the problem is that basic science produces positive externalities that can’t be captured by its discoverers. Erwin Schrödinger was famous for discovering the right wave equation in quantum mechanics, but he and his family didn’t become rich because of that, despite the fact that modern electronics relies in part on this work.
Furthermore, private property rights on natural resources, particularly unimproved land, don’t lead to higher productivity. The reason is that property rights do not induce people to create more natural resources, since there’s a fixed amount. Georgists seek to reform capitalism by capturing this unearned value given to people who own land.
So we have a bottom line here: capitalism is probably not the best system for encouraging growth. It’s pretty good, but maybe there’s an even better system, and we have a sense for what a better one might look like.
Appendix: A false dichotomy
Personally, I’m not convinced that economic growth is unambiguously good anyway. The reason is not that I think we should focus on equality instead, but that I think both of these goals might be missing the target.
To be sure, as a utilitarian, I care about maximizing prosperity over the long-term. And that means caring a lot about economic growth. But one of the main ways that we could lose all of that prosperity is if the human species itself goes extinct. In a future blog post, I may explore what institutions I think might help us in this respect.