PGL and Mark Thoma on Greg Mankiw
links for 2007-07-16

Let's Not Tell Hilzoy!

Yesterday Hilzoy--driven into shrill unholy madness by Fred Hiatt's publication in the Washington Post of Michael Gerson's jejune version of arguments that have not survived the first two weeks of any philosophy class taught in the past 2500 years--wrote:

Obsidian Wings: Michael Gerson: Keep Your Day Job: If one of Bush's speechwriters wanted to write an op-ed on the latest advances in entomology, or some unique properties of eight-dimensional space, or the best techniques to use in constructing a certain kind of organic lattice, I imagine that the editors of the Washington Post would recognize that some fact-checking was in order. But moral philosophy? Anyone can do that!...

Let's not tell her that today the New York Times published Greg Mankiw's one-paragraph missketch of John Rawls:

Fair Taxes? Depends What You Mean by ‘Fair’ - New York Times: Professor Rawls concluded that the primary goal of public policy should be to redistribute resources to help those at the very bottom of the economic ladder. If Professor Rawls were alive today, he would most likely want to raise the top income tax rate of 35 percent in order to finance a more generous safety net. And for much the same reason, he would probably raise taxes on the middle class as well...

This is, of course, wrong. Rawls does not think that the primary goal of public policy should be to redistribute resources to help those at the very bottom. Rawls thinks that the first goal of public policy is to maximize liberty for all. He thinks that the second goal of public policy is to make everybody better off. Redistribution plays third fiddle in Rawls's orchestra: it is a constraint on social wealth maximization--things that make people better off must be shared: choose that set of social and economic arrangements that makes everybody better off, but don't choose a set of social and economic arrangement that makes some people better off at the price of making the worst-off even worse off.

Here is what I think is the best way to think of this third point, of Rawls's "Difference Principle":

A group of people are sitting around the campfire, after a hard day's worth of work and pay in which what jobs people did and how hard they worked and how they were rewarded was determined by some complicated and not very transparent process.

Looking around, the person who is worst off says: "Hey! Wait a minute! This isn't fair. Everybody else is better off than I am."

And one of the others replies: "I'm sorry. You do get less than everybody else. But we set things up in the best way we could. Given the constraints imposed by human psychology and the natural world, we couldn't have set things up in any way so that you would have been better off."

"Oh. That's OK then."

According to Rawls, an arrangement that passes this test is "just" and "fair."

Now I don't think that Rawls has it correct: I don't think that socioeconomic arrangements that pass Rawls's test are necessarily just, and I don't think socioeconomic arrangements that are just necessarily pass Rawls's test. There are too many lexicographic orderings wandering around Rawls's setup for any economist to be happy with it.

But the fact that Rawls did not get it right is no reason for Mankiw to get Rawls's argument wrong.

Let's also not tell Hilzoy that Mankiw also gets Robert Nozick's argument wrong. Mankiw writes:

Nozick wrote: “We are not in the position of children who have been given portions of pie by someone who now makes last-minute adjustments to rectify careless cutting. There is no central distribution, no person or group entitled to control all the resources, jointly deciding how they are to be doled out. What each person gets, he gets from others who give to him in exchange for something, or as a gift. In a free society, diverse persons control different resources, and new holdings arise out of the voluntary exchanges and actions of persons.” To libertarians like Professor Nozick, requiring the rich to pay more just because they are rich is little more than officially sanctioned theft...

It is true that this is a fair thumbnail sketch of what many of Nozick's followers believed that his argument said--and perhaps it is a fair thumbnail sketch of what Nozick encouraged his followers to believe his argument said (my elders at Harvard did not think Nozick was the most scrupulous of men). But it's not where Nozick's argument leads: the logic of Nozick's argument points in a very different direction than Mankiw claims it does.

First we have to inquire into how the rich became rich. If they became rich because of theft--either their own theft, or theft on the part of somebody who then gave them something or sold them something at an especially good price, et cetera--requiring them to pay more in taxes is not "officially sanctioned theft" but rather simple justice. The same holds if they are rich because their appropriation of rights to control and benefit from pieces of property from the Lockeian store originally held in common has reduced the opportunities of others. Only after concluding that the wealth of the rich (a) is not the result of some act of theft in either the recent or the deep past, (b) is not the result of appropriation from the Lockeian common store that has diminished others' opportunities, and (c) is not justified by the fact that the rich receive services (i.e., protection of property against theft) from the government more valuable than the poor, are you then allowed to say that differential taxation is "officially-sanctioned theft."

And, of course, it is not clear that Nozick's argument is correct. I don't think his argument nails it any more than I think Rawls's argument does.

But let's not tell Hilzoy any of this. I don't think she'd be heartened by it--not even if we also tell her that--for reasons outlined by Tyler Cowen--Mankiw gets the technical economics more wrong than the moral philosophy.