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Equality for Taxi Drivers and Surgeons?

Those who defend extreme inequality by arguing against complete equality are doing their best to divert our attention from the questions that matter.

By Bob Lord

It never fails. Every opinion piece purporting to counter the voices opposing today’s extreme inequality employs the same sleight of hand: Justify economic inequality in the abstract, without commenting on the actual level of inequality we face.

The latest example appeared in this past Sunday’s New York Times. In Growth, Not Forced Equality, Saves the Poor, University of Illinois professor Deirdre McCloskey can’t even get past the title without swerving into an argument against Soviet-style communism.

What level of income disparity between brain surgeons and taxi drivers ought to give us pause? As a society, we need to ask that question.

What level of income disparity between brain surgeons and taxi drivers ought to give us pause? Our society needs to ask.

“Forced equality”? I’ve read hundreds of articles and tens of books on the subject of American economic inequality. Not one has argued for “forced equality.” Robert Reich,  regarded by many as the leading voice against America’s extreme inequality, has a new book out entitled Saving Capitalism. I’ve not read it yet, but I’ll bet that Reich’s ideas for “saving capitalism” don’t include “forcing equality.” Just a hunch.

Consistent with the title to her piece, McCloskey writes as if Reich and other contemporary egalitarian activists advocate pure communism.

“If a brain surgeon and a taxi driver earn the same amount,” McCloskey contends, “we won’t have enough brain surgeons. Why bother?”

Does McCloskey truly believe that the average brain surgeon yearns to drive a cab, if only cabs paid as much as performing surgery? Funny, I’ve never heard that perspective from any of the brain surgeons I know.

I get the distinct impression from my contact with doctors that they prefer the intellectual stimulation of their work to the more mundane work of driving taxis. I know this: If I could make the same amount serving in a restaurant or working construction as I do practicing law, I’d continue to practice law. I just like doing legal work better, the same way restaurant servers or construction workers may prefer what they do all day over studying arcane tax regulations.

But I digress. The question is not, as McCloskey suggests, whether zero inequality would be a good thing. Rather, it’s whether extreme inequality is a bad thing.

Bill Gates, one person amid 320 million, has one-thousandth of America’s wealth.

Our analytical starting point ought not be exploring whether paying brain surgeons and taxi drivers equally would be a good idea, but exploring what level of income disparity between brain surgeons and taxi drivers ought to give us pause.

Would our society benefit, for instance, if brain surgeons made 300 times what taxi drivers do, such that brain surgeons would earn more on the first work day of the year than taxi drivers could earn in an entire year?

Would you consider this 300-times gap unconscionable? Much of our economy is already operating at that level of disparity. CEOs currently take home over 300 times the pay of average workers at America’s large corporations, many of which pay little or nothing in corporate tax.

Do we benefit from the incentives to innovate an unequal society provides to the likes of a Bill Gates? In all likelihood, yes. But that’s the easy question. The tougher question, which McCloskey never raises, is whether people like Gates need $80 billion to feel incentivized. Would Bill Gates really have operated any differently if his financial upside could only have hit $80 million? If not, hasn’t American society overpaid for his genius by a factor of a thousand?

McCloskey doesn’t seem bothered one bit by the size of the Gates fortune. But Gates,  one person in a country of 320 million, controls one-thousandth of our nation’s total wealth. Place Gates in Philadelphia or Phoenix and the Microsoft man would hold about 20 percent of either city’s entire wealth. How much is too much?

McCloskey feels no discomfort over the size of the Gates fortune in part because of his charitable contributions. But other billionaires do next to nothing philanthropically, and even Gates has chosen to hang on, until death, to the bulk of his fortune. That could be more than a quarter century from now. And does it make sense — in a democracy — for one individual to decide how such an immense accumulation of wealth gets employed?

Inequality and growth do not exist in separate spheres.

McCloskey’s main point seems to be that growth, not the reduction of inequality, will solve poverty. But inequality and growth do not exist in separate spheres. In real life, the more that wealth and income concentrate at the top, the more the economic benefits from growth flow to the already rich — and away from the alleviation of poverty.

Is increasing wealth and income concentration the price we have to pay for the growth McCloskey contends would significantly reduce poverty? McCloskey doesn’t say, but the data from prior periods of robust economic growth suggest the opposite: that a more modest level of inequality would stimulate growth.

McCloskey’s new Times piece exalts capitalism. Yet surely she must be aware that insufficiently regulated and insufficiently taxed capitalist economies tend to drive income and wealth to the very top. America’s two worst economic collapses of the past century each followed periods where the rich, facing little in the way of taxes or regulations, amassed incredibly outsized shares of America’s income and wealth.

McCloskey and those who share her world view are ignoring an inconvenient truth: The growth she considers the antidote to poverty depends on the de-concentration of wealth and income at the top.

Which is exactly what Robert Reich and others have been arguing all along.

  • Shiggity

    People tend to ignore inequality when it benefits them.

    Here is the disastrous picture that baby boomers don’t want you to talk about if you’re young.

    Change in Average Net Worth by Age Group, 1983–2010:

    The baby boomers and the elderly GOT ALMOST EVERYTHING. Generation X got a tiny tiny amount. The millennials WENT NEGATIVE.

    Awesome leadership when your leaders completely sell you out for themselves huh?

  • Giorgio Sironi

    Looks like a classic straw man argument to compare surgeons and drivers. I would also consider that this view of considering wealth as purely meritocratic is myopic as to become a brain surgeon you often need to be born in the right place, in the right family and maybe even with the right biology (think memory but also firm hands). It is difficult to think of Bill Gates as having worked 100,000x harder than the average person.

  • Deirdre McCloskey

    Dear Mr. Lord,
    You believe inequality is a big problem. I believe that (1.) inequality is falling worldwide and (2.) even in the US it is falling in terms of real comfort (are you damaged by Gates billions?) and (3.) historically and for the future and for the wide world the bulk of the way that the poor is saved is through economic growth and (4.) various schemes of redistribution don’t work very well, for all sorts of reasons (including the sticky fingers of our rulers: look at agricultural subsidies). Instead of facing these points you glom onto my point that without wage differentials there would be less incentive to spend eight years becoming a doctor. But I do not doubt you could make the case against some of my points, and even come to agree with a few of them, if you had more space than a short column. You and your readers need to get serious, and go beyond 2,000 words at a time. Do read Bob Reich’s excellent if mistaken books. But why not try some others that actually challenge your beliefs? Try one of mine, for example.
    Or would you rather merely stick with angry name-calling and motive-questioning?
    Deirdre Nansen McCloskey

    • allen801

      Sounds like you espouse classic libertarian garbage. There is no reason to argue with you as I do not share your beliefs and you will not share mine. I can only hope that the economic model you champion and which has been in effect at least since Ronald Reagan falls into the dust bin of history as soon as possible.

      • Deirdre McCloskey

        Dear anonymous:
        I see. Once we have tagged people as “classical libertarian” or “Marxist” or whatever, then we should stop listening. No one ever changes her mind because she has listened. We should decide on our ideologies by what is fashionable. Don’t ever read books you disagree with. We should never explore common grounds of “beliefs” in order perhaps to arrive at a commonly held conclusion. We should sneer and shout abuse at anyone who disagrees with us, or who we believe is associated with people we disagree with.
        That’s a realty good way of running an intellectual life. Really, really. Carry on, and bless you.

    • equality and growth

      Dear Prof McCloskey, you gave 4 putative objections to the claim (C) “inequality is a big problem”. Let me reply.
      1 is true, but still does not rebut C. Something X can be decreasing worldwide but still be a big problem. Malaria, lethal violence, …
      2 “are you damaged by Gates billions”. In the sense that waste is damaging, yes. Resources for billionary positional luxury lifestyles do more in the lives of less wealthy people. Because marginal diminishing utility of money! You cherry-pick Gates because of his philantrophy, but other billionaries do net harm e.g. buying reactionary political power. The egalitarian argument is that reallocation from the WHOLE billionarie class is net beneficial.
      3 The nordics are more equal and competitive. Evidence indicate that current level inequality is a drag on growth, Today’s financialized capitalism involve massive zero sum talent waste.
      4 counterevidence: the nordics.

      Furthermore your NYT piece has argument flaws and factual errors.
      A. you straw man egalitarians (“forced equality”) and thereby create a false dichotomy. Bob Lord calmly describes the problem with that.
      B. Frankfurts “sufficientarianism” is a terminally flawed normative view. For a start, read the reviews
      Rondel (2016) Egalitarians, Sufficientarians, and Mathematicians: A Critical Notice of Harry Frankfurt’s On Inequality
      Herzog (2016) Harry G. Frankfurt, On Inequality
      C. Inequality is bad in itself because unfair. See Temkin 2015 Equality as Comparative Fairness.
      D. Your take on Rawls’ Difference Principle is factually incorrect. The DP is an integrated part of Rawls bigger theory and there constrained by the fair equality of opportunity principle (not satisfied by any capitalist country today!) and basic liberties principle (ditto). Rawls rejects laisses faire capitalism and defends the far more egalitarian property owning democracy.

      • Deirdre McCloskey

        That’s better than name calling! Now we can calmly think through the logic and examine the facts together, and maybe come to some partial agreements, or at least some clarity about our own views. Your doctrinal point about Rawls would be good if it were not that the difference principle is deduced from (a clumsily handled) understanding of bets under uncertainty. Briefly, Rawls takes maximin as axiomatic, without any reason. He thinks it’s implied by rationality.
        I’ll have a look at the review you mention, though I guess you know that Frankfurt’s view has been discussed for decades.
        I am indeed familiar with the diminishing marginal utility of money. It strictly implies, in act utilitarianism, exact equality of all incomes. Not a dollar more. Is that your position? If so, we have a problem, since only a nightmarish totalitarianism could come close to accomplishing it. You seem to value liberty of the sort Nozick discusses at zero. Correct? Then we have the same problem.
        If something bad (I call it bad for the sake of argument) is decreasing worldwide, as you concede, maybe the system in which the decrease occurs is worth preserving, Your position is one of utopia—if matters are not perfect by your criteria, then we should make major changes in voluntary exchange. Again, you seem to value the liberty of ordinary voluntary exchange at zero.
        Inequality is unfair, you say. All right, let’s pound nails into your head until you are a stupid as I am. You can think of other proposals to create equality. That I may benefit from your high intelligence by exchanging voluntarily with you plays no part in your reasoning, though it did in Rawls’. Objections to inequality produced by voluntary exchange faces the Wilt Chamberlain example. if Wilt gets rich by people offering him money to watch him make jump shots, what’s the beef? Again, a repeated theme: exchange, you imply, is unfair.
        You object to the phrase “forced equality.” Do you pay your income taxes voluntarily? That is, if the government came to you cap in hand and asked you to contribute to the Iraq War or agricultural subsidies, or for that matter to a fund for the poor, would you turn over 20 percent of your income, unless the IRS had its powers? Threats of jailing are called “force.” It has long been accepted that a minimal definition of government is the possession of a monopoly of force. I approve of it, since competing forces are nasty indeed. But let’s not pretend that government does not exercise force. So the equality is forced if anything other than voluntarily achieved.
        More generally, my good friends the New Egalitarians imagine we live in a perfect (Nordic?) society in which the government has magical powers of costless redistribution. You have no reply to that (and you might want to know that Sweden has moved sharply away from its 1970s welfarism, to the point of having school vouchers; and Nordic incomes are below ours).

        • equality and growth

          “Your doctrinal point about Rawls would be good if it were not that the difference principle is deduced from (a clumsily handled) understanding of bets under uncertainty.”

          No, that is not Rawls argument in A Theory of Justice. Maximin rationality reasoning is part of the argument for the basic liberties principle against utilitarianism. His fair equality of opportunity principle and the difference principle are defended with reciprocity reasoning.

          “I guess you know that Frankfurt’s view has been discussed for decades.”

          Yes I called it “terminally flawed” because by now its flaws are decades old and fixes have not been forthcoming. Frankfurt’s latest book mostly rehashes his old stuff without engaging with the research frontier on distributive justice arguments.

          “diminishing marginal utility of money … strictly implies, in act utilitarianism, exact equality of all incomes … If so, we have a problem, since only a nightmarish totalitarianism could come close to accomplishing it”
          Incorrect. Utilitarianism accepts or rejects policies based on actual wellbeing effects. A policy with “nightmarish” wellbeing effects is not utilitarian approved. The real policy question we face today is if incremental inequality decrease is a net beneficial policy. The evidence points to yes. After some movement in that direction the marginal benefit of reducing inequality further likely shrinks. But the US has some ways to go. It is here telling which countries with which resource distributions that dominate the top tier of the World Happiness report ranking.

          “If something bad … is decreasing worldwide … maybe the system in which the decrease occurs is worth preserving”
          What you call “the system” is a spectrum of systems and policy options, some markedly less unequal that the US status quo. You trip yourself up with a false dichotomy (only two options: status quo or “nightmarish totalitarianism”).

          “Again, you seem to value the liberty of ordinary voluntary exchange at zero.”
          Individual market exchange activities are quite useful and valuable, for some purposes to some extent. So are other forms of production and exchange. Our policy mix should track the evidence on what works best.

          “Objections to inequality produced by voluntary exchange faces the Wilt Chamberlain example”
          In the Chamberlain case and in the real world we should accept the set of rules for property, taxation and private and public production that promote a set of moral goals including wellbeing and equality (equality not the only or absolute goal). Guided by such goals and empirical evidence we tax Chamberlain and offer public goods and services. Nozick trips up his argument by misrepresenting the theories he targets. See Kymlicka’s textbook Contemporary Political Philosophy for more details on the trip up.

          “You object to the phrase “forced equality.” Do you pay your income taxes voluntarily?”
          Yes I do. But I see where you want to go. In reply: of course it is forced just like our status quo mix of private property rules are forced/coercive/aggressive. Any resource control rule, including nozickian libertarian rule, is necessarily coercive in that sense. So in that sense your prefix adds no argument for or against equality or inequality. Matt Bruenig’s grab world example is useful here , .

          “imagine we live in a perfect … society in which the government has magical powers of costless redistribution”
          Straw man. The real argument is yet again that when all costs and benefits for the alternatives are considered a policy that decreases inequality is overall best.

          • Deirdre McCloskey

            Dear What’s Your Name,
            You exhaust me, and have more time for this than I do! But you seem a reasonable person. Consider that the government you want to engage in delicate utilitarian calculations might not quite be up to it. In Sweden, maybe (though not if one actually knows Sweden well). But in Trump’s America?
            Let me sign off and get back to my book. I suggest you do the same.
            Deirdre Nansen McCloskey

          • equality and growth

            Thank you for the discussion. But I’m sorry to say that what I take away from this short exchange is that you fall short in knowledge, argumentation and capacity to admit mistake.

          • Deirdre McCloskey

            Dear What’s-Your Name,
            Ah, so you couldn’t end the discussion on a gracious note! A pity. I suggest you read some of my books and reconsider. Yet
            I have little hope you will. You believe that a paragraph or two on a blog is wisdom.

          • equality and growth

            Dear Deirdre McCloskey, I’m again sorry but you did in fact fall short in the three respects I described. What is the gracious way to say that?

          • Deirdre McCloskey

            Don’t be silly, dear. I’ve written three books in 1,700 pages making the points. You have read none of them, and persist in thinking that scientific arguments must be reducible to a paragraph in a blog, which seems to be what you regard as scholarship. A tip for the future: whenever you attack someone for anything, say, falling short in knowledge, argumentation and capacity to admit mistakes, check the charges for applicability to your own case.

    • Dave Hartwell

      “Are you damaged by Gates’ billions”? Yes. I believe we all are. Because his level of success is dependent on the faulty stock market machinations of the corporatist, monopolistic, exploitative elite.

    • h3rodotus

      Dear Deirdre,

      Thank you for taking your time to share your expertise with us. I have a simple question as I am neither an economist nor particularly well read in this area. Bill Gates and Microsoft fought innovation in technology so hard that hey suffered Anti-trust issues with the government. Below are a few quotes from their case with Sun Microsystems. This was just one way they worked to kill innovation at the time (see quotes below).

      It is my experiance that the people who ascend to the top of their fields based on innovaton generally try to kill innovation once they are there. What I mean to say by this is that there doesn’t seem to be any honor among the captains of industry to allow a normal pace of achievement for others to innovate and succeed under the current system.

      My aunt worked at Safeway in 1987 as a checker, she made $18 an hour (equiv $36 an hour in modern dollars) and triple time on holidays. It was a great job until corporate raiders came and tried to take over the company to break it up and sell it’s assests, the resulting debt from fighting the take over crippled the company and lead to the dissolving of workers rights and protections.

      The other day I met an Uber driver who worked as a checker at Whole Foods. She said she was forced to work two jobs to feed her family because the store only pays he $12 an hour (approx $6 an hour in 1987 dollars).

      This problem seems quite simple to me. Wages for workers have been in decline for the past 30 years. Wages for executives have been on the rise. Why should the executive pay be rising while the worker pay has seen a real decline? Capitalism works because of it’s ability to keep the market fair and open by allowing market pressuers to keep people honest and drive in ivation. Here is my question:

      We see that corporations like MicroSoft have used illegal means to fight innovation, this is anti-capitalist correct? Why would you hold up Mr. Gates who’s company has been convicted of being anti-capitalist as a standard bearer for the system he has attempted to defraud?

      Also, how are people who work at places like grocery stores supposed to survive on a wage that is less than half of what they were making 30 years ago? People argue that we cannot pay workers $15 an hour when in the past we used to pay them more than that and our country prospered. I think we can prove that Mr. Lord is correct in his assumption that people do not need exaggerated monitary rewards to seek professional achievement and that is proven by the fact that a large portion of American workers are working at jobs that do not even iffer a wage sufficient enough to feed their families.

      A few passages from the Microsoft case below:

      “Referring to RMI and any Java developers who might access Microsoft’s site looking for it, a Microsoft employee wrote to his approving manager, `They’ll have to stumble across it to know it’s there. . . . I’d say it’s pretty buried.'” FOF 392, 84 F. Supp.2d at 106. Fifth, Microsoft intentionally deceived developers into believing the software products they were developing with Microsoft tools were cross-platform.

      In Re Microsoft Corporation Antitrust Litigation, ( 2002), 237 F. Supp.2d 639, 642 (D. Md. 2002)

      The purpose of the strategy devised and implemented by Microsoft was described in its internal documents. A November 1996 email stated: “[W]e should just quietly grow j++ [Microsoft’s incompatible developer tools] share and assume that people will take more advantage of our classes without ever realizing they are building win32-only java apps.” FOF 394, 84 F. Supp.2d at 107. Another document was even more succinct: “Kill cross-platform Java by grow[ing] the polluted Java market.” Microsoft, 253 F.3d at 76-77 (quoting Government Ex. 259).”

      • Deirdre McCloskey

        Dear h3rodotus,
        The best way I can reply is to ask you to read more in economics, with an open mind. You have an ethical story about market-tested betterment (by the way, it is false that wage shave fallen: in real terms they have risen). That’s a good first step. Ethics matters, as my book the Bourgeois Virtues stresses. But to understand the system one has to study it. You would not expect to understand chemistry slam, bang just because you are made up with chemicals. Likewise economics. Ethics is not a sufficient guide. Necessary, but not sufficient.
        Deirdre McCloskey

        • h3rodotus

          Thank you, I started reading more and I can’t seem to find a site that agrees with your stance on wage increases. There is note of a small increase in the 90s but that overall they are stagnant or in deline. I listed a few quite from sites I thought might be good places to look you are these sites a good place to get info?

          Also, can you please answer because I’m curious, you said that ethics matter but you didn’t answer why you used the unethical Bill Gates as a standard bearer?

          The Economist:
          “Despite five years of growth American real wages are still 1.2% below what they were at the beginning of 2009. In Britain, real wages fell every year between 2009 and 2014, the longest decline since the mid-1800s”.

          Business Insider:
          “Real wages fell 0.2% in 2012, down from $295.49 (1982-84 dollars) to $294.83 per week, according to the 2013 Economic Report of the President. Thus, a 1.9% increase in nominal wages was more than wiped out by inflation, marking the 40th consecutive year that real wages have remained below their 1972 peak.”

          Economic Policy Institute:
          The wages of middle-wage workers were totally flat or in decline over the 1980s, 1990s and 2000s, except for the late 1990s. The wages of low-wage workers fared even worse, falling 5 percent from 1979 to 2013. In contrast, the hourly wages of high-wage workers rose 41 percent.

          • Deirdre McCloskey

            Dear h3rodotus,
            You need to get beyond the usual journalism and the usual left sources, which always stop with the official, CPI measures,a nd repeat each other endlessly, against the ocular evidence that anyone who has lived through the period has that things are getting better. The head of the US CPI agrees (I have spoken to her personally about it) that the index does not adequately reflect improving quality of goods and services. The CPI is not conspiring to get it wrong—the agency does as good a job as it can to get better housing, cars, TVs, medicine, entertainment, etc. into the index. But a lot is too hard to measure. Look up the Boskin Report in the early 1990s, which concluded that unaccounted quality overstates inflation by about 1% per year. That’s not stellar growth. But it’s not the zero widely claimed.

          • h3rodotus

            Dear Deirdre,

            The ocular evidence to everyone outside of the power elite is that things are getting worse. I read every book Ayn Rand wrote when I was 19, I have a favorable view of capitalism and consider myself to be a conservative, which is why I had to leave the republican party.

            In my time, at 39 years of age, I have seen a decline in worker protections, the growth of using contractors as employees to avoid workman’s comp and other labor protections, the rise of the internship for workers that previously would have made a wage and the sharp increase in slave labor practiced by companies like Whole Foods and Victoria’s Secret in US prisons.

            Wages are depressed and have been depressed. The biggest employee in the country is Wal-Mart, a company that pays such a low wage it has to advise employees on how to sign up for government assistance.

            You seem to me a highly educated person and a critical thinker. I ask you, am I really supposed to accept that you are telling me to ignore journalists and instead listen to something you heard your friend once say to prove you point? Outside of a complex theory book on economics, is there any site you can suggest for me to check out?

            Also, please don’t forget about my Bill Gates question, why would Gates be a standard bearer when he tried to cheat the system and kill innovation? In my opinion that would historically be viewed as anti-capitalist.

  • Bill Sherman

    of course, the real problem in america is that rich people are not rich enough.

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