Tuesday, March 15, 2011

Time Horizons

Tim Kowal points FLG to this post over at Bleeding Heart Libertarians that illustrates precisely what FLG has been harping about with his Time Horizons theory.

Imagine there are two nearly identical societies, Fairnessland and ParetoSuperiorland. Imagine both are some form of liberal society, and both equally protect citizens' political and civil liberties.

...

However, imagine that because ParetoSuperiorland allows more inequality, it has faster growth. (I'm not here claiming that allowing inequality really does cause growth. So no need to argue with me about that.) Fairnessland has an annual growth rate of 2%, with each class's income growing equally quickly. Suppose, however, that ParetoSuperiorland has a faster growth rate.

You can click the link to see the exact numbers, but not surprisingly even the poor are better off with the higher growth rate despite the inequality after 100 years.

What's interesting to FLG is a particular commenter over there named TheOtherChuckD who seems entirely incapable of seeing anything other than what he would like to see:
You made an argument by rigging the rules of your model. The absurd timeframe, positing stagnation and leaving out all other concerns (like income mobility), all serve to lead readers by the hand to a set of conclusions.

It's a common libertarian strawman: would you rather be poor in a poor but equal country or a rich but unequal country? Would you rather be poor in 2011 or rich in 1911? Arguments like these rest on the built-in assumption that inequality powers growth and safety nets hamper it.

It's worth referencing an earlier BHL post: would you still be a libertarian if the assumptions you've made about the positive economic effects of libertarianism were wrong?

A far more interesting question would involve taking your thumb off of the scale.

Assume ParetoSuperiorland had the same growth rate as Fairnessland, but high inequality. However, citizens had a far better chance of moving from the bottom decile to the top. Fairnessland has greater income inequality but people in the bottom decile rarely if ever become rich.

Any answer would really have to grapple with issues of the kind of society we want and the tradeoffs we make, instead of just encouraging readers to reach for the bigger pie.

I know it's not the question you're asking, but at least it can be asked without stacking the deck to such an extent.

The entire point of the post is to say, look, imagine there is a trade-off between inequality and growth. (And to be honest that's not entirely unreasonable over a long period of time where incentives and rewards kick in, but anyway...) Here's how that would play out. Now, how should we deal with this?

What is most baffling to FLG is that assertion by TheOtherChuckD that the timeframe, a century, is absurd given that the question at hand is how a society should organize itself, not in minute detail mind you, but very broad brush.

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