Thursday, 25 May 2017

Fairness and/or equality

There has been a bit of a fracas over the notions of 'fairness and equality' during the general election:
'You are MARXIST!' John McDonnell doesn't deny Andrew Marr claims he plans to squeeze rich | Politics | News | Express.co.uk

Indeed, the public services trade union UNISON say that one of their...

"main aims is to help workers fight for fairness and equality in the workplace and beyond. Challenging discrimination and winning equality is at the heart of everything UNISON does.
"Besides the right not to be discriminated against or bullied, fair treatment also includes equal working conditions and pay."

Fighting for fairness and equality | What we do | UNISON National

Although 'fairness and equality' are not the preserve of the left:

Helen Hims UKIP candidate - Weston-super-Mare general election 2017
What would your main aims be?

c) Defending British cultures, traditions and way of life. Encouraging all citizens, be they first or tenth generation, to cherish and identify with our proud British values of fairness, freedom and equality under the law.

The US 'Atlantic' looks at the difference between the two:

People Don't Actually Want Equality

They want fairness.

PAUL BLOOM OCT 22, 2015 

Bernie Sanders talks about economic inequality all the time, and it’s a message that resonates. You don’t need to be a socialist to worry about the divide between rich and poor in America. Many Americans across the political spectrum claim to be deeply troubled by economic inequality, and many say they support changes that would yield a more equal distribution of income and wealth.

But in his just-published book, On Inequality, the philosopher Harry Frankfurt argues that economic equality has no intrinsic value. This is a moral claim, but it’s also a psychological one: Frankfurt suggests that if people take the time to reflect, they’ll realize that inequality isn’t really what’s bothering them.

People might be troubled by what they see as unjust causes of economic inequality, a perfectly reasonable concern given how much your income and wealth are determined by accidents of birth, including how much money your parents had, your sex, and the color of your skin. We are troubled as well by potential consequences of economic inequality. We may think it corrodes democracy, or increases crime, or diminishes overall happiness. Most of all, people worry about poverty—not that some have less, but rather “that those with less have too little.”

Frankfurt argues, though, that we aren’t really bothered by inequality for its own sake. He points out that few worry about inequalities between the very rich and the very well off, even though these might be greater, both absolutely and proportionately, than inequalities between the moderately well-off and the poor. A world in which everyone suffered from horrible poverty would be a perfectly equal one, he says, but few would prefer that to the world in which we now live. Therefore, “equality” can’t be what we really value.

The science of inequality: why people prefer unequal societies

In a thought-provoking new paper, three Yale scientists argue it’s not inequality in life that really bothers us, but unfairness

Christina Starmans, Mark Sheskin and Paul Bloom

Thursday 4 May 2017

Anyone looking for evidence that people have a natural aversion to inequality will find numerous laboratory studies that seemingly confirm their view. Studies have found “a universal desire for more equal pay”, “egalitarian motives in humans”, “egalitarianism in young children”, and that “equality trumps reciprocity”. A Google Scholar search for “inequality aversion” yields over 10,000 papers that bear on this topic.

When subjects in laboratory studies are asked to divide resources among unrelated individuals, they tend to divide them equally. If a previous situation has led to a pre-existing inequality, people will divide future resources unequally in order to correct or minimise the inequality between others. This bias is so powerful that subjects sometimes prefer equal outcomes in which everyone gets less overall to unequal outcomes where everyone gets more overall.

Furthermore, people appear to view the equal distribution of resources as a moral good; they express anger toward those who benefit from unequal distributions. This outrage is sufficiently strong that subjects will pay to punish unequal distributors. One study examining this across 15 diverse cultures found that members of all populations demonstrated some willingness to administer costly third-party punishment for unequal division of resources – although the magnitude of this punishment varied substantially across populations.

‘A desire for unequality’

Given these findings, one might expect that when people are asked to distribute resources across a real-world group of people, they would choose an equal distribution of resources across all segments of society. But they do not.

A recent study by Norton and Ariely received well-deserved media attention as it showed that people both underestimate the amount of inequality in our society, and prefer a more egalitarian society to the one they think they live in.

The authors describe their studies as examining “disagreements about the optimal level of wealth inequality”, and report the finding of “a surprising level of consensus: all demographic groups – even those not usually associated with wealth redistribution, such as Republicans and the wealthy – desired a more equal distribution of wealth than the status quo”. An article by Ariely was titled: “Americans want to live in a much more equal country (they just don’t realize it)”.

These summaries are accurate: participants in these studies did prefer more equality than the current situation. But the results also suggest that they were not particularly worried about large inequalities. Instead, these subjects claimed that, in the perfect society, individuals in the top 20% should have more than three times as much money as individuals in the bottom 20%.

When they were given a forced choice between equal and unequal distributions of wealth, and told to assume that they would be randomly assigned to be anyone from the richest to the poorest person (that is, a “veil of ignorance”), over half of the subjects explicitly rejected the option of an equal distribution of wealth, preferring inequality. Thus, the data suggest that when it comes to real-world distributions of wealth, people have a preference for a certain amount of inequality.

This preference for inequality materialises in 16 other countries, across people on both the left and right of the political spectrum, and in teenagers. As Norton puts it: “People exhibit a desire for unequality – not too equal, but not too unequal.”

The science of inequality: why people prefer unequal societies | Inequality | The Guardian

The Foundation for Economic Education looks at the two ideas from a very different perspective:

The Unfairness of Equal Outcomes

Steven Horwitz Friday, April 28, 2017

When I talk to student groups about inequality, one of the first things I ask them to do is consider a mental experiment. Imagine a society in which, for example, the richest 20 percent of households earn an average of $60,000 per year and the poorest 20 percent of households earn an average of $10,000 per year. Imagine average household income overall is around $35,000 per year.

Now imagine a different society in which the richest 20 percent of households earn $150,000 on average and the poorest 20 percent about $18,000. Suppose the overall average is about $54,000.

If we compare these two societies, there’s no doubt that the first one is far more equal. The distance between rich and poor is much smaller. But if we ask which society is the more desirable one, or which one people would like to live in if they did not know if they’d be rich or poor, most people would pick the second, despite its higher degree of inequality. Not only is it richer on average, but it’s clear that it’s possible to become very rich and, perhaps most important, the poor in the second society are much better off than those in the first.

(It’s worth noting that the second society roughly corresponds to the US of 2017.)

That so many people’s intuition is that the second society is better suggests that perhaps what we really care about is something other than inequality per se. We care about upward mobility, or average income overall, or how well the least well off do.

Inequality vs. Unfairness

But maybe there’s another element to this concern. A recent study in Nature argued, with evidence, that what bothers people more than inequality per se is “unfairness.” People will accept inequality if they feel the process that produced it is fair. By implication, they will not support equality if it violates their norms of fairness.

We see this in another reaction students have when I give talks about inequality. I point out the number of Apple products visible in the room and ask them if they think the wealth Steve Jobs and other Apple founders accumulated over their lifetimes was objectionable. Is that the kind of inequality they object to? Students are usually hard-pressed to articulate why Jobs’ wealth is wrong, and they look sheepishly at their iPhones when I ask them how much they would have to be paid to give up their phones and connectivity, and they realize it’s way more than they pay for them.

I also remind them that economic studies show that only about 4% of the total benefits of innovation accrue to the innovator. The rest goes to consumers.

So why might we be okay with the more unequal society where the poor and average folks do better? And why might we be okay with the wealth earned by innovators like Steve Jobs or Bill Gates or Mark Zuckerberg? Probably because they correspond to some notion of “fairness,” whether from a concern for the least well-off or from the fact that the wealth of the rich is connected with even greater benefits for the rest of us.

So how can those of us who think genuinely competitive markets are key to human betterment use this information to address concerns about inequality? I think there are two ways in which we can deploy fairness arguments.

The Fairness of Voluntary Exchange

The first is the one I suggest above: continually reinforcing the mutually beneficial nature of voluntary exchange. We should insist that wealth earned in a real market based on open entry and exit and voluntarily agreed-to transactions is fair because all parties believe themselves better off because of the exchanges.

Yes, the owners of capital accumulate wealth, but only because we think what they have created and transferred to us is more valuable than the wealth we transfer to them. It is no less true to say that consumers accumulate wealth through this process, as the thought experiment about giving up your phone and connectivity indicates. As Robert Nozick argued in Anarchy, State, and Utopia: if each step in the evolution of the market is fair by itself, how can the pattern of income that emerges be unfair?

Fairness Before the Law

The second fairness argument is one that comes from Hayek. He observed in The Constitution of Liberty that if we want equality of outcomes, we will have to treat people unequally. If, however, we treat people equally, we will get unequal outcomes. Hayek’s argument was premised on the fact that human beings are not equal in our native intelligence, strength, skills, and abilities. Although we can all change and improve those things, they are always constrained by differences in natural gifts.

If we wish to have social progress, especially for the least well-off, we need to find ways to ensure that we can take advantage of the different knowledge, skills, and abilities of other people. For Hayek, market exchange guided by the signals of prices and profits is how we do so. What such an arrangement requires, however, is that individuals be treated equally before the law.

The differences among humans are, in Hayek’s view, a reason to treat them equally, not differently: “It is of the essence of the demand for equality before the law that people should be treated alike in spite of the fact that they are different.” Or in the words of Rabbi Jonathan Sacks “It is through exchange that difference becomes a blessing not a curse.”

If people really care about fairness, then supporters of the market should be insisting on the importance of equality before the law. If we really did want to create a world of equal outcomes, we would have to penalize the productive in various ways, and we would have to provide unequal benefits to those who were less productive. In the extreme, we end up in the world of Kurt Vonnegut’s Harrison Bergeron, where the state constructs individualized forms of interference to hamper the skilled, such as buzzers in the ears of the intelligent or weights on the limbs of the strong.

Equality of outcomes requires that we treat people differently, and this will likely be perceived as unfair by many. Equality before the law corresponds better with notions of fairness even if the outcomes it produces are unequal.

Another example of such unfairness is the way in which those with political connections can rig the economic game in their favor. When those with wealth can use the political process to protect their profits from new competitors or new products by legally restricting entry or the conditions of competition, many will perceive that as unfair. The same young people concerned about inequality also get that it’s wrong for cab companies to use government to deny them services like Uber and Lyft.

It’s especially important that many of the ways in which incumbent firms with economic power use government to protect their profits end up harming the poor disproportionately. Policies from occupational licensure to zoning restrictions to the minimum wage to the aforementioned privileges for taxicabs all serve to ossify the wealth of relatively rich and throw up barriers to the upward mobility of the poor.

If what appear to be concerns about inequality are, in fact, concerns about unfairness, we have ways of addressing them that demonstrate the power of exchange and competitive markets. Markets are more fair because they require that governments treat us all equally and that none of us have the ability to use political power to protect ourselves from the competition of the marketplace and the choices of consumers. In addition, market-based societies have been the best cure for poverty humans have ever known.

We need not cede the high ground of fairness and equality to the opposition. The liberal tradition was built on equality before the law and its implicit norm of fairness. It’s time for us to recapture that as part of the humane, progressive case for markets.

The Unfairness of Equal Outcomes - Foundation for Economic Education - Working for a free and prosperous world

See also:
Humans care about economic fairness, not economic inequality – Acton Institute PowerBlog

Futures Forum: Does Uber promote equality?
Futures Forum: Economic freedom and political equality at the local level >>> or, the triumph of corporatism

Futures Forum: The sharing economy >>> “This on-demand, or so-called gig, economy is creating exciting economies and unleashing innovation. But it is also raising hard questions about workplace protections and what a good job will look like in the future.

No comments: