“Of the tendencies that are harmful to sound economics, the most seductive, and in my opinion the most poisonous, is to focus on questions of distribution,” declared Robert Lucas Jr. of the University of Chicago, the most influential macroeconomist of his generation, in 2004.
---Krugman.
Reading Piketty's very engaging Capital. (If you want a soft copy just drop me a line. There's also a very good summary by Krugman in the NYRB).
Well, I think Krugman is right here. Inequality and distribution is a marginal issue in standard neo-classical econ where the main emphasis is on efficiency. To the extent that inequality is discussed it is usually in instrumental terms: to what extent and in which direction does income inequality effect income growth? That lack of interest is, I suspect, partly down to ideological reasons but also partly because of an assumption that over time things will even out (Kuznets). Another way of saying that is that the neo-classical framework posits that over time there will be a "convergence" so that each country, given the same "parameters" will grow at the same rate.
Of course, there are empirical and theoretical objections to this view of history. But the main point is, to my mind at least, that 'welfare economics' and, more generally, questions of fairness, distribution and justice are out of bounds to the "positive" discipline of economics. What that means, effectively, is that we do not look at the "evaluative space" (i.e. what do we mean by 'goodness') -or we do so in a particularly narrow way (satisfaction of one's preferences is good)-and we ignore questions of aggregation (or take it for granted that the Pareto principle is the only way to 'aggregate').
This lack of perspective is crucial when it comes to the environment ad climate change where Utilitarianism-the dominant approach-is woefully inadequate.
But why this amnesia? Could it simply be the idea that inequality would be a spur to growth so that even the poor in an unequal society would be better off than they would have been in a poorer but more egalitarian society? Inequality ceases to matter according to this view. Or is it, alternatively, the view that inequalities actually decline in market societies (compared to the inequalities and deep hierarchies in feudal societies and developing countries this seems intuitively appealing).
What is missing is the way in which different types of inequalities interact (is there a cluster of disadvantage, for example?). How do inequalities in gender, power, nutritional status, say, interact with inequalities in income and assets? These, to me, seem to be crucial but immensely difficult issues. And what happens to inequalities over time? By what process are they exacerbated or diminished (here one would have to take on board the connections between markets and democratic political systems).
---Krugman.
Reading Piketty's very engaging Capital. (If you want a soft copy just drop me a line. There's also a very good summary by Krugman in the NYRB).
Well, I think Krugman is right here. Inequality and distribution is a marginal issue in standard neo-classical econ where the main emphasis is on efficiency. To the extent that inequality is discussed it is usually in instrumental terms: to what extent and in which direction does income inequality effect income growth? That lack of interest is, I suspect, partly down to ideological reasons but also partly because of an assumption that over time things will even out (Kuznets). Another way of saying that is that the neo-classical framework posits that over time there will be a "convergence" so that each country, given the same "parameters" will grow at the same rate.
Of course, there are empirical and theoretical objections to this view of history. But the main point is, to my mind at least, that 'welfare economics' and, more generally, questions of fairness, distribution and justice are out of bounds to the "positive" discipline of economics. What that means, effectively, is that we do not look at the "evaluative space" (i.e. what do we mean by 'goodness') -or we do so in a particularly narrow way (satisfaction of one's preferences is good)-and we ignore questions of aggregation (or take it for granted that the Pareto principle is the only way to 'aggregate').
This lack of perspective is crucial when it comes to the environment ad climate change where Utilitarianism-the dominant approach-is woefully inadequate.
But why this amnesia? Could it simply be the idea that inequality would be a spur to growth so that even the poor in an unequal society would be better off than they would have been in a poorer but more egalitarian society? Inequality ceases to matter according to this view. Or is it, alternatively, the view that inequalities actually decline in market societies (compared to the inequalities and deep hierarchies in feudal societies and developing countries this seems intuitively appealing).
What is missing is the way in which different types of inequalities interact (is there a cluster of disadvantage, for example?). How do inequalities in gender, power, nutritional status, say, interact with inequalities in income and assets? These, to me, seem to be crucial but immensely difficult issues. And what happens to inequalities over time? By what process are they exacerbated or diminished (here one would have to take on board the connections between markets and democratic political systems).
2 comments:
is there any factual proof to support this idea? "Could it simply be the idea that inequality would be a spur to growth so that even the poor in an unequal society would be better off than they would have been in a poorer but more egalitarian society?"
Don't know about the empirical bit but it is a main contention of economic theory ( equality or redistribution dampen incentives). It was also smith's African king example...I.e. Even the poorest in a rich but unequal commercial society would be better off than a rich MaN in a poor society.
Factually it is difficult to say because what is " better off"?
K.
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