Sunday, January 5, 2014

Entitlement

In an economics class I took in college, the professor offered to redistribute the grades he awarded the class in any manner that the entire class could agree on. In other words, if we all agreed to receive whatever the average grade would turn out to be, he would do that. If we agreed to reduce the grades of the top 10% of the class by a certain number of points, and increase the grades of the bottom 10% by the same amount, he would do that. Whatever method of redistribution we could settle on, so long as it allocated the same total value of grades as the professor was going to award to us individually, would be ok with him.

Despite considerable discussion, the class could not agree on any sort of redistribution scheme, and the professor told us that he had in fact never had a class able to agree on any form of redistribution of grades. This experiment was meant to illustrate the problems any society will run into whenever there is discussion of redistribution of income as a means of reducing inequality. The top earners are likely to  be unwilling to agree to reduce the share of what they feel they have fairly earned. They often resent the idea of giving the fruits of their labors to the lower earners, who are often characterized as less deserving or less hardworking. This problem is especially understandable in a class of college students with respect to the grades that most feel they have a fair chance of earning by their own talents and hard work. 

When we're only talking about money, people should be more understanding of the role that luck plays in the distribution of wealth. As well as the role of some basic unfairnesses that are built into the system, for example that teachers are generally paid less well than say, stockbrokers, even though many people agree that teachers make a more important contribution to society. People are also beginning to understand the extreme levels of inequality that have crept into our system as compared to say, 50 years ago, some of this inequality due to changes in the economy and some due to changes in government policies. Polling indicates that the vast majority of people would favor a more even distribution of wealth than the one we have currently.

So now that we have prominent politicians finally taking the issue of wealth and income inequality head on--President Obama in a recent speech called income inequality the defining challenge of our time, and the new mayor of New York City, Bill de Blasio, made inequality a centerpiece of his campaign and his inauguration speech--there should be more receptivity to proposals to do something about this problem. And there are a lot of ways the problem can be addressed, from increasing tax rates on the wealthiest, to increasing the minimum wage, to changing a culture in which companies find it acceptable to award executives vast multiples of the pay they dole out to ordinary workers. (Can anyone justify our current practice of paying CEOs about 200 times what ordinary employees earn, as compared to a ratio in the 1950's of about 20 to 1?)

I'm not here to advocate any particular solution, only to point out that all proposals to solve the problem will likely run into the kind of opposition that we discovered in my economics class, and that we should not dismiss this opposition lightly. Those at the top of the wealth and income scales are apt to feel that they are entitled to what they have, and resentful of any changes in their position. This is true even when people understand that they might not have fairly earned the levels of income they are receiving. I recently heard about a series of experiments run by some psychology professors at Berkeley aimed at measuring this sense of entitlement. For example, they had sets of students play rigged Monopoly games, in which favored players were given extra money every time they passed "Go," as well as extra rolls of the dice. Even though the players understood that the games were rigged, the "rich" players tended to attribute their success at the game to their own efforts, rather than to the advantages these skewed rules gave them. 

Therefore, it's not enough just to point out how skewed the distribution of wealth and income has become. It's also probably not a good idea for politicians simply to play to resentment by the 99% against the 1%. Any proposal for dealing with the problem of wealth and income inequality must also consider the resistance to such proposals by those most favorably positioned, and should put forward creative approaches to overcoming that resistance. At the very least, we probably should not be feeding the sense of entitlement of those most favored by current policies, which is what we sometimes hear from defenders of the status quo and those suspicious of government efforts to solve a real problem.


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