This topic came to my attention after reading an article, Starmans, C., Sheskin, M. & Bloom, P. Why people prefer unequal societies. Nat. Hum. Behav. 1, 0082 (2017). This article was very interesting, in part because, while it did not really change my opinions, helped me to better understand my opinions and articulate them better.
To summarize the article: there are, broadly speaking, three types of psychological studies which are discussed. The first type is a resource-distribution experiment, where the subject must distribute a collection of resources between various people. The result is generally that people tend to want an equal distribution of resources, even when more total resources could be distributed with an unequal distribution (e.g. when dividing an odd number of erasers between two people, children tended to say to throw away the last eraser, to avoid giving more to one person). These experiments are sometimes cited as an example of people instinctively opposing inequality. The second type of experiment is similar to the first, but with additional factors whereby some of the people are more deserving than others. In these cases, people tend to distribute more resources to those who are more deserving. The third type of experiment, or study, is a type in which people are asked to say how much wealth inequality is ideal in a society. People generally pick a society with some wealth inequality, although substantially less inequality than exists in our world today (which is sometimes presented, in the popular accounts, as suggesting that people want to reduce inequality). In other words, the people in the higher percentiles will have more wealth than in the lower percentiles.
The paper argues that we can explain the results of all three types experiments with a single hypothesis, namely, that people want fairness rather than inequality: ‘In this paper we have outlined a wealth of empirical evidence suggesting that people don’t care about reducing inequality per se. Rather, people have an aversion toward unfairness, and under certain special circumstances this leads them to reject unequal distributions.’ Whether this is true in general or not, it is certainly applicable to my own views. One other point which is brought up is one which they cite from Frankfurt, H. G. On Inequality (Princeton Univ. Press, 2015). Frankfurt, they claim, has argued that we should not focus on reducing inequality as such, but rather on ensuring that everyone has enough for a decent life.
Both of these points fit nicely with my own views on economics, and indeed, one of my primary objections to capitalism is that it is not fair. It is unfair in several ways. As I have discussed previously, I do not think it is fair that investors can make enormous profits without doing anything (hence why I support a high capital gains tax, with the resulting revenue distributed in a basic income). Second, it is unfair because even workers might be paid far more than they deserve – or far less. CEOs today make more than 300 times what average workers make. This is absurd. On the other hand, people who work in research and development are often required to sign over the rights to all their ideas to their employer. An employee might come up with an idea that means billions in profits to the company, but they themselves only receive a few thousand dollar bonus on top of their salary. On the reverse side, someone might make an important discovery or contribution, but be given far more money than they really deserve; Bill Gates did not ‘deserve’ all the money he made for porting DOS to a 32-bit platform (or was it 16-bit?).
The usual counterargument to these points is ‘Well, the company agreed to pay the CEO that amount, and the worker agreed to sign over their IP rights.’ Now, this is true, but we must emphasize that people do agree to things that are not fair. Whatever our propensity for fairness, people are not perfect. Some people, especially the aggressive and selfish personality-types which seem to tend towards trying to become executives, are willing to be unfair, if it leads to their own advantage. Some people, conditioned by their social conditions, might look on both of these cases (the CEO and the inventor) as being fair, even though they are not (consider that, conditioned by islam, there are people who see it is fair for a petty thief to have their hand chopped off! And conditioned by christianity, there are people who see it as fair for a person to burn forever, for finite ‘sins’ committed on earth). Some people are willing to agree to things that are not fair, because they do not see any alternative – an inventor who really needs a job is not in any position to negotiate the terms of their contract, especially when almost every employer puts a similar clause into their terms and conditions. Then there are cases where a person is being even further coerced, by financial pressures or otherwise. Or they agree to something which is not fair, because they think it is fair at the time, but it turns out not to be, such as the sale of Manhatten for a handful of trinkets.
We see, therefore, that the voluntary nature of an agreement is by no means a guarantee that the agreement is fair.
Related to this is a problem for artists and inventors, namely, that people whose works are incredible may nonetheless not find an audience to pay for them. Van Gogh, for example, is widely regarded as a great painter, yet had no commercial success. On the other hand, a truly abominable book like Fifty Shades of Grey can make tremendous amounts of money for its author. The value of art is always subjective, but while it might be hard to see what a ‘fair’ recompense for an artist might be, it is certainly possible to point out many specific instances where their recompense is most unfair.
Another way in which capitalism is unfair is in the lack of social mobility. Generally speaking, those who are rich got that way by inheriting a sizable sum of money, or being given a sizable amount of money from their families; at the very least, they were generally able to go to excellent schools, and to make powerful connections early in life. There are very few instances of what used to be called ‘self-made men,’ or ‘rags to riches’ success stories. The reasons for this are complex, but suffice it to say that empirically, it is very true that ‘it takes money to make money.’ In other words, without money to start with, it is nearly impossible to ever make a significant amount of money. This is becoming more and more true, as wages stagnate but worker productivity rises.
That’s not to say that rich people never work hard. Some of them have worked very hard, even if they started out with a lot of advantages. The real point is not that rich people have advantages, but that poor people have disadvantages.
Solving these problems of unfairness, however, are very complex. But to summarize, I wish we could find a system that would 1. guarantee everyone enough to have a decent life (not just food and shelter and health care, but also enough to enjoy themselves, within reason), and 2. result in a more fair distribution of wealth. I think universal basic income is an important way to try to deal with both of these issues. However, this is already quite long, so I will reserve further discussions for another blog.