Wednesday, May 11, 2005

Ante up!

Sandefur makes two good arguments challenging my previous post.

First, he argues against my premise that life is, on some level, a competition for resources. He points out that in modern society, wealth is not a zero-sum game. So as I make money, I am not necessarily taking it away from other people. In fact, if I invest the money (in a business or bank) I may be providing other people with the opportunity to make money.

This is an excellent point, because it encourages us to refine our thinking about economics. If Ann has 1000 businesses, or even 1000 Rolex watches, there's no reason to believe that she is doing the society any harm. In fact, if Ann has 1000 businesses, she's probably improving the standard of living for the people around her.

The obvious question is: If money can be created, why don't we all have as much money as we want? And why do whites have proportionally more money than blacks?

I suspect that Sandefur would attempt to explain this disparity based on virtue. In other words, the rich are more virtuous than the poor - they work harder - and therefore they have more money. (I doubt that he would go so far as to assert that whites have proportionally more virtue than blacks.) But having some personal experience with the poor, I feel justified in saying that this explanation is inadequate. We cannot characterize the poor as "moochers" and "looters". Some poor people are lazy. But some rich people are lazy, too. And some poor people work extremely hard. So I don't think that this explanation is sufficient.

Instead, I would argue that our current distribution of resources has little to do with virtue and more to do with the fact that you must have resources to get resources. If this is true, my first premise stands: Life really is a competition for resources, and some of us start out so far behind that we can't compete.

Second, he questions my use of the word "oppression". How can free-market capitalism be characterized as oppressing the poor?

Pure capitalism is oppressive because it excludes the poor from the market based on factors that are beyond their control. In particular, it excludes them based on poor schooling, bad family life, skin color, weak social connections, and lack of capital. People with mental and physical disabilities are also marginalized.

Capitalism might work perfectly if everyone started out with equal resources. But in the current system, you have to ante up to play, and a lot of people can't make the ante. If you realize this, and allow the system to continue unmodified, I think it would be fair to characterize you as oppressing the poor.

Now if Sandefur disagrees and says that the poor have equal opportunities to generate wealth, this is the point we will have to debate. But if he agrees, we can ask another question that I think is more interesting: How should we change the current system?

Briefly, I'll state my opinion.

First, I think that we should create government programs that mitigate the immediate harms that result from the imbalance of resources. Government-sponsored health care would be one such program. Welfare would be another.

But I also think that we should work to re-balance the system by empowering the poor. As a society, we should help the poor get resources - such as healthy families and good schooling - that will really help them play in the market. Creating these valuable resources, more than handing out money, will help alleviate our oppression of the poor.

(Update: new posts from St. Pierre and Sandefur. And guys, please try to spell Sandefur's name right.)


life_of_bryan said...

Good point about resources, and having to have them to get more. I partly agree with Sandufer, but certain resources are more or less finite, which implies a competition at some level. For some reason I also think that as long as you have a strength or presence of one resource (and maybe lacking in others), you should be able to leverage that to create more wealth/resources for yourself. And perhaps the point of this debate is that some entity should ensure you have a fair shot at finding success in this pursuit?

Perhaps Sandufer would draw a distinction between equal opportunity and equal starting point -- a little abstract I know. Maybe in a purely technical sense, if there are no laws that prohibit you (someone of your color, background, economic status, belief system, etc) from participating in the free market, then you might choose to interpret that as being equal opportunity for everyone. Disadvantaged starting point, not necessarily inviting, but equal "opportunity" since you both have equal protection under the laws & regulations in place. But realistically speaking, is that really a fair chance? I'm not saying equal opportunity must result in equal fact I'm not sure what I'm saying.

What are we really asking for here? Maybe someone should document the ideal outcomes of a "fair" or "legitimate" market system, and then decide whether it is within the bounds or role of the govt to facilitate vs. being left to civilian influence. Would that conversation even be possible or worthwhile?

Matthew said...

Bryan, thanks for being our local libertarian.

You ask a good question: Why isn't it enough to have a government and economy with no legal barriers to entry?

My answer is: Because we can do better. We can't simply legislate a system in which everyone starts out with good parents, a safe neighborhood, two 500's and five 100's. But we can create a system in which the gap between rich and poor is not so great that certain classes of people are practically excluded from the market.

One of the tell-tale signs that the market is oppressive is this: There's not much movement between socioeconomic classes.

Our wealthiest people have similar skin color and similar backgrounds.

And if the system were just, don't you think there would be more movement? Don't you think that your co-workers would have more varied backgrounds? Don't you think there would be more janitors who come from the suburbs, and more CEOs who come from the inner city?

K-Rewx said...

The 80/20 Principle (based on the work of Italian economist Vilfredo Pareto) has played a key role in the development of our digital world. IBM and other computer types have almost claimed the principle for their own, but Pareto's work was discovered in a study of the distribution of wealth. His finding: The distribution of wealth across the population was predictably unbalanced.

In what he claims is the first book on the 80/20 Principle, Richard Koch weighs in with some thoughts that I hope will contribute to this discussion.

"The 80/20 Principle asserts that imbalance is natural, but not that what is natural is right." p. 239

"The essence of the 80/20 Principle is that it wants to improve on what it observes and is a powerful tool for so doing." p. 240

"The really serious issue is not unemployment or poverty but inequality. [sounds like a spiritual twist, doesn't it?]
Growing social inequality, in societies where the overall level of wealth is rising, is the real issue we should all be debating. It is clear that, in the absence of redistribution of wealth, free markets imply unequal wealth and that increasingly free markets create increasing inequality. This is happening fastest in those countries, such as the United States, Great Britain, and parts of Asia, that have made their markets the freest and that have increased this freedom over time. The 80/20 Principle explains why it is happening: 80 percent of what is useful and valued (measured democratically by consumers' free purchases) is created by 20 percent of the workforce. If markets are unobstructed, rewards will be unequally distributed because value is unequally created." p. 245

Notice that Koch also prophecies: "There will be an upsurge, over the next 10-20 years, in managerial unemployment." p. 244. [This means that many of us middle class folk will be dropping out of the middle class and spiraling down in the economic scale if free markets are not restricted toward equality.]

Koch's conclusion: "There is no reason in essence why an interventionist approach could not be successful in any area of social policy." p. 254.

However, Koch argues against the state taking on this intervention through government run entities. Instead he suggests that the state contract out education and similar pursuits. In regard to economic affairs he says: "arbitrage and efficiency will be best served by the state intervening as little as possible in economic affairs." p. 258.

Koch also points out that the history of capitalism is the history of higher living standards and higher levels of employment. New technologies and purchasing power call forth even newer technologies, higher standards of living and new kinds of jobs.

A. Lo said...

Okay, so I agree. We should empower the poor, we should try to see some equal distribution of resources. But the big question I want an answer to is how do we do that? What are some practical ways for us to empower the little guys and give the finger to the big guys?

K-rewx makes an interesting point (through Koch) that perhaps the state should contract out education and similar pursuits, but it seems to me that unless we can convince the poor that education is a worthwhile pursuit, it won't much matter WHO runs the system, it will fail, at least for them. So how do we do that?

I've heard an interesting dialogue that the answer is for suburban churches to adopt one family a piece, find them affordable housing in the suburbs and teach them and their children the morality and values of suburbia. Some will say this will work better than taking our own suburban values to the city, where existing pressures are too much for young people and their families to handle, and I'm told that studies have shown that children more or less rise to the level of their peers, regardless of who and where those peers happen to be. Would this work?

life_of_bryan said...

If I implied that abscence of legal barriers should count as a fair playing field, that wasn't the intention behind my question. I was just wondering what Sandufer's take on it might be.

I think a.lo asks some of the same things I'm wondering...what's your desire, and how can we make it happen? If it were easily answered, it wouldn't be a problem -- unless some economic think-tank is holding out on us. The town idiot in me also wonders, since I'm no anthropologist, has there ever been a culture/society to peacably achieve a reasonable balance of resources? I guess the point is, would the great thinkers even find this a realistic ideal, or would there always be some sort of imbalance no matter what system you tried?

Wow, I didn't even realize I was part libertarian (also part Scottish and 1/16th Cherokee), but don't worry, I'll be something else next week. My ideas are reshaped every day...the beauty of being non-commital.

Paul said...

I wrote a rather long comment and was robbed by blogger - down for maintenance.

So I'll just say: you don't even have to be poor or minority to experience corporate oppression, and refer to - if anyone wants to see what a middle class white guy has gone through with our system of health care.