Dan Carlin’s Common Sense podcast from January 31, 2015, used the most recent State of the Union and subsequent political maneuvering as a launching point to discussing the nature of work and similar themes. Carlin notes that he hates the term “income inequality” because it frames the issue of wealth disparity in ways that are potentially unhelpful, but struggles for a better term.
His stuff is always worth a listen. This particular podcast reminded me of some prior posts I had done, particularly this one entitled “Technology and the Future of Work.” One question we have to ask ourselves is whether what we designate as the free market, if unregulated, will function in a sustainable way. And, if not, what sorts of regulations are necessary to create that sustainability. Obviously, I think regulation of some sort is necessary. After all, the very concept of property (as distinguished from “stuff you happen to possess at the moment” and the manner of its enforcement is itself regulation of sorts. Now we’re just haggling over the price.
We also have to come to grips with our goals for an economy. Maximum productivity sounds like a good goal until you think of the distribution. Lets say the unregulated free market produces $100 worth of value but $98 goes to one guy and the remaining $2 is divided up so that the remaining 99 people get about $0.02 apiece. Then lets say that regulations put a serious drag on productivity, cutting it in half so that the regulated economy produces only $50 in value. But, let say that the distribution is much closer to equal – maybe the one guy gets $10 while the other 99 get more like $0.40 apiece. Which economic system is better?
One of the things Carlin mentioned was a billionaire commenting that the masses simply needed to reduce their expectations. Maybe the economy has changed such that the average job simply isn’t going to make you able to afford a suburban home and an iphone. This plays somewhat on an idea I’ve had for awhile – that it would be useful for the State to provide a model budget for its citizens based on various income levels. My initial impulse for this was that a lot of citizens are bad with money, and there are often complaints that poor people have enough to live on, but they’re making poor spending choices (e.g. cable, cell phones, tattoos, cigarettes). Perhaps a model budget would help — one for poverty level, one for median income, and maybe model budgets for other income levels. On the other hand, it would be a little uncomfortable if that model budget for median income revealed that the middle class simply could not afford the things we normally associated with “middle class.”
A certain amount of income inequality is very sustainable and, in fact, desirable. If there is that pot of gold available if you just work a little harder, that is quite an incentive. But, at a certain point, the folks on the bottom just aren’t going to give a damn about the productivity of the system and the underlying government structure that supports it. Carlin mentioned the people in Greece and their recent lurch to the left in the wake of austerity measures. How much of a reduction are the people at the top of the heap willing to take in exchange for a sustainable system? Maybe the guy getting $98 in the unregulated market is willing to go to $10 if his alternative is the peasants snapping, wrecking the system, and just murdering him for his stuff (think French & Russian Revolutions).
If we don’t rely solely on the free market to make the determination, how do we decide who gets what and under what circumstances? Well, that’s politics.