Fetters and Fairness

When will the left stop saying dumb things like this?

The U.S. economic-policy debate is in fact dominated by the assumption that unfettered markets work best, a view that’s applied to our domestic economy and to that of other countries through international financial institutions that the United States controls. John Kerry’s recent statement that he is “not a redistributionist” indicates how dominant this view has become.

That’s Lawrence Mishel in TAP.

If the economic-policy debate is in fact dominated by the assumption that “unfettered” markets work best, then why don’t we see fewer fetters? Bush’s shrimp tariff surely indicates how dominant this view has become. No? Or the US’s continued attempts to stonewall the WTO on US free trade violations in order to protect inefficient domestic interests? Kerry’s statement is just a lie, and, in any case, not being a redistributionist doesn’t imply support for unfettered markets. One might be against redistribution but want fetters on the market in order to slow the rate of growth for ecological reasons, say.

Mishel’s concern, however, is redistribution. He’s worried about inequality. The top 1% of families earned 19.6% of all income. That sort of thing. Yet that sort of thing tells us almost nothing interesting at all. But Mishel leaps forward:

Because of the inequality in the United States, even though our per-capita income is higher than many countries, our low-income families are not better off than those in other places where per-capita income is lower.

This is a confused sentence. He seems to imply that the fact that the income of American low-income families is lower than the income of low-income families in some other countries has some logical connection to inequality. But there is no logical connection. (If one guy, Rick, discovered a trillion dollars of unobtanium in a hole, it would skew the inequality figures, but wouldn’t have anything to do with explaining why the least well-off have what they do.) And if Mishel’s actually making sense, as opposed to positing dubious causal power to inequality, all he’s saying is that given two sets of numbers, one set’s having a higher average doesn’t imply also having a higher lowest element, which is so trivial there’s no point in mentioning it.

More:

The social class a person belongs to really matters — it determines your health, how long you live, where you live, your exposure to crime, your success in school, and the likely success of your children.

This is a bit much. Your class determines none of these things. It influences them. And “class” here just means something like “income bracket.” Mishel is correctly saying that your health, longevity, lifestyle, safety and success will be improved by having more money. No doubt! Will the the folks at the bottom (and, ahem, that’s me!), do better if we put more fetters on the market? It seems unlikely.

It strikes me that Mishel is confusing matters of regulation with matters of distribution. Now, it happens that economic regulations are very often implemented in order to bias distribution in favor of certain interests over others. (Shrimp!) But suppose we had a clean slate and committed to restricting regulation to only those that are generally efficiency enhancing. This would mean wiping out almost all trade restrictions and huge swathes of the government bureaucracy. Such a system would surely count as “unfettered” in Mishel’s terms. Now, suppose we set a tax rate sufficient to guarantee a minimum income sufficient to provide the means to develop human capital to a certain critical level. Now, this may or may not cause a reduction in the overall rate of growth, although some slowdown strikes me as likely. But, notably, this kind of guaranteed minimum within the context of a relatively minimal state does not seem to entail especially fettered markets. We haven’t added any regulations on the market other than those needed for the purposes of our very streamlined tax system.

This is in fact my big beef with economic egalitarians. Most of the time they aren’t really talking about equality at all. They’re talking about the poor getting enough. A society in which the top 1% has 50% of the stuff, but where the poorest person has a million dollars looks pretty great to me. A million dollars is enough. Who cares if someone else has a house made of diamonds?

When the left starts wanting to actually help the poor, then maybe they’ll start arguing for the de-fettering of the market in order to enable a truly efficient and effective redistributive welfare state.

Mishel concludes:

I daresay that there’s no reason to believe that unfettered markets provide us with the type of society our faiths guide us to have in terms of the lives of the poor, the treatment of workers, and the solidarity of our communities.

Well, I double-dog daresay that markets much more unfettered than ours would better serve the kind of welfare state Mishel professes to want.