Pre-Tax Inequality and Distributive Versus Allocative Justice

Thanks to Tyler for linking the pre-tax inequality post below. Not unusually, Tyler's comments are cryptic but suggestive:

This is all well worth knowing, and it does help counter the view that growing inequality of income is a poliical [sic] conspiracy. But oddly both the critics and the defenders here are missing one major inequality-related difference between Germany and the United States, namely social norms. We have weaker families, weaker social pressures to conform, deeper bayous, and as a result more flat out lunatics, losers, and violent psychopaths. (Did I mention we also have more innovation?) That’s inequality too, though the usual political recipes aren’t likely to provide the cure.

My gut tells me that I agree with Tyler about his conjecture that America has higher variance in sanity, though I'm not sure what to make of this. However, Ryan Avent thinks Tyler's speaking nonsense:

I can only imagine that he added all that bizarre stuff about bayous to cover the fact that his first sentence makes absolutely no sense at all. If pre-tax inequality isn’t all that unusual in America, relative to similar nations, but income inequality after taxes and transfers is unusual, doesn’t that suggest that the tax and transfer process might be contributing to inequality in a fairly significant way? And mightn’t that be because American tax policies favor the rich to a degree unmatched in other developed nations? How does this, in any way, debunk the notion that political efforts to protect the rich are in fact protecting the rich?

If it helps, here's what I had in mind while writing the original post: John Rawls's distinction between distributive and allocative justice.
Nozick had accused Rawls of offering the idea that social justice is a pattern of holdings. However, if people are able to make whatever voluntary exchanges they like, they will constantly disrupt the pattern. And so, if Rawls is right that justice is a pattern, the state will have to constantly interfere with individual's rights and liberties in order to reinstate the pattern that is constantly ruined by free exchange. There seems to be a conflict between liberty and justice-as-pattern. So said Nozick.
Now, Rawls said that this confused allocative justice for distributive justice — which is what Rawls's theory is supposed to be a theory of. A theory of distributive justice is a theory about the way the “basic structure” of a society's institutions distribute opportunities and goods. Once you've got the basic structure right, such that the least-well off are generally doing as well as they can given the feasible institutional alternatives, then whatever pattern that emerges from that is fine, more or less. It will not in fact require the constant, meddlesome re-allocation of goods from some people to others.
Rawls likes a system that he called “property-owning democracy” (which I still for the life of me don't really understand) which he contrasts with what he called a “market welfare state” (or something like that — this is off the cuff). If I remember right, Rawls thought that market welfare states didn't really fairly distribute opportunities and goods at the level of the basic structure, and substituted tax-and-transfer policies of material reallocation as a kind of pale approximation of the kind of true-blue social justice that comes from getting the basic structure right.
OK! So the reason that graph was interesting to me is that I had a strong sense from reading Rawls and his students that the European social democracies are thought to be much closer to a proper “property-owning democracy” than the U.S. market welfare state, and so I found it telling that the U.S. and Sweden, say, are only negligibly different in terms of pre-tax inequality. For whatever reason, their basic structures are generating similar levels of inequality. And so the difference in final inequality may not so much reflect a difference in distributive justice, in the Rawlsian sense, but a difference in policies of re-allocation, which Rawls did not consider central to justice.
However, reading Tyler's addendum containing the thoughts of his “very eminent source,” I see the similarities in pre-tax inequality do have quite different underlying causes: in the U.S. people get really extraordinarily rich; in a lot of Europe, a good chunk of the working-age population don't have jobs at all, and so basically have nothing before transfers. So, in terms of basic structure, it may well be: advantage America! In Rawlsian terms, a basic structure that creates a high ongoing unemployment rate is going to be denying many of the least well-off with “the social bases for self-respect,” one of the most important Rawlsian primary goods.
Now, I understand not everyone (anyone?) shares my special interest in applied Rawlsianism. So, to actually address Ryan's point, here's why the pre-tax numbers may seem to cut against a “conspiracy” argument. My original thought was that if greater U.S. inequality was a function of uniquely weak unions, uniquely shifting compensation norms (allowing CEOs salaries to rise, e.g.), uniquely wild superstar markets, uniquely high levels of opportunity hoarding by the already privileged, etc., then U.S. pre-tax inequality ought to stand out more than it does. But since it doesn't, the relatively high U.S. level of post-tax and transfer inequality is more likely a reflection of the simple fact that high-ish levels of inequality bother Americans much less than it bothers Europeans.
I think the main reason for this, culturally, is that modern Europe emerged from a system of predatory aristocratic privilege and rigid class stratification, whereas the U.S. started out as a relatively egalitarian society. So, to caricature the difference, Europeans see inequality as a sign of intolerable exclusive advantages while Americans see inequality reflecting the fact that some people, who are to be admired an emulated, have made good on the abundant opportunities America affords. If the difference in post-tax-and-transfer inequality simply reflects different cultural attitudes about inequality, then remaining complaints about the relatively high U.S. level of inequality are really just complaint about what Americans believe.

Author: Will Wilkinson

Vice President for Research at the Niskanen Center

13 thoughts

  1. Will’s disappointment with the stymieing of free speech on IQ research is rather humorous (as is the further excoriation by the Cornell profs) because that’s exactly what’s being done to IQ research everywhere. The respected professors see that the only use in doing IQ research is to refute these prejudiced claims in innate differences. The facts on the ground, however, are startlingly different. While it’s true there are ample environmental causes of IQ depression amongst the poorest in the world, it is intellectually dishonest to attribute the entirety of the black-white IQ gap to said factors. When one controls for socioeconomic status, American Blacks still under perform American Whites by nearly a whole standard deviation, a result that remains true up and down the socioeconomic ladder (meaning that regardless of the socioeconomic decile you choose, whites will still outscore blacks by around 10 IQ points). One can assume that American Blacks in the top socioeconomic decile do not suffer from the pernicious environmental issues that our dear professors so readily mentioned (things like malnutrition or significantly poorer schooling).
    And with regards to the claims about women and mathematics, all I have to say is that I generally buy the claims made by many of those in the environmental construction crowd, but with one central caveat. The smaller normal distribution curve for women with regards to IQ is undermined as a deterministic parameter by two key factors: women tend to over-perform on tests of conscientiousness, which is nearly as important as g in predicting success in any given field, and when one compares across races and ethnicities the differences become wholly insignificant. Amongst those with IQs in the top quartile, Asian women consistently outscore White Men on tests of mathematical reasoning, but at the same time, they consistently score lower than them on tests of verbal reasoning. But the reverse is true when compared to Asian Men. Asian Women score higher then them in tests of verbal reasoning, but worse on tests of mathematical reasoning. This would suggest that, although there exists some sexual IQ differences, they pale in comparison to other, more significant, factors.
    The truths to which these fine professors attest to may not exist. Then what of their defense of the open exchange of ideas? They only talk of the discussion as if, prima facie, the more politically correct response is also the scientifically verifiable one. What if it isn’t? Would they (could they) support the discussion now? Based on my interaction with those who partake in the academic lifestyle, I’d like to think so, but I fear they would not.
    And Will, I’m not going to let you get away with your statement on modern intellectual convergence and imply that things will continue to trend onward as it has. While the Flynn affect has shrunken the gaps somewhat in many countries, it has begun to reverse itself in two nations, England and Japan. The suggestion some have here is that the Flynn affect is more a reflection of opportunity gaps between the have’s and the have-not’s (whether that is men and women, rich and poor, or white and black), and as we have become wealthier and educational opportunities have become open to all, the effect will slowly begin to recede. There is some suggestion that the most important environmental stimulus needed for the increase in IQ is at least a decade of structured education, and now that that is more universal then ever before, the gaps in IQ will become more and more stable. It has already happened in some areas of the country and may spread further.
    Other than that, congratulations on a fantastic blog. I love reading (and commenting to I guess) on such intellectually stimulating blogs, and I hope this is first of many I shall do.

    1. <I"When one controls for socioeconomic status, American Blacks still under perform American Whites by nearly a whole standard deviation"
      Interesting. So, relative to whites, blacks are extremely high achievers, doing much more with what they’ve got than white people. Black persons with IQ’s of 84 earn what white’s of average IQ earn, while retarded blacks earn what whites in the low average range earn. And blacks with merely average IQ’s earn what white’s with IQ’s of 116 earn.
      How do they do it? Maybe IQ isn’t as robust predictor of success as it’s made out to be by bloggerss.

  2. “more erosion in sexist social expectations
    Not just expectations, actual barriers – actual barriers, says the woman who was told by her high school “guidance counselor” that she couldn’t take Algebra II because 1 – “the class was full” and 2 – “she wouldn’t want to be the only girl there.” This was in 1978, people! I went on to study conic sections from Apollonius (ancient Greek!).
    Mwah-hah-hah. You won’t be able to use entrenched social power to protect you from intellectual competition much longer, you heterogametes you.
    But seriously, the power of testosterone in the womb to shape brains is amazing. Due to these effects, I will never be surprised if men on the far extreme of math ability continue to outnumber women at that extreme, just because of this factor.
    Men and women are different in some ways. Vive la difference! That doesn’t prevent us from establishing a just society, however.
    Back to this dorky g factor. I just don’t believe in it. No one can agree on how to describe this puppy, no one can agree how to measure it, no one can predict with it — it’s just a unicorn, folks, give it up. What the hell is scientific about it?
    Those stupid tests are completely biased in numerous ways, they just are. African-Americans are disadvantaged by them, while people of my ethnicity are favored by them. They should all be scrapped. If you believe otherwise, then you’re stuck believing I’m a near-genius and the people of my ethnicity are on the whole the smartest people in the world. Which just ain’t so. Prima facie, Nobel prizes or not.
    Why are so many (guys) attached to this idea so strongly? Isn’t that suspicious?

  3. jlerner: “When one controls for socioeconomic status, American Blacks still under perform American Whites by nearly a whole standard deviation”
    Ben Wechsler IV: “Interesting. So, relative to whites, blacks are extremely high achievers, doing much more with what they’ve got than white people.”
    No, because the first statement is in reference to background factors, not earned income. Controlling for IQ closes most of the B-W wage gap. So blacks and whites matched for IQ have similar occupational returns.
    On the other hand, we see very different IQ outcomes for the children of blacks and whites of matched economic backgrounds. Black children from homes in the highest socioeconomic bracket have lower IQ scores than white children from homes in the lowest socioeconomic bracket. And their adult income reflects their IQ score virtually regardless of race or class background.
    So this could be interpreted either as blacks underperfoming given initial socioeconomic advantages, or neither blacks or whites performing any differently than you would expect give initial IQ scores.
    Figure 8 is the best piece of evidence offered on this question so far.
    La Griffe is no piker, and the PISA numbers are all available to check online. Williams study isn’t published until next month, so we can’t evaluate it’s methodology or know what data set was used. But it’s hard to compete with the PISA data if we are asking how much cultural differences matter.

  4. Hello,my name is robyn King I am a 24-year-old female living in Los Angeles,California The United States Of America and yes I think and would say that all 100 percent both males and females japanese people all over the world have the most highest I.Q. ever recorded and that all of them score 228 I.Q.’s all over the world.The reason why I say this is because 100 percent of them get and are straight A+ students and straight A students all through school and college all through their lives from generations after generations and they are always really very extremely smart in school and education.They have an extremely very high excellent education rate and are the most smartest race of people in the world and have the very top rate of their education.

  5. Hello,my name is Robyn King I am a 24-year-old female living in Los Angeles,California The United States Of America I think and know that all japanese people and all of the oriental asian race of people are 99.9 percent near perfect both males and females and for having extremely very high I.Q.s like that and I wish that they were perfect!

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