Social Justice, Liberalism

Fairnessland and Economic Growth

Update: Some readers are having a surprisingly difficult time understanding this post. So, here is the question I'm interested in:

Suppose it turned out, empirically, that improving the income level of the poor at any given time by equalizing incomes eventually leads to the poor in that society having less than they otherwise would have had under a less equal but faster growing scheme. If so, which is preferable, all other things equal?

A. Equalize things now so that the poor now do much better.

B. Allow for growth so that the poor in the future do much better.

It's also worth asking how much one's answer depends upon just what the differences in growth rates are stipulated to be. 

Imagine there are two nearly identical societies, Fairnessland and ParetoSuperiorland. Imagine both are some form of liberal society, and both equally protect citizens' political and civil liberties.

In both societies, there are three economic classes, poor, middle, and rich. Fairnessland's basic structure allows inequality, and the inequality it allows at any given year is to the maximal benefit of the poor. Empirically, it turns out that at any given year, the distribution of wealth that maximally benefits the poor is 15-19-24. ParetoSuperiorland, on the other hand, has a basic structure that provides less well for the poor. Throughout its history, ParetoSuperiorland has a 10-20-40 distribution. 

However, imagine that because ParetoSuperiorland allows more inequality, it has faster growth. (I'm not here claiming that allowing inequality really does cause growth. So no need to argue with me about that.) Fairnessland has an annual growth rate of 2%, with each class's income growing equally quickly. Suppose, however, that ParetoSuperiorland has a faster growth rate.  

Here is the comparative performance of the two economies over time, starting in year 1900, if ParetoSuperiorland has a 4% growth rate.

 

ParetoSuperiorland 4%

Fairnessland 2%

 

Poor 

Middle

Rich

Poor

Middle

Rich

1900

10

20

40

15

19

24

1901

10.4

20.8

41.6

15.3

19.4

24.5

1902

10.8

21.6

43.2

15.6

19.8

25.0

1925

26.7

53.3

106.6

24.6

31.2

39.4

1950

71.1

142.1

284.3

40.4

51.2

64.6

2000

505.1

1010.1

2020.2

108.7

137.7

173.9

Here is the comparative performance if ParetoSuperiorland has a 3% growth rate: 

 

ParetoSuperiorland 3%

Fairnessland 2%

 

Poor 

Middle

Rich

Poor

Middle

Rich

1900

10

20

40

15

19

24

1901

10.3

20.6

41.2

15.3

19.4

24.5

1902

10.6

21.2

42.4

15.6

19.8

25.0

1925

20.9

41.9

83.8

24.6

31.2

39.4

1950

43.8

87.7

175.4

40.4

51.2

64.6

2000

192.1

383.4

768.6

108.7

137.7

173.9

 

Feel free to imagine that in ParetoSuperiorland, the middle and rich classes have even higher growth rates than the poor.

(Note: This is a conceptual post meant to discuss values. I'm not making an empirical, economic argument here.) 

Some issues:

1. Note that at any given time, the poor of ParetoSuperiorland would do better by transforming ParetoSuperiorland into Fairnessland. So, at any given time, the poor of ParetoSuperiorland would see a 50% increase in their income if their country adopted the institutions of Fairnessland. Should ParetoSuperiorland adopt the basic structure of Fairnessland?

2. However, over time, ParetoSuperiorland does better for its poor than Fairnessland. In the first example, when the ParetoSuperiorland's growth rate is 4%, the poor class starts doing better in only 25 years. Does this make ParetoSuperiorland superior to Fairnessland?

3. Suppose you could be born into one of these countries. Which country would you prefer to be born into? Why? Should everyone else have the same preference? How could a country justly decide between being like ParetoSuperiorland and being like Fairnessland?

4. Suppose ParetoSuperiorland and Fairnessland are neighbors and allow immigration. Would the poor from ParetoSuperiorland tend to immigrate to Fairnessland or vice versa?

5. Some philosophers claim that in order for a society to be just, people in that society need to affirm the right theory of justice, or something close enough to it. Suppose that everyone in Fairnessland believes in the right theory of justice, whatever that is, but everyone in ParetoSuperiorland believes in some wrong theory (not a terribly wrong one, but a wrong one nonetheless). What difference does that make in your overall assessment of these two societies?

 

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Author: Jason Brennan
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