Inequality and rationality

One of the most interesting features of the inequality debates is that one side puts forward rational arguments while the other side puts forward emotional arguments. Saying that you already have a lot of stuff but you feel bad that someone else has much more stuff than you is an emotional argument, and it cannot be met with rational replies. Appeals to ‘fairness’ in this context are just a way of expressing feelings (feeling very angry about all the unfairness) – if people feel that something is unfair there is no rational argument on earth that will make them stop feeling that it’s unfair.

This is the point that many rational people don’t understand. They work so hard trying to explain that inequality is not ‘unfair’ but they fail to appreciate that this debate is proceeding in the emotional realm where appeals to rationality have no persuasive power whatsoever.

John Tamny's Popular Economics (great book, google it) makes this grievous error, explaining economics and ignoring emotional arguments relating to Justice and Equality and Fairness. Nobody's going to buy that in the 21st century. It's actually really hard to read Tamny's book because if you are highly credentialed and well versed in the ways of the world you naturally look for the chapter on Social Justice and there isn't one. I know, shocking. Almost like being in a parallel universe.

Instead of the missing Social Justice chapter, which I can only imagine was an oversight on Tamny's part, he has a chapter titled 'Wealth Inequality is Beautiful'. I know, shocking. Reader, I braved that chapter. It is every bit as shocking as you'd expect. He writes things like 'entrepreneurs improve life' and 'individual success that leads to wealth disparity often causes those who are not wealthy to take the risks necessary to attain riches' (p.54) Stories about entrepreneurs who were born in poverty and worked hard to turn their fortunes around (with no freebies) abound in this chapter. It's very shocking to read this, because obviously we've all been taught that rich people got rich by stealing, exploiting, backstabbing, and other forms of being evil and, even worse, greedy.

Steven Pinker’s Enlightenment Now is another good example of the point I’m making here. As hinted at in the title, he has made the mistake of appealing to rationality which immediately ensures that nobody who actually cares about inequality will be reading his book. Instead they'll be reading Piketty's Capital, which is the correct book to read for those who want lots of data confirming that they are right to be angry about inequality. You know, facts and figures about how many millionaires there are in the world today, and how infuriating that is. 

​Pinker observes that ‘economic inequality has become an obsession’. How true. Here we are, talking about it on my blog. Hold on tight, because Pinker is going to say something rational about that - big mistake, in a post-rational world where 'emotional intelligence' (feeling what other people are feeling) is the most important thing. Pinker writes:

​economic inequality undoubtedly has increased in most Western countries since its low point around 1980, particularly in the United States and other English-speaking countries, and especially in the contrast between the very richest and everyone else.
 
p. 98.
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But wait, this fact doesn't make him feel angry yet, which is quite surprising. What's going on in his heart, assuming he has one? Does he not care about the 90% who have less stuff than the 10%? Clearly not. Instead, in a staggering display of calm in the face of provocation, he writes ​that the anxieties created by inequality ‘are serious and must be addressed, if only to defuse the destructive agendas they have incited, such as abandoning market economies, technological progress, and foreign trade’ (p. 98).

This is where it starts to become clear that Pinker's analysis is not going to go well. When people are angry about inequality, taking their concerns seriously means accepting their proposed solutions. To those who care about all this inequality blather, those so-called ‘destructive agendas’ are the only acceptable response capable of showing that their concerns are being taken seriously and being addressed. When people complain about issues, they have in mind the precise response they’re looking for (the ‘destructive agendas’) and they will not be mollified by the sorts of facts that Pinker tries to highlight.
 
What facts does Pinker present? They are facts that will be well known and even common sense to anyone looking at the world objectively, but the trouble with facts is that they do not address emotional claims such as people feeling very angry about the way the world is. Facts tend to cling rigidly to reality, which is problematic in a world where ideals matter more than reality. A closer look at some of the truths Pinker highlights:

​Income inequality is not a fundamental component of well-being. It is not like health, prosperity, knowledge, safety, peace, and … other areas of progress.
 
p. 98
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In today’s world, people who lack access to education or healthcare (no schools or hospitals in their village) are living in conditions of absolute poverty. These are things they need, not because they have to keep up with the neighbours and be equal to other people but simply because these things are essential to life and human flourishing. Nothing to do with inequality, but everything to do with access to the basic necessities of life.

​This is pretty self-evident, really. But this is not what people are angry about. They are not rioting and mounting the barricades because they have heard about folks in the South Sudan with no food and no opportunities to learn how to read and write. No, they are viciously angry that there are CEOs of large corporations out there earning 1000 times their own salary, and what does Professor Pinker have to say about that?

​The confusion of inequality with poverty comes straight out of the lump fallacy – the mindset in which wealth is a finite resource, like an antelope carcass, which has to be divvied up in zero-sum fashion, so that if some people end up with more, others must have less.

p. 99
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Also known as the 'cow udder' theory of life – when other people get to the cow first and milk her dry, there’ll be nothing left for those who come after. Or otherwise referred to as the 'economic pie' theory which states that if one person gets a bigger slice that means the others have to get a smaller slice. In a large company, if the CEO gets paid too much the lump fallacy suggests that there’ll be less money left to share out among the other workers. No wonder people are angry about executive pay: they assume that if the executives would only get paid less, our own pay cheques would automatically increase because there'd be more to go round. They are angry about billionaires because if there weren’t any billionaires the rest of us would be…millionaires I suppose. All that nice money would be fairly distributed so that we’d all have a fair share of it.
 
Such fallacies are emotional because they are driven by fear. Fear that there won’t be enough stuff to go round is a very existential fear, maybe from long ago at the dawn of humanity when we were hunter-gatherers and there literally was an antelope carcass or a single milking cow that had to feed the whole tribe. Now we live in an age of abundance but it’s not easy to acquire an abundance mentality: it feels too risky, owing to an inchoate and amorphous fear of ‘missing out’ on what other people are enjoying. You see them out there, showcased in the Daily Mail, snapped by the paparazzi as they cruise about on their yachts, sipping their champagne and dripping diamonds everywhere, and how infuriating is that when you're struggling to keep a roof over your head and put food on the table. And maybe there's a little bit of envy thrown in there as well, but mostly fear and outrage.
 
These deeply rooted fears cannot be mollified by highlighting economic facts about productivity in the way that many rational economists try to do. No amount of exponential productivity and economic growth will allay the fears of someone who is in a panic that the good things of life being dished out to everyone will run out before he gets to the front of the queue. Why else do people go crazy at the sales, camping outside the doors overnight then rushing in as soon as the dawn breaks to buy a whole load of crap they don’t need with money they don’t have? It’s a visceral fear that they’ll miss out and get left behind when the pack moves on, like a nightmare scenario from Ice Age. Rationality has fled the building.
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