Friday, November 10, 2006

Equality vs. Efficiency

This article (pdf) reminded me of the freedomg vs efficiency thread we had a while back. It talks about how a professor at the University of Chicago was able to effect a fair amount of conservative indoctrination merely by defining the terms of debate:
In the wake of Katrina and Iraq, this might seem quaint, but what Sanderson is doing makes sense. Temperamentally, it reflects his own, libertarian-inflected, “pox-on-both-their-houses” centrism, but his insistence on political equanimity is also crucial to his pedagogical success. Students are most likely to have been exposed to macroeconomic issues within the context of political debates about free trade, the size of the budget deficit, tax rates, etc. In order to assure students that they aren’t just learning a set of political talking points, he must go out of his way to hammer home the fact that what he’s offering is unbiased and nonpartisan: positive not normative, facts not opinion. “I don’t have a dog in this fight,” Sanderson tells the students. So every joke about George Bush is followed by a joke about Hillary Clinton, every shot at a Democrat quickly balanced by a shot at Republicans.

The effect, intentional or not, is that Sanderson appears to represent the exact center of the political spectrum, and that can leave students with a strange perception of just where the center lies. During a discussion of flat, progressive and regressive tax structures, a student asked about the argument against the flat tax. “What’s wrong with the flat rate tax?” Sanderson replies. “Well, the bad thing was that Steve Forbes was the spokesman. It’s not obvious that there’s that much wrong with it. There’s sort of a movement out there for a flat rate tax. Because it strikes some people: What could be fairer than that? It also doesn’t distort incentives. It has a lot going for it.”


Sanderson’s politics aren’t one-dimensional, and he certainly isn’t a propagandist. But the fact remains that he has the predispositions of someone who “learned economics from Milton Friedman.” First, there’s a tendency to see trade-offs between equity and efficiency even where they might not exist. Dean Baker, an economist at the Center for Economic and Policy Research and author of the book The Conservative Nanny State, points out that policies can be both fairer and more efficient. For instance, Baker told me, “it is not clear that a flat tax is more efficient than a progressive income tax. This is entirely an empirical question. It is entirely possible that taxing middle-income workers and Bill Gates at a 25 percent rate will create more distortions than taxing middle-income workers at a 15 percent rate and Bill Gates at a 40 percent rate. … They want liberals to say that we care about fairness and they care about efficiency. This is crap. They find ways to justify redistributing income upward and proclaim it to be efficient. The reality is it is not fair and generally not efficient either.”


Bret said...

I would, as the other side of that old thread, argue that nobody in this discussion is offering straight "facts". Taxation is the process by which money is taken from individuals. It is usually followed by public spending, which in nearly every case can be boiled down to a subsidy for someone. Freeways are subsidies to trucking companies, commuters, and developers. Welfare is a subsidy for the poor, etc.

It therefore makes sense that people will argue until the last dog dies regarding the specifics of who the money should be taken from, and to whom it should then be given. The question is never "What is fair?" (although nearly everyone with a public opinion would like you to believe otherwise); rather, it is always "What are our goals, and does this help accomplish them?"

In other words, taxation is always about efficiency, and never equality.

PS - It just occurred to me that the original debate was about -freedom- and efficiency. You've tricked me again Tommaso! *shakes fist*

Tommaso Sciortino said...

Yeah it is a slightly different comparison (freedom vs. efficiency vs. equality) but it's all part of the false dichotomy topic.

As for taxation I'll agree that tax debates are often lead by special interests but the whole point of democracy is that special interests are constrained by the general interest: voters matters. So what happens when the general populace asks themselves "what are our goals?" Well generally you get "what's fair" (it's the only thing different interests can agree on). I'm not saying it always works out that way, I'm just saying that it's not special interests all the way down.