What Kind Of Equality?

Swarthmore professor Tim Burke asks the important question "what kind of equality?" There is equality in the sense of equal opportunity, which may of course end up resulting in actual economic inequalities, or a reduction of the distance between rich and poor, or a more absolute rigid egalitarianism.

Disregarding the normative natural right justification as pseudo-religious and just generally unsound, there are still reasons why inequality is desirable. I would never wish for absolute equality. As I said before, a certain amount of inequality provides positive incentives for risk-taking and provides a healthy social outlet for the expression of ambition and competitive urges.

However, I think that common sense tells us that the effect is subject to highly diminishing returns. Someone ought to do a real psychological study testing the effect of different levels of incentive on effort, ambition and productivity. But without even having access to the study, I think it's clear what the results would be, and why they would turn out that way. Productivity can't be a linear function of incentive. For one, the conclusion is preposterous because it presumes that the workers have unlimited capacity to work harder as wealth disparities grow ever greater. Is this realistic? Does the average worker even have the ability to produce at 5, 10 or greater times an observed baseline level, which would represent the ratio of highest to average wealth roughly? If resources are in fact limited, not only would there be an upper ceiling beyond which a person simply cannot respond with increased productivity, the productivity function will almost certainly have diminishing returns. This is not a matter of incentive, it's a matter of resources - psychological or economic. Consider the following thought experiment:

Assume that x times the disparity in wealth equals x times the incentive - though in reality it's probably less. Psychologically, how would you expect someone with limited resources working relativity close to capacity to respond to a doubling of the (internal) incentive? I think the intuitive answer is that it would take into account how close to capacity the person is. That is, the response will be to increase their utilization of resources by some fixed fraction of their remaining resources.

To put it a little more formally, say M is the maximum level of resources, or the total reserve of resources. Presumably people start working at a reasonable fraction of their total capacity, say B. Then, the total increase in resource utilization corresponding to a doubling of incentive is f(M-B) where f is some fixed fraction. Any value of f could correspond to a given multiplication in the incentive; I guess you could say it reflects the sensitivity of a person in responding to incentives. The next doubling of incentive will result in f(1-f)(M-B), the next f(M-B - f(1-f)(M-B) - f(M-B)) = f(1- f(1-f) - f)(M-B) = f(1-f)^2(M-B). Or, for n doublings of incentive, the marginal contribution to productivity will be f(1-f)^n(M-B), which gets very small very quickly.

Perhaps you don't like this model because you think that how people respond to incentives does not depend on how close to their maximum working capacity they are. This is a psychologically plausible position. Then you have a situation where people exhaust their resources, presumably after a short period of time. The practical implications of this are that there will be a definite ceiling beyond which increases in incentives do not lead to any corresponding increase in productivity. If this is the case, beyond this point there wouldn't be any utilitity, in terms of motivation, in having greater inequality of wealth at all. In the first case, there would be greatly diminishing reason to promote greater inequality of wealth as it gets higher. Either way it seems like a losing policy.

This seems to mean that great differences in wealth have no motivational function; the motivational rationale for economic inequalities becomes null very quickly. So this would lead me to believe that some degree of inequality is beneficial, but only in small amounts.

Equality of opportunity is a harder thing to work out on its own. People who have more resources naturally are going to have an advantage over people with less resources in a capitalist system. There are actually a whole bunch of "scientific" justifications for supporting policies that perpetuate economic advantages through families. Suffice it to say that I think they're all bad, in both senses. So I think equality of opportunity is something we should strive for. The answer to me seems to be that in keeping actual inequality to a minimum, the playing field of opportunity will stay level also. Radicalization of starting points, aside from being prohibitively impractical, would probably not even be desirable, because it probably would lead to a situation little different from the current one. This is not to say that we are doing a perfect job ensuring equal opportunity, just that an equal opportunity scheme would also probably lead to great inequalities if left untempered.

No comments: