Matt Nolan takes a close look at fairness and points to equality of opportunity rather than eliminating inequality as a better goal

Matt Nolan takes a close look at fairness and points to equality of opportunity rather than eliminating inequality as a better goal
People are different, so is some inequality 'good' asks Matt Nolan.

By Matthew Nolan*

My apologises again – I will have to extend my break from the tax series of articles I was writing up (latest one was the fifth on goods and services taxes).

While completing the article on the progressivity of taxes I realised that I needed to briefly mention how this interacts with inequality – but we haven’t had a discussion about what inequality means, and why we care.

As a result, I aim to talk about inequality a little bit here as a precursor for that.

Note that, just like the tax articles, the goal here isn’t to say what level of inequality is good or bad, whether we should have more or less, and how you should feel about the issue as a person.

Instead I’m just aiming to look at the causes of inequality, how this relates to fairness, how this relates to what is “attainable” and use this to provide a framework for discussing the issue.

Also, I did not catch the Institute of Policy Studies Inequality Symposium last week, and haven’t had the chance to read Max Rashbrooke’s book. I will be sure to have a look at their material in the future – and I thought I should mention that this work was released recently.

Inequality as a "bad"

Inequality is a strange beast.

Like “productivity”, or a change in a price, what inequality means only makes sense when we ask where it has come from.

Inequality is not poverty, we can’t point to it as directly making a harm.

Now there is a potential argument for viewing inequality as inherently bad – the idea that people will try to “keep up with the Joneses”.

The social pressure to buy status goods (Veblen goods) then forces people who are relatively poor to enter a status war they can’t win.

These status wars, combined with wealth inequality, could potentially increase social divisions and damage trust. These ideas come from the old “Institutional” schools of economics during the early 20th century.

However, this is a qualified argument about lifetime income inequality, and as a result we need to take care with it.

The Spirit Level book, authored by Richard Wilkinson and Kate Pickett, has helped to publicise this idea in more recent times.

However, its results should be take with care as it greatly exaggerates the argument, mismeasures lifetime inequality, and as a result should not be taken as the primary starting point for the analysis of the impact of inequality.  My review of it is here.

There is a key point in all this though which is widely accepted by economists and policy makers, lifetime income inequality may be something that violates our perception of fairness and as a result may be something that we as a society want to reduce.

Often this boils down to the fundamental idea of equality of opportunity.

Static measures of income inequality exaggerate the level of lifetime income inequality (earning little income when you are young is different to earning little income when you are older and trying to raise a family), but we are currently a bit short on other data.

As a result, to really discuss inequality and interpret societies preference regarding this, we need to dig down think about the causes.

Which causes of changes in our measures are bad, which are good, and which are difficult to interpret in this lifetime sense?.

Splitting things up

We are primarily interested in thinking about causes when trying to understand both how we feel about observed changes in inequality as a society, and when it comes to thinking about how we might use government to respond to these changes.

So what are some common causes that may make the measures of income inequality (at a point in time) move as time changes, and how do they relate to lifetime income inequality?

· Population or household structure can change through time:
even if lifetime inequality was unchanged, changes in where a person is on their lifecycle (their age), and the type of household structure that exists, can change static measures of inequality.  For example, my income increased when I stopped being a student and began working, and it will decline when I retire from working.

· Population distribution and human capital investment
A subset of the point above.  Over a lifetime, different people invest different amounts in human capital (eg time spent training) – which offers a future return.  As a result, we would expect a younger population to look “more equal” than an older population even if lifetime inequality in the two societies was the same!

· Technology and skill change:
Over time technology and the types of skills required by employees and investors changes.  Understanding the sort of process of change we are going through is important – for example, if technological change was making it very hard for some groups to ever get involved in the labour market at current prices this is reducing their opportunities even if the new technology is “increasing the economic pie”.

· Changes in relative prices:
Related to the point above – a change in “inequality” in incomes may be largely due to changes in the relative prices goods and services we can buy?  For example, an increase in measured income inequality could occur when necessities have become cheaper even if there was change in the real goods and services different income groups can buy!  A growing price gap between “normal” televisions and slightly better televisions would be an example of such a change.

· Changes in government policies and tax:
The types of legal system, regulation, and the progressivity of the tax system will have an impact on how income is distributed.  Furthermore, government spending (which aims to increase the provision of/demand for certain goods and services) will also impact on this.

There are a number of other causes we could think of, and we could boil these broad categories down into narrower ones. 

On top of this we need to define what the unit of interest is, is it the individual, households, families? What is our economic and social ‘unit’ for measuring outcomes?

Ultimately, the idea of trying to pin point what set of “causes” have changed in the distribution in income, and thereby income inequality, is wildly complicated.

And the question of how it matters adds another hard complication!  Hence why we can get very different results from different economists (see this from the US and then this regarding changes in the US income distribution through time – as a sidenote in the NZ context work in this area has been done with this from Motu).

There are severe limits to our knowledge – and this makes useful intervention harder

The fact there are many potential causes (and different causes imply that different policies are appropriate), and that it can be difficult to separate them is only part of the reason why our “knowledge is limited”.

Often when we look at these issues we suffer from an illusion of control – thinking we have a greater ability to control and understand the consequences of our actions than we actually do.  In truth, not only do we not know what real causes (the causes we care about) are behind inequality – we have a pretty bad idea around how policy changes will impact on the income distribution in a general sense.

Now, we do know that progressive taxation and transfers will do the trick, and is the economists’ main suggestion for doing so – the hard bit is trying to tie that back to the very reasons society cares!  This is a pretty important question for us to ask when trying to figure out what “social preference” we are trying to satisfy, and what price we are willing to pay, with our policy choices!

People are different, so some inequality is “good”

Sometimes people take the idea of reducing income inequality too far, and start to assume the goal is equality. The Spirit Level didn’t help matters by mixing up the two, and confusing income inequality with other forms of inequality by often using the world ‘inequality’ to represent all these things!

However, it is quite easy to make the case that complete equality is bad – fundamentally people are different.  Some people don’t mind working as much, some people value consumption a lot more than others, and some people really enjoy leisure time.  Furthermore, even if we were all 3D printed copies of one another we know we want different things, have different skills, and earn different amounts through time – complete equality would not allow for this.

Forcing people to have the same amount of income, or do the same amount of work, instead of “trading” these things between themselves will leave them worse off.  And this is exactly what many schemes of complete equality of income does!

As a result, in order to get the equality of opportunity we desire we need to ask what the best level of income inequality is! We actually have a social preference for some level of lifetime income inequality.

When people talk about fighting inequality to help with trust and social cohesion, they have the noble goal in mind of helping us co-operate with each other.

And yes, as individuals we should co-operate and care for each other – no person is an island. However, this would make an awful argument for complete equality – individuals are inherently different and a society that cares about individuals is one that learns to accept and work with this fact. 

And of course the elephant in the room is how government policy choices have an impact on trust and co-operation. What drives these matters, and would a society that tries to more closely control means of production and income actually create greater trust and social cohesion? 

As a result, both extremes of looking only at the island or only at the person are inherently flawed.

Total income is not independent of our push to make things “fairer”

An incredibly important point that is often missed is that many of our schemes to make the income distribution “fairer” will lower the size of the pie. There is an “equity-efficiency” trade-off as we discussed in the article on income taxes.  The more we de-link the private value of investment/work from the social value by increasing redistribution the smaller the “economic pie” will be.

The Spirit Level book mentioned earlier aims to dismiss this link – but it gets itself confused on causes.  To quote one of my work colleagues,

“to the extent that greater equality comes from greater social cohesion, one might believe that greater equality is also associated with greater welfare.  Where it comes unstuck is when equality becomes the objective and leads to policies that discourage effort and enterprise”.

This is fine, in no world are we simply trying to make the pie as big as possible.

But it is a trade-off we need to think about, and it is a cost we need to admit when looking at the benefits of our perceived increase in fairness!

Don’t use this as an excuse to do nothing – let’s just make sure we have thought it through

Many people reading this will see the sort of exercise I’m running through as an excuse to do nothing. And to be fair, many people run through this sort of exercise and then state that nothing should be done.

But in truth, all I am doing is noting down the points we have to keep in mind before we try to run out and save the world with policy – there are good intentions out there, so the goal of discussing trade-offs is to add a layer of understand to shape those intentions into the right actions.

These concerns make targeting “inequality” in of itself a bit of a strange thing to do – we just have too much uncertainty about what it means.

Instead our focus needs to be on issues that we understand, or where our social preference if very much against something.

Absolute poverty is the clearest of these examples – as a society we have a preference that members of our society should not live on less than a certain income, and we use government policy to deal with that.

Working for Families can be taken as another example, where we say that as a society we want to transfer resources towards those who decide to raise children.

Now I have no place to tell you what policies we should as a society pick.

Ultimately, there is some social preference for fairness out there that involves the acceptance of some trade-off between “equity and efficiency” that I cannot see and comment on – and it should be left for society to determine.

But this broad framework gives us an idea of thinking about why we have a social preference over inequality as a society (or more fundamentally the causes of inequality), and some of the matters we need to consider if we want to meet this.

This will allow us to move onto to thinking about progressivity in the tax system next fortnight.

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Matt Nolan is a senior economist at Infometrics. You can contact him here »

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Of course all this is grounded in philosophy - morality and ethics - and without that basic understanding of competing philosophical views, we end up thinking about inequality in largely monetary/economic terms.
 
Better I think to ground the consideration in a discussion of the principles of equality and justice (and more particularly distributive justice/morality) - rather than inequality and economics, as the latter way leads us too quickly into issues of "incentives" before such time as one has settled on what is morally right and morally wrong.
 
By way of example, your discussion above fails to acknowledge that nature/society distributes both "goods" and "bads" - and one needs to think about proportionality in terms of distribution of "bads" perhaps even more so than "goods".
 
PS. think this way - had NZ's colonisers settled the place with honourable notions of justice/equality for all - the monetary/economic inequality we now see with respect to Maori would never have eventuated.  My point - equality is about notions of justice first and foremost. Social injustice breeds the kind of inequality you are now talking about.  

Lets put it simply without all the bumpf shall we. The more egalitarian the society the happier it is.

Egalitarian in what sense?  The Marxian/utopian ideal of a stateless, classless society - where each individual member of society contributes in accordance with his/her ability and receives in accordance with his/her need?   I've often wondered how 'happy' such a society would be. Free will of course is a strange thing.  My dad was a brilliant physicist - government job, top secret lab, promising career - when all he really wanted to do was build the perfect stereo speaker and solve the perpetual motion problem. He chucked in the career; designed, built and patented the speaker - and nearly bagged the pm prize. Took a panel of physicists three years to disprove his theory apparently.  

But you've got to have the "bumpf", more charitably described as careful and thoughtful analysis of the evidence base.  You've got to be precise about what you mean by "egalitarian", otherwise you won't be able to debate how best to achieve it or work out whether we are in fact achieving it. 
 
It's not enough to say "A earns $5 and B earns $10, therefore our society is not egalitarian, it would be more egalitarian and hence our society would be happier if both earned $7.5".  
 
Do you think B would agree with that, and be happy to continue to work on that basis?  Do you think it would be fair, if B works twice as effectively as A,or has a more challenging and responsible job, or has many years more experience?  Do you think that will encourage A to work harder, or pay more attention to training opportunities?
 
 
 
 
 

yep

 

http://fair-use.org/benjamin-tucker/instead-of-a-book/socialism-what-it-is

Socialism: What It Is

[Liberty, May 17, 1884.]

Do you like the word Socialism? said a lady to me the other day; I fear I do not; somehow I shrink when I hear it. It is associated with so much that is bad! Ought we to keep it?
The lady who asked this question is an earnest Anarchist, a firm friend of Liberty, and—it is almost superfluous to add—highly intelligent. Her words voice the feeling of many. But after all it is only a feeling, and will not stand the test of thought. Yes, I answered, it is a glorious word, much abused, violently distorted, stupidly misunderstood, but expressing better than any other the purpose of political and economic progress, the aim of the Revolution in this century, the recognition of the great truth that Liberty and Equality, through the law of Solidarity, will cause the welfare of each to contribute to the welfare of all. So good a word cannot be spared, must not be sacrificed, shall not be stolen.
How can it be saved? Only by lifting it out of the confusion which obscures it, so that all may see it clearly and definitely, and what it fundamentally means. Some writers make Socialism inclusive of all efforts to ameliorate social conditions. Proudhon is reputed to have said something of the kind. However that may be, the definition seems to broad. Etymologically it is not unwarrantable, but derivatively the word has a more technical and definite meaning.
To-day (pardon the paradox!) society is fundamentally anti social. The whole so-called social fabrice rests on privilege and power, and is disordered and strained in every direction by the inequalities that necessarily result therefrom. The welfare of each, instead of contributing to that of all, as it naturally should and would, almost invariably detracts from that of all. Wealth is made by legal privilege a hook with which to filch from labor’s pockets. Every man who gets rich thereby makes his neighbor poor. The better off one is, the worse off the rest are. As Ruskin says, every grain of calculated Increment to the rich is balanced by its mathematical equivalent of Decrement to the poor. The Laborer’s Deficit is precisely equal to the Capitalist’s Efficit.
Now, Socialism wants to change all this. Socialism says that what’s one man’s meat must no longer be another’s poison; that no man shall be able to add to his riches except by labor; that in adding to his riches by labor alone no man makes another man poorer; that on the contrary every man thus adding to his riches makes every other man richer; that increase and concentration of wealth through labor tend to increase, cheapen, and vary production; that every increase of capital in the hands of the laborer tends, in the absence of legal monopoly, to put more products, better products, cheaper products, and a greater variety of products within the reach of every man who works; and that thi fact means the physical, mental, and moral perfecting of mankind, and the realization of human fraternity. Is that not glorious? Shall a word that means all that be cast aside simply because some have tried to wed it with authority? By no means. The man who subscribes to that, whatever he may think himself, whatever he may call himself, however bitterly he may attack the thing which he mistakes for Socialism, is himself a Socialist; and the man who subscribes to its opposite and acts upon its opposite, however benevolent he may be, however pious he may be, whatever his station in society, whatever his standing in the Church, whatever his position in the State, is not a Socialist, but a Thief. For there are at bottom but two classes,—the Socialists and the Thieves. Socialism, practically, is war upon usury in all its forms, the great Anti-Theft Movement of the nineteenth century; and Socialists are the only people to whom the preachers of morality have no right or occasion to cite the eighth commandment, Thou shalt not steal! That commandment is Socialism’s flag. Only not as a commandment, but as a law of nature. Socialism does not order; it prophesies. It does not say: Thou shalt not steal! It says: When all men have Liberty, thou wilt not steal.
Why, then, does my lady questioner shrink when she hears the word Socialism? I will tell her. Because a large number of people, who see the evils of usury and are desirous of destroying them, foolishly imagine they can do so by authority, and accordingly are trying to abolish privilege by centring all production and activity in the State to the destruction of competition and its blessings, to the degradation of the individual, and to the putrefaction of Society. They are well-meaning but misguided people, and their efforts are bound to prove abortive. Their influence is mischievous principally in this: that a large number of other people, who have not yet seen the evils of usury and do not know that Liberty will destroy them, but nevertheless earnestly believe in Liberty for Liberty’s sake, are led to mistake this effort to make the State the be-all and end-all of society for the whole of Socialism and the only Socialism, and, rightly horrified at it, to hold it up as such to the deserved scorn of mankind. But the very reasonable and just criticisms of the individualists of this stripe upon State Socialism, when analyzed, are found to be directed, not against the Socialism, but against the State. So far Liberty is with them. But Liberty insists on Socialism, nevertheless,—on true Socialism, Anarchistic Socialism: the prevalence on earth of Liberty, Equality, and Solidarity. From that my lady questioner will never shrink.
 
Equality
Equality = Every person has the right but not necessarily the obligation to participate or achieve something. Some people practice this “right” applied with obligation to themselves, their families and wider community in the positive form of equality, while others believe it is their right and others are obligated to financially assist them every step of the way which is the negative form.  The former group understands and respects  equality while the latter group has contempt and destroys equality.
 
The current thinking that equality is achieved by redistribution places severe limitations on lifting people out of poverty and actually places more people into the lower income brackets.

Well its simple, we have had less re-distribution for 30 years and its failed miserably, so as an experiment in neo-liberal right wing economics its an abject failure.
regards

What is the basis of the statement that we have had less re-distribution for 30 years? 

Oh lots of graphs and data.
Or maybe I'd be more correct in saying the re-distribution has been upwards and not leveling/downwards, depends if you want to split hairs, or not.
regards

Could you provide some please?
What data indicate that resources have been taken from poor people and given to rich people to a greater extent in the last 30 years than was the case previously?
 

Fact. Is the basis.
 
Every time you get a base-cost (line rental, for instance) the lesser-users (the poorer) get disproportionately pinged. Benefits will have declined in the period too, some of us remember the Richardson and Shipley years.
 
Why your need to harp on, repeat the digs, but not to learn? Acting on behalf of whom? I ignored your 'linear' question recently; one gets tired of trying to educate those who follow mantra.

Asking someone to define their terms and show their evidence is perfectly reasonable in debate, not a "dig" at all.  The statement that "there has been less redistribution in the last 30 years" implies a definition of redistribution, that there is a measure which indicates the level of redistribution, and that data are available to show how that has changed with time.   Clearly Steven has all of the above, and I'd be interested to see it. 
 

I'm up for pulling some data together, but before I start that rather painful process (I am travelling for work this week so would be pulling it together in the evenings on my smartphone), I'd just like to clarify what you would regard as acceptable evidence so I’m not wasting my time- would you regard an increase in the percentage of wealth held by the richest 10% and a accompanying decrease for the bottom 25% as being a sound basis for the statement, and can the "we have" be considered to be global or are you speaking of an NZ we.

My views of the most ideal reasonably attainable society would include the following:
Good opportunities for all, specifically in education. Equal opportunity is probably unrealistic.
A minimum but basic level of living standard for all, including those not able to work, or temporarily out of work.
A higher minimum level of living for all that are working say 40-50 hours a week; including the ability to enjoy reasonable housing, food, transport, and leisure activities; and importantly, the financial ability to raise children. All such workers should in other words be able to enjoy a full role in society, even if it cannot always be gold plated.
Access to affordable health care to a reasonable level.
We seem to have a consensus in NZ on all the above, such that they hardly need stating. The debates of course are around the levels of the minimums; while I think there are some misunderstandings of why certain mechanisms have evolved. Working for Families for example would not have been necessary in the 1980s to achieve the above goals, but minimum wages have not kept up with higher wages, so it is now necessary, or the goals would not be met, all else being equal. Ideally the commercial world would have solved for this, but for I believe many reasons, probably including globalisation, it has not.
Above these minimums, how the balance of the pie is shared out seems best left to market forces and incentives.
There is potentially another debate around whether it is sensible for the higher income/ higher wealth people (who presumably pay a good share of current taxes outside of GST) to pay higher than necessary taxes, so that they then can be paid government pensions in later years. Similar arguments could be had in terms of health and education provision. This area of middle and upper class entitlements seems a political minefield though, so probably best only tinkered with; although if studies suggest it will have to be tinkered with in time if it is not sustainable, then I would prefer we had smaller pain now, than a shock to many later.
Government provision vs private sector provision is yet a further debate in terms of efficiency, and to some extent, equality. 
Enough for now, though.
 
 

We seem to have a consensus in NZ on all the above.
 
No we do not - not by a long shot.
 
Take just one example - reasonable housing.  If we as a society agreed on this we would have minimum standards for residential rental properties - a warrant of fitness type regime.
 
Why do we have it for vehicles but not houses?  Because where vehicles are concerned there is the potential for a poorly maintained vehicle, with say bald tyres, to bring harm to not only its driver and occupants but to other road users.  So, why would that same logic not apply to housing - meaning the owner of the house should not be able to expose others to harm. We are soooooo not interested in houses causing harm that the whole issue of meth-lab contamination is swept right under the carpet.  I mean with a car WoF we have standards and we check emissions meet such standards .. surely we should insist a house which is treated as a commercial endeavour should be equally checked for poisonous substances before such time as it can be legally sold and/or rented. 
 
This is what I mean by the "goods" and the "bads" that society distributes. Lack of regulatation often serves to unevenly distribute the "bads". The proliferation of liquor outlets and pokie machines in low income districts is another case in point.
 
So why do our dear leaders (i.e. regulators) not fix these things?  Because in the main they are working in the interests of capital - and not human or social capital.

A meth lab isnt really a std housing issue now is it, its also covered by insurance, so the landlord doesnt meet the bill....
Not aware there are emmision stds as such...I think its a visual if it smokes too much. Who do you punish btw? poor ppl have older cars, rob someone of their employment?  hard calls IMHO.
Pokies id ban, utterly.
regards

A meth lab isnt really a std housing issue now is it -
 
You tell me;
 
http://www.hobanz.org.nz/meth-safe-house.html
 

Lots of guess work, not much real data...what do you want to do make it compulsory for ex-meth lab checks? cost, millions.  Looking at that piece it suggests a better check would be raising GPs awareness, first Q is the house rented? or has it been rented recently?
regards

No, you make methlab testing compulsory for all transactions associated with housing - rental or sale - including for annual health inspection checks on motels, caravans and other such places for hire or lease.  Costs to test are minimal - for a 3-bed property - less than the annual cost to warrant a car.
 
All people who rent houses - usually rent houses that have previously been rented. Try telling a rental agent that you want to do a methlab test before you rent the property. See what the response is.
 

Dont be silly, thats 10s of millions wasted for a small problem.
3k isnt minimal.
regards

3k? Not according to this;
 
http://www.methsolutions.co.nz/Order%20a%20Test/
 
Treating the health effects of just one severely affected person would run into the 10s of thousands - not counting the loss of productivity.
 

The first piece you showed indicated a proper test was in the order of $3k.   The second is surface testing....sure use it if there is a suspected problem.
Lets ask another Q, if you have only so much money, is it best to spend it on this? or something else giving a better outcome statistically?
I certainly dont like the idea of giving private organisations a govn sanctioned and controlled monopoly, which compulsory testing does.
regards
 
 
 

Lets ask another Q, if you have only so much money, is it best to spend it on this?
 
What is "this"? A right to a safe home environment - just as the compulsory WoF on a car supposedly delivers a right to a safe transport/road environment.  Compulsory methlab testing would also serve to catch more cooks (and users) - as it would be apparent if testing occured following each tenancy who the offenders are. And if they had children living at the address during the time of contamination - we could compulsory require residue testing on those children and subsequently prosecute the parents for that crime against their children as well.
.
As I said earlier what we do and don't regulate is a good way to determine how we as a society distribute the "goods" and the "bads".  Most of our current regulation (and non-regulation) is in the service of capital (stores of 'money'), not labour (people).
 
 

Kate,
Clearly there is not a consensus on the levels of the minimums that society should provide; but on housing for example, I believe there is a consensus that it is not acceptable for anyone to have to live under a bridge for purely economic reasons, and so if someone cannot afford basic housing, society helps them into some, whether with direct housing, or with rental supplements. I don't actually see much daylight between National and Labour practice in the area, suggesting there is political consensus on most of the details.
The warrant of fitness idea is tempting, although I agree with steven that I would prefer bureaucracy to be kept out of the process unless there is clear evidence that it is required in each case. Minimum standards can be defined for sure, (including having some maximum traces of illicit drugs allowable) and any tenants then can know that they are entitled to those minimum standards, and should jhave processes in place to have them rectified where they are not. I naively perhaps expect we have such processes in place now, although am sure they are not always perfect in practice. 

Hi, as an aside I think I read somewhere for P I believe the maximum allowable is zero....I think an insurance company lost that one when they refused to pay out to a Landlord?
Im really un-easy on rental suppliments, it seems to be nothing more than a nice earner for landlords.  The other alternative is Housing NZ ie govn builds....which costs capital and maintenance....are hard one to answer.
WoF, is also hard, just who does it effect? just renters? what goes in it? my worry would be its the thin end of the wedge and once in, ie things keep getting added. 
Why do we need a WoF or minimal standards when the tenant can move if they are not happy?  If the tenant cannot afford to move who in their right mind thinks the costs of upgrading wont be met by increased rent? or the tenent gets "kicked out" and someone who can pay more is put in?  where does the tenant go then? Or does the Govn pay even more in rent suppliment?
regards

An economics professor at a local college made a statement that he had never failed a single student before, but had recently failed an entire class. That class... had insisted that Labour’s socialism worked and that no one would be poor and no one would be rich, a great equalizer.
The professor then said, "OK, we will have an experiment in this class on Labour’s plan".. All grades will be averaged and everyone will receive the same grade so no one will fail and no one will receive an A.... (substituting grades for dollars - something closer to home and more readily understood by all).
After the first test, the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy. As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little.
The second test average was a D! No one was happy.
When the 3rd test rolled around, the average was an F.
As the tests proceeded, the scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else.
 
To their great surprise, ALL FAILED and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great, but when government takes all the reward away, no one will try or want to succeed. Could not be any simpler than that. (Please pass this on) These are possibly the 5 best sentences you'll ever read and all applicable to this experiment:
1. You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity.
2. What one person receives without working for, another person must work for without receiving.
3. The government cannot give to anybody anything that the government does not first take from somebody else.
4. You cannot multiply wealth by dividing it!
5. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is the beginning of the end of any nation.
Can you think of a reason for not sharing this?
Neither could I.

absolute rot....straw men abound.
 
regards

Can you think of a reason for not sharing this? Yep becauseit is too daft and full of fallacious reasoning. Quite frankly it is a piece of shallow right wing thinking, but then that is the status quo. No 2 is where all the right wingers fall over.  "2. What one person receives without working for, another person must work for without receiving." They are anti welfare but think nothing of stealing another mans labour.

thinking? na surely not......
LOL....
 

Sorry, to be clear, I did not write this but someone on another site did, and correct this is straw man. It was a simple way to start a discussion
If it is a piece of shallow right wing thinking, how do we rectify points 1, 3, 4, and 5 in a left wing system? I personally don't think NZ knows what system we have or want, a mixture of both if possible but proberly not. Who/how do we mix it? I want something that is clear for all

Well lets be clear about one thing and get back on topic, left or right doesn't matter when it comes to unearned income or taking the wealth of others. All politicians are guilty on that front. So you want a political system that works then you have to address the roots of unearned income.

There are some fairly unbridgable differences between those who assert all taxation is theft and the government is incapable of distributing resources fairly, and those that point out Scandanavia does have viable countries with the model that success does mean bringing the rest of society along with you.
The Internet tends to make the voices of the fringe louder. For example compare the activity of Libertarians on the Internet with the number of Libertarians in parliament.

However with the Internet at least the fringe have the opportunity of posting thier thoughts and being heard. Before the main parties in effect controlled the media...
regards

HI,
The piece is so utterly wrong and false that correcting it, or trying to is all but impossible
Prosperity, for instance comes down to exploiting resources to create the illusion of wealth for some, or all, depending on the political system. The trouble is these resources are often non-renewable, so once gone, its bye bye.  Lets take the professors stance, a hard right winger / libertarian, the system he wants exploits without restraint by a few......lets take the ultra left, that system exploits without restraint for the many.  there is no real difference both systems exhaust their eco system and collapse.  (NB like a "libertarian" govn I dont believe for one instance there has ever been a true communist govn.)
Which is main reason I left the Green party, Green and "red" cannot co-exist, one has to dominate as they are mutually exclusive. You can see that in their present vote buying strategy....its really more like the alliance with a green cloak...or maybe watermelon is deserved. Its not very green though.
regards

I am glad you introduced a definition of wealth into the discussion. Could that be pushed further? The questions that arise are if the one off resources affected the distribution or perhaps even facilitated the inequity.
 
Where I see it has highly relevant to the discussion is bringing it back to the amount of unearners in society. In past empires the vast majority of people were still involved in primary production, probably 90%, leaving 10% for your artists, bureaucrats and military types. The ability to utilise dense energy sources means that ratio has almost been flipped, perhaps 20% in primary production and 80% unearners.
 
We have had a 10 generation ramp up in population so that has caused all sorts of distortions and volatility, the ride back down will do the same. I would like Matt to expand the time frame a little as only that will bring context to contemporary issues.

From memory I think Ive seen written that it was 80/20 split, ie 80% producing energy to support 20% doing "higher" things (ie pre-1800s).   Be that as it may, you are right, Ive seen suggestions that each person in the develiped world today has at least the equiv work of 20 slaves provided by fossil energy to do work for them...(could even be higher)  so that is more like 5%/95% That has allowed much specialisation, over-specialisation in fact and huge complexity and hence technology...hence on the way down, as Ive said we will have a lot of carrot pullers and boy are they not going to be happy about that.  We'll also lose this level of complexity and hence technology.  Look at the best case scenario, oil gone by 2050...Im assuming we wil have electrical power, (sun driven and thorium looks probable, if we have the time) but transport power is the crunch and that's looking scarce...food or fuel it comes down to.
regards
 
 

So what we have become is a society of takers where the rule has become "take unto others as they would take unto you". In terms of what Matt is saying it is about those who find the best methods of taking. The clever try to do like the hillbilly's post does, take on one hand while redirecting blame to others. As you say, right or left are just different but equally bad.
 
To mature as a society we have to look at the methods for the redistribution of wealth. But with 95% of us on the take (yep me included), the answer won't be political.

Little off topic, but this is where i struggle with the idea of sustainability and what people seem to think living green is. I believe fundamentally that we have two choices
1. Continue growth (illusionary/fake). This could last 20-50 years until a point where the world realises that we are out of oil and basically have a war to depopulate to 10% current population
2. Live sustainability which just prolongs the decline but we still run out of oil. With this situation somehow the world would have to destroy 7 billion people which will happen by choice, people that we cannot feed. I guess it gives more chance to find a magical solution
I think we go with choice one because it is the only way people realise we have a problem and perhaps after the shock/war there may be some societies that can rebuild who can look after themselves. For example New Zealand going back to 1800s maybe we can feed 4million people living around the country. It is hard to see a world without oil, and i know I've missed alot out but who makes this decision when we look 3 years at a time, a WARLORD maybe.
What other choice do we have?Kick can???

Good on you for getting straight to the heart of the matter. Only thing missing is that you talk in terms of the future when process "1." is well underway and been proven to be the preferred option.
 
Have a gander at the world population graph and compare that to of "The Seneca Effect". In simple statistical terms the world population hit an inflection point in 1961. The rate of growth has been slowing for 50 years and we haven't found a solution. Now it is too late, physics now mean that option "1." will finish playing out. Best we can do is smooth the ride a little, but the outcome is assured. The growth currently being reported is obfuscation of the reality. Sure population growth may continue at low levels for a while longer but the quality can only reduce.
 
If you think this is all green nonsense well it has a parallel in the business world in the Sigmoid Curve. The time to make changes to your business model is at the inflection point but most businesses wait until they are past the peak to act, which usually is insufficient to arrest the decline.
 
Quite on topic btw. In terms of equality Matt is talking about an expanding pie, the reality is the pie shrinks from now on in. Watch the battle ahead as the 1% start feeding on themselves as they evolve to become the 0.1%
 

Now you get to the problem, one that makes most else moot.  In terms of oil, we dont have 20 years let alone 50, NB its all gone in 2050 as best case.  Trouble is its not the all gone point that hurts but the drop in supply as we run down to nil thats going to hurt. I dont think we have 20 before those who are our leaders and are capable of deduction conclude we have 2 to 5 years to start of this run down.  Ppl like ASPO (association for the study of peak oil) were sure 10 if not 15 years ago BTW.  Of course those who are our leaders and the parties have been promising us to make things better just vote them in, they are locked on course because there is no option they can swallow...hence we wont change course led from the top, which is #1
#2 the consensus would be 1.5 to 2 billion, effectively I'd assume the drop would match oil drop, 8% per annum.....that sounds so pleasant......not. I dont know about a war purely because you need masses of energy to wield one. EROEI (energy return on energy invested) ie invading and holding another nation's resources as the US has proved in iraq is crippling just for one nation.  I think its going to be more isolationist by govns, with lots of migration, think locusts....thats the big issue....a long swim to NZ of course....but lots of boats will try.....what do we do about that? machine gun them on the beach? what a great thought.
I dont think we have to go back to the 1800s, we have had considerable advances in science, engineering and medical knowledge has moved on a long way.  I'd guess if you looked at how much energy per person we are going to have and look back in history then 1920~1960s for electrical power at least....the challenge is going to be transport energy.  Another way to think on it is consumerism is 60~70% of GDP, thats a huge amount of energy waste....most of that can go....
Comes back to ppl, over-population....the Green's wont even comment on such a thing, let alone have a policy for it, so no other party will for sure...(hence why I quit the Green's)
regards
 
 
 
 

You can argue econmic philosophy on the basis of fairy tales, but if people want an actual real example of something similar to the above scenario (with a professor who liked to grade the students against each other, rather than the difficulty of the subject) all the students wound up getting an A, but a great risk to their overall grade (if any student had broken ranks, that student  would have gotten the only A and everyone else would have failed).
http://www.insidehighered.com/news/2013/02/12/students-boycott-final-cha...
 
 

My fairy tales are way to exciting too argue eco, good link thou. Interesting that evering great is normally made or broken by a single person (or group)...

Your talk about causes has one glaring omission Matt, well to me anyway.  Or perhaps it is different factor altogether. Anyway you can't have a cause without the means to execute it. Once you have the morality issue sorted that Kate highlights then you can look at the means or methods of redistributing wealth and ask if they are acceptable.
 
For instance I can show conclusively to anyone that interest will cause a redistribution of wealth, Don Brash tried to deny this issue but lost the debate with me.
 
There is wealth inequality through a difference in individuals value to the market sure, but what about those who don't actually contribute anything productive but live of the backs of others while accumulating a disproportionate amount of wealth. Property Investors being the paramount expression of this in New Zealand. The really pointed question that needs asked is what level of unearnt income do we accept as a society.

The really pointed question that needs asked is what level of unearnt income do we accept as a society.
 
Exactly.
 
The US had a lot of unearnt wealth coming from monopolies, unregulated financial entities and cartels a hundred years ago. When they broke up the robber barons and regulated the financial industries they got a couple of generations of widespread prosperity.
 
I think we need a repeat of that process.

This time it doesn't work. You could smear the peanut-butter dead smooth - equal incomes/wealth for all - and we'd still be in trouble.
 
The reason is that old problem of mentally  transferring 'wealth' to the proxy. There were 1 billion (well, less than 2 by a long measure) people back then, and all the oil still in-place. Almost none of the pollutive costs currently-held (carbon, nuclear waste, acidification, depletion, contamination) were held then.
 
Wealth per head is resources per head, and energy per head to process them - all else is bunkum. 7 billion have to be 'poorer' on a per-head basis alone, and poorer again through depletion. Thinking we're 'richer' at this point is mass delusion. The costs are simply not being included.

I think the equality of opportunity ideas of equality are a very middle class idea, the idea that anyone through smarts and effort can improve themselves. I think this is a good social goal and encourages people to strive. I also think that heavily stratified societies with a lot of inheritted wealth and little social movement are the worse for it by lots of social metrics, so I support people having the opportunity to strive. Indeed, I would support myself being taxed more to support a society where the cost of failure (for example in unplayable student loans) was less to the individuals to encourage more striving (people are mostly risk averse and are more likely to strive for a small reward if the cost of failure is low than strive for a large reward if the cost of failure is high).