Saturday, October 22, 2011

Equality of Income: The New, Newer, Newest Crisis of self-congratulatory social policy.

A central element in the development of a collectivist sentiment in this century, at least in Western countries, has been the belief in equality of income as a social goal and a willingness to use the arm of the state to promote it. Two very different questions must be asked in evaluating the egalitarian sentiment and the egalitarian measures it has produced. The first is normative and ethical: what is the justification for state intervention to promote equality? The second is positive and scientific: what has been the effect of the measures actually taken? - Milton Friedman (1)

Friedman is asking an excellent question: what exact justification do politicos, through the mechanism of government, regard as empirical evidence for the promotion of equality of income. Friedman’s second question is: regardless of the justification, what is the effect/result of such political actions in the realm of equality of income?

Keeping the above two questions in mind, Friedman refers to “development of a collectivist sentiment” as a group promoting equality of income but left the details of the group unidentified. That is to say, the above two questions posed by Friedman are directly related to a group promoting such sentiment. Deferring to James Buchanan and public choice theory, we can, as a general rule, count out an organized “sentiment” emanating from a highly diffused voter and/or taxpayer. That is, James and Jane Goodfellow are not the group in question. Enter Thomas Sowell and “visions”. (2)

 The group promoting the equality of income argument was subsequently identified by Thomas Sowell. The Vision of the Anointed, A Conflict of Visions, and Intellectuals and Society identify ideological crusades [how society should be organized] of the twentieth century and continuing today. Sowell identifies  a group of self-appointed intellectuals, supported by media intelligentsia and the academic intelligentsia,  are promoted based upon the “moral exaltation of the anointed”. Moreover,, the general argument put forward by the anointed is notional and not empirical. Stated alternatively, particular “visions” are notional proposition, based on “the way things out to be”, argued through verbal virtuosity, and ending in the promoters of the vision merely painting the world in their own self-image. (3) (4) (5)

 One additional item that needs examined is the attempt to frame arguments by comparing the imperfect with the perfect. (6) That the anointed choose a social subject then compare the imperfection of the subject with the unreal world of perfections.  The difference between perfection and imperfection is then put forward as a problem. The now identified “problem” can only be solved through the achievement of their particular vision.

Hence we have identified the group promoting “sentiment” and this group’s justification is merely their particular notional vision with the vision further promoted as a vision of moral exaltation.

Next we need to examine equality of income in its action phase or “distribution of income”. Pundits, talking heads, media types, and the anointed themselves put forth a battery of statistics showing how distribution of income is incorrect. The problem with the statistics highlighted by those making the mal distribution of income argument is that they use “household statistics”. That is, the income producing components within a “household unit” have been declining for decades and decades (persona making up the household unit have been declining). Hence the number of people within a household has shrunk and hence the income produced by the household has shrunk as the income producing units within the shrinking household have declined). The correct measurement is per capita income which has risen. However, the per capita statistics do not support the anointed’s argument hence the anointed, academia, and media promote the statistic household income which is fallacious in this particular argument.

Closely related to the fallacious household income argument is the failure to account for taxes paid and benefits received [the actual transfer of income in action]. Stated alternatively, the income distribution statistic put forth as evidence are gross income statistics for higher end earners before taxes are extracted. Conversely, for lower income earners their incomes are shown before transfer payments are received such as: food stamps, aid for dependent children, Medicaid, unemployment benefits, housing subsidies, etc., etc. When taxes are extracted and subsequent benefits received are accounted for, the distribution of income statistics suddenly becomes much more equalized. However, just as pointed out above, the anointed, academia, and media promote the gross statistic before transfer which once again is fallacious in this particular argument.

One needs to pause for a moment and ask an important question: what is the exact empirical formula for the perfect distribution of income? Have you seen the formula? Problem is that no such formula exists. Hence is the current distribution the perfect formula? Was the distribution of income prior to 1880, 1905, or 1930 the correct distribution of income? Is mal-distribution of income the perfect formula? When no such formula exists a very common occurrence is the phenomena of “the middle”. That is, if one has no evidence that a perfect formula exists then one opts for the middle of two extremes. Stated alternatively, “equality of income” is really an argument of “middle of income” as the anointed have no formula to present and hence the middle must be the answer. That is, “equality of income” is not empirically based, its notional based and notionally presented.

“It is no less arbitrary and dogmatic to declare a priori that “the truth lies somewhere in between.” It may. It may not. On some highly specific issue, it may lie entirely on one side – and on another issue, with the other side. On still other issues, it may in fact lie in between.” Thomas Sowell, page 215, A Conflict of Visions.

A final point that needs examination before we proceed to Friedman’s question of “what has been the effect of the measures actually taken?” is that of the concepts of fair and just. “Fair” and “just” imply that something can in fact be determined as fair which makes it just. The problem arises that fair and just are basically political terms and not economic concepts. That is, fair and just have very little meaning other than the meaning one assigns in a particular situation. That fair and just are argument points of a political dimension, as subject A is fair and just if Z is undertaken, while subject B is fair and just if X is undertaken. That is, Z and X are merely political arguments to substantiate A and B. Stated alternatively, “fair” is merely what you are doing and the other person is not doing. That fair and just are merely notional argument points of a political type as the meaning assigned, is assigned, for persuasive reasons not empirical reasons.

Now we come to Friedman’s question of “what has been the effect of the measures actually taken?” According to the anointed and their vision the result is that the equality of income and its companion the distribution of income are in crisis. That is, in the last six months the anointed, academia, and media are promoting class warfare through the argument that equality of income and distribution of income are not fair and just. The problem is: the last eighty some years of policy, programs, and progressive taxation leading to transfer payment creating a supposed equality of income and just/fair distribution of income was their idea! The course of action over the last eighty years is their doing and now somehow one is supposed to forget the source of the action and merely concentrate on a manufactured “crisis”. How convenient!

The “convenience” of their argument has been identified by Thomas Sowell as the following formula: crisis, solution, results, response. A crisis is manufactured, a solution is proposed, the result is abysmal, and the response?

“THE RESPONSE: Those who attribute detrimental result Z to the policies instituted are dismissed as ‘simplistic’ for ignoring the ‘complexities’ involved, as ‘many factors’ went into determining the outcome. The burden of proof is put on the critics to demonstrate to a certainty that these policies alone were the only possible cause of the worsening that occurred. No burden of proof whatever is put on those who had so confidently, [but wrongly], predicted improvement. Indeed, it is often asserted that things would have been even worse, were it not for the wonderful programs that mitigated the inevitable damage from other factors. (7)

One must appreciate Sowell’s observation written in 1995 of “Indeed, it is often asserted that things would have been even worse, were it not for the wonderful programs that mitigated the inevitable damage from other factors”. Have you observed the above assertion regarding the many failed policies in the last three years? Further, if one were to point out the convenience element of the anointed, academia and media regarding their own policies being a part of their newest manufactured crisis, you will then be confronted with the non-empirical [argument with no argument] political talking point of “things would have been even worse”.

A final point, when mentioning Thomas Sowell’s book The Vision of the Anointed, that is merely an identifier as the complete title is: The Vision of the Anointed: Self-Congratulation as a Basis for Social Policy. The complete title is very, very appropriate.


 (1)    Capitalism and Freedom, Milton Friedman, 1962, reprinted as a fortieth anniversary edition, 2002, page 161.
(2)    James M. Buchanan and Gordon Tullock, The Calculus of Consent: Logical Foundations of Constitutional Democracy, 1958

(3)    (4) (5) Thomas Sowell, The Vision of the Anointed, A Conflict of Visions, and Intellectuals and Society

(6)    Capitalism and Freedom, Milton Friedman, 1962, reprinted as a fortieth anniversary edition, 2002

(7)    The Vision of the Anointed: Self-Congratulation as a Basis for Social Policy, Thomas Sowell, 1985, pages 7 and 8

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