On “strawmanning” some people and inequality

For some years now, I have been interested in the topic of inequality. One of the angles that I have pursued is a purely empirical one in which I attempt to improvement measurements. This angle has yielded two papers (one of which is still in progress while the other is still in want of a home) that reconsider the shape of the U-curve of income inequality in the United States since circa 1900.

The other angle that I have pursued is more theoretical and is a spawn of the work of Gordon Tullock on income redistribution. That line of research makes a simple point: there are some inequalities that are, in normative terms, worrisome while others are not. The income inequality stemming from the career choices of a benedictine monk and a hedge fund banker are not worrisome. The income inequality stemming from being a prisoner of one’s birth or from rent-seekers shaping rules in their favor is worrisome.  Moreover, some interventions meant to remedy inequalities might actually make things worse in the long-run (some articles even find that taxing income for the sake of redistribution may increase inequality if certain conditions are present – see here).  I have two articles on this (one forthcoming, the other already published) and a paper still in progress (with Rosolino Candela), but they are merely an extension of the aforementioned Gordon Tullock and some other economists like Randall Holcombe, William Watson and Vito Tanzi. After all, the point that a “first, do no harm” policy to inequality might be more productive is not novel (all that it needs is a deep exploration and a robust exposition).

Notice that there is an implicit assumption in this line of research: inequality is a topic worth studying. This is why I am annoyed by statements like those that Gabriel Zucman made to ProMarket. When asked if he was getting pushback for his research on inequality (which is novel and very important), Zucman answers the following:

Of course, yes. I get pushback, let’s say not as much on the substance oftentimes as on the approach. Some people in economics feel that economics should be only about efficiency, and that talking about distributional issues and inequality is not what economists should be doing, that it’s something that politicians should be doing.

This is “strawmanning“. There is no economist who thinks inequality is not a worthwhile topic. Literally none. True, economists may have waned in their interest towards the topic for some years but it never became a secondary topic. Major articles were published in major journals throughout the 1990s (which is often identified as a low point in the literature) – most of them groundbreaking enough to propel the topic forward a mere decade later. This should not be surprising given the heavy ideological and normative ramifications of studying inequality. The topic is so important to all social sciences that no one disregards it. As such, who are these “some people” that Zucman alludes too?

I assume that “some people” are strawmen substitutes for those who, while agreeing that inequality is an important topic, disagree with the policy prescriptions and the normative implications that Zucman draws from his work. The group most “hostile” to the arguments of Zucman (and others such as Piketty, Saez, Atkinson and Stiglitz) is the one that stems from the public choice tradition. Yet, economists in the public-choice tradition probably give distributional issues a more central role in their research than Zucman does. They care about institutional arrangements and the rules of the game in determining outcomes. The very concept of rent-seeking, so essential to public choice theory, relates to how distributional coalitions can emerge to shape the rules of the game in a way that redistribute wealth from X to Y in ways that are socially counterproductive. As such, rent-seeking is essentially a concept that relates to distributional issues in a way that is intimately related to efficiency.

The argument by Zucman to bolster his own claim is one of the reason why I am cynical towards the times we live in. It denotes a certain tribalism that demonizes the “other side” in order to avoid engaging in them. That tribalism, I believe (but I may be wrong), is more prevalent than in the not-so-distant past. Strawmanning only makes the problem worse.

Why cash is beautiful

If you had $20 to spend, what would you get? Would it be the bottle of wine a guest brought to the dinner party you invited her to? No? It cost her $20, but you wanted it less than the jar of Nutella and very nice glass of whisky you bought with the last $20 you spent. Economists recognize that that gift was inefficient. She took $20 and turned it into something worth less than $20 by making it a gift for you. And you’ll do the same when she invites you over for dinner.

You agree with me, but you feel like something is fishy. I’m tricking you somehow maybe, but certainly you won’t bring an AJ with you the next time a friend invites you to a party. And you’d be disturbed if they did the same to you. A gift is just more thoughtful.

This was a common theme from my students listened to an Econtalk podcast. But I disagree with that assessment. Not as an economist (from which position I also disagree), but as a sociable person, from an aesthetic position. Cash is beautiful. When you give me a twenty dollar bill you are giving me the sweat of your brow to buy anything my heart desires. And what I receive may very well spare me the sweat of my own brow to meet my own needs. A bottle of wine is thoughtful, but cash gives me access to time and time is the most precious commodity.

Most people, when receiving a gift, would be happier with something that is less valuable to them than they would getting access to anything they want or need via a cash gift. And frankly, I’d rather try to convince them that I wronged them by not giving them cash over a bottle of wine over a bottle of wine. So the next time I go to a party I’ll bring a gift and not cash. At least if that party’s hosted by “civilians”. Economists I’ll just give cash… I’m not sure if that implies I like them more or less.