The reason that I post on economic inequality is that it concerns me. I think that economic inequality leads to political inequality which leads to social inequality which spells doom for a system like ours. I’m less worried about the ultra-rich because a) there aren’t very many of them and b) there isn’t much we can do about them. There will always be a few superstars. I’m a lot more worried about the next rung down on the economic ladder who are much more dependent on rent-seeking than the relative handful of superstars.
I guess that whether you find this article at CityLab proposing a merit-based approach to increasing equality boring, outrageous, or thought-provoking depends on what you bring to the discussion. It’s hard to excerpt but here’s a snippet:
I think we can have a society that rewards people for productive or otherwise socially valuable contributions while also taking care of the poor and those who can’t work. If people were paid based on performance and we removed the political advantages that certain professional elites have carved out for themselves, we’d be much better off in terms of both inequality and economic growth.
Merit-based egalitarianism gives everyone opportunities to acquire valuable skills throughout childhood and eliminates the market privileges that come from uneven political power. Because the vast majority of people are perfectly capable of contributing to society when given a chance, this arrangement will result in an egalitarian society. There would still be rich people—because of extraordinary ideas, contributions, or luck, but their fortunes would be seen as essentially fair. Extreme inequality is unfair because so much of it is not based on merit. Low to moderate inequality could be fair and merit-based.
Where I’m skeptical about his proposal is that I don’t believe that the beneficiaries of the present system would ever stand for it. They have come to accept a neo-Calvinist model in which they are meritorious by definition and are eager to preserve their advantages in any way they can, if only to ensure that their children, who don’t have the merit however defined that they did, enjoy the same advantages that they did.
Any merit-based system depends on empirical measurements. You attack a merit-based system by pointing out the impossibility of coming up with a perfect system of measuring merit. We actually know of such a system—a market economy. We tend to reject market economies not because they aren’t merit-based but because they are. The cold equations.
““Markets can remain irrational longer than you can remain solvent.â€
Keynes (or A Gary Shilling)
Markets are our best pricing tool, but they can be wrong as we saw with the housing crisis and many other times through history. Tulips anyone? It is also not clear that markets are the right tool for everything, or maybe they are and we just dont know how to make them work. One thing for sure is that it doesn’t always mean lower prices. The further away you get from perfect market conditions (transparency, equal knowledge, perfect substitutions, etc) the worse markets perform. There is some point, I believe, where they work so poorly they are not useful.
Since I know medicine best I guess I should point out that the more market oriented the system, the higher the costs. Private insurance nearly always pays much more than does the government. Systems with more government involvement are cheaper. Outcomes, wait times, etc end up being about the same in most cases when you average everything out. More market oriented systems were tried like in Singapore and it cost so much they backed off.
So I would prefer we use markets when we can make them work. Do something else when they dont work. We can decrease subsidizing some people in that second tier via markets, but in some cases it will take efforts to directly stop govt subsidies. For the record, I dont think it will change much in our culture or governance. Our pathology lies with the ultra rich. It wasn’t some doctor, lawyer or architect earning $75,000 more than they “should have” that sent manufacturing to China or decided we should cozy up to Saudi Arabia at all costs.
Steve
For medicine to become market-based we would need to abolish professional licensing, credentialing, patents, Medicare, Medicaid, and so many other things you can’t even say “health care” and “market-based” in the same sentence without being so selective in your definitions as to be meaningless.
Since the median and average wage for architects is around $80,000, they probably aren’t a good example for you. The number of architects who earn “$80,000 more than they should” is vanishingly small. Income in the practice of law occur in a bimodal distribution with most lawyers earning far less than $80,000 so that probably isn’t a good example, either. Nearly all lawyers who do work for large law firms. I don’t know whether they’re worth it or not. In general they’re employed by the financial sector or, increasingly, the health care sector.
I’d be interested in your prescription for reducing the ranks or wealth of the ultra-rich. Taxation hasn’t worked in the past.
My evaluation is that the financial crisis wasn’t induced by the market system but by the lack of one. Finance is the second least market-based sector, right after health care. Our problem, as I mentioned in the body of the post, is that we can’t face the implications of a market-based system not that it wouldn’t price merit properly.
“meritorious by definition”
If God took all the money in the world, and divided it equally among the population, in a short time, the money would find it’s way back to it’s rightful owners.
Is something I’ve heard way too many times in my life, but it’s not entirely wrong.
I also hear people say, “I’d like to have HIS money, when they don’t really want to have it, but to spend it.
Maybe if the Govt. wants to do something for the poor, they could relax or ignore housing codes so shantytowns could be built. If the wealthy want to help, they could kick in portapotties and a garden hose.
Merit based systems won’t work because public schools won’t or can’t teach what the children of the well-to-do learn at the knee
Secrets are whispered the gardeners’ children will never hear.
Absent some form of licensing and credentialing I would not work in the field. I say that even though credentialing has become a major time consuming hassle for me. I have a full time office person that does nothing but credentialing and it still takes a lot of my time. Granted, we have grown from about 16 providers when I started to almost 200, but there is so much more involved. Credentialing and licensing is how we find problems and has kept us from hiring some of the wrong people. Of note, most of this goes to make the private insurers happy.
If someone made me health care tsar, I would change the process. State based licensing makes no sense and just makes it harder to move people around. Make it national level licensing. Credentialing could be greatly simplified. After you initially credential with a hospital or insurance company we should not have to send in all of the same material every time, just pertinent changes.
Eliminating Medicare and Medicaid would mean no poor people, probably almost no one in the lowest 20th percentile would have insurance. No one except for pretty well off people over 65-70 would have insurance.
Steve
“Eliminating Medicare and Medicaid would mean no poor people, probably almost no one in the lowest 20th percentile would have insurance. No one except for pretty well off people over 65-70 would have insurance.”
The classic error.
Without the government free beer and whisky program no one except the wealthy would be able to buy beer or whiskey.
Without the government free cars program no one except the wealthy would be able to buy a car.
Without the government free clothing program ……………..
You might be interested to know that all people make decisions as to how to spend their resources. Its their responsibility and their decision.
The only issue wrt health insurance is the ability of insurers to cease coverage to premium paying customers. It should not be allowed. It does raise issues with mandatory purchasing of coverage, but that’s for another day.
“The classic error.”
Nope, that is what we had before we had Medicare and Medicaid. Even if we reduced costs to world record levels (maintaining first world quality) it would still be very expensive. Back before Medicare our costs weren’t that much different than most of the rest of the world and most people in groups I mentioned had no insurance. Yes, they made choices. Eat and pay rent or get medical care.
I guess I should point out the classical conservative error is to ignore history and cling to dogma. Tax cuts lead to increased revenue dont you know! Trickle down for everyone!
Steve