This follows Noah Smith’s recent Bloomberg view piece replying to John Cochrane. I won’t restate all the good points John makes, which are recounted carefully in Noah’s post. Instead I’ll list some other counters. If you have read Noah’s article, you’ll have to suffer that the writing will seem more like a fire safety instruction list by comparison with his prose.
1. Success involves a large slice of luck, even given initial endowments of talent and capacity, which often masquerades as skill which should get its just reward, and sets off path dependence. Of course, those endowments are themselves luck from the point of view of the individual. Read the biography of Bill Gates. For sure he seems to have been extraordinarily talented and hard-working. But he also got unusual access to computing resources in California at a time when an explosion of computing activity was taking place there.
2. Extreme inequality is self-propagating, allowing the rich and often fortunate to buy better formal and informal education for their offspring. This, as well as flouting the sense of justice of many (at least me), also distorts the allocation of talent next period, which is inefficient, and will depress investment in human capital by those who would normally benefit from it.
3. Cochrane asserts, without evidence, that public good provision – eg education – is problematic to the point of it being better to cease. I am going to assert the opposite, with the most informal wave at ‘evidence’: That public education has been socially transformational in capitalist democracies. Extreme inequality is corrosive of this public good. Redistributing away from the very rich I assert may be extremely beneficial, and I would suspect would have little cost.
4. Little cost? Why? Well, are those with £10bn really in it for the 11th? If not, let’s take most of it from them.
5. Super-success is a cooperative effort. The super-successful profit from the collaboration, acquiescence and cooperation of the rest of us. (Didn’t Obama state something similar ‘you didn’t build that’?) Redistributive tax to curtail inequality is, a reciprocal act that returns the cooperative favour. Super-capitalist success rests on a myriad of powerfully productive public goods whose output is a system of imperfect but productive property rights, and the coordination on a decision not to overwhelm the limited resources we put aside to protect them. (Another example to flout Cochrane’s pessimism about the possibility of putting public funds to good public good provision, incidentally). Reading back this paragraph, I see it’s intimately bound up with Cochrane’s assumption that the poor wont’ rise up to take the riches of the rich (poo-pooed by Noah). So what if they will or won’t? The point is there is a contract of sorts, the ability to produce vast personal wealth being one fruit of it.
6. I’m personally swayed by Rawlesian arguments that society’s rule should insure against the lottery of birth and early development. This legitimizes redistribution, using the fruits of the super-successful to compensate those less fortunate. This isn’t really a counter of the right order to Cochrane, [as Nozick said: so what if you like Rawls? Maybe I don’t] but it’s one many share.
7. Cochrane’s basic argument, distilled by an email a friend sent me, is: ‘if we are worried that inequality causes cronyism, let’s fix cronyism’. Easier said than done, unless you want to dismantle all public goods. And to some extent self-contradictory. Who’s going to fix cronyism? Probably a lot of cronyism-fixing government employees and legislators, that’s who.
8. Not a counter to Cochrane, who doesn’t rely on this argument, but nevertheless it is worth stating: that many object to redistribution on grounds of natural rights, that people are not means to ends, but ends themselves. This natural rights framework often fails (conscription for war, retaining the monopoly of violence with the state and restricting this and other individual freedoms so that society works…). So that 11th billion dollars, in my view, is there for the taking.