September 28, 2015

I suppose I brought it all upon myself

So the Pope, amongst other things, has a bunch of left-wing anti-capitalist views. Lots of people on the right have decided that they want to argue with the Pope about this and the general line that they take is that the Pope is wrong and capitalism is good because you can see that well-functioning market economies actually do a great deal to raise living standards broadly. The good news for conservatives is that this is correct -- compared to the political economy of Maoist China or even Peronist Argentina, market capitalism looks great. The bad news for conservatives is that for the purposes of the political arguments that happen inside market-oriented democracies this logic is toxic to the conservative position.

Money is very useful to poor people

This is because while we argue about a lot of things in western politics, the really big thing we argue over is whether people with high market incomes should be taxed in order to provide "free stuff" to the poor and the middle class.

And the case for free stuff is pretty compelling. A person who has to downgrade from a $38,000 Mercedes C-Class to a $17,000 Hyundai Elantra clearly suffers a fall in living standards. But the gap in well-being between a Mercedes owner and a Hyundai owner is small compared to the gap between a Hyundai owner and someone with no car. And if instead of a new Hyundai your redistribution scheme lets a poor family get life-saving medicine for their child, the difference becomes enormous. It's of course true that a over-the-top or just sloppily designed redistribution scheme could be ruinous. But the evidence is pretty overwhelming that you can design a growth-friendly tax code that still raises a ton of money and then improve living standards by giving people some free stuff.


Capitalism as ethics

This is why thoughtful opponents of the welfare state have generally avoided making the argument that capitalism is good because it promotes human well-being. Since capitalism does promote human well-being, "capitalism promotes human well-being" sounds like a good argument in its favor. But it turns out that capitalism plus a large welfare state promotes human well-being even more. So you either need to embrace the welfare state (the correct answer) or come up with another justification of capitalism. One that frequently arises is what Greg Mankiw has referred to as the "just deserts" perspective in which "people should receive compensation congruent with their contributions" and we should aim for a society in which public policy ought to ensure that "every individual would earn the value of his or her own marginal product."

So if, for example, you are blind and inability to see makes it hard for you to earn a living in an unregulated market that's too bad for you. Your vision impairment means your ability to contribute to market production is limited, and therefore it is morally appropriate that your living standards be limited as well. By the same token, if a combination of genetics and childhood living conditions have left you with an IQ that is 2 standard deviations below average (this is about five percent of people) then, again, it's just the case that you deserve to have a much lower standard of living than society could provide for you if it were willing to do more redistribution.

Mankiw's moralized capitalism seems bone-chilling to me but I don't really think I can prove him wrong. It is, however, pretty trivial to see that Mankiwism isn't a Christian worldview. Jesus didn't preach "blessed are those with high marginal products, for they shall inherit incomes proportionate to their contributions." The practical benefits of capitalism are something that maybe a Christian should care about, but the practical benefits of capitalism-plus-welfare-state are bigger. To justify the tax cutter policy agenda, you need some thicker ethical theory and it ends up being a distinctly non-Christian one.

Song of the Day

I love Metric, the new album is great, and the opening track "Lie Lie Lie" seems appropriate to Jeb Bush's tax cut marketing pitch.