Inequality – a problem of ‘Social meaning’

There is a perspective you can take on the world that will allow you to see every comparative difference as a social problem.

The fact that top athletes earn exorbitant amounts of money, that CEOs command similar pay, that things cost too much, that I’m writing on a laptop in Canada while others are living in destitute poverty around the world. All of these things can be seen as social problems that require political solutions.

Such perceptions all have the capacity to provoke moral indignation in their own idiosyncratic way. That is because they are worthy of that sentiment. They are also worthy of remedial action, but the devil is in the details.

Of crucial importance is differentiating between emotional judgments, and what follows. Emotional judgments are not ‘irrational feelings’ to be downplayed or ignored. They are valid in their own right. There is yet a gap between the emotional appraisal of some circumstance, event, or situation as good or bad, and the inference made on that basis. The chasm between the recognition that something provokes a feeling of disapprobation, and the formulation of the steps taken to rectify it is a massive one. The gap grows larger and larger the more ‘social’ the nature of the problem is.

In the case of athletes who make ‘too much’ money, or CEOs who take in ‘exorbitant bonuses’, the feeling is that the reward is not tied to merit or morality, that the amount is disproportionate to the task in question, or that it appears scandalous in light of so much poverty and inequality. These feelings are ‘correct’ in some way, because they accurately describe particular situations, and even patterns of behaviour and ways of doing things.

Any specific example of overcompensation that is the source of moral outrage must really be viewed in light of the larger system in which it is but a small part. The ‘reason’ why athletes and CEOs are paid so much is because of what people are willing to pay for their services. The financial reward is a product of the risk inherent in the job, the time and effort that it takes to get to that level, the pressure that those at the top face, and the limited supply of people with the requisite personality traits. The collection of these factors contribute to the high levels of compensation.

Seeing how things look to the individuals involved paints a different picture than what is seen from the vantage of the observer feeling moral indignation. It is useful to see things from both the perspective of a person commanding a high rate of compensation and those who are willing to compensate them for it.

If you have spent your entire life training to be a high level basketball player, then you eat, sleep, and breathe basketball. You invest the vast majority of your time taking jump shots late at night in the gym, practicing, going to tournaments, training, eating well and staying fit. This is a sacrifice, and a gamble because you forego many of the short-term pleasures and all of the other educational and training alternatives that you could pursue to lead another life. This involves both the cultivation of virtues, and the undertaking of risk. It is not as if anyone who cultivates a high degree of skill in any domain is a saint, but they practice the virtues of discipline, commitment, teamwork, look after themselves, and so on. The risk is also substantial. What if you get injured?

Practice – not always that much fun!

The same goes for CEOs. They do not sit around and chomp on cigars. They combine high levels of intelligence, the ability to communicate well, control their emotions, and be diplomatic and inspiring as a leader. They must also maintain a persistent drive and ambition to get to where they want to be in the face of many obstacles. Their services are also valuable on the whole. They manage and employ large teams of people, and deliver goods and services that are desired and valued. There is huge risk in doing this, endless challenges, and a major expenditure of energy and time devoted to singular causes.

From the perspective of a recruiter on the other hand, the decision to hire is based on the constraints of the market. HR executives and General Managers of sports teams alike, are entirely confined in their hiring decision by the market value of people in the talent pool who will go to a competitor, and even switch careers if they do not get what they are expecting.

People simply do not pursue extremely difficult tasks if there is not some kind of reward, material or otherwise that is commensurate with the efforts made. Even if the reward is financial, this is often in the service of goals and interests that are relative to a person’s circumstances. If you have a skill set and interests geared to entrepreneurship and innovation, you will need a lot wealth and capital to achieve it. This is why compensation is so large for the high-end earners – they have much larger projects and goals that require the resources to put toward them.

Entrepreneur and Venture Capitalist Peter Thiel on Markets

Another common complaint is about how much something costs. The truth is, the monetary value of a good is a phenomenon that – as a matter of description – is determined entirely by subjective preferences. All the way up and down the supply chain, people make decisions about how to value inputs, time, their services, and those of others on the basis of the complex interaction between the set of their own preferences, those of others, and the finite amount of time, money, and resources that they and others have at their disposal. All of these factors constitute a set of constraints that gives every decision a cost that must be weighed and trade-off against alternatives. Prices reflect this in a very crude way. They convey this information most clearly when small decision-making units (individuals, firms, organizations, local and state-level governments) are free to make their own decisions; the smaller the unit, the more information it has about its own circumstances, and the effects that will help and hinder the pursuit of its interests.

The greatest fallacy is to think that costs can be lowered by controlling prices and regulation. Since, in the aggregate, prices reflect the cost of something in relation to all of their other factors that influence it, the change in cost in one area, if imposed, is merely to transfer it up, down, or across a supply chain.

At the bottom of the cost equation is the ability of an economic region to produce what people want, given the set of practical, technological, and preference constraints that comprise the society in question. Without an increase in productivity, there can be no sustainable net gain to the size of the economic pie, only ‘redistributions’ of it to special interest groups.

Perhaps the principle difference between left and right is the emphasis on ‘structural’ vs. ‘behavioural’ explanations of social phenomena. The constraints listed above are often just viewed as ‘structures’ to be overcome through concerted political action by those on the left.

Conservatives tend to think that the set of constraints is not easily changed, and even if the particular arrangement can be modified, many of the original ‘problems’ simply remain or re-emerge in another form. This is because they are the product of recurring patterns of behaviour, rooted in human nature. Leftists and increasingly left-leaning liberals believe both that human nature is very malleable, that they know what the specific changes should be, and how to make them. They will be imposed via legislation, and increasingly large-scale, transnational political organizations.

In order to change the compensation schemes in the market, make people less interested in acquiring high levels of wealth, or in paying a great deal to watch sports for example, not only are many small changes required, but an entirely different system of economics, politics, and social norms are needed in order to bring them about. This is why progressivism can quite fairly be described as a collection of ‘solutions’ to just about every ‘problem’ imaginable. Very few of these solutions are focused on being a better person on the individual level, but about changing the behaviours of others by political fiat.

Of course, all of this is nothing new. When you take discussions about the ‘distribution’ of resources to their logical end point, you recognize that advocates of ‘redistribution’ must end up advocating for some kind of collectivism. Socialism is on the rise again because many more moderate liberals (not progressives) have realized that their middle-of-the-road policies of progressive taxation, welfare state initiatives, and universal health care cannot hope to achieve the goals that they are in service of – reducing material and status inequality, both measures that have ‘relative’ definitions. There is only one path to achieving those goals – and that is a coercive, state-controlled socialism where freedom and prosperity go to die.

Socialism faces challenges for a number of reasons (see The National Review‘s special edition this month). First and foremost, is that it does not do justice to the challenge of coordination. 99.999999…..% of the events in the universe are not under your control. This is also true for the 7 billion other people on the planet. Coordination is something that happens on the small scale at multiple layers in our own lives. It is not possible to coordinate more than a small fraction of our actions explicitly, and the difficulty increases exponentially with the size and scope of the situation in question. Rational, planned and explicit coordination is the exception, not the rule.

Think of how difficult it is to genuinely listen, consider, and properly take into account the concerns of others and balance them against your own in a relationship, in friend groups, your family, office, or sports team. The further away you go from the small group, the more difficult it is to make decisions that equally respect the competing wishes and desires of others. The vast majority of collective decisions do not involve a warm, fuzzy consensus. Many are done without consultation whatsoever. There is nothing insidious about this. After no more than 5 seconds of reflection, you can discern this basic fact by recognizing the staggering magnitude of things you would have to do to bring about a significant increase in decisions made on the basis of deliberation and consultation.

The attempt to achieve social goals via centralized organization, legislation, regulation, and taxation necessarily involves more and more coercion, and fails to take into account the ever larger amounts of information, and preferences that increase as a factor of the size of the intended affected area.

However, the reality is that many progressive policy goals are only about the differences in relative and material levels of equality on the surface. The underlying cause for concern is the social meaning of these differences. There is a good deal of truth to the idea that the value ascribed to certain pursuits, and the differences between that value and those of others is the real driver behind the feeling of injustice due to inequality. Although politics and culture are intertwined, this strikes me as more of a cultural problem, and one that is not affected or remedied by redistribution schemes and clamours for more dignity and respect. The evaluation of behaviours and forms of life are ultimately made by individuals based on what they perceive to be true; they cannot be coerced by the enforcement of politically correct taboos. In fact, as we are seeing now – this tends to backfire.

Economic growth is not just about maximum output for minimum input that is to be gained by slashing labour and looking for cost saving technology at every turn. A collaborative work environment where people feel valued and are given the freedom and responsibility to create, as well as stronger communities for time spent with family and friends, and the like, all have the potential to make businesses, individuals, and communities more productive.

The main argument behind GDP growth as a net boon to society is the idea that people can get more of the things that they want and value – both higher and lower pursuits – for less. It doesn’t just work out in practice though. Many of the things we desire have nothing to do with the abundance of material goods, opportunity to pursue career options of one’s choosing, and the like. What we value most are things that we have had a hand and a stake in – the truly valuable goods are the result of the freely made decisions that culminate in the achievement of one’s own projects. Ultimately, these goals and projects must be tied to values that you and others think are good, in a higher sense. Wealth is only a means to this end.

It is a strange truth that you can be happy, good, and fulfilled in abject poverty, and a completely miserable and worthless human with great wealth and many accomplishments under one’s belt.

Material abundance, financial resources, and choice are only enabling conditions, not the source of value itself. The case for growth must be made on these grounds. It is far more preferable to be sick and miserable in the West than anywhere else, and that is not a trivial thing in the least.

2 comments

  1. Come with me to Tijuana next February. It will provide a new lense in which to view the impact of ones place of birth and how profoundly it shapes our lives. Yes, social and financial structures impact on this – but this is really a place where no supporting structure dooms many to abject poverty with no hope of getting out of the circumstances we are born into. Challenging reading – I am enjoying it.

    Sent from my iPad

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