OPEN CLASSROOM BARRY BLUESTONE OCTOBER 12, 2011 Equality vs. Efficiency: The Big Tradeoff

OPEN CLASSROOM

BARRY BLUESTONE

OCTOBER 12, 2011

Equality vs. Efficiency: The Big Tradeoff

THE GODKIN LECTURES ON THE ESSENTIALS OF FREE GOVERNMENT AND THE DUTIES OF THE

CITIZEN

HARVARD UNIVERSITY

1975

Arthur Okun

Political Institutions

Provide universally distributed rights and privileges that proclaim the equality of all citizens Acquired at no monetary cost Violate law of comparative advantage – People with

great stake in a certain right have no more right to it than others

Equal without regard to ability or intelligence Not distributed as incentives Violates equity and freedom – Everyone must pay for

right regardless of who uses it Cannot be bought and sold

Our rights can be viewed as inefficient, because they:

Preclude prices that would promote economizing Since no price for free speech, too many people use it too freely!

Violate the law of comparative advantage We academics who are so smart have no more right to free speech

than those who have flunked out of elementary school!

Incentives that would augment socially productive effort

If speech were a market good, people would work harder to obtain it

Trades that potentially would benefit buyer and seller alike

Starving person cannot trade his vote for a loaf of bread

Economic Institutions

Rely on market-determined incomes that generate substantial disparities among citizens in material welfare

Differentials in income are meant to serve as incentives – rewards and penalties – to promote efficiency in the use of resources and generate growth in output

The Big Tradeoff

“Equal rights and Unequal Incomes generate tensions between the political principles of democracy and the economic principles of capitalism”

“Uneasy compromise rather than a fundamental inconsistency”

Reasons for Rights

Liberty Protect individuals from encroachment by the state e.g. “Freedom of Speech” Universal and identifiable criteria used rather than

discretionary – Bill of Rights

Pluralism Rights are a protection against intervention of market in all

parts of society … “need to keep the market in its place” … so that everything does not become a market commodity with a price, but no social significance – e.g. Olympic Medals

Humanism Stress on human dignity – Mutual respect without a quid pro

quo

“Rights” vs. “Marketable Commodity”

How far should we go in ensuring rights? Free speech? Free public education? Right to pollute? Free housing? Public welfare? Right to a job?

Bans on Exchange

“By prohibiting your sale of rights, society is encroaching on your freedom, but it is also protecting you from others who might to take your rights away” Child labor laws prohibit some families from making

ends meet Minimum wage laws prohibit workers from offering

their labor at any wage they choose

Transgressions of Dollars on Rights

Buy better legal services – receive preferential treatment before the law

Buy better political platform – campaign financing

Lobbying by means of pecuniary offers

Rights/Market Goods Continuum

j

IncentivesQuid pro QuoInequality

No IncentivesNo Quid pro QuoEquality

The “Big Tradeoff”

Rights/Market Goods Continuum

Freedom of SpeechFreedom of AssemblyFreedom of Religion

X

Rights/Market Goods Continuum

Diamond Pinky Rings

X

Rights/Market Goods Continuum

Freedom of SpeechFreedom of AssemblyFreedom of Religion

Diamond Pinky Rings

X X

Rights/Market Goods Continuum

Food - 1920

X

Rights/Market Goods Continuum

Food – 1930County WelfareWorker – Commodity Distribution

X

Rights/Market Goods Continuum

X

Food – 1960“Food Stamp Program”

Rights/Market Goods Continuum

Housing

X

Rights/Market Goods Continuum

X

Public Housing

Rights/Market Goods Continuum

Section 8 Housing

X

Rights/Market Goods Continuum

Homeownership

X

Rights/Market Goods Continuum

Homeownership:FHA, VA, Fannie Mae, Freddie MacMortgage Interest Deduction

X

Rights/Market Goods Continuum

Homeownership:Diminish Fannie Mae, Freddie Mac?Eliminate Mortgage Interest Deduction?

X X

Rights/Market Goods Continuum

X

Health Care:1950

Rights/Market Goods Continuum

X

Health Care:1960Medicare,Medicaid

Rights/Market Goods Continuum

X

Health Care:2010“Obamacare”

Rights/Market Goods Continuum

X

Health Care:2012-2016

??

Rights/Market Goods Continuum

Job

X

Rights/Market Goods Continuum

Job

X

?

Rights/Market Goods Continuum

X

Freedom of Speech

Rights/Market Goods Continuum

X

Freedom of Speech

Citizens United Supreme Court Ruling

All Political Discourse …

Where on the continuum do you place something?

Conservatives generally favor keeping as much as possible as “market goods”

Liberals generally favor expanding “rights”

Today that battle is perhaps more divisive than ever

What’s your favorite candidate for a new right?

What’s your favorite to make a “market good”?