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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”?