You shall not covet your neighbor's hour; you shall not covet your neighbor's wife, or his manservant, or his maidservant, or his ox, or his donkey, or anything that is your neighbor's.
Gen: 20.17
In a review of Thomas Piketty's Capital in the Twenty-First Century, "Living with Inequality," Garett Jones makes a point that I think is much broader than merely a critique of Piketty's approach:
Instead of preaching to reduce inequality as a means to reduce social conflict, we should instead preach to reduce social conflict itself. The best way to defuse the situation is to teach tolerance for inequality. Piketty wants tolerance formerit-based inequality, for better workers earning more than others, for a reward to frugality, and the like. But we could also use tolerance for luck-based inequality: for the inheritor of a fortune, for the pretty-good CEO who gets an eight-figure bonus just because his company's product went viral on Vine. Political battles against inequality have too many invisible casualties—missing factories, unbuilt apartment complexes—even in the best of cases. And given the intense political world of the aging rich countries, we're unlikely to experience the best of cases.
That's why I propose the creation of the Tenth Commandment Club. The tenth commandment—"You shall not covet"—is a foundation of social peace. The Nobel Laureate economist Vernon Smith noted the tenth commandment along with the eighth (you shall not steal) in his Nobel toast, saying that they "provide the property right foundations for markets, and warned that petty distributional jealousy must not be allowed to destroy" those foundations. If academics, pundits, and columnists would avowedly reject covetousness, would openly reject comparisons between the average (extremely fortunate) American and the average billionaire, would mock people who claimed that frugal billionaires are a systematic threat to modern life, then soon our time could be spent discussing policy issues that really matter.
People who are genuinely materially desperate aren't the issue here. The Tenth Commandment Club has no qualms with a Jean Valjean stealing bread to feed his family. But the implicit emphasis of Piketty's Capital is with comparing the 1 percent (or 0.01 percent) to the typical person living in the G-7, a person who is, on average, more fortunate than most of the world's population and more materially fortunate than almost anyone living in the 19th-century novels that Piketty so loves to discuss. To paraphrase an old P.J. O'Rourke joke, just think about Mr. Darcy's visits to the dentist.
Jones' point was probably inspired by Vernon Smith's Nobel Memorial Banquet Speech, when Smith said we wished to celebrate:
The ancient Judeo Commandments: Thou shalt not steal or covet the possessions of thy neighbor, which provide the property right foundations for markets, and warned that petty distributional jealousy must not be allowed to destroy them. Neither shalt thou commit murder, adultery or bear false witness, which provide the foundations for cohesive social exchange.
As usual, ancient wisdom does better than modern economics. Piketty aside, inequality is simply an unjustified obsession of far too many economists on the left. With that obsession they all too often violate the Tenth Commandment.
Nassim Taleb, a magnificent voice in the current debate in favor of ancient wisdom, lambasts those who have focused on inequality per se instead of the threat of those who gain income despite having not skin in the game:
Worry about skin in the game, not inequality. Worry about equality in opportunity not outcome. Worry about the powerful corporations taking over the system via lobbyists and blocking artisans. Worry about the class of privileged mandarins-WNSITG (with no skin in the game) taking over the system via "grandes ecoles"...
Taleb also critiques Piketty's statistical measurements of inequality, but here I don't see myself talking about Piketty himself as much as larger trends within leftist economics.
Really, what matters is an ethical point: We all too often violate the Tenth Commandment when we talk about the threats of inequality. It doesn't matter whether our words are put in terms of the 99% or of the social conflict created by inequality, they are still motivating by wanting what is our neighbor's.
A pity is that one of the principalc jobs of the economist is to teach the public that the commercial society is morally good. That is something we can all learn from Adam Smith's research program from The Theory of Moral Sentiments to The Wealth of Nations. Through the honest pursuit of income, the very rich work towards the benefit of all. The very rich thereby deserve celebration, not derision.
It is only when the very rich don't have skin in the game and when they use politics to game the system for themselves that we should worry. Otherwise we should simply be good Jews/Muslims/Christians/Smithians and respect the Tenth Commandments. As usual, traditional deontic morality > modern technical economics.
Immigration in a Hive-Mind World
Nathan Smith, an economist who has done work estimating the potential impact of open borders, has recently provided his thoughts about the impact of the hive-mind hypothesis, best argued for by Garett Jones, on immigration in "Open Immigration and the Hive Mind Hypothesis."
For those unacquainted with Mr. Jone's hive-mind hypothesis, the main paper that explicates the idea, "National IQ and National Productivity" is available at SSRN. I've always taken the hive-mind hypothesis, at least as far as it matters for Mr. Smith's post, to be the hypothesis that if we took the causes of an person's productivity and expressed them in terms of a Price equation, the covariance term would dominate. The domination of the covariance term reflects the spillover effects of human capital from one person to another.
The hive-mind hypothesis could have a staunch advocate of open borders thinking twice. After all, if the hypothesis holds water, then the productivity gains that economists expect due to the rearrangement of factors of production across the world. As Mr. Smith writes:
Mr. Smith ends up concluding that open borders would probably not kill the golden goose even in a hive-mind world because there is no reason to think that the allocation of human capital across the world is anywhere near optimal. Open immigration, and the right institutions, could therefore move around people to make for even better hive minds.
The entire post is worth reading at length, for no other reason than the hive-mind hypothesis helps to introduce concerns of scale and increasing returns that I think can be neglected in discussions about immigration. Although Mr. Jones' exact hypothesis may not be right, though I certainly lean more in the affirmative direction, increasing returns exist elsewhere in human society as a product of scaling—the Santa Fe Institute has made possible a lot of research in increasing returns in cities as a result of scale—so the problem is a general one that advocates of open immigration must grapple with.
Posted by Harrison Searles on 05/07/2015 at 08:02 AM in Commentary, Economics, Garett Jones | Permalink | Comments (0)
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