Protect the plate, man. Now we could niggle at this and that, but it wouldn't matter, just as it makes little sense to debate bank regulation with someone who believes debt is evil. But at the heart of this paroxysm nestles an argument that attracts fans from across the fruited plain, and that speaks to broader questions of inequality. The term is "just deserts," and it refers not to the lemon meringue pie on the sideboard but to the notion that individuals get the wealth "they deserve." In March 2010, Harvard economist Gregory Mankiw published an essay titled provocatively "Spreading the Wealth Around: Reflections Inspired by Joe the Plumber." (Joes are everywhere.) Mankiw packages inequality and redistribution issues into a just-deserts argument. "A person who contributes more to society deserves a higher income that reflects those greater contributions. Society permits him that higher income not just to incentivize him, as it does according to utilitarian theory, but because that income is rightfully his. This perspective is, I believe, what Robert Nozick, Milton Friedman, and other classically liberal writers have in mind."
Maybe, but Mankiw's argument is still both more complicated and simpler than that. He accepts the empirical fact that inequality is increasing, blaming it on a plateauing in educational advancement in a high-tech age. In his search for an "optimal" tax system, he test-drives various utilitarian measures, recognizing the impracticality of, say, taxing folks according to their excess income above productivity or on silly correlations like height. He ends up back at a place that should surprise no one: the market. "Under a standard set of assumptions, a competitive economy leads to an efficient allocation of resources." He admits that most economists -- most sentient beings -- don't identify equilibrium with equitableness. But he's not "most." "After all, it is a standard result that in a competitive economy, the factors of production are paid the value of their marginal product." Ipso facto: "One might easily conclude that, under these idealized conditions, each person receives his just deserts."
Or one may not. Mankiw is drawn to the shimmer of "idealized conditions," the "standard set of assumptions." But the real world is a spookier place than an assemblage of theory and standard results. Mankiw is too sophisticated to embrace Mr. Wall Street's neo-Darwinian notion that might makes right. But he embraces a related assumption that markets make right, and to the underlying utilitarianism. What happens to comp calculations in markets that swerve like flocks of starlings? In the real world, as opposed to "idealized conditions," do markets attain efficient equilibrium, and how do we know? Is the marginal value really a true measure of pay and worth? Is it the only measure? Can markets set values on all aspects of life? In the end, Mankiw draws back from the libertarian implications of a fully fledged just-deserts theory. He admits the "real world differs from a classical competitive economy free of market imperfections." And he claims that a Just Deserts Theorist really must ask "whether people's compensation reflects the contributions they make to society and how much they benefit from government action," thus welcoming a mob of squishy, subjective inputs, from the definition of "contribution" to the calculation of "benefit." We could be warming our hands in Zuccotti Park. It's a lot simpler to judge worth by the size of your bladder.
Thompson Hine said partners Roy Hadley Jr. and John Watkins joined its corporate transactions and securities and business litigation practice groups, respectively. For other updates launch today's Movers & shakers slideshow.
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