Must-Read: Noah Smith (2013): “Just Deserts”
(2013): “Just Deserts”: “‘I get what you get in ten years, in two days.’–Chris Brown…
…Mankiw wants… a value system based on “just deserts”… “people should receive compensation congruent with their contributions”…. I think it’s worthwhile to think through the implications….
Brad CEO… makes $30 million a year…. Mike Clerk, who works at Wal-Mart… $25,000 a year…. So Mike works and works and works, for three years…. Suppose Brad randomly sees Mike’s new Civic in a parking lot and decides that he wants the same car…. Brad will have to work a little less than 5 hours…. Go to a couple meetings, send some emails, and the Civic is his.
Now suppose Mike goes to Greg Mankiw and asks: “Dr. Mankiw, why is it right and just that it took me 4% of my entire lifespan to buy this car, with all my heroic efforts and harsh self-denial, when it took that Brad CEO guy less than a day? I put in every bit as much effort as he does, day after day. Why does he deserve to get things with so much less effort than I put in?” Dr. Mankiw responds:
I am more persuaded by the thesis advanced by Claudia Goldin and Lawrence Katz (2008) in their book The Race between Education and Technology. Goldin and Katz argue that skillbiased technological change continually increases the demand for skilled labor. By itself, this force tends to increase the earnings gap between skilled and unskilled workers, thereby increasing inequality….
“OK,” Mike says. “But why, then, is Brad CEO so much more productive than I am? Where does his $30 million productivity come from?”Dr. Mankiw responds:
[T]he intergenerational transmission of income has many causes beyond unequal opportunity. In particular, parents and children share genes…. IQ… has a large degree of heritability… IQ is only one dimension of talent, but it is easy to believe that other dimensions, such as self-control, ability to focus, and interpersonal skills, have a degree of genetic heritability as well.
“So let me get this straight,” Mike says. “Brad deserves to be so much richer than me because of ability he was born with?…”
Mike falls off of a ladder…. In the old days, before Mankiw’s “just deserts” theory gained widespread acceptance, Mike would have been able to collect Social Security disability; now, however, the government tells him that he does not deserve disability payments–they constitute an unfair transfer of income from the productive to the unproductive…. Mike cannot go to physical therapy because he cannot afford health insurance, and Medicaid was canceled because Medicaid payments do not constitute… “just deserts”….
Hopefully by now I’ve made my point. It’s easy to say that people deserve to get whatever they can manage to get in a “free” market. But when you start to actually think… you realize that it probably doesn’t fit very closely with most people’s concept of… “just deserts”…. Moral values are just statements of opinion, and Greg Mankiw is certainly entitled to his own. But I somehow doubt that his opinion of “just deserts” will be able to win over a majority of Americans, even among the intellectual classes.