Wednesday, June 10, 2015

Inequality of Opportunity: Another View

Ravi Kanbur and Adam Wagstaff have weighed in on inequality of opportunity, and you can read their thoughts here.  As it happens, I provided a short discussion of the same topic in my textbook, Microeconomics: A Fresh Start.  It appears in the appendix to Chapter 18 on Inequality, where I briefly run through various theories of distributive justice.  Here's my take:

Equality of opportunity.  Perhaps the world is too complex to measure either contribution or effort with any accuracy.  There are so many different kinds of effort to compare, and the ways contributions are combined in real-world production systems makes it difficult to tell just who contributed what.  Moreover, perhaps both contribution and effort should be recognized, although not in any precise combination.  In that case we might be drawn to an approach that says, let all start with an equal chance to succeed, and let effort, contribution and luck determine outcomes however they will.  Specifically, the criterion of equal opportunity embodies two elements, that there should be a moment in each individual’s life (the “starting point”) at which equality should reign, and that the rules that govern success should not be biased toward any particular individuals or groups.  These are extremely demanding requirements, and it is doubtful that any existing society meets them completely; yet they could serve as goals to be pursued.  In practical terms, the first will usually require substantial intervention in market outcomes, since the advantages that children of rich parents would otherwise have need to be offset, but the second is usually thought of as compatible with the way markets should work if they are regulated to be transparent and fair.

There are two large difficulties with equal opportunity as a principle of justice.  First, what exactly should be this hypothetical moment of perfect equality—the equal starting line, to use the metaphor of a footrace?  Should it be birth?  This means that the unequal distribution of luck before birth must be counterbalanced, so that those who are congenitally stronger or more clever should be disadvantaged in equal measure.  If that doesn’t appeal to you, then you perhaps imagine a moment even before birth and before genetic qualities are doled out.  But related to this is the problem that, as soon as we are born, we begin to do things or have things done to us that, if not offset, will lead to unequal life chances down the road.  The further back we push the moment of equality, the more subsequent inequality we must accept.  If opportunities are to be equal at birth, then the advantages that some get in childhood will not count against “equal opportunity”.  Perhaps you would set a much later age for the “starting point”—say 18.  This commits you to much greater intervention to offset all the many pluses and minuses that can accrue by that age, including many that are due to the choices that children make for themselves.  At the same time, it can be seen as a bit heartless, since it doesn’t allow for second chances.  If someone discovers what they truly want at the age of 25 or so, too bad: they missed the moment of equality and they will have to make do with whatever opportunities they are lucky enough to still have.  This sort of criticism can be addressed by requiring a multiplicity of “somewhat equal opportunities” that can reappear as one grows older, but then the criterion loses its sharpness: how equal must these second chances be and how many must be offered?

The second large difficulty is that equality of opportunity is compatible with almost any level of general inequality, as we defined it in this chapter.  Suppose, for example, that you have a society that works according to this rule: every year a lottery is held with just one winning number.  The individual who wins that year gets everything—every last penny of income, all the wealth, the land, everything of value.  Everyone else must beg for enough to survive on.  The principle of equal opportunity demands only one thing, that the lottery be perfectly fair, so that each person has the same chance to be tycoon-for-a-year, but surely this demand does not go far enough.  Can extremely unequal divisions of life’s good things be viewed as just simply because the system is fair at the moment just before division?

1 comment:

Frank Moraes said...

These are excellent points. And I'm glad that economists are taking the issue serious. Just the same, I'm concerned. "Equality of opportunity" really isn't an economic idea -- at least in modern America. A couple of years ago, I remember reading an Avik Roy article where he attempted to define the concept to mean simply the lack of specific laws stopping someone from doing a job. So basically: the lack of a caste system. I thought it was refreshingly honest. When people bring up "equality of opportunity" it is done to excuse doing nothing about actual inequality. It is, in other words, purely rhetorical.