Think of it as a primer laying the groundwork for a couple of upcoming posts. Consider first reasons for thinking that Okun was right. Some of it will disappear in transit, so the poor will not receive all the money that is taken from the rich. More recently, however, doubts have become increasingly prominent.
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It is also striking how well it has aged. In fact, much of it reads as if it is participating in contemporary debates, although. For example, Okun argues against using the reduction of political power as a justifications for more progressive taxation or anti-trust enforcement--something that one hears increasingly lately. Okun supports progressive taxation as a way to raise revenue from people who would not miss it very much, but argues persuasively, in my view against the political rationale, writing, "The key remedies must be specific aids and sanctions rather than general efforts to curb bigness and wealth.
Even if the most ambitious program of progressive taxation were enacted, Howard Hughes would retain more than enough money to produce counterfeit votes.
It is no easy task to formulate and enforce specific and detailed rules of the game that would prevent him from spending money to acquire undue power. But I find that route far more promising than one that seeks to curb his power by taking his money away.
Would you do it? Forty years of progressives have defined themselves around the rejection of this metaphor, arguing that inequality-reducing policies promote economic growth by allowing people to better utilize their human capital, trust each other, break up rent seeking, and the like.
All of this is likely true at least some of the time, as Okun himself recognized. But the opposite, the case of tradeoff, is also true some of the time. And it is this situation that presents the biggest challenge for public policy and thus merits the most discussion. In fact, if we were doing public policy right the equality-efficiency tradeoff would be operative for all public policies, because we would already have done all of the policies that improved on both dimensions and so would only be left with the ones that were a tradeoff.
It would be a mistake, however, to reduce the book to one long argument about a leaky bucket. In fact, Okun does not even get to this until his last chapter. Prior to that he developed a Michael Sandel-like "spheres of justice" argument for the importance of the market but limiting it to the allocation of baubles and trinkets like swimming pools while sometimes inefficiently allowing the rights to the basis for the allocation of other more fundamental goods, like political power which in theory should be distributed equally with one person, one vote.
He rejects Friedman-ites for capitalism as inherently good because of freedom my freedom to use my private property is denying your freedom to use it and also Friedman-ite arguments for the fairness of the ensuing distribution even if people are paid their marginal products that should have no special ethical status.
But he does strongly defend the market for its track record on efficiency while demonstrating in this case slightly dated but still true that socialism has massively underperformed. The book is a deep exploration of philosophy, politics, and economics.
He presents some good arguments against conferring any natural and inherent meaning on freedom, but would these apply to my freedom not to have you harvest my organs for the greater good? In sometimes taking on the easy cases he fails to fully explain his basis for supporting equality and judging largely based on outcomes. I say this less as a critic, and more to express my mild--and only mild--disappointment that he missed a few chances to give me better arguments for the views I largely share.
Rather than the simple and overly reductive memory I had from the foil that the title has become, I found the book to be thoughtful, nuanced, more modern than I expected or we have progressed less than I had thought , and it actually affected my thinking somewhat. Brookings did a service by reissuing it, including the excellent introduction by Larry Summers.
Efficiency and equality (1): The (not so) Big Tradeoff
I just re-read this after 25 years. Books by Arthur M. Perhaps the reason I best liked this book is the bridge it creates between often disparate fields of economics and moral philosophy. Its political and social institutions distribute rights and privileges universally and proclaim the equality of all citizens. Scott rated it it was amazing Jul 11, Be the first to ask a question about Equality and Efficiency.
Arthur Melvin Okun
Equality and Efficiency
Equality and Efficiency: The Big Tradeoff (A Brookings Classic)