Do You Deserve Your Income?

by Will Wilkinson on January 31, 2005

Like Tyler and Alex, I find Elizabeth Anderson’s remarks about Hayek and desert to be rather cryptic. The argument, as far as I can make it out, is this:

(1) If P deserves x at t, then there is something P did prior to t in vittue of which x is deserved.
(2) One’s income is determined by the price of one’s labor on the market.
(3) The price of one’s labor is determined by the demand for one’s labor on the market.
So, (4) one’s income is determined by the demand for one’s labor on the market.
(5) Suppose x is P’s income.
So, to reiterate, (1) if P deserves x at t, then P did something prior to t in virtue of which she deserves x.
But, (6) P did not do anything to create demand for her labor on the market.
Therefore, (7) P does not deserve x.

That is, because you didn’t have anything to do with demand being what it is, you don’t deserve the price you command for your labor on the market.

There are a number of problems with this particular argument. The first problem is premise (1). I don’t believe desert is always backward looking. People can, for example, deserve love, not for anything they have done, but because of the way it could transform them. (Christians, do you hear me?) Similarly, people can deserve a chance or an opportunity, although they haven’t done anything yet to earn it. But let’s set that aside.

It strikes me that (6) just has nothing to do with anything relating to desert. What I did prior to t to deserve x (whatever the value of x is) was complete my end of a contract that was entered into voluntarily by the relevant parties within a system of just rules. It just doesn’t matter what I did to fix the particular value of x. If S agreed to pay me x for completing my end of a contract, and I complete my end of the contract, then I deserve x from S. THIS IS OBVIOUS and if an argument implies the contrary, then we have a ready reductio of the argument.

The question Anderson seems to raise is: how is it that I could possibly deserve, say, $67,456.84 per year rather than $23,764.45 per year when I have so little to do with determining the conditions under which my labor commands either amount?

And the answer is easy. The same way I can deserve a silver medal in Olympic tennis, even though I had so little to do with determining the existence of the Olypmics, or the rules of tennis, or the quality of my pool of competitors. My reward is fixed by a combination of my performance, chance, and the rules of the games. The existence of chance or my lack of responsibility for the rules simply does not bear on what I deserve in this context.

Do you know what’s annoying? Computer programmers who were making $90,000 per year because of the labor shortage in computer programmers, and who are now whining because they get $50,000, or can’t find work at all because of some eager low-cost chap in Bangalore. Why is this annoying? Because computer programmers don’t deserve to get any particular amount of money for their labor. They deserve to get whatever is specified by a fair contract within a just system of rules. If the number shifts, it has nothing to do with what the programmer deserves. The programmer, or whomever, deserves whatever the value of of the variable happens to be, but they don’t deserve that the value of the variable be anything in particular.

Some further thoughts.

Does Anderson’s argument imply that I would be making a fundamental mistake if I argued to my boss that I deserve a raise because everyone else doing the same job is being paid more?

How close does Anderson get to committing the Fundamental Redistributivist Error (the FRE), which is the very common but nonetheless logically horrifying error of inferring from the fact that P doesn’t deserve x to the conclusion that there exists someone who is morally authorized strip x from P. Somebody ought to write an article about the manifold expressions of FRE titled “How Not to Argue For Taxes.”

Now, I myself believe that there are conditions under which the state is legitimate, and under which it may justly redistribute holdings. However, I think it’s a lot harder to show that there is someone who is morally authorized to use coercion to take stuff than it is to show that people deserve what is specified in a fair contract when they complete their end of it.

  • Leon
    Will,
    We therefore disagree on what Anderson achieved or not. I think she succeed in undermining the "I deserve my pre-tax income" argument.

    One way I see this is that there is no symmetry. Going bust because of bad luck might be deserved, or it might not: you could not foresee, nor insure yourself against bad luck. There is a market failure: markets are incomplete.

    Merits, in a Hayekian sense has noting to do with $$ outcome. Still, it is clear that we should not redistribute according to merit. However, there is here powerful moral claim for taxation. We could all be better off with some re-distribution, some social net.

    Of course, this argument could be disproved too.
  • monkyboy
    I don't see how you proved your point, either, Will.

    Maybe in the case of a person hiring a craftsman to do a certain job for a fixed price your point holds.

    But what about a case like Michael Ovitz and Disney? His pal Michael Eisner hires him then fires him a year later and gives him $140 million. The shareholders of Disney disagree and a decade long court battle ensues. Even if Disney loses, it's the insurance companies that will have to pay.

    Or consider a televangelist who shows his viewers pictures of starving children to raise money for his church, then spends the money on mansions, jets, hookers, etc. for himnself.

    In most cases, the person who assigns you your wage is not the person that has to pay for it. The 'wage setting agent' is using other peoples money to pay your wages.

    The government pays a huge portion of wages in today's economy. Ideally, the people should get to say what those wages are, but in reality they don't. At least in the case of people paid by the government, some form of desert could be applied through voting...
  • Will Wilkinson
    Anderson:

    The claim "I deserve my income," as applied to an individual's pretax income in free market economies, has considerable intuitive force. If true, it suggests a powerful moral claim against taxation for redistributive purposes, on the intuitively plausible supposition that a just economic order ought to ensure that people get what they morally deserve.


    And then she's arguing: not true, right?

    I'm not arguing that there "I deserve it" is a sufficient argument against taxation. I'm arguing that Anderson fails to undermine the "I deserve it" argument on the terms she sets for herself and thus fails with this argument to undermine the intuitive "powerful moral claim against taxation for redistributive purposes."
  • Tim
    Anderson does not argue that "you can't object to taxes because you don't deserve your income." What she argues is that the statement "I deserve my income" isn't a knockout argument against taxation. One might object to taxation on other grounds, or argue that you deserve your income more than the recipient of largesse, but merely asserting that you deserve it because you earned it doesn't, by itself, prove that taxation is immoral.
  • Leon
    The last post on Hayek's point is clear, "merit" as a value judgment has nothing to do with what you earned. Your income is a market-based affair, trying to map list B into list A is a silly affair, you earned it, period. (no FRE here)

    Still, markets ARE incomplete, you can't foresee all the downside and cannot insure against all you would wish too. This is the universe we live in, which makes room for a government to provide the so-called social net. This is the point for taxation that is not being addressed. see?
    (as I understand it, at least)
  • Anonymous
    Leon,

    Right, the argument is that you can't object to taxes because you don't deserve your income. I argue that one obviously can deserve one's income, and that Anderson's thoughts about labor prices fail to establish otherwise. How is that off the mark?
  • Leon
    I think this post is off the mark. Elizabeth is countering the argument that because you deserved, earned, and now own your income, then nobody can tax it without stealing you. She makes a fair argument for taxation in this context and I can't see how this post is addressing her point. Try harder next time.
  • monkyboy
    Hmmm, what a strange site. Quotes from TJ are always appreciated, though.

    Everyone starts out life thinking they are going to get rich, win the noble prize, be well respected for their sharp wit, etc. In reality, a very small percentage of people reach these goals. It's easy to be a libertarian when you are young.

    If the odds hold, even 2/3 of libertarians will be dependant on Social Security to live when they retire. Social Security is there to protect them from their irrational exuberence.

    I know, I know, you and Will really are special...
  • Since Elizabeth's series of posts are all about the alleged legitimacy of taxation, and since her sole purpose seems to be denying the claim that taxation is in any way similar to what most people consider theft, it is certainly appropriate for me to remind you and your kind of the plain obvious wrongness of taking something that does not belong to you, regardless of whether you have the support of a majority of your fellow comrades.

    The fact that the government decided to steal some taxpayers' dollars and use it to fund basic research (which I did not ask it or want it to do, by the way) in no way precludes my use of technologies that take advantage of some of that research, but would undeniably exist in some similar form today regardless.

    We aren't talking about the "real world" here; we are talking about the logical veracity of the above mentioned left2right post, which, until someone corrects me otherwise, is not about externalities. Further, when you get out into the real world, you will discover that such a creature as a government which can solve more public goods problems (of which externalities are a type) than it creates does not exist. Rational ignorance of the electorate, of course, being the largest public goods problem of all.
  • monkyboy
    Hehe Micha,

    I'm glad you are able to remind us that all taxes are theft using the government built internet from your government funded school.

    As you say, of course Will is talking about contracts with no externalities. When you get out into the real world, you will discover that such a creature doesn't exist.
  • I think this is far from obvious. If I were a nuclear physicist and agreed to build several nuclear weapons for Osama bin Laden...

    Of course, Will is talking about contracts with no externalities. Everyone agrees that externalities play an important part in the legitimacy of contracts.

    I have not yet read Elizabeth Anderson's post (and based on her previous two poorly reasoned apologies for taxation, I doubt I'm missing much), but if Will's reformulation is an accurate description, it doesn't seem like she is making any reference to externalities. This looks more like pure, unadulterated confiscation. (Or a prelude to unadulterated confiscation, pace your last paragraph)
  • Not every Microsoft millionaire deserved their fortune.

    Who deserved the fortune more than the people who voluntarily contracted for it? Life is indeed unfair. But that alone doesn't demonstrate that we could make life more fair by stealing lucky people's money.

    All she said was, given that capitalism is at times unfair, and always uncetain, people should have insurance against financial misfortune. And she argues that those who are too poor to buy this insurance...should have it bought for them.

    What's stopping you, Elizabeth and anyone else who thinks this is a worthy cause from acting on this perceived injustice by going out and buying insurance for poor people?
  • If S agreed to pay me x for completing my end of a contract, and I complete my end of the contract, then I deserve x from S. THIS IS OBVIOUS and if an argument implies the contrary, then we have a ready reductio of the argument.

    I think this is far from obvious. If I were a nuclear physicist and agreed to build several nuclear weapons for Osama bin Laden and sign a contract by which he promises to give me one city out of the several he would blackmail out of Iraq with those weapons, and then I build him the weapons, I think it would be wrong to say that I deserve that city. It might be right to say that he has a contractual obligation to give me the city, and perhaps even to use the coercion he promised in order to get the city for me, but that doesn't seem to give me any moral desert. Unless I understand "deserve" in a much different way than you.

    Of course, this isn't the sort of situation Andersen is talking about, but I think it shows that the point you make isn't a reductio.

    And of course, as I recall, she also doesn't make "the fundamental redistributivist error" - the point of her post is merely to show that saying "I deserve my income" isn't a valid argument against taxation. She hasn't yet gone on to make any positive arguments in favor of the justifications of taxation. She's just (so far) writing a series of posts about arguments that don't actually turn out to have force preventing it. If she's established that I don't deserve my income, I think she will still concede that she hasn't yet established that anyone has the right to take that income away.
  • I think we are missing an important point here: risk. Let's say, I am offered employment at Microsoft with a fixed annual salary and few stock options. Stock options are risky. So, if my stock options remain underwater I will be the one who will be suffering the loss (There is no way Microsoft is going to offer me free stock options). Therefore, if my stock options give me a huge fortune I do indeed deserve the outcome. Thus, reward and risk go together. They cannot be separated.

    Same thing goes if I am running a business. If I have made fixed and working capital investment and the expected demand does not materialize then I will be the one who will be suffering the loss of capital. Therefore, if demand is much more than expected and I make a fortune, I completely deserve the outcome.
  • monkyboy
    As I understand her argument, she is just saying that America's economy is unfair sometimes.

    Not every Microsoft millionaire deserved their fortune. At most, a few hundred smart and ruthless people made Microsoft the giant it is now.

    And not everyone at Enron was a crook. Again, at most there were maybe fifty incredibly greedy people who tubed what was then the seventh largest company in America. Yet over 10,000 people lost their jobs and their pensions.

    All she said was, given that capitalism is at times unfair, and always uncetain, people should have insurance against financial misfortune. And she argues that those who are too poor to buy this insurance...should have it bought for them.
  • Thaddeus McMonster
    so the argument is that you don't deserve your income unless you did something to create the demand for a service you provide?

    This is the most idiotic thing I've ever heard. According to this logic, a doctor specializing in gunshot wounds only "deserves" his pay if he is the one who shot his patients?

    Am I missing something here?
  • Nicely done, Will. I was trying to formulate similar arguments, but couldn't find the right way to say it. Bravo.
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