New at Free Will: Lew Daly and Unjust Deserts

by Will Wilkinson on February 2, 2009

In this week’s Free Will, I chat with Lew Daly of Demos about his book with Gar Alperovitz, Unjust Deserts: How the Rich Are Taking Our Common Inheritance and Why We Should Take It Back. I found the book, especially the first part, stimulating if unconvincing. Daly and Alperovitz adopt a Douglass North-style neo-institutionalism and emphasize the broadly social nature of scientific discovery, invention, and economic growth. I’m completely on board with all this. They begin by noting that good institutions and technological advance are the foundation of growth, which is also true enough. They go out of their way to emphasize that successful economic activity depends on an enabling climate of norms, property rights, and decent government. Yup.

But it doesn’t take them long to fallaciously infer that your dog owns your house. The main thrust of Daly and Alperovitz’s argument is that the cumulative nature of the scientific advance and entreprenuerial discovery that leads to productivity gains implies that, as time goes on, individuals add a diminishing fraction of the overall value of the goods and services they help produce. D&A then push hard on a very simple and I think largely discredited notion of desert as the basis for just distribution. Since I didn’t come up with the theory of computation, did not build this computer or the Internet, since I cannot singlehandedly prop up the entire context of wealth-enabling institutions in which I am embedded, and since taxpayers paid for the education that enabled me to read and write, I deserve next to nothing of the economic value of this blog (if it has any). Daly and Alperovitz’s view comes down to the idea that, since we’re constantly enjoying and building on the positive spillovers of prior economic activity and earlier generations of wise governnance, society deserves almost everything produced. As you’ll see in the diavlog with Lew, I had some problems with this argument.

In particular, their story seems to imply that networks of scientists and innovators now long dead deserve a large portion of the wealth that we now create, since they are causally responsible for its foundation. But if that’s true, then it’s likely true that today’s innovators are also undercompensated, since they will be able to internalize only a tiny fraction of the value they pass on to future generations. So which is it? Larry and Sergei are too rich or not rich enough? Moreover, if successful American entrepreneurs don’t deserve much of their profits, then neither do contemporary American citizens who have done even less than the entrepeneurs to create economic value. Sure, I couldn’t make a fortune selling widget polish if no one ever invented the widget, or if the institutions in which widgets could be invented never developed. But there is nothing in the argument that implies that current tax consumers deserve my profits more. Even if we buy that I don’t deserve my income, D&A don’t seem to bother showing that society does. At least, I couldn’t find the argument that shows why, if I don’t deserve X, then a big set of people who also do not deserve X have a legitimate claim to it. This confusion is compounded by their lazy identification of society with the membership of the nation state. 

Their real worry is inequality. They want higher taxes on the wealthy and more government spending. And they seem to think popular but confused intuitions about desert and distribution stand in the way of their egalitarian policy objectives. That may be true. But it’s hard to see how offering an even less intuitve but nevertheless false account of desert and distribution is supposed to help them.

  • powerr
    It is very amazing.
    staffing power
  • briceachang
    I cannot singlehandedly prop up the entire context of wealth-enabling institutions in which I am embedded, and since taxpayers paid for the education that enabled me to read and write, I deserve next to nothing of the economic value of this blog (if it has any). Daly and Alperovitz’s view comes thrift savings plan down to the idea that, since we’re constantly enjoying and building on the positive spillovers of prior economic activity and earlier generations of wise governnance
  • Nico D
    DWAnderson totally nails everything I want to say about the substance of the podcast, so I don't feel I need to say anything more about that, accept maybe to emphasize that I really don't see how it follows from the institutionalist points Daly makes to that society deserves all my earnings. OK, and I'll also say that "political argument" seems to mean that he wants to defeat desert-based arguments being used to argue against higher taxes, because this helps Daly satisfy his political preferences. As much as he seems to be a pretty intellectually honest person, this just seems depressingly willing to sacrifice the truth on the altar of politics.

    Now to style: Will, you're one of the best bloggers ever and one of my favorite thinkers, and I think you're more consistently right in your views than almost anyone. And I listen to every episode of Free Will. I just have to say: You really ramble too much! Free Will would go from awesome to transcendent if you could manage to express the same (brilliant) ideas in about half the words. Part of the problem is that you frequently dart off in a new direction mid-sentence, and attach lots of extra clauses. Also, I think you ought to let your guests talk a bit more, especially if they want to interject. Often when they're about to say something, you just keep going.

    I don't know if it would be better to post this on bloggingheads, but I figured you'd be more likely to read it here. Anyway, just some feedback from a big fan. Keep up the righteous work! :-)

    Oh, and why hasn't there been a new episode in more than a month? I really hope you pick it up again soon.
  • newshutz
    I hope I am not too late to be noticed. It takes me a while to absorb and thing on some things.

    It strikes me that much of what Lew was talking about can be addressed my Locke's provision for the proper ownership of land. You can make use of it, as long as you leave as much and as good for others. The ability of others to use what has been invented before is not limited by ones use.
  • Eric Auld
    What did Lew mean when he said it was a political argument rather than a philisophical argument? Sorry if this is obvious, but I am having a hard time figuring out what that actually means.
  • As I indicated in the comments on BloggingHeads, I thought this was a pretty good diavlog. Just because you can't say individuals deserve (by exogenous standards) a collectively generated surplus might mean "no one deserves it" rather than "it should be divided equally."

    By the end I think Lew was backing off the contention that everyone deserves an equal share of this collectively generated surplus, and retreating to the more limited claim that desert based arguments against government taxation or regulation are insufficient. I suspect both Will and Lew agree on this point.

    Where I suspect they disagree is on whether there are other compelling justifications for respecting status quo wealth distributions and minimizing regulation and taxation. We never arrived at that argument however.

    BTW, I think desert may well be an endogenous concept, by that I mean, if you have a "just" system than the participants in that system "deserve" what is theirs. For this insight I credit Robert Nozick because that was my first exposure to this notion. This use of the term "desert" rescues it from irrelevance (what would occur if no one deserved anything), but perhaps it is not consistent with the common understanding of the term.
  • Tracy W
    I deserve next to nothing of the economic value of this blog (if it has any)


    Isn't it possible that you only get next to nothing of the economic value of this blog, if you get any?

    It strikes me that many people in society only get next to nothing of the value they created. For example, when I was a child I was prescribed probably life-saving antibiotics. This cost my parents about $30 for the doctor's visit and maybe $20 for the antibiotics. Okay, this was quite a few years ago, but still this money was trivial compared to what I have earned so far in my adult life, let alone the non-monetary value of my life (my parents seem to be glad I'm alive). Yet the doctor and the receptionist at the doctor clinic, and the pharmacist who handed over the medicine and the guys who delivered the medicine to the door and so forth only got paid peanuts for that particular peice of life-saving work.
    And the farmers who provide the food that keeps me alive also typically get paid trivial amounts compared to the value to me of not feeling hungry.
    Now the reason that I can buy food and antibiotics at such a trivial percentage of my life-time earnings is that many other people also benefit from antibiotics and food, so farmers, doctors and the shareholders of pharmaceutical companies can take advantage from economics of scale and make a comfortable living despite that they don't get much of the consumer surplus that they create. And of course doctors and the shareholders of pharmaceutical companies benefit from farmers' food production, and in many countries farmers can benefit from doctors and antibiotics. So society as a whole benefits far more from these surpluses.

    Now this is not true of every task. If I buy a painting for $100 direct from the artist and only get $120 worth of pleasure from it, and guests to my home only get a further $20 of value, and the artist only paid $10 for the materials, the artist is clearly getting a majority of the benefit rather than society as a whole. But even in the frivolous arts and literature the creator of the work does not necessarily get a majority of the value - for example a blockbluster writer like J. K. Rowling sold millions of books, but much of the value she created went to subsidising the fixed costs of all the books publishers produce that aren't blockblusters and a lot went to all the people who piggybacked on the pleasure she created (eg people involved in the Harry Potter movies, and subsidising all the movies made about books that don't earn what the producers paid to the original writer, producers of official Harry Potter merchandise, and the people who created and sold the materials fans of the book use to produce their own fanwork, eg stage makeup to draw the Potter scar on your kid's forehead), and also many of the fans of the Harry Potter works appear to get a great deal of pleasure out of them beyond the money they paid, and also whatever value society gets from the practice many kids got in reading skills.

    So the idea that we only deserve a small part of the value we create implies that we should tax at a higher rate only those people who can gain the lion's share of their value, which on the whole implies people working in areas where there aren't significant gains to scale. Relative to existing practice, We should shift the tax burden away from the creators of easily-replicable value, such as authors and film-makers, to the creators of original non-replicated works (like theatre actors or live musicians or artists who earn large amounts of money from selling original works like Damien Hirst). We should tax people more the less valuable their efforts are to saving life or improving its quality (eg speech therapists should be taxed more than ER nurses) and the more their work depends on their individual skills compared to making use of the diverse products produced by others (eg nannies should be taxed more than aluminum refiners as aluminimum refining depends on a high level of capital and manufacturing costs so a lot of the value aluminium refiners create goes to the creators of the inputs.)

    Or, going back to my original point, the more people who read your blog, the less we should tax you, as it implies that whatever gain you get is mostly going to you. The more people who read your blog this implies the more value you are creating for society, either for people who believe they gain directly from your wisdom, or for people who enjoy having their ideas challenged by an intelligent mind even if they don't agree with you, or for people who love shooting down incredibly stupid ideas and find your blog a rich source of said ideas. Very popular bloggers are probably only getting next to nothing of the economic and non-economic value of their blogs, even if they gain vastly from it on a personal level.
  • Greg N.
    Thanks for this, Will. I thought of your work immediately when I was watching these guys on C-Span. I haven't read their book because I've placed a moratorium on new books until I get through some old stuff, but I was hoping to see your review. This is even better; can't wait to watch.
  • PaN
    This I would have to say is one of the reasons why I love your commentary so. I pretty much agree with the first part of his argument as you do, in that the societal knowledge base is the cause of innovation. I believe that the wealth creation is based on the institutions that society creates. I would like to say academia is one of the main cause of innovation but that is probably caused by a bias sprouting from my overly romanticized view of academia, I love the idea of academia, working for the soul purpose of knowledge, I will put my deepest rooted belief in the fact that the institutions of academia in the liberal arts sense is one of the institutions that has provided a significant amount to knowledge to wealth creation. I do think that the author did down play that effect entrepreneurship has had on wealth creation.
    I love how you pointed out one of the main flaws with the reasoning, the idea of just deserts. I have had a highly privileged life and I will not say that is my just desert, I am way above what I should justifiably have based on the wealth of my parents. But based on what I have I should try to expand what I have further for the pursuit of further wealth and also knowledge. What I gain from the wealth is not what I deserve but a result of the incentive systems put in place by institutions to evolve human knowledge. It is the government/the leadership of the societal institutions to set the incentive system up in a way that creates the largest incentive to have me work to expand knowledge. This does not necessarily mean expanding the knowledge provide services to people who work to expand knowledge, to make the expansion of knowledge easier.
    I do value equity for two reasons though, the first is that I believe a certain level of equity in a society is a human right. I do not think this is based on what people deserve, but because of a moral responsibility of society to maintain the institutions to best expand the happiness of the people in said society.
    I am sorry if my ideas come out in an unorganized manner, it was just written in a stream of conscious way, with little desire for it to make full sense, and without the initiative to edit it to make it more concise, I am sorry but I am selfish. I will not feel bad if you decline to read my ideas though, because it is written largely out of a desire to increase my utility by pretending my ideas have more use to society than they actually have and therefore giving me a false sense of purpose, I will not pass judgment on weather it provides a service or not. ... and I am done rambling on the nature of my ramblings, wasting server space for my utilitarian gain.
  • Unit
    Sounds like Daly never read the "I pencil" story...
  • Amicus
    neither do contemporary American citizens who have done even less than the entrepeneurs to create economic value
    =====
    Out of curiosity, what percentage of the annual national income, in say, 2004-2008, do you attribute to a group called "entrepreneurs"?

    My point would be that, for what most people think of as entrepreneurship, that number is very, very small.

    So, how does a very small exception to a broad thesis help?
  • hp
    A corollary to GilM's insightful comment: you would also think that those who believe in coercion would have a well developed understanding of what they want to inflict on everyone. When you ask "Just how high do you want tax rates to be? 100%? Would 90% be enough?" They will easily cede the point that would be both unfair and ultimately counterproductive. "What about 80%?" . . . Of course there is never any real answer, only this mystical belief in more government and less freedom.
  • huadpe
    I don't think there's a delusion involved here, but rather a misapplication of property rights.

    What is fundamentally being referred to here as the inherited cultural, societal, ethical, and other norms, values, and information boils down to a form of extraordinarily productive and useful intellectual property.

    The Daly argument is that this property is owned, and owned collectively. These are each strong assumptions and I will take them in turn.

    First the argument that it is owned. This is taken as an argument seeming to work within the framework of libertarianism in order to undermine it. Libertarians do argue that the product of one's work is wholly their own, and remains their own ad infinitum unless they dispense of it or trade it willingly. So the intellectual property of our forebears is theirs, not ours, and to the extent that we use it as a foundation to build upon, we owe them royalties.

    The second argument is not made as explicit, but it is implied. And this is that the death of its creators leases the property into public ownership. That is, that it becomes owned by everyone when its creator dies. This therefore implies the right of others to seek royalties on the product of my labour to the extent that it rests on the institutions and ideals which preceded and influenced me.

    I would however argue that these ideas are not publicly owned, but rather are unowned. No member of society has an individual claim on them, and they exist as ideas which can be known and possessed, but not owned.

    The reason for this is the nature of ideas as opposed to objects. An idea can be known by an infinite number of people, and doesn't have any need to be owned. An idea doesn't need to be owned in order to be used, unlike physical property. These foundational ideas are vastly important, and completely unowned.
  • Sigivald
    If I was uncharitable, I'd simply call it dishonest handwaving.

    Being more charitable, I'm tempted to call it self-deluded handwaving; working backwards from the desired goal and some idea that "desert" might be helpful, they've found something they've (quite sincerely) convinced themselves justifies the desired goal.
  • It always amazes me how egalitarians just assume that their preferred distribution is somehow privileged, and "society" obviously needs to impose it by force; while the distribution that arises from voluntary transactions somehow needs special justification.
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