Thursday, 28 January 2016

Creating a plausible desert base

In my previous blogs I have outlined problems with the three main bases for economic desert and argued that making a direct link between market prices and desert is inherently problematic. In this blog I will present what I believe is a fairer desert base. This desert base utilises both desert bases and market prices, but as part of a wider desert equation. Essentially the idea is to construct a desert base by putting together the best parts of existing proposals.

The fair desert base is to give each person weighted share of social product which accounts for their personal sacrifice (encompassing time, effort, danger, stressfulness and risk of harm) expended in productive enterprise (accounting for the effectiveness of that enterprise and whether they had the ability to contribute more than they have). I will refer to it as the constructed desert base but an alternative name for the proposed desert base is the ability-adjusted multifaceted base.

So for an individual (i) where d is deserved income, n is the number of people in society, r is the total amount of resources available for distribution in the given time-period, s is personal sacrifice compared to the average (where the average is 1), p is productivity,  m is the individual’s market income (compared to average where the average is 1) and a is the application of the person’s ability to the work that they do (compared to average where the average is 1), the constructed desert base would be something like:

Of course the actual weightings of the factors and the practicalities of assessing these components (particularly sacrifice) is more complicated than is indicated above. Furthermore, we might want to apply ability to many of the subcomponents. Some people might have more stamina and be able to work longer and harder while others have disabilities that reduce their capacity. Some people might be more able to deal with stress or responsibility or unpleasant working environments than others.

As I emphasised, people’s gross income will (in normal circumstances) go up if they take work requiring more personal sacrifice, as I outlined in my previous blog. It will also go up (again generally though not universally) if they engage in more productive work, and also if they make use of their ability. However, some people have a much wider menu of productive options available to them and so they may be able to earn more than others without making as much of a personal sacrifice.

For example, a top professional footballer may well have to train and play hard to retain their position. But they don’t work several hundred times as hard as a roofer. The relative difference in effort is much smaller than that of market income. If the roofer could play football at that level they would do so, certainly given the financial rewards. However, they do not have the required natural talent and so do not have the option. The different earnings between the two do not reflect a large difference in sacrifice but rather a large difference in ability.

Markets play an important and interesting role in the constructed desert base. As I pointed out in my previous blog, an individual will tend to earn more if they work longer, do less popular work, and do work whose products are more highly desired by others. In that sense, higher earnings imply a higher level of desert. However, at the same time, higher earnings often arise due to a higher ability to earn, which does not indicate greater deservingness.

Why is the constructed desert base a good way to link desert and income? It utilises a market test to distinguish people who sacrifice more to provide the goods and services that others value. However, it is not a slave to market valuations as it corrects for the influence of ability.

I think the constructed desert base would match most of the cases where people intuit that person x deserves more than person y. Of course, it won’t satisfy those who see desert through a purely market or single-based-desert approach to the issue. However, I have explained in previous blogs why these positions aren't really that attractive.

For the record, I would suggest that I think the scepticism I proposed about linking desert to economic outcomes still applies. I suggested that desert theories fail if they attempt to build a bridge either from a desert base to income or from market incomes to a desert base. My proposal, however, is to attempt to link the relevant factors in an interlocked manner which utilises the market and the existing plausible desert bases.

One possible criticism might be that my constructed desert base is not thereby a pre-institutional notion of desert. However, just because it is a constructed desert base this does not mean it cannot be pre-institutional; I am not proposing institutions and then judging the distribution on its closeness to those institutions. It is important to utilise the market so that a) the amount people deserve is linked to the total wealth available for distribution and b) there is a link between what consumers want and what producers deserve. In my next blog—the final in this series on desert—I will conclude by discussing the institutional implications of the constructed economic desert base.

1 comment:

dougbamford said...

Thanks to my lovely and super-smart wife Katy for helping make the equations presented above much more manageable and sensible than I would have ended up with on my own.

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