Preface for a book I might never write

Preface for a book I might never write: Arguing for the CLIPH-rate tax

Lately I’ve been teaching or planning courses about distributive justice and I’ve mapped out a book I’d love to write if I had the time. It's probably about third on my list of projects though I sometimes mentally change the order of priority.

In fact, I wouldn't be starting from scratch. As well as having taught some of the theories, I could use a couple of pieces I’ve published, and I have written some blogs on the topic too. However, I thought it might be nice to note down the idea here, just as no doubt countless authors have written a preface but never completed the actual book.

The basic idea is to write a three-part (or even volume!) work presenting the argument(s) for my CLIPH-rate tax system from three different theories of justice; Egalitarianism, Consequentialism and desert theory.

Egalitarianism

The egalitarian argument is the easiest one to reproduce as I’ve already written a couple of pieces about this, in an edited collection and in my article “Arguing for hourly averaging.” Resource egalitarianism is the theory of distributive justice I find most compelling, and so this has been my primary concern up until now.

However, not everyone is convinced by egalitarianism and I think that it is possible to make strong arguments for the CLIPH-rate tax from two other theories.

Consequentialism and prioritarianism

Consequentialists about distributive justice believe that the economy should be designed to bring about the best total consequences. The good consequences could be subjective welfare, preference satisfaction, freedoms or some mixture of goods. Consequentialism is a totalising theory; bring about the most good. It therefore doesn’t matter how the goods and bads of society are distributed. Someone might be very badly off both absolutely and relatively under a consequentialist system and they would have no grounds for complaint (except by rejecting consequentialism). For many people, this is enough to reject consequentialism; everyone is just a means to bring about the best total consequences.

In fact, consequentialism does not have to ignore distributive matters entirely. Prioritarianism is a consequentialist theory which gives priority to those who are worse-off when undertaking the consequentialist calculation. The weighting towards the worse-off could vary; with greater emphasis on maximising the total amount of good or with greater priority given to those who have less. Prioritarianism seems to make consequentialism a lot more acceptable, though it doesn’t fully resolve all concerns about it.

How can you argue for the CLIPH-rate tax along consequentialist or prioritarian lines? I’ve made some points in previous blogs and in my book about the ways that an economy with the CLIPH-rate tax at its heart would combine incentives to work, save and invest with a great deal of redistribution to assist those on low incomes. Consequentialists, and particularly prioritarians, would want to ensure that there isn’t an impoverished class of workers at “the bottom” of society. Raising the standard of those who are badly off should bring about better total (let alone prioritised) consequences if we accept that nearly everyone gets declining marginal utility from resources. A poor person will get more utility (or whatever other good you specify) from a £10 gift than a rich person would. A successful economy should therefore focuses on making the worse off as well as possible, where this can be done without damaging overall economic productivity too much.

I would like to do more to show that the CLIPH-rate tax can both help to enlarge the pie while ensuring that everyone gets a decent slice. Hour credits are a key part of the tax calculation, and the only thing that someone can do (by choice) to get more hour credits is to undertake more work. The incentive to work is therefore built into the system. Meanwhile the tax calculation should generate as much taxation from unearned income as possible, representing the ideal form of taxation.

This is because the CLIPH-rate tax should do a good job of taxing not just unearned income but, relatedly, all forms of economic rent. Economic rents accrue to someone when they get more than they need in order to make the economic transaction in question. So if a landlord is considering renting a room and would accept £100 for it, but can get £200 due to high demand, then fully half of the rental income they get is economic rent. If this landlord has a tax rate of 50% they would still rent out their room, but instead of their getting the economic rent, it would go to the government. This revenue can be used to assist the less fortunate members of society, increasing their happiness.

That is a summary of the theory anyway, and I’d like to have more to back up my claims. It would be great to work with economists to help make the case.

Desert theories

I also think that a very strong case can be made for the CLIPH-rate tax from the perspective of desert theory. In a CLIPH-rate tax economy people get more income if they either get more hour credits (more hours worked) or have a higher income. Income made from working will therefore generate much more of a reward than unearned income, something which chimes well with desert theory.

Desert theories aren’t particularly popular with political philosophers, though they seem to be more popular with the general public, who often talk about particular people getting more or less than they deserve. A dodgy banker, crook or tabloid “benefit/welfare queen” could be said to have much more than they deserve. On the other hand, people might claim that nurses, kindly and charitable soul, or other hard-working person get less than they should.

Philosophers have delineated a few different bases for these desert claims. One is that some are more productive than others and should be rewarded accordingly. This is the productive contribution desert base associated with David Miller, Jonathan Riley and Gregory Mankiw.

A second desert base holds that people who do more burdensome jobs should get more than others. This is the compensation for burdensomeness desert base associated with Julian Lamont.  According to this theory, the person who does dangerous or unpleasant work deserves more than others who have less burdensome jobs. Someone working very hard in the cold on a North-sea oil rig with a high risk of death deserves much more than someone who works in a comfortable office.

The third desert base has features from the two above and attempts to get around the problems they have. This is that people who put in more effort should get more than others. This view is associated with George Sher, Wojciech Sadurski and Heather Milne. There are issues with all three desert bases though they all have some intuitive appeal. One is the extent they link to what people earn on the labour market.

I believe there is strong case to be made that the CLIPH-rate tax does a very good job of tracking these desert bases. Under a CLIPH-rate tax system people will get more if they get more hour credits (work longer hours) or if they have a higher income, and particularly if they do both these by working longer hours for higher pay. This seems to track all the desert bases above, since market pay rates reward productivity, burdensomeness and effort, and the hourly element also represents a productive contribution, the burden of giving up one’s time and an effort. Meanwhile, people who receive mostly unearned income from gifts or economic rents will be taxed very highly.

Other theories

I don’t think that there is much traction in arguing for the CLIPH-rate tax from libertarianism, though perhaps it might work from a few of the less common versions of left-libertarianism. Nevertheless, it would be a stretch and I don’t find libertarianism compelling anyway so I can live without trying to make that argument.

Sufficientarianism is another theory that is plausible. While I’m sure it’s possible to make an argument from sufficientarianism I’m not sure whether it is worth attempting it. After all, there are lots of forms of sufficientarianism and many people advocate a pluralist theory anyway (sufficientarianism + some other theory). Plus I don’t see why the CLIPH-rate tax particularly does any better at getting people above thresholds except perhaps for the consequentialist/prioritarian reasons set out above. Let me know if you disagree and think I should write about this.

Prospects and next steps

What are the prospects for ever writing this book? We’ll see. I might be able to do it fairly quickly if I could devote a chunk of time to it, but other things always seem more pressing. Perhaps I can start with a few journal articles and see if anything develops from there. Maybe this is as far as it will get? If so, its nice to have a record at least.

And if anyone has any suggestions or wants to collaborate do drop me an email.

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.

Economic desert bases

People who complain that society "gives x more than they deserve" and "gives y less than they deserve" presumably have some basis for making this judgment. We can take this question one step back and ask the underlying basis for this. We call this the desert base.

Essentially, a desert base is the underlying thing which determines what people deserve. For winning the best leading actor oscar the base is providing the most impressive acting performance in an eligible film. However, where it comes to economic desert agreement about the ideal base is lacking.

The three most commonly cited desert bases are:

·         Effort (people who work hard deserve more than the lazy)

·         Contribution/Productivity (people who make a larger contribution to society should get more)

·         Compensation (people who give up more should get more)

However, there are problems with each of these bases:

To reward people for the effort they make opens the question as to what activities should count as ones which efforts count. If I put a lot of effort into playing football with my friends this presumably doesn’t mean I deserve as much as someone who works hard as a paramedic. However, does this mean that the professional footballer is also undeserving? Presumably there would have to be a threshold at which point people’s activities become ‘work’ and thereby qualify them as deserving.

But this means that a particularly hard working lower division footballer is as deserving as a premier league one. Perhaps they are, but this raises further concerns about the incentives that such a system creates. If only your efforts determine your rewards then this reduces the pressure to increase productivity or for people to do work that they are more suited to—natural footballers would be better off playing rugby and vice versa so that both are putting in extra effort. Indeed people might find the work they would be best at easier and taking that work might make them worse off.

To reward people according to their contribution, on the other hand, would provide very good incentives for people. Someone who provides goods and services that are more valued by others (according to how much they are willing to pay for them) will receive more. One major concern with this is that it does not seem fair to reward people according to their productivity. Some people are more naturally talented than others and such people would be able to contribute more than others.

The third prominent approach could be seen as a solution to the two problems above. By providing people compensation for their activities in the name of the social product this would seem to take account of the effort that people put in but also allows for further sacrifices that people make that do not fall under the heading of effort. So someone who takes a particularly risky (though not otherwise taxing) job might be deserving of greater reward. It gets around the talent issue to a degree because people who find a job easier due to their talent would deserve less than their colleagues who find it difficult.

However, the compensation approach still shares a lot of the issues with the effort approach. People who suffer more for the economic produce because of their inefficiency would be more deserving than others. This again discourages people from doing work to which they are most suited and from making productivity gains.

Supporters of their preferred desert base can just bite the bullets presented above. However, specifying the potential underlying desert bases can draw out problems that might not occur to those who unreflectively adopt a desert-approach to economic justice.

In the next blog I will present a more fundamental reason to doubt the applicability of desert to economic justice.