Friday, June 21, 2013

The Left on Just Deserts

I just got an email from the left-leaning Economic Policy Institute regarding their work on inequality.  I was struck by this passage:
Since the 1970s, the United States has become increasingly unequal in terms of income, wages, wealth and opportunity. Today, 1 percent of Americans are taking home nearly 20 percent of the country's total income and own nearly 35 percent of the country's wealth. This means that you (yes, you!) are probably making less money than you deserve to.*
Notice the emphasis on what "you deserve."  They aren't following the logic of the conventional Mirrlees model: they aren't saying we should redistribute more because the marginal utility of the rich is so much less than the marginal utility of the poor and middle class.  Rather, they are talking about what people deserve.

If economists want their models to connect with the political debate, they have to spend less time emphasizing diminishing marginal utility and more time thinking about just deserts.

That does not mean the EPI's conclusion is correct.  But I think they are right about the framing of the issue.

*By the way, this was a mass email, not to me personally.  I don't think EPI really thinks I am making less money than I deserve to.