Monday, July 13, 2020

Notes- Justice Class 5

The readings for class 5 are: Excerpts from The Myth of Ownership (Murphy & Nagel) and from Justice as Fairness (Rawls). 

Previously, we covered Meritocracy and used those learnings to understand Universal Basic Income.

The Myth of Ownership: 

Ch 5- The Tax Base

Income, defined in one way, is Consumption plus Increase in Wealth.
Q: Is Consumption Tax better than Income Tax?

Q:What is the point of a Tax system?
    1. To raise revenue for public provision
    2. Secure economic justice
    3. Provide desirable behavioural incentives

The assumption of people being rational actors is not misplaced but, in my opinion, incomplete because definitions of rationality change both from perspective and scale. As much as I agree that people respond to incentives, they do not always act in ways an institution or a group of people might find rational. It is because I think some individuals, by doing the opposite of what might seem safe, send a different albeit stronger signal. Evolutionary Psychology might give me a framework to better understand that phenomenon. On a related note, the podcaster Amit Varma endorses Public Choice Theory a lot; I need to get some reading done on that.

Tax system should be simpler to reduce the cost of operations as well to give people less options to game the system for their benefit.

Why is it morally irrelevant as to whether a tax scheme imposes equal, or proportional, or any other pattern? If I do not take the libertarian view that all tax is theft, then I think I tax people based on their "ability to pay". As much as I understand that there is a certain arbitrariness to that mechanism, and as always there will be few exceptions, for the most part isn't it fair? I can see how people would game the system and show that they have less they really do (black money) but that's more of an operational issue than an ethical one. Need to read the previous chapter.

Outcomes are more important than intentions- As much as I want to, I can't think of a reason to refute that.

I don't understand Hall & Rabushka's Flat Tax Proposal- If the VAT is not 'flat' but is proportional to an individual's income, how is it different from the regular tiered income tax? Quick detour to Wikipedia doesn't help.

Cash Flow Tax- Individuals pay tax on all their earnings but deduct any amounts saved in the tax year. This seems like a more natural consumption tax.

I'm beginning to think that this reading is a wrong idea for a liveblog pilot. The subject is very tough and the authors' writing is not very easy to follow. So more than a summary of my thoughts at the end of the chapter, this seems like a litany of confusing concepts.

The Kurt example clarifies some of the above concepts. 

The authors argue that a tax system should encourage savings because investment is good for economic growth. From my understanding, that means that most members of a society should earn money but since they do not have the necessary expertise to invest (read delay gratification) and would rather consume (read immediate gratification), a much smaller section of professionals can use the money 'rightly', for increasing the wealth of society as a whole. I can't speak for everyone else but I admit that I am probably worse than an average professional investor (I'm not completely sure of it, though, because I'm convinced by most of Nassim Taleb's arguments in Fooled by Randomness). That doesn't give me solace from the fact that I'm probably just another specialised worker bee. 

I'm pausing this reading at the end of sub-section III for now.

Justice as Fairness (pages 134-140):

Ch 3- The Original Position

"..the balance of reasons itself rests on judgment, though judgment informed and guided by reasoning."- I have always thought about how imposition of a liberal framework is i. arbitrary ii. an imposition. I think this is a wonderfully succinct summary of the liberal ideology. Another explanation that I absolutely adore comes up in a conversation between Kapil Komireddi and Amit Varma when, if I remember correctly, Amit asks his regular question of if our liberal constitution is itself an imposition on a largely illiberal society. While Madhav Khosla, again I hope I'm not misattributing, contests the argument that we are an illiberal society, talking about India's bottom-up liberalism honed by millennia of co-existence, Kapil references Sunil Khilnani's, and as an extension Nehru's, Idea of India by telling us that that's the idea of India which is expansive and accepting enough to accommodate and celebrate all other conceptions of India. This is what is at the heart of what I call the Liberal Disequilibrium- That an illiberal person can ask for the ouster of a liberal from society but a liberal person, by definition, cannot do that. A liberal is not a hyper-rationalist devoid of all opinions and judgements, but someone who's opinions are more learned, deduced than accepted, and at which he is able to look at as objectively as possible. Therefore, liberalism is not a religion but more of a framework akin to scientific thinking.

Rawls' elaborates on how political philosophy is a very social affair and it would be very hard to come up with almost mathematically precise and complete theories.

Ch 4- Institutions of a Just Basic Structure

Property owning democracy vs a capitalist welfare state

I like how Rawls qualifies his statements by clearly stating that they are not conclusive, expansive claims but illustrative thoughts. Not only does this increase my respect in the writer but it also leads me to think, and apply those theories and see if they work, instead of just accepting them as laws.

A liberal democracy tries to create a fair system of cooperation between free and equal citizens, as well as between generations.

5 kinds of regimes with political, economic and social institutions:
    a. laissez-faire capitalism
    b. welfare-state capitalism
    c. state socialism with a command economy
    d. property owning democracy
    e. liberal (democratic) socialism

4 questions regarding any regime:
    a. question of right- whether its institutions are right and just
    b. question of design- whether a regime's institutions can be effectively designed to realise its declared aims and objectives
    c. question of compliance- whether the citizens who's interests and ends are shaped by the regime's basic structure, can be relied on to comply with the 'just' rules. Corruption is a part of this
    d. question of competence- whether the tasks assigned to offices and positions are simply too difficult to those who hold them

This is riveting elucidation, almost a mathematical blueprint of how our societies are organised. I have noticed this aspect of almost mathematical abstraction even in Prof. Mehta's talks; It seems like as much as political theorists understand and consider unpredictable human behaviour, mathematical thinking, like when deducing conclusions from axioms, is the most conducive way to think of and explain politics and society.

I wonder how these concepts have been updated since the ascendance of Behavioural Economics (Eg: Nudge Theory). 

The importance of above questions is roughly in descending order.

Paused at the end of page 136

Notes from the class-

How do we think of property rights? 
Normatively speaking, we agree that everyone should have a share in the economy. 

What is property? What is the right to property? Indian constitution had such a right that was later removed.

Approaches to private property:
    a. Natural rights approach- I own my labour. If I mix my labour with something, by the virtue of my labour enhancing that thing, it becomes mine. Reservations: I might gain right to use, but why right to own; If labour grants a right to property, then what about latecomers (an extension of previous week's discussion)?
    b. Some right to property is an extension of our freedom and self-expression. It is very important to concretising our freedom (Hegel). 
    c. Hayek- Rules of private property allocation produce an efficient economy. (Hayek said something similar when talking about meritocracy. He agrees that the link between work and material reward is tenuous at best but it is necessary).

Relationship between property and sovereignty- If property is a good thing, shouldn't it be distributed widely?

Accepting property is good but :
    a. People's starting places are arbitrary
    b. And won't trade then increase inequality
How do we solve this?

We are embodied beings. We need property to be able to do many things including something as quotidian as to have the right to privacy you need a room you can call your own. Without property, what is taken away from you is the basic right of self-expression.

Q: What if you move from scarce forms of property, like land, to almost infinite forms, like data? 
    Growing the property pie instead of distributing it, even if some inequality will persist. Distribution need not be zero-sum. 
    Challenges to above idea: a. As economies get more complex, with other forms of property than land getting institutionalised, how do questions of ownership get determined? [I don't understand this]
    b. Nagel & Murphy- The patterns of accumulation that you see in any society are actually the constructs of property rules we've decided. They exist because we allow certain allocations to exist. They are not the basis of property rights but consequence of allocation in a certain way. Eg: If you take away my accumulated capital, then you're taking away my property. But it is your property in the first place because there are certain rules that allow you to have it in the first place- Inheritance. 
    We think: We have property, it is being taxed. Then we question why and how of it. N & M reverse that. The property that you have is a product of prior taxation rules. It doesn't exist independent of them. The question, then, is what is the justification of those rules? 

Forest Rights debates in India- Historically, communities had rights to use products of the forests which is different from right to dispose it or something. 
"The only guys who didn't have a free market right in their property were farmers"- Links to a SeenUnseen episode.

Paradox of India- We thought it was okay to restrict property rights in land for agriculture sector (the entire mantle of redistribution fell on them) but why does it not apply to other forms of property or capital?

Q: Why should distribution of property be an act of justice? Why can't it be a means through which enough money is raised to spend on more welfare-ish schemes?

Q: Conflict between different types of justice: Individual rights vs Environmental rights etc. 

You can't ask specific questions to know if something is just. It has to be turned into a more generic, big question. Something that Balagopal said as well. 

Yes, the economic usage of an asset is important. But the converse is also true: Dynamics of inequality that is produced by taxation can be measured by those calibrations. [Er..]

What is the moral basis for saying someone can inherit property?
    One argument for: Property continuity (wanting to leave my grandchildren something) is a form of expression of freedom.
Two problematic aspects:
    a. Somebody in society seems to be getting an undue share of unearned income- Granting moral legitimacy for something unearned
    b. It seems to be most obvious location at which social concerns about inequality and wide distribution of property can be easily located- Because of the nature of its compounding cumulative power
US till 70s had a steep inheritance tax
Is it possible to have a cut-off and then the state takes the rest- I'm thinking what are the second-order consequences of such an act. How will people find ways to subvert the system?
The person who has the money has the moral right to use it as she pleases. But if we're saying that we ought to use to money for social welfare, then there's no point quibbling over moral questions and we should concentrate on the efficiency of tax collection. 

Fundamental Right vs Legal Right

Countervailing considerations: 
    a. Consider a Land-only Economy: The small set of people who're getting land by virtue of their birth are enjoying freedoms that I don't. The same applies to cases where capital is very unequally distributed.  
    Could it be that the giver has the right to give but the received doesn't have the right to take.
    "Inheritance is, arguably, the most stable method of perpetuating inequality"
    Free transfer can only be free when all people have atleast a basic, adequate freedom/ power to be capable of doing a free transfer
    b. From the point of view of Well-being and Freedom: Yes, people can accumulate wealth through free exchange. By allowing high levels of accumulation, especially that is not earned (without consideration of marginal utility), society as a whole is signalling the fact that wealth is the most important social value.  You could utilize something like scientific esteem as an incentive.

Adam Smith- "Wealth is unnecessary to well-being and happiness beyond a certain point".

Q: If we have a problem with inter-generational transfer of wealth that's arbitrary, then are all arbitrary transfers wrong? 

Chicago Economists- I inherit property worth 5 million from my parents. You come and say I can wring out a value of 10 million from this. So the argument goes, auction off inheritance and increase turnover of property. All the time.
Efficiency (of usage) is not always the right way to answer questions of justice. 

How many of you are comfortable inheriting a large amount of money? There seems to be queasiness with the unearned nature of that income. But on the other hand, being born into money is not very different from being born beautiful or athletic etc. and the only reason we're debating this is because we can measure money. Although, large inheritance visibly channels social power and so is worth debating. 

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