my nerves are bad to-night

Here’s a statement that I don’t think will be too contentious, across the ideological spectrum:

The American way is to draw sharp distinctions between winners and losers, in order to encourage people to hustle.

People on the political left might rephrase this in stronger, more derogatory language. People on the political right would mostly celebrate the statement. But as a description of the American status quo, I think it is fairly uncontroversial. It expresses the barely tacit rationale behind a whole panoply of American institutions that comfort the already comfortable and afflict the already afflicted. Consider the so-called corporate welfare state, or tax expenditures like the mortgage interest deduction and the deductibility of health costs (only) of the stably employed. These things come to exist for specific historical reasons, they won by particular lobbies, but they endure because of widespread hospitable ideology. It should be possible to “make it”. “Making it” should be a safe, comfortable place, while those who fail to make it should bear consequences for their deficiencies.

Suppose, as I think many people on the right would argue, this ideology or worldview has contributed to power and prosperity of the United States. Sharp distinctions between winners and losers encourage individuals to work hard rather than slack off. Some succeed, some don’t, but the net effect is to reward effort and enterprise, generating a vibrant, prosperous economy. The punishment of losers is a price that must be paid to create a nation that is collectively a winner. And the burden of that price falls on those who most deserve it, those who lose — in part due to misfortune sure, but largely because they simply failed to work as hard or as well as their competitors.

People on the political left would dispute this account for all kinds of (good) reasons. But let’s put that aside, and consider it on its own terms. This perspective on American life would, I think, be described as “rugged individualism”.

But, in the lingo of economics, consider the “social welfare function” embedded in this story. The claim is emphatically not that this system maximizes some measure of aggregate utility that could be decomposed to a sum of individual welfares. On the contrary, it celebrates as necessary large costs in individual welfare for the sake of impersonal characteristics of the aggregate: “prosperity”, or “strength”. It is an entirely collectivist justification for policies that are deeply harmful at an individual level, if you take seriously at all the idea of diminishing marginal utility. The individualist approach to maximizing welfare would be to redistribute. If we (contentiously but commonly) assume people share comparable utility functions, aggregate utility is maximized by taking from the rich and giving to the poor. At least in a methodological sense, it is socialists who are the individualists, attending to the sum of individual welfares, while unsympathetic capitalists rely upon collectivism to justify their good fortune and the policy apparatus that magnifies and sustains it.  read more

PHOTOGRAPH: Paul Mason